<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1997
REGISTRATION NO. 333-34603
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
Amendment No. 1
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
TRANSCOASTAL MARINE SERVICES, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<C> <C> <C>
DELAWARE
(State or Other Jurisdiction 1389 72-1353528
of Incorporation or (Primary Standard Industrial (I.R.S. Employer
Organization) Classification Code Number) Identification Number)
</TABLE>
JOHNNIE W. DOMINGUE
TRANSCOASTAL MARINE SERVICES, INC.
3535 BRIARPARK, SUITE 210
HOUSTON, TEXAS 77042
(713) 784-7429
(Name, address, including zip code, and telephone number, including area
code, of registrant's principal executive offices and agent for service)
copies to:
<TABLE>
<C> <C>
ROBERT J. VIGUET, JR. TED W. PARIS
CHAMBERLAIN, HRDLICKA, WHITE, WILLIAMS & BAKER & BOTTS, L.L.P.
MARTIN 3000 ONE SHELL PLAZA
1200 SMITH STREET, SUITE 1400 910 LOUISIANA
HOUSTON, TEXAS 77002-4310 HOUSTON, TEXAS 77002-4995
(713) 658-1818 (713) 229-1234
FAX: (713) 658-2553 FAX: (713) 229-1522
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and the list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(1) PRICE(2) REGISTRATION FEE(3)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.001 per
share........................... -- -- $92,000,000 $27,879
==================================================================================================================
</TABLE>
(1) In accordance with Rule 457(o) under the Securities Act of 1933, as amended,
the number of shares being registered and the proposed maximum offering
price per share are not included in this table.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) $22,303 of the Registration Fee has previously been paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This Prospectus shall not
constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED OCTOBER 8, 1997
PROSPECTUS
5,000,000 SHARES
COMMON STOCK
[TRANSCOASTAL MARINE SERVICES, INC. LOGO]
------------------------
All of the shares of common stock, par value $.001 per share ("Common
Stock"), of TransCoastal Marine Services, Inc. ("TCMS") offered hereby are being
sold by TCMS. TCMS has applied to have the Common Stock approved for quotation
on the Nasdaq National Market under the symbol "TCMS." Prior to the Offering,
there has been no public market for the Common Stock. It is estimated that the
initial public offering price will be in the range of $14.00 to $16.00 per
share. See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF MATERIAL
RISKS THAT SHOULD BE CONSIDERED BY POTENTIAL INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
-------- ------------ -----------
<S> <C> <C> <C>
Per Share...............................
Total(3)................................
</TABLE>
- ---------------
(1) TCMS has agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses payable by TCMS estimated at $1,300,000.
(3) TCMS has granted the Underwriters a 30-day option to purchase up to an
additional 750,000 shares of Common Stock on the same terms and conditions
as set forth above, solely to cover over-allotments, if any. If the
Underwriters exercise such option in full, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by the Underwriters. The
Underwriters reserve the right to reject orders in whole or in part. It is
expected that delivery of the shares of Common Stock will be made against
payment therefor in New York, New York on or about , 1997.
------------------------
JEFFERIES & COMPANY, INC. JOHNSON RICE & COMPANY L.L.C.
, 1997
<PAGE> 3
[GRAPHIC: PHOTOGRAPH OF M/V DISCOVERY.]
THE M/V DISCOVERY PERFORMING JETTING OPERATIONS IN THE GULF OF MEXICO.
[GRAPHIC: PHOTOGRAPH OF SPUD BARGE SPREAD ON LOCATION AT A WORK SITE.]
SPUD BARGE SPREAD INSTALLING A PIPELINE IN THE GULF OF MEXICO TRANSITION
ZONE.
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT AND OTHER STABILIZING TRANSACTIONS AND THE IMPOSITION
OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
Concurrently with and as a condition to the closing of the Offering,
TransCoastal Marine Services, Inc., a recently organized Delaware corporation,
will acquire, in separate transactions (collectively, the "Acquisitions"), in
exchange for cash and shares of its Common Stock, four privately owned marine
construction businesses (each a "Founding Company") and certain real properties
used in the businesses of the Founding Companies. Unless otherwise indicated by
the context, references herein to (i) "TCMS" mean TransCoastal Marine Services,
Inc. (and its predecessor), prior to consummation of the Acquisitions, and (ii)
the "Company" mean TCMS, pro forma to give effect to the Acquisitions.
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Unless
otherwise indicated by the context, all share, per share and financial
information set forth herein (i) has been adjusted to give effect to the
Acquisitions; (ii) assumes an initial public offering price of $15.00 per share
(the midpoint of the estimated initial public offering price range); (iii)
assumes that the Underwriters' over-allotment option will not be exercised; and
(iv) gives effect to a stock split of the outstanding shares of Common Stock
effected in August 1997. The number of shares of Common Stock to be issued in
each Acquisition will depend on the initial public offering price of the Common
Stock. Accordingly, the disclosures herein relating to the shares of Common
Stock to be issued in connection with the Acquisitions are estimated, based on
an assumed initial public offering price of $15.00 per share.
THE COMPANY
GENERAL
TCMS was organized in April 1996 to become a fully integrated marine
construction company focusing on the transition zone (marsh, swamp and coastal
regions out to water depths of 20 feet) and shallow water (water depths of 20 to
200 feet) regions along the U.S. Gulf Coast. The Company's goal is to become a
leader in the consolidation of these fragmented segments of the marine
construction industry through an aggressive acquisition program. TCMS has
entered into definitive agreements to acquire the Founding Companies
concurrently with the closing of the Offering. As a result of the Acquisitions,
the Company believes it will be the largest provider of transition zone marine
construction services along the U.S. Gulf Coast, as well as a significant
provider of shallow water construction services. The Company's primary services
include pipeline installation and repair, hydrostatic testing and commissioning
of pipelines and fabrication and refurbishment of components for offshore
platforms and drilling rigs.
Although TCMS has recently been formed and has no operating history, the
Founding Companies have been in business an average of 47 years and have
substantial experience in operating in difficult transition zone and shallow
water environments. Marine construction activities in the transition zone
require substantial expertise and customized equipment, as compared to open
water operations, due to the unique physical characteristics often involved,
including unstable marshbeds and obstructions such as trees, submerged stumps
and a substantial infrastructure of existing pipelines. The Company believes it
will benefit from the expertise developed by the management and personnel of the
Founding Companies in operating in transition zone and shallow water
environments and its ability to design and manufacture its own specialized
equipment for these operations.
Following the Acquisitions, the Company will provide marine construction
and related services from five port facilities strategically located along the
U.S. Gulf Coast from Orange, Texas to Mobile, Alabama. The Company believes this
geographic coverage will create marketing advantages and operating efficiencies
for the Founding Companies by improving their access to projects in this region
and providing the ability to offer a broader range of services to their existing
customer bases. The Company believes these advantages will result in higher
utilization of its assets. The Company also believes it will be able to use its
fabrication operations to reduce its equipment maintenance costs and related
vessel downtime and eliminate subcontracting of certain services (including
hydrostatic testing and pipeline burial) on many of its pipeline installation
and repair projects.
3
<PAGE> 5
OPERATIONS
Pipeline Installation and Repair. The efficient development of an offshore
oil and gas field frequently involves the addition or extension of an
infrastructure of gathering lines and trunklines (large diameter pipelines). The
Company's pipeline installation operations are focused on the transition zone
and shallow water regions along the U.S. Gulf Coast, where the Company believes
it is the only company providing pipeline installation and repair services from
water depths of 200 feet through the transition zone and to onshore gathering
and processing facilities. The Company's fleet includes (i) 15 spud barges and
ancillary equipment, operated in water depths of up to 20 feet, and (ii) two
anchor barges and three multipurpose vessels (used in both pipeline installation
and repair and hydrostatic testing, commissioning and related operations),
primarily operated in water depths beyond 20 feet. The Company also owns
specialized equipment for offshore pipeline jetting (a specialized pipeline
burying technique) and testing services, marine dredging and trench digging. The
Company generated revenue of approximately $53.5 million and $45.9 million from
its pipeline installation and repair services during the twelve months ended
December 31, 1996 and the six months ended June 30, 1997, respectively.
Hydrostatic Testing and Commissioning. The Company performs onshore and
offshore hydrostatic testing and commissioning of pipelines for oil and gas
producers and pipeline construction companies along the U.S. Gulf Coast and in
certain international markets. During hydrostatic testing, water is pumped into
a newly installed or existing pipeline to increase the internal pressure beyond
the designed capacity of the pipeline in order to test its structural integrity.
Pipeline commissioning involves final preparation of a completed and
successfully tested pipeline for operation in accordance with applicable
regulatory standards. In connection with its hydrostatic testing and
commissioning services, the Company also performs pipeline cleaning, drying and
dehydration services. The Company generated revenue of approximately $7.6
million and $4.4 million from its hydrostatic testing and commissioning and
related services during the twelve months ended December 31, 1996 and the six
months ended June 30, 1997, respectively.
Offshore Fabrication. The Company fabricates and refurbishes (i) structural
components of fixed platforms for use in the offshore development and production
of oil and gas and (ii) structural components, primarily deck structures, for
offshore drilling rigs and barge drilling rigs. The Company also manufactures
amphibious undercarriages for marine construction equipment used in transition
zone waters. The Company generated revenue of approximately $11.8 million and
$5.8 million from its offshore fabrication services during the twelve months
ended December 31, 1996 and the six months ended June 30, 1997, respectively.
INDUSTRY OVERVIEW
The market for offshore pipeline installation and related services along
the U.S. Gulf Coast is primarily dependent on the levels of oil and gas
exploration, development and production activities and pipeline capacity
utilization in the Gulf of Mexico. The Company believes recent increases in oil
and gas production in the Gulf of Mexico have significantly reduced available
pipeline capacity to transport the hydrocarbons to onshore gathering,
transmission and processing facilities. In a report published in January 1997,
the Minerals Management Service of the U.S. Department of the Interior (the
"MMS") projected an increase in Gulf of Mexico oil production of up to 76% from
1,097 Mbpd (thousand barrels per day) in 1996 to 1,932 Mbpd by 2000, and an
increase in natural gas production of up to 25% from 13.8 Bcfd (billion cubic
feet per day) in 1996 to 17.2 Bcfd by 2000, assuming increased use of new
technologies, such as 3-D seismic and horizontal drilling techniques, would
offset declines in production from currently producing fields. This outlook is
supported by recent increases in offshore leases awarded by the Department of
the Interior in its semi-annual Outer Continental Shelf ("OCS") lease auctions.
The number of offshore leases awarded to operators increased from 202 in 1992,
covering approximately 1.0 million acres, to 1,508 in 1996, covering
approximately 8.0 million acres.
The MMS anticipates that a substantial portion of the increased oil and gas
production in the Gulf of Mexico will come from deep water projects. The Company
believes the continued development of deep water (depths of 200 feet to 1,000
feet) and very deep water (depths of 1,000 feet and deeper) oil and gas fields
will require construction of new pipelines and tie-ins to existing pipeline
systems in the transition zone and shallow
4
<PAGE> 6
water regions along the U.S. Gulf Coast to transport future hydrocarbon
production to shore. The Company also expects increases in demand for its
services resulting from new pipeline construction needed to support incremental
development activity within these transition zone and shallow water regions, as
well as the repair service requirements of the existing pipeline infrastructure.
According to a June 1997 report by Offshore Data Services, Inc., there were 255
pipeline construction projects in the design or planning phase in the Gulf of
Mexico, including 165 in water depths of less than 150 feet.
BUSINESS STRATEGY
The Company's business strategy emphasizes growth through continued
consolidation of the transition zone and shallow water segments of the marine
construction industry and internal development. Key elements of the Company's
business strategy include:
Maintaining Focus on Transition Zone and Shallow Water Market Segments. The
Company intends to maintain its focus on the U.S. Gulf Coast transition zone and
shallow water markets because of its strong competitive position and substantial
expertise in these markets and the positive outlook for new oil and gas
exploration and development activity in the Gulf of Mexico. The Company
anticipates substantial growth in these markets as new pipelines are added to
gather and transport the higher levels of production expected to result from
increased exploration and development activity in the Gulf of Mexico.
Capitalizing on Combined Capabilities of the Founding Companies. The
Company believes that, as a result of the consolidation of the Founding
Companies, it is the only company providing pipeline installation and repair
services from water depths of 200 feet through the transition zone and to
onshore gathering, transmission and processing facilities along the U.S. Gulf
Coast. The Company's competitors in the pipeline installation and repair
services market currently provide services either in the transition zone or
shallow water regions, but not both. This market segmentation often requires
customers to separate an installation or repair project into different
components and award it to multiple contractors or award the project to a single
contractor and rely on that contractor's ability to coordinate with
subcontractors to complete the balance of the project.
Expanding through Acquisitions. The Company intends to increase its market
presence by acquiring additional businesses and assets. The Company believes the
highly fragmented nature of the industry presents a substantial consolidation
opportunity for a well-capitalized competitor with a strong market presence.
Pursuing International Expansion Opportunities. The Company also intends to
expand internationally by capitalizing on its relationships with hydrostatic
testing customers in international markets and domestic customers with
international operations and the experience of its management in developing
business and conducting operations in international markets. The Company intends
to target areas for international expansion with geographic conditions similar
to those along the U.S. Gulf Coast, such as Venezuela and offshore West Africa.
Improving Operating Margins. The Company believes the combination of the
Founding Companies will provide significant opportunities to improve operating
margins and increase profitability. The Company believes it will be able to
achieve operating efficiencies and cost savings by consolidating overlapping
facilities and administrative functions and by implementing a comprehensive
marketing effort emphasizing its abilities as an integrated provider of pipeline
installation and repair and related services in the transition zone and shallow
water market segments.
SUMMARY OF THE ACQUISITIONS
TCMS has entered into definitive agreements to acquire the Founding
Companies concurrently with and as a condition to the closing of the Offering.
The consideration TCMS will pay to acquire the Founding Companies and certain
related real estate consists of (i) approximately $85.7 million in cash, (ii)
$3.0 million in 8.0% notes payable over a ten-year term ending in 2007 and (iii)
2,570,933 shares of Common Stock, and the Company will also assume up to $11.5
million of indebtedness of the Founding Companies. Two of the Acquisitions are
subject to post-closing adjustments, based on a multiple of estimated earnings
before interest, taxes, depreciation and amortization ("EBITDA") and payable in
a combination of cash and shares of Common Stock. Based on a preliminary
determination, the Company currently estimates that such post-closing
adjustments will not exceed $0.5 million. See "Certain
Transactions -- Acquisitions of the Founding Companies."
5
<PAGE> 7
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by TCMS................. 5,000,000 shares
Common Stock outstanding after the
Offering(1)................................ 8,826,933 shares
Use of Proceeds.............................. The net proceeds from the Offering will be
used, together with $35.0 million of initial
borrowings under a new revolving credit
facility (the "Revolving Credit Facility"),
to pay the cash portion of the aggregate
purchase price for the Acquisitions, to repay
indebtedness of TCMS and the Founding
Companies and to pay certain costs related to
the Offering and the Acquisitions. Additional
borrowings under the Revolving Credit
Facility will be available for other general
corporate purposes, which may include future
acquisitions. See "Use of Proceeds."
Proposed Nasdaq National Market symbol....... TCMS
</TABLE>
- ---------------
(1) The number of shares to be outstanding when the Offering closes will consist
of (i) an aggregate of 1,256,000 shares issued to founders of TCMS and
certain of its executive officers and consultants, (ii) 2,570,933 shares to
be issued as consideration in the Acquisitions and (iii) the 5,000,000
shares being offered hereby. Such share number does not include (i)
approximately 526,000 shares subject to options anticipated to be
outstanding under TCMS' 1997 Stock Option Plan (the "1997 Stock Option
Plan") on the date the Offering closes, (ii) an aggregate of 50,000 shares
issuable pursuant to a warrant (the "MG Warrant") issued by TCMS to
McFarland, Grossman & Company, Inc. ("MGCO"), a financial advisory firm that
assisted the Company in connection with the Acquisitions and in arranging
the Revolving Credit Facility, or (iii) an aggregate of 175,000 shares
issuable pursuant to a warrant (the "Lender Warrant") to be issued by TCMS
to an unrelated financial institution (the "Lender") in connection with the
Revolving Credit Facility. The number of shares to be outstanding on closing
of the Offering will decrease if the initial public offering price is
higher, and will increase if the initial public offering price is lower,
than $15.00 per share. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Combined Liquidity and
Capital Resources," "Management -- 1997 Stock Option Plan" and "Certain
Transactions -- Organization of the Company," "-- Acquisitions of the
Founding Companies" and "-- Financial Advisory Services." The holders of
3,826,933 shares have agreed not to offer or sell any of their shares for a
period of one year from the date of this Prospectus without the prior
written consent of Jefferies & Company, Inc. See "Underwriting." In
addition, all shares issued as consideration in the Acquisitions will be
"restricted securities" under Rule 144 of the Securities Act of 1933, as
amended (the "Securities Act"), and will be issued to an aggregate of nine
persons, all of whom are affiliates of Founding Companies.
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. See "Risk Factors."
6
<PAGE> 8
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following summary unaudited pro forma combined financial information
presents certain historical information of the Company, as adjusted to give
effect to (i) the Acquisitions, (ii) the closing of the Offering and the
application of the proceeds therefrom, (iii) the receipt and application of
$35.0 million of borrowings under the Revolving Credit Facility and (iv) the
other pro forma adjustments referred to below. See "Selected Financial
Information" and the Unaudited Pro Forma Combined Financial Statements and the
notes thereto included in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 JUNE 30, 1997
----------------- -------------
(IN THOUSANDS, EXCEPT SHARE
AND PER SHARE DATA)
<S> <C> <C>
Statement of Operations Information(1):
Revenue................................................... $ 72,744 $ 54,906
Cost of revenue........................................... 60,573 42,923
Selling, general and administrative expenses(2)........... 6,931 3,943
Depreciation and amortization(3).......................... 5,918 3,626
Operating income (loss)................................... (678) 4,414
Interest expense(4)....................................... (4,519) (2,259)
Other income, net......................................... 1,163 617
Provision (benefit) for income taxes...................... (967) 1,432
Net income (loss)......................................... $ (3,067) $ 1,340
========== ==========
Pro forma income (loss) per share......................... $ (.35) $ .15
Shares used in computing pro forma income (loss) per
share(5)............................................... 8,850,266 8,850,266
</TABLE>
<TABLE>
<CAPTION>
AS ADJUSTED(1)
--------------
JUNE 30, 1997
--------------
(IN THOUSANDS)
<S> <C>
Balance Sheet Information:
Working capital........................................... $ 9,445
Property, plant and equipment, net........................ 63,493
Total assets.............................................. 162,590
Long-term debt, net of current maturities................. 37,700
Stockholders' equity...................................... 85,157
</TABLE>
- ---------------
(1) The pro forma combined statement of operations information assumes the
Offering, the Acquisitions, $35.0 million of initial borrowings under the
Revolving Credit Facility and the issuance of the presently outstanding
Common Stock all were closed on January 1 of each period presented. The pro
forma, as adjusted, balance sheet information assumes those transactions
were closed on June 30, 1997. The pro forma combined financial information
(i) is not necessarily indicative of the results the Company would have
obtained had these events actually occurred when assumed or of the Company's
future results, (ii) is based on preliminary estimates (primarily of the
aggregate purchase price of the Acquisitions), available information and
certain assumptions management deems appropriate and (iii) should be read in
conjunction with the financial statements and notes thereto included in this
Prospectus.
(2) Includes the effect of certain eliminations of related-party rental and
lease expenses resulting from the purchase of certain real properties as
part of the Acquisitions, as follows: (i) $357,000 for the year ended
December 31, 1996; and (ii) $179,000 for the six months ended June 30, 1997.
Does not include anticipated future costs related to TCMS' new corporate
management and costs associated with being a public company, which cannot be
accurately estimated at this time and which management of TCMS expects will
be offset by certain cost savings and margin improvements resulting from the
combination of the Founding Companies (which also cannot be accurately
estimated at this time).
(3) Includes amortization of the $64.6 million of goodwill to be recorded as a
result of the Acquisitions as of June 30, 1997 and additional depreciation
expense due to the allocation of $43.7 million of the purchase price to
property, plant and equipment, as described in the Notes to the Unaudited
Pro Forma Combined Financial Statements.
(4) Reflects interest expense relating to $35.0 million of initial borrowings
under the Revolving Credit Facility and the $3.0 million of 8.0% notes being
issued to the sole shareholder of RFCNI as part of the Acquisition of RFCNI,
net of a reduction in interest expense related to the refinancing of the
Founding Companies' outstanding indebtedness.
(5) Includes (i) an aggregate of 1,256,000 shares issued to founders of TCMS and
certain of its executive officers and consultants, (ii) 2,570,933 shares to
be issued as consideration in the Acquisitions, (iii) the effect of 50,000
shares issuable pursuant to the MG Warrant and (iv) the 5,000,000 shares
being offered hereby.
7
<PAGE> 9
SUMMARY HISTORICAL FINANCIAL INFORMATION FOR THE FOUNDING COMPANIES
The following table presents summary historical financial information for
each of the Founding Companies (see "The Company" for the complete names of
each) for the three most recent fiscal years (except where otherwise indicated),
the six months ended June 30, 1996 and 1997 and the eight months ended August
31, 1997. This information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes thereto included in this Prospectus.
<TABLE>
<CAPTION>
EIGHT
SIX MONTHS ENDED MONTHS
JUNE 30 ENDED
------------------ AUGUST 31,
1994 1995 1996 1996 1997 1997
------- ------- ------- ------- ------- -----------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Woodson(1):
Revenue..................... $ 7,786 $18,075 $17,933 $10,689 $18,104 $26,039
Cost of revenue............. 5,874 12,716 13,561 7,833 15,243 21,200
Selling, general and
administrative
expenses................. 3,011 2,672 2,968 1,479 1,435 1,791
Depreciation and
amortization............. 728 574 562 291 455 634
Operating income (loss)..... (1,827) 2,113 842 1,086 971 2,414
CSI(2):
Revenue..................... $ 5,331 $ 5,226 $ 8,447 $ 3,815 $ 9,606 $11,032
Cost of revenue............. 2,964 3,334 5,264 2,463 5,651 6,619
Selling, general and
administrative
expenses................. 1,725 2,285 2,435 1,160 1,270 1,758
Depreciation and
amortization............. 288 269 359 202 245 336
Operating income (loss)..... 354 (662) 389 (10) 2,440 2,319
HBH(1):
Revenue..................... $15,261 $14,771 $36,873 $19,062 $23,850 $33,323
Cost of revenue............. 12,585 16,803 33,727 16,343 19,394 25,700
Selling, general and
administrative
expenses................. 929 867 1,000 484 671 1,056
Depreciation and
amortization............. 503 871 1,482 719 750 1,007
Operating income (loss)..... 1,244 (3,770) 664 1,516 3,035 5,560
RFCNI(1):
Revenue..................... $ 5,611 $10,497 $ 9,730 $ 3,159 $ 4,536 $ 7,062
Cost of revenue............. 4,715 9,426 8,260 2,708 3,825 5,596
Selling, general and
administrative
expenses................. 650 698 885 363 674 919
Depreciation and
amortization............. 16 15 12 8 8 14
Operating income............ 230 358 573 80 29 533
</TABLE>
- ---------------
(1) Fiscal year results are for fiscal years ended December 31, 1994, 1995 and
1996.
(2) Fiscal year results are for fiscal years ended May 31, 1994 and 1995 and the
twelve months ended December 31, 1996.
8
<PAGE> 10
RISK FACTORS
An investment in the shares of Common Stock offered by this Prospectus
involves a high degree of risk. Prospective investors should carefully consider
the following factors, as well as the other information contained in this
Prospectus.
FORWARD-LOOKING INFORMATION
This Prospectus contains certain forward-looking statements. The words
"expect," "believe," "anticipate," "project," "estimate," "predict" and similar
expressions are intended to identify forward-looking statements. Such statements
involve risks, uncertainties and assumptions (including the risk factors
described below). Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual outcomes
may vary materially from those indicated.
CYCLICAL INDUSTRY; DEPENDENCE ON OIL AND GAS INDUSTRY
The demand for marine construction services has traditionally been
cyclical, depending primarily on the capital expenditures of oil and gas
companies for developmental construction. These capital expenditures are
influenced by such factors as prevailing oil and gas prices, expectations about
future prices, the cost of exploring for, producing and delivering oil and gas,
the sale and expiration dates of available offshore leases, the discovery rate
of new oil and gas reserves in offshore areas, local and international political
and economic conditions, technological advances, and the ability of oil and gas
companies to generate funds for capital expenditures. Oil and natural gas prices
and the level of offshore drilling and exploration activity have varied
substantially in recent years, resulting in significant fluctuations in demand
for the Company's services. Significant downturns in demand have in the past
adversely impacted each of the Founding Companies, with the result that each of
the Founding Companies has from time to time incurred operating losses. See
"-- History of Operating Losses of the Founding Companies." A significant or
prolonged reduction in oil or natural gas prices in the future would likely
depress offshore drilling and development activity. A substantial reduction of
such activity would reduce demand for the Company's services and could have a
material adverse effect on the Company's financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business -- Industry Overview."
HISTORY OF OPERATING LOSSES OF THE FOUNDING COMPANIES
Each of the Founding Companies has, from time to time, incurred losses from
operations, particularly during periods of low industry demand for marine
construction services. Some of these operating losses have been incurred in
recent periods. Woodson and RFCNI incurred net operating losses in the three
months ended March 31, 1997, and CSI and HBH incurred net operating losses in
fiscal 1995 and in the three months ended March 31, 1996. The predecessor to
RFCNI completed bankruptcy proceedings in 1988 following a prolonged period of
operating losses. In the event of a substantial or prolonged decline in demand,
the Company could be materially and adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Industry Overview."
RISKS ASSOCIATED WITH CONTRACTUAL PRICING IN THE OFFSHORE CONSTRUCTION INDUSTRY
As a result of the competitive conditions in the marine construction
industry, a substantial number of the Company's projects are performed on a
fixed-price basis. The revenue, costs and gross profit realized on a contract
will often vary from the estimated amounts for various reasons, including errors
in estimates or bidding, changes in the availability and cost of labor and
material and variations in productivity from the original estimates. These
variations and the risks inherent in the marine construction industry may result
in revenue and gross profits different from those originally estimated and can
result in reduced profitability or losses on projects. Depending on the size of
a project, variations from estimated contract performance can have a significant
impact on the Company's operating results for any particular fiscal quarter or
year. See "Business -- Customers and Contracts."
9
<PAGE> 11
ABSENCE OF COMBINED OPERATING HISTORY
TCMS was organized in April 1996 and has conducted no operations to date
other than in connection with the Offering and the Acquisitions. The Founding
Companies have operated as separate, independent businesses, and there can be no
assurance that the Company will be able to integrate the operations of these
businesses successfully or to institute the systems and procedures, including
accounting and financial reporting systems, necessary to manage the combined
enterprises on a profitable basis. Until the Company establishes centralized
accounting and other administrative systems, it will rely on the separate
systems of the Founding Companies. The success of the Company will depend, in
part, on the extent to which the Company is able to centralize these functions,
eliminate the unnecessary duplication of other functions and otherwise integrate
the Founding Companies and such additional businesses as the Company may
acquire. The Company's executive management team has only recently been
assembled, and no assurance can be given that the Company's executive officers
will be able to manage effectively the combined entity or implement the
Company's business strategy. The inability of the Company to integrate the
Founding Companies successfully would have a material adverse effect on the
Company's business, financial condition, results of operations and cash flows.
See "Business -- Business Strategy" and "Management."
POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE
On closing of the Acquisitions and the Offering, 8,826,933 shares of Common
Stock will be outstanding. The 5,000,000 shares of Common Stock offered hereby
will be freely tradable unless acquired by affiliates of TCMS. All the remaining
shares of Common Stock to be outstanding on the closing of the Acquisitions and
the Offering may be resold publicly only following their effective registration
under the Securities Act or pursuant to an exemption from the registration
requirements of that act, such as Rule 144 thereunder. Shareholders of the
Founding Companies will have certain registration rights with respect to
2,370,933 shares of Common Stock received by them in the Acquisitions, subject
to the one-year Lockup Period described below. The availability for sale, or
sale, of the shares of Common Stock eligible for future sale could adversely
affect the market price of the Common Stock prevailing from time to time.
After the Offering closes, TCMS intends to file a registration statement on
Form S-8 with the Securities and Exchange Commission (the "Commission") to
register the shares issuable pursuant to the 1997 Stock Option Plan under the
Securities Act. After that registration statement becomes effective, the shares
registered thereby generally will on issuance be freely tradable by holders who
are not affiliates of TCMS and, subject to the volume and other limitations of
Rule 144, by holders who are affiliates of TCMS. See "Management -- 1997 Stock
Option Plan."
TCMS and its directors and executive officers, MGCO, Lender, J&D Capital
Investments, L.C. (which is majority owned by G. Darcy Klug, a promoter of
TCMS), all of TCMS' other current stockholders and all persons who receive
shares of Common Stock in connection with the Acquisitions have agreed not to
offer or sell any of those shares for a period of one year from the date of this
Prospectus (the "Lockup Period") without the prior written consent of Jefferies
& Company, Inc., except that TCMS may issue Common Stock in connection with the
Acquisitions and, subject to certain conditions, in connection with future
acquisitions, on exercise of the MG Warrant, the Lender Warrant and pursuant to
awards under the 1997 Stock Option Plan. Jefferies & Company, Inc. has advised
TCMS that it has no present intention to waive the restrictions on sales of
shares of Common Stock during the Lockup Period. See "Shares Eligible for Future
Sale."
RISKS RELATED TO THE COMPANY'S ACQUISITION STRATEGY
The Company intends to grow by acquiring additional marine construction
businesses. There can be no assurance that the Company will be able to identify,
acquire or profitably manage additional businesses or successfully integrate
acquired businesses, if any, into the Company without substantial costs, delays,
or other operational or financial difficulties. The Company expects to face
competition for acquisition candidates, which may limit the number of
acquisition opportunities available to the Company and may lead to higher
acquisition prices. Further, acquisitions involve a number of other risks,
including failure of the acquired business to achieve expected results,
diversion of management's attention and resources to acquisitions, failure
10
<PAGE> 12
to retain key customers or personnel of the acquired business and risks
associated with unanticipated events or liabilities, some or all of which could
have a material adverse effect on the Company's business, financial condition
and results of operations. Acquisitions accounted for as purchases may result in
substantial annual noncash amortization charges for goodwill and other
intangible assets in the Company's statements of operations. See
"Business -- Business Strategy."
The Company's acquisition strategy will require substantial capital. Using
internally generated cash or debt to complete acquisitions could substantially
limit the Company's operational and financial flexibility. The extent to which
the Company will be able or willing to use shares of Common Stock to consummate
acquisitions will depend on its market value from time to time and the
willingness of potential sellers to accept it as full or partial payment. Using
shares of Common Stock for this purpose may result in significant dilution to
then existing stockholders. No assurance can be given the Company will be able
to obtain the capital it will need to continue to finance a successful
acquisition program and its other cash needs. In addition, acquisitions
involving consideration in excess of $5.0 million will require the consent of
the Lender under the Revolving Credit Facility. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Combined Liquidity and Capital Resources."
NEED FOR SKILLED WORKERS
The Company's ability to remain productive and become profitable will
depend substantially on its ability to retain and attract skilled construction
workers, primarily welders, pipefitters and equipment operators. The Company's
ability to expand its operations is impacted by its ability to increase its
labor force. The demand for skilled workers is high and the supply is limited. A
significant increase in the wages paid by competing employers could result in a
reduction in the Company's skilled labor force, increases in the wage rates paid
by the Company, or both. If either of these events occurred, the capacity and
profitability of the Company could be diminished and the growth potential of the
Company could be impaired. See "Business -- Employees."
FLUCTUATIONS IN OPERATING RESULTS
The Company's results of operations may fluctuate significantly from
quarter to quarter or year to year because of a number of factors, including the
timing of future acquisitions, seasonal fluctuations in the demand for marine
construction services (particularly during the winter months) and competitive
factors. Accordingly, quarterly comparisons of the Company's revenue and
operating results should not be relied on as an indication of future
performance, and the results of any quarterly period may not be indicative of
results to be expected for a full year. The Company recognizes most of its
contract revenue on a percentage-of-completion basis. Accordingly, contract
price and cost estimates are reviewed periodically as the work progresses, and
adjustments proportionate to the percentage of completion are reflected in
income in the period when the facts giving rise to a revised estimate become
known. To the extent that these adjustments result in a reduction or elimination
of previously reported profits with respect to a project, the Company would
recognize a charge against current earnings, which could be material. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Customers and Contracts."
OPERATING RISKS
Domestic. Marine construction involves a high degree of operational risk.
Hazards such as vessels capsizing, sinking, grounding, colliding and sustaining
damage from severe weather conditions are inherent in marine operations. These
hazards can cause personal injury or loss of life, severe damage to and
destruction of property and equipment, pollution or environmental damage and
suspension of operations. Certain employees of the Company are covered by
provisions of the Jones Act, the Death on the High Seas Act and general maritime
law, which laws operate to make the liability limits established by state
workers' compensation laws inapplicable to these employees and, instead, permit
them or their representatives to pursue actions against the Company and the
applicable vessel for damages or job-related injuries, with generally no
statutory limitations on the Company's potential liability. The failure of
offshore pipelines and structural components during and after installation can
result in similar injuries and damages. Litigation arising from such an
occurrence may result in the Company being named as a defendant in lawsuits
asserting large claims. The Company maintains
11
<PAGE> 13
such insurance protection as it deems prudent, including hull insurance on its
vessels. However, certain risks are either not insurable or insurance is
available only at rates that the Company considers not to be economical. There
can be no assurance that any such insurance will be sufficient or effective
under all circumstances or against all hazards to which the Company may be
subject. A successful claim for which the Company is not fully insured could
have a material adverse effect on the Company. Moreover, no assurance can be
given that the Company will be able to maintain adequate insurance in the future
at rates it considers reasonable.
International. The Company's international operations are subject to a
number of risks inherent in business operations in foreign countries, including
political, social and economic instability, potential seizure or nationalization
of assets, currency restrictions and exchange rate fluctuations, nullification,
modification or renegotiation of contracts, import-export quotas and other forms
of public and governmental regulations, all of which are beyond the control of
the Company. Additionally, the ability of the Company to compete in
international markets may be adversely affected by import duties and fees,
foreign taxes, foreign governmental regulations that favor or require the
awarding of contracts to local contractors, or regulations requiring foreign
contractors to employ citizens of, or purchase supplies from, a particular
jurisdiction.
COMPETITION
The marine construction services business is highly competitive and in
recent years has been characterized by overcapacity, which resulted in
substantial pressure on pricing and operating margins. Overcapacity in the
industry may recur in the future. Contracts for marine construction services are
usually awarded on a competitive bid basis. Price competition is a primary
factor in determining which qualified contractor with available equipment is
awarded a contract. Some of the Company's competitors are larger and have
greater financial and other resources than the Company. See "-- Cyclical
Industry; Dependence on Oil and Gas Industry" and "Business -- Competition."
GOVERNMENTAL REGULATION
The Company's operations are subject to and affected by various types of
governmental regulation, including numerous federal, state and local
environmental protection laws and regulations, which are becoming increasingly
complex, stringent and expensive. Significant fines and penalties may be imposed
for noncompliance, and certain environmental laws impose joint and several
"strict liability" for remediation of spills and releases of oil and hazardous
substances, creating liability for environmental damages, without regard to
negligence or fault. Such laws and regulations may expose the Company to
liability for the conduct of or conditions caused by others, including the
Company's subcontractors, or for acts of the Company which were in compliance
with all applicable laws at the time such acts were performed. Future
acquisitions by the Company also may be subject to regulation, including
antitrust reviews. In addition, the Company depends on the demand for its
services from the oil and gas industry and could be affected materially by
changes in taxes, price controls or other laws relating to the oil and gas
industry generally. The adoption of laws or regulations curtailing exploration
and development drilling for oil and gas for economic, environmental or other
policy reasons could adversely affect the Company's operations by limiting
demand for its services. See "Business -- Governmental Regulation and
Environmental Matters."
CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS
Following the closing of the Acquisitions and the Offering, the Company's
founders, executive officers and directors and the persons receiving shares of
Common Stock in connection with the Acquisitions will beneficially own 3,826,933
shares of Common Stock. These stockholders will control in the aggregate
approximately 43.4% of the votes of all shares of Common Stock and, if acting in
concert, may be able to exercise control over the Company's affairs, elect the
entire Board of Directors and control the outcome of any matter submitted to a
vote of the Company's stockholders. See "Security Ownership of Certain
Beneficial Owners and Management."
12
<PAGE> 14
SUBSTANTIAL PROCEEDS OF OFFERING PAYABLE TO AFFILIATES OF FOUNDING COMPANIES
Of the estimated net proceeds of the Offering and the initial borrowings
under the Revolving Credit Facility, approximately $85.7 million will be paid as
the cash portions of the purchase prices for the Acquisitions and the related
real estate. As a result of the CSI acquisition, Mr. Daniel N. Hargett, Sr.,
will receive $36.7 million and will hold more than five percent of the shares of
Common Stock outstanding when the Offering closes. Following the CSI
Acquisition, Mr. Hargett will serve as a director of TCMS and will continue to
serve as president of CSI. Shareholders of Woodson will receive an aggregate of
$19.8 million in cash and will hold approximately 14% of the Common Stock
outstanding when the Offering closes. Four of the Woodson shareholders will
continue to serve as president of the respective Woodson companies following the
closing of the Offering.
DEPENDENCE ON KEY MANAGEMENT PERSONNEL
The success of the Company's operations will depend on the continuing
efforts of its executive officers and the senior operating management of the
Founding Companies, and likely will depend on the senior management of any
significant businesses the Company acquires in the future. The business or
prospects of the Company could be affected adversely if any of those persons
does not continue in his or her management role after joining the Company, and
the Company is unable to attract and retain qualified replacements. See
"Management."
NO PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, no public market for the Common Stock has existed,
and the initial public offering price, which TCMS and representatives of the
Underwriters will negotiate, may not be indicative of the price at which the
Common Stock will trade after the Offering. See "Underwriting" for the factors
to be considered in determining the initial public offering price. TCMS has
applied to have the Common Stock approved for quotation on the Nasdaq National
Market, but no assurance can be given that an active trading market will develop
or be maintained for the Common Stock. The market price of the Common Stock
after the Offering may fluctuate significantly from time to time in response to
numerous factors, including the timing of any acquisitions by the Company,
variations in the reported financial results of the Company or those of its
competitors, changes by financial research analysts in their estimates of future
earnings of the Company, changing conditions in the economy in general or in the
Company's industry in particular and unfavorable publicity or changes in
applicable laws and regulations (or judicial or administrative interpretations
thereof) affecting the Company or its business. In addition, the stock markets
experience significant price and volume volatility from time to time which may
affect the market price of the Common Stock for reasons unrelated to the
Company's performance.
POSSIBLE ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER PROVISIONS
The Amended and Restated Certificate of Incorporation of TCMS (the
"Charter") authorizes the Board of Directors to issue, without stockholder
approval, one or more series of preferred stock having such preferences, powers
and relative, participating, optional and other rights (including preferences
over the Common Stock respecting dividends and distributions and voting rights)
as the Board of Directors may determine. The issuance of this "blank-check"
preferred stock could render more difficult or discourage an attempt to obtain
control of the Company by means of a tender offer, merger, proxy contest or
otherwise. In addition, the Charter contains a prohibition of stockholder action
by written consent and an anti-greenmail provision. Certain provisions of the
Delaware General Corporation Law (the "DGCL") may also discourage takeover
attempts that have not been approved by the Board of Directors. See "Description
of Capital Stock."
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of Common Stock in the Offering will experience immediate,
substantial dilution in the net tangible book value of their stock of $12.68 per
share and may experience further dilution in that value from issuances of Common
Stock in the future. See "Dilution."
13
<PAGE> 15
THE COMPANY
TCMS was organized in April 1996 to become a fully integrated marine
construction company focusing on the transition zone (marsh, swamp and coastal
regions out to water depths of 20 feet) and shallow water (water depths of 20 to
200 feet) regions along the U.S. Gulf Coast. The Company's goal is to become a
leader in the consolidation of these fragmented segments of the marine
construction industry through an aggressive acquisition program. On closing of
the Acquisitions, the Company's services will include offshore pipeline
installation and repair services, hydrostatic testing and commissioning of
pipelines and fabrication and refurbishment of components for offshore platforms
and drilling rigs. TCMS has entered into definitive agreements to acquire the
Founding Companies concurrently with and as a condition to the closing of the
Offering. In 1996, the Founding Companies, which have been in business an
average of 47 years, had pro forma combined revenue of approximately $73.0
million. For a description of the transactions pursuant to which these
businesses will be acquired, see "Certain Transactions -- Organization of the
Company." The following is a brief description of the Founding Companies:
Woodson. Woodson Construction Company (collectively with three affiliated
companies, "Woodson") is primarily engaged in the business of installing and
repairing pipelines in water depths of up to 20 feet, through the transition
zone to onshore gathering, transmission and processing facilities along the U.
S. Gulf Coast. Woodson is headquartered in Lafayette, Louisiana and maintains
its primary operating facility in Delcambre, Louisiana. Woodson primarily
operates in the marshland areas of Louisiana and, to a lesser extent, in similar
regions in neighboring states. In addition to pipeline installation and repair,
Woodson also (i) manufactures amphibious undercarriages for use in its own
operations and for sale to third parties, and (ii) performs onshore
environmental site assessments and on-site remediation of petroleum-contaminated
areas. Woodson generated revenue of approximately $17.9 million and $18.1
million during the year ended December 31, 1996 and the six months ended June
30, 1997, respectively.
CSI. CSI Hydrostatic Testers, Inc. (collectively with a subsidiary and an
affiliated company, "CSI"), performs (i) onshore and offshore hydrostatic
testing and commissioning of pipelines, (ii) pipeline cleaning, drying and
dehydration and (iii) pipeline jetting and other pipeline burial services. CSI
is headquartered in Lafayette, Louisiana and operates along the U.S. Gulf Coast
and in certain international markets. CSI generated revenue of approximately
$8.4 million and $9.6 million during the year ended December 31, 1996 and the
six months ended June 30, 1997, respectively.
HBH. HBH, Inc. ("HBH") focuses its operations on installing and repairing
offshore pipelines for the oil and gas industry within the transition zone and
shallow water regions along the U. S. Gulf Coast. HBH is headquartered in Belle
Chasse, Louisiana and operates primarily off the coast of Louisiana and in
Mobile Bay, off the coast of Alabama. HBH generated revenue of approximately
$36.9 million and $23.9 million during the year ended December 31, 1996 and the
six months ended June 30, 1997, respectively.
RFCNI. The Red Fox Companies of New Iberia, Inc. ("RFCNI") is primarily
engaged in the fabrication and refurbishment of (i) structural components of
fixed platforms for use in the development of oil and gas, and (ii) structural
components, primarily deck structures, for offshore drilling rigs and barge
drilling rigs. RFCNI also fabricates marine sewage treatment units, which are
installed on offshore platforms and drilling rigs. RFCNI's headquarters and
principal fabrication yard are located in New Iberia, Louisiana. RFCNI generated
revenue of approximately $9.7 million and $4.5 million during the year ended
December 31, 1996 and the six months ended June 30, 1997, respectively.
SUMMARY OF TERMS OF THE ACQUISITIONS. The aggregate consideration TCMS will
pay to acquire the Founding Companies and certain related real estate consists
of (i) approximately $85.7 million in cash, (ii) $3.0 million in 8.0% notes
payable over a ten-year term ending in 2007 and (iii) 2,570,933 shares of Common
Stock. The Company will also assume up to $11.5 million of indebtedness of the
Founding Companies and then repay or refinance substantially all that
indebtedness at or shortly after the closing of the Acquisitions. In addition,
the acquisition agreements for the RFCNI and CSI acquisitions provide for
post-closing adjustments, which are to be determined based on a multiple of
estimated EBITDA for RFCNI and one of the entities comprising CSI, payable in a
combination of cash and shares of Common Stock. Based
14
<PAGE> 16
on a preliminary determination, the Company currently estimates that such
post-closing adjustments will not exceed $0.5 million.
The closing of each Acquisition is subject to customary conditions,
including, among others: the continuing accuracy of the representations and
warranties made by the Founding Companies, their principal shareholders and
TCMS; the performance of each of their respective covenants included in the
agreements relating to the Acquisitions; and the nonexistence of a material
adverse change in the results of operations, financial condition or business of
each Founding Company prior to the closing date.
Any Founding Company's acquisition agreement may be terminated under
certain circumstances prior to the closing of the Offering, including: (i) by
the mutual consent of the Board of Directors of TCMS and the owner or owners of
that Founding Company; (ii) by TCMS if the disclosure schedules to the
acquisition agreement are amended to reflect a material adverse change in that
Founding Company; or (iii) if a material breach or default under the agreement
by one party occurs and is not waived. No assurance can be given that the
conditions to the closing of all the Acquisitions will be satisfied or waived or
that each Acquisition will close. See "Certain Transactions -- Acquisitions of
the Founding Companies."
Senior management of each of the Founding Companies will continue to be
employed by the respective Founding Companies immediately following the
Offering. In addition to serving as directors of TCMS, H. Daniel Hughes II and
Daniel H. Hargett, Sr. will continue to serve as president of HBH and CSI,
respectively, each under a three-year employment agreement. The current
president of each Woodson company and ten other senior members of management of
the Founding Companies will also execute employment agreements to continue to
serve their respective Founding Companies.
TCMS is a Delaware corporation. Its corporate offices are located at 3535
Briarpark, Suite 210, Houston, Texas 77042, and its telephone number is (713)
784-7429.
15
<PAGE> 17
USE OF PROCEEDS
TCMS estimates its net proceeds from the Offering will be approximately
$68.5 million (approximately $79.1 million if the Underwriters exercise their
over-allotment option in full), after deducting the underwriting discounts and
commissions and estimated offering expenses, including approximately $0.7
million to be used to repay advances under the J&D Loan Agreement, which were
used to fund Offering expenses. The Company will use these net proceeds,
together with $35.0 million of initial borrowings under the Revolving Credit
Facility, to (i) pay the $85.7 million cash portion of the aggregate purchase
price for the Acquisitions, (ii) repay up to $11.5 million of outstanding
indebtedness of the Founding Companies, (iii) pay success bonuses and salaries
aggregating $0.5 million to certain members of executive management of TCMS,
(iv) pay financial advisory fees of $0.9 million to MGCO, (v) pay debt costs
related to the Revolving Credit Facility of $0.9 million and (vi) for general
corporate purposes. Additional borrowings under the Revolving Credit Facility
will be available for general corporate purposes, which may include future
acquisitions.
TCMS intends to enter into a credit agreement with the Lender providing for
the Revolving Credit Facility prior to the closing of the Offering. Pursuant to
a commitment letter obtained from the Lender, TCMS expects the Revolving Credit
Facility will be secured by liens on substantially all the Company's existing
property, plant and equipment. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Combined Liquidity and Capital
Resources."
The indebtedness of the Founding Companies to be repaid from the proceeds
of the Offering bears interest at rates ranging from 6.6% to 11.2% per annum and
would otherwise mature at various dates through April 2003. Advances under the
J&D Loan Agreement bear interest at a rate of 10.0% per annum and are due on or
before the earlier of June 19, 1998 and 30 days following the closing of the
Offering.
DIVIDEND POLICY
TCMS currently intends to retain its earnings, if any, to finance the
expansion of its business and for general corporate purposes, including future
acquisitions, and does not anticipate paying any cash dividends on its Common
Stock for the foreseeable future. Any future dividends will be at the discretion
of the Board of Directors, after taking into account various factors, including,
among others, the Company's financial condition, results of operations, cash
flows from operations, current and anticipated cash needs and expansion plans,
the income tax laws then in effect, the requirements of Delaware law, the
restrictions imposed by the Revolving Credit Facility and any restrictions that
may be imposed by the Company's future credit arrangements. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Combined Liquidity and Capital Resources."
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<PAGE> 18
CAPITALIZATION
The following table sets forth the short-term debt and current maturities
of long-term debt and capitalization of the Company as of June 30, 1997(i) on a
pro forma combined basis to give effect to the Acquisitions and (ii) as adjusted
to give effect to the Offering and the application of the estimated net proceeds
therefrom and the receipt and application of $35.0 million of initial borrowings
under the Revolving Credit Facility, as described in "Use of Proceeds." This
table should be read in conjunction with the Unaudited Pro Forma Combined
Financial Statements of the Company and the notes thereto included in this
Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
------------------------
PRO FORMA AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Notes payable and current maturities of long-term debt(1)... $ 4,027 $ 1,294
Notes payable to founding stockholders(2)................... 85,686 --
------- --------
Total short-term debt............................. $89,713 $ 1,294
======= ========
Long-term debt, net of current maturities................... $11,654 $ 37,700
Stockholders' equity:
Preferred Stock, $.001 par value, 2,000,000 shares
authorized; none issued and outstanding................ -- --
Common Stock, $.001 par value, 20,000,000 shares
authorized; 3,826,933 issued and outstanding, pro
forma; and 8,826,933 issued and outstanding, as
adjusted............................................... 4 9
Restricted Common Stock, $.001 par value, 3,000,000 shares
authorized; none issued and outstanding................ -- --
Additional paid-in capital................................ 9,948 78,499
Retained earnings......................................... 6,635 6,635
Net unrealized gain on available for sale securities, net
of deferred income taxes............................... 14 14
------- --------
Total stockholders' equity........................... 16,601 85,157
------- --------
Total capitalization.............................. $28,255 $122,857
======= ========
</TABLE>
- ---------------
(1) For a description of the Company's debt, see the notes to Unaudited Pro
Forma Combined Financial Statements and notes to the Founding Companies'
Financial Statements included herein.
(2) Includes the cash portion of the aggregate consideration to be paid in
connection with the Acquisitions, which will be paid from a portion of the
net proceeds of the Offering and borrowings under the Revolving Credit
Facility.
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<PAGE> 19
DILUTION
The deficit in pro forma net tangible book value of the Company as of June
30, 1997 was approximately $(48.0) million, or approximately $(12.56) per share
of Common Stock, after giving effect to the Acquisitions and the financings
thereof. The pro forma net tangible book value per share represents the quotient
of the Company's pro forma tangible net worth (pro forma total tangible assets
less pro forma total liabilities) divided by the number of shares of Common
Stock to be outstanding after giving effect to the Acquisitions. After giving
effect to the sale of the shares of Common Stock offered hereby, and after
deducting underwriting discounts and estimated offering expenses payable by the
Company and the application of the estimated net proceeds therefrom and the
receipt and application of $35.0 million of funding under the Revolving Credit
Facility, as described in "Use of Proceeds," the Company's pro forma net
tangible book value as of June 30, 1997 would have been approximately $20.5
million, or approximately $2.32 per share. This represents an immediate increase
in pro forma net tangible book value of approximately $14.88 per share to
existing stockholders and an immediate dilution of approximately $12.68 per
share to new investors purchasing shares in the Offering. The following table
illustrates this pro forma dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $15.00
Pro forma net tangible book value per share before the
Offering.................................................. $(12.56)
Increase in pro forma net tangible book value per share
attributable to new investors............................. 14.88
-------
Pro forma net tangible book value per share after the
Offering.................................................. 2.32
------
Dilution per share to new investor(s)....................... $12.68
======
</TABLE>
The dilution to new investors purchasing shares in the Offering will
increase if the initial public offering price is higher, and will decrease if
the initial public offering price is lower, than $15.00 per share.
The following table sets forth, on a pro forma basis to give effect to the
Acquisitions as of June 30, 1997, the number of shares of Common Stock purchased
from the Company, the total consideration paid and the average price per share
paid by existing stockholders and the new investors purchasing shares of Common
Stock from the Company in the Offering (before deducting underwriting discounts
and commissions and estimated offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 3,826,933 43.4% $(48,048,000)(1) (178)% $12.56
New investors.............. 5,000,000 56.6% 75,000,000 278 15.00
--------- ----- ------------ -----
Total............ 8,826,933 100.0% $ 26,952,000 100.0%
========= ===== ============ =====
</TABLE>
- ---------------
(1) Total consideration paid by existing stockholders represents the Company's
pro forma combined stockholders' equity less pro forma combined goodwill, in
each case before giving effect to the post-merger adjustments set forth in
the Unaudited Pro Forma Combined Balance Sheet of TCMS and the Founding
Companies included herein.
18
<PAGE> 20
SELECTED FINANCIAL INFORMATION
In accordance with the applicable accounting rules of the Commission,
Woodson has been identified as the "accounting acquiror" for financial
accounting purposes. The following selected historical consolidated financial
information of the accounting acquiror has been derived (i) from the audited
financial statements of Woodson for the years ended December 31, 1992, 1993,
1994, 1995 and 1996 and (ii) from the unaudited financial statements of Woodson
for the six months ended June 30, 1996 and 1997, which have been prepared on the
same basis as the audited statements and, in the opinion of Woodson, reflect all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of that information. See the combined historical financial
statements of Woodson and the notes thereto included herein. The following
summary unaudited pro forma financial information represents historical
information of the Company, as adjusted to give effect to (i) the Acquisitions,
(ii) the closing of the Offering and the application of the proceeds therefrom,
(iii) the receipt and application of $35.0 million of initial borrowings under
the Revolving Credit Facility and (iv) the other pro forma adjustments referred
to below. See the Unaudited Pro Forma Combined Financial Statements and the
notes thereto included herein.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31 ENDED JUNE 30
------------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL STATEMENT OF OPERATIONS
INFORMATION FOR WOODSON:
Revenue.............................. $25,529(1) $14,302 $ 7,786 $18,075 $17,933 $10,689 $18,104
Cost of revenue...................... 21,845(1) 10,909 5,874 12,716 13,561 7,833 15,243
Selling, general and administrative
expenses........................... 3,254 2,991 3,011 2,672 2,968 1,479 1,435
Depreciation and amortization........ 794 831 728 574 562 291 455
------- ------- ------- ------- ------- ------- -------
Operating income (loss).............. (364) (429) (1,827) 2,113 842 1,086 971
Interest income...................... 59 43 20 25 86 40 64
Interest expense..................... (57) (58) (101) (109) (35) (6) (45)
Other income, net.................... 248(2) 107 96 69 357(3) 99 496(3)
------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes.... (114) (337) (1,812) 2,098 1,250 1,219 1,486
Provision (benefit) for income
taxes.............................. (4) (141) (86) 91 91 17 191
Cumulative effect of accounting
change............................. -- 225(4) -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Net income (loss).................... $ (110) $ 29 $(1,726) $ 2,007 $ 1,159 $ 1,202 $ 1,295
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, 1996 ENDED JUNE 30, 1997
----------------- --------------------
(IN THOUSANDS, EXCEPT SHARE AND PER
SHARE INFORMATION)
<S> <C> <C>
PRO FORMA COMBINED STATEMENT OF OPERATIONS INFORMATION(5):
Revenue................................................... $ 72,744 $ 54,906
Cost of revenue........................................... 60,573 42,923
Selling, general and administrative expenses(6)........... 6,931 3,943
Depreciation and amortization(7).......................... 5,918 3,626
---------- ----------
Operating income (loss)................................... (678) 4,414
Interest expense(8)....................................... (4,519) (2,259)
Other income, net......................................... 1,163 617
Provision (benefit) for income taxes...................... (967) 1,432
---------- ----------
Net income (loss)......................................... $ (3,067) $ 1,340
========== ==========
Pro forma income (loss) per share......................... $ (.35) $ .15
Shares used in computing pro forma income (loss) per
share(9)................................................ 8,850,266 8,850,266
</TABLE>
19
<PAGE> 21
<TABLE>
<CAPTION>
DECEMBER 31 JUNE 30, 1997
------------------------------------------ ------------------------
PRO FORMA
AS
1992 1993 1994 1995 1996 HISTORICAL ADJUSTED(5)
------ ------ ------ ------ ------ ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Working capital............................... $3,938 $2,862 $1,401 $4,628 $3,803 $ 3,432 $ 9,445
Property, plant and equipment, net............ 2,745 2,669 2,252 1,872 2,956 4,348 63,493
Total assets.................................. 9,956 8,764 6,997 9,007 9,156 13,648 162,590
Long-term debt, net of current maturities..... 79 48 19 -- -- -- 37,700
Shareholders' equity.......................... 7,775 7,370 5,646 7,616 7,717 8,707 85,157
</TABLE>
- ---------------
(1) Variance between years is primarily attributable to a higher level of
construction activity and the fact that the 1992 period was a thirteen-month
period due to a change in fiscal year end.
(2) This amount is primarily comprised of royalty income not realized in other
periods.
(3) This amount primarily represents gains recognized on the sale of various
assets.
(4) Represents the net effect of adopting FASB No. 109, "Accounting for Income
Taxes."
(5) The pro forma combined statement of operations information assumes the
Offering, the Acquisitions, $35.0 million of initial borrowings under the
Revolving Credit Facility and the issuance of the presently outstanding
Common Stock all were closed on January 1 of each period presented. The pro
forma, as adjusted balance sheet information assumes those transactions were
closed on June 30, 1997. The pro forma combined financial information (i) is
not necessarily indicative of the results the Company would have obtained
had these events actually occurred when assumed or of the Company's future
results, (ii) is based on preliminary estimates, available information and
certain assumptions management deems appropriate and (iii) should be read in
conjunction with the financial statements and notes thereto included in this
Prospectus.
(6) Includes the effect of certain eliminations of related-party rental and
lease expenses resulting from the purchase of certain real properties as
part of the Acquisitions, as follows: (i) $357,000 for the year ended
December 31, 1996 and (ii) $179,000 for the six months ended June 30, 1997.
Does not include anticipated future costs related to TCMS' new corporate
management and costs associated with being a public company, which cannot be
accurately estimated at this time and which management of TCMS expects will
be offset by certain cost savings and margin improvements resulting from the
combination of the Founding Companies (which also cannot be accurately
estimated at this time).
(7) Includes amortization of the $64.6 million of goodwill to be recorded as a
result of the Acquisitions and additional depreciation expense due to the
allocation of $43.7 million of the purchase price to property, plant and
equipment, as described in the Notes to the Unaudited Pro Forma Combined
Financial Statements.
(8) Reflects interest expense relating to $35.0 million of initial borrowings
under the Revolving Credit Facility and the $3.0 million of 8.0% notes being
issued to the sole shareholder of RFCNI as part of the Acquisition of RFCNI,
net of a reduction in interest expense related to the refinancing of the
Founding Companies' outstanding indebtedness.
(9) Includes (i) an aggregate of 1,256,000 shares issued to founders of TCMS and
certain of its executive officers and consultants, (ii) 2,570,933 shares to
be issued as consideration in the Acquisitions, (iii) the effect of 50,000
shares issuable pursuant to the MG Warrant and (iv) the 5,000,000 shares
being offered hereby.
20
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Selected
Financial Information" and the financial statements and the notes thereto
included elsewhere in this Prospectus. The following information contains
forward-looking statements. For a discussion of certain limitations inherent in
such statements, see "Risk Factors -- Forward-Looking Information."
INTRODUCTION
The Company derives its revenue primarily from providing services related
to pipeline installation and repair, hydrostatic testing and commissioning of
pipelines, and fabrication and refurbishment of components for oil and gas
production platforms and drilling rigs. To a lesser extent, the Company
generates revenue from (i) the manufacture and sale of amphibious undercarriages
for marine construction equipment used in stump-studded swamp terrain and (ii)
onshore environmental site assessments and on-site remediation of petroleum-
contaminated areas.
Most of the Company's services are provided under fixed-priced contracts
and are generally completed within one year. These contracts are usually
accounted for using the percentage-of-completion method of accounting. Under
this method, the percentage-of-completion is determined by comparing contract
costs incurred to date with total estimated contract costs. Any significant
revision in cost and income estimates is reflected in the accounting period in
which the facts that require the revision become known. Income is recognized by
applying the percentage completed to the projected total income for each
contract in progress. Cost of revenue consists of direct material, labor and
subcontracting costs and indirect costs related to contract performance, such as
indirect labor, supplies and tools. Cost of revenue also includes the
manufacturing costs related to the amphibious undercarriages sold and costs
associated with the services provided for site assessments and remediation
activities. Selling, general and administrative expenses have historically
consisted primarily of compensation and benefits to owners as well as to sales
and administrative employees, fees for professional services and other general
office expenses. Selling, general and administrative expenses have also
historically included incentive and discretionary bonuses paid to owners,
including amounts paid in lieu of S corporation distributions to enable them to
meet their income tax obligations.
The Founding Companies have historically operated as independent, privately
owned entities, and their results of operations reflect varying tax structures
(S corporations or C corporations) which have influenced the historical level of
owners' compensation. Cost of revenue and selling, general and administrative
expenses as a percentage of revenue may not be comparable among the individual
Founding Companies because of differences in their operations.
The Company believes the combination of the Founding Companies will provide
opportunities to improve operating margins and increase profitability. The
Company believes it will be able to achieve operating efficiencies and cost
savings by consolidating overlapping facilities and certain administrative
functions, eliminating the rental expense on certain related party leases
relating to certain real properties being purchased as part of the Acquisitions
and by rationalizing its asset base. In addition, the Company believes it will
be able to increase its asset utilization by implementing a comprehensive
marketing effort to capitalize on its position as an integrated provider of
pipeline installation and repair and related services in both the transition
zone and shallow water market segments. The Company anticipates the savings and
margin improvements from these efforts will be partially offset by costs related
to the Company's new corporate management and by costs associated with being a
public company; however, the Company cannot currently quantify these anticipated
savings, margin improvements or costs. Except for the elimination of the rental
expense referred to above, the pro forma financial information herein reflects
neither expected savings, margin improvements nor expected incremental costs.
The marine construction industry along the U. S. Gulf Coast is highly
seasonal as a result of weather conditions, the availability of daylight hours
and the timing of capital expenditures by oil and gas companies. Historically,
the Founding Companies have performed a substantial portion of their services
during the period from March through November, and, therefore, a
disproportionate portion of their contract revenue, gross
21
<PAGE> 23
profit and net income generally has been earned during the second and third
quarters of the calendar year. Because of this seasonality, the Company's future
full year results are not likely to be a direct multiple of any particular
quarter or combination of quarters. Additionally, the Company's results of
operations will also be affected by the level of oil and gas exploration and
development activity maintained by oil and gas companies in the Gulf of Mexico.
The level of exploration and development activity is related to several factors,
including trends of oil and gas prices, exploration and production companies'
expectations of future oil and gas prices, and changes in technology which
reduce costs and improve expected returns on investment.
In July 1996, the Commission issued Staff Accounting Bulletin No. 97 ("SAB
97"), relating to business combinations immediately prior to an initial public
offering. SAB 97 requires that these combinations be accounted for using the
purchase method of accounting and requires one of the companies to be designated
as the accounting acquiror. In connection with the Acquisitions and the
Offering, Woodson has been designated as the acquiring company because its
current shareholders, in the aggregate, represent the highest percentage of the
Common Stock (other than shares of Common Stock to be issued in the Offering)
that will be issued to former shareholders of the Founding Companies. For the
remaining Founding Companies including TCMS, $64.6 million (pro forma as of June
30, 1997) of the excess of the purchase price over the fair value of the net
assets to be acquired, will be recorded as "goodwill" and will be amortized as a
non-cash charge to the Company's statements of operations over a 40-year period.
The annual pro forma impact of this amortization expense, which is generally
non-deductible for tax purposes, is $1.6 million. Prior to the issuance of SAB
97, goodwill and related amortization expense were not required to be recorded
for most business combinations similar to the Acquisitions. See "Certain
Transactions -- Organization of the Company."
COMBINED RESULTS OF OPERATIONS
The combined results of operations of the Founding Companies for the
periods presented in the table below do not represent combined results of
operations presented in accordance with generally accepted accounting principles
(because combining companies not under common control is not permitted under
those principles), but are only a summation of the revenue, cost of revenue,
selling, general and administrative expenses and depreciation and amortization
of TCMS and the individual Founding Companies on a historical basis (and these
items as a percentage of revenue). The combined results exclude the effects of
pro forma adjustments and intercompany eliminations between the Founding
Companies and, therefore, may not be comparable to the Company's
post-combination results of operations because: (i) the Founding Companies were
not under common control or common management during the periods presented; (ii)
the Founding Companies had different tax structures during the periods
presented; (iii) the Company will incur incremental costs related to its new
corporate management and being a public company; (iv) the Company will use the
purchase method to record the Acquisitions, resulting in the recording of
goodwill, which will be amortized over 40 years; and (v) the combined
information does not reflect the potential benefits and cost savings the Company
expects to realize when operating as a combined entity.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
----------------------------------
1994(1) 1995(1) 1996(2) 1996 1997
--------------- --------------- --------------- --------------- ---------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue........................ $33,989 100.0% $48,569 100.0% $72,983 100.0% $36,725 100.0% $56,096 100.0%
Costs and expenses:
Cost of revenue.............. 26,138 76.9 42,279 87.0 60,812 83.3 29,347 79.9 44,113 78.6
Selling, general and
administrative expenses.... 6,315 18.6 6,522 13.4 7,288 10.0 3,486 9.5 4,122 7.4
Depreciation and
amortization............... 1,535 4.5 1,729 3.6 2,415 3.3 1,220 3.3 1,458 2.6
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Operating income (loss)........ $ 1 --% $(1,961) (4.0)% $ 2,468 3.4% $ 2,672 7.3% $ 6,403 11.4%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
- ---------------
(1) The financial information is presented on the basis of a year ended December
31 for each Founding Company except CSI, which is presented for the fiscal
year ended May 31.
(2) Reflects results of operations for the Founding Companies for the twelve
months ended December 31, 1996.
22
<PAGE> 24
Recent Unaudited Pro Forma Combined Financial Results
On a pro forma combined basis, the Founding Companies generated revenue of
$76.3 million for the eight months ended August 31, 1997. The pro forma combined
operating income for the period was $8.0 million, which is net of $4.9 million
of depreciation and amortization on a pro forma combined basis. Pro forma
combined net income for the eight months ended August 31, 1997 was $2.9 million,
resulting in pro forma income per share of $0.33 (using 8,850,266 shares of
Common Stock in the computation of pro forma income per share).
Combined results for the six months ended June 30, 1997 compared to the six
months ended June 30, 1996
Revenue. Revenue increased $19.4 million, or 52.7%, for the six months
ended June 30, 1997 compared to the corresponding period in the prior year. The
increase primarily resulted from increased pipeline construction activity at
Woodson and HBH, with revenue increasing by $12.2 million from this activity. In
addition, revenue increased $5.8 million at CSI, with the newly acquired (and
recently refurbished) M/V Discovery (a multi-purpose service vessel) generating
most of this increase, and $1.4 million at RFCNI, as a result of increased
fabrication activity during the 1997 period.
Cost of revenue. Cost of revenue increased $14.8 million, or 50.3%, for the
six months ended June 30, 1997 compared to the corresponding period in the prior
year. The increase primarily resulted from increased costs of $10.5 million at
Woodson and HBH, associated principally with increased pipeline construction
activity. In addition, costs associated with the operation of the M/V Discovery
were primarily responsible for a $3.2 million increase in cost of revenue at CSI
for the 1997 period. As a percentage of revenue, cost of revenue was 78.6% for
the six months ended June 30, 1997 compared to 79.9% for the corresponding
period in the prior year.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.6 million, or 18.2%, for the six months
ended June 30, 1997 compared to the corresponding period in the prior year. As a
percentage of revenue, selling, general and administrative expenses were 7.4%
for the six months ended June 30, 1997 compared to 9.5% for the corresponding
period in the prior year.
Depreciation and amortization. Depreciation and amortization expenses
increased $0.2 million, or 19.5%, for the six months ended June 30, 1997
compared to the corresponding period in the prior year. The increase was related
to equipment purchases and the acquisition of, and improvements to, the M/V
Discovery.
Combined results for 1996 compared to 1995
Revenue. Revenue increased $24.4 million, or 50.3%, in 1996 compared to
1995. The increase was due primarily to the increased revenues of $22.1 million
at HBH resulting largely from a full year of operations of the BH-400 pipelay
barge, which was placed in service in October 1995, and the completion of a
large pipeline installation project in the transition zone along the U.S. Gulf
Coast.
Cost of revenue. Cost of revenue increased $18.5 million, or 43.8%, in 1996
compared to 1995. The increase was primarily attributable to the increase in
activity resulting from a full year of operations of the BH-400. As a percentage
of revenue, cost of revenue was 83.3% in 1996 compared to 87.0% in 1995. The
improved margin was primarily due to reductions in standby time, weather
downtime and subcontract services.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.8 million, or 11.7%, in 1996 compared to
1995. As a percentage of revenue, selling, general and administrative expenses
were 10.0% in 1996 compared to 13.4% in 1995.
Depreciation and amortization. Depreciation and amortization expenses
increased $0.7 million, or 39.7%, in 1996 compared to 1995, due primarily to the
acquisition of the BH-400 in October 1995.
Combined results for 1995 compared to 1994
Revenue. Revenue increased $14.6 million, or 42.9%, in 1995 compared to
1994. The increase was due primarily to increased pipeline installation and
repair operations and increased fabrication activity.
23
<PAGE> 25
Cost of revenue. Cost of revenue increased $16.1 million, or 61.8%, in 1995
compared to 1994. The increase was due to increased pipeline installation and
repair activity, including increased costs relating to standby time, weather
downtime and subcontract services caused in part by the late delivery of the
BH-400. In addition, increased activity in lower margin, material-intensive
fabrication work contributed to the cost increase as well as to the higher cost
as a percentage of revenue. As a percentage of revenue, cost of revenue was
87.0% in 1995 compared to 76.9% in 1994.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.2 million, or 3.3%, in 1995 compared to
1994. As a percentage of revenue, selling, general and administrative expenses
were 13.4% in 1995 compared to 18.6% in 1994.
Depreciation and amortization. Depreciation and amortization expenses
increased $0.2 million, or 12.6%, due primarily to equipment purchases by HBH.
COMBINED LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1997, TCMS and the Founding Companies
generated a combined $2.5 million of net cash from operating activities. Net
cash used in investing activities was a combined $2.9 million. Principal uses of
cash consisted of $5.5 million of capital expenditures, including approximately
$3.5 million to acquire the M/V Discovery, offset partially by $2.4 million in
proceeds from sales of investments. Net cash provided by financing activities
was a combined $2.2 million, due to net increases in long-term debt. At June 30,
1997, TCMS and the Founding Companies had working capital of $5.7 million and
long-term debt, net of current maturities, of $9.3 million. On a pro forma
basis, after giving effect to the Offering and the application of the proceeds
therefrom together with $35.0 million of initial borrowings under the Revolving
Credit Facility, the Company would have had combined working capital of $9.4
million and long-term debt, net of current maturities, of $37.7 million at June
30, 1997.
During 1996, the Founding Companies generated a combined $3.5 million in
net cash from operating activities. Principal sources of cash were net income of
$2.5 million and depreciation and amortization of $2.4 million, offset partially
by net uses of cash for working capital, principally accounts receivable. Net
cash used in investing activities was a combined $1.9 million. Principal uses of
cash consisted of $5.0 million for purchases of equipment, offset partially by
proceeds from the sales of investments, collection of notes receivable from a
shareholder and proceeds from the sale of equipment. Net cash used in financing
activities was a combined $2.1 million. At December 31, 1996, the Founding
Companies had combined working capital of $0.9 million and long-term debt of
$7.6 million.
TCMS intends to enter into a credit agreement with the Lender providing for
the Revolving Credit Facility prior to the closing of the Offering. TCMS expects
that the Revolving Credit Facility will provide for borrowings up to $75.0
million, with the initial borrowing availability being $50.0 million and the
remaining $25.0 million being made available from time to time and in such
amounts as the Lender shall determine in its sole discretion. The Company also
expects borrowings under the Revolving Credit Facility will bear interest at
LIBOR plus 275 basis points (8.37% at October 3, 1997), payable monthly.
Interest expense will be effected by approximately $44,000 for a 1/8 percent
variance in the LIBOR rate on the initial borrowings of $35.0 million. The
Revolving Credit Facility will be secured by liens on substantially all the
Company's existing property, plant and equipment and a pledge of the capital
stock of the Founding Companies and each of the Company's other subsidiaries.
Borrowings under the Revolving Credit Facility are expected to be used to pay a
portion of the aggregate purchase price for the Acquisitions and for general
corporate purposes, which may include future acquisitions. Based on a commitment
letter (and related term sheet) obtained from the Lender, the Company expects
that the Revolving Credit Facility will require the Company to comply with
various loan covenants, including (i) maintenance of certain financial ratios;
(ii) restrictions on additional indebtedness; and (iii) restrictions on liens,
guarantees, advances and dividends. Notwithstanding these restrictions, it is
anticipated that the Revolving Credit Facility will permit the Company to obtain
a working capital line of credit (with amounts thereunder not to exceed $10.0
million as of the end of each quarter), secured by the Company's accounts
receivable. The Company anticipates the Revolving Credit Facility will extend
through October 1999 and all outstanding principal and accrued and unpaid
interest as of that date will
24
<PAGE> 26
be due and payable on that date. The Company also anticipates the Revolving
Credit Facility will contain mandatory prepayment provisions requiring
prepayment of outstanding borrowings from the issuance of debt or equity
securities for cash and any proceeds from other borrowings (other than under the
working capital line of credit referred to above).
The Company intends to continue pursuing attractive acquisition
opportunities. The timing, size or success of any acquisition effort and the
associated potential capital commitments are unpredictable. The Company expects
to fund future acquisitions through the issuance of additional equity as well as
through a combination of working capital, cash flow from operations and
borrowings, including borrowings under the Revolving Credit Facility.
INFLATION
Inflation has not had a material impact on the Company's results of
operations for the last three years or during the six months ended June 30,
1997.
RESULTS OF OPERATIONS -- WOODSON
The following table presents certain selected data (and that data as a
percentage of revenue) of Woodson on a historical basis for the periods
indicated (dollars in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31 JUNE 30
--------------------------------------------------- ---------------------------------
1994 1995 1996 1996 1997
--------------- --------------- --------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue........................... $ 7,786 100.0% $18,075 100.0% $17,933 100.0% $10,689 100.0% $18,104 100.0%
Costs and expenses:
Cost of revenue................. 5,874 75.4 12,716 70.3 13,561 75.6 7,833 73.3 15,243 84.2
Selling, general and
administrative expenses....... 3,011 38.7 2,672 14.8 2,968 16.6 1,479 13.8 1,435 7.9
Depreciation and amortization... 728 9.4 574 3.2 562 3.1 291 2.7 455 2.5
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Operating income (loss)........... $(1,827) (23.5)% $ 2,113 11.7% $ 842 4.7% $ 1,086 10.2% $ 971 5.4%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
Woodson's results for the six months ended June 30, 1997 compared to the six
months ended June 30, 1996
Revenue. Revenue increased $7.4 million, or 69.4%, for the six months ended
June 30, 1997 compared to the corresponding period in the prior year. The
increase was primarily due to increases of $7.2 million and $0.6 million,
respectively, in pipeline construction revenue and revenue related to the
manufacturing of amphibious undercarriages, partially offset by a decrease of
$0.4 million in revenue from environmental services. The pipeline construction
revenue increase was attributable to improved market activity in 1997.
Cost of revenue. Cost of revenue increased $7.4 million, or 94.6%, for the
six months ended June 30, 1997 compared to the corresponding period in the prior
year. The increase was primarily due to the increase in pipeline construction
activity in the 1997 period. As a percentage of revenue, cost of revenue was
84.2% for the six months ended June 30, 1997 compared to 73.3% for the
corresponding period in the prior year.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased $44,000, or 3.0%, for the six months ended
June 30, 1997 compared to the corresponding period in the prior year. As a
percentage of revenue, selling, general and administrative expenses were 7.9%
for the six months ended June 30, 1997 compared to 13.8% for the corresponding
period in the prior year.
Depreciation and amortization. Depreciation and amortization expenses
increased $0.2 million, or 56.4%, for the six months ended June 30, 1997
compared to the corresponding period in the prior year. The increase was due to
the additional property, plant and equipment placed in service in 1996 and early
1997.
25
<PAGE> 27
Woodson's results for 1996 compared to 1995
Revenue. Revenue decreased $0.1 million, or 0.8%, in 1996 compared to 1995.
The decrease was primarily a result of a $0.7 million decrease in environmental
services revenue caused by less activity with the Louisiana Department of
Environmental Quality, partially offset by a $0.6 million increase in revenue
from sales of amphibious undercarriages.
Cost of revenue. Cost of revenue increased $0.8 million, or 6.6%, in 1996
compared to 1995. The increase was primarily due to additional maintenance costs
during equipment downtime. As a percentage of revenue, cost of revenue was 75.6%
in 1996 compared to 70.3% in 1995.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.3 million, or 11.1%, in 1996 compared to
1995. The increase was primarily due to a one-time bonus paid to officers and
the employment of a safety consultant. As a percentage of revenue, selling,
general and administrative expenses were 16.6% in 1996 compared to 14.8% in
1995.
Depreciation and amortization. Depreciation and amortization expenses were
essentially unchanged for 1996 compared to 1995.
Woodson's results for 1995 compared to 1994
Revenue. Revenue increased $10.3 million, or 132%, in 1995 compared to
1994. The increase was primarily due to the unusual decline in 1994 new sales
contracts resulting from adverse market conditions and a corresponding increase
in 1995 revenue because of increased activity, primarily in the pipeline
construction market.
Cost of revenue. Cost of revenue increased $6.8 million, or 117%, in 1995
compared to 1994. As a percentage of revenue, cost of revenue was 70.3% in 1995
compared to 75.4% in 1994. The percentage decrease was primarily due to higher
utilization rates for Woodson's pipelaying barges and related equipment, which
resulted in a reduction in maintenance costs as there was less time available in
1995 to perform maintenance on idle equipment.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased $0.3 million, or 11.3%, in 1995 compared to
1994. The decrease was primarily due to a reduction in bad debt expense. As a
percentage of revenue, selling, general and administrative expenses were 14.8%
in 1995 compared to 38.7% in 1994. The percentage decrease was primarily due to
the significant increase in revenue discussed above without a commensurate
increase in overhead expenses.
Depreciation and amortization. Depreciation and amortization expenses
decreased $0.2 million 1995, or 21.2%, compared to 1994.
Woodson's liquidity and capital resources
Woodson generated $0.3 million in net cash in operating activities for the
six months ended June 30, 1997. Generally, sufficient funds for operating the
business have been generated from operations with minimum borrowings, due in
part to the S elections made by two of the affiliated entities, which limited
corporate level income taxes. Net cash provided by investing activities was $1.3
million, primarily from proceeds from sales of investments, which were offset
partially by capital expenditures. Net cash used in financing activities was
$0.8 million, representing repayments of short-term borrowings. At June 30,
1997, Woodson had working capital of $3.4 million, including $1.0 million in
short-term borrowings.
Woodson generated $2.7 million in net cash from operating activities in the
year ended December 31, 1996. Net cash used in investing activities was
approximately $1.8 million, principally for capital expenditures. Net cash used
in financing activities was $0.6 million, primarily for the payment of
dividends. At December 31, 1996, Woodson had working capital of $3.8 million,
including $0.7 million in short-term borrowings.
26
<PAGE> 28
RESULTS OF OPERATIONS -- CSI
The following table presents certain selected data (and that data as a
percentage of revenue) of CSI on a historical basis for the periods indicated
(dollars in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
----------------------------------
1994(1) 1995(1) 1996(2) 1996 1997
--------------- --------------- --------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue........................... $ 5,331 100.0% $ 5,226 100.0% $ 8,447 100.0% $ 3,815 100.0% $ 9,606 100.0%
Costs and expenses:
Cost of revenue................. 2,964 55.6 3,334 63.8 5,264 62.3 2,463 64.6 5,651 58.8
Selling, general and
administrative expenses....... 1,725 33.2 2,285 44.6 2,435 29.3 1,160 30.4 1,270 13.2
Depreciation and amortization... 288 4.6 269 4.3 359 3.7 202 5.3 245 2.6
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Operating income (loss)........... $ 354 6.6% $ (662) (12.7)% $ 389 4.7% $ (10) (0.3)% $ 2,440 25.4%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
- ---------------
(1) The financial information is presented for the twelve months ended May 31.
(2) Reflects results of operations for the twelve months ended December 31,
1996.
CSI's results for the six months ended June 30, 1997 compared to the six
months ended June 30, 1996
Revenue. Revenue increased $5.8 million, or 152%, for the six months ended
June 30, 1997 compared to the corresponding period in the prior year. The
increase was primarily due to the additional revenue generated by the M/V
Discovery, which was acquired in early January 1997.
Cost of revenue. Cost of revenue increased $3.2 million, or 129%, for the
six months ended June 30, 1997 compared to the corresponding period in the prior
year. The increase was primarily due to costs associated with the operation of
the M/V Discovery. As a percentage of revenue, cost of revenue was 58.8% for the
six months ended June 30, 1997 compared to 64.6% for the corresponding period in
the prior year. The decrease as a percentage of revenue was due to increased
marine construction activity.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.1 million, or 9.5%, for the six months
ended June 30, 1997 compared to the corresponding period in the prior year. As a
percentage of revenue, selling, general and administrative expenses were 13.2%
for the six months ended June 30, 1997 compared to 30.4% for the corresponding
period in the prior year. The percentage decrease was primarily attributable to
the significant increase in revenue relating to the M/V Discovery without a
commensurate increase in overhead expenses.
Depreciation and amortization. Depreciation and amortization expenses
increased $43,000, or 21.3%, for the six months ended June 30, 1997 compared to
the corresponding period in the prior year. The increase was related to the
acquisition of, and improvements to, the M/V Discovery.
CSI's results for the year ended December 31, 1996 compared to the year ended
May 31, 1995
Revenue. Revenue increased $3.2 million, or 61.3%, in 1996 compared to the
1995 period. The increase was primarily due to an increase in marine
construction activity in the Gulf of Mexico.
Cost of revenue. Cost of revenue increased $1.9 million, or 57.9%, in 1996
compared to the 1995 period. The increase in cost of revenue was primarily due
to the corresponding increase in revenue and related direct costs resulting from
the increased activity. As a percentage of revenue, cost of revenue was 62.3% in
1996 compared to 63.8% in the 1995 period.
27
<PAGE> 29
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.2 million, or 6.6%, in 1996 compared to the
1995 period. As a percentage of revenue, selling, general and administrative
expenses were 28.8% in 1996 compared to 43.7% in the 1995 period. The percentage
decrease was primarily due to the significant increase in revenue experienced in
1996 without a commensurate increase in overhead expenses.
Depreciation and amortization. Depreciation and amortization expenses
increased $0.1 million, or 33.5%, for 1996 compared to the 1995 period. The
increase was related to additions of property, plant and equipment in 1995 and
1996.
CSI's results for the year ended May 31, 1995 compared to the year ended May
31, 1994
Revenue. Revenue decreased nominally in 1995 compared to the 1994 period.
Cost of revenue. Cost of revenue increased $0.4 million, or 12.5%, in 1995
compared to the 1994 period. As a percentage of revenue, cost of revenue was
63.8% in 1995 compared to 55.6% in the 1994 period. The percentage increase was
primarily due to lower margins on contracts for hydrostatic testing services
performed in the 1995 period, resulting from price discounting.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.6 million, or 32.5%, in 1995 compared to
the 1994 period. The increase was primarily due to an expansion of the
administrative staff and the payment of a one-time bonus of $100,000 to CSI's
principal officers. As a percentage of revenue, selling, general and
administrative expenses were 43.7% in 1995 compared to 32.4% in the 1994 period.
Depreciation and amortization. Depreciation and amortization expenses were
essentially unchanged in 1995 compared to the 1994 period.
CSI's results for the seven months ended December 31, 1995
The following table presents certain selected data (and that data as a
percentage of revenue) of CSI on a historical basis for the period indicated
(dollars in thousands):
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED
DECEMBER 31,
1995
-----------------
<S> <C> <C>
Revenue..................................................... $6,041 100.0%
Costs and expenses:
Cost of revenue........................................... 3,010 49.8
Selling, general and administrative expenses.............. 1,282 21.2
Depreciation and amortization............................. 177 3.0
------ -----
Operating income............................................ $1,572 26.0%
====== =====
</TABLE>
Revenue. Revenue for the seven months ended December 31, 1995 included
three significant high-margin jobs totaling $2.5 million, or 41.4% of the total
revenue for the period. These unusually high-margin, short-duration jobs were
bid on the basis of standard rental rates and included substantially higher
built-in margins compared to competitive bid projects.
Cost of revenue. As a percentage of revenue, cost of revenue was 49.8%,
compared to 63.8% for the twelve months ended May 31, 1995. The decrease as a
percentage of revenue was due primarily to the higher-margin jobs included in
the job mix in the seven-month period.
Selling, general and administrative expenses. As a percentage of revenue,
selling, general and administrative expenses were 21.2%, compared to 44.6% for
the twelve months ended May 31, 1995. The seven months represented an active
period during which revenues increased substantially while selling, general and
administrative expenses remained relatively constant.
28
<PAGE> 30
Depreciation and Amortization. On a per-month basis, depreciation and
amortization expenses were relatively constant in the seven months ended
December 31, 1995 and the twelve months ended May 31, 1995.
CSI's liquidity and capital resources
CSI generated $0.5 million in net cash from operating activities during the
six months ended June 30, 1997. Net cash used in investing activities was $3.8
million, with $4.2 million used for capital expenditures being offset partially
by the sale of certain investments that generated net proceeds of $0.4 million.
Net cash provided by financing activities was approximately $3.7 million,
principally related to the issuance of notes payable. At June 30, 1997, CSI had
working capital of $2.1 million and $5.8 million of debt outstanding (of which
$1.1 million was classified as current). Long-term debt consisted of a $3.4
million mortgage note on the M/V Discovery and three bank notes aggregating $1.9
million.
CSI generated $1.2 million in net cash from operating activities during the
year ended December 31, 1996. Net cash used in investing activities was
approximately $0.2 million, principally for capital expenditures, which was
offset by proceeds from sales of investments. Net cash used in financing
activities was $1.2 million, which included borrowings of $1.8 million and
repayments of $0.4 million and purchase of treasury stock for $2.3 million. At
December 31, 1996, CSI had working capital of $1.7 million and $2.1 million of
debt outstanding, all of which is classified as current because the notes are
due on demand.
RESULTS OF OPERATIONS -- HBH
The following table presents certain selected data (and that data as a
percentage of revenue) of HBH on a historical basis for the periods indicated
(dollars in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31 JUNE 30
---------------------------------------------------- ----------------------------------
1994 1995 1996 1996 1997
--------------- --------------- --------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue.......................... $15,261 100.0% $14,771 100.0% $36,873 100.0% $19,062 100.0% $23,850 100.0%
Costs and expenses:
Cost of revenue................ 12,585 82.4 16,803 113.7 33,727 91.5 16,343 85.7 19,394 81.3
Selling, general and
administrative expenses...... 929 6.1 867 5.9 1,000 2.7 484 2.5 671 2.8
Depreciation and
amortization................. 503 3.3 871 5.9 1,482 4.0 719 3.8 750 3.2
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Operating income (loss).......... $ 1,244 8.2% $(3,770) (25.5)% $ 664 1.8% $ 1,516 8.0% $ 3,035 12.7%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
HBH's results for the six months ended June 30, 1997 compared to the six
months ended June 30, 1996
Revenue. Revenue increased $4.8 million, or 25.1%, for the six months ended
June 30, 1997 compared to the corresponding period in the prior year. The
revenue increase was attributable to improved pipeline construction activity in
1997, with two major projects contributing $16.8 million in revenue.
Cost of revenue. Cost of revenue increased $3.1 million, or 18.7%, for the
six months ended June 30, 1997 compared to the corresponding period in the prior
year. The increase was primarily attributable to costs related to the higher
level of activity in pipeline construction in 1997. Improved pricing and less
subcontracting costs as a percentage of overall cost on the major projects in
the current period have contributed to higher margins. As a percentage of
revenue, cost of revenue was 81.3% for the six months ended June 30, 1997
compared to 85.7% for the corresponding period in the prior year.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.2 million, or 38.6%, for the six months
ended June 30, 1997 compared to the corresponding period in the prior year. The
increase was primarily attributable to accruals of performance bonuses in 1997,
which were partially
29
<PAGE> 31
offset by the elimination of consulting fees paid in 1996 to HBH's former sole
shareholder. As a percentage of revenue, selling, general and administrative
expenses were 2.8% for the six months ended June 30, 1997 compared to 2.5% for
the corresponding period in the prior year.
Depreciation and amortization. Depreciation and amortization expenses
increased $31,000, or 4.3%, for the six months ended June 30, 1997 compared to
the corresponding period in the prior year due to additions to its property,
plant and equipment.
HBH's results for 1996 compared to 1995
Revenue. Revenue increased $22.1 million, or 150%, in 1996 compared to
1995. The increase was due primarily to full year operating results of the
BH-400, which was placed in service in October 1995, and the completion of a
large pipeline installation project which generated $13.0 million in revenue.
Cost of revenue. Cost of revenue increased $16.9 million, or 101%, in 1996
compared to 1995. The increase was primarily attributable to direct costs, such
as labor, associated with the operations of the BH-400. As a percentage of
revenue, cost of revenue was 91.5% in 1996 compared to 113.7% in 1995.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.1 million, or 15.3%, in 1996 compared to
1995. The increase was primarily attributable to increased salaries. As a
percentage of revenue, selling, general and administrative expenses were 2.7% in
1996 compared to 5.9% in 1995.
Depreciation and amortization. Depreciation and amortization expenses
increased $0.6 million, or 70.2%, in 1996 compared to 1995, due primarily to the
acquisition of the BH-400 in October 1995.
HBH's results for 1995 compared to 1994
Revenue. Revenue decreased $0.5 million, or 3.2%, in 1995 compared to 1994.
The decrease was due primarily to the completion of a large pipeline
installation project in 1994, which generated $5.6 million in revenue.
Cost of revenue. Cost of revenue increased $4.2 million, or 33.5%, in 1995
compared to 1994. The increase was primarily attributable to the late delivery
of the BH-400, which delayed the start of two fixed-price contract jobs, thereby
increasing costs relating to standby time, weather downtime and sub-contract
services. As a percentage of revenue, cost of revenue was 114% in 1995 compared
to 82.5% in 1994.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased $0.1 million, or 6.7%, in 1995 compared to
1994. The decrease was primarily attributable to the payment of performance
bonuses in 1994. As a percentage of revenue, selling, general and administrative
expenses were 5.9% in 1995 compared to 6.1% in 1994.
Depreciation and amortization. Depreciation and amortization expenses
increased $0.4 million, or 73.2%, in 1995 compared to 1994, due primarily to the
acquisition of the BH-400 in October 1995 and other additions to property, plant
and equipment in 1994 and 1995.
HBH's liquidity and capital resources
HBH generated $1.2 million in net cash from operating activities during the
six months ended June 30, 1997. Net cash used in investing activities was $0.3
million, principally for capital expenditures. Net cash used in financing
activities was $0.9 million, which included $20.2 million proceeds from a bank
line of credit and $21.2 million of repayments. At June 30, 1997, HBH had a
working capital deficit of $0.2 million, including $1.5 million of current
maturities of debt.
HBH generated $0.1 million in net cash from operating activities during the
year ended December 31, 1996. Net cash provided by investing activities was
approximately $0.1 million, principally for capital expenditures of $1.0 million
which was offset by $0.9 million of collections on notes. Net cash used in
financing activities was $0.1 million, which included $29.0 million of
borrowings throughout the year under a
30
<PAGE> 32
bank line of credit, $0.6 million from subordinated debt and $0.3 million from
capital contributions from HBH's sole shareholder, together with debt repayments
throughout the year of $30.5 million. At December 31, 1996, HBH had a working
capital deficit of $3.5 million, including $2.4 million of current maturities of
debt.
RESULTS OF OPERATIONS -- RFCNI
The following table presents certain selected data (and that data as a
percentage of revenue) of RFCNI on a historical basis for the periods indicated
(dollars in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31 JUNE 30
--------------------------------------------------- --------------------------------
1994 1995 1996 1996 1997
-------------- --------------- -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue............................. $5,611 100.0% $10,497 100.0% $9,730 100.0% $3,159 100.0% $4,536 100.0%
Costs and expenses:
Cost of revenue................... 4,715 84.0 9,426 89.8 8,260 84.9 2,708 85.7 3,825 84.3
Selling, general and
administrative expenses......... 650 11.6 698 6.7 885 9.1 363 11.5 674 14.9
Depreciation and amortization..... 16 .3 15 .1 12 .1 8 .3 8 .2
------ ----- ------- ----- ------ ----- ------ ----- ------ -----
Operating income.................... $ 230 4.1% $ 358 3.4% $ 573 5.9% $ 80 2.5% $ 29 0.6%
====== ===== ======= ===== ====== ===== ====== ===== ====== =====
</TABLE>
RFCNI's results for the six months ended June
30, 1997 compared to the six months ended June 30, 1996
Revenue. Revenue increased $1.4 million, or 43.6%, in the six months ended
June 30, 1997 compared to the corresponding period in the prior year. Revenue
from general fabrication work increased $0.8 million and revenue from
fabrication of sewage treatment units increased $0.6 million for the 1997
period.
Cost of revenue. Cost of revenue increased $1.1 million, or 41.2%, for the
six months ended June 30, 1997 compared to the corresponding period in the prior
year. As a percentage of revenue, cost of revenue was 84.3% for the six months
ended June 30, 1997 compared to 85.7% for the corresponding period in the prior
year.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.3 million, or 85.7%, for the six months
ended June 30, 1997 compared to the corresponding period in the prior year. The
increase was primarily attributable to higher levels of marketing personnel and
related costs. As a percentage of revenue, selling, general and administrative
expenses were 14.9% for the six months ended June 30, 1997 compared to 11.5% for
the corresponding period in the prior year.
Depreciation and amortization. Depreciation and amortization expenses were
unchanged for the period ended June 30, 1997 compared to the corresponding
period in the prior year.
RFCNI's results for 1996 compared to 1995
Revenue. Revenue decreased $0.8 million, or 7.3%, in 1996 compared to 1995.
The decrease was due primarily to the completion of a large deck and jacket
fabrication project in 1995, which generated $4.7 million in revenue.
Cost of revenue. Cost of revenue decreased $1.2 million, or 12.4%, in 1996
compared to 1995. The decrease was primarily attributable to less subcontracting
of fabrication work in 1995 compared to 1996. As a percentage of revenue, cost
of revenue was 84.9% in 1996 compared to 89.8% in 1995.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.2 million, or 26.8%, in 1996 compared to
1995. The increase was primarily attributable to an increase in
31
<PAGE> 33
payroll and related costs due to personnel added to expand RFCNI's marketing
capabilities. As a percentage of revenue, selling, general and administrative
expenses were 9.1% for 1996 compared to 6.7% in 1995.
Depreciation and amortization. Depreciation and amortization expenses were
essentially unchanged in 1996 compared to 1995.
RFCNI's results for 1995 compared to 1994
Revenue. Revenue increased $4.9 million, or 87.1%, in 1995 compared to
1994. The increase was due primarily to revenue generated from a large deck and
jacket fabrication project in 1995, which generated $4.7 million in revenue.
Cost of revenue. Cost of revenue increased $4.7 million, or 99.9%, in 1995
compared to 1994. The increase was primarily attributable to high material
procurement costs associated with the above-mentioned deck and jacket
fabrication project. As a percentage of revenue, cost of revenue was 89.8% in
1995 compared to 84.0% in 1994.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $48,000, or 7.4%, in 1995 compared to 1994. As
a percentage of revenue, selling, general and administrative expenses were 6.7%
in 1995 compared to 11.6% in 1994.
Depreciation and amortization. Depreciation and amortization expenses were
essentially unchanged in 1995 compared to 1994.
RFCNI's liquidity and capital resources
RFCNI generated $0.7 million in net cash from operating activities during
the six months ended June 30, 1997. Net cash used in investing activities was
minimal. At June 30, 1997, RFCNI had working capital of $0.5 million and no debt
outstanding.
RFCNI used $0.6 million in net cash from operating activities during the
year ended December 31, 1996. Net cash provided from investing activities was
approximately $0.1 million, principally from collections of debt from related
parties. Net cash used in financing activities was $0.2 million, primarily for
dividend payments to RFCNI's sole shareholder. At December 31, 1996, RFCNI had
working capital of $0.5 million and no debt outstanding.
ACCOUNTING MATTERS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS
No. 128, which is effective for periods ending after December 15, 1997,
including interim periods, simplifies the standards for computing earnings per
share and replaces the presentation of primary earnings per share with a
presentation of basic earnings per share. Initial adoption of this standard is
not expected to have a material impact on the Company's financial position or
results of operations.
32
<PAGE> 34
BUSINESS
GENERAL
TCMS was organized in April 1996 to become a fully integrated marine
construction company focusing on the transition zone (marsh, swamp and coastal
regions out to water depths of 20 feet) and shallow water (water depths of 20 to
200 feet) regions along the U.S. Gulf Coast. The Company's goal is to become a
leader in the consolidation of these fragmented segments of the marine
construction industry through an aggressive acquisition program. TCMS has
entered into definitive agreements to acquire the Founding Companies
concurrently with the closing of the Offering. As a result of the Acquisitions,
the Company believes it will be the largest provider of transition zone marine
construction services along the U.S. Gulf Coast, as well as a significant
provider of shallow water construction services. The Company's primary services
include pipeline installation and repair, hydrostatic testing and commissioning
of pipelines and fabrication and refurbishment of components for offshore
platforms and drilling rigs.
Although TCMS has recently been formed and has no operating history, the
Founding Companies have been in business an average of 47 years and have
substantial experience in operating in difficult transition zone and shallow
water environments. Marine construction activities in the transition zone
require substantial expertise and customized equipment, as compared to open
water operations, due to the unique physical characteristics often involved,
including unstable marshbeds and obstructions such as trees, submerged stumps
and a substantial infrastructure of existing pipelines. The Company believes it
will benefit from the expertise developed by the management and personnel of the
Founding Companies in operating in transition zone and shallow water
environments and its ability to design and manufacture its own specialized
equipment for these operations.
Following the Acquisitions, the Company will provide marine construction
and related services from five port facilities strategically located along the
U.S. Gulf Coast from Orange, Texas to Mobile, Alabama. The Company believes this
geographic coverage will create marketing advantages and operating efficiencies
for the Founding Companies by improving their access to projects in this region
and providing the ability to offer a broader range of services to their existing
customer bases. The Company believes these advantages will result in higher
utilization of its assets. The Company also believes it will be able to use its
fabrication operations to reduce its equipment maintenance costs and related
vessel downtime and eliminate subcontracting of certain services (including
hydrostatic testing and pipeline burial) on many of its pipeline installation
and repair projects.
OPERATIONS
Pipeline Installation and Repair. The efficient development of an offshore
oil and gas field frequently involves the addition or extension of an
infrastructure of gathering lines and trunklines (large diameter pipelines). The
Company's pipeline installation operations are focused on the transition zone
and shallow water regions along the U.S. Gulf Coast, where the Company believes
it is the only company providing pipeline installation and repair services from
water depths of 200 feet through the transition zone and to onshore gathering
and processing facilities. The Company's fleet includes (i) 15 spud barges and
ancillary equipment, operated in water depths of up to 20 feet, and (ii) two
anchor barges and three multipurpose vessels (used in both pipeline installation
and repair and hydrostatic testing, commissioning and related operations),
primarily operated in water depths beyond 20 feet. The Company also owns
specialized equipment for offshore pipeline jetting (a specialized pipeline
burying technique) and testing services, marine dredging and trench digging. The
Company generated revenue of approximately $53.5 million and $45.9 million from
its pipeline installation and repair services during the twelve months ended
December 31, 1996 and the six months ended June 30, 1997, respectively.
Offshore pipeline installation generally involves welding together standard
lengths (typically 40-foot lengths) of concrete coated steel pipe using a series
of welding, X-ray, coating and inspection stations along the length of a barge.
The new welds are X-rayed to ensure their integrity and then coated with
protective materials to inhibit corrosion and add weight to the pipe. In many
cases, the barge moves ahead on its anchors
33
<PAGE> 35
or spuds and the completed pipe sections are moved off the stern to settle on
the seabed. In swamps, marshes and certain other transition zone waters, the
completed pipeline is often installed by pulling it from the barge using a winch
while the barge remains in place. When necessary, a pontoon ramp or "stinger"
system is used in these operations to support the descending pipe to avoid
over-stressing the pipeline.
Once the pipeline has settled on the seabed, it is often buried to a
specified depth in order to protect it from potential damage or to comply with
environmental regulations and concerns. For example, in waters offshore the
United States, state and federal governmental regulations require that offshore
oil and gas pipelines greater than 8.75 inches in diameter and located in water
depths of 200 feet or less be buried at least three feet below the sea floor.
Pipelines are generally buried either by dredging or digging a trench ahead of
the pipelaying operations for the pipeline to settle into as it is installed or
by following the pipelaying operations with a towed jet sled, which uses high
pressure bursts of air and water to create a trench underneath the pipeline as
it settles into the seabed.
The Company owns and operates various barges, vessels and other items of
equipment to perform full-service pipeline construction projects in transition
zone and shallow water regions. The Company also provides construction
personnel, support equipment and logistical services as required for each
individual project. For pipelaying in water depths of 10 feet to 200 feet, the
Company uses its pipelay barge BH-400, which is capable of laying pipe from two
inches to 36 inches in diameter. For transition zone and other shallow water
projects, the Company uses a variety of equipment, including its pipelay barge
BH-300, which is capable of laying pipe from two inches to 36 inches in diameter
in water depths of up to 40 feet. Both the BH-400 and the BH-300 can be
outfitted with either a seabed plow or a skid-mounted jet sled for pipeline
burial operations. For swamp and marsh projects, the Company owns a lay barge
spread consisting of three interconnected spud barges (a barge that uses
multiple spuds attached vertically to the hull, which are lowered and raised as
necessary to anchor the barge in the seabed) and related equipment. The Company
also owns the equipment necessary to outfit a second spread of spud barges,
which it historically has rented from time to time as demand has dictated. In
addition, the Company has two jet/bury barges (BH-200 and BH-202), which are
equipped to bury pipe from two inches to 20 inches in diameter and are capable
of working in water depths as shallow as three feet and as deep as 25 feet.
The Company's fleet also includes three multi-purpose vessels, the
M/V Discovery, the M/V Sea Level 21 and the M/V Sand Queen. The M/V Discovery is
used for pipeline jetting and other support services, as well as hydrostatic
testing and commissioning services. The M/V Sea Level 21 and M/V Sand Queen are
used primarily in hydrostatic testing and commissioning services, but can also
be used as support vessels in connection with the Company's pipeline
installation and repair services. For a listing of the Company's principal
marine equipment, see "-- Marine Vessels and Equipment."
Hydrostatic Testing and Commissioning. The Company performs onshore and
offshore hydrostatic testing and commissioning of pipelines for oil and gas
producers and pipeline construction companies along the U.S. Gulf Coast and in
certain international markets. During hydrostatic testing, water is pumped into
a newly installed or existing pipeline to increase the internal pressure beyond
the designed capacity of the pipeline in order to test its structural integrity.
Pipeline commissioning involves final preparation of a completed and
successfully tested pipeline for operation in accordance with applicable
regulatory standards. In connection with its hydrostatic testing and
commissioning services, the Company also performs pipeline cleaning, drying and
dehydration services. The Company has three vessels that are used for
hydrostatic testing, including the M/V Discovery, a 270-foot, multi-purpose
construction utility vessel equipped with a dynamic positioning system. The
Company generated revenue of approximately $7.6 million and $4.4 million from
its hydrostatic testing and commissioning and related services during the twelve
months ended December 31, 1996 and the six months ended June 30, 1997,
respectively.
Offshore Fabrication. The Company fabricates and refurbishes (i) structural
components of fixed platforms for use in the offshore development and production
of oil and gas and (ii) structural components, primarily deck structures, for
offshore drilling rigs and barge drilling rigs. Components are built either as
single structures or in sections to be installed on location. The Company also
manufactures amphibious undercarriages for marine construction equipment used in
transition zone waters. The Company generated revenue of
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approximately $11.8 million and $5.8 million from its offshore fabrication
services during the twelve months ended December 31, 1996 and the six months
ended June 30, 1997, respectively.
INDUSTRY OVERVIEW
The market for offshore pipeline installation and related services along
the U.S. Gulf Coast is primarily dependent on the levels of oil and gas
exploration, development and production activities and pipeline capacity
utilization in the Gulf of Mexico. The Company believes recent increases in oil
and gas production in the Gulf of Mexico have significantly reduced available
pipeline capacity to transport the hydrocarbons to onshore gathering,
transmission and processing facilities. In a report published in January 1997,
the Minerals Management Service of the U.S. Department of the Interior (the
"MMS") projected an increase in Gulf of Mexico oil production of up to 76.1%
from 1,097 Mbpd (thousand barrels per day) in 1996 to 1,932 Mbpd by 2000, and an
increase in natural gas production of up to 25% from 13.8 Bcfd (billion cubic
feet per day) in 1996 to 17.2 Bcfd by 2000, assuming increased use of new
technologies, such as 3-D seismic and horizontal drilling techniques, would
offset declines in production from currently producing fields. This outlook is
supported by recent increases in offshore leases awarded by the Department of
the Interior in its semi-annual Outer Continental Shelf ("OCS") lease auctions.
The number of offshore leases awarded to operators increased from 202 in 1992,
covering approximately 1.0 million acres, to 1,508 in 1996, covering
approximately 8.0 million acres.
The MMS anticipates that a substantial portion of the increased oil and gas
production in the Gulf of Mexico will come from deep water projects. The Company
believes the continued development of deep water (depths of 200 feet to 1,000
feet) and very deep water (depths of 1,000 feet and deeper) oil and gas fields
will require construction of new pipelines and tie-ins to existing pipeline
systems in the transition zone and shallow water regions along the U.S. Gulf
Coast to transport future hydrocarbon production to shore. The Company also
expects increases in demand for its services resulting from new pipeline
construction needed to support incremental development activity within these
transition zone and shallow water regions, as well as the repair service
requirements of the existing pipeline infrastructure. According to a June 1997
report by Offshore Data Services, Inc., there were 255 pipeline construction
projects in the design or planning phase in the Gulf of Mexico, including 165 in
water depths of less than 150 feet.
BUSINESS STRATEGY
The Company's business strategy emphasizes growth through continued
consolidation of the transition zone and shallow water segments of the marine
construction industry and internal development. Key elements of the Company's
business strategy include:
Maintaining Focus on Transition Zone and Shallow Water Market Segments. The
Company intends to maintain its focus on the U.S. Gulf Coast transition zone and
shallow water markets because of its strong competitive position and substantial
expertise in these markets and the positive outlook for new oil and gas
exploration and development activity in the Gulf of Mexico. The Company
anticipates substantial growth in these markets as new pipelines are added to
gather and transport the higher levels of production expected to result from
increased exploration and development activity in the Gulf of Mexico.
Capitalizing on Combined Capabilities of the Founding Companies. The
Company believes that, as a result of the consolidation of the Founding
Companies, it is the only company providing pipeline installation and repair
services from water depths of 200 feet through the transition zone and to
onshore gathering, transmission and processing facilities along the U.S. Gulf
Coast. The Company's competitors in the pipeline installation and repair
services market currently provide services either in the transition zone or
shallow water regions, but not both. This market segmentation often requires
customers to separate an installation or repair project into different
components and award it to multiple contractors or award the project to a single
contractor and rely on that contractor's ability to coordinate with
subcontractors to complete the balance of the project. The Company believes its
capabilities place it in a favorable position to bid and compete for contracts
requiring expertise in both the transition zone and shallow water regions.
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Expanding Through Acquisitions. The Company intends to increase its market
presence by acquiring additional businesses and assets. The market for
transition zone and shallow water marine construction services is primarily
served by small and medium-sized private companies, and the Company believes the
highly fragmented nature of the industry presents a substantial consolidation
opportunity for a well-capitalized competitor with a strong market presence.
Pursuing International Expansion Opportunities. The Company also intends to
expand internationally by capitalizing on its relationships with hydrostatic
testing customers in international markets and domestic customers with
international operations and the experience of its management in developing
business and conducting operations in international markets. The Company intends
to target areas for international expansion with geographic conditions similar
to those along the U.S. Gulf Coast, such as Venezuela and offshore West Africa.
The Company may pursue international expansion through acquisitions of regional
marine construction companies or relocation of existing equipment.
Improving Operating Margins. The Company believes the combination of the
Founding Companies will provide significant opportunities to improve operating
margins and increase profitability. The Company believes it will be able to
achieve operating efficiencies and cost savings by consolidating overlapping
facilities and certain administrative functions and by rationalizing its asset
base. In addition, the Company believes it will be able to increase its asset
utilization by implementing a comprehensive marketing effort to capitalize on
its position as an integrated provider of pipeline installation and repair and
related services in the transition zone and shallow water market segments.
MARINE VESSELS AND EQUIPMENT
The Company's fleet includes three multi-purpose vessels, two anchor barges
and 15 spud barges. The following table describes the Company's principal marine
construction equipment.
<TABLE>
<CAPTION>
DIMENSIONS
NAME TYPE (FEET) FUNCTION
---- ---- ---------- --------
<S> <C> <C> <C>
M/V Discovery... Multi-purpose 270 x 42 x 19 Hydrostatic testing, pipeline jetting, diving
Construction Ship support, coring support; 8-point mooring system;
(Panamanian flagged) dynamic positioning system; accommodations for 54
persons
M/V Sea Level Multi-purpose 175 x 40 x 13 Hydrostatic testing, diving support, coring support;
21............ Construction Ship 4-point mooring system; accommodations for 28 persons
(U.S. flagged)
M/V Sand Multi-purpose 110 x 24 x 9 Hydrostatic testing and diving support; with
Queen......... Utility Vessel accommodations for 19 persons
(U.S. flagged)
BH-400.......... Anchor Barge 260 x 72 x 16 Pipe laying (2"-36" diameter pipe) in 10() to 300()
(U.S. flagged) water depths; 8-point mooring system; accommodations
for 90 persons
BH-300.......... Anchor Barge 185 x 45 x 9 Pipe laying (2"-36" diameter pipe) in 5() to 40()
water depths; 6-point mooring system and spuds
BH-203.......... Spud/Utility Barge 90 x 26 x 5 Pipeline repair, pipeline burial in 4() to 25() water
depths
BH-202.......... Spud/Bury Barge 100 x 32 x 5 Pipeline jetting, dredging in 5() to 25() water
depths
BH-200.......... Spud/Bury Barge 120 x 30 x 7 Pipeline jetting, dredging in 5() to 25() water
depths
BH-105.......... Spud/Anchor Barge 150 x 40 x 8 Pipe laying (2"-20" diameter pipe), dredging, pile
driving in 5() to 100() water depths
BH-104.......... Spud Barge 110 x 34 x 6 Pipe laying (2"-20" diameter pipe), dredging, pile
driving in 4() to 25() water depths
Woodson Marsh Three Interconnected 140 x 38 x 7 Pipe laying (2"-48" diameter pipe) in 1() to 40()
Pipelay Spud Barges 140 x 36 x 7 water depths
Spread........ 140 x 36 x 7
</TABLE>
The Company anticipates that all the vessels and barges (together with all
the other property, plant and equipment currently owned by the Company) will be
subject to liens securing indebtedness outstanding under
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the Revolving Credit Facility. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Combined Liquidity and Capital
Resources."
FACILITIES
Administration. The Company owns administrative buildings in Lafayette and
Belle Chasse, Louisiana, and leases office space in New Iberia, Louisiana and
Houston, Texas.
Construction Support Facilities. The Company's marine construction
activities are supported by five onshore bases which provide administrative
functions for projects and dock space for the Company's floating equipment with
the ability to supply the vessels with provisions and fuel, and to perform
maintenance and repairs to vessels and equipment. The facility located in Belle
Chasse, Louisiana is owned by the Company. The facilities and dock frontage at
Berwick and Delcambre, Louisiana, and Mobile Bay, Alabama are leased, with
remaining lease terms ranging from month-to-month to 16 years.
Fabrication Yard. The Company's principal fabrication yard is located in
New Iberia, Louisiana, with waterfront docking and direct, deep channel access
to the Gulf of Mexico. The fabrication facility includes approximately 14 acres
of leased land and a 23,200 square foot fabrication shop which is supplied with
automatic welding, heavy fabrication and material handling equipment. The
fabrication yard also has specially designed concrete reinforcements and
approximately 700 linear feet of water frontage. The Company is improving the
fabrication yard to provide it with the ability to load out structures weighing
up to 5,000 tons. The fabrication yard also has a rail spur, which provides it
direct access to rail transportation. The Company also owns an 18,000 square
foot fabrication facility situated on approximately two acres of land in
Lafayette, Louisiana, and has an option to purchase a 10,000 square foot
fabrication facility situated on approximately five acres of land in Belle
Chasse, Louisiana.
MATERIALS
The principal materials used by the Company in its business are carbon and
alloy steel in various forms, welding supplies, fuel oil, gasoline and paint,
which are currently available in adequate supply from many sources. The Company
does not depend on any single supplier or source. Pipe used in the Company's
pipeline construction operations is generally provided by the Company's
customers.
SAFETY AND QUALITY ASSURANCE
Management is concerned with the safety and health of the Company's
employees and maintains a stringent safety assurance program to reduce the
possibility of costly accidents. Each of the Founding Companies has established
guidelines to ensure compliance with all applicable state and federal safety
regulations. Each of them provides ongoing training and safety education through
orientations for new employees and subcontractors, periodic crew safety training
meetings and first aid and CPR training. Each of the Founding Companies has a
comprehensive drug testing program and conducts periodic employee health
screenings.
The Company's operations are conducted in compliance with the applicable
standards of the American Petroleum Institute, the American Welding Society and
the American Society of Mechanical Engineers, as well as customer
specifications. Training programs have been instituted to upgrade the skills of
the Company's personnel and maintain high-quality standards. Management believes
these programs enhance the quality of its services and reduce the total cost of
work performed.
CUSTOMERS AND CONTRACTS
The Company's primary customers are major and independent oil and gas
exploration and production companies, drilling contractors, hydrocarbon
transportation companies and other marine construction companies. The level of
construction services required by any one customer depends on the amount of that
customer's capital expenditure budget devoted to marine construction in any
single year. Consequently, customers that account for a significant portion of
revenue in one fiscal year may represent an immaterial
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portion of revenue in subsequent fiscal years. The five most significant
customers of the Founding Companies on a combined basis during fiscal 1996 (in
alphabetical order) were: Mallard Bay Drilling, Inc., Mobil Corporation,
Offshore Energy Development Corporation, Samedan Oil Corporation and Shell Oil
Company. The Company had only one customer that represented more than 10% of its
pro forma combined revenues in fiscal 1996. While the Company is not dependent
on any one customer, the loss of one of its significant customers could, at
least on a short-term basis, have an adverse effect on the Company's results of
operations.
The Company's contracts are typically of short duration, being completed in
one to six months. A substantial number of the Company's projects are performed
on a fixed-price basis, although some projects are performed on an
alliance/partnering or cost-plus basis. Under a fixed-price contract, the
Company receives the price fixed in the contract, subject to adjustment only for
change orders placed by the customer. As a result, the Company is responsible
for all cost overruns under fixed-price contracts. Under a typical
alliance/partnering arrangement, the Company and the customer agree in advance
to a target price that includes specified levels of labor and material costs and
profit margins. If the project is completed at less than the cost levels
targeted in the contract, the contract price is reduced by a portion of the
savings. If the cost to completion is greater than targeted costs, the contract
price is increased, but generally to the target price plus the actual
incremental cost of material and direct labor. Accordingly, under an
alliance/partnering arrangement, the Company has some protection against cost
overruns but must share a portion of any cost savings with the customer. Under
cost-plus arrangements, the Company receives a specified fee in excess of its
direct labor and material cost and so is protected against cost overruns but
does not benefit directly from cost savings. The revenue, costs and gross profit
realized on a contract will often vary from the estimated amounts on which such
contracts were originally based because of various reasons, including errors in
estimates or bidding, changes in the availability and cost of labor and material
and variations in productivity from the original estimates. These variations and
the risks inherent in the marine construction industry may result in revenue and
gross profits different from those originally estimated and can result in
reduced profitability or losses on projects. Depending on the size of a project,
variations from estimated contract performance can have a significant impact on
the Company's operating results for any particular fiscal quarter or year.
COMPETITION
The marine construction services business is highly competitive and in
recent years has been characterized by overcapacity, which has resulted in
substantial pressure on pricing and operating margins. The Company expects the
overcapacity in the industry to reoccur from time to time in the future.
Contracts for marine construction services are usually awarded on a competitive
bid basis. Although the Company believes customers consider, among other things,
the availability and technical capabilities of equipment and personnel,
efficiency, condition of equipment, safety record and reputation, price
competition is currently a primary factor in determining which qualified
contractor with available equipment is awarded a contract. Some of the Company's
competitors are larger and have greater financial and other resources than the
Company.
The Company categorizes the market for offshore construction services into
four segments: (i) transition zone (less than 20 feet), (ii) shallow water (20
feet to 200 feet), (iii) deep water (200 feet to 1,000 feet) and (iv) very deep
water (1,000 feet or deeper). The Company generally focuses on projects in
transition zone and shallow water regions along the U. S. Gulf Coast. Activity
in these regions has increased significantly in recent years primarily because
of increases in oil and gas production in the Gulf of Mexico. Several companies
that have one or more derrick or pipelaying barges compete in the transition
zone and shallow water regions. The Company believes, however, that, on the
closing of the Acquisitions, it will be the largest transition zone marine
construction services company focused on the U.S. Gulf Coast and a significant
provider of shallow water marine construction services in that area. The Company
believes that competition for projects in the deep water (greater than 200 feet)
and the very deep water (greater than 1,000 feet) regions of the Gulf of Mexico
is primarily limited to two large competitors, Global Industries, Ltd. and J.
Ray McDermott, S.A., with several other international contractors capable of
relocating equipment to the Gulf of Mexico to work on specific deep or very deep
water contracts. Because projects in the deep and very deep water regions
involve different vessels and equipment, as well as different technical
expertise, the Company does not presently intend to compete in those markets.
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<PAGE> 40
The Company also competes with numerous competitors in connection with its
hydrostatic testing and commission services and fabrication operations.
BACKLOG
As of August 31, 1997, the Company's unfilled contracts and backlog orders
(including verbal orders) amounted to approximately $58.8 million; however, the
Company does not consider its backlog amounts to be a reliable indicator of
future revenue because most of the Company's projects are awarded and performed
within a relatively short period of time. The Company's backlog fluctuates
significantly based on the timing of contract awards and varying levels of
operating activity throughout the year. The Company is generally able to
complete its projects within a 12-month period.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
General
Many aspects of the Company's operations are subject to governmental
regulation, including regulation by the U.S. Coast Guard, the National
Transportation Safety Board, the U.S. Customs Service and the Occupational
Safety and Health Administration, as well as by private industry organizations
such as the American Bureau of Shipping. The Coast Guard and the National
Transportation Safety Board set safety standards and are authorized to
investigate vessel accidents and recommend improved safety standards relating to
vessels. The Occupational Safety and Health Administration performs similar
functions with respect to the Company's onshore facilities and operations. In
addition, the Company depends on the demand for its services from the oil and
gas industry and, therefore, the Company's business is affected by the laws and
regulations, as well as changing taxes and governmental policies, relating to
the oil and gas industry generally.
Certain of the Company's barges and vessels are subject to safety and
classification standards imposing requirements for periodic inspections and the
maintenance of certain certificates and insurance coverages, generally depending
on the type and size of and service performed by the barge or vessel. In
addition, in order for a vessel to engage in the U.S. Coastwise Trade (providing
transportation services between the states), the vessel must have been built in
the United States. All the Company's barges and vessels are eligible for service
in the U.S. Coastwise Trade, except for the M/V Discovery, a Panamanian flagged
vessel. As a multi-purpose construction vessel providing non-transportation
services to the offshore oil and gas industry, the Company believes the market
for the services performed by the M/V Discovery is not materially limited by its
Panamanian registration.
The Company is required by various governmental and quasi-governmental
agencies to obtain certain permits, licenses and certificates with respect to
its operations. The Company believes that it has obtained all permits, licenses
and certificates necessary to the conduct of its business.
In addition to government regulation, various private industry
organizations, such as the American Petroleum Institute, the American Society of
Mechanical Engineers and the American Welding Society, promulgate technical
standards that must be adhered to during the course of the Company's fabrication
operations.
Environmental, Health and Safety
The operations of the Company are also affected by numerous federal, state
and local laws and regulations relating to protection of the environment
including the Outer Continental Shelf Lands Act, the Federal Water Pollution
Control Act of 1972 and the Oil Pollution Act of 1990. The Company is not aware
of any noncompliance with applicable environmental laws and regulations that
would likely have a material adverse effect on the Company's business or
financial condition. The requirements of these laws and regulations are becoming
increasingly complex, stringent and expensive, and some provide for liability
for damages to natural resources or threats to public health and safety. Certain
environmental laws provide for "strict liability" for remediation of spills and
releases of hazardous substances. Sanctions for noncompliance may include
revocation of permits, corrective action orders, administrative or civil
penalties, and criminal
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<PAGE> 41
prosecution. Such laws and regulations may expose the Company to liability for
(i) its actions that may cause environmental damage such as barge or vessel
collisions with rigs, tankers or pipelines or defective Company manufactured
products or improper installation of products of others, (ii) the conduct of or
conditions caused by others or (iii) acts of the Company that are in compliance
with all applicable laws at the time such acts were performed. It is possible
that changes in the environmental laws and enforcement policies thereunder, or
claims for damages to persons, property, natural resources or the environment,
could result in substantial costs and liabilities to the Company. The Company's
insurance policies provide liability coverage for sudden and accidental
occurrences of pollution and cleanup and containment of the foregoing in amounts
the Company believes are comparable to policy limits carried by other
construction contractors in the offshore industry.
The Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended, and similar laws provide for responses to and liability for
releases of hazardous substances into the environment. Additionally, the Clean
Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the
Safe Drinking Water Act, the Emergency Planning and Community Right to Know Act,
each as amended, and similar foreign, state or local counterparts to these
federal laws, regulate air emissions, water discharges, hazardous substances and
wastes, and may require public disclosure related to the use of various
hazardous substances. Compliance with these environmental laws and regulations
may require the acquisition of permits or other authorizations for certain
activities and compliance with various standards or procedural requirements. The
Company believes its facilities are in substantial compliance with these
regulatory standards, and the Company does not currently anticipate any material
adverse effect on its business or consolidated financial position as a result of
future compliance with existing environmental laws and regulations controlling
the discharge of materials into the environment or otherwise relating to the
protection of the environment. However, future events, such as changes in
existing laws and regulations or their interpretation, more vigorous enforcement
policies of regulatory agencies, or stricter or different interpretations of
existing laws and regulations, may require expenditures by the Company which may
be material. Accordingly, there can be no assurance that the Company will not
incur significant environmental compliance costs in the future. In addition,
offshore construction and drilling in certain areas has been opposed by
environmental groups and, in certain areas, has been restricted. To the extent
laws are enacted or other governmental actions are taken that prohibit or
restrict offshore construction and drilling or impose environmental protection
requirements that result in increased costs to the oil and gas industry in
general and the offshore construction industry in particular, the business and
prospects of the Company could be adversely affected.
The Company's operations are also governed by laws and regulations relating
to workplace and worker health, primarily the Occupational Safety and Health Act
and the regulations promulgated thereunder. In addition, various other
governmental and quasi-governmental agencies require the Company to obtain
certain permits, licenses and certificates from time to time with respect to its
operations. The Company believes it has all material permits, licenses and
certificates necessary to the conduct of its existing business.
Certain employees of the Company are covered by provisions of the Jones
Act, the Death on the High Seas Act and general maritime law, which laws operate
to make the liability limits established by state workers' compensation laws
inapplicable to these employees and, instead, permit them or their
representatives to pursue actions against the Company for damages or job-related
injuries, with generally no limitations on the Company's potential liability.
The Company's ownership and operation of vessels can give rise to large and
varied liability risks, such as risks of collisions with other vessels or
structures, sinking, fires and other marine casualties, which can result in
significant claims for damages against both the Company and third parties for,
among other things, personal injury, death, property damage, pollution and loss
of business.
LEGAL PROCEEDINGS
The Company is currently involved in two class action lawsuits for
unspecified personal injury and property damages arising from events in October
1991 and January 1992 during the course of a pipeline installation project for a
third party gas transmission company. One of the class actions, involving
approximately 9,840 class members, entitled Rivera v. United Gas Pipeline Co.,
No. 28738, was instituted against Woodson Construction Company, Inc. on October
29, 1991 in the 40th Judicial District Court, Parish of
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St. John the Baptist, State of Louisiana, and the other class action, involving
approximately 7,858 class members, entitled Husseiney v. United Gas Pipeline
Co., No. 29089, was instituted on January 27, 1992 against Woodson Construction
Company, Inc. in the 40th Judicial District Court, Parish of St. John the
Baptist, State of Louisiana. The claims of 24 representative class members in
each case were tried in 1995, and judgments were rendered against Woodson
Construction Company, Inc., which were later affirmed by the court of appeal. In
the Rivera lawsuit, five of the 24 representative plaintiffs were awarded
compensatory damages of $7,500 in the aggregate, but punitive damages were
denied. In the Husseiney lawsuit, compensatory damages of $18,589 and punitive
damages of $9,500 in the aggregate were assessed against Woodson Construction
Company, Inc. in favor of 16 of the 24 representative plaintiffs. In both
lawsuits, the compensatory damages awarded are expected to be covered by the
Company's insurance, but punitive damage awards are not expected to be covered
by insurance. The punitive damages awarded to the 16 representative class
members varied according to the representatives' proximity to the incident and
individual experience with respect to it. The amount of punitive damages
applicable to the remaining 7,834 class members who seek to adjudicate their
claims will be litigated on an individual basis. Until those remaining claims
are finally adjudicated, settled, dismissed or otherwise terminated, the total
amount of the punitive damages to which the Company may be subject cannot
reasonably be estimated. In July 1997, all parties involved applied to the
Louisiana Supreme Court for further discretionary review of the judgments. The
Company believes that there are meritorious arguments favorable to its position,
but is unable to predict whether the Louisiana Supreme Court will grant relief
from the judgments.
The Company is involved in various other lawsuits arising in the ordinary
course of business, some of which involve substantial claims for damages. While
the outcome of these other lawsuits cannot be predicted with certainty,
management believes these matters will not have a material adverse effect on the
consolidated financial position or results of operations of the Company.
INSURANCE
The Company's operations are subject to inherent risks of offshore and
inland marine activity, including hazards such as vessels capsizing, sinking,
grounding, colliding and sustaining damage from severe weather conditions. These
hazards can cause personal injury or loss of life, severe damage to and
destruction of property and equipment, pollution or environmental damage and
suspension of operations. The Company maintains such insurance protection as it
deems prudent, including hull insurance. However, certain risks are either not
insurable or insurance is available only at rates that the Company considers not
to be economical. There can be no assurance that any such insurance will be
sufficient or effective under all circumstances or against all hazards to which
the Company may be subject. A successful claim for which the Company is not
fully insured could have a material adverse effect on the Company. Moreover, no
assurance can be given that the Company will be able to maintain adequate
insurance in the future at rates it considers reasonable.
INTELLECTUAL PROPERTY
Although the Company's intellectual property rights are, in the aggregate,
important to the Company's business, the Company believes its technical
knowledge and experience, reputation and customer relationships are more
important to its competitive position than any patents, licenses, trademarks or
other intellectual property rights.
EMPLOYEES
The size of the Company's work force, other than its clerical and
administrative personnel, is variable and depends on the Company's workload at
any particular time. As of July 31, 1997, the Founding Companies had an
aggregate of approximately 645 employees. In addition, many workers are hired on
a contract basis and are available to the Company on short notice. None of the
Company's employees are covered by a collective bargaining agreement.
The Company's ability to remain productive and become profitable will
depend substantially on its ability to retain and attract skilled construction
workers, primarily welders, pipefitters and equipment operators. The Company's
ability to expand its operations depends on its ability to increase its labor
force. The demand for such workers is high and the supply is limited. While the
Company believes its wage rates are competitive and its relationship with its
skilled labor force is good, a significant increase in the wages paid by
competing
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employers could result in a reduction in the Company's skilled labor force,
increases in the wage rates paid by the Company, or both. If either of these
events occurred, the profits realized by the Company from work then in progress
would be reduced or eliminated and, in the long-term, the capacity and
profitability of the Company could be diminished and the growth potential of the
Company could be impaired.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the executive
officers and directors of TCMS as of the closing of the Offering (ages are as of
August 31, 1997).
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Bill E. Stallworth................ 65 Chairman of the Board of Directors and Chief
Executive Officer(1)
Thad "Bo" Smith................... 55 President, Chief Operating Officer and Director
Johnnie W. Domingue............... 50 Senior Vice President, Chief Financial Officer,
Treasurer and Secretary
H. Daniel Hughes II............... 38 Director(4); President of HBH
Daniel N. Hargett, Sr. ........... 57 Director(1)(4); President of CSI
Patrick B. Collins................ 68 Director(3)
Clifford E. McFarland............. 41 Director(3)
D. Glenn Richardson............... 54 Director(2)
Jean Savoy........................ 50 Director(1)(2)(3)
Nathan M. Avery................... 62 Director(1)(2)(4)
</TABLE>
- ---------------
(1) Member of Board Executive Committee.
(2) Member of Board Compensation Committee.
(3) Member of Board Audit Committee.
(4) Appointment will become effective when the Offering closes.
Bill E. Stallworth has served as Chairman of the Board and Chief Executive
Officer of TCMS since August 1997. Mr. Stallworth has over 40 years of
experience in the oil and gas engineering and construction industries including
experience as a field engineer, construction manager, project director, group
vice president of fabrication, offshore installation and submarine pipeline
construction, and, as the President of Brown & Root International, Inc.,
executive manager of worldwide engineering and construction activities. Mr.
Stallworth served in various capacities with Brown & Root, Inc. ("Brown & Root")
from 1956 to 1986, including service as a member of Brown & Root's Board of
Directors from 1981 to 1986. Mr. Stallworth founded an engineering and
construction consulting company in 1986, providing services in the international
oil and gas and construction industries. Mr. Stallworth is currently serving on
the Board of Directors of Fugro N.V., a multi-national consulting company, and
on the Texas A&M Board of Advisors for the Center of International Business
Studies. Mr. Stallworth holds a bachelor of science degree in architectural
construction from Texas A&M University.
Thad "Bo" Smith has served as President and Chief Operating Officer of TCMS
since August 1997. Mr. Smith has 29 years of experience in offshore and shallow
water marine construction projects, including field supervision, cost
estimating, contract procurement, operations management, corporate business
development, strategic planning and executive management, with direct
involvement in offshore pipeline construction and fabrication operations in both
domestic and international shallow water regions. From January 1997 to August
1997, he worked as an independent consultant in the areas of business strategy
and product development. From 1967 to 1996, Mr. Smith held various positions
with Brown & Root, where his last position was President of Brown & Root's
Worldwide Service, Civil and Environmental Business. Mr. Smith was with Brown &
Root's Marine Division from 1967 to 1986 with his last position as Senior Vice
President with responsibilities for its European and African offshore oil and
gas construction business. Mr. Smith is currently
42
<PAGE> 44
serving on the University of Houston, College of Business Dean's Executive
Advisory Board and is a Director for the Houston Area Research Council. Mr.
Smith holds a bachelor of business administration degree in management from the
University of Houston.
Johnnie W. Domingue has served as Senior Vice President and Chief Financial
Officer of TCMS since May 1997. From 1996 to 1997, Mr. Domingue was Vice
President and Chief Financial Officer of Ankle & Foot Centers of America, a
start-up venture for the consolidation of foot and ankle specialists. From 1988
to 1995, he was employed by Community Health Computing, Corp., a computer
software and service company, in various positions including President and Chief
Executive Officer. In 1995, Community Health Computing Corp. and Community
Health Computing, Inc., one of its subsidiaries, were reorganized under
bankruptcy proceedings pursuant to Chapter 11 of the United States Bankruptcy
Code. Mr. Domingue served as Vice President, Finance and Treasurer of Synercom
Technology, Inc., a publicly traded company, from 1982 to 1988. From 1976 to
1982, he served as Vice President of Finance and Controller of Galveston-Houston
Company. From 1970 to 1976, Mr. Domingue served in a number of positions as a
certified public accountant with Coopers & Lybrand LLP.
H. Daniel Hughes II will become a director of TCMS on the closing of the
Offering. Mr. Hughes has served as the President of HBH since 1993 and served as
its Vice President from 1991 to 1993. Prior to joining HBH, he held various
positions in related entities since 1981, including service as President of
Dixie Machine Welding and Metalworks, Inc., a topside ship repair and industrial
fabrication company. Mr. Hughes holds a bachelor of business administration from
the University of Texas at Austin.
Daniel N. Hargett, Sr. will become a director of TCMS on the closing of the
Offering. He has served as Chief Executive Officer of CSI since 1963. In 1981,
Mr. Hargett founded Hargett Mooring & Marine, Inc., a supplier of vessels
providing marine construction support.
Patrick B. Collins was elected to the Board of Directors in September 1997.
From 1967 to 1991, Mr. Collins was a partner with Coopers & Lybrand LLP. Since
1991, Mr. Collins has been an independent business consultant specializing in
financial and accounting matters. Mr. Collins is currently serving on the Board
of Directors of HCC Insurance Holdings, Inc., a property and casualty insurance
company based in Houston, Texas.
Clifford E. McFarland was elected to the Board of Directors in September
1997. In November 1991, Mr. McFarland co-founded McFarland, Grossman & Company,
Inc., a Houston, Texas-based investment banking and financial advisory firm, and
has served as its Managing Director and President since that time. Mr. McFarland
is currently serving on the Board of Directors of Teletouch Communications, Inc.
of Tyler, Texas and Sport Clips, Inc., of Georgetown, Texas.
D. Glenn Richardson was elected to the Board of Directors in September
1997. Mr. Richardson founded Falcon Drilling Company, Inc. of Houston, Texas,
which he served as a director and as President and Chief Operating Officer from
1990 until his retirement in June 1996. Mr. Richardson founded Glendel Drilling
Company, Inc., a barge drilling rig operator based in Abbeville, Louisiana, and
served as its President from 1980 to 1989. Mr. Richardson currently owns and
operates a cattle ranch in Louisiana.
Jean Savoy was elected to the Board of Directors in September 1997. Mr.
Savoy, a promoter of TCMS, is a member, manager and director of J&D Capital
Investments, L.C., a consulting and financial services company based in
Lafayette, Louisiana. For more than the past 25 years, Mr. Savoy has served as
an independent directional and horizontal drilling consultant for independent
and major oil and gas companies and various directional drilling concerns.
Nathan M. Avery will become a director of TCMS on the closing of the
Offering. Since 1972, Mr. Avery has served as Chairman of the Board, President
and Chief Executive Officer of Galveston-Houston Company, a company specializing
in manufacturing oilfield service products. He has been active in the oil and
gas industry since the 1960s. Mr. Avery is currently a director and member of
the Executive Committee of Daniel Industries, Inc. and a director of Prime
Cable. He is also an advisory director of Cooper Cameron Corporation. Mr. Avery
was Chairman of the Board of the Board of Directors of Bettis Corporation until
December 1996.
43
<PAGE> 45
In addition to these persons, the Company intends to continue to employ
substantially all of the senior operating management of each of the Founding
Companies following the closing of the Acquisitions.
COMMITTEES OF THE BOARD
The Board of Directors has established an Executive Committee, an Audit
Committee and a Compensation Committee. The Executive Committee advises the
Board of Directors on matters relating to the senior management of the Company.
The Audit Committee recommends the appointment of auditors and oversees the
accounting and audit functions of the Company. The Compensation Committee
determines executive officers' and key employees' salaries and bonuses and
administers the 1997 Stock Option Plan. Messrs. Stallworth, Hargett, Savoy and
Avery will serve as members of the Executive Committee. Messrs. Collins,
McFarland and Savoy will serve as members of the Company's Audit Committee and
Messrs. Richardson, Avery and Savoy will serve as members of the Compensation
Committee.
DIRECTOR COMPENSATION
After the closing of the Offering, each member of the Board of Directors
who is not a full-time employee of the Company (a "Non-Employee Director") will
be paid (i) an annual retainer of $5,000, payable in quarterly installments, and
(ii) $500 per meeting of the Board of Directors or any committee thereof (unless
held on the same day as a Board meeting) at which the director is present.
Directors who are full-time employees of the Company will not receive any
compensation for serving as directors. All directors will be reimbursed for all
ordinary and necessary expenses incurred in attending any meeting of the Board
of Directors or any committee thereof or otherwise incurred in their capacity as
directors.
EXECUTIVE COMPENSATION AND EMPLOYMENT AGREEMENTS
TCMS was organized in April 1996 and, prior to the Offering, has not
conducted any operations other than activities related to the Acquisitions and
the Offering. TCMS did not pay any compensation to its executive officers during
1996. During 1997, TCMS has compensated Mr. Domingue $50,000 under an employment
memorandum executed on April 21, 1997 between TCMS and Mr. Domingue. Prior to
their becoming officers of the Company, Messrs. Stallworth and Smith were
compensated under a consulting agreement between the Company and Stallworth,
Frankhouser & Associates, a Houston-based consulting firm. See "Certain
Transactions." Pursuant to their respective employment agreements, Messrs.
Stallworth, Smith and Domingue will receive success bonuses of $115,000,
$130,000 and $100,000, respectively, on the closing of the Offering. See
"-- 1997 Stock Option Plan."
TCMS has entered into employment agreements with Messrs. Stallworth and
Smith effective August 1, 1997 and will have employment agreements with each of
Messrs. Hargett, Domingue and Hughes following the closing of the Offering.
Their annualized base salaries will be: Mr. Stallworth -- $200,000; Mr. Smith --
$200,000; Mr. Hargett -- $200,000; Mr. Domingue -- $180,000; and Mr.
Hughes -- $175,000.
The following summary of the executive employment agreements does not
purport to be complete and is qualified by reference to them, copies of which
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part. Each such employment agreement provides for an annual base
salary in an amount not less than the initial specified amount and entitling the
employee to participate in all TCMS' compensation plans (as defined) in which
other executive officers of TCMS participate. Each of these agreements has a
three-year term and continues thereafter on a year-to-year basis on the same
terms and conditions existing at the time of renewal, subject to the right of
TCMS and the employee to terminate the employee's employment at any time. If the
employee's employment is terminated by TCMS without cause (as defined), the
employee will be entitled, for 12 months following the effective date of such
termination, to (i) periodic payments equal to his annual cash base salary (as
defined) from TCMS, including bonuses, if any, and (ii) continued participation
in all TCMS' compensation plans (other than the granting of new awards under the
1997 Stock Option Plan or any other performance-based plan) during such period.
If a change of control (as defined) of TCMS occurs and the terms of the
employment agreement are not adopted, the employee will be entitled to receive
an amount equal to 36 months of his then-current base salary under the
44
<PAGE> 46
agreement, payable semimonthly. The employment agreements contain or will
contain covenants limiting competition with the Company during the term of the
employment agreement and for additional periods up to two years after the
termination of employment.
1997 STOCK OPTION PLAN
In August 1997, the Board of Directors and the stockholders of TCMS
approved the 1997 Stock Option Plan. The 1997 Stock Option Plan provides for the
granting of stock options ("Options") to directors, executive officers, certain
other employees and certain non-employee consultants of the Company. Within
certain limitations provided by the 1997 Stock Option Plan, such Options may
include provisions regarding vesting, exercise price, the amount of each grant
and other terms as shall be approved by the Board of Directors or by a committee
designated by the Board. Options granted under the 1997 Stock Option Plan may be
either options that qualify as "incentive stock options," within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")
("Incentive Options"), or those that do not qualify as such ("Non-qualified
Options"). The 1997 Stock Option Plan, which permits up to 750,000 shares of
Common Stock to be issued, terminates in August 2007.
The 1997 Stock Option Plan is administered by the Board of Directors or by
the Compensation Committee of the Board, which committee, to the extent
required, will be constituted so as to qualify for certain exemptions under Rule
16b-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and, to satisfy the requirements of Section 162(m) of the Code, will at all
times consist of at least two non-employee directors. Subject to the terms of
the 1997 Stock Option Plan, the Board of Directors or the Compensation Committee
determines the persons to whom Options are granted and the terms and the number
of shares covered by each Option. The term of each Option may not exceed ten
years from the date the Option is granted, or five years in the case of an
Incentive Option granted to a holder of more than 10% of the fully diluted
capital stock of TCMS. Non-qualified Options and Incentive Options may become
exercisable six months after the date of grant and may continue to be
exercisable, in whole or in part, up to ten years after the date of grant, as
determined by the Board or the Compensation Committee.
The 1997 Stock Option Plan provides that all Non-qualified Options and
Incentive Options which are not exercisable on the date of termination of an
Optionholder's employment generally expire when the optionee ceases to be
affiliated with the Company; however, the Board of Directors or the Compensation
Committee may, in its discretion, permit the holder to exercise unvested Options
following such termination for specified periods of time if the six-month
waiting period has been satisfied. Options may not be transferred other than by
will or the laws of descent and distribution, and during the lifetime of an
optionee may be exercised only by the optionee. The 1997 Stock Option Plan
provides that each stock option agreement with respect to any Non-qualified
Option or Incentive Option shall specify the effects of termination of
employment or consulting on exercisability of such options.
The 1997 Stock Option Plan contains a provision accelerating the
exercisability of Options upon the occurrence of specified events, including
merger, consolidation, dissolution or liquidation of TCMS. The acceleration of
vesting of Options in the event of a merger or other similar event may be seen
as an anti-takeover provision and may have the effect of discouraging a proposal
for merger, a takeover attempt or other efforts to gain control of TCMS.
Payment on the exercise of an Option may be in cash, by check or, at the
discretion of the Board, by delivery of shares of Common Stock with a "fair
market value," as defined in the 1997 Stock Option Plan, equal to the aggregate
exercise price, or by means of a "cashless exercise" involving the sale of
shares by, or a loan from, a broker.
Pursuant to the 1997 Stock Option Plan and effective as of the date the
initial public offering price is determined, Incentive Options will be granted
to Messrs. Stallworth, Smith, Domingue, Hargett and Hughes. The shares under the
option grant will be equal to 2.5 times the annual compensation of each
respective executive divided by the initial public offering price. Assuming an
initial public offering price per share of $15.00, Incentive Options to purchase
shares of Common Stock will be granted to the persons named in "-- Executive
Compensation and Employment Agreements" above as follows: 33,333 shares to Mr.
Stallworth, 33,333 shares to Mr. Smith, 30,000 shares to Mr. Domingue, 33,333
shares to Mr. Hargett
45
<PAGE> 47
and 29,167 shares to Mr. Hughes. Each of those Options will have an exercise
price equal to the initial public offering price per share. These Options will
vest at the rate of 20% per year, commencing on the first anniversary of the
closing of the Offering, and will expire at the earlier of ten years from the
date of grant or three months following termination of employment.
Pursuant to an October 1997 action of the Board of Directors and under the
terms of the 1997 Stock Option Plan, the Company has approved Non-qualified
Options for each of the initial Non-Employee Directors as follows (the
"Non-Employee Director Awards"): (i) the automatic grant to each of the initial
Non-Employee Directors (including those elected to begin service upon completion
of the Offering) of options to purchase 5,000 shares, effective as of the date
the initial public offering price is determined, at an exercise price equal to
the initial per share public offering price, (ii) the automatic grant to each
Non-Employee Director elected after the completion of the Offering of options to
purchase 5,000 shares, effective on the date of such person's initial election
as a director, at an exercise price equal to the fair market value of the Common
Stock on the date of such grant, and (iii) the automatic grant to each
Non-Employee Director of options to purchase 5,000 shares at each annual meeting
of stockholders thereafter at which such director is re-elected or remains a
director, unless such annual meeting is held within three months following such
person's election as a director, at an exercise price equal to the fair market
value of the Common Stock on the date of such grant. The Company has reserved
100,000 shares of Common Stock for issuance pursuant to the Non-Employee
Directors Awards; however, the Board of Directors may revoke at any time the
next automatic grant of options otherwise provided for pursuant to the
Non-Employee Director Awards. Each option granted pursuant to the Non-Employee
Director Awards shall be exercisable in full upon receipt and shall expire ten
years after the date of grant, unless sooner exercised or cancelled due to
termination of service or death.
46
<PAGE> 48
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of October 7, 1997, and as adjusted to give
effect to the closing of the Acquisitions and the Offering, as to (i) all
persons who will then be the "beneficial owners" (as defined by the Commission)
of 5% or more of the Common Stock, (ii) each director and person nominated to
become a director on closing of the Offering; (iii) each executive officer; (iv)
certain executive officers of each of the Founding Companies; and (v) all
executive officers and directors of the Company as a group. All persons listed
have an address c/o the Company's principal executive offices and have sole
voting and investment power with respect to their shares, unless otherwise
indicated.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY SHARES
OWNED AS OF BENEFICIALLY
OCTOBER 7, OWNED AFTER
1997(1) OFFERING(1)
------------------- -------------------
NUMBER OF NUMBER OF
SHAREHOLDERS SHARES PERCENT SHARES PERCENT
------------ --------- ------- --------- -------
<S> <C> <C> <C> <C>
Jean Savoy(2)(3)................................. 742,500 58.9% 742,500 8.4%
G. Darcy Klug(2)(3).............................. 737,500 58.7 737,500 8.4
J&D Capital Investments, L.C.(3)................. 737,500 58.7 737,500 8.4
James B. Thompson, Jr.(3)........................ 100,000 8.0 100,000 1.1
Bill E. Stallworth............................... 100,000 8.0 100,000 1.1
Thad Smith....................................... 100,000 8.0 100,000 1.1
Johnnie W. Domingue.............................. 75,000 6.0 75,000 *
Beldon E. Fox, Jr.(3)............................ 75,000 6.0 75,000 *
Clifford E. McFarland(4)......................... 55,000 4.2 55,000 *
Patrick B. Collins............................... 8,000 * 8,000 *
The Succession of Herbert D. Hughes.............. -- -- 600,000 6.8
Louis Woodson.................................... -- -- 580,000 6.6
Daniel N. Hargett, Sr............................ -- -- 533,333 6.0
H. Daniel Hughes II.............................. -- * -- *
D. Glenn Richardson.............................. 5,000 * 5,000 *
Nathan Avery..................................... -- -- 5,000 *
All executive officers, directors and persons
nominated
to become directors as a group (10 persons).... 1,085,500 81.9 1,923,833 21.6
</TABLE>
- ---------------
* Less than one percent
(1) Shares shown include shares that could be acquired on exercise of currently
outstanding stock options which vest within 60 days of the date of this
Prospectus as follows: Jean Savoy -- 5,000; Clifford E. McFarland -- 5,000;
Patrick B. Collins -- 5,000; D. Glenn Richardson -- 5,000; and Nathan
Avery -- 5,000.
(2) Shares shown include 737,500 shares held by J&D Capital Investments, L.C.,
of which Mr. Klug owns 73.75% and Mr. Savoy owns 26.25% of the membership
interests.
(3) The holder has agreed to exchange all such shares of Common Stock for an
equal number of shares of Restricted Common Stock, par value $.001 per share
("Restricted Common Stock"), contemporaneously with the closing of the
Offering under certain circumstances. See "Certain Transactions --
Acquisitions of the Founding Companies" and "Description of Capital
Stock -- Common Stock and Restricted Common Stock."
(4) Shares shown reflect warrants to purchase 50,000 shares issued to McFarland,
Grossman & Company, Inc., of which Mr. McFarland is a co-founder and
managing director.
47
<PAGE> 49
CERTAIN TRANSACTIONS
ORGANIZATION OF THE COMPANY
In connection with its formation, TCMS issued 600,000 shares of its Common
Stock to J&D Capital Investments, L.C. ("J&D") for an aggregate cash
consideration of $600 (62,500 of which shares were subsequently sold to
unrelated third parties). G. Darcy Klug and Jean Savoy, promoters of TCMS, own
73.75% and 26.25% of the membership interests of J&D, respectively. TCMS also
issued, in connection with its formation, 300,000 shares of Common Stock to G.
Darcy Klug, individually (200,000 of which shares were subsequently contributed
by Mr. Klug to J&D and 100,000 of which shares were subsequently sold to James
B. Thompson, Jr.), and 75,000 shares of Common Stock to Beldon E. Fox, Jr., each
for cash consideration equal to $.001 per share. On closing of the Offering, the
holders of these 975,000 shares of Common Stock have agreed to exchange such
shares for an equal number of shares of Restricted Common Stock if required to
ensure that shareholders of the Woodson companies become, collectively, the
largest holder of TCMS voting stock immediately following the Acquisitions.
Effective February 19, 1997, TCMS and J&D entered into a consulting
agreement pursuant to which J&D provides consulting and financial services to
TCMS. Under the consulting agreement, J&D is to receive a consulting fee of
$12,500 per month, payable on the closing of the Offering, at which time the
agreement shall terminate. On September 24, 1997, TCMS and J&D amended the
consulting agreement, so that following the completion of the Offering, J&D will
provide the Company financial advisory and related services in connection with
its acquisition program. J&D will receive a consulting fee of $23,500 per month
and Non-Qualified options under the 1997 Stock Option Plan to purchase 44,000
shares (assuming an initial public offering price of $15.00 per share) for an
exercise price equal to the initial public offering price per share. These
options will vest at the rate of 20% per year, commencing on the first
anniversary of the closing of the Offering, and will expire at the earlier of
ten years from the date of grant or three months following termination of the
consulting and financial services agreement. In addition, J&D will also be
eligible to receive annual performance-based bonuses. In addition, J&D has made
advances to TCMS pursuant to the J&D Loan Agreement to enable TCMS to pay
various professional and administrative expenses in connection with its
formation and the Offering. As of September 30, 1997, there were outstanding
advances under the J&D Loan Agreement totaling $554,583, which amount bears
interest at a rate of 10% per annum and is payable on or before the earlier of
June 19, 1998 or 30 days following the closing of the Offering. All the advances
made under the J&D Loan Agreement, together with accrued interest thereon, will
be repaid from the net proceeds of the Offering. See "Use of Proceeds."
On April 14, 1997, TCMS entered into an agreement for consulting services
("Executive Services Agreement") with Stallworth, Frankhouser & Associates, a
Houston-based business consulting firm ("SFA"), pursuant to which Bill E.
Stallworth and Thad Smith have provided executive services to TCMS in connection
with its formation, the Acquisitions and the Offering. Under the Executive
Services Agreement, SFA is entitled to receive (i) $10,000 per month for the
services provided by Mr. Stallworth so long as he provides a minimum of 85 hours
of services per month to TCMS and (ii) $250 per hour for the services provided
by Mr. Smith, with a maximum daily charge of $2,000 per day. Either TCMS or SFA
may terminate the Executive Services Agreement by providing the other party 30
days' prior notice. The Executive Services Agreement was amended to provide for
termination of consulting services effective August 1, 1997, and to provide for
the payment of cash bonuses, payable upon the closing of the Offering, to Mr.
Stallworth and Mr. Smith in the amount of $115,000 and $130,000, respectively.
Effective August 1, 1997, the Company entered into employment agreements with
Mr. Stallworth and Mr. Smith under which each will receive a base salary of
$10,000 per month prior to the closing of the Offering.
On April 21, 1997, TCMS executed a memorandum agreement with Johnnie W.
Domingue, providing the terms of Mr. Domingue's employment with TCMS in
connection with its formation, the Acquisitions and the Offering. Under that
agreement, Mr. Domingue receives a base salary of $10,000 per month. Mr.
Domingue will receive a success bonus of $100,000 on the closing of the
Offering. Either party may terminate the agreement on 30 days' written notice.
48
<PAGE> 50
From March 1997 to April 1997, TCMS also sold a total of 275,000 shares of
Common Stock at $.001 per share to various members of management as follows: Mr.
Stallworth -- 100,000 shares; Mr. Smith -- 100,000 shares; and Mr.
Domingue -- 75,000 shares.
TCMS has entered into stock repurchase agreements with each of Messrs.
Stallworth, Smith and Domingue, pursuant to which TCMS is entitled to
repurchase, for $.001 per share, a portion of the shares of Common Stock
previously issued to each of them, in the event such individual (i) is
terminated from his employment with TCMS for cause (as defined in the
agreements) or (ii) voluntarily resigns from his employment with TCMS within 18
months of the closing of the Offering. All shares of Common Stock held by such
persons on the closing of the Offering will initially be subject to the
repurchase rights and that number will be reduced pro rata each month thereafter
until the end of that 18-month period, when no shares will be subject to
repurchase by TCMS. Messrs. Stallworth, Smith and Domingue may not sell any
shares of Common Stock so long as they remain subject to the repurchase rights.
ACQUISITIONS OF THE FOUNDING COMPANIES
Concurrently with the closing of the Offering, TCMS will acquire by merger
or stock purchase all the issued and outstanding capital stock of the Founding
Companies, at which time, each Founding Company will become a wholly owned
subsidiary of TCMS. The aggregate consideration TCMS will pay to acquire the
Founding Companies and certain related real estate consists of (i) approximately
$85.7 million in cash, (ii) $3.0 million in 8% notes payable over a ten-year
term ending in 2007 and (iii) 2,570,933 shares of Common Stock. TCMS will also
assume up to $11.5 million of indebtedness of the Founding Companies and then
repay or refinance substantially all that indebtedness at or shortly after the
closing of the Acquisitions. In addition, the acquisition agreements for the
RFCNI and CSI Acquisitions provide for post-closing adjustments, which are to be
determined based on a multiple of estimated EBITDA of RFCNI and one of the
entities comprising CSI, payable in a combination of cash and shares of Common
Stock. Based on a preliminary determination, the Company currently estimates
that such post-closing adjustments will not exceed $0.5 million.
The consideration being paid by TCMS for each Founding Company was
determined by arm's-length negotiations between TCMS and the owner or owners of
that Founding Company.
HBH and two of the Woodson companies are S corporations. In connection with
the Acquisitions, these companies will make distributions to their shareholders
equal to 42% of their undistributed net earnings since January 1, 1997 ("S
Corporation Distributions"). If the S Corporation Distributions were distributed
as of June 30, 1997, the aggregate amount of the S Corporation Distributions
would have been $1.5 million.
The following table sets forth the estimated consideration to be paid by
TCMS for each of the Founding Companies and related real estate (dollars in
thousands). These amounts do not include any S Corporation Distributions to be
made to the shareholders of the various Founding Companies.
<TABLE>
<CAPTION>
SHARES OF
LONG-TERM COMMON DEBT
CASH DEBT STOCK ASSUMED
------- --------- --------- -------
<S> <C> <C> <C> <C>
Woodson(1)(2).................................... $19,836 $ -- 1,237,600 $ --
CSI.............................................. 40,000 -- 533,333 5,500
HBH.............................................. 24,350(3) -- 600,000 6,000
RFCNI............................................ 1,500 3,000 200,000 --
------- ------ --------- -------
Total.................................. $85,686 $3,000 2,570,933 $11,500
======= ====== ========= =======
</TABLE>
- ---------------
(1) Three of the Woodson Companies will be acquired for TCMS Common Stock in
separate merger transactions and the stock of the fourth Woodson Company
will be purchased for cash and shares of TCMS Common Stock.
(2) J&D, James B. Thompson, Jr. and Beldon E. Fox, Jr. have each agreed to
exchange all of their shares of Common Stock for Restricted Common Stock
contemporaneously with the closing of the Offering if
49
<PAGE> 51
required to ensure that shareholders of the Woodson companies become,
collectively, the largest holder of Common Stock entitled to vote
immediately following the Acquisitions. See "Description of Capital
Stock -- Common Stock and Restricted Common Stock."
(3) Does not include an option exercise price of $1.2 million applicable to an
option to purchase a five-acre tract of real property and improvements
adjacent to a 13-acre tract of land used by HBH, which is being acquired in
connection with the Acquisition of HBH.
In connection with the Acquisitions, and as consideration for their
interests in the Founding Companies, the following officers, directors and
beneficial owners of more than 5% of the outstanding shares of Common Stock will
receive cash and shares of Common Stock as set forth in the following table
(dollars in thousands). These amounts do not include any S Corporation
Distributions to be made to the shareholders of the various Founding Companies.
<TABLE>
<CAPTION>
SHARES OF
NAME CASH COMMON STOCK
---- ------- ------------
<S> <C> <C>
Daniel N. Hargett, Sr...................................... $36,670 533,333
Louis Woodson.............................................. -- 580,000
The Succession of Herbert D. Hughes........................ 24,350 600,000
------- ---------
Total............................................ $61,020 1,713,333
======= =========
</TABLE>
Certain of the Founding Companies have incurred indebtedness which has been
personally guaranteed by its stockholders or by entities controlled by its
stockholders. At June 30, 1997, the aggregate amount of indebtedness of these
Founding Companies that was subject to personal guarantees was approximately
$12.5 million. TCMS intends to repay such indebtedness at the closing of the
Acquisitions.
Certain of the Acquisitions (the "Mergers") are structured so that each
relevant Founding Company will be merged with and into a subsidiary of TCMS,
with the subsidiary surviving the transaction. TCMS has received an opinion of
counsel that no Founding Company will recognize income or gain in connection
with the Mergers, which opinion is based on certain assumptions as to factual
matters (which the Company believes are correct). If gain were recognized, the
Company would be liable for federal and state income taxes (without recourse to
others), the amount of which would depend on the difference between the value of
the assets of the relevant Founding Company reduced by the adjusted basis
thereof. Such federal or state income tax liabilities, if imposed, could have a
material adverse effect on the financial condition of the Company.
The closing of each Acquisition is subject to customary conditions
including, among others: the continuing accuracy of the representations and
warranties made by the Founding Companies, their principal shareholders and
TCMS, the performance of each of their respective covenants included in the
agreements relating to the Acquisitions and the nonexistence of a material
adverse change in the results of operations, financial condition or business of
each Founding Company prior to the closing date.
Any Founding Company's acquisition agreement may be terminated under
certain circumstances prior to the closing of the Offering, including: (i) by
the mutual consent of the Board of Directors of TCMS and the owner or owners of
that Founding Company; (ii) by TCMS if the disclosure schedules to the
acquisition agreement are amended to reflect a material adverse change in that
Founding Company; or (iii) if a material breach or default under the agreement
by one party occurs and is not waived. No assurance can be given that the
conditions to the closing of all the Acquisitions will be satisfied or waived or
that each Acquisition will close.
FINANCIAL ADVISORY SERVICES
In February 1997, the Company engaged McFarland, Grossman & Company, Inc.
("MGCO") to provide financial advisory services for a period of six months in
connection with the Acquisitions and related financings. Under the terms of the
engagement letter between the Company and MGCO, as amended on June 25, 1997 (the
"MGCO Engagement Letter"), the Company paid MGCO an initial financial advisory
fee of $15,000, plus monthly fees aggregating $30,000, and reimbursed MGCO for
its out-of-pocket expenses
50
<PAGE> 52
relating to the services provided. In connection with the MGCO Engagement
Letter, the Company issued the MG Warrant to MGCO for $100 in cash. The MG
Warrant provides for the purchase of up to 50,000 shares of Common Stock, at a
per share exercise price equal to the lesser of $8.00 and 70% of the initial
public offering price set forth on the cover page of this Prospectus. The MG
Warrant may be exercised in whole or, from time to time, in part, at any time
during the five-year period beginning on the issuance date of the Warrant. The
Company granted certain registration rights to MGCO with respect to the shares
of Common Stock issuable upon exercise of the MG Warrant.
Pursuant to the MGCO Engagement Letter, MGCO will be entitled to receive
the following fees in the future: (i) a $400,000 success fee, payable on closing
of the Acquisitions; (ii) a senior debt placement fee of up to 2% of the
Revolving Credit Facility, payable on closing of the Revolving Credit Facility;
and (iii) a private placement fee equal to 5% of the amount of any private
placement made by the Company within two years of August 12, 1997 with any
capital source introduced to the Company by MGCO during the term of the MGCO
Engagement Letter, together with a warrant to purchase an amount equal to 10% of
the securities issued in any such private placement at the issue price in that
private placement.
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<PAGE> 53
DESCRIPTION OF CAPITAL STOCK
GENERAL
TCMS' Charter authorizes the issuance of 25,000,000 shares of capital
stock, consisting of 20,000,000 shares of Common Stock, 3,000,000 shares of
Restricted Common Stock and 2,000,000 shares of Preferred Stock, par value $.001
per share ("Preferred Stock"). At September 30, 1997, 1,256,000 shares of Common
Stock were outstanding, and no shares of either Restricted Common Stock or
Preferred Stock were outstanding. On closing of the Acquisitions and the
Offering, TCMS will have outstanding 8,826,933 shares of Common Stock and no
shares of Preferred Stock or Restricted Common Stock will be outstanding (except
to the extent that shares of Common Stock may be exchanged for shares of
Restricted Common Stock contemporaneously with closing of the Offering. See
"Certain Transactions -- Acquisitions of the Founding Companies"). The following
summary description of certain terms of the capital stock of TCMS is qualified
in its entirety by reference to the Charter, which is included as an exhibit to
the Registration Statement of which this Prospectus is a part.
COMMON STOCK AND RESTRICTED COMMON STOCK
The holders of Common Stock are each entitled to one vote for each share
held on all matters to which they are entitled to vote, including the election
of directors. The holders of Restricted Common Stock have no voting rights.
After the closing of the Offering, the Board of Directors will be elected
annually and will serve one-year terms. Cumulative voting for the election of
directors is not permitted. Any director, or the entire Board of Directors, may
be removed at any time, with cause, by a majority of the aggregate number of
votes which may be cast by the holders of outstanding shares of Common Stock.
Any shares of Restricted Common Stock that may be issued will automatically
convert into Common Stock on a share-for-share basis (i) in the event any person
acquires beneficial ownership of 25% or more of the outstanding shares of Common
Stock of TCMS in or as a result of a transaction or a series of transactions
that shall not have been approved or ratified by at least 80% of the Continuing
Directors (as defined in the Charter), (ii) 18 months after the closing of the
Offering or (iii) in the event a majority of the aggregate number of votes which
may be cast by the holders of outstanding shares of Common Stock approve such
conversion.
Subject to the rights of any then outstanding shares of Preferred Stock,
holders of Common Stock (and Restricted Common Stock if any are issued) are
entitled to participate pro rata in such dividends as may be declared in the
discretion of the Board of Directors out of the funds legally available
therefor. Holders of Common Stock (and Restricted Common Stock if any are
issued) are entitled to share ratably in the net assets of TCMS on liquidation
after payment or provision for all liabilities and any preferential liquidation
rights of any Preferred Stock then outstanding. Holders of Common Stock and
holders of Restricted Common Stock will have no preemptive rights to purchase
shares of stock of TCMS. Shares of Common Stock are not subject to any
redemption provisions and are not convertible into any other securities of TCMS.
Shares of Restricted Common Stock, if issued, will not be subject to any
redemption provisions, but will be convertible into Common Stock on the
occurrence of certain events as described above. All outstanding shares of
Common Stock are, and the shares of Common Stock to be issued pursuant to the
Offering and the Acquisitions will be, on payment therefor, fully paid and
non-assessable.
PREFERRED STOCK
The Preferred Stock may be issued from time to time by the Board of
Directors in one or more classes or series. Subject to the provisions of the
Charter and limitations prescribed by law, the Board of Directors is expressly
authorized to adopt resolutions to issue the shares, to fix the number of shares
and to change the number of shares constituting any class or series and to
provide for or change the voting powers, designations, preferences and relative,
participating, optional or other special rights, qualifications, limitations or
restrictions thereof, including dividend rights (including whether dividends are
cumulative), dividend rates, terms of redemption (including sinking fund
provisions), redemption prices, conversion rights and liquidation prefer-
52
<PAGE> 54
ences of the shares constituting any series of the Preferred Stock, in each case
without any further action or vote by the stockholders. TCMS has no current
plans to issue any shares of Preferred Stock.
One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of TCMS by means of a tender offer, proxy contest, merger or
otherwise, and thereby to protect the continuity of the management of TCMS. The
issuance of shares of the Preferred Stock pursuant to the Board of Directors'
authority described above may adversely affect the rights of the holders of
Common Stock. For example, Preferred Stock issued by TCMS may rank prior to the
Common Stock and Restricted Common Stock as to dividend rights, liquidation
preference or both, may have full or limited voting rights and may be
convertible into shares of Common Stock. Accordingly, the issuance of shares of
Preferred Stock may discourage bids for the Common Stock or may otherwise
adversely affect the market price of the Common Stock.
STATUTORY BUSINESS COMBINATION PROVISION
TCMS is subject to Section 203 of the DGCL which, with certain exceptions,
prohibits a Delaware corporation from engaging in any of a broad range of
business combinations with any "interested stockholder" for a period of three
years following the date that stockholder became an interested stockholder,
unless: (i) prior to that date, the board of directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder, (ii) on closing of the
transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those shares owned
(a) by persons who are directors and also officers of the corporation and (b) by
employee stock plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer, or (iii) on or after that date, the
business combination is approved by the corporation's board of directors and
authorized at an annual or special meeting of stockholders by the affirmative
vote of at least 66 2/3% of the outstanding voting stock not owned by the
interested stockholder. Under Section 203, the restrictions described above also
do not apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of one of certain
extraordinary transactions involving the corporation and a person who had not
been an interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors who were directors prior to that person becoming an interested
stockholder during the previous three years or were recommended for election or
elected to succeed those directors by a majority of those directors. An
"interested stockholder" is defined as any person that is (a) the owner of 15%
or more of the outstanding voting stock of the corporation or (b) an affiliate
or associate of the corporation and was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-year
period immediately prior to the date it is sought to be determined whether that
person was an interested stockholder.
CERTAIN PROVISIONS OF THE CHARTER AND BYLAWS
Pursuant to the Charter and as permitted by Delaware law, a director of
TCMS is not liable to TCMS or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability in connection with a
breach of duty of loyalty to TCMS or its stockholders, for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, for dividend payments, stock repurchases or redemptions illegal under
Delaware law or any transaction in which that director derived an improper
personal benefit.
Additionally, the Charter provides that directors and officers of TCMS will
be indemnified by TCMS to the fullest extent authorized by Delaware law, as it
now exists or may in the future be amended, against all expenses and liabilities
actually and reasonably incurred in connection with service for or on behalf of
TCMS, and further permits the advancing of expenses incurred in defense of
claims.
53
<PAGE> 55
The Charter provides that any action required or permitted to be taken by
the stockholders of TCMS must be effected at a duly called meeting and may not
be taken or effected by a written consent of stockholders in lieu thereof. The
Charter provides that a special meeting of stockholders may be called only by
the President, the Board of Directors or by such other person or persons as may
be authorized in the Bylaws of TCMS. Those Bylaws provide that only those
matters set forth in the notice of the special meeting may be considered or
acted on at that special meeting. The Charter provides that the Board of
Directors may adopt, amend or repeal the Bylaws of TCMS by the affirmative vote
of a majority of the Board of Directors without the consent or vote of the
stockholders of TCMS; provided, however, that the stockholders of TCMS may
adopt, amend or repeal its Bylaws by the affirmative vote of the holders of at
least a majority of the shares entitled to vote in the election of directors
which are present in person or represented by proxy at a duly constituted
meeting of the stockholders at which a quorum is present.
The Charter contains an "anti-greenmail" mechanism which prohibits the
Company from acquiring any voting securities from any beneficial owner of more
than 10% of the outstanding voting securities of the Company, except for (i)
acquisitions pursuant to a tender offer to all of the holders of the Company's
voting securities at the same price and on the same terms and conditions, (ii)
acquisitions in compliance with Rule 10b-18 under the Securities and Exchange
Act of 1934, as amended, or (iii) acquisitions at a price not exceeding the
"fair market value" (as defined in the Charter) per share.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
On closing of the Acquisitions and completion of the Offering, 8,826,933
shares of Common Stock will be outstanding. See "Certain
Transactions -- Acquisitions of the Founding Companies." The 5,000,000 shares of
Common Stock offered hereby will be freely tradable unless acquired by
affiliates of TCMS. All the remaining 3,826,933 shares (including the 2,570,933
shares to be issued to affiliates of the Founding Companies) of Common Stock to
be outstanding on the closing of the Acquisitions and the Offering may be resold
publicly only following their effective registration under the Securities Act or
pursuant to an exemption from the registration requirements of that act, such as
Rule 144 thereunder. As described below, certain shareholders of the Founding
Companies will have certain registration rights with respect to the shares of
Common Stock received by them in the Acquisitions.
When the Offering closes, TCMS also will have outstanding (i) options to
purchase up to a total of approximately 457,000 shares of Common Stock, which
are anticipated to be outstanding pursuant to the 1997 Stock Option Plan on the
date the Offering closes, (ii) the MG Warrant (which provides for the issuance
of up to 50,000 shares of Common Stock and grants the holder thereof certain
registration rights) and (iii) the Lender Warrant (which will provide for the
issuance of up to 175,000 shares of Common Stock and will grant the holder
thereof certain registration rights). TCMS intends to file a registration
statement on Form S-8 with the Commission to register the shares issuable
pursuant to its 1997 Stock Option Plan under the Securities Act. After that
registration statement becomes effective, the shares registered thereby
generally will on issuance be available for sale in the open market by holders
who are not affiliates of TCMS and, subject to the volume and other limitations
of Rule 144, by holders who are affiliates of TCMS. See "Management -- 1997
Stock Option Plan."
In general, under Rule 144, if a minimum of one year has elapsed since the
later of the date of acquisition of the restricted securities from TCMS or an
affiliate of TCMS, the holder (or holders whose shares of Common Stock are
aggregated) of such restricted securities, including holders who may be deemed
"affiliates of TCMS," is entitled to sell within any three-month period a number
of shares that does not exceed the greater of (i) one percent of the then
outstanding shares of the Common Stock (approximately 88,269 shares on
completion of the Offering) or (ii) the average weekly reported volume of
trading of the Common Stock during the four calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain provisions regarding the manner
of sale, notice requirements and the availability of current public information
about
54
<PAGE> 56
TCMS. Affiliates may sell shares not constituting restricted securities in
accordance with the foregoing volume limitations and other requirements but
without regard to the one year holding period. Under Rule 144(k), if a period of
at least two years has elapsed since the later of the date on which restricted
securities were acquired from TCMS or the date they were acquired from an
affiliate of TCMS, a holder of such restricted securities who is not an
affiliate of TCMS at the time of the sale and has not been such an affiliate for
at least three months prior to the sale is entitled to sell the shares
immediately without regard to the volume limitations and other conditions of
Rule 144 described above. The foregoing summary of Rule 144 is not intended to
be a complete description thereof and is qualified in its entirety by reference
thereto. The Commission has proposed certain amendments to Rule 144 that would,
among other things, eliminate the manner of sale requirements and revise the
notice provisions of that rule. The Commission has also solicited comments on
other possible changes to Rule 144, including possible revisions to the one- and
two-year holding periods and volume limitations described above.
TCMS has entered into registration rights agreements with the shareholders
of each of Woodson, CSI and HBH, who, collectively, will acquire 2,370,933
shares of Common Stock in connection with the Acquisitions. Pursuant to each of
those agreements, at any time after one year from the date of the closing of the
Offering, the former shareholders of each of those companies may make one
request that TCMS file a registration statement registering the resale of the
Common Stock held by them. In addition, pursuant to the registration rights
agreements, each of the former shareholders of Woodson, CSI and HBH will have
the right to include any shares of Common Stock owned by them in certain
registration statements filed by TCMS under the Securities Act. TCMS is
generally required to pay the costs associated with any offering by those
shareholders pursuant to the exercise of their registration rights. The
registration rights agreements provide that the number of shares of Common Stock
that must be registered on behalf of the selling stockholders is subject to
limitation if the managing underwriter or TCMS' financial advisor, as the case
may be, determines that market conditions so require. TCMS will indemnify the
selling stockholders, and those stockholders will indemnify TCMS, against
certain liabilities in respect of any registration statement or offering that
includes shares pursuant to the registration rights agreements.
TCMS and its directors and executive officers, MGCO, Lender, J&D, all of
TCMS' other current stockholders and all persons who receive shares of Common
Stock in connection with the Acquisitions have agreed not to offer or sell any
of those shares for a period of one year from the date of this Prospectus (the
"Lockup Period") without the prior written consent of Jefferies & Company, Inc.,
except that TCMS may issue Common Stock in connection with the Acquisitions and,
subject to certain conditions, in connection with future acquisitions, on
exercise of the MG Warrant and the Lender Warrant and pursuant to awards under
the 1997 Stock Option Plan.
55
<PAGE> 57
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to the Underwriters named below (the
"Underwriters"), for whom Jefferies & Company, Inc. and Johnson Rice & Company
L.L.C. are acting as the representatives (the "Representatives"), and the
Underwriters have severally agreed to purchase, the number of shares of Common
Stock set forth opposite their respective names in the table below at the public
offering price less the underwriting discount set forth on the cover page of
this Prospectus:
<TABLE>
<CAPTION>
NUMBER
OF SHARES
UNDERWRITERS ---------
<S> <C>
Jefferies & Company, Inc....................................
Johnson Rice & Company L.L.C................................
---------
Total............................................. 5,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligation of the Underwriters
to purchase the shares of Common Stock offered hereby is subject to certain
conditions, including the closing of each of the Acquisitions. The Underwriters
are committed to purchase all of the shares of Common Stock offered hereby
(other than those covered by the over-allotment option described below), if any
are purchased.
The Underwriters propose to offer the shares of Common Stock to the public
initially at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may
reallow, a discount not in excess of $ per share to certain other
dealers. After the initial public offering of the Common Stock, the public
offering price, the concession to selected dealers and the reallowance to other
dealers may be changed by the Representatives.
TCMS has granted the Underwriters an option, exercisable for 30 days from
the date of this Prospectus, to purchase up to 750,000 additional shares of
Common Stock at the initial public offering price, less the underwriting
discount. To the extent such option is exercised, each Underwriter will become
obligated, subject to certain conditions, to purchase additional shares of
Common Stock proportionate to such Underwriter's initial commitment as indicated
in the preceding table. The Underwriters may exercise such right of purchase
only for the purpose of covering over-allotments, if any, made in connection
with the shares of Common Stock offered hereby.
TCMS and its directors and executive officers, MGCO, Lender, J&D, all of
TCMS' other current stockholders and all persons who receive shares of Common
Stock in connection with the Acquisitions have agreed not to offer or sell any
of those shares for a period of one year from the date of this Prospectus
without the prior written consent of Jefferies & Company, Inc., except that TCMS
may issue Common Stock in connection with the Acquisitions and, subject to
certain conditions, in connection with future acquisitions, on exercise of the
MG Warrant and the Lender Warrant and pursuant to awards under the 1997 Stock
Option Plan.
The Representatives have informed TCMS that they do not expect the
Underwriters to confirm sales of Common Stock offered by this Prospectus to any
accounts over which they exercise discretionary authority.
At the request of TCMS, the Underwriters have reserved up to 250,000 shares
of the Common Stock offered hereby for sale at the initial public offering price
to employees of the Company and certain other persons designated by TCMS who
have expressed an interest in purchasing shares of Common Stock. The
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<PAGE> 58
number of shares of Common Stock available to the general public will be reduced
to the extent these persons purchase the reserved shares.
TCMS has agreed to indemnify the Underwriters against certain liabilities
that may be incurred in connection with the offering of the shares of Common
Stock, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.
Prior to the Offering, there has been no public trading market for the
shares of Common Stock, and there can be no assurance that an active trading
market will develop or be sustained upon the completion of the Offering. The
initial public offering price of the shares of Common Stock will be determined
by negotiations between TCMS and the Representatives. Among the factors that
will be considered in determining such public offering price will be the history
of and the prospects for the industry in which the Founding Companies compete,
an assessment of the Company's management, the past and present operations of
the Founding Companies, the past and present earnings of the Founding Companies
and the trend of their earnings, the general condition of the securities markets
at the time of the Offering, the price-earning ratios and market prices of
publicly traded securities of companies that TCMS and the Representatives
believe to be comparable to TCMS, and other factors deemed to be relevant.
In order to facilitate the Offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may overallot in
connection with the Offering, creating a short position in the Common Stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, the
Common Stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an Underwriter or a dealer in distributing the
Common Stock in the Offering, if the syndicate repurchases previously
distributed shares of Common Stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the Common Stock above independent
market levels. The Underwriters are not required to engage in these activities
and may end any of these activities at any time.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock being offered
hereby will be passed on for the Company by Chamberlain, Hrdlicka, White,
Williams & Martin, Houston, Texas and for the Underwriters by Baker & Botts,
L.L.P., Houston, Texas.
EXPERTS
The audited financial statements of TCMS, Woodson and CSI included in this
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
The audited financial statements of HBH, as of December 31, 1996 and 1995
and for each of the three years in the period ended December 31, 1996, included
in this Prospectus, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and have been so included
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
The audited financial statements of RFCNI included in this Prospectus have
been audited by Darnall, Sikes & Frederick, independent certified public
accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of such firm as experts in giving such
report.
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<PAGE> 59
ADDITIONAL INFORMATION
The Company has not previously been subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended. The Company has filed a
Registration Statement on Form S-1 (together with all amendments, schedules and
exhibits thereto, the "Registration Statement") with the Commission under the
Securities Act, with respect to the Common Stock offered hereby. This
Prospectus, which is included as part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
portions of which have been omitted in accordance with the rules and regulations
of the Commission. Statements contained in this Prospectus as to the contents of
any contract or other document referred to herein are not necessarily complete,
and in each instance that a reference is made to a contract or other document
filed as an exhibit to the Registration Statement, each such statement is
qualified in all respects by such reference. A copy of the Registration
Statement may be examined without charge at the Commission's principal offices
at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices
of the Commission located at 7 World Trade Center, Suite 1300, New York, New
York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of all or any part of the Registration Statement may be
obtained from the Public Reference Section of the Commission upon payment of
certain fees prescribed by the Commission. Copies of such materials may also be
obtained over the Internet at http://www.sec.gov.
The Company intends to furnish to its stockholders annual reports
containing audited financial statements examined by an independent public
accounting firm for each fiscal year.
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<PAGE> 60
TRANSCOASTAL MARINE SERVICES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
TransCoastal Marine Services, Inc. Unaudited Pro Forma:
Basis of Presentation..................................... F-2
Unaudited Pro Forma Combined Balance Sheet................ F-3
Unaudited Pro Forma Combined Statements of Operations..... F-4
Notes to Unaudited Pro Forma Combined Financial
Statements............................................. F-6
TransCoastal Marine Services, Inc.:
Report of Independent Public Accountants.................. F-12
Consolidated Balance Sheets............................... F-13
Consolidated Statements of Operations..................... F-14
Consolidated Statements of Stockholders' Equity
(Deficit).............................................. F-15
Consolidated Statements of Cash Flows..................... F-16
Notes to Consolidated Financial Statements................ F-17
Founding Companies:
The Woodson Companies
Report of Independent Public Accountants............... F-22
Combined Balance Sheets................................ F-23
Combined Statements of Operations...................... F-24
Combined Statements of Shareholders' Equity............ F-25
Combined Statements of Cash Flows...................... F-26
Notes to Combined Financial Statements................. F-27
The CSI Companies
Report of Independent Public Accountants............... F-36
Combined Balance Sheets................................ F-37
Combined Statements of Operations...................... F-38
Combined Statements of Owners' Equity.................. F-39
Combined Statements of Cash Flows...................... F-40
Notes to Combined Financial Statements................. F-41
HBH, Inc.
Independent Auditors' Report........................... F-48
Balance Sheets......................................... F-49
Statements of Operations............................... F-50
Statements of Shareholder's Equity (Deficit)........... F-51
Statements of Cash Flows............................... F-52
Notes to Financial Statements.......................... F-53
The Red Fox Companies of New Iberia, Inc.
Report of Independent Public Accountants............... F-58
Balance Sheets......................................... F-59
Statements of Operations............................... F-60
Statements of Shareholder's Equity..................... F-61
Statements of Cash Flows............................... F-62
Notes to Financial Statements.......................... F-63
</TABLE>
F-1
<PAGE> 61
TRANSCOASTAL MARINE SERVICES, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma combined financial statements give effect
to the acquisitions by TransCoastal Marine Services, Inc. ("TCMS") of the
outstanding capital stock of The Woodson Companies, The CSI Companies, HBH,
Inc., and the Red Fox Companies of New Iberia, Inc. ("RFCNI") (together, the
"Founding Companies") and certain related real properties. TCMS and the Founding
Companies are hereinafter referred to as the Company. These acquisitions (the
"Acquisitions") will occur concurrently with and as a condition to the closing
of TCMS's initial public offering (the "Offering") and will be accounted for
using the purchase method of accounting, with The Woodson Companies being
reflected as the "accounting acquiror."
The unaudited pro forma combined balance sheet gives effect to the
Acquisitions and the Offering as if they had occurred on June 30, 1997. The
unaudited pro forma combined statement of operations gives effect to the
Acquisitions and the Offering as if they had occurred on January 1 of each
period presented.
TCMS has preliminarily analyzed the savings that it expects to realize from
reductions in rent expense resulting from elimination of certain leases with
certain former stockholders of the Founding Companies or their affiliates with
respect to certain real properties being purchased in connection with the
Acquisitions. TCMS cannot currently quantify other potential savings until
completion of the combination of the Founding Companies. It is anticipated that
these savings will be partially offset by the costs related to the Company's new
corporate management and by the costs associated with being a public company;
however, because these costs cannot be accurately quantified at this time, they
have not been included in the pro forma financial information of the Company.
The pro forma adjustments are based on preliminary estimates (primarily of
the aggregate purchase price of the Acquisitions), available information and
certain assumptions that management deems appropriate, but which may be revised
as additional information becomes available. The pro forma financial information
does not purport to represent what the Company's financial position or results
of operations would actually have been if such transactions had in fact occurred
on the dates assumed and are not necessarily representative of the Company's
financial position or results of operations for any future period. Since the
Founding Companies were not under common control or management, historical
combined results may not be comparable to, or indicative of, future performance.
The unaudited pro forma combined financial statements should be read in
conjunction with the other financial statements and notes thereto included in
this Prospectus. See "Risk Factors" included in this Prospectus.
F-2
<PAGE> 62
TRANSCOASTAL MARINE SERVICES, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
THE THE
WOODSON CSI PRO FORMA
COMPANIES COMPANIES HBH, INC. RFCNI TCMS ADJUSTMENTS PRO FORMA
--------- --------- --------- ------ ---- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.............................. $ 1,919 $ 1,332 $ 59 $ 707 $ 1 $ (2,590) $ 1,428
Receivables, net.................. 4,753 4,490 10,225 1,242 -- -- 20,710
Costs and estimated earnings in
excess of billings on
uncompleted contracts........... 1,053 -- 1,539 358 -- -- 2,950
Inventory......................... 364 -- -- -- -- -- 364
Other............................. 284 1,389 564 128 462 732 3,559
------- ------- ------- ------ ---- -------- --------
Total current assets........ 8,373 7,211 12,387 2,435 463 (1,858) 29,011
------- ------- ------- ------ ---- -------- --------
PROPERTY AND EQUIPMENT, net......... 4,348 7,053 8,328 44 -- 43,720 63,493
GOODWILL............................ -- -- -- -- -- 64,649 64,649
OTHER............................... 927 39 157 34 40 3 1,200
------- ------- ------- ------ ---- -------- --------
Total assets................ $13,648 $14,303 $20,872 $2,513 $503 $106,514 $158,353
======= ======= ======= ====== ==== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued
liabilities..................... $ 3,229 $ 4,116 $11,141 $1,508 $375 $ 1,571 $ 21,940
Notes payable and current
maturities of long-term debt.... 994 1,069 1,477 -- 187 300 4,027
Payable to founding
stockholders.................... -- -- -- -- -- 85,686 85,686
Billings in excess of costs and
estimated earnings on
uncompleted contracts........... 718 -- -- 422 -- -- 1,140
------- ------- ------- ------ ---- -------- --------
Total current liabilities... 4,941 5,185 12,618 1,930 562 87,557 112,793
------- ------- ------- ------ ---- -------- --------
LONG-TERM DEBT...................... -- 4,696 5,267 -- -- 1,691 11,654
DEFERRED INCOME TAXES............... -- 670 -- 8 -- 16,627 17,305
------- ------- ------- ------ ---- -------- --------
Total liabilities........... 4,941 10,551 17,885 1,938 562 105,875 141,752
------- ------- ------- ------ ---- -------- --------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock...................... 98 264 66 1 1 (426) 4
Additional paid-in capital........ 25 380 808 -- 12 8,723 9,948
Retained earnings (deficit)....... 8,570 5,672 2,113 574 (72) (10,222) 6,635
Treasury stock.................... -- (2,564) -- -- -- 2,564 --
Net unrealized gain on
available-for-sale securities... 14 -- -- -- -- -- 14
------- ------- ------- ------ ---- -------- --------
Total stockholders' equity
(deficit)................. 8,707 3,752 2,987 575 (59) 639 16,601
------- ------- ------- ------ ---- -------- --------
Total liabilities and
stockholders' equity...... $13,648 $14,303 $20,872 $2,513 $503 $106,514 $158,353
======= ======= ======= ====== ==== ======== ========
<CAPTION>
POST-ACQUISITION AS
ADJUSTMENTS ADJUSTED
---------------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.............................. $ 4,056 $ 5,484
Receivables, net.................. -- 20,710
Costs and estimated earnings in
excess of billings on
uncompleted contracts........... -- 2,950
Inventory......................... -- 364
Other............................. (1,194) 2,365
-------- --------
Total current assets........ 2,862 31,873
-------- --------
PROPERTY AND EQUIPMENT, net......... -- 63,493
GOODWILL............................ -- 64,649
OTHER............................... 1,375 2,575
-------- --------
Total assets................ $ 4,237 $162,590
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued
liabilities..................... $ (1,946) $ 19,994
Notes payable and current
maturities of long-term debt.... (2,733) 1,294
Payable to founding
stockholders.................... (85,686) --
Billings in excess of costs and
estimated earnings on
uncompleted contracts........... -- 1,140
-------- --------
Total current liabilities... (90,365) 22,428
-------- --------
LONG-TERM DEBT...................... 26,046 37,700
DEFERRED INCOME TAXES............... -- 17,305
-------- --------
Total liabilities........... (64,319) 77,433
-------- --------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock...................... 5 9
Additional paid-in capital........ 68,551 78,499
Retained earnings (deficit)....... -- 6,635
Treasury stock.................... -- --
Net unrealized gain on
available-for-sale securities... -- 14
-------- --------
Total stockholders' equity
(deficit)................. 68,556 85,157
-------- --------
Total liabilities and
stockholders' equity...... $ 4,237 $162,590
======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-3
<PAGE> 63
TRANSCOASTAL MARINE SERVICES, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THE THE
WOODSON CSI HBH, PRO FORMA
COMPANIES COMPANIES INC. RFCNI TCMS TOTAL ADJUSTMENTS PRO FORMA
--------- --------- ------- ------ ---- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE........................... $17,933 $8,447 $36,873 $9,730 $ -- $72,983 $ 239 $ 72,744
COSTS AND EXPENSES:
Cost of revenue................. 13,561 5,264 33,727 8,260 -- 60,812 (239) 60,573
Selling, general and
administrative expenses....... 2,968 2,435 1,000 885 -- 7,288 (357) 6,931
Depreciation and amortization... 562 359 1,482 12 -- 2,415 3,503 5,918
------- ------ ------- ------ ---- ------- ------- ---------
Operating income (loss)... 842 389 664 573 -- 2,468 (3,146) (678)
INTEREST EXPENSE.................. (35) (137) (853) (30) -- (1,055) (3,464) (4,519)
OTHER INCOME (EXPENSE), net....... 443 134 646 (60) -- 1,163 -- 1,163
------- ------ ------- ------ ---- ------- ------- ---------
Income (loss) before
taxes................... 1,250 386 457 483 -- 2,576 (6,610) (4,034)
PROVISION (BENEFIT) FOR INCOME
TAXES........................... 91 205 -- 197 -- 493 (1,460) (967)
------- ------ ------- ------ ---- ------- ------- ---------
NET INCOME (LOSS)................. $ 1,159 $ 181 $ 457 $ 286 $ -- $ 2,083 $(5,150) $ (3,067)
======= ====== ======= ====== ==== ======= ======= =========
PRO FORMA LOSS PER SHARE.......... $ (.35)
=========
SHARES USED IN COMPUTING PRO FORMA
LOSS PER SHARE.................. 8,850,266
=========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-4
<PAGE> 64
TRANSCOASTAL MARINE SERVICES, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THE THE
WOODSON CSI PRO FORMA
COMPANIES COMPANIES HBH, INC. RFCNI TCMS TOTAL ADJUSTMENTS PRO FORMA
--------- --------- --------- ------ ---- ------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE................... $18,104 $9,606 $23,850 $4,536 $ -- $56,096 $ 1,190 $ 54,906
COSTS AND EXPENSES:
Cost of revenue......... 15,243 5,651 19,394 3,825 -- 44,113 (1,190) 42,923
Selling, general and
administrative
expenses.............. 1,435 1,270 671 674 72 4,122 (179) 3,943
Depreciation and
amortization.......... 455 245 750 8 -- 1,458 2,168 3,626
------- ------ ------- ------ ---- ------- ------- ----------
Operating income
(loss)......... 971 2,440 3,035 29 (72) 6,403 (1,989) 4,414
INTEREST EXPENSE.......... (45) (214) (368) (7) -- (634) (1,625) (2,259)
OTHER INCOME (EXPENSE),
net..................... 560 44 26 (13) -- 617 -- 617
------- ------ ------- ------ ---- ------- ------- ----------
Income (loss)
before taxes... 1,486 2,270 2,693 9 (72) 6,386 (3,614) 2,772
PROVISION (BENEFIT) FOR
INCOME TAXES............ 191 931 -- 2 -- 1,124 308 1,432
------- ------ ------- ------ ---- ------- ------- ----------
NET INCOME (LOSS)......... $ 1,295 $1,339 $ 2,693 $ 7 $(72) $ 5,262 $(3,922) $ 1,340
======= ====== ======= ====== ==== ======= ======= ==========
PRO FORMA INCOME PER
SHARE................... $ 0.15
==========
SHARES USED IN COMPUTING
PRO FORMA INCOME PER
SHARE................... 8,850,266
==========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-5
<PAGE> 65
TRANSCOASTAL MARINE SERVICES, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. GENERAL
TCMS was organized in April 1996 to become a fully integrated marine
construction company focusing on the transition zone (marsh and swamp regions
out to water depths of 20 feet) and shallow water (water depths of 20 to 200
feet) regions along the U.S. Gulf Coast. TCMS has conducted no operations to
date and will acquire the Founding Companies concurrently with and as a
condition to the closing of the Offering.
The historical financial statements reflect the financial position and
results of operations of the Founding Companies and were derived from the
respective Founding Companies' financial statements where indicated. The periods
included in these financial statements for the individual Founding Companies are
as of and for the six months ended June 30, 1997, and for the year ended
December 31, 1996. The audited historical financial statements included herein
have been included in accordance with Rule 3-05 of Regulation S-X of the
Securities and Exchange Commission.
2. ACQUISITION OF FOUNDING COMPANIES
Concurrent with and as a condition to the closing of the Offering, TCMS
will acquire all of the outstanding capital stock of the Founding Companies and
related real estate. The Acquisitions will be accounted for using the purchase
method of accounting, with The Woodson Companies being treated as the accounting
acquiror.
The following table sets forth the estimated consideration to be paid in
cash, long-term debt and shares of TCMS common stock ("Common Stock") to the
owners of each of the Founding Companies. In addition, TCMS will be assuming
debt on certain of the Founding Companies. For purposes of computing the
estimated purchase price for accounting purposes, the value of the shares is
determined using an estimate of the fair value. The estimated purchase price for
each Acquisition and related allocations of the excess purchase price are based
on preliminary estimates and, in the case of RFCNI, are subject to certain
purchase price adjustments at and following closing (in thousands, except share
amounts):
<TABLE>
<CAPTION>
ESTIMATED CONSIDERATION
----------------------------------
LONG-TERM SHARES OF DEBT
CASH DEBT COMMON STOCK ASSUMED
------- --------- ------------ -------
<S> <C> <C> <C> <C>
The Woodson Companies....................... $19,836 $ -- 1,237,600 $ --
The CSI Companies........................... 40,000 -- 533,333 5,500
HBH, Inc.................................... 24,350 -- 600,000 6,000
RFCNI....................................... 1,500 3,000 200,000 --
------- ------ --------- -------
Total............................. $85,686 $3,000 2,570,933 $11,500
======= ====== ========= =======
</TABLE>
In connection with the acquisitions of the Founding Companies, the excess
of cost over fair value of net assets acquired will be amortized using the
straight-line method over 40 years. Management of the acquired businesses have
successfully operated the Founding Companies for a number of years and, with the
additional capital provided by TCMS, should be positioned to take advantage of
increased opportunities. TCMS has no reason to expect major changes in the
business conditions in which the acquired Founding Companies operate which might
affect the recoverability of the recorded intangibles. However, in the event
business conditions change, the recoverability will be reevaluated based upon
revised projections of future undiscounted operating income and cash flows and,
if impaired, the balances will be adjusted accordingly.
3. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS AS OF JUNE 30, 1997
(a) Records the purchase of the Founding Companies by TCMS as described in
Note 2 consisting of $85.7 million in cash, $3.0 million in long-term debt and
2,570,933 shares of Common Stock together with the assumption of $11.5 million
in debt for a total estimated purchase price of $131.0 million, and also records
the
F-6
<PAGE> 66
TRANSCOASTAL MARINE SERVICES, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
fair value of TCMS' assets and liabilities, resulting in excess purchase price
over the fair value of assets acquired of $64.6 million. Also records the S
corporation distribution for certain Founding Companies of approximately $2.6
million. Records estimated deferred offering costs (excluding underwriting
fees), costs associated with warrants issued and non-employee stock options and
deferred taxes related to S corporations assuming C corporation treatment.
(b) Records the cash proceeds from the issuance of shares of Common Stock
net of estimated Offering costs (based on an assumed initial public offering
price of $15.00 per share). Offering costs primarily consist of underwriting
discounts and commissions, accounting fees, legal fees and printing expenses.
(c) Records the cash portion of the consideration to be paid to the
shareholders of the Founding Companies in connection with the Acquisitions and
the reduction of certain debt obligations with the proceeds from this Offering.
(d) Records $35.0 million of initial borrowings under a new revolving
credit facility (the "Revolving Credit Facility"), related debt issuance costs
(see Note 6) and related current maturities.
The following tables summarize unaudited pro forma combined balance sheet
adjustments (in thousands):
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
-----------
(A)
<S> <C>
ASSETS
Cash........................................................ $ (2,590)
Other current assets........................................ 732
Property and equipment, net................................. 43,720
Goodwill.................................................... 64,649
Other....................................................... 3
---------
Total assets...................................... $ 106,514
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities --
Accounts payable and accrued liabilities.................. $ (1,571)
Notes payable and current maturities of long-term debt.... (300)
Payable to founding stockholders.......................... (85,686)
---------
Total current liabilities......................... (87,557)
Long-term debt, net of current maturities................... (1,691)
Deferred income taxes....................................... (16,627)
---------
Total liabilities................................. (105,875)
Stockholders' equity --
Common stock.............................................. 426
Additional paid-in capital................................ (8,723)
Retained earnings......................................... 10,222
Treasury stock............................................ (2,564)
---------
Total stockholders' equity........................ 639
---------
Total liabilities and stockholders' equity........ $(106,514)
=========
</TABLE>
F-7
<PAGE> 67
TRANSCOASTAL MARINE SERVICES, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
POST-ACQUISITION
(B) (C) (D) ADJUSTMENTS
-------- -------- -------- ----------------
<S> <C> <C> <C> <C>
ASSETS
Current assets --
Cash and cash equivalents..................... $ 67,660 $(97,186) $ 33,582 $ 4,056
Other current assets.......................... (1,194) -- -- (1,194)
Other non current assets...................... -- -- 1,375 1,375
-------- -------- -------- --------
Total assets.................................. $ 66,466 $(97,186) $ 34,957 $ 4,237
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities --
Accounts payable and accrued liabilities...... $ 1,903 $ -- $ 43 $ 1,946
Notes payable and current portion of long-term
debt....................................... 187 2,546 2,733
Payable to founding stockholders.............. -- 85,686 -- 85,686
-------- -------- -------- --------
Total current liabilities............. 2,090 88,232 43 90,365
Long-term debt, net of current maturities....... -- 8,954 (35,000) (26,046)
-------- -------- -------- --------
Total liabilities..................... 2,090 97,186 (34,957) 64,319
Stockholders' equity --
Common stock.................................. (5) -- -- (5)
Additional paid-in capital.................... (68,551) -- -- (68,551)
-------- -------- -------- --------
Total stockholders' equity............ (68,556) -- -- (68,556)
-------- -------- -------- --------
Total liabilities and stockholders'
equity.............................. $(66,466) $ 97,186 $(34,957) $ (4,237)
======== ======== ======== ========
</TABLE>
4. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(a) Reflects the increase in depreciation and amortization and the
reduction in certain related-party rental and lease expenses based upon the
assumed ownership of certain leased property, pursuant to the terms of certain
acquisition agreements. Also reflects a $2.2 million non-cash compensation
charge related to the issuance of 275,000 shares of common stock to management
of TCMS which is offset by a reversal of such charge due to its non-recurring
nature.
(b) Reflects goodwill amortization of $1.6 million relating to the
Acquisitions, using a 40-year estimated life, plus additional depreciation
expense of $1.7 million due to the allocation of a portion of the excess
purchase price to fixed assets.
(c) Reflects the anticipated reduction in interest expense of $1.1 million
due to refinancing the outstanding indebtedness of the Founding Companies in
conjunction with the Acquisitions, net of the additional interest expense of
$4.5 million on the $3.0 million in long-term debt incurred as part of the
Acquisitions and $35.0 million of initial borrowings under the Revolving Credit
Facility.
(d) Reflects the incremental provision for federal and state income taxes
for all entities being combined.
(e) Reflects the elimination of intercompany revenues and associated costs
for all entities being combined.
F-8
<PAGE> 68
TRANSCOASTAL MARINE SERVICES, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes unaudited pro forma combined statement of
operations adjustments (in thousands):
<TABLE>
<CAPTION>
PRO FORMA
(A) (B) (C) (D) (E) ADJUSTMENTS
----- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue.............................. $ -- $ -- $ -- $ -- $ 239 $ 239
Costs and expenses:
Cost of revenue.................... -- -- -- -- (239) (239)
Selling, general and administrative
expenses........................ (357) -- -- -- -- (357)
Depreciation and amortization........ 181 3,322 -- -- -- 3,503
----- ------- ------- ------- ------- -------
Operating income (loss)......... 176 (3,322) -- -- -- (3,146)
Interest expense................... -- -- (3,464) -- -- (3,464)
----- ------- ------- ------- ------- -------
Income (loss) before taxes...... 176 (3,322) (3,464) -- -- (6,610)
Provision (benefit) for income
taxes.............................. -- -- -- (1,460) -- (1,460)
----- ------- ------- ------- ------- -------
Net income (loss).................... $ 176 $(3,322) $(3,464) $ 1,460 $ -- $(5,150)
===== ======= ======= ======= ======= =======
</TABLE>
During 1996, The CSI Companies recognized an extraordinary gain of $342,000
related to forgiving certain debt. Due to the nonrecurring nature of this
extraordinary gain, it has not been reflected in the unaudited pro forma
combined statement of operations for the year ended December 31, 1996.
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(a) Reflects the increase in depreciation and amortization and the
reduction in certain related-party rental and lease expenses based upon the
assumed ownership of certain leased property, pursuant to the terms of certain
acquisition agreements. Also reflects a $2.2 million non-cash compensation
charge related to the issuance of 275,000 shares of common stock to management
of the Company which is offset by a reversal of such charge due to its
non-recurring nature.
(b) Reflects goodwill amortization of $0.8 million relating to the
Acquisitions, using a 40-year estimated life, plus additional depreciation
expense of $1.3 million resulting from the allocation of a portion of the excess
purchase price to property and equipment.
(c) Reflects the anticipated reduction in interest expense of $0.6 million
resulting from refinancing the outstanding indebtedness of the Founding
Companies in conjunction with the Acquisitions, net of the additional interest
expense of $2.3 million on the $3.0 million in long-term debt incurred as part
of the Acquisitions and $35.0 million of initial borrowings under the Revolving
Credit Facility.
(d) Reflects the incremental provision for federal and state income taxes
for all entities being combined.
(e) Reflects the elimination of intercompany revenues and associated costs
for all entities being combined.
F-9
<PAGE> 69
TRANSCOASTAL MARINE SERVICES, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes unaudited pro forma combined statement of
operations adjustments:
<TABLE>
<CAPTION>
PRO FORMA
(A) (B) (C) (D) (E) ADJUSTMENTS
---- ------- ------- ------ ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue................................... $ -- $ -- $ -- $ -- $ 1,190 $ 1,190
Costs and expenses:
Cost of revenue......................... -- -- -- -- (1,190) (1,190)
Selling, general and administrative
expenses............................. (179) -- -- -- -- (179)
Depreciation and amortization........... 91 2,077 -- -- -- 2,168
---- ------- ------- ------ ------- -------
Operating income (loss).............. 88 (2,077) -- -- -- (1,989)
Interest expense........................ -- -- (1,625) -- -- (1,625)
---- ------- ------- ------ ------- -------
Income (loss) before taxes........... 88 (2,077) (1,625) -- -- (3,614)
Provision (benefit) for income taxes...... -- -- -- 308 -- 308
---- ------- ------- ------ ------- -------
Net income (loss)......................... $ 88 $(2,077) $(1,625) $ (308) $ -- $(3,922)
==== ======= ======= ====== ======= =======
</TABLE>
5. PRO FORMA INCOME (LOSS) PER SHARE
The following table summarizes shares used in computing pro forma income
(loss) per share:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ ----------
<S> <C> <C>
TCMS --
Founders.................................................. 975,000 975,000
Management................................................ 275,000 275,000
Consultants............................................... 6,000 6,000
Founding Companies --
The Woodson Companies..................................... 1,237,600 1,237,600
The CSI Companies......................................... 533,333 533,333
HBH, Inc.................................................. 600,000 600,000
RFCNI..................................................... 200,000 200,000
Offering.................................................... 5,000,000 5,000,000
Effect of assumed exercise of Common Stock purchase warrant
(see Note 6).............................................. 23,333 23,333
--------- ---------
Shares used in computing pro forma income (loss) per
share..................................................... 8,850,266 8,850,266
========= =========
</TABLE>
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," which
simplifies the standards required under current accounting rules for computing
earnings per share and replaces the presentation of primary earnings per share
and fully diluted earnings per share with a presentation of basic earnings per
share ("basic EPS") and diluted earnings per share ("diluted EPS"). Basic EPS
excludes dilution and is determined by dividing income available to common
stockholders by the weighted average number of common shares outstanding during
the period. Diluted EPS reflects the potential dilution that could occur if
securities and other contracts to issue common stock were exercised or converted
into common stock. Diluted EPS is computed similarly to fully diluted earnings
per share under current accounting rules. The implementation of SFAS No. 128 in
1997 is not expected to have a material effect on TCMS's earnings per share as
determined under current accounting rules.
F-10
<PAGE> 70
TRANSCOASTAL MARINE SERVICES, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
6. SUBSEQUENT EVENTS
Common Stock
In March and April 1997, 175,000 and 100,000 shares of Common Stock,
respectively, were sold to management at $.001 per share. As a result, the
Company will record a non-recurring, non-cash compensation charge of $2.2
million effective with the closing of the Offering, representing the difference
between the amount paid for the shares and the estimated fair value of the
shares on the date of sale of such Common Stock. Due to the non-recurring nature
of this item, this amount has been excluded from the pro forma combined
statement of operations.
Common Stock Purchase Warrant
During the first quarter of 1997, the Company entered into an advisory
agreement with an investment banking firm, which was amended in June 1997 to
provide for the sale of a warrant to acquire 50,000 shares of Common Stock (the
"MG Warrant") for $.001 per share. The MG Warrant has an exercise price of the
lesser of $8 per share or 70 percent of the initial price to the public in the
Offering and is exercisable for five years, beginning six months after closing
of the Offering.
Revolving Credit Facility
TCMS anticipates it will enter into the Revolving Credit Facility prior to
the closing of the Offering. The Revolving Credit Facility is intended to be
used to pay part of the cash portion of the aggregate purchase price for the
Founding Companies and general corporate purposes. In connection with the
Revolving Credit Facility, the Company will issue to the lender a warrant to
acquire 175,000 shares of Common Stock at an exercise price equal to the initial
per share price to the public in the Offering. The consideration for that
warrant will be $175 and the warrant is expected to be exercisable for five
years from the date of issuance.
Tax Election
TCMS, The Woodson Companies and HBH, Inc. will review the feasibility of
entering into agreements to make an Internal Revenue Code Section 338(h)(10) tax
election related to the acquisitions of Laine Construction Company and HBH, Inc.
by TCMS. The irrevocable tax election allows the acquiring corporation to treat
the anticipated stock purchases as deemed asset purchases. The election can only
occur with the consent of the selling shareholders. The election provides a
step-up in basis for tax purposes equal to the excess of the sales proceeds plus
any liabilities assumed over the acquired companies' adjusted tax basis.
Accordingly, TCMS would receive a higher depreciable tax basis in the assets
providing significant future tax benefits to TCMS.
F-11
<PAGE> 71
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To TransCoastal Marine Services, Inc.:
We have audited the accompanying consolidated balance sheet of TransCoastal
Marine Services, Inc. and subsidiary as of December 31, 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the period from inception (April 2, 1996) through December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
TransCoastal Marine Services, Inc. and subsidiary as of December 31, 1996, and
the consolidated results of their operations and their cash flows for the period
from inception (April 2, 1996) through December 31, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
August 11, 1997
F-12
<PAGE> 72
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................. $ 1 $ 1
Deferred offering costs................................... -- 462
Other assets.............................................. -- 40
---- -------
Total assets...................................... $ 1 $ 503
==== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Short-term borrowings from related party.................. $ -- $ 187
Accounts payable and accrued expenses..................... -- 375
---- -------
Total liabilities................................. -- 562
---- -------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.001 par value, 2,000,000 shares
authorized, none issued and outstanding................ -- --
Common stock, $.001 par value, 20,000,000 shares
authorized, 975,000 and 1,253,000 shares issued and
outstanding at December 31, 1996 and June 30, 1997,
respectively........................................... 1 1
Restricted common stock, $.001 par value, 3,000,000 shares
authorized, none issued and outstanding........... -- --
Additional paid-in capital................................ -- 12
Retained deficit.......................................... -- (72)
---- -------
Total stockholders' equity (deficit).............. 1 (59)
---- -------
Total liabilities and stockholders' equity........ $ 1 $ 503
==== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-13
<PAGE> 73
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(APRIL 2, 1996) SIX MONTHS
THROUGH ENDED JUNE 30,
DECEMBER 31, -------------------------
1996 1996 1997
--------------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
REVENUE................................................. $ -- $ -- $ --
GENERAL AND ADMINISTRATIVE EXPENSES..................... -- -- 72
---- ---- ----
LOSS BEFORE INCOME TAXES................................ -- -- (72)
INCOME TAXES............................................ -- -- --
---- ---- ----
NET LOSS................................................ $ -- $ -- $(72)
==== ==== ====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-14
<PAGE> 74
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
RESTRICTED
COMMON STOCK COMMON STOCK ADDITIONAL
------------------ -------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- ------ ---------- ------- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT INCEPTION (April 2,
1996).......................... -- $ -- -- $ -- $ -- $ -- $ --
SALE OF COMMON STOCK............. 975,000 1 -- -- -- -- 1
--------- ---- --- ------- ---- ---- ----
BALANCE AT DECEMBER 31, 1996..... 975,000 1 -- -- -- -- 1
SALE OF COMMON STOCK............. 278,000 -- -- -- -- -- --
ADDITIONAL PAID-IN CAPITAL....... -- -- -- -- 12 12
NET LOSS (Unaudited)............. -- -- -- -- -- (72) (72)
--------- ---- --- ------- ---- ---- ----
BALANCE AT JUNE 30, 1997
(Unaudited).................... 1,253,000 $ 1 -- $ -- $ 12 $(72) $(59)
========= ==== === ======= ==== ==== ====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-15
<PAGE> 75
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(APRIL 2, 1996) SIX MONTHS
THROUGH ENDED JUNE 30,
DECEMBER 31, --------------------------
1996 1996 1997
--------------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................. $ -- $ -- $ (72)
Adjustments to reconcile net loss to net cash used in
operating activities --
Changes in operating assets and liabilities --
Deferred operating costs........................ -- -- (462)
Other assets.................................... -- -- (40)
Accounts payable and accrued expenses........... -- -- 375
---- ----- -----
Net cash used in operating activities........ -- -- (199)
---- ----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock issuance......................... 1 1 12
Proceeds from short-term borrowings.................. -- -- 187
---- ----- -----
Net cash provided by financing activities.... 1 1 199
---- ----- -----
NET INCREASE IN CASH AND CASH EQUIVALENTS.............. 1 1 --
CASH AND CASH EQUIVALENTS, beginning of period......... -- -- 1
---- ----- -----
CASH AND CASH EQUIVALENTS, end of period............... $ 1 $ 1 $ 1
==== ===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-16
<PAGE> 76
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
TransCoastal Marine Services, Inc., a Delaware corporation ("TCMS"),
commenced operations in April 1996. TCMS intends to acquire four businesses (the
"Founding Companies") in separate transactions (collectively, the
"Acquisitions") simultaneously with an initial public offering (the "Offering")
of its common stock (the "Common Stock"). Unless otherwise indicated, all
references herein to the "Company" include the Founding Companies, and
references herein to "TCMS" mean TransCoastal Marine Services, Inc., prior to
the consummation of the Acquisitions.
TCMS operations to date have related to the Offering and the Acquisitions.
All expenditures to date have been funded through loans from J&D Capital
Investments, L.C. ("J&D"). J&D is owned by two of the Company's founders. At
December 31, 1996, no costs had been incurred in connection with the Offering.
At June 30, 1997, approximately $462,000 has been incurred in connection with
the Offering. TCMS has accounted for these costs as deferred offering costs.
TCMS is dependent on the Offering to complete the pending Acquisitions and to
repay J&D. There is no assurance that the pending Acquisitions will be completed
or that the Company will be able to generate future operating revenues.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
TCMS and its wholly owned subsidiary, Red Fox International, Inc., a Louisiana
corporation. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenue and expense during the reporting period. Actual
results could differ from those estimates.
Income Taxes
TCMS accounts for income taxes in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Under SFAS
No. 109, the Company recognizes deferred tax liabilities and assets for the
expected future tax consequences of events that have been recognized differently
in the financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement carrying amounts and tax basis of assets and liabilities
using enacted tax rates and laws in effect in the years in which the differences
are expected to reverse. Deferred tax assets are evaluated for realization based
on a more-likely-than-not criteria in determining if a valuation allowance
should be provided. Income tax expense is the tax payable for the year and the
change during the year in deferred tax assets and liabilities.
Recent Accounting Pronouncements
SFAS No. 123, "Accounting for Stock-Based Compensation," allows entities to
choose between a new fair value-based method of accounting for employee stock
options or similar equity instruments and the current intrinsic, value-based
method of accounting prescribed by Accounting Principles Board ("APB") Opinion
No. 25. Entities electing to remain with the accounting in APB Opinion No. 25
must make pro forma disclosures of net income and earnings per share as if the
fair value method of accounting had been applied. TCMS has elected to account
for the issuance of stock options pursuant to APB Opinion No. 25 and will
provide pro forma disclosure of net income and earnings per share, as
applicable, in the notes to future consolidated financial statements.
F-17
<PAGE> 77
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share." For the Company, SFAS No. 128 will be effective for
the year ended December 31, 1997. SFAS No. 128 simplifies the standards required
under current accounting rules for computing earnings per share and replaces the
presentation of primary earnings per share and fully diluted earnings per share
with a presentation of basic earnings per share ("basic EPS") and diluted
earnings per share ("diluted EPS"). Basic EPS excludes dilution and is
determined by dividing income available to common stockholders by the weighted
average number of common shares outstanding during the period. Diluted EPS
reflects the potential dilution that could occur if securities and other
contracts to issue common stock were exercised or converted into common stock.
Diluted EPS is computed similarly to fully diluted earnings per share under
current accounting rules. The implementation of SFAS No. 128 is not expected to
have a material effect on the Company's earnings per share as determined under
current accounting rules.
Interim Financial Information
The interim consolidated balance sheet as of June 30, 1997, and statements
of operations for the six months ended June 30, 1996 and 1997, are unaudited,
and certain information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting principles,
have been omitted. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, necessary to fairly present the
consolidated financial position, results of operations and cash flows with
respect to the interim financial statements have been included. The results of
operations for the interim periods are not necessarily indicative of the results
for the entire fiscal year.
3. SUMMARY OF FINANCING ARRANGEMENTS
In February 1997, TCMS and J&D entered into an agreement providing for an
unsecured revolving credit facility (the "J&D Loan Agreement"), which was
amended in June 1997 to provide for borrowings up to $1.0 million, with interest
of 10 percent per annum due on the unpaid principal balance outstanding computed
from the date of each advance until maturity. Amounts outstanding under the J&D
Loan Agreement are due and payable on the earlier of June 19, 1998 or 30 days
following the successful completion of the Offering. As of June 30, 1997,
advances of $187,000 were outstanding.
4. SHAREHOLDERS' EQUITY
Preferred Stock
TCMS's Board of Directors is authorized to designate the voting power,
preferences, dividends, liquidation rights, redemption and other features
related to the TCMS's preferred stock. As of December 31, 1996 and June 30,
1997, no TCMS preferred stock had been issued.
Common Stock
TCMS effected a 1,000-for-one stock split in August 1997 of the outstanding
shares of Common Stock. In addition, TCMS increased the number of authorized
shares of Common Stock to 20,000,000 and authorized 3,000,000 shares of
restricted common stock ("Restricted Common Stock"). The effects of the stock
split and the increase in the shares of authorized Common Stock and Restricted
Common Stock have been retroactively reflected on the accompanying balance
sheets and in those notes.
In March and April 1997, 175,000 shares and 100,000 shares of Common Stock,
respectively, were sold to management at $.001 per share. TCMS will record a
non-recurring, non-cash compensation charge of $2.2 million effective with the
closing of the Offering, representing the difference between the amount paid for
the shares and the estimated fair value of the shares on the date of sale of
such Common Stock.
F-18
<PAGE> 78
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In April 1997, TCMS issued 3,000 shares of Common Stock to a consultant for
services performed in connection with the Offering. The $12,200 difference
between the amount paid and the estimated fair market value of the shares on the
date of issue was recorded as deferred offering costs in the second quarter of
1997. In July 1997, an additional 3,000 shares of Common Stock were issued with
the same terms to another consultant for services performed in connection with
the Offering. An additional $32,000 will be recorded as deferred offering costs
in the third quarter of 1997.
Restricted Common Stock
Shares of Restricted Common Stock, if issued, will have no voting rights.
Shares of Restricted Common Stock, if issued, would be convertible into shares
of Common Stock on a share-for-share basis (i) in the event of certain ownership
changes, (ii) 18 months after the Offering or (iii) in the event of approval by
a majority of holders of the Common Stock. As of December 31, 1996 and June 30,
1997, no Restricted Common Stock has been issued.
Employee Stock Option Plan
In August 1997, TCMS' stockholders approved the TCMS 1997 Stock Option Plan
(the "Plan"), which provides for the granting of stock options to directors,
executive officers, certain other employees and certain non-employee consultants
of the Company. The Plan permits the granting of options for up to 750,000
shares of Common Stock. The terms of the option awards will be established by
the compensation committee of the board of directors of TCMS. TCMS has granted
stock options to purchase an estimated 97,000 shares of Common Stock to certain
members of the executive management team of the Company. The number of shares
estimated to be issued is based upon 2.5 times the annual compensation of the
respective executives divided by the initial public offering price. These
options will be exercisable at an exercise price equal to the per share initial
public offering price, vest over a five-year period from the date of grant and
expire 10 years from the date of grant. Additionally, the Company expects to
grant stock options to purchase an estimated 360,000 shares of Common Stock to
certain other members of management and key operating personnel of the Founding
Companies.
5. COMMITMENTS AND CONTINGENCIES
Advisory Agreement
In February 1997, the Company entered into an advisory agreement with a
financial advisory firm (the firm) for a period of six months in connection with
the Acquisitions and related financings. Under the terms of the agreement
between the Company and the firm, as amended on June 25, 1997, the Company paid
the firm an initial financial advisory fee of $15,000, plus monthly fees
aggregating $30,000, and reimbursed the firm for its out-of-pocket expenses
relating to the services provided. The Company also issued a warrant to the firm
for $100 in cash. The warrant provides for the purchase of up to 50,000 shares
of Common Stock, at a per share exercise price equal to the lesser of $8.00 or
70% of the initial public offering price. The warrant may be exercised in whole
or, from time to time, in part, at any time during the five-year period
beginning six months after the Offering closes. In connection with the warrant,
the Company granted certain registration rights to the firm.
The firm will be entitled to receive the following fees in the future: (i)
a $400,000 success fee, payable on closing the Acquisitions; (ii) a senior debt
placement fee of up to 2% of the Revolving Credit Facility (see Note 6), payable
on closing of the Revolving Credit Facility; and (iii) a private placement fee
equal to five percent of the amount of any private placement made by the Company
within two years of August 12, 1997 with any capital source introduced to the
Company by the firm, together with a warrant to purchase an amount equal to 10%
of the securities issued in any such private placement.
F-19
<PAGE> 79
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consulting Agreements
In February 1997, TCMS entered into a consulting and financial advisory
agreement (the "Consulting Agreement") with J&D. The Consulting Agreement
provides for a monthly fee of $12,500, payable on the closing of the Offering
and terminates on the earlier of the closing of the Offering or December 31,
1997. All amounts incurred through June 30, 1997 were capitalized as deferred
offering costs. On September 24, 1997, TCMS and J&D amended the consulting
agreement, so that, following the completion of the Offering, J&D will provide
the Company financial advisory and related services in connection with its
acquisition program. J&D will receive a consulting fee of $23,500 per month and
non-qualified options under the 1997 Stock Option Plan, to purchase 44,000
shares (assuming an initial public offering price of $15.00 per share) for an
exercise price equal to the initial public offering price per share. These
options will vest at the rate of 20% per year, commencing on the first
anniversary of the closing of the Offering, and will expire at the earlier of
ten years from the date of grant or three months following termination of the
consulting and financial services agreement. In addition, J&D will be eligible
to receive annual performance-based bonuses.
In April 1997, TCMS entered into consulting services agreements with
certain officers of the Company. Pursuant to these agreements, the officers will
provide executive services in connection with the formation of TCMS and the
closing of the Offering. Expenses related to these contract services are
estimated to be approximately $30,000 per month until the date the Offering
closes, at which time these agreements automatically terminate.
Employment Agreements
In August 1997, TCMS entered into employment agreements with three officers
of the Company. Two of the agreements are effective August 1, 1997 and one upon
closing of the Offering. The term of the agreements extends three years
following the closing of the Offering. Additionally, the Company is committed to
offer employment agreements to certain members of management and key operating
personnel of the Founding Companies on similar terms and conditions to existing
agreements.
6. SUBSEQUENT EVENTS
Acquisitions
The Company has entered into definitive agreements to acquire the Founding
Companies and related real estate on the date the Offering closes. The Founding
Companies are The Woodson Companies, The CSI Companies, HBH, Inc. and The Red
Fox Companies of New Iberia, Inc. The aggregate consideration expected to be
paid by TCMS to acquire the Founding Companies is approximately $85,650,000 in
cash, $3,000,000 in debt and 2,570,933 shares of Common Stock (including certain
estimated post-closing adjustments). In addition, the Company will be assuming
debt on certain of the Founding Companies.
Revolving Credit Facility
TCMS intends to enter into a credit agreement with an unrelated financial
institution (the "Lender") providing for the Revolving Credit Facility prior to
the closing of the Offering. TCMS expects that the Revolving Credit Facility
will provide for borrowings up to $75.0 million, with the initial borrowing
availability being $50.0 million and the remaining $25.0 million being made
available from time to time and in such amounts as the Lender shall determine in
its sole discretion. The Company also expects borrowings under the Revolving
Credit Facility will bear interest at LIBOR plus 275 basis points (8.37% at
October 3, 1997), payable monthly, and will be secured by liens on substantially
all the Company's existing property, plant and equipment and a pledge of the
capital stock of the Founding Companies and each of the Company's other
subsidiaries. Borrowings under the Revolving Credit Facility are expected to be
used to pay a portion of the aggregate purchase price for the Acquisitions and
for general corporate purposes, which may include future acquisitions. Based on
a commitment letter (and related term sheet) obtained from the Lender, the
Company
F-20
<PAGE> 80
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
expects that the Revolving Credit Facility will require the Company to comply
with various loan covenants, including (i) maintenance of certain financial
ratios; (ii) restrictions on additional indebtedness; and (iii) restrictions on
liens, guarantees, advances and dividends. The Company anticipates the Revolving
Credit Facility will extend through October 1999 and all outstanding principal
and accrued and unpaid interest as of that date will be due and payable on that
date. The Company also anticipates the Revolving Credit Facility will contain
mandatory prepayment provisions requiring prepayment of outstanding borrowings
from the issuance of debt or equity securities for cash and any proceeds from
other borrowings (other than under the working capital line of credit referred
to above). In connection with the Revolving Credit Facility, the Company will
issue to the lender a warrant to acquire 175,000 shares of Common Stock at an
exercise price equal to the initial per share price to the public in the
Offering. The consideration for that warrant will be $175 and the warrant is
expected to be exercisable for five years from its date of issuance.
Registration Statement
In August 1997, the Company filed a registration statement on Form S-1 for
the Offering. An investment in shares of Common Stock involves a high degree of
risk, including, among others, absence of a combined operating history, risks
relating to the Company's acquisition strategy, risks relating to acquisition
financing, reliance on key personnel and a substantial portion of the proceeds
from the Offering payable to affiliates of the Founding Companies. For a more
thorough discussion of risk factors, see "Risk Factors" included in this
Prospectus.
F-21
<PAGE> 81
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Woodson Companies:
We have audited the accompanying combined balance sheets of The Woodson
Companies (as defined in Note 1) as of December 31, 1995 and 1996, and the
related combined statements of operations, shareholders' equity and cash flows
for the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the management of The Woodson Companies.
Our responsibility is to express an opinion on these combined financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of The Woodson
Companies as of December 31, 1995 and 1996, and the combined results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
July 18, 1997 (except with respect
to the matter discussed in
Note 12, as to which
the date is July 31, 1997).
F-22
<PAGE> 82
THE WOODSON COMPANIES
COMBINED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
---------------- JUNE 30,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 852 $1,117 $ 1,919
Accounts receivable....................................... 343 103 433
Contracts receivable...................................... 2,871 1,315 4,320
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 45 -- 1,053
Inventory................................................. 179 243 364
Available-for-sale securities, at fair value.............. 1,249 1,603 81
Other current assets...................................... 480 861 203
------ ------ -------
Total current assets.............................. 6,019 5,242 8,373
PROPERTY, PLANT AND EQUIPMENT, net.......................... 1,872 2,956 4,348
OTHER ASSETS:
Notes receivable from related parties..................... 560 657 657
Other..................................................... 556 301 270
------ ------ -------
Total assets...................................... $9,007 $9,156 $13,648
====== ====== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Short-term borrowings..................................... $ -- $ 229 $ 994
Notes payable to shareholders............................. -- 450 --
Current maturities of long-term debt...................... 19 -- --
Accounts payable.......................................... 234 510 1,813
Accrued expenses.......................................... 138 250 1,416
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 1,000 -- 718
------ ------ -------
Total liabilities................................. 1,391 1,439 4,941
------ ------ -------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock.............................................. 98 98 98
Additional paid-in capital................................ 25 25 25
Retained earnings......................................... 7,382 7,275 8,570
Net unrealized gain on available-for-sale securities, net
of deferred income taxes............................... 111 319 14
------ ------ -------
Total shareholders' equity........................ 7,616 7,717 8,707
------ ------ -------
Total liabilities and shareholders' equity........ $9,007 $9,156 $13,648
====== ====== =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-23
<PAGE> 83
THE WOODSON COMPANIES
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31 ENDED JUNE 30
--------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE...................................... $ 7,786 $18,075 $17,933 $10,689 $18,104
COSTS AND EXPENSES:
Cost of revenue............................ 5,874 12,716 13,561 7,833 15,243
Selling, general and administrative
expenses................................ 3,011 2,672 2,968 1,479 1,435
Depreciation and amortization.............. 728 574 562 291 455
------- ------- ------- ------- -------
Operating income (loss)................. (1,827) 2,113 842 1,086 971
OTHER INCOME (EXPENSE):
Interest income............................ 20 25 86 40 64
Interest expense........................... (101) (109) (35) (6) (45)
Other...................................... 96 69 357 99 496
------- ------- ------- ------- -------
Total other income (expense)....... 15 (15) 408 133 515
------- ------- ------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES............ (1,812) 2,098 1,250 1,219 1,486
INCOME TAXES PROVISION (BENEFIT)............. (86) 91 91 17 191
------- ------- ------- ------- -------
NET INCOME (LOSS)............................ $(1,726) $ 2,007 $ 1,159 1,202 1,295
======= ======= ======= ======= =======
PRO FORMA INFORMATION (UNAUDITED) (Note 2)
Income (loss) before income taxes....... $(1,812) $ 2,098 $ 1,250 1,219 1,486
Pro forma income taxes.................. -- 839 500 488 594
------- ------- ------- ------- -------
Pro forma net income (loss)............. $(1,812) $ 1,259 $ 750 731 892
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-24
<PAGE> 84
THE WOODSON COMPANIES
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
NET UNREALIZED
COMMON STOCK ADDITIONAL GAIN (LOSS) ON
----------------- PAID-IN RETAINED AVAILABLE-FOR-SALE
SHARES AMOUNT CAPITAL EARNINGS SECURITIES TOTAL
--------- ------ ---------- -------- ------------------ -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993..................... 76,057.50 $98 $25 $ 7,384 $(138) $ 7,369
DIVIDENDS........................................ -- -- -- (193) -- (193)
NET LOSS......................................... -- -- -- (1,726) -- (1,726)
CHANGE IN VALUATION ALLOWANCE FOR NET UNREALIZED
GAIN (LOSS) ON AVAILABLE-FOR-SALE SECURITIES... -- -- -- -- (97) (97)
--------- --- --- ------- ------ -------
BALANCE AT DECEMBER 31, 1994..................... 76,057.50 98 25 5,465 (235) 5,353
DIVIDENDS........................................ -- -- -- (90) -- (90)
NET INCOME....................................... -- -- -- 2,007 -- 2,007
CHANGE IN VALUATION ALLOWANCE FOR NET UNREALIZED
GAIN (LOSS) ON AVAILABLE-FOR-SALE SECURITIES... -- -- -- -- 346 346
--------- --- --- ------- ------ -------
BALANCE AT DECEMBER 31, 1995..................... 76,057.50 98 25 7,382 111 7,616
DIVIDENDS........................................ -- -- -- (1,266) -- (1,266)
NET INCOME....................................... -- -- -- 1,159 -- 1,159
CHANGE IN VALUATION ALLOWANCE FOR NET UNREALIZED
GAIN (LOSS) ON AVAILABLE-FOR-SALE SECURITIES... -- -- -- -- 208 208
--------- --- --- ------- ------ -------
BALANCE AT DECEMBER 31, 1996..................... 76,057.50 98 25 7,275 319 7,717
NET INCOME....................................... -- -- -- 1,295 -- 1,295
CHANGE IN VALUATION ALLOWANCE FOR NET UNREALIZED
GAIN (LOSS) ON AVAILABLE-FOR-SALE SECURITIES... -- -- -- -- (305) (305)
--------- --- --- ------- ------ -------
BALANCE AT JUNE 30, 1997......................... 76,057.50 $98 $25 $ 8,570 $ 14 $ 8,707
========= === === ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-25
<PAGE> 85
THE WOODSON COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31 JUNE 30
--------------------------- ---------------
1994 1995 1996 1996 1997
------- ------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $(1,726) $ 2,007 $ 1,159 $1,202 $1,295
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities --
Depreciation and amortization........................... 728 574 562 291 455
Provision for doubtful accounts......................... 217 4 -- -- --
(Gain) loss on sale of property, plant and equipment.... (68) 98 (340) (101) --
Realized gains on sale of available-for-sale
securities............................................ -- -- -- -- (517)
Dividend income......................................... -- -- (36) (24) --
Deferred income taxes................................... (86) 91 91 17 190
Changes in operating assets and liabilities --
(Increase) decrease in --
Accounts receivable................................. 67 (231) 240 288 (330)
Contracts receivable................................ 1,036 (1,349) 1,556 (891) (3,005)
Cost and estimated earnings in excess of billings on
uncompleted contracts............................. (141) 179 45 (328) (1,053)
Inventory........................................... 17 24 (64) (86) (121)
Other current assets................................ (193) 248 71 373 207
Other assets........................................ 75 (9) (15) (20) (2)
Increase (decrease) in --
Accounts payable and accrued expenses............... (708) 176 388 1,108 2,469
Billings in excess of costs and estimated earnings
on uncompleted contracts.......................... -- 1,000 (1,000) (550) 718
------- ------- ------- ------ ------
Net cash provided by (used in) operating
activities........................................ (782) 2,812 2,657 1,279 306
------- ------- ------- ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of capital assets...................... 71 182 427 1 239
Capital expenditures...................................... (314) (1,039) (1,801) (562) (994)
Purchase of investments................................... (30) (124) (93) (56) --
Proceeds from sale of investments......................... -- -- 113 -- 2,028
Collections on amounts due from affiliate................. 19 192 -- -- --
(Advances) collections on notes receivable, net........... 5 (45) (392) 25 --
------- ------- ------- ------ ------
Net cash provided by (used in) investing
activities........................................ (249) (834) (1,746) (592) 1,273
------- ------- ------- ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans against cash surrender value of
officers' life insurance policies....................... 142 -- -- -- --
Proceeds from notes payable............................... 1,206 3,846 615 -- --
Proceeds from issuance of notes payable to shareholders... 1,260 -- 450 -- --
Principal payments on notes payable....................... (733) (4,582) (445) (14) (327)
Principal payments on notes payable to shareholders....... (1,050) (420) -- -- (450)
Payment of dividends to shareholders...................... (193) (90) (1,266) (1,260) --
------- ------- ------- ------ ------
Net cash provided by (used in) financing
activities........................................ 632 (1,246) (646) (1,274) (777)
------- ------- ------- ------ ------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (399) 732 265 (587) 802
CASH AND CASH EQUIVALENTS, beginning of period.............. 519 120 852 852 1,117
------- ------- ------- ------ ------
CASH AND CASH EQUIVALENTS, end of period.................... $ 120 $ 852 $ 1,117 $ 265 $1,919
======= ======= ======= ====== ======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for --
Interest................................................ $ 101 $ 102 $ 35 $ 6 $ 45
Non-cash investing and financing activities:
Purchase of assets through assumption of debt........... -- -- -- -- 1,093
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-26
<PAGE> 86
THE WOODSON COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
Principles of Combination
The accompanying combined financial statements include the accounts of the
following corporations, all headquartered in Lafayette, Louisiana, which are
related by the common ownership of immediate family members:
Woodson Construction Company, Inc. (WCC)
Laine Construction Company, Inc. (Laine)
Kori Corporation (Kori)
EnviroSystems, Inc. (Enviro)
Financial statements for the aforementioned companies (collectively, "The
Woodson Companies" or the "Companies") have been prepared on a combined basis
due to the Companies' common ownership by immediate family members acting as a
control group.
Description of Operations
WCC and Laine are in the business of constructing pipelines for the oil and
gas industry primarily offshore Louisiana, Texas, Mississippi and Alabama. WCC
secures contracts with customers and subcontracts substantially all the work to
Laine, which is owned by several officers of WCC.
Kori manufactures amphibious undercarriages for use primarily in marine
construction in the transition zone (from zero to 20 feet in depth). As an
Original Equipment Manufacturer ("OEM"), Kori supplies amphibious undercarriages
to companies that manufacture and/or distribute excavators..
Enviro performs sight assessments and on-site remediation of
petroleum-based products. Enviro also assists customers in the preparation and
submission of applications for reimbursement to the Louisiana Department of
Environmental Quality. All of Enviro's revenue is derived from sources within
the State of Louisiana.
Although the Companies have experienced growth in revenue over the past few
years, there is an inherent concentration of credit risk associated with
contracts receivable from their major customers. At December 31, 1995 and 1996,
two customers comprised approximately 42 percent and 61 percent, respectively,
of the total contracts receivable balance. As the Companies have historically
funded their operations with cash flows from operations, the combined entity may
be impacted by its dependence on a limited number of customers. Management
believes the risk is mitigated by the long-standing business relationships with
and reputation of the Companies' major customers. Although there is no assurance
with regard to the future business associations between the Companies and their
major customers, management believes the Companies do not have a significant
concentration of risk at December 31, 1995 and 1996. See Note 13 for a summary
of sales to major customers.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenue and expense during the reporting period. Actual
results could differ from those estimates.
F-27
<PAGE> 87
THE WOODSON COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Cash and Cash Equivalents
Cash equivalents consist of highly liquid debt instruments purchased with
original maturities of three months or less.
Inventory
Inventories represent raw materials and production supplies and are stated
at cost using the specific-identification method. Cost is not in excess of
market. At December 31, 1995 and 1996, the amount of inventory (including
materials and work-in-process) held was approximately $179,000 and $243,000,
respectively. Work-in-process inventory historically has not been significant.
Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line and accelerated
methods based on the estimated useful lives of the assets, which range from five
to 31.5 years. Additions, improvements and renewals significantly adding to the
asset value or extending the life of the asset are capitalized. Ordinary
maintenance and repairs which do not extend the physical or economic lives of
the plant or equipment are charged to expense as incurred (see Note 5 for a
summary of property, plant and equipment).
Revenue Recognition
Revenues from construction contracts, which are typically of short
duration, are recognized on the percentage-of-completion method. Under this
method, the percentage of completion is determined by comparing contract costs
incurred to date with total estimated contract costs. Income is recognized by
applying the percentage complete to the projected total income for each contract
in progress. Contract costs include all direct material, labor and subcontract
costs and those indirect costs related to contract performance, such as indirect
labor, supplies and tools. Revisions in cost and income estimates are reflected
in the accounting period in which the facts requiring revision become known. In
addition, anticipated losses to be incurred on contracts in progress are charged
to income as soon as such losses can be determined.
Fair Value of Financial Instruments
The Woodson Companies consider the fair value of all financial instruments
to not be materially different from their carrying values at each year-end based
on management's estimate of the Companies' ability to borrow funds under terms
and conditions similar to those applicable to the Companies' existing debt.
Income Taxes
The Companies account for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes."
Under SFAS No. 109, the Companies recognize deferred tax liabilities and assets
for the expected future tax consequences of events recognized differently in the
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between the financial
statement carrying amounts and tax basis of assets and liabilities using enacted
tax rates and laws in effect in the years in which the differences are expected
to reverse. Deferred tax assets are evaluated for realization based on a
more-likely-than-not criteria in determining if a valuation allowance should be
provided. Income tax expense is the tax payable for the year and the change
during the year in deferred tax assets and liabilities.
The Woodson Companies' shareholders have elected to have two of the
combined companies (Laine and Enviro) taxed as S Corporations for federal and
state income tax purposes whereby shareholders are liable for individual federal
and state income taxes on their allocated portions of the applicable entity's
taxable income.
F-28
<PAGE> 88
THE WOODSON COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Accordingly, the historical financial statements do not include provisions for
income taxes relating to those entities.
Pro forma net income (loss) consists of the historical net income (loss) of
the Companies, including two S Corporations, adjusted for income taxes that
would have been recorded had each company operated as a C Corporation.
Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Woodson Companies
adopted SFAS No. 121 on January 1, 1996. The impact of adopting this standard
did not have a material impact on the Companies' combined results of operations.
Interim Financial Information
The interim combined balance sheet as of June 30, 1997 and combined
statements of operations for the six months ended June 30, 1996 and 1997 are
unaudited, and certain information and footnote disclosures, normally included
in financial statements prepared in accordance with generally accepted
accounting principles, have been omitted. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary to
fairly present the financial position, results of operations and cash flows with
respect to the interim combined financial statements have been included. The
results of operations for the interim periods are not necessarily indicative of
the results for the entire fiscal year.
3. CONTRACTS AND ACCOUNTS RECEIVABLE
Amounts due on contracts as of the dates shown are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-----------------
1995 1996
------ ------
<S> <C> <C>
Completed contracts......................................... $ 469 $ 908
Contracts in progress --
Current................................................... 1,496 250
Retainage due within one year............................. 906 157
------ ------
$2,871 $1,315
====== ======
</TABLE>
The portion of the retainage due in excess of one year is not significant.
The Woodson Companies' accounts receivable balances as of December 31, 1995
and 1996 were approximately $343,000 and $103,000, respectively. The Woodson
Companies charge uncollectible receivables (contracts and accounts) to expense
when available information indicates that it is probable that the assets have
been impaired. Bad debt expense amounted to $217,000, $4,000 and $-- for the
years ended December 31, 1994, 1995 and 1996, respectively.
F-29
<PAGE> 89
THE WOODSON COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Information with respect to uncompleted contracts as of the dates shown is
as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1995 1996
------- ------
<S> <C> <C>
Costs incurred on uncompleted contracts..................... $ 5,736 $ --
Estimated profit earned to date............................. 1,270 --
------- ------
7,006 --
Less -- Billings to date.................................... (7,961) --
------- ------
$ (955) $ --
======= ======
</TABLE>
The above amounts are included in the accompanying balance sheets under the
following captions (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1995 1996
------- ------
<S> <C> <C>
Costs and estimated earnings in excess of billings on
uncompleted contracts..................................... $ 45 $ --
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... (1,000) --
------- ------
$ (955) $ --
======= ======
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at the dates shown
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
----------------
1995 1996
------ ------
<S> <C> <C>
Buildings................................................... $ 750 $ 490
Machinery and equipment..................................... 5,325 5,953
Furniture and fixtures...................................... 594 661
Transportation equipment.................................... 1,520 1,500
------ ------
8,189 8,604
Less -- Accumulated depreciation and amortization........... 6,317 5,648
------ ------
$1,872 $2,956
====== ======
</TABLE>
The Woodson Companies lease certain equipment used in the normal course of
their operations typically under month-to-month lease agreements. During the
years ended December 31, 1994, 1995 and 1996, the Companies expensed $650,000,
$1,783,000 and $1,920,000, respectively, relating to these leases.
6. AVAILABLE-FOR-SALE SECURITIES
In accordance with SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," the Companies' marketable equity securities are
included in an available-for-sale caption in the accompanying
F-30
<PAGE> 90
THE WOODSON COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
balance sheets and are carried at market value, with the difference between cost
and market value, net of related tax effects, included as a component of
shareholders' equity computed as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
----------------
1995 1996
------ ------
<S> <C> <C>
Fair value.................................................. $1,249 $1,603
Cost........................................................ 1,084 1,121
------ ------
Gross unrealized gain..................................... 165 482
Deferred tax effects........................................ 54 163
------ ------
Net unrealized gain....................................... $ 111 $ 319
====== ======
</TABLE>
Subsequent to December 1996, the Companies sold certain marketable equity
securities for net proceeds of $1,578,000. This transaction resulted in a gain
of $516,000, before related tax effects. Additionally, as a result of this sale,
the net unrealized gain on available-for-sale securities, net of deferred income
taxes, will be reduced by $305,000.
7. SUMMARY OF FINANCING ARRANGEMENTS
Short-term borrowings and notes payable to nonaffiliates consist of the
following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------
1995 1996
---- -----
<S> <C> <C>
Note payable to an insurance company in monthly installments
of $70,000, including interest at 7.45%, maturing April
15, 1997.................................................. $ -- $ 209
Note payable to an equipment company in monthly installments
of $3,000, including interest, maturing July 9, 1997,
secured by machinery and equipment........................ -- 20
Note payable to contractor in monthly installments of
$2,000, including interest, paid in 1996, secured by
machinery and equipment................................... 19 --
---- -----
Total financing obligations to nonaffiliates...... 19 229
Less -- Current portion..................................... (19) (229)
---- -----
Long-term balance................................. $ -- $ --
==== =====
</TABLE>
8. INCOME TAXES
Federal income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Federal provision (benefit) --
Current................................................... $ -- $-- $--
Deferred.................................................. (86) 91 91
</TABLE>
F-31
<PAGE> 91
THE WOODSON COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate rate of 34 percent to income
(loss) before income taxes as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Provision at the statutory rate............................ $(616) $ 713 $ 425
Increase resulting from --
Permanent differences --
S Corporation nontaxable income....................... 300 (642) (346)
Recognition of valuation allowance on net operating
loss carryforwards.................................. 237 -- --
Expenses not deductible for tax purposes.............. 7 18 5
State income tax and other, net....................... (14) 2 7
----- ----- -----
$ (86) $ 91 $ 91
===== ===== =====
</TABLE>
Deferred income tax provisions result from temporary differences in the
recognition of income and expenses for financial reporting purposes and for tax
purposes. The tax effects of these temporary differences, representing deferred
tax assets and liabilities, result principally from the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------
1995 1996
---- -----
<S> <C> <C>
Tax benefit of net operating loss carryforwards, net of
valuation allowance of $237............................... $272 $ 265
Tax effect on deferred gain on available-for-sale
securities................................................ (54) (163)
Other accrued expenses not deductible for tax purposes...... 84 10
Basis differences on property, plant and equipment.......... 5 (6)
---- -----
Net deferred tax assets........................... $307 $ 106
==== =====
</TABLE>
The net deferred tax assets and liabilities are comprised of the following
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------
1995 1996
---- ----
<S> <C> <C>
Deferred tax assets --
Current................................................... $ -- $ --
Long-term................................................. 361 275
---- ----
Total............................................. 361 275
---- ----
Deferred tax liabilities --
Current................................................... -- --
Long-term................................................. 54 169
---- ----
Total............................................. 54 169
---- ----
Net deferred income tax assets.................... $307 $106
==== ====
</TABLE>
9. RELATED-PARTY TRANSACTIONS
On December 31, 1996, the Companies advanced to their shareholders $450,000
pursuant to three promissory notes. The promissory notes are payable to the
Companies on demand, bear interest annually at a rate of 8 percent and are
included in other current assets in the accompanying balance sheets.
During December 1996, the Companies issued three unsecured promissory notes
to their shareholders, payable on demand and bearing interest at 8 percent. The
balance on the notes payable to the shareholders at December 31, 1996, was
$450,000.
F-32
<PAGE> 92
THE WOODSON COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The companies lease office space from certain of their shareholders. The
amount recorded as expense related to this lease was $142,200 for each of the
three years ended December 31, 1994, 1995 and 1996.
In addition to the above transactions, WCC sold certain buildings, land and
improvements during the years ended December 31, 1995 and 1996 to companies
owned by three of its officers who are also immediate family members of a major
shareholder for a total of $567,000 and $106,000, respectively. WCC realized a
loss on the transaction in the amount of $96,000 and a gain of $100,000 during
the years ended December 31, 1995 and 1996, respectively. These transactions
resulted in notes receivable from related parties as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------
1995 1996
---- ----
<S> <C> <C>
Notes receivable from related parties, dated December 29,
1995 and January 2, 1996, payable in 30 annual
installments ranging from $2,000 to $9,000, including
principal and interest.................................... $567 $665
Less -- Current portion................................ (7) (8)
---- ----
Long-term receivable.............................. $560 $657
==== ====
</TABLE>
These notes receivable resulted in interest income of $43,000 for the year
ended December 31, 1996.
10. RETIREMENT PLAN
The Woodson Companies Employee Profit Sharing Plan ("the Plan") provides
for contributions of up to 10 percent of the annual compensation of each
participant. The Plan includes employees of at least 21 years of age with one
year of completed service. Participants who became eligible after January 1,
1990 remain nonvested until the completion of five years of service, at which
time the participants become 100 percent vested. The Companies have obtained a
favorable tax determination letter from the Internal Revenue Service with
respect to the Plan.
The Woodson Companies made Plan contributions of $--, $30,000 and $26,000
for the years ended December 31, 1994, 1995 and 1996, respectively.
11. SHAREHOLDERS' EQUITY
The components of capital stock as of December 31, 1995 and 1996 are as
follows (in thousands except share and per-share information):
<TABLE>
<CAPTION>
CLASS OF SHARES SHARES PAR VALUE STATED
COMPANY SHARES AUTHORIZED ISSUED PER SHARE VALUE
------- -------- ---------- --------- --------- ------
<S> <C> <C> <C> <C> <C>
WCC ................................ Common 200,000 75,000.00 $1 $75
Laine .............................. Common 500 7.50 $100 1
Kori................................ Common 5,000 750.00 $10 7
Enviro.............................. Common 10,000 300.00 No Par 15
--------- ---
Total capital stock....... 76,057.50 $98
========= ===
</TABLE>
12. COMMITMENTS AND CONTINGENCIES
Insurance
The Woodson Companies are subject to numerous risks and uncertainties
because of the nature and status of their operations. The Woodson Companies
maintain insurance coverage for events and in amounts that they deem
appropriate. Management believes that uninsured losses, if any, will not be
materially adverse to the Companies' financial position or results of
operations.
The Woodson Companies maintain a self-insurance program for their workers'
compensation claims. The insurance carrier requires the Companies to retain
$81,000 in a money market account and a $37,000 escrow fund, which the Companies
have included in other assets in the accompanying balance sheets. The program
provides for self-insurance coverage of $10,000 per occurrence, subject to a
maximum exposure of $50,000 per
F-33
<PAGE> 93
THE WOODSON COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
year. No expenses were accrued relative to the self-insurance program for the
periods shown in the statements of operations.
Litigation
The Companies are currently involved in two class action lawsuits for
unspecified personal injury and property damages arising from events in October
1991 and January 1992 during the course of a pipeline installation project for a
third party gas transmission company. One of the class actions, involving
approximately 9,840 class members, entitled Rivera v. United Gas Pipeline Co.,
No. 28738, was instituted against Woodson Construction Company, Inc. on October
29, 1991 in the 40th Judicial District Court, Parish of St. John the Baptist,
State of Louisiana, and the other class action, involving approximately 7,858
class members, entitled Husseiney v. United Gas Pipeline Co., No. 29089, was
instituted on January 27, 1992 against Woodson Construction Company, Inc. in the
40th Judicial District Court, Parish of St. John the Baptist, State of
Louisiana. The claims of 24 representative class members in each case were tried
in 1995, and judgments were rendered against Woodson Construction Company, Inc.,
which were later affirmed by the court of appeal. In the Rivera lawsuit, five of
the 24 representative plaintiffs were awarded compensatory damages of $7,500 in
the aggregate, but punitive damages were denied. In the Husseiney lawsuit,
compensatory damages of $18,589 and punitive damages of $9,500 in the aggregate
were assessed against Woodson Construction Company, Inc. in favor of 16 of the
24 representative plaintiffs. In both lawsuits, the compensatory damages awarded
are expected to be covered by the Companies' insurance, but punitive damage
awards are not expected to be covered by insurance. The punitive damages awarded
to the 16 representative class members varied according to the representatives'
proximity to the incident and individual experience with respect to it. The
amount of punitive damages applicable to the remaining 7,834 class members who
seek to adjudicate their claims will be litigated on an individual basis. Until
those remaining claims are finally adjudicated, settled, dismissed or otherwise
terminated, the total amount of the punitive damages to which the Companies may
be subject cannot reasonably be estimated. In July 1997, all parties involved
applied to the Louisiana Supreme Court for further discretionary review of the
judgments. The Companies believe that there are meritorious arguments favorable
to their position, but are unable to predict whether the Louisiana Supreme Court
will grant relief from the judgments.
The Companies are involved in various other lawsuits arising in the
ordinary course of business, some of which involve substantial claims for
damages. While the outcome of these other lawsuits cannot be predicted with
certainty, management believes these matters will not have a material adverse
effect on the combined financial position or results of operations of the
Companies.
13. SALES TO MAJOR CUSTOMERS
The customer bases for the Companies are primarily concentrated in the oil
and gas industry. The revenue earned from each customer varies from year to year
based on the contracts awarded. Sales to customers comprising 10 percent or more
of the Companies' total revenue are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Customer A................................................. 19.7% 13.7% 10.1%
Customer B................................................. 17.8 -- --
Customer C................................................. -- 32.8 55.0
</TABLE>
14. SUBSEQUENT EVENTS
The Woodson Companies and their shareholders expect to enter into
definitive agreements with TransCoastal Marine Services, Inc. ("TCMS"), pursuant
to which all the outstanding shares of the common stock of WCC, Kori and Enviro
will be acquired for TCMS common stock in three separate merger
F-34
<PAGE> 94
THE WOODSON COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
transactions, and all the outstanding shares of the common stock of Laine will
be purchased for cash and shares of TCMS common stock concurrently with the
closing of the initial public offering (the "Offering") of the common stock of
TCMS.
Shortly before the closing of the Offering, the Companies' shareholders
will elect to terminate the status as an S corporation for Laine and Enviro and
those companies will become subject to federal and state income taxes. Prior to
their termination as S corporations, subject to the terms of the acquisition
agreements, the Companies must refrain from declaring or paying any dividends or
Subchapter S distributions to any shareholders, directors, management sales
agents, employees or other personnel, except for dividends and distributions to
shareholders paid or declared in 1997 which in the aggregate do not exceed 43.2%
of the Companies' pretax income during 1997 excluding certain other mutually
agreed-to distributions, through the earlier of September 30, 1997 or the
Closing Date.
F-35
<PAGE> 95
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The CSI Companies:
We have audited the accompanying combined balance sheets of The CSI
Companies (as defined in Note 1), as of December 31, 1995 and 1996, and the
related combined statements of operations, owners' equity and cash flows for
each of the two years in the period ended May 31, 1995, the seven months ended
December 31, 1995, and the year ended December 31, 1996. These financial
statements are the responsibility of the management of The CSI Companies. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of The CSI
Companies, as of December 31, 1995 and 1996, and the combined results of their
operations and their cash flows for each of the two years in the period ended
May 31, 1995, the seven months ended December 31, 1995 and the year ended
December 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
July 18, 1997 (except with
respect to the matter discussed
in Note 10, as to which the date is
July 31, 1997)
F-36
<PAGE> 96
THE CSI COMPANIES
COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------- JUNE 30,
1995 1996 1997
------ ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 758 $ 571 $ 872
Restricted cash equivalents............................... -- 460 460
Accounts receivable....................................... 2,534 1,368 4,490
Available-for-sale securities, at fair value.............. 2,418 522 151
Receivables from related parties.......................... 282 746 760
Other current assets...................................... 167 708 478
------ ------- -------
Total current assets.............................. 6,159 4,375 7,211
PROPERTY, PLANT AND EQUIPMENT, net.......................... 1,400 3,109 7,053
OTHER ASSETS................................................ 42 18 39
------ ------- -------
Total assets...................................... $7,601 $ 7,502 $14,303
====== ======= =======
LIABILITIES AND OWNERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $1,144 $ 355 $ 1,069
Accounts payable.......................................... 718 1,591 140
Accrued expenses.......................................... 192 282 2,780
Income taxes payable...................................... 217 478 1,196
------ ------- -------
Total current liabilities......................... 2,271 2,706 5,185
------ ------- -------
DEFERRED INCOME TAX LIABILITY............................... 630 561 670
LONG-TERM DEBT.............................................. 25 1,738 4,696
COMMITMENTS AND CONTINGENCIES
OWNERS' EQUITY:
Common stock.............................................. 264 264 264
Additional paid-in capital................................ 380 380 380
Retained earnings......................................... 4,031 4,417 5,672
Treasury stock, at cost, 83.3 shares as of December 31,
1996 and March 31, 1997................................ -- (2,564) (2,564)
------ ------- -------
Total owners' equity.............................. 4,675 2,497 3,752
------ ------- -------
Total liabilities and owners' equity.............. $7,601 $ 7,502 $14,303
====== ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-37
<PAGE> 97
THE CSI COMPANIES
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED SEVEN MONTHS ENDED
MAY 31 ENDED YEAR ENDED JUNE 30
--------------- DECEMBER 31, DECEMBER 31, ---------------
1994 1995 1995 1996 1996 1997
------ ------ ------------ ------------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
REVENUE................................ $5,331 $5,226 $6,041 $8,447 $3,815 $9,606
COSTS AND EXPENSES:
Cost of revenue...................... 2,964 3,334 3,010 5,264 2,463 5,651
Selling, general and administrative
expenses.......................... 1,725 2,285 1,282 2,435 1,160 1,270
Depreciation and amortization........ 288 269 177 359 202 245
------ ------ ------ ------ ------ ------
Operating income (loss)........... 354 (662) 1,572 389 (10) 2,440
OTHER INCOME (EXPENSE):
Interest income...................... 84 117 80 159 33 72
Interest expense..................... (14) (5) (11) (137) (28) (214)
Other................................ 73 14 (6) (25) 54 (28)
------ ------ ------ ------ ------ ------
Total other income
(expense).................. 143 126 63 (3) 59 (170)
------ ------ ------ ------ ------ ------
INCOME (LOSS) BEFORE INCOME TAXES...... 497 (536) 1,635 386 49 2,270
INCOME TAXES PROVISION (BENEFIT)....... 190 (150) 642 205 84 931
EXTRAORDINARY GAIN..................... -- -- -- 342 342 --
------ ------ ------ ------ ------ ------
NET INCOME (LOSS)...................... $ 307 $ (386) $ 993 $ 523 $ 307 $1,339
====== ====== ====== ====== ====== ======
PRO FORMA INFORMATION (UNAUDITED) (NOTE
2)
Income (loss) before income taxes.... $ 497 $ (536) $1,635 $ 386 $ 49 $2,270
Extraordinary gain................... -- -- -- 342 342 --
Pro forma income taxes............... 222 (125) 684 356 156 940
------ ------ ------ ------ ------ ------
Pro forma net income (loss)............ $ 275 $ (411) $ 951 $ 372 $ 235 $1,330
====== ====== ====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-38
<PAGE> 98
THE CSI COMPANIES
COMBINED STATEMENTS OF OWNERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------- PAID-IN RETAINED TREASURY
SHARES AMOUNT CAPITAL EARNINGS STOCK TOTAL
------ ------ ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT MAY 31, 1993.................... 1,166 $264 $380 $3,117 $ -- $ 3,761
NET INCOME................................. -- -- -- 307 -- 307
----- ---- ---- ------ ------- -------
BALANCE AT MAY 31, 1994.................... 1,166 264 380 3,424 -- 4,068
NET LOSS................................... -- -- -- (386) -- (386)
----- ---- ---- ------ ------- -------
BALANCE AT MAY 31, 1995.................... 1,166 264 380 3,038 -- 3,682
NET INCOME................................. -- -- -- 993 -- 993
----- ---- ---- ------ ------- -------
BALANCE AT DECEMBER 31, 1995............... 1,166 264 380 4,031 -- 4,675
DISTRIBUTION TO PARTNER OF
HARGETT INVESTMENTS LLC.................. -- -- -- (137) -- (137)
NET INCOME................................. -- -- -- 523 -- 523
PURCHASE OF TREASURY STOCK................. (83) -- -- -- (2,564) (2,564)
----- ---- ---- ------ ------- -------
BALANCE AT DECEMBER 31, 1996............... 1,083 264 380 4,417 (2,564) 2,497
DISTRIBUTION TO PARTNER OF
HARGETT INVESTMENT LLC................... -- -- -- (84) -- (84)
NET INCOME (Unaudited)..................... -- -- -- 1,339 -- 1,339
----- ---- ---- ------ ------- -------
BALANCE AT JUNE 30, 1997 (Unaudited)....... 1,083 $264 $380 $5,672 $(2,564) $ 3,752
===== ==== ==== ====== ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-39
<PAGE> 99
THE CSI COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEVEN SIX MONTHS
YEAR ENDED MONTHS ENDED
MAY 31 ENDED YEAR ENDED JUNE 30
---------------- DECEMBER 31, DECEMBER 31, ------------------
1994 1995 1995 1996 1996 1997
------ ------ ------------ ------------ ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................. $ 307 $ (386) $ 993 $ 523 $ 307 $ 1,339
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities --
Depreciation and amortization............... 288 269 177 359 202 245
Provision for doubtful accounts............. 41 6 6 24 -- 40
Deferred tax provision (benefit)............ 214 (97) 349 (69) (74) 109
Extraordinary gain.......................... -- -- -- (342) (342) --
(Gain) loss on sale of property, plant and
equipment................................. 61 13 -- 19 6 --
Changes in operating assets and
liabilities --
(Increase) decrease in --
Restricted cash equivalents............. -- -- -- (460) -- --
Accounts receivable..................... (53) 146 (1,872) 1,142 433 (3,162)
Receivables from related parties........ (264) -- (18) (728) (401) (14)
Other current assets.................... 200 (168) 171 (541) (153) 230
Other assets............................ 258 96 (6) 24 41 (21)
Increase (decrease) in --
Accounts payable and accrued expenses... 173 132 307 963 96 1,047
Income taxes payable.................... (24) (52) 291 261 91 717
------ ------ ------- ------- ------- -------
Net cash provided by (used in) in
operating activities.................. 1,201 (41) 398 1,175 206 530
------ ------ ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of capital assets.......... 90 -- -- 3 3 --
Capital expenditures.......................... (142) (408) (238) (2,090) (374) (4,188)
Proceeds from sale (purchase) of investments,
net......................................... (957) (498) (963) 1,896 1,093 371
------ ------ ------- ------- ------- -------
Net cash provided by (used in) investing
activities............................ (1,009) (906) (1,201) (191) 722 (3,817)
------ ------ ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable........... (417) (388) (184) (1,201) (58) (1,344)
Proceeds from issuance of notes payable....... 121 530 40 2,467 1,657 5,016
Distribution to partner of Hargett Investments
LLC......................................... -- -- -- (137) -- (84)
Purchase of treasury stock.................... -- -- -- (2,300) (2,300) --
------ ------ ------- ------- ------- -------
Net cash provided by (used in) financing
activities............................ (296) 142 (144) (1,171) (701) 3,588
------ ------ ------- ------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................... (104) (805) (947) (187) 227 301
CASH AND CASH EQUIVALENTS, beginning of
period........................................ 2,614 2,510 1,705 758 758 571
------ ------ ------- ------- ------- -------
CASH AND CASH EQUIVALENTS, end of period........ $2,510 $1,705 $ 758 $ 571 $ 985 $ 872
====== ====== ======= ======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for --
Interest.................................... $ 14 $ 5 $ 11 $ 138 $ 28 $ 214
Taxes....................................... -- -- -- 102 -- --
Exchange of receivable from related party for
treasury stock.............................. -- -- -- 264 -- --
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-40
<PAGE> 100
THE CSI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
Principles of Combination
The accompanying combined financial statements include the accounts of the
following companies, all headquartered in Lafayette, Louisiana, which are
related by the common ownership of a major shareholder and immediate family
members:
CSI Hydrostatic Testers, Inc. (CSI) and its wholly owned subsidiary,
Blue-Water Hydro Test
Corporation (Blue-Water)
Hargett Mooring and Marine, Inc. (HMMI)
Hargett Investments LLC (HI)
Financial statements for the aforementioned companies ("The CSI Companies"
or the "Companies") have been prepared on a combined basis due to the Companies'
common ownership.
DESCRIPTION OF OPERATIONS
CSI is primarily engaged in testing offshore oil and gas pipelines and
providing sandblasting and painting services to companies in the oil and gas
industry. CSI's main operating area is in and around the Gulf of Mexico.
Blue-Water had no operations as of December 31, 1996. HMMI is a marine vessel
company, focused on chartering vessels for certain energy-related services. HI's
operations consist of leasing office space to CSI.
Although the Companies have experienced growth in revenue over the past few
years, there is an inherent concentration of credit risk associated with
contracts receivable from their major customers. At December 31, 1995 and 1996,
two customers comprised approximately 55 percent and three customers comprised
approximately 45 percent, respectively, of the total accounts receivable
balance. As the Companies have historically funded their operations with cash
flows from operations, the combined entity may be impacted by its dependence on
a limited number of customers. Management believes the risk is mitigated by the
long-standing business relationship with and reputation of the Companies' major
clients. Although there is no assurance with regard to the future business
associations between the Companies and their major customers, management
believes the Companies do not have a significant concentration of risk at
December 31, 1995 and 1996. See Note 12 for a summary of sales to major
customers.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenue and expense during the reporting period. Actual
results could differ from those estimates.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid debt instruments purchased with
original maturities of three months or less.
Restricted Cash
Restricted cash represents cash equivalent investments to support letters
of credit established by the Companies in the normal course of business with
certain vendors.
F-41
<PAGE> 101
THE CSI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line and accelerated
methods based on the estimated useful lives of the assets, which range from
three to 30 years. Additions, improvements and renewals significantly adding to
the asset value or extending the life of the asset are capitalized. Ordinary
maintenance and repairs which do not extend the physical or economic lives of
the plant or equipment are charged to expense as incurred.
Revenue Recognition
The Companies follow the percentage-of-completion method of accounting for
construction contracts which are typically of short duration. Under this method,
the percentage of completion is determined by comparing contract costs incurred
to date with total estimated contract costs. Income is recognized by applying
the percentage complete to the projected total income for each contract in
progress. Contract costs include all direct material, labor and subcontract
costs and those indirect costs related to contract performance, such as indirect
labor, supplies and tools. Revisions in cost and income estimates are reflected
in the accounting period in which the facts requiring revision become known. In
addition, anticipated losses to be incurred on contracts in progress are charged
to income as soon as such losses can be determined. With regard to pipeline
testing services performed, the companies recognize revenues on an as-billed
basis, with an accrual made at each period end for unbilled revenue.
Fair Value of Financial Instruments
The CSI Companies consider the fair value of all financial instruments to
not be materially different from their carrying values at each year-end based on
management's estimate of the Companies' ability to borrow funds under terms and
conditions similar to those applicable to the Companies' existing debt.
Income Taxes
The Companies account for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes."
Under SFAS No. 109, the Companies recognize deferred tax liabilities and assets
for the expected future tax consequences of events that have been recognized
differently in the financial statements or tax returns. Under this method,
deferred tax liabilities and assets are determined based on the difference
between the financial statement carrying amounts and tax basis of assets and
liabilities using enacted tax rates and laws in effect in the years in which the
differences are expected to reverse. Deferred tax assets are evaluated for
realization based on a more-likely-than-not criteria in determining if a
valuation allowance should be provided. Income tax expense is the tax payable
for the year and the change during the year in deferred tax assets and
liabilities.
One of the combining entities, HI, is a limited liability corporation. Its
members are liable for individual federal and state income taxes on their
allocated portions of its taxable income. Accordingly, the historical financial
statements do not include provisions for income taxes relating to HI.
Pro forma net income (loss) consists of the historical net income (loss) of
the Companies', including HI, a limited liability corporation, adjusted for
income taxes that would have been recorded had each Company operated as a C
corporation.
Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Companies adopted SFAS
No. 121 on January 1, 1996. The impact of adopting this standard did not have a
material impact on the combined results of operations.
F-42
<PAGE> 102
THE CSI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Interim Financial Information
The interim combined balance sheet as of June 30, 1997 and combined
statements of operations for the six months ended June 30, 1996 and 1997 are
unaudited, and certain information and footnote disclosures, normally included
in financial statements prepared in accordance with generally accepted
accounting principles, have been omitted. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary to
fairly present the financial position, results of operations and cash flows with
respect to the interim combined financial statements have been included. The
results of operations for the interim periods are not necessarily indicative of
the results for the entire fiscal year.
3. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following as of the dates shown (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
----------------
1995 1996
------ ------
<S> <C> <C>
Billed to customers......................................... $2,074 $1,206
Revenues earned not yet billed.............................. 460 162
------ ------
$2,534 $1,368
====== ======
</TABLE>
Bad debt expense amounted to $41,000, $6,000, $6,000 and $24,000 for the
years ended May 31, 1994 and 1995, the seven months ended December 31, 1995 and
the year ended December 31, 1996, respectively.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at the dates shown
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1995 1996
------- -------
<S> <C> <C>
Land........................................................ $ 258 $ 258
Buildings and improvements.................................. 1,641 1,533
Machinery and equipment..................................... 2,983 3,370
Furniture and fixtures...................................... 464 26
Marine vessels.............................................. 635 2,217
------- -------
5,981 7,404
Less -- Accumulated depreciation and amortization........... (4,581) (4,295)
------- -------
$ 1,400 $ 3,109
======= =======
</TABLE>
The CSI Companies lease certain equipment used in the normal course of
their operations under, typically month-to-month lease agreements. During the
years ended May 31, 1994 and 1995, the seven months ended December 31, 1995 and
the year ended December 31, 1996, the Companies expensed $236,000, $243,000,
$688,000 and $1,019,000, respectively, related to these leases.
5. AVAILABLE-FOR-SALE SECURITIES
In accordance with SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," the Companies' marketable equity securities are
included in an available-for-sale caption in the accompanying combined balance
sheets and are carried at market value. The difference between cost and market
value is not material.
F-43
<PAGE> 103
THE CSI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
6. SUMMARY OF FINANCING ARRANGEMENTS
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1995 1996
------- -------
<S> <C> <C>
Note payable to a finance company in monthly installments of
$1,000, including interest at 8.50%, maturing June 1998,
secured by equipment and a personal guarantee by an
officer and shareholder of the Companies.................. $ 36 $ 25
Two notes payable to a financing company in monthly
installments of $27,000 and $26,000, including interest at
8.25% and 7.82%, maturing April 1996 and 1997,
respectively, secured by unearned insurance policy
premiums.................................................. 105 162
Note payable to a bank, due in monthly installments of
$24,000, including interest at 9.25%, maturing April 2003,
secured by equipment and a personal guarantee by an
officer and shareholder of the Companies.................. -- 1,398
Note payable to a trust company............................. 1,028 --
Note payable to a bank, due in monthly installments of
$5,000, including interest at 9.00%, maturing June 2001
with a balloon payment of $475,000, secured by real estate
and a personal guarantee by an officer and shareholder of
the Companies............................................. -- 508
------- -------
Total financing obligations....................... 1,169 2,093
Less -- Current portion of long-term debt................... (1,144) (355)
------- -------
Long-term debt.................................... $ 25 $ 1,738
======= =======
</TABLE>
The note payable to a trust company for $1,028,000 was secured by a
mortgage on certain of the Companies' real estate. The Companies retired the
outstanding balance of that note in 1996 for $680,000. In connection with the
retirement, the Companies recognized an extraordinary gain of $342,000 for the
difference between the outstanding balance on the note at the time of retirement
and the amount paid.
Aggregate annual principal payments on financing obligations outstanding at
December 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997........................................................ $ 355
1998........................................................ 211
1999........................................................ 217
2000........................................................ 238
2001........................................................ 703
Thereafter.................................................. 369
------
Total............................................. $2,093
======
</TABLE>
Additionally, in October 1996, the Companies established a $500,000 line of
credit with a bank, bearing interest at 9.5 percent, due on demand or in monthly
payments. The line of credit matures in October 1997 and is secured by equipment
and accounts receivable of the Companies and by the personal guarantee of the
chief executive officer and principal shareholder. As of December 31, 1996, no
amounts had been drawn under the line of credit.
F-44
<PAGE> 104
THE CSI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
Income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
SEVEN
YEAR ENDED MONTHS
MAY 31 ENDED YEAR ENDED
------------ DECEMBER 31, DECEMBER 31,
1994 1995 1995 1996
---- ----- ------------ ------------
<S> <C> <C> <C> <C>
Federal and state --
Current.................................... $(24) $ (53) $293 $274
Deferred................................... 214 (97) 349 (69)
</TABLE>
Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate rate of 34 percent to income
(loss) before income taxes as follows (in thousands):
<TABLE>
<CAPTION>
SEVEN
YEAR ENDED MONTHS
MAY 31 ENDED YEAR ENDED
------------ DECEMBER 31, DECEMBER 31,
1994 1995 1995 1996
---- ----- ------------ ------------
<S> <C> <C> <C> <C>
Provision at the statutory rate.............. $169 $(182) $556 $248
Increase resulting from --
Permanent differences --
Limited liability company nontaxable
income................................ (21) (25) (18) (136)
State income tax, net................... 17 (11) 57 28
Other................................... 25 68 47 65
---- ----- ---- ----
$190 $(150) $642 $205
==== ===== ==== ====
</TABLE>
Deferred income tax provisions result from temporary differences in the
recognition of income and expenses for financial reporting purposes and for tax
purposes. The tax effects of these temporary differences, representing deferred
tax assets and liabilities, result principally from the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
---------------
1995 1996
----- -----
<S> <C> <C>
Utilization of operating losses............................. $ -- $ (84)
Bad debt expense............................................ (76) 58
Other accrued expenses not deductible for tax purposes...... 19 59
Basis differences on property, plant and equipment.......... (98) (114)
State taxes................................................. 45 40
Overseas operations......................................... (520) (520)
----- -----
Net deferred tax liability........................ $(630) $(561)
===== =====
</TABLE>
F-45
<PAGE> 105
THE CSI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The net deferred tax assets and liabilities are comprised of the following
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------
1995 1996
---- ----
<S> <C> <C>
Deferred tax assets --
Current................................................... $ 39 $147
Long-term................................................. 15 --
---- ----
Total............................................. 54 147
---- ----
Deferred tax liabilities --
Current................................................... 558 488
Long-term................................................. 126 220
---- ----
Total............................................. 684 708
---- ----
Net deferred income tax liability................. $630 $561
==== ====
</TABLE>
8. RETIREMENT PLAN
The Companies maintain an Internal Revenue Code Section 401(k) plan which
covers all qualified employees meeting certain service and age requirements. The
Companies' contribution is discretionary. The Companies contributed $-- and
$18,000 for the seven-month period ended December 31, 1995 and the year ended
December 31, 1996, respectively. The 401(k) plan was discontinued in early 1997.
9. SHAREHOLDERS' EQUITY
The components of shareholders' equity as of December 31, 1995 and 1996,
are as follows (in thousands, except share and per share data) (see Note 1):
<TABLE>
<CAPTION>
CLASS OF SHARES SHARES PAR VALUE STATED
COMPANY OWNERSHIP AUTHORIZED ISSUED PER SHARE VALUE
------- ------------ ---------- -------- --------- ------
<S> <C> <C> <C> <C> <C>
CSI and subsidiary................. Common stock 700 166.67 $50.00 $ 9
HMMI............................... Common stock 999 999.00 No par 255
HI................................. Member units N/A N/A N/A N/A
-------- ----
1,165.67 $264
======== ====
</TABLE>
Total capital related to HI is included in additional paid-in capital in
the accompanying balance sheets.
During 1996, CSI purchased 83 1/3 shares of common stock (one-half of its
outstanding shares) from an officer of CSI for $2,564,000. The purchase price
consisted of $2,300,000 in cash plus the forgiveness of a $264,000 receivable
from the officer. The purchased common stock has been recorded as treasury stock
in the accompanying financial statements.
10. COMMITMENTS AND CONTINGENCIES
Litigation
The CSI Companies are involved in various legal actions incidental to the
ordinary course of business. A former employee brought one such lawsuit against
HMMI in 1991. The former employee alleged personal injury while in the course
and scope of his employment and submitted an opening settlement demand of
$700,000. HMMI filed a motion for a summary judgment in which the district court
granted the motion and dismissed the plaintiff's claim. The summary judgment was
reversed on appeal by the Third Circuit Court of Appeals. HMMI has filed a
petition, which is still pending, for the Louisiana Supreme Court to hear the
case in order to reverse the lower court's ruling. The petition is currently
pending. In the opinion of the Companies' management, after consultation with
outside legal counsel, the ultimate disposition of such proceedings,
F-46
<PAGE> 106
THE CSI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
including the case above, will not have a material adverse effect on the
Companies' financial position or results of operations.
Operating Leases
The Companies currently lease two vehicles under noncancelable operating
leases that provide for two-year terms. Future minimum lease payments under such
operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
- -----------
<S> <C> <C>
1997.................................................................. $12
1998.................................................................. 28
---
$40
===
</TABLE>
Rental expense for the vehicle leases as described above and various other
leases for the years ended May 31, 1994 and 1995, the seven months ended
December 31, 1995 and the year ended December 31, 1996 was $--, $25,000, $17,000
and $17,000, respectively.
11. SALES TO MAJOR CUSTOMERS
The customer bases for the Companies are primarily concentrated in the oil
and gas industry. The revenue earned from each customer varies from year to year
based on the contracts awarded. Sales to customers comprising 10 percent or more
of the Companies' total revenue are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEVEN MONTHS
MAY 31 ENDED YEAR ENDED
----------- DECEMBER 31, DECEMBER 31,
1994 1995 1995 1996
---- ---- ------------ ------------
<S> <C> <C> <C> <C>
Customer A..................................... 29% 26% --% --%
Customer B..................................... 14 10 -- --
Customer C..................................... 16 17 -- --
Customer D..................................... 11 -- -- --
Customer E..................................... -- -- 22 --
Customer F..................................... -- -- -- 12
Customer G..................................... -- -- -- 21
Customer H..................................... -- -- -- 20
</TABLE>
12. SUBSEQUENT EVENTS
Definitive Agreement
The CSI Companies and their shareholders expect to enter into a definitive
agreement with TransCoastal Marine Service, Inc. ("TCMS"), pursuant to which all
the outstanding shares of common stock and limited liability company interests
in the Companies will be acquired for cash and shares of TCMS common stock
concurrently with the consummation of the initial public offering of the common
stock of TCMS.
Vessel Acquisition
In March 1997, the Companies purchased a marine vessel for $3.5 million
financed with a $3.5 million term note bearing interest at 10.7 percent. The
note is secured by a mortgage on the marine vessel and a personal guarantee of
an officer and shareholder of the Companies, is due in 59 monthly installments
of $59,000 and matures in 2002 with a $1,318,000 balloon payment on maturity.
The vessel was purchased for the purpose of expanding the capabilities of the
Companies' offshore pipeline testing operations.
F-47
<PAGE> 107
INDEPENDENT AUDITORS' REPORT
Board of Directors
HBH, Inc.
Belle Chasse, Louisiana
We have audited the accompanying balance sheets of HBH, Inc. as of December
31, 1995 and 1996, and the related statements of operations, shareholder's
equity (deficit) and cash flows for each of the three years in the period ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of HBH, Inc. as of December 31,
1995 and 1996, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
March 27, 1997
(May 7, 1997 as to Note 6)
F-48
<PAGE> 108
HBH, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
------------------ JUNE 30,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash...................................................... $ 24 $ 44 $ 59
Accounts receivable, net.................................. 6,044 8,553 10,225
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. -- -- 1,539
Prepaid expenses.......................................... 180 405 519
Current portion of notes receivable from shareholder...... 218 -- 37
Other current assets...................................... 45 252 8
------- ------- -------
Total current assets.............................. 6,511 9,254 12,387
PROPERTY, PLANT AND EQUIPMENT, net.......................... 9,293 8,748 8,328
OTHER ASSETS:
Notes receivable from shareholder......................... 885 194 157
------- ------- -------
Total assets...................................... $16,689 $18,196 $20,872
======= ======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES:
Revolving line of credit.................................. $ 2,200 $ 1,476 $ 500
Current maturities of long-term debt...................... 812 940 977
Accounts payable.......................................... 7,215 7,986 8,942
Accrued expenses.......................................... 1,087 908 2,199
Billings in excess of costs and estimated losses on
uncompleted contracts.................................. 306 1,397 --
------- ------- -------
Total current liabilities......................... 11,620 12,707 12,618
LONG-TERM DEBT, less current maturities..................... 5,521 5,060 4,632
SUBORDINATED DEBT........................................... -- 635 635
DEFERRED GAIN ON SALE OF PROPERTY AND EQUIPMENT............. 508 -- --
------- ------- -------
Total liabilities................................. 17,649 18,402 17,885
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDER'S EQUITY (DEFICIT):
Common stock, no par value, 3,000 shares authorized, 882
shares issued and outstanding at stated value.......... 66 66 66
Additional paid-in capital................................ 8 308 808
Retained earnings (accumulated deficit)................... (1,034) (580) 2,113
------- ------- -------
Total shareholder's equity (deficit).............. (960) (206) 2,987
------- ------- -------
Total liabilities and shareholder's equity
(deficit)....................................... $16,689 $18,196 $20,872
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-49
<PAGE> 109
HBH, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31 JUNE 30
--------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE.......................................... $15,261 $14,771 $36,873 $19,062 $23,850
COSTS AND EXPENSES:
Cost of revenue................................ 12,585 16,803 33,727 16,343 19,394
Selling, general and administrative expense.... 929 867 1,000 484 671
Depreciation................................... 503 871 1,482 719 750
------- ------- ------- ------- -------
14,017 18,541 36,209 17,546 20,815
------- ------- ------- ------- -------
Operating income (loss)..................... 1,244 (3,770) 664 1,516 3,035
OTHER INCOME (EXPENSE):
Interest income................................ 132 113 45 28 7
Interest expense............................... (85) (288) (853) (436) (368)
Gain on sale of property, plant and
equipment................................... 37 33 601 517 19
------- ------- ------- ------- -------
Total other income (expense)........... 84 (142) (207) 109 (342)
------- ------- ------- ------- -------
INCOME (LOSS).................................... $ 1,328 $(3,912) $ 457 $ 1,625 $ 2,693
======= ======= ======= ======= =======
PRO FORMA INFORMATION (UNAUDITED) (Note 2)
Historical net income (loss)................... $ 1,328 $(3,912) $ 457 $ 1,625 $ 2,693
Pro forma income tax provision (benefit)....... 500 (1,460) 170 600 1,000
------- ------- ------- ------- -------
Pro forma net income (loss).................... $ 828 $(2,452) $ 287 $ 1,025 $ 1,693
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-50
<PAGE> 110
HBH, INC.
STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ---------- -------- -------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994.......................... 882 $66 $ 8 $ 2,430 $ 2,504
DIVIDENDS........................................... -- -- -- (599) (599)
NET INCOME.......................................... -- -- -- 1,328 1,328
--- --- ---- ------- -------
BALANCE AT DECEMBER 31, 1994........................ 882 66 8 3,159 3,233
DIVIDENDS........................................... -- -- -- (281) (281)
NET LOSS............................................ -- -- -- (3,912) (3,912)
--- --- ---- ------- -------
BALANCE AT DECEMBER 31, 1995........................ 882 66 8 (1,034) (960)
CAPITAL CONTRIBUTIONS............................... -- -- 300 -- 300
DIVIDENDS........................................... -- -- -- (3) (3)
NET INCOME.......................................... -- -- -- 457 457
--- --- ---- ------- -------
BALANCE AT DECEMBER 31, 1996........................ 882 66 308 (580) (206)
CAPITAL CONTRIBUTIONS (Unaudited)................... -- -- 500 -- 500
NET INCOME (Unaudited).............................. -- -- -- 2,693 2,693
--- --- ---- ------- -------
BALANCE AT JUNE 30, 1997 (Unaudited)................ 882 $66 $808 $ 2,113 $ 2,987
=== === ==== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-51
<PAGE> 111
HBH, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31 JUNE 30
---------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).............................. $ 1,328 $(3,912) $ 457 $ 1,625 $ 2,693
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization................ 503 871 1,482 719 750
(Gain) on sale of property, plant and
equipment................................. (37) (33) (601) (517) (19)
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable..................... (3,797) (1,401) (2,509) (178) (1,672)
Costs and estimated earnings (losses) in
excess of billings on uncompleted
contracts............................. 155 -- -- (169) (1,539)
Other current assets.................... (20) (52) (432) 64 130
Increase (decrease) in:
Accounts payable and accrued expenses... 2,130 4,872 594 (147) 2,247
Billings in excess of costs and
estimated earnings (losses) on
uncompleted
contracts............................. -- 306 1,090 (306) (1,397)
------- ------- -------- ------- -------
Net cash provided by (used in) operating
activities............................ 262 651 81 1,091 1,193
------- ------- -------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and
equipment.................................... 8 11 221 49 34
Additions of property, plant and equipment..... (971) (7,859) (1,066) (575) (345)
Collection of notes receivable from
shareholder.................................. 181 201 909 657 --
------- ------- -------- ------- -------
Net cash provided by (used in) investing
activities............................ (782) (7,647) 64 131 (311)
------- ------- -------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit................... 875 2,900 28,958 10,707 20,175
Payments on line of credit..................... (725) (850) (29,682) (10,626) (21,151)
Proceeds from subordinated debt................ -- -- 635 635 --
Proceeds from notes payable to others.......... 219 5,534 532 500 82
Principal payments on notes payable to
others....................................... (267) (371) (865) (429) (473)
Capital contributions.......................... -- -- 300 300 500
Payment of dividends to shareholder............ (599) (281) (3) (3) --
------- ------- -------- ------- -------
Net cash provided by (used in) financing
activities............................ (497) 6,932 (125) 1,084 (867)
------- ------- -------- ------- -------
NET INCREASE (DECREASE) IN CASH.................. (1,017) (64) 20 2,306 15
CASH, beginning of period........................ 1,105 88 24 24 44
------- ------- -------- ------- -------
CASH, end of period.............................. $ 88 $ 24 $ 44 $ 2,330 $ 59
======= ======= ======== ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest..................................... $ 84 $ 286 $ 842 $ 429 $ 378
======= ======= ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-52
<PAGE> 112
HBH, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
HBH, Inc. (the "Company"), is wholly owned by the Estate of H.D. Hughes.
The Company is engaged in the marine pipeline and oilfield construction business
in the central area of the Gulf of Mexico.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid debt instruments purchased with
original maturities of three months or less.
Accounts Receivable
The Company provides its services to a limited number of customers. At
December 31, 1996, five customers accounted for approximately 19%, 18%, 14%, 14%
and 13% of accounts receivable, respectively.
Accounts receivable are reduced by any allowance for doubtful accounts as
considered necessary. The need for an allowance is determined by management
based on an evaluation of individual accounts. Historical chargeoffs have not
been significant.
Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method based on
the estimated useful lives of the assets, which range from 3 to 10 years for
machinery and equipment and other assets. Additions, improvements and renewals
significantly adding to the asset value or extending the life of the asset are
capitalized. Ordinary maintenance and repairs not extending the physical or
economic lives of the plant or equipment are charged to expense as incurred.
Revenue Recognition
The Company follows the percentage-of-completion method of accounting for
major (generally over $100,000) construction contracts which are typically of
short duration. Under this method, the percentage of completion is determined by
comparing contract costs incurred to date with total estimated contract costs.
Income is recognized by applying the percentage complete to the projected total
income for each contract in progress. Contract costs include all direct
material, labor and subcontract costs and those indirect costs related to
contract performance, such as indirect labor, supplies and tools. Revisions in
cost and income estimates are reflected in the accounting period in which the
facts requiring the revision become known. In addition, anticipated losses to be
incurred on contracts in progress are charged to income as soon as losses can be
determined.
Revenue is recognized on minor construction contracts using the
completed-contract method whereby billings and costs are accumulated during the
period of construction but profits are not recorded until completion of the
contracts. This method approximates the percentage of completion method because
of the short-term nature of the minor contracts.
Revenues from day-rate contracts are recognized currently as the work is
performed.
F-53
<PAGE> 113
HBH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Fair Value of Financial Instruments
The Company considers the fair value of all financial instruments to be a
reasonable approximation of their carrying values since financial instruments
such as cash, accounts receivable, accounts payable and accrued expenses have a
short duration and interest on debt is generally either at a floating rate or at
a rate which approximates current market.
Income Taxes
The Company has elected to be taxed for federal and state income tax
purposes under Subchapter S of the Internal Revenue Code. Any current taxable
income or loss of the Company is allocated to the shareholder who is responsible
for the taxes thereon.
The Company generally has paid dividends to its shareholder at the same
time that he was required to make income tax payments based on his taxable
income which included the results of the Company's operations.
Pro forma net income (loss) consists of the Company's historical income
(loss) as an S Corporation, adjusted for income taxes that would have been
recorded had the Company operated as a C Corporation.
Impairment of Long-Lived Assets
In March 1995, the Financing Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company adopted SFAS No. 121 on January 1, 1996. The impact of
adopting this standard did not have a material impact on the Company's results
of operations.
Interim Financial Information
The interim financial statements as of June 30, 1997 and for the six months
ended June 30, 1996 and 1997 are unaudited, and certain information and footnote
disclosures, normally included in annual financial statements prepared in
accordance with generally accepted accounting principles, have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the financial position, results of
operations and cash flows with respect to the interim financial statements have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.
3. ACCOUNTS AND CONTRACTS RECEIVABLE
Amounts due on contracts as of the dates shown are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
----------------
1995 1996
------ ------
<S> <C> <C>
Completed contracts......................................... $1,430 $5,366
Contracts in progress:
Current................................................... 4,045 2,929
Retainage due within one year............................. 569 258
Less -- allowance for doubtful accounts..................... -- --
------ ------
$6,044 $8,553
====== ======
</TABLE>
F-54
<PAGE> 114
HBH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The portion of the retainage due in excess of one year is not significant.
4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Information with respect to uncompleted contracts as of the date shown is
as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1995 1996
------- -------
<S> <C> <C>
Costs incurred on uncompleted contracts..................... $ 8,848 $ 2,688
Estimated losses on uncompleted contracts................... (3,548) (898)
------- -------
5,300 1,790
Less -- Billings to date.................................... (5,606) (3,187)
------- -------
$ (306) $(1,397)
======= =======
</TABLE>
The above amounts are included in the accompanying balance sheets under the
caption of billings in excess of costs and estimated losses on uncompleted
contracts.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at the dates shown
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1995 1996
------- -------
<S> <C> <C>
Buildings................................................... $ 32 $ 32
Machinery and equipment..................................... 15,396 16,129
Furniture and fixtures...................................... 80 93
Transportation equipment.................................... 736 710
------- -------
16,244 16,964
Less -- Accumulated depreciation and amortization........... (6,951) (8,216)
------- -------
$ 9,293 $ 8,748
======= =======
</TABLE>
6. SUMMARY OF FINANCING ARRANGEMENTS
The Company's revolving line of credit is payable to a bank and bears
interest at prime plus 0.75% (9% at December 31, 1996) and is due April 17,
1997. The agreement provides for maximum borrowings of $3,000,000. The Company's
agreement in connection with the line of credit payable to a bank contains
certain covenants with respect to the minimum amount of tangible net worth, the
maximum ratio of debt to equity and a minimum quarterly amount of net earnings.
The Company was not in compliance with these covenants at December 31, 1996.
These requirements were waived through the new maturity date of the note which
has been extended until June 16, 1997 (see Note 9).
F-55
<PAGE> 115
HBH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
----------------
1995 1996
------ ------
<S> <C> <C>
Note payable to a bank, bearing interest at 9.25%, payable
in monthly installments of principal and interest of
approximately $74,000 with the unpaid balance due October
31, 2000.................................................. $5,358 $4,952
Note payable to a finance company, bearing interest at 6.79%
to 8.55%, due at various dates through 1998 and 2001...... 691 847
Various installment notes payable, bearing interest rates
ranging from 9.0% to 11.2%, due at various dates through
1998...................................................... 130 104
Note payable to a finance company, bearing interest at
6.63%, payable in monthly installments through July
1998...................................................... 153 97
------ ------
6,332 6,000
Less current portion........................................ (811) (940)
------ ------
$5,521 $5,060
====== ======
</TABLE>
Substantially all of the Company's assets are pledged as collateral on the
long-term debt. The notes payable to the banks are guaranteed by the Company's
shareholder.
As of December 31, 1996, aggregate annual principal payments on the
revolving line of credit and long-term debt are payable as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
- ------------------------
<S> <C>
1997............................................................... $2,416
1998............................................................... 788
1999............................................................... 659
2000............................................................... 3,583
2001............................................................... 30
------
$7,476
======
</TABLE>
7. RELATED-PARTY TRANSACTIONS
Amounts due from the Company's sole shareholder in the form of notes
receivable amounted to $194,000 at December 31, 1996 and $1,103,000 at December
31, 1995, at various interest rates ranging up to 9%. Interest income on these
notes was approximately $44,000 for the year ended December 31, 1996, $101,000
for the year ended December 31, 1995 and $117,000 for the year ended December
31, 1994.
Land and buildings were sold to the Company's sole shareholder in October
1983. The excess of the sales price over the carrying value of the property was
deferred and was being recognized as payments were received on the note. During
1996, the remaining balance of the note was collected and the remaining gain of
$508,000 was recognized as income. The Company is leasing this property from the
shareholder on a month-to-month basis. Rent expense amounted to $167,000 for
each of 1996, 1995 and 1994.
The subordinated debt is due to the shareholder and is subordinate to the
revolving line of credit. The note bears interest at 9.45 percent, and interest
only is due in monthly installments through June 11, 2001, at which time the
terms of repayment of interest and principal are to be renegotiated.
The Company has guaranteed a note payable to a bank by the Company's sole
shareholder with a balance of $1,104,000 at December 31, 1996.
F-56
<PAGE> 116
HBH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company paid consulting, debt guarantee and other fees to the Company's
sole shareholder through December 31, 1996. These fees aggregated $233,000 for
each of 1996, 1995 and 1994.
8. COMMITMENTS AND CONTINGENCIES
The Company is a party to various legal proceedings arising in the ordinary
course of business and is not aware of any litigation threatened against it that
could have a material effect on the financial statements.
9. SUBSEQUENT EVENTS (UNAUDITED)
In June 1997, the maturity date of the revolving line of credit was
extended until June 16, 1998.
The Company and its shareholder have entered into a definitive agreement
(being held in escrow subject to the satisfaction of certain conditions) with
TransCoastal Marine Services, Inc. ("TCMS"), pursuant to which all the
outstanding shares of the Company's common stock will be sold to TCMS for cash
and shares of TCMS common stock concurrently with the consummation of the
initial public offering (the "Offering") of the common stock of TCMS.
A sale of the stock as described above would automatically terminate the
Company's status as an S corporation. Under the terms of the definitive
agreement, the Company has agreed to restrictions upon dividends or S
corporation distributions.
10. SALES TO MAJOR CUSTOMERS
The customer base for the Company is primarily concentrated in the oil and
gas industry. The revenue earned from each customer varies from year to year
based on the contracts awarded. Sales to customers comprising 10 percent or more
of the Company's total revenue are summarized as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------
1994 1995 1996
------ ------ -------
<S> <C> <C> <C>
Customer A................................................ $ -- $2,155 $17,862
Customer B................................................ 6,440 3,434 5,533
Customer C................................................ -- 3,194 --
Customer D................................................ -- 1,981 --
Customer E................................................ 3,030 -- --
</TABLE>
******
F-57
<PAGE> 117
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Red Fox Companies of New Iberia, Inc.:
We have audited the accompanying balance sheets of The Red Fox Companies of
New Iberia, Inc., as of December 31, 1995 and 1996, and the related statements
of operations, shareholder's equity and cash flows for the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Red Fox Companies of New
Iberia, Inc., as of December 31, 1995 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
DARNALL, SIKES & FREDERICK
Lafayette, Louisiana
June 6, 1997
F-58
<PAGE> 118
THE RED FOX COMPANIES OF NEW IBERIA, INC.
BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------- JUNE 30,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash...................................................... $ 752 $ 89 $ 707
Contracts receivable...................................... 511 910 1,242
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 345 243 358
Deferred tax asset........................................ -- -- 22
Other current assets...................................... 37 82 106
------ ------ ------
Total current assets.............................. 1,645 1,324 2,435
PROPERTY, PLANT AND EQUIPMENT, net.......................... 59 38 44
AMOUNTS DUE FROM OFFICERS................................... 78 -- 34
------ ------ ------
Total assets...................................... $1,782 $1,362 $2,513
====== ====== ======
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $1,040 $ 570 $ 302
Accrued expenses.......................................... 216 130 1,206
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. -- 5 422
Deferred income taxes..................................... 66 81 --
------ ------ ------
Total current liabilities......................... 1,322 786 1,930
LOANS PAYABLE TO RELATED PARTIES............................ 43 -- --
DEFERRED INCOME TAXES....................................... 3 8 8
------ ------ ------
Total liabilities................................. 1,368 794 1,938
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY:
Common stock, no par value, 1,000 shares authorized, 100
shares issued and outstanding.......................... 1 1 1
Retained earnings......................................... 413 567 574
------ ------ ------
Total shareholder's equity........................ 414 568 575
------ ------ ------
Total liabilities and shareholder's equity........ $1,782 $1,362 $2,513
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-59
<PAGE> 119
THE RED FOX COMPANIES OF NEW IBERIA, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31 JUNE 30
------------------------- ---------------
1994 1995 1996 1996 1997
------ ------- ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE.............................................. $5,611 $10,497 $9,730 $3,159 $4,536
COSTS AND EXPENSES:
Cost of revenue.................................... 4,715 9,426 8,260 2,708 3,825
Selling, general and administrative expenses....... 650 698 885 363 674
Depreciation and amortization...................... 16 15 12 8 8
------ ------- ------ ------ ------
Operating income (loss) 230 358 573 80 29
OTHER INCOME (EXPENSE):
Interest expense................................... (70) (8) (30) (20) (7)
Other.............................................. (32) (80) (60) (21) (13)
------ ------- ------ ------ ------
Total other expense........................ (102) (88) (90) (41) (20)
------ ------- ------ ------ ------
INCOME BEFORE INCOME TAXES........................... 128 270 483 39 9
PROVISION FOR INCOME TAXES........................... 50 117 197 9 2
------ ------- ------ ------ ------
NET INCOME........................................... $ 78 $ 153 $ 286 $ 30 $ 7
====== ======= ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-60
<PAGE> 120
THE RED FOX COMPANIES OF NEW IBERIA, INC.
STATEMENTS OF SHAREHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
--------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
------ ------ -------- -----
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993................................ 100 $1 $ 182 $ 183
NET INCOME.................................................. -- -- 78 78
--- -- ----- -----
BALANCE AT DECEMBER 31, 1994................................ 100 1 260 261
NET INCOME.................................................. -- -- 153 153
--- -- ----- -----
BALANCE AT DECEMBER 31, 1995................................ 100 1 413 414
DIVIDENDS................................................... -- -- (132) (132)
NET INCOME.................................................. -- -- 286 286
--- -- ----- -----
BALANCE AT DECEMBER 31, 1996................................ 100 1 567 568
NET INCOME (Unaudited)...................................... -- -- 7 7
--- -- ----- -----
BALANCE AT June 30, 1997 (Unaudited)........................ 100 $1 $ 574 $ 575
=== == ===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-61
<PAGE> 121
THE RED FOX COMPANIES OF NEW IBERIA, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31 ENDED JUNE 30
------------------------ -------------
1994 1995 1996 1996 1997
------ ------ ------ ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................... $ 78 $ 153 $ 286 $ 30 $ 7
Adjustments to reconcile net income to net cash
provided by (used in) operating activities --
Depreciation.................................... 16 15 12 8 6
Loss on sale of property, plant and equipment... 4 -- -- -- --
Changes in operating assets and liabilities --
(Increase) decrease in --
Contracts receivable....................... 18 24 (399) (25) (332)
Costs and estimated earnings in excess of
billings on uncompleted contracts........ (169) (137) 102 162 (115)
Other current assets....................... -- (34) (45) (45) (24)
Increase (decrease) in --
Accounts payable and accrued expenses...... 211 852 (557) (816) 808
Billings in excess of costs and estimated
earnings on uncompleted contracts........ -- -- 5 -- 417
Deferred income taxes...................... 50 3 20 (3) (103)
----- ----- ----- ----- -----
Net cash provided by (used in) operating
activities............................... 208 876 (576) (689) 664
----- ----- ----- ----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and
equipment....................................... 2 -- -- -- --
Capital expenditures............................... (9) (35) (28) (4) (12)
Payments from shareholder and related parties...... -- -- 115 -- --
(Payments to) advances from shareholder and related
parties......................................... (57) (21) -- (14) (34)
----- ----- ----- ----- -----
Net cash provided by (used in) investing
activities............................... (64) (56) 87 (18) (46)
----- ----- ----- ----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable to shareholder and
related parties................................. 221 -- -- -- --
Principal payments on notes payable to others...... (197) (28) -- -- --
Principal payments on notes payable to shareholder
and related parties............................. -- (208) (42) (4) --
Payment of dividends to shareholder................ -- -- (132) -- --
----- ----- ----- ----- -----
Net cash provided by (used in) financing
activities............................... 24 (236) (174) (4) --
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................................ 168 584 (663) (711) 618
CASH AND CASH EQUIVALENTS, beginning of period....... -- 168 752 752 89
----- ----- ----- ----- -----
CASH AND CASH EQUIVALENTS, end of period............. $ 168 $ 752 $ 89 $ 41 $ 707
===== ===== ===== ===== =====
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash used for --
Interest........................................ $ 70 $ 8 $ 30 $ 20 $ 7
Income taxes.................................... -- 98 140 -- --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-62
<PAGE> 122
THE RED FOX COMPANIES OF NEW IBERIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
The Red Fox Companies of New Iberia, Inc. (the "Company") is primarily
engaged in the fabrication and refurbishment of (i) structural components of
fixed platforms for use in the development of oil and gas, and (ii) structural
components, primarily deck structures, for offshore drilling rigs and barge
drilling rigs. RFCNI also fabricates marine sewage treatment units that are
installed on offshore platforms and drilling rigs.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenue and expense during the reporting period. Actual
results could differ from those estimates.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid debt instruments purchased with
original maturities of three months or less.
Contracts Receivable
The Company provides for doubtful accounts using the direct write-off
method. In the Company's case, use of this method does not result in a material
difference from the valuation method required by generally accepted accounting
principles.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation expense is
computed using the straight-line method based on the estimated useful lives of
the assets, which range from five to seven years. Additions, improvements and
renewals significantly adding to the asset value or extending the life of the
asset are capitalized. Ordinary maintenance and repairs not extending the
physical or economic lives of the plant or equipment are charged to expense as
incurred.
Revenue Recognition
Revenue from construction contracts, which are typically of short duration,
are recognized on the percentage-of-completion method. Under this method, the
percentage of completion is determined by comparing contract costs incurred to
date with total estimated contract costs. Income is recognized by applying the
percentage complete to the projected total income for each contract in progress.
Contract costs include all direct material, labor and subcontract costs and
those indirect costs related to contract performance, such as indirect labor,
supplies and tools. Revisions in cost and income estimates are reflected in the
accounting period in which the facts that require revision become known. In
addition, anticipated losses to be incurred on contracts in progress are charged
to income as soon as such losses can be determined.
The asset caption entitled "Costs and estimated earnings in excess of
billings on uncompleted contracts" represents revenue recognized in excess of
amounts billed. The liability caption entitled "Billings in excess of costs and
estimated earnings on uncompleted contracts" represents billings in excess of
revenue recognized.
Fair Value of Financial Instruments
The Company considers the fair value of all financial instruments to not be
materially different from their carrying values at December 31, 1995 and 1996.
F-63
<PAGE> 123
THE RED FOX COMPANIES OF NEW IBERIA, INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes."
Under SFAS No. 109, the Company recognized deferred tax liabilities and assets
for the expected future tax consequences of events that have been recognized
differently in the financial statements or tax returns. Under this method,
deferred tax liabilities and assets are determined based on the difference
between the financial statement carrying amounts and tax basis of assets and
liabilities using enacted tax rates and laws in effect in the years in which the
differences are expected to reverse. Deferred tax assets are evaluated for
realization based on a more-likely-than-not criteria in determining if a
valuation allowance should be provided. Income tax expense is the tax payable
for the year and the change during the year in deferred tax assets and
liabilities.
Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." SFAS No. 121 requires long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company adopted SFAS No.
121 on January 1, 1996. The impact of adopting this standard did not have a
material impact on the results of operations.
Interim Financial Information
The interim balance sheet as of June 30, 1997 and statements of operations
for the six months ended June 30, 1996 and 1997 are unaudited, and certain
information and footnote disclosures, normally included in financial statements
prepared in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
financial statements have been included. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
3. ACCOUNTS AND CONTRACTS RECEIVABLE
Amounts due on contracts as of the dates shown are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------
1995 1996
---- ----
<S> <C> <C>
Completed contracts......................................... $487 $616
Contracts in progress....................................... 24 294
---- ----
$511 $910
==== ====
</TABLE>
F-64
<PAGE> 124
THE RED FOX COMPANIES OF NEW IBERIA, INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Information with respect to uncompleted contracts as of the dates shown is
as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
---------------
1995 1996
----- ------
<S> <C> <C>
Costs incurred on uncompleted contracts..................... $ 654 $3,508
Estimated profit earned to date............................. 114 266
Accrued loss on uncompleted contracts....................... (152) --
----- ------
616 3,774
Less -- Billings to date.................................... 271 3,536
----- ------
$ 345 $ 238
===== ======
</TABLE>
The above amounts are included in the accompanying balance sheets under the
following captions (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------
1995 1996
---- ----
<S> <C> <C>
Costs and estimated earnings in excess of billings on
uncompleted contracts..................................... $345 $243
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... -- (5)
---- ----
$345 $238
==== ====
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at the dates shown
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------
1995 1996
---- ----
<S> <C> <C>
Buildings................................................... $-- $ 4
Machinery and equipment..................................... 15 29
Transportation equipment.................................... 75 28
--- ---
90 61
Less -- Accumulated depreciation............................ (31) (23)
--- ---
$59 $38
=== ===
</TABLE>
6. INCOME TAXES
Federal income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
--------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Federal --
Current................................................... $-- $101 $155
Deferred.................................................. 50 3 20
</TABLE>
F-65
<PAGE> 125
THE RED FOX COMPANIES OF NEW IBERIA, INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate rate of 34 percent to income
(loss) before income taxes as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
--------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Provision at the statutory rate............................. $44 $92 $164
Increase resulting from state income tax, net............... 5 11 22
</TABLE>
Deferred income tax provisions result from temporary differences in the
recognition of income and expenses for financial reporting purposes and for tax
purposes. The tax effects of these temporary differences, representing deferred
tax assets and liabilities, result principally from the following:
<TABLE>
<CAPTION>
DECEMBER 31
---------------
1995 1996
----- ----
<S> <C> <C>
Accrued losses on uncompleted contracts..................... $ 51 $ --
Uncompleted contracts....................................... (117) (81)
Basis differences on property, plant and equipment.......... (3) (8)
----- ----
Net deferred tax liabilities...................... $ (69) $(89)
===== ====
</TABLE>
The net deferred tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Deferred tax assets, current................................ $ 51 $ --
---- ----
Deferred tax liabilities --
Current................................................... 117 81
Long-term................................................. 3 8
---- ----
Total............................................. 120 89
---- ----
Net deferred income tax liabilities............... $(69) $(89)
==== ====
</TABLE>
7. RELATED-PARTY TRANSACTIONS
The following transactions occurred between the Company and certain related
parties:
a. Loans receivable from Company officers at December 31, 1995 and 1996
were $78,000 and $--, respectively. These loans were unsecured and
provided no set repayment terms.
b. Loans due from or payable to a party related to the Company's president
at December 31, 1995 and 1996 were as follows (in thousands):
<TABLE>
<CAPTION>
LOANS LOANS
RECEIVABLE PAYABLE
---------- -------
<S> <C> <C>
December 31, 1995........................................... $-- $43
December 31, 1996........................................... 17 --
</TABLE>
These loans were unsecured and noninterest-bearing. There were also no set
repayment terms.
F-66
<PAGE> 126
THE RED FOX COMPANIES OF NEW IBERIA, INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
c. Lease agreements between the Company and related parties as of December
31, 1994, 1995 and 1996 consisted of the following:
(1) The Company leases real estate from a party related to the
Company's president. The annual rent paid by the Company for 1994, 1995 and
1996 was $30,000, $30,000 and $30,000, respectively. In addition, rent for
the year ending December 31, 1997 in the amount of $27,000 was prepaid.
(2) The Company leases vehicles from a party related to the Company's
president. Rental amounts paid for vehicles in 1994, 1995 and 1996 were
$--, $7,000 and $25,000, respectively.
(3) The Company leases a vehicle from its president. The associated
rental amounts paid by the Company for 1994, 1995 and 1996 were $20,000,
$44,000 and $38,000, respectively.
d. The Company had sales to a company owned by a party related to the
Company's president during the year ended December 31, 1996 totaling $162,000.
8. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases certain equipment used in the normal course of its
operations under month-to-month lease agreements cancelable only by the Company.
The Company leases automobiles under operating leases which are
noncancelable for the first 24 months and, in certain cases, the first 48
months. Thereafter, the leases are on a month-to-month basis.
The Company leases office space under an operating lease which is
noncancelable for the first 120 months.
Approximate annual minimum lease payments under operating leases as of
December 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997........................................................ $ 45
1998........................................................ 45
1999........................................................ 38
2000........................................................ 31
2001........................................................ 30
Thereafter.................................................. 135
----
$324
====
</TABLE>
The Company expensed amounts related to these leases as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
--------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Building.................................................... $ 34 $ 38 $ 48
Vehicles.................................................... 12 28 49
Equipment................................................... 205 291 273
</TABLE>
F-67
<PAGE> 127
THE RED FOX COMPANIES OF NEW IBERIA, INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
9. SALES TO MAJOR CUSTOMERS
The customer base for the Company is primarily concentrated in the oil and
gas industry. The revenue earned from each customer varies from year to year
based on the contracts awarded. Sales to customers comprising 10 percent or more
of the Company's total revenue are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Customer A.................................................. 25.0% 76.3% --%
Customer B.................................................. 11.8 -- 10.9
Customer C.................................................. 11.5 -- --
Customer D.................................................. -- -- 49.4
</TABLE>
10. SUBSEQUENT EVENTS
The Company expects to enter into a definitive agreement with TransCoastal
Marine Services, Inc. ("TCMS"), pursuant to which all the outstanding shares of
the Company's common stock will be acquired for notes and shares of TCMS common
stock concurrently with the closing of the initial public offering of the common
stock of TCMS.
F-68
<PAGE> 128
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING
DESCRIBED IN THIS PROSPECTUS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION, IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................ 3
Risk Factors.............................. 9
The Company............................... 15
Use of Proceeds........................... 17
Dividend Policy........................... 17
Capitalization............................ 18
Dilution.................................. 19
Selected Financial Information............ 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 22
Business.................................. 34
Management................................ 43
Security Ownership of Certain Beneficial
Owners and Management................... 47
Certain Transactions...................... 48
Description of Capital Stock.............. 52
Shares Eligible for Future Sale........... 54
Underwriting.............................. 56
Legal Matters............................. 57
Experts................................... 57
Additional Information.................... 58
Index to Financial Statements............. F-1
</TABLE>
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
5,000,000 SHARES
COMMON STOCK
[TRANSCOASTAL MARINE SERVICES, INC. LOGO]
PROSPECTUS
JEFFERIES & COMPANY, INC.
JOHNSON RICE &
COMPANY L.L.C.
, 1997
<PAGE> 129
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses (other than
underwriting discounts and commissions) payable by the Registrant in connection
with the issuance and distribution of the securities being registered. All
amounts are estimates except for the fees payable to the SEC.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 27,879
NASD Filing Fee............................................. 9,700
NASDAQ Listing Fee.......................................... 36,875
Legal Fees and Expenses..................................... 400,000
Accounting Fees and Expenses................................ 400,000
Blue sky fees and expenses (including counsel fees)......... 5,000
Printing Costs.............................................. 225,000
Consulting fees............................................. 112,000
Transfer Agent and Registrar fees and expenses.............. 10,000
Miscellaneous............................................... 73,546
----------
Total............................................. $1,300,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation, as amended, and Bylaws
incorporate substantially the provisions of the Delaware General Corporation Law
("DGCL") providing for indemnification of directors and officers of the Company
against expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with any proceeding arising by reason of the
fact that such person is or was an officer or director of the Company or is or
was serving at the request of the Company as a director, officer or employee of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise.
As permitted by Section 102 of the DGCL, the Company's Certificate of
Incorporation, as amended, contains provisions eliminating a director's personal
liability for monetary damages to the Company and its stockholders arising from
a breach of a director's fiduciary duty except for liability (a) for any breach
of the director's duty of loyalty to the Company or its stockholders, (b) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under Section 174 of the DGCL, or (d) for any
transaction from which the director derived an improper personal benefit.
Section 145 of the DGCL provides generally that a person sued as a
director, officer, employee or agent of a corporation may be indemnified by the
corporation for reasonable expenses, including attorneys' fees, if in the case
of other than derivative suits such person has acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation (and, in the case of a criminal proceeding, had no
reasonable cause to believe that such person's conduct was unlawful). In the
case of a derivative suit, an officer, employee or agent of the corporation
which is not protected by the Certificate of Incorporation may be indemnified by
the corporation for reasonable expenses, including attorneys' fees, if such
person has acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, except that no
indemnification shall be made in the case of a derivative suit in respect of any
claim as to which an officer, employee or agent has been adjudged to be liable
to the corporation unless that person is fairly and reasonably entitled to
indemnity for proper expenses. Indemnification is mandatory in the case of a
director, officer, employee, or agent who is successful on the merits in defense
of a suit against such person.
The Company intends to purchase liability insurance policies covering
directors and officers in certain circumstances.
II-1
<PAGE> 130
Under Section of the Underwriting Agreement filed as Exhibit 1.1 to
this Registration Statement, the Underwriters have agreed to indemnify, under
certain conditions, the Company, its officers and directors, and persons who
control the Company, within the meaning of the Securities Act of 1933, as
amended, against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Set forth below is certain information concerning all sales of securities
by TCMS that were not registered under the Securities Act of 1933. The
description presented below gives effect to TCMS' 1,000-to-1 stock split on
August 8, 1997.
On March 24, 1997, TCMS issued and sold shares of Common Stock in the
amounts indicated in exchange for the indicated number of shares of common stock
of Red Fox International, Inc., a Louisiana corporation ("RFI Shares"): G. Darcy
Klug -- 300,000 shares in exchange for 300 RFI Shares; J&D Capital Investments,
L.C. -- 600,000 shares in exchange for 600 RFI Shares; and Beldon E. Fox,
Jr. -- 75,000 shares in exchange for 75 RFI Shares.
On March 24, 1997, TCMS issued and sold shares of Common Stock as follows:
Johnnie W. Domingue -- 75,000 shares for $75; Bill E. Stallworth -- 100,000
shares for $100.
On April 2, 1997, TCMS issued and sold 3,000 shares of Common Stock to
Stanley E. Rauhut for $3.
On April 25, 1997, TCMS issued and sold 100,000 shares of Common Stock to
Thad Smith for $100.
On July 15, 1997, TCMS issued and sold 3,000 shares of Common Stock to
Patrick Collins for $3.
The aggregate consideration TCMS will pay to acquire the Founding Companies
and certain related real estate consists of (i) approximately $85.7 million in
cash, (ii) $3.0 million in 8% notes payable over a ten-year term ending in 2007,
and (iii) 2,570,933 shares of Common Stock. TCMS will also assume up to $11.5
million of indebtedness of the Founding Companies and then repay or refinance
substantially all that indebtedness at or shortly after the closing of the
Acquisitions. In addition, the acquisition agreements for the RFCNI and CSI
Acquisitions provide for post-closing adjustments, which are to be determined
based on a multiple of estimated EBITDA of RFCNI and one of the entities
comprising CSI, payable in a combination of cash and shares of Common Stock. In
consideration for the acquisition of the Founding Companies, TCMS will issue and
sell the following securities: (i) 1,237,600 shares of Common Stock to four
shareholders of Woodson pursuant to a stock purchase agreement and three merger
agreements, each dated August 29, 1997; (ii) 533,333 shares of Common Stock to
three shareholders of CSI (one of which, Daniel N. Hargett, Sr., will become a
director of TCMS as of the closing of the Offering) pursuant to a stock purchase
agreement dated August 29, 1997; (iii) 600,000 shares of Common Stock to the
sole shareholder of HBH pursuant to a stock purchase agreement dated August 20,
1997, and (iv) 200,000 shares of Common Stock and a $3.0 million, 8% ten-year
promissory note payable by TCMS to the sole shareholder of RFCNI pursuant to a
merger agreement dated August 27, 1997.
The sales and issuances of the securities referenced above are exempt from
registration under the Securities Act pursuant to Section 4(2) thereof as
transactions not involving any public offering, with the recipients representing
their intentions to acquire the securities for their own accounts and not with a
view to the distribution thereof. In each case TCMS took steps to ensure that
the purchaser was acquiring securities for purposes of investment and not with a
view to distribution, including execution of an agreement by each purchaser
concerning such purchaser's investment intent. With regard to the sale of
securities to shareholders of the Founding Companies, TCMS believes that each
shareholder is an accredited investor and that such investor received full
disclosure of all material facts through a private offering memorandum provided
by TCMS.
See "Certain Transactions" for a discussion of the issuance of shares of
Common Stock in connection with the Acquisitions.
II-2
<PAGE> 131
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<S> <S>
1.1 -- Form of Underwriting Agreement.
3.1 -- Amended and Restated Certificate of Incorporation of
TCMS.
*3.2 -- Bylaws of TCMS.
4.1 -- Form of Certificate representing Common Stock.
4.2 -- Form of Share Exchange Agreement among TCMS, J&D Capital
Investments, L.C., James B. Thompson and Beldon E. Fox,
Jr.
*4.3 -- Form of Secured Promissory Note to be issued in the
acquisition of RFCNI.
5.1 -- Opinion of Chamberlain, Hrdlicka, White, Williams &
Martin.
8.1 -- Form of Opinion of Chamberlain, Hrdlicka, White, Williams
& Martin regarding certain tax matters concerning the
acquisition of Woodson Construction Company, Inc.
8.2 -- Form of Opinion of Chamberlain, Hrdlicka, White, Williams
& Martin regarding certain tax matters concerning the
acquisition of Kori Corporation.
8.3 -- Form of Opinion of Chamberlain, Hrdlicka, White, Williams
& Martin regarding certain tax matters concerning the
acquisition of EnviroSystems, Inc.
8.4 -- Form of Opinion of Chamberlain, Hrdlicka, White, Williams
& Martin regarding certain tax matters concerning the
acquisition of The Red Fox Companies of New Iberia, Inc.
*10.1 -- TCMS 1997 Stock Option Plan.
*10.2 -- Employment Agreement dated as of August 6, 1997, between
TCMS and Bill E. Stallworth.
*10.3 -- Employment Agreement dated as of August 6, 1997, between
TCMS and Thad Smith.
*10.4 -- Employment Agreement dated as of August 6, 1997, between
TCMS and Johnnie W. Domingue.
*10.5 -- Stock Repurchase Agreement dated as of March 24, 1997,
between TCMS and Bill E. Stallworth.
*10.6 -- Stock Repurchase Agreement dated as of April 25, 1997,
between TCMS and Thad Smith.
*10.7 -- Stock Repurchase Agreement dated as of March 24, 1997,
between TCMS and Johnnie W. Domingue.
10.8 -- Form of Employment Agreement between HBH, Inc. and H.
Daniel Hughes II.
10.9 -- Form of Employment Agreement between CSI Hydrostatic
Testers, Inc. and Daniel N. Hargett, Sr.
*10.10 -- Agreement for Consulting Services dated April 14, 1997,
between TCMS and Stallworth, Frankhouser & Associates, as
amended August 6, 1997.
*10.11 -- Employment Letter dated April 21, 1997, between TCMS and
Johnnie W. Domingue, as amended August 6, 1997.
10.12 -- Form of warrant issued to McFarland, Grossman & Company,
Inc.
10.13 -- Purchase and Sale Agreement dated as of August 28, 1997,
by and among TCMS, Laine Construction Company, Inc.,
Paula Woodson, Linda Woodson and Cheryl Woodson.
</TABLE>
II-3
<PAGE> 132
<TABLE>
<S> <C>
10.14 -- Agreement and Plan of Merger dated as of August 28, 1997,
by and among TCMS, Woodson Acquisition Corp., Woodson
Construction Company, Inc. and Louis Woodson.
10.15 -- Agreement and Plan of Merger dated August 28, 1997, by
and among TCMS, Kori Acquisition Corp., Kori Corporation,
Paula Woodson, Linda Woodson and Cheryl Woodson.
10.16 -- Agreement and Plan of Merger dated as of August 28, 1997,
by and among TCMS, Enviro Acquisition Corp.,
EnviroSystems, Inc., Paula Woodson, Linda Woodson and
Cheryl Woodson.
10.17 -- Purchase and Sale Agreement dated as of August 28, 1997,
among TCMS, CSI Hydrostatic Testers, Inc., Hargett
Mooring and Marine, Inc., Daniel N. Hargett, Sr., Yvette
Hargett and Richard Hargett.
10.18 -- Purchase and Sale Agreement dated as of August 20, 1997,
by and among TCMS, HBH, Inc. and the Succession of
Herbert D. Hughes.
10.19 -- Agreement and Plan of Merger dated as of August 27, 1997,
by and among TCMS, RNI Acquisition Corp., The Red Fox
Companies of New Iberia, Inc. and The Beldon E. Fox, Sr.
Grandchildren's Trust No. 1.
10.20 -- Form of Agreement to Purchase and Sell dated as of August
28, 1997, by and among TCMS and Linda Woodson, Cheryl
Woodson and Paula Woodson.
10.21 -- Agreement to Purchase and Sell dated as of August 20,
1997, by and between TCMS and the Succession of Herbert
D. Hughes.
10.22 -- Leasehold Purchase Agreement dated as of August 11, 1997,
by and between TCMS and The Beldon E. Fox, Sr.
Grandchildren's Trust No. 1.
10.23 -- Amendment and Restated Consulting and Financial Advisory
Services Agreement dated September 24, 1997, between TCMS
and J&D Capital Investments, L.C.
21.1 -- List of Subsidiaries of the Company.
23.1 -- Consent of Deloitte & Touche LLP.
23.2 -- Consent of Darnall, Sikes & Frederick.
23.3 -- Consent of Arthur Andersen LLP.
23.4 -- Consent of Chamberlain, Hrdlicka, White, Williams &
Martin (included in Exhibit 5.1).
*23.5 -- Consent of H. Daniel Hughes II to be named as a director.
*23.6 -- Consent of Daniel N. Hargett, Sr. to be named as a
director.
23.7 -- Consent of Nathan M. Avery to be named as director.
27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed.
(b) Financial Statement Schedules
All schedules are omitted because they are not applicable or because the
required information is contained in the Financial Statements or Notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event
II-4
<PAGE> 133
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) That for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
(2) That for the purposes of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(3) To provide to the Underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to
each purchaser.
II-5
<PAGE> 134
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas
on October 8, 1997.
TRANSCOASTAL MARINE SERVICES, INC.
By: /s/ BILL E. STALLWORTH
----------------------------------
Bill E. Stallworth, Chairman of
the Board of Directors and Chief
Executive Officer
Each individual whose signature appears below constitutes and appoints Bill
E. Stallworth, Thad Smith and Johnnie W. Domingue, and each of them, his true
and lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement and any subsequent registration statements filed
by the Registrant pursuant to Rule 462(b) of the Securities Act of 1933, which
relates to this Registration Statement, and to file same, with all exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that such attorneys-in-fact and agents, or his or their substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ BILL E. STALLWORTH Chairman of the Board of October 8, 1997
- --------------------------------------------------- Directors, and Chief Executive
Bill E. Stallworth Officer (Principal Executive
Officer)
/s/ THAD SMITH President, Chief Operating October 8, 1997
- --------------------------------------------------- Officer and Director
Thad Smith
/s/ JOHNNIE W. DOMINGUE Senior Vice President, Chief October 8, 1997
- --------------------------------------------------- Financial Officer, Treasurer
Johnnie W. Domingue and Secretary (Principal
Financial and Accounting
Officer)
/s/ JEAN SAVOY Director October 8, 1997
- ---------------------------------------------------
Jean Savoy
/s/ PATRICK B. COLLINS Director October 8, 1997
- ---------------------------------------------------
Patrick B. Collins
/s/ CLIFFORD E. MCFARLAND Director October 8, 1997
- ---------------------------------------------------
Clifford E. McFarland
/s/ D. GLENN RICHARDSON Director October 8, 1997
- ---------------------------------------------------
D. Glenn Richardson
</TABLE>
II-6
<PAGE> 135
INDEX TO EXHIBITS
<TABLE>
<S> <S>
1.1 -- Form of Underwriting Agreement.
3.1 -- Amended and Restated Certificate of Incorporation of
TCMS.
*3.2 -- Bylaws of TCMS.
4.1 -- Form of Certificate representing Common Stock.
4.2 -- Form of Share Exchange Agreement among TCMS, J&D Capital
Investments, L.C., James B. Thompson and Beldon E. Fox,
Jr.
*4.3 -- Form of Secured Promissory Note to be issued in the
acquisition of RFCNI.
5.1 -- Opinion of Chamberlain, Hrdlicka, White, Williams &
Martin.
8.1 -- Form of Opinion of Chamberlain, Hrdlicka, White, Williams
& Martin regarding certain tax matters concerning the
acquisition of Woodson Construction Company, Inc.
8.2 -- Form of Opinion of Chamberlain, Hrdlicka, White, Williams
& Martin regarding certain tax matters concerning the
acquisition of Kori Corporation.
8.3 -- Form of Opinion of Chamberlain, Hrdlicka, White, Williams
& Martin regarding certain tax matters concerning the
acquisition of EnviroSystems, Inc.
8.4 -- Form of Opinion of Chamberlain, Hrdlicka, White, Williams
& Martin regarding certain tax matters concerning the
acquisition of The Red Fox Companies of New Iberia, Inc.
*10.1 -- TCMS 1997 Stock Option Plan.
*10.2 -- Employment Agreement dated as of August 6, 1997, between
TCMS and Bill E. Stallworth.
*10.3 -- Employment Agreement dated as of August 6, 1997, between
TCMS and Thad Smith.
*10.4 -- Employment Agreement dated as of August 6, 1997, between
TCMS and Johnnie W. Domingue.
*10.5 -- Stock Repurchase Agreement dated as of March 24, 1997,
between TCMS and Bill E. Stallworth.
*10.6 -- Stock Repurchase Agreement dated as of April 25, 1997,
between TCMS and Thad Smith.
*10.7 -- Stock Repurchase Agreement dated as of March 24, 1997,
between TCMS and Johnnie W. Domingue.
10.8 -- Form of Employment Agreement between HBH, Inc. and H.
Daniel Hughes II.
10.9 -- Form of Employment Agreement between CSI Hydrostatic
Testers, Inc. and Daniel N. Hargett, Sr.
*10.10 -- Agreement for Consulting Services dated April 14, 1997,
between TCMS and Stallworth, Frankhouser & Associates, as
amended August 6, 1997.
*10.11 -- Employment Letter dated April 21, 1997, between TCMS and
Johnnie W. Domingue, as amended August 6, 1997.
10.12 -- Form of warrant issued to McFarland, Grossman & Company,
Inc.
10.13 -- Purchase and Sale Agreement dated as of August 28, 1997,
by and among TCMS, Laine Construction Company, Inc.,
Paula Woodson, Linda Woodson and Cheryl Woodson.
</TABLE>
<PAGE> 136
<TABLE>
<S> <C>
10.14 -- Agreement and Plan of Merger dated as of August 28, 1997,
by and among TCMS, Woodson Acquisition Corp., Woodson
Construction Company, Inc. and Louis Woodson.
10.15 -- Agreement and Plan of Merger dated August 28, 1997, by
and among TCMS, Kori Acquisition Corp., Kori Corporation,
Paula Woodson, Linda Woodson and Cheryl Woodson.
10.16 -- Agreement and Plan of Merger dated as of August 28, 1997,
by and among TCMS, Enviro Acquisition Corp.,
Envirosystems, Inc., Paula Woodson, Linda Woodson and
Cheryl Woodson.
10.17 -- Purchase and Sale Agreement dated as of August 28, 1997,
among TCMS, CSI Hydrostatic Testers, Inc., Hargett
Mooring and Marine, Inc., Daniel N. Hargett, Sr., Yvette
Hargett and Richard Hargett.
10.18 -- Purchase and Sale Agreement dated as of August 20, 1997,
by and among TCMS, HBH, Inc. and the Succession of
Herbert D. Hughes.
10.19 -- Agreement and Plan of Merger dated as of August 27, 1997,
by and among TCMS, RNI Acquisition Corp., The Red Fox
Companies of New Iberia, Inc. and The Beldon E. Fox, Sr.
Grandchildren's Trust No. 1.
10.20 -- Form of Agreement to Purchase and Sell dated as of August
28, 1997, by and among TCMS and Linda Woodson, Cheryl
Woodson and Paula Woodson.
10.21 -- Agreement to Purchase and Sell dated as of August 20,
1997, by and between TCMS and the Succession of Herbert
D. Hughes.
10.22 -- Leasehold Purchase Agreement dated as of August 11, 1997,
by and between TCMS and The Beldon E. Fox, Sr.
Grandchildren's Trust No. 1.
10.23 -- Amendment and Restated Consulting and Financial Advisory
Services Agreement dated September 24, 1997, between TCMS
and J&D Capital Investments, L.C.
21.1 -- List of Subsidiaries of the Company.
23.1 -- Consent of Deloitte & Touche LLP.
23.2 -- Consent of Darnall, Sikes & Frederick.
23.3 -- Consent of Arthur Andersen LLP.
23.4 -- Consent of Chamberlain, Hrdlicka, White, Williams &
Martin (included in Exhibit 5.1).
*23.5 -- Consent of H. Daniel Hughes II to be named as a director.
*23.6 -- Consent of Daniel N. Hargett, Sr. to be named as a
director.
23.7 -- Consent of Nathan M. Avery to be named as a director.
27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 1.1
TRANSCOASTAL MARINE SERVICES, INC.
(A DELAWARE CORPORATION)
____________ SHARES OF COMMON STOCK
UNDERWRITING AGREEMENT
October ___, 1997
JEFFERIES & COMPANY, INC.
JOHNSON RICE & COMPANY, L.L.C.
As Representatives of
the Several Underwriters
c/o Jefferies & Company, Inc.
650 Fifth Avenue, 4th Floor
New York, New York 10019
Attn: Syndicate Department
Dear Sirs:
TransCoastal Marine Services, Inc., a Delaware corporation (the
"Company"), hereby confirms its agreement with you (this "Agreement"), as
representatives (the "Representatives") of the underwriters named in Schedule I
hereto (the "Underwriters"), with respect to the sale by the Company and the
purchase by the Underwriters, acting severally and not jointly, of an aggregate
of __________ shares (the "Firm Shares") of the Company's common stock, par
value $.001 per share ("Common Stock"). The Company also has agreed to sell up
to __________ shares (the "Additional Shares") of Common Stock to cover over-
allotments, if any. The Firm Shares and the Additional Shares are hereinafter
sometimes collectively referred to as the "Shares."
You have advised us that the Underwriters desire to purchase the
Shares and that the Underwriters propose to make a public offering of the
Shares on the terms set forth in the Prospectus referred to below as soon as
you deem advisable after the Registration Statement referred to below becomes
effective.
The terms that follow, when used in this Agreement, shall have the
meanings indicated. "Preliminary Prospectus" shall mean any prospectus subject
to completion referred to in
<PAGE> 2
Section 1(a)(i) below and any preliminary prospectus included in the
Registration Statement on the date that the Registration Statement becomes
effective (the "Effective Date") that omits Rule 430A Information (as defined
below). "Registration Statement" shall mean the registration statement referred
to in Section 1(a)(i) below, including all exhibits thereto, as amended at the
Representation Date (as defined below) (or, if not effective at the
Representation Date, in the form in which it shall become effective) and, in
the event any post-effective amendment thereto becomes effective prior to the
Firm Shares Closing Date (as defined in Section 2(c) hereof), shall also mean
such registration statement as so amended. Any registration statement filed
pursuant to Rule 462(b) (as defined below) of the Act Regulations (as defined
below) is herein referred to as the "Rule 462(b) Registration Statement," and
after such filing the term "Registration Statement" shall include the Rule
462(b) Registration Statement. Such term shall also include Rule 430A
Information deemed to be included therein at the Effective Date as provided by
Rule 430A (as defined below). The final prospectus constituting a part of the
Registration Statement (including the Rule 430A Information), in the form first
furnished to the Underwriters for use in the offering of the Shares, as from
time to time amended or supplemented, is hereinafter referred to as the
"Prospectus," except that if any revised prospectus shall be provided to the
Underwriters by the Company that differs from the prospectus on file at the
Securities and Exchange Commission (the "Commission") at the Effective Date
(whether or not such revised prospectus is required to be filed by the Company
pursuant to Rule 424 of the Act Regulations), the term "Prospectus" shall refer
to each such revised prospectus from and after the time it is first provided to
the Underwriters for such use. For purposes of this Agreement, all references
to the Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment of or supplement to any of the foregoing shall include the copy
filed with the Commission pursuant to the Commission's Electronic Data
Gathering, Analysis and Retrieval ("EDGAR") system. "Rule 158," "Rule 424,"
"Rule 430A," "Rule 434" and "Rule 462(b)" refer to such rules under the
Securities Act of 1933, as amended (the "Act"; and the rules and regulations
under the Act are referred to as the "Act Regulations"). "Rule 430A
Information" means information with respect to the Shares and the offering
thereof permitted to be omitted from the Registration Statement when it becomes
effective pursuant to Rule 430A. The "Acquisitions" shall refer to the
Company's acquisition, on the Firm Shares Closing Date, of the entities
indicated as "Founding Companies" in Schedule II hereto (the "Founding
Companies").
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) The Company represents and warrants to the Underwriters as of
the date hereof (such date being referred to as the "Representation Date") and
as of the Closing Date (for purposes of this Section 1(a), the "Closing Date"
shall refer to the Firm Shares Closing Date and, if different, any Additional
Shares Closing Date) as follows:
(i) The Company has filed with the Commission a
registration statement on Form S-1 (Registration No. ________),
including a related prospectus subject to completion, and one or more
amendments thereto, each of which has previously been furnished to the
Underwriters, for the registration under the Act of the offering and
sale of the Shares. The Company will file with the Commission either
(A) prior to effectiveness of such registration
-2-
<PAGE> 3
statement, a further amendment to such registration statement
(including the form of final prospectus) or (B) after effectiveness of
such registration statement, a final prospectus in accordance with
Rules 430A and 424(b) or Rule 434. The Company has included in such
registration statement, as amended at the Effective Date, all
information (other than Rule 430A Information in the case of clause
(B)) required by the Act and the Act Regulations to be included in the
prospectus with respect to the Shares and the offering thereof. As
filed, such amendment and form of final prospectus, or such final
prospectus, shall contain all Rule 430A Information, together with all
other such required information, with respect to the Shares and the
offering thereof and, except to the extent the Underwriters shall
agree in writing to a modification, shall be in all substantive
respects in the form furnished to the Underwriters prior to the date
hereof.
(ii) At the Effective Date, at the time of the
effectiveness of any Rule 462(b) Registration Statement and any
post-effective amendment thereto and on the Closing Date, the
Registration Statement did and will comply in all material respects
with the applicable requirements of the Act and the Act Regulations
and did not and will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading;
and, when the Prospectus is first filed (if required) in accordance
with Rule 424(b) or Rule 434, when any amendment or supplement thereto
is filed with the Commission, when the Prospectus or any amendment or
supplement thereto is first provided to the Underwriters for use and
on the Closing Date, the Prospectus and any amendment or supplement
thereto will comply in all material respects with the applicable
requirements of the Act and the Act Regulations and will not include
any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Each
Preliminary Prospectus and the Prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Act, complied when so
filed in all material respects with the Act Regulations and did not
contain an untrue statement of a material fact and did not omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Notwithstanding the
foregoing, the Company makes no representation or warranty with
respect to any information contained in or omitted from the
Registration Statement or the Prospectus or any related preliminary
prospectus or any amendment thereof or supplement thereto in reliance
upon and in conformity with the information provided in writing to the
Company by or on behalf of the Underwriters through you, expressly for
use in the Registration Statement or the Prospectus (which information
is identified in Section 6(b) of this Agreement). The Commission has
not issued any order preventing or suspending the use of any
Preliminary Prospectus. Each Preliminary Prospectus and the Prospectus
delivered to the Underwriters for use in connection with the offering
of the Shares was identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T of the Commission.
-3-
<PAGE> 4
(iii) The Company is a corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware, with full corporate power and authority to own, lease and
operate its properties and to conduct its business as now being
conducted and as proposed to be conducted as described in the
Registration Statement and the Prospectus, and is duly registered and
qualified to transact business and is in good standing as a foreign
corporation in each jurisdiction where the character or location of
its properties (whether owned or leased) or the nature or conduct of
its business makes such registration or qualification necessary,
except where the failure to so register or qualify would not,
individually or in the aggregate, have a Material Adverse Effect. As
used in this Agreement, the term "Material Adverse Effect" shall mean
an adverse effect on the condition (financial or other), business,
business prospects, properties, net worth or results of operations of
the Company or any of the Subsidiaries (as hereinafter defined) that
is or would be material to the Company and the Subsidiaries, taken as
a whole, whether or not occurring in the ordinary course of business.
(iv) All the Company's subsidiaries, including the
Founding Companies, are listed on Schedule II hereto (collectively,
the "Subsidiaries"). Each of the Subsidiaries is a corporation duly
organized and validly existing in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power and
authority to own, lease and operate its properties and to conduct its
business as now being conducted and as proposed to be conducted as
described in the Registration Statement and the Prospectus, and is
duly registered and qualified to transact business and is in good
standing as a foreign corporation in each jurisdiction where the
character or location of its properties (whether owned or leased) or
the nature or conduct of its business makes such registration or
qualification necessary, except where the failure so to register or
qualify would not, individually or in the aggregate, have a Material
Adverse Effect. The information set forth in Schedule II hereto with
respect to the Subsidiaries is true and correct. Except for the shares
of capital stock of each of the Subsidiaries, neither the Company nor
any of the Subsidiaries owns any shares of stock or any other
securities of any corporation or has any equity interest in any firm,
partnership, association or other entity, other than as reflected in
the consolidated financial statements included in the Registration
Statement and the Prospectus.
(v) Each of the Company and the Subsidiaries has all
necessary authorizations, approvals, franchises, orders, licenses,
rights-of-way, operating rights, easements, certificates and permits
of and from, and has made all declarations and filings with, all
regulatory or governmental officials and bodies (whether foreign or
domestic), all self-regulatory organizations and all courts and other
tribunals ("Permits") to own or lease its properties and to conduct
its business as now being conducted and as proposed to be conducted as
described in the Registration Statement and the Prospectus, except
where failure to have obtained or made the same would not have,
individually or in the aggregate, a Material Adverse Effect, and
neither the Company nor any of the Subsidiaries has received any
notice of proceedings relating to the revocation or modification of
any such Permits, if the failure to be so licensed or approved or if
the subject of an unfavorable decision, ruling
-4-
<PAGE> 5
or finding would have, individually or in the aggregate, a Material
Adverse Effect. The Company and each of the Subsidiaries have
fulfilled and performed all their respective current material
obligations with respect to such Permits, and no event has occurred
that allows, or after notice or lapse of time, or both, would allow,
revocation or termination thereof or result in any other material
impairment of the rights of the holder of any such Permit; and such
Permits contain no restrictions that are materially burdensome to the
Company and the Subsidiaries. The Company and each of the Subsidiaries
are in compliance with all applicable laws, rules, regulations, orders
and consents, the violation of which could, individually or in the
aggregate, have a Material Adverse Effect. The property and business
of the Company and the Subsidiaries conform in all material respects
to the descriptions thereof contained in the Prospectus and the
Registration Statement.
(vi) All of the Company's authorized and outstanding
capital stock has been duly authorized and validly issued, is fully
paid and nonassessable and is free of and was not issued in violation
of any preemptive or similar rights. The Shares have been duly and
validly authorized and, when issued and delivered to the Underwriters
against payment therefor in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable and free of and will not
have been issued in violation of any preemptive or similar rights
created by statute, agreement or otherwise. All corporate action
required to be taken by the Company for the authorization, issuance
and sale of the Shares has been duly and validly taken. The
capitalization of the Company conforms to the description thereof and
the statements made with respect thereto in the Registration Statement
and the Prospectus as of the date set forth therein. Each class or
series of stock of the Company conforms in all material respects to
the description thereof in the Registration Statement and the
Prospectus. Except as described in the Registration Statement and the
Prospectus, (A) there are no outstanding securities convertible into
or exchangeable for, and no outstanding options, warrants or other
rights to purchase, any shares of the capital stock of the Company,
nor any agreements or commitments to issue any of the same and (B)
there are no preemptive or other rights to subscribe for or to
purchase, and no restrictions upon the voting or transfer of, any
capital stock of the Company pursuant to the Company's certificate of
incorporation or bylaws or any agreement or other instrument to which
the Company is a party. There is no holder of any securities of the
Company or any other person who has the right, contractual or
otherwise, to cause the Company to sell or otherwise issue to him or
her, or permit him or her to underwrite the sale of, any of the
Shares. No person has any right to the registration of any security of
the Company by reason of the filing of the Registration Statement with
the Commission or the consummation of the transactions contemplated
hereby.
(vii) All the outstanding shares of capital stock of each
Subsidiary have been duly authorized and are validly issued, fully
paid and nonassessable and were not issued in violation of or subject
to any preemptive or similar rights. Except as otherwise set forth in
the Registration Statement and the Prospectus, all outstanding shares
of capital stock of the Subsidiaries (after giving effect to the
Acquisitions) will, as of the Closing Date, be owned
-5-
<PAGE> 6
by the Company, directly or indirectly through another Subsidiary,
free and clear of any security interests, pledges, liens, charges,
encumbrances, equities or other claims.
(viii) The Company has all requisite power and authority to
enter into this Agreement, to carry out the provisions and conditions
hereof and to issue, sell and deliver the Shares to the Underwriters
as provided herein. This Agreement has been duly authorized, executed
and delivered by the Company and constitutes a legal, valid and
binding agreement of the Company, enforceable against it in accordance
with the terms hereof, except as that enforceability may be subject to
the effect of (A) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally
and (B) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). The
Company has all requisite power and authority to enter into each of
the agreements pursuant to which an Acquisition is being consummated
(collectively, the "Acquisition Agreements" and, together with the
related agreements to be entered into in connection with the closings
of the Acquisitions, the "Transaction Agreements"), and to carry out
the provisions and conditions thereof. Each Founding Company and each
shareholder of each Founding Company (collectively, the "Founding
Company Shareholders") has all requisite power and authority to enter
into each Transaction Agreement to which he, she or it is (or, as of
the Closing Date, will be) a party and to perform his, her or its
obligations thereunder. The execution and delivery of, and the
performance by the Company, the Founding Companies and the Founding
Company Shareholders of their respective obligations under, the
Transaction Agreements to which they are parties, respectively, have
been duly and validly authorized by the Company, the Founding
Companies and the Founding Company Shareholders and each Transaction
Agreement has been (or, in the case of any such Transaction Agreement
to be entered into between the date of this Agreement and the time of
the deliveries to be made under this Agreement on the Closing Date,
will, as of the Closing Date, be) duly executed and delivered by the
Company and each Founding Company and/or Founding Company Shareholders
which is a party to such agreement, and constitutes (or, in the case
of any such Transaction Agreement to be entered into between the date
of this Agreement and the time of the deliveries to be made under this
Agreement on the Closing Date, will, as of the Closing Date,
constitute) the legal, valid and binding agreement of the Company and
each such Founding Company and/or Founding Company Shareholder,
enforceable in accordance with its terms, except as that
enforceability may be subject to the effect of (A) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and (B) general principles
of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(ix) Neither the execution, delivery or performance of
this Agreement or any of the Transaction Agreements, the offer,
issuance, sale or delivery of the Shares nor the consummation of the
transactions contemplated by this Agreement or any of the Transaction
Agreements (A) requires the consent, approval, authorization or order
of, or registration or filing with, any court or governmental or
regulatory agency or body, except such as have
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<PAGE> 7
been obtained under the Act and such as may be required under the
securities or "blue sky" laws ("Blue Sky" laws) of any jurisdiction in
connection with the purchase and distribution of the Shares by the
Underwriters or such as may be required by the National Association of
Securities Dealers, Inc. (the "NASD") and such other approvals as have
been obtained, (B) conflicts or will conflict with, result in a breach
of, or constitute a default under the terms of any indenture,
agreement, lease or other instrument to which the Company or any of
the Founding Companies or Founding Company Shareholders is a party or
by which any of them or any of their respective properties may be
bound, or will result in the creation or imposition of any lien,
charge or encumbrance on any property or assets of the Company or any
of the Subsidiaries pursuant to the terms of any agreement or
instrument to which any of them is a party or by which any of them may
be bound or to which any of the property or assets of any of them is
subject, (C) conflicts or will conflict with or violate any law,
order, statute, rule, regulation, consent or memorandum of
understanding applicable to the Company or any of the Founding
Companies or Founding Company Shareholders of any court, regulatory
body, administrative agency, governmental body or arbitrator having
jurisdiction over the Company or any of the Founding Companies or
Founding Company Shareholders (in the case of (B) or (C) above, where
such conflict, breach, default or violation, individually or in the
aggregate, would have a Material Adverse Effect) or (D) will conflict
with or violate the certificate or articles of incorporation or bylaws
of the Company or any Subsidiary.
(x) Each of the Company and the Subsidiaries has good and
marketable title to all real and personal property described in the
Registration Statement and Prospectus as being owned by it, in each
case free and clear of all security interests, liens, charges,
encumbrances, equities, restrictions and claims, except such as are
described in the Registration Statement and Prospectus or such as are
not burdensome and do not interfere with the use or proposed use of
the property or the conduct of the business of the Company or any of
the Subsidiaries in a manner that is or would be material to the
business of the Company or any of the Subsidiaries. Each of the
Company and the Subsidiaries has valid, subsisting and enforceable
leases for the properties described in the Registration Statement and
the Prospectus as being leased by it.
(xi) Each of the Company and the Subsidiaries owns or
possesses valid and enforceable rights to use all patents, trademarks,
trademark registrations, service marks, service mark registrations,
trade names, copyrights, licenses, inventions and other rights
necessary for the conduct of its business as described in the
Registration Statement and the Prospectus, and neither the Company nor
any of the Subsidiaries (A) has received a notice of, or knows of any
basis for, any conflict with the asserted rights of others with
respect to any of the foregoing or (B) has knowledge of any
infringement by any other person or entity with respect to any of the
foregoing.
(xii) Arthur Andersen LLP, Deloitte & Touche LLP and
Darnell, Sikes & Frederick, who have certified financial statements
included in the Registration Statement and
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<PAGE> 8
the Prospectus, are independent public accountants with respect to the
Company and the Subsidiaries as required by the Act and the Act
Regulations.
(xiii) The historical financial statements and related notes
included in the Registration Statement and the Prospectus present
fairly the financial position of each of the Company and the Founding
Companies, on the basis stated in the Registration Statement, at the
respective dates thereof and the results of operations, shareholders'
equity and cash flows of the Company and each of the Founding
Companies for the respective periods covered thereby; and such
financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis
throughout the entire periods involved, except as otherwise disclosed
in the Registration Statement and the Prospectus. The selected
financial information included in the Registration Statement or the
Prospectus (and any amendment or supplement thereto) presents fairly
the information shown therein and has been compiled on a basis
consistent with that of the audited financial statements included
therein and the books and records of the Company and the applicable
Founding Companies. The pro forma combined financial statements of
the Company and the Subsidiaries contained in the Registration
Statement and in the Prospectus present fairly the information shown
therein, have been prepared in accordance with the applicable
provisions of Article 11 of Regulation S-X promulgated by the
Commission with respect to pro forma financial statements and have
been properly compiled on the pro forma bases described therein and,
in the opinion of the Company, the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances
referred to therein; and the other financial and statistical
information and data included in the Registration Statement and the
Prospectus are accurately presented and prepared on a basis consistent
with such financial statements and the books and records of the
Company and the Subsidiaries. No other financial statements or
schedules of the Company and the Founding Companies, other than the
Financial Data Schedule required by Item 601(c) of Regulation S-K, are
required by the Act or the Act Regulations to be included in the
Registration Statement or Prospectus.
(xiv) As of the date of the Prospectus, neither the Company
nor any of the Subsidiaries is currently planning any probable
acquisitions (other than the Acquisitions) for which disclosure of pro
forma financial information in the Prospectus is required by the Act.
(xv) Neither the Company nor any of the Subsidiaries is in
violation of its certificate or articles of incorporation or bylaws or
other organizational documents. Neither the Company nor any Subsidiary
is, nor with the passage of time or the giving of notice or both would
be, in violation of any law, ordinance or administrative or
governmental rule or regulation applicable to the Company or any of
the Subsidiaries, or of any franchise, license, permit, judgment,
order or decree of any court or governmental agency or body or of any
arbitrator having jurisdiction over the Company or any of the
Subsidiaries, or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any
mortgage, loan agreement, note, bond, debenture, credit agreement or
any
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<PAGE> 9
other evidence of indebtedness or in any agreement, contract,
indenture, lease or other instrument to which the Company or any of
the Subsidiaries is a party or by which it may be bound, or to which
any of the property or assets of the Company or any of the
Subsidiaries is subject, the effect of which violation or default in
performance or observance would, individually or in the aggregate,
have a Material Adverse Effect.
(xvi) There is no action, suit or proceeding pending before
or by any court, arbitrator or governmental agency or body (whether
foreign or domestic) or, to the best knowledge of the Company,
threatened against the Company or any of the Subsidiaries or to which
any of their respective properties is subject (A) that is required to
be described in the Registration Statement or the Prospectus but is
not described as required or (B) that, if adversely determined, would,
individually or in the aggregate, have a Material Adverse Effect.
There is no agreement, contract, indenture, lease or other document or
instrument that is required to be described in the Registration
Statement or Prospectus or to be filed as an exhibit to the
Registration Statement that is not described or filed as required by
the Act or the Act Regulations. Except as disclosed in the
Registration Statement and the Prospectus, there are no business
relationships or related party transactions required to be disclosed
therein by Item 404 of Regulation S-K of the Commission.
(xvii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus (or any
amendment or supplement thereto), except as otherwise specifically
stated therein: (A) neither the Company nor any of the Subsidiaries
has (1) issued any securities, (2) incurred any material liability or
obligation, direct or contingent, (3) entered into any transaction not
in the ordinary course of business that is material to the Company and
the Subsidiaries, taken as a whole, (4) entered into any transaction
with an affiliate of the Company or any of the Subsidiaries (as the
term "affiliate" is defined in Rule 405 of the Act Regulations) that
would be required to be disclosed in the Prospectus or the
Registration Statement or (5) declared or paid any dividend on its
capital stock or made any other distribution to its equity holders;
(B) there has not been any material change in the capital stock or
other equity, or material increase in the short-term or long-term
debt, of the Company or any of the Subsidiaries; and (C) there has
been no change or development with respect to the financial condition,
business or business prospects of the Company or any of the
Subsidiaries, whether or not arising in the ordinary course of
business, that, individually or in the aggregate, would result in, or
may reasonably be expected to result in, a Material Adverse Effect.
(xviii) Neither the Company nor any Subsidiary is involved in
any labor dispute and, to the best knowledge of the Company, no such
dispute is threatened. Neither the Company nor any of the Subsidiaries
has ever been a party to a collective bargaining agreement. There is
no significant unfair labor practice complaint pending against the
Company or any of the Subsidiaries, or, to the best knowledge of the
Company, threatened against any of them, before the National Labor
Relations Board or any state or local labor relations board. The
Company is not aware of any existing or imminent labor disturbance of
the employees
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<PAGE> 10
of any of its or any Subsidiary's principal suppliers, customers or
contractors, which, individually or in the aggregate, would result in
a Material Adverse Effect.
(xix) Neither the Company nor any Subsidiary nor, to the
best knowledge of the Company, any employee or agent of the Company or
any Subsidiary has made any payment of funds of the Company or any
Subsidiary or received or retained any funds in violation of any
statute, law, rule or regulation, which payment, receipt or retention
is of a character required to be disclosed in the Prospectus. Neither
the Company nor any Subsidiary has made any payment or engaged in any
arrangement prohibited by the Foreign Corrupt Practices Act of 1977,
as amended. The Company maintains a system of internal accounting
controls which is sufficient to provide reasonable assurances that (A)
transactions are executed in accordance with management's general or
specific authorization, (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain
accountability for assets, (C) access to assets is permitted only in
accordance with management's general or specific authorization and (D)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(xx) The Company and each Subsidiary have (A) filed in a
timely manner (or obtained extensions with respect thereto) all
federal, state, local and foreign tax returns that are required to be
filed by them, which returns are complete and correct in all material
respects and, to the best knowledge of the Company, are not the
subject of any audit proceedings, and (B) paid all taxes shown on such
returns and all assessments with respect thereto to the extent the
same have become due. Neither the Company nor any of its Subsidiaries
will incur any federal or state income tax liability by reason of any
of the Acquisitions.
(xxi) The Company and each Subsidiary maintain insurance,
which is in full force and effect, of the types and in the amounts
customary in their respective businesses. Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or
to obtain similar coverage from insurers at a cost that would not have
a Material Adverse Effect.
(xxii) The Company and each of the Subsidiaries (A) have
conducted their respective businesses in compliance with all
applicable federal, state, local and foreign laws and regulations,
including, without limitation, those relating to the protection of
human health and safety, including, without limitation, those
promulgated under the Occupational Safety and Health Act
(collectively, "OSHA Laws") and those relating to the protection of
the environment or to hazardous or toxic substances or wastes,
pollutants or contaminants (collectively, "Environmental Laws"), (B)
have received all permits, licenses or other approvals required of
them under applicable OSHA Laws or Environmental Laws to conduct their
respective businesses and (C) are in compliance with all terms and
conditions of any
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<PAGE> 11
such permit, license or approval, except in the case of clauses (A),
(B) and (C) above where such noncompliance with applicable laws,
failure to receive required permits, licenses or approvals or failure
to comply with the terms and conditions of such permits, licenses or
approvals would not, individually or in the aggregate, have a Material
Adverse Effect. Except as set forth in the Registration Statement and
the Prospectus, there is no material claim under any OSHA Law or
Environmental Law, including common law, pending or threatened against
the Company or any of the Subsidiaries and, to the best knowledge of
the Company, there are no past or present actions, activities,
circumstances, events or incidents, including, without limitation,
releases of any material into the environment, that would reasonably
be expected to form the basis of any material claim against the
Company or any of the Subsidiaries.
(xxiii) In connection with the offering of the Shares
contemplated hereby, the Company has conducted a review of the effect
of Environmental Laws on the business, operations and properties of
the Company and the Subsidiaries in the course of which it has
identified and evaluated associated costs and liabilities (including,
without limitation, any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental Laws
or any permit, license or approval, any related constraints on
operating activities and any potential liabilities to third parties).
On the basis of such review, the Company has concluded that such
associated costs and liabilities would not, individually or in the
aggregate, result in a Material Adverse Effect or any development
involving a prospective Material Adverse Effect.
(xxiv) The Company has not distributed and, prior to the
later to occur of (A) the Closing Date or (B) completion of the
distribution of the Shares, will not distribute any offering material
in connection with the offering and sale of the Shares other than the
Registration Statement, a Preliminary Prospectus, the Prospectus or
other materials, if any, permitted by the Act.
(xxv) The Company is not, and upon the issuance and sale of
the Shares as herein contemplated and the application of the net
proceeds therefrom as described in the Prospectus will not be, an
"investment company" or an entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of
1940, as amended.
(xxvi) The Shares have been duly approved for quotation on
the Nasdaq National Market and the Common Stock has been duly
registered under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(b) Any certificate signed by any officer of the Company delivered
to the Underwriters or to counsel for the Underwriters pursuant to the terms of
this Agreement shall be deemed a representation and warranty by the Company
to each Underwriter as to the matters covered thereby.
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<PAGE> 12
SECTION 2. SALE AND DELIVERY TO THE UNDERWRITERS: CLOSING.
(a) Subject to the terms and conditions set forth herein, the
Company agrees to issue and sell to each Underwriter, severally and not
jointly, and, on the basis of the representations and warranties of the Company
herein contained and subject to the terms and conditions herein set forth, each
Underwriter agrees, severally and not jointly, to purchase from the Company, at
a purchase price of $_____ per share (the "Initial Price"), the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule I hereto
plus any additional number of Shares which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 8 hereof (subject
to such adjustments as you may make to avoid fractional shares). The Company
will have no obligation to sell the Underwriters any of the Firm Shares
hereunder unless the Underwriters purchase all of the Firm Shares hereunder.
(b) The Company hereby grants to the Underwriters an option to
purchase all or any part of the Additional Shares at the Initial Price. On the
basis of the representations and warranties of the Company herein contained and
subject to the terms and conditions herein set forth, upon any exercise of such
option, each Underwriter shall, severally and not jointly, purchase from the
Company such number of Additional Shares which bears the same ratio to the
aggregate number of Additional Shares being purchased as the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule I hereto (or
such number increased as provided in Section 8 hereof) bears to __________
(subject to such adjustments as you may make to avoid fractional shares). Such
option may be exercised only to cover over-allotments in the sale of the Firm
Shares by the Underwriters and may be exercised in whole or in part at any time
on or before 12:00 noon, New York City time, on the business day before the
Firm Shares Closing Date (as hereinafter defined), and thereafter from time to
time within 30 days after the date of the Prospectus, in each case upon written
or telegraphic notice, or verbal or telephonic notice confirmed by written or
facsimile notice, by the Underwriters to the Company no later than 12:00 noon,
New York City time, on the business day before the Firm Shares Closing Date or
at least two business days before the Additional Shares Closing Date (as
hereinafter defined), as the case may be, setting forth the number of
Additional Shares to be purchased and the time and date (if other than the Firm
Shares Closing Date) of such purchase.
(c) Payment of the purchase price for, and delivery of, the Firm
Shares to be purchased by the Underwriters shall be made at the offices of
Jefferies & Company, Inc., Harborside Financial Center, Plaza III, Suite 705,
Jersey City, New Jersey, 07310, Attn: Victor Polizzotto, or at such other place
as shall be agreed upon by you and the Company, at 10:00 a.m., New York City
time, on the third or fourth business day (as permitted under Rule 15c6-1 under
the Exchange Act) (unless postponed in accordance with the provisions of
Section 8 hereof) following the date the Registration Statement becomes
effective (or, if the Company has elected to rely on Rule 430A or Rule 434, the
third or fourth business day (as permitted under Rule 15c6-1 under the Exchange
Act) after the determination of the initial public offering price of the
Shares), or such other time not later than ten business days after such date as
shall be agreed upon by the Underwriters and the Company (such time and date of
payment and delivery being herein called the "Firm Shares Closing Date").
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<PAGE> 13
Payment shall be made to the Company by wire transfer of immediately available
funds against delivery to you for the respective accounts of the Underwriters
of certificates representing the Firm Shares to be purchased by them.
(d) Payment of the purchase price for, and delivery of, any
Additional Shares to be purchased by the Underwriters shall be made at the
office as set forth in Section 2(c) or at such other place as shall be agreed
upon by you and the Company at the time and on the date (which may be the same
as the Firm Shares Closing Date) specified in the notice referred to in Section
2(b) (such time and date of delivery and payment being herein called the
"Additional Shares Closing Date"). Payment shall be made to the Company by wire
transfer of immediately available funds against delivery to you for the
respective accounts of the Underwriters of certificates representing the
Additional Shares being purchased.
(e) Certificates representing the Shares shall be in such
denominations and registered in such names as the Underwriters may request in
writing at least two business days before the Firm Shares Closing Date or, in
the case of Additional Shares, on the day of notice of exercise of the option
as described in Section 2(b). The certificates representing the Shares will be
made available for examination and packaging by the Underwriters not later than
1:00 p.m., New York City time, on the last business day prior to the Firm
Shares Closing Date (or the Additional Shares Closing Date in the case of the
Additional Shares) at such place as is designated by the Underwriters.
SECTION 3. COVENANTS OF THE COMPANY.
The Company covenants and agrees with each of the Underwriters as
follows:
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the Representation Date, and any
amendment thereof, to become effective, as promptly as practicable after the
date hereof. Subject to the foregoing, if the Registration Statement has
become or becomes effective pursuant to Rule 430A, or filing of the Prospectus
or supplement to the Prospectus is otherwise required under Rule 424(b) or Rule
434, the Company will cause the Prospectus, properly completed, or such
supplement thereto to be filed with the Commission pursuant to the applicable
paragraph of Rule 424(b) or Rule 434 within the time period prescribed and will
provide evidence satisfactory to you of such timely filing. If the Company
elects to rely on Rule 434, the Company will prepare and file a term sheet that
complies with the requirements of Rule 434. The Company will promptly advise
you (i) when the Registration Statement shall have become effective, (ii) when
the Prospectus, and any supplement thereto, shall have been filed (if required)
with the Commission pursuant to Rule 424(b) or Rule 434, (iii) when any
amendment or supplement is required as provided in Section 3(c) hereof, (iv)
when any amendment to the Registration Statement shall have been filed or
becomes effective, (v) of any request by the Commission for any amendment of
the Registration Statement or supplement to any Prospectus or for any
additional information, (vi) of the receipt by the Company of any notification
of, or if the Company otherwise has knowledge of, the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the institution or threatening of any
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<PAGE> 14
proceeding for that purpose and (vii) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Shares
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose. The Company will use its best efforts to prevent the issuance
of any such stop order and, if issued, to obtain as soon as possible the
withdrawal thereof.
(b) The Company will give the Representatives notice of its
intention to file or prepare any amendment to the Registration Statement
(including any filing under Rule 462(b)) or any amendment, supplement or
revision to either the prospectus included in the Registration Statement at the
time it became effective or to the Prospectus, whether pursuant to the Act or
otherwise, will furnish the Representatives with copies of any such documents a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file or use any such document to which the Representatives
shall reasonably object.
(c) The Company will comply with the Act and the Act Regulations
so as to permit the completion of the distribution of the Shares as
contemplated by this Agreement and in the Prospectus. If, at any time when a
prospectus relating to the Shares is required to be delivered under the Act or
the Act Regulations, any event occurs as a result of which the Prospectus as
then amended or supplemented would contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it shall be necessary to
amend the Registration Statement or amend or supplement the Prospectus to
comply with the Act, the Act Regulations, or any other applicable law the
Company promptly will prepare and file with the Commission, subject to
paragraph (b) of this Section 3, an amendment or supplement that will correct
such statement or omission or effect such compliance. Neither your consent to
nor your delivery of any such amendment or supplement shall constitute a waiver
of any of the conditions set forth in Section 5.
(d) The Company consents to the use of the Prospectus in
accordance with the provisions of the Act and with the Blue Sky laws of the
jurisdictions in which the Shares are offered by the Underwriters and by all
dealers to whom Shares may be sold, both in connection with the offering and
sale of the Shares and for such period of time thereafter as the Prospectus is
required by the Act to be delivered in connection with the sales by any
Underwriter or dealer. The Company will comply with all requirements imposed
upon it by the Act, as now and hereafter amended, and any Blue Sky laws to
which it may be subject so far as necessary to permit the continuance of sales
of or dealing in the Shares in accordance with the provisions hereof and the
Prospectus.
(e) As soon as practicable, the Company will make generally
available to its security holders and to the Underwriters a consolidated
earnings statement of the Company and the Subsidiaries covering a twelve-month
period beginning after the Effective Date that will satisfy the provisions of
Section 11(a) of the Act and Rule 158 under the Act Regulations and shall
advise you in writing when such statement has been made so available.
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<PAGE> 15
(f) The Company will furnish to you, without charge, three signed
copies of the Registration Statement (including exhibits thereto and each
amendment thereto) and, so long as delivery of a prospectus by an Underwriter
or dealer may be required by the Act, the Act Regulations or any other
applicable law, as many copies of the Prospectus and all amendments and
supplements thereto as the Underwriters may reasonably request. The Prospectus
and any amendments or supplements thereto furnished to the Underwriters will be
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T
of the Commission.
(g) During the period of five years hereafter, the Company will
furnish to you, as soon as practicable after the end of each fiscal year, a
copy of its annual report to stockholders for such year; and the Company will
furnish to you (i) as soon as available, a copy of each report or definitive
proxy statement of the Company filed with the Commission under the Exchange Act
or mailed to stockholders and (ii) from time to time, such other information
concerning the Company as you may reasonably request.
(h) Except as provided in this Agreement, the Company will not,
and will cause each of its officers, directors and current stockholders and
each person or entity receiving shares of Common Stock in connection with the
Acquisitions to enter into agreements with the Underwriters in the form set
forth in Exhibit A hereto ("Lockup Agreements") to the effect that they will
not, for a period of one year following the date of the Prospectus, without
prior written consent of Jefferies & Company, Inc., directly or indirectly,
offer to sell, assign, pledge, issue, distribute, sell, contract to sell, grant
any option or enter into any contract for the sale of, or otherwise voluntarily
transfer or dispose of, or announce any offer, sale, grant of any option to
purchase or other transfer or disposition of, any shares of Common Stock, or
any other securities of the Company or any security or other instrument which
by its terms is convertible into or exercisable or exchangeable for shares of
Common Stock or other securities of the Company, whether now owned or hereafter
acquired by the undersigned or with respect to which the undersigned has or
hereafter acquires the power of disposition, including, without limitation, any
shares of Common Stock issuable under any employee stock options or warrants;
provided, however, that the Company may (i) issue shares of Common Stock in
connection with the Acquisitions, (ii) issue shares of restricted common stock,
par value $.001 per share, of the Company ("Restricted Common Stock") in
exchange for shares of Common Stock or issue shares of Common Stock on
conversion of shares of Restricted Common Stock, in each case as contemplated
in the Prospectus, (iii) issue shares of Common Stock on exercise of presently
outstanding stock options under the Company's 1997 Stock Option Plan, (iv)
issue up to 50,000 shares of Common Stock on exercise of the presently
outstanding warrant described in the Prospectus and (v) issue up to 2,000,000
shares of Common Stock in connection with future acquisitions, so long as, in
the case of any issuance described in clause (iii), (iv) or (v) of this
sentence, the recipient of those shares agrees to be bound by an agreement in
form and substance substantially the same as the form set forth in Exhibit A.
Any certificate representing shares of Common Stock or Restricted Common Stock
subject to the transfer restrictions set forth in this Section 3(h) shall bear
a legend appropriately reflecting such restrictions.
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<PAGE> 16
(i) The Company will comply with all the provisions of any
undertakings contained in the Registration Statement and this Agreement.
(j) The Company will not at any time, directly or indirectly, take
any action intended, or that might reasonably be expected, to cause or result
in, or that will cause, stabilization of the price of the shares of Common
Stock to facilitate the sale or resale of any of the Shares.
(k) The Company will apply the net proceeds from the offering and
sale of the Shares in accordance with the description set forth in the "Use of
Proceeds" section of the Prospectus and shall file such reports with the
Commission with respect to the sale of the Shares and the application of the
proceeds therefrom as may be required under the Act, the Act Regulations, the
Exchange Act or the rules and regulations thereunder. The Company shall provide
you a draft of each such report prior to its filing for your approval, and
shall furnish you with a signed copy of each such report.
(l) The Company will cooperate with the Underwriters and their
counsel in connection with endeavoring to obtain and maintain the qualification
or registration, or exemption from qualification, of the Shares for offer and
sale under the applicable securities laws of such states and other
jurisdictions of the United States as the Underwriters may designate; provided,
that in no event shall the Company be obligated to qualify to do business in
any jurisdiction where it is not now so qualified or to take any action that
would subject it to taxation or general service of process in any jurisdiction
where it is not now so subject. In each jurisdiction in which the Shares are so
qualified, the Company will file all such statements and reports as may be
required by the laws of such jurisdictions to continue such qualifications in
effect for a period of not less than one year from the Effective Date of the
Registration Statement and any Rule 462(b) Registration Statement.
SECTION 4. PAYMENT OF EXPENSES.
The Company will pay, or reimburse if paid by the Underwriters, all
actual and reasonable costs and expenses incident to the performance of the
obligations of the Company under this Agreement, including (i) the fees,
disbursements and expenses of counsel and accountants for the Company and all
other expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus, the Prospectus, and any
amendments or supplements thereto, and the mailing and delivery of copies
thereof to the Underwriters and dealers; (ii) the cost of printing the
Agreement Among Underwriters, this Agreement, the Selling Agreement, any Dealer
Agreements, the Underwriters' Questionnaire and the Blue Sky Memorandum (in
both preliminary and final form); (iii) all expenses in connection with
qualification of the Shares for offering and sale under state securities laws
as provided in Section 3(l) hereof, including filing and registration fees and
the fees, disbursements and expenses of counsel for the Underwriters in
connection with such qualification and in connection with Blue Sky surveys;
(iv) the filing fees and fees and expenses of counsel for the Underwriters
incident to securing any required review by the NASD; (v) the cost of
preparing, printing, authenticating, issuing and delivering stock certificates;
(vi) all fees of the Company's transfer agent and registrar; (vii) any fees for
including the Shares on the Nasdaq National Market; (viii) the transportation
and
-16-
<PAGE> 17
other expenses incurred by or on behalf of Company representatives in
connection with presentations to prospective purchasers of the Shares; and (ix)
all other costs and expenses incident to the performance of its obligations
hereunder that are not otherwise specifically provided for in this Section.
If this Agreement is terminated by the Underwriters in accordance with
Section 5 hereof because of any failure or refusal on the part of the Company
to comply with the terms hereof or because any of the conditions set forth in
Section 5 hereof are not satisfied, the Company shall reimburse the
Underwriters for all of their reasonable out-of-pocket expenses, including the
reasonable fees and disbursements of counsel for the Underwriters.
SECTION 5. CONDITIONS OF THE UNDERWRITERS' OBLIGATION.
The obligations of the Underwriters to purchase the Shares hereunder
is subject to the continued accuracy of the representations and warranties of
the Company herein contained, to the accuracy of the statements of the Company
made in any certificates delivered pursuant to the provisions hereof, to the
performance by the Company of its obligations and agreements hereunder and to
the following further conditions (for purposes of this Section 5, the "Closing
Date" shall refer to the Firm Shares Closing Date, in the case of conditions to
be satisfied in connection with the purchase and sale of the Firm Shares, and,
if different, any Additional Shares Closing Date, in the case of conditions to
be satisfied in connection with the purchase and sale of Additional Shares to
be completed on that date):
(a) The Registration Statement, including any Rule 462(b)
Registration Statement, shall have become effective, and you shall have
received notice thereof, not later than 5:30 p.m., New York City time, on the
date hereof, or such later time and date as shall be approved by the
Representatives and the Company and shall remain effective at the Closing Date.
No stop order suspending the effectiveness of the Registration Statement shall
have been issued under the Act or proceedings therefor initiated or threatened
by the Commission. No order suspending the effectiveness of the Registration
Statement or the qualification or registration of the Shares under the Blue Sky
laws of any jurisdiction shall be in effect or proceedings therefor initiated
or threatened by the Commission or the authorities of any such jurisdiction. If
the Company has elected to rely upon Rule 430A or Rule 434, the price of the
Shares and any price-related or other information previously omitted from the
effective Registration Statement pursuant to Rule 430A or Rule 434 shall have
been transmitted to the Commission for filing pursuant to Rule 424(b) within
the prescribed time period, and, prior to the Closing Date, the Company shall
have provided evidence satisfactory to the Underwriters of such timely filing,
or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A.
(b) Subsequent to the execution and delivery of this Agreement,
there shall not have occurred (i) any change, or any development involving a
prospective change, constituting, individually or in the aggregate, a Material
Adverse Effect, which, in the judgment of the Underwriters, materially impairs
the investment quality of the Shares or, in the judgment of the
-17-
<PAGE> 18
Underwriters, makes it impracticable or inadvisable to proceed with completion
of the sale of and payment for the Shares; (ii) any event or development
relating to or involving the Company or any Subsidiary or any officer or
director of the Company or any Subsidiary which makes any statement made in the
Prospectus an untrue statement of a material fact or which, in the opinion of
the Company and its counsel or the Underwriters and their counsel, requires the
making of any addition to or change in the Prospectus in order to state a
material fact required by the Act or any other applicable law to be stated
therein or necessary in order to make the statements therein not misleading, if
amending or supplementing the Prospectus to reflect such event or development
would, in your opinion, as Representatives of the several Underwriters,
materially adversely affect the market for the Shares; (iii) any suspension or
limitation of trading in securities generally on the New York Stock Exchange or
the Nasdaq National Market, or any setting of minimum prices for trading on
such exchange or system, or any suspension of trading of any securities of the
Company on any such exchange or system or in the over-the-counter market; (iv)
any banking moratorium declared by federal or New York authorities; or (v) any
outbreak or escalation of major hostilities in which the United States is
involved, any declaration of war by Congress or any other substantial national
or international calamity or emergency if, in the reasonable judgment of the
Underwriters, the effect of any such outbreak, escalation, declaration,
calamity or emergency makes it impractical or inadvisable to proceed with
completion of the sale of and payment for the Shares.
(c) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there shall have been no
litigation or other proceeding instituted against the Company, any of the
Subsidiaries or their affiliates, or any of their respective officers or
directors in their capacities as such, before or by any federal, state or local
court, commission, regulatory body, administrative agency or other governmental
body, domestic or foreign, or arbitrator, in which litigation or proceeding an
unfavorable ruling, decision or finding would, individually or in the
aggregate, have a Material Adverse Effect.
(d) The following conditions contained in clauses (i), (ii) and
(iii) of this Section 5(d) shall have been satisfied on and as of the Closing
Date and the Company shall have furnished to the Underwriters a certificate of
the Company, signed by the Chief Executive Officer and the Chief Financial
Officer of the Company, dated the Closing Date, to the effect that the signers
of such certificate have carefully examined the Registration Statement, the
Prospectus, any supplement or amendment to the Prospectus, and this Agreement
and that:
(i) each of the representations and warranties of the
Company in this Agreement is true and correct in all material respects
on and as of the Closing Date with the same effect as if made on the
Closing Date, and the Company has (A) complied with all the covenants
and agreements contained in this Agreement to be performed or complied
with on the part of the Company and (B) satisfied all the conditions
under this Agreement on its part to be performed or satisfied at or
prior to the Closing Date;
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<PAGE> 19
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge,
contemplated or threatened; and
(iii) since the date of the most recent financial
statements included in the Prospectus, there has been no change that
would, individually or in the aggregate, have a Material Adverse
Effect.
(e) The Company shall have furnished to the Underwriters a
certificate of the Chief Executive Officer and the Chief Financial Officer of
the Company (and any other executive officer of the Company or any Subsidiary
that you may request), dated the Closing Date, to the effect that the signers
of such certificate have carefully examined the Registration Statement, the
Prospectus, any supplement or amendment to the Prospectus, each of the
Transaction Agreements, the opinion of Chamberlain, Hrdlicka, White, Williams &
Martin, counsel for the Company, filed as exhibit 8.1 to the Registration
Statement (the "Tax Opinion") and the certificates as to factual matters
attached to the Tax Opinion (the "Certificates") and that they believe each of
the factual matters underlying the opinions expressed in the Tax Opinion, as
set forth in the Tax Opinion and the Certificates, are true and they have no
reason to believe that those factual matters are not true.
(f) The Underwriters shall have received an opinion from
Chamberlain, Hrdlicka, White, Williams & Martin, counsel for the Company,
satisfactory in form and substance to you, dated as of the Closing Date, to the
effect set forth in Exhibit B hereto.
(g) At the Representation Date and at the Closing Date, each of
Arthur Andersen LLP, Deloitte & Touche LLP and Darnall, Sikes & Frederick shall
each have furnished to the Underwriters a letter or letters, dated respectively
as of the date of this Agreement and the Closing Date, in form and substance
satisfactory to you, containing statements and information of the type
customarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial and statistical
information pertaining to the Company and the respective Subsidiaries as to
which those firms have issued independent auditor's reports which are contained
in the Registration Statement and the Prospectus.
(h) On or prior to the Representation Date, the Company shall have
furnished to the Underwriters Lockup Letters from each of the Company's
officers, directors and current stockholders and each person or entity
receiving shares of Common Stock in connection with the Acquisitions.
(i) At the Closing Date, counsel for the Underwriters shall have
been furnished with such information, certificates and documents as they may
reasonably require for the purpose of enabling them to pass upon the issuance
and sale of the Shares as contemplated herein and related proceedings, or to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions herein contained, or otherwise in
connection with the offering and sale of the Shares; and all opinions and
certificates mentioned above or elsewhere in this
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<PAGE> 20
Agreement shall be reasonably satisfactory in form and substance to you and
counsel for the Underwriters.
(j) The NASD shall not have raised any objection with respect to
the fairness and reasonableness of the underwriting terms and arrangements.
(k) The Acquisitions shall have been consummated as of the Firm
Shares Closing Date on the terms set forth in the Registration Statement and
the Acquisition Agreements, without waiver or modification of any material
terms or provisions of any Acquisition Agreement, except as may be approved by
you.
If any condition specified in this Section 5 shall not have been
fulfilled in all material respects when and as required to be fulfilled, this
Agreement may be terminated by the Underwriters by notice to the Company and
such termination shall be without liability of any party to any other party
except as provided in Section 4.
SECTION 6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify, defend and hold harmless each
Underwriter and its respective officers, stockholders, employees and directors
and any person who controls any Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act from and against any loss, expense,
liability, claim or damage (including reasonable costs of investigation and
reasonable attorney fees and expenses) that, jointly or severally, any such
Underwriter or any such officer, stockholder, employee, director or controlling
person may incur under the Act or otherwise, as such expenses are incurred,
insofar as such loss, expense, liability, claim or damage arises out of or is
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement (or in the Registration Statement as
amended by any post-effective amendment thereof) or any omission or alleged
omission to state a material fact required to be stated in such Registration
Statement or necessary to make the statements made therein not misleading or
any untrue statement or alleged untrue statement of a material fact contained
in a Prospectus (the term Prospectus for the purpose of this Section 6 being
deemed to include any Preliminary Prospectus, the Prospectus, and the
Prospectus as amended or supplemented) or any omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, the Company will not be liable in any
such case to the extent any such loss, expense, liability, claim or damage
arises out of or is based upon any untrue statement or omission or alleged
untrue statement or omission that has been made therein or omitted therefrom in
reliance upon and in conformity with the information relating to any
Underwriter provided in writing to the Company by or on behalf of such
Underwriter, expressly for use in the Registration Statement or the Prospectus.
The foregoing indemnity agreement shall be in addition to any liability that
the Company may otherwise have.
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<PAGE> 21
(b) Each Underwriter, severally and not jointly, agrees to
indemnify, defend and hold harmless the Company and its officers, stockholders,
employees and directors and any person who controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act from and
against any loss, expense, liability, claim or damage (including reasonable
costs of investigation and reasonable attorney fees) that the Company or any
such officer, stockholder, employee, director or controlling person may incur
under the Act or otherwise to the same extent as the provisions of Section 6(a)
above, but only insofar as such loss, expense, liability, claim or damage
arises out of or is based upon any untrue statement or omission or alleged
untrue statement or omission made in reliance or in conformity with information
relating to such Underwriter furnished in writing to the Company by or on
behalf of such Underwriter, expressly for use in the Registration Statement or
the Prospectus. The Company agrees that the only information provided in
writing by or on behalf of any Underwriter to the Company, expressly for use in
the Registration Statement or the Prospectus, is that information contained in
the last paragraph on the cover page of the Prospectus, the two paragraphs on
page 2 of the Prospectus and the second, fifth, ninth and tenth paragraphs
following the table included in the section of the Prospectus captioned
"Underwriting."
(c) If any action is brought against an indemnified party or
parties under this Section 6, the indemnified party or parties shall promptly
notify the indemnifying party in writing of the institution of such action
(provided that the failure to give such notice shall not relieve the
indemnifying party of any liability that it may have pursuant to this
Agreement, unless and to the extent the indemnifying party did not otherwise
learn of such action and such failure has resulted in the forfeiture of
substantive rights or defenses by the indemnifying party) and the indemnifying
party shall assume the defense of such action, including the employment of
counsel and payment of reasonable expenses. The indemnified party or parties
shall have the right to employ its or their own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of the
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying party in connection with
the defense of such action, (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to take charge of the
defense of such action within a reasonable time after notice of the institution
of such action, (iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them that are different
from or additional to those available to the indemnifying party or (iv) the use
of counsel chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest (in which case the
indemnifying party shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by the indemnifying party and paid as
incurred. Anything in this paragraph to the contrary notwithstanding, the
indemnifying party shall not be liable for any settlement of any such claim or
action effected without its written consent, which consent shall not be
unreasonably withheld.
(d) If the indemnification provided for in this Section 6 is
insufficient or unavailable to an indemnified party under subsection (a) or (b)
of this Section 6 in respect of any loss, expense, liability, claim or damage
referred to therein (or any action in respect thereof), then each
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<PAGE> 22
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, expense, liability, claim or damage
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other hand
from the offering of the Shares or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and the
Underwriters on the other hand in connection with the statements or omissions
that resulted in such loss, expense, liability, claim or damage as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other hand shall be deemed
to be in the same proportion as the total proceeds from the offering and sale
of the Shares (net of underwriting discounts and commissions but before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters. The relative fault of
the Company on the one hand and the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue statement or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the loss, expense, liability, claim
or damage referred to above shall be deemed to include any legal or other fees
or expenses reasonably incurred by such party in connection with investigating
or defending any claim or action.
(e) The Company and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 6 were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account
of the equitable considerations referred to in Section 6(d) above.
Notwithstanding the provisions of this Section 6, no Underwriter shall be
required to contribute any amount in excess of the underwriting discount
received by it by reason of such untrue statement or alleged untrue statement
or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
SECTION 7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY.
The respective indemnity and contribution agreements contained in
Section 6, and the covenants, representations and warranties of the Company
contained in this Agreement or contained
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<PAGE> 23
in certificates of officers of the Company submitted pursuant hereto, shall
remain in full force and effect, regardless of any investigation, or statement
as to the results thereof, made by or on behalf of any Underwriter or any of
its respective officers, directors, employees, stockholders or any person who
controls any Underwriter, or by or on behalf of the Company or any of the
officers or directors or any controlling person of the Company, and will
survive delivery of and payment for the Shares and any termination of this
Agreement. A successor to any Underwriter or any of its respective officers,
directors, employees, stockholders or any person controlling any Underwriter or
to the Company or any of its officers, directors, employees, stockholders or
any person controlling the Company, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in Section 6.
SECTION 8. DEFAULT.
(a) If any Underwriter or Underwriters shall default in its or
their obligations to purchase Shares hereunder on either the Firm Shares
Closing Date or the Additional Shares Closing Date (as used in this Section 8,
each a "Closing Date") and the aggregate number of Shares that such defaulting
Underwriter or Underwriters agreed but failed to purchase does not exceed 10%
of the total number of Shares that the Underwriters are obligated to purchase
on such Closing Date, the Representatives may make arrangements satisfactory to
the Company for the purchase of such Shares by other persons, including any of
the Underwriters, but if no such arrangements are made by such Closing Date the
non-defaulting Underwriters shall be obligated severally, in proportion to
their respective commitments hereunder, to purchase the Shares that such
defaulting Underwriter or Underwriters agreed but failed to purchase on such
Closing Date. If any Underwriter or Underwriters so default and the aggregate
number of Shares with respect to which such default or defaults occur exceeds
10% of the total number of Shares that the Underwriters are obligated to
purchase on such Closing Date and arrangements satisfactory to the
Representatives and the Company for the purchase of such Shares by other
persons are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or
the Company, except as provided in this Section 8 (provided that if such
default occurs with respect to the Additional Shares after the Firm Shares
Closing Date, this Agreement will not terminate as to the Firm Shares). In the
event of any such default which does not result in termination of this
Agreement, either the Representatives or the Company shall have the right to
postpone the Closing Date for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other relevant documents or arrangements. As used in this Agreement, the
term "Underwriter" includes any person substituted for an Underwriter under
this Section. Nothing herein will relieve a defaulting Underwriter from
liability for its default.
(b) If the Company shall fail at any Closing Date to sell the
number of Shares that it is obligated to sell hereunder, then this Agreement
shall terminate without liability on the part of any nondefaulting party;
provided that the provisions of Sections 4, 5 and 6 and 9 through 12 shall
remain in full force and effect. No action taken pursuant to this Section shall
relieve the Company from liability, if any, with respect to such default.
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<PAGE> 24
SECTION 9. NOTICES.
All notices and other communications hereunder will be in writing and
shall be deemed to have been duly given if mailed or transmitted by standard
form of telecommunication. Notices to the Underwriters shall be directed to the
Underwriters in care of Jefferies & Company, Inc. at 11100 Santa Monica
Boulevard, Los Angeles, California 90071, Attn: Jerry Gluck, Esq., with a copy
to Ted W. Paris, Baker & Botts, L.L.P., 3000 One Shell Plaza, Houston, Texas
77002-4995; or, if sent to the Company, directed to TransCoastal Marine
Services, Inc., 3535 Briarpark, Suite 210, Houston, Texas 77042, Attn: Johnnie
Domingue, with a copy to Robert J. Viguet, Jr., Chamberlain, Hrdlicka, White,
Williams & Martin, 1200 Smith, Suite 1400, Houston, Texas 77002-4310.
SECTION 10. PARTIES.
This Agreement shall inure to the benefit of and be binding upon the
Underwriters and the Company and their respective successors and legal
representatives. Nothing expressed or mentioned in this Agreement is intended
or shall be construed to provide any person, firm or corporation, other than
the Underwriters, the Company and their respective successors and legal
representatives and the controlling persons, officers, employees, directors and
stockholders referred to in Section 6 and their respective heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein or therein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the Underwriters, the Company, and their
respective successors and legal representatives, and such controlling persons,
stockholders, officers and directors, and their respective heirs and legal
representatives, and for the benefit of no other person, firm or corporation.
No purchaser of Shares from any Underwriter shall be deemed to be a successor
by reason merely of such purchase.
SECTION 11. GOVERNING LAW AND TIME.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED IN SUCH STATE. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME,
UNLESS OTHERWISE SPECIFIED.
SECTION 12. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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<PAGE> 25
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement among the Company and the Underwriters in accordance with its terms.
Very truly yours,
TRANSCOASTAL MARINE SERVICES, INC.
By:
----------------------------------
Name:
----------------------------
Title:
----------------------------
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
JEFFERIES & COMPANY, INC.
JOHNSON RICE & COMPANY, L.L.C.
As Representatives of
the Several Underwriters
By: Jefferies & Company, Inc.
By:
-------------------------------
Name:
-------------------------
Title:
-------------------------
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<PAGE> 26
SCHEDULE I
UNDERWRITERS
<TABLE>
<CAPTION>
Number of
Firm Shares
Name of Underwriter to be Purchased
- ------------------- ---------------
<S> <C>
Jefferies & Company, Inc.
Johnson Rice & Company L.L.C.
----------
Total ==========
</TABLE>
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<PAGE> 27
SCHEDULE II
SUBSIDIARIES
<TABLE>
<CAPTION>
Jurisdiction of Incorporation Percentage
Name or Organization Ownership
---- --------------- ---------
<S> <C> <C>
Woodson Construction Company(1) . . . . . . . . . . . . . . . . . . Louisiana 100%
Laine Construction Company, Inc.(1) . . . . . . . . . . . . . . . . Louisiana 100%
Kori Corporation(1) . . . . . . . . . . . . . . . . . . . . . . . . Louisiana 100%
Envirosystems, Inc.(1) . . . . . . . . . . . . . . . . . . . . . . . Louisiana 100%
HBH, Inc.(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Louisiana 100%
CSI Hydrostatic Testers, Inc.(1) . . . . . . . . . . . . . . . . . . Louisiana 100%
Hargett Mooring & Marine, Inc.(1) . . . . . . . . . . . . . . . . . Louisiana 100%
The Red Fox Companies of New Iberia, Inc.(1) . . . . . . . . . . . . Louisiana 100%
[List others]
</TABLE>
- --------------------
(1) Each a Founding Company.
-27-
<PAGE> 28
EXHIBIT A
August 11, 1997
Jefferies & Company, Inc.
Johnson Rice & Company L.L.C.
c/o Jefferies & Company, Inc.
650 Fifth Avenue, 4th Floor
New York, NY 10019
Ladies and Gentlemen:
As an inducement to the Underwriters (as defined below) to execute the
Underwriting Agreement (the "Underwriting Agreement") in connection with a
proposed public offering (the "Public Offering") by TransCoastal Marine
Services, Inc., a Delaware corporation (the "Company"), of shares of its common
stock, $.001 par value per share ("Common Stock"), the undersigned agrees that
for a period of one year (the "Lock-Up Period") after the date of the final
prospectus used to confirm sales made pursuant to the Public Offering, the
undersigned will not, without the prior written consent of Jefferies & Company,
Inc., as a representative of the Underwriters to be named in the Underwriting
Agreement (the "Underwriters"), directly or indirectly, offer to sell, assign,
pledge, issue, distribute, sell, contract to sell, grant any option or enter
into any contract for the sale of, or otherwise voluntarily transfer or dispose
of, or announce any offer, sale, grant of any option to purchase or other
transfer or disposition of, any shares of Common Stock, or any other securities
of the Company or any security or other instrument which by its terms is
convertible into or exercisable or exchangeable for shares of Common Stock or
other securities of the Company, whether now owned or hereafter acquired by the
undersigned or with respect to which the undersigned has or hereafter acquires
the power of disposition, including, without limitation, any shares of Common
Stock issuable under any employee stock options or warrants. In addition, the
undersigned hereby irrevocably waives (i) any registration rights to which the
undersigned would be entitled in connection with the Public Offering and (ii)
any demand registration rights to which the undersigned would be entitled to
exercise during the Lock-Up Period.
In furtherance of the foregoing, the Company and its transfer agent
and registrar are hereby authorized to decline to make any transfer of any
security if such transfer would constitute a violation or breach of this
agreement.
The provisions of this agreement shall be binding upon the undersigned
and the assigns, heirs, and personal representatives of the undersigned and
shall be for the benefit of the Company and the Underwriters.
Very truly yours,
----------------------------------
A-1
<PAGE> 29
EXHIBIT B
Form of Opinion of Counsel to the
Company to be Delivered to the Underwriters
1. The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of Delaware. The
Company is duly registered and qualified to transact business and is in good
standing as a foreign corporation in each jurisdiction in which the character
or location of its properties (whether owned or leased) or the nature or
conduct of its business makes such registration or qualification necessary,
except where the failure to so register or qualify would not, individually or
in the aggregate, have a Material Adverse Effect. The Company has full
corporate power and authority to own, lease and operate its properties and
conduct its business as now being conducted and as proposed to be conducted as
described in the Registration Statement and the Prospectus. To the knowledge of
such counsel, the Company is not in violation of any provision of its restated
certificate of incorporation, bylaws or other organizational documents.
2. Each Subsidiary has been duly organized and is validly
existing as a corporation in good standing under the laws of the jurisdiction
of its incorporation. Each Subsidiary is duly registered and qualified to
transact business and is in good standing as a foreign corporation in each
jurisdiction in which the character or location of its properties (whether
owned or leased) or the nature or conduct of its business makes such
registration or qualification necessary, except where the failure to so
register or qualify would not, individually or in the aggregate, have a
Material Adverse Effect. Each Subsidiary has full corporate power and authority
to own, lease and operate its properties and to conduct its business as now
being conducted and as proposed to be conducted as described in the
Registration Statement and the Prospectus.
3. Each of the Company and the Subsidiaries has all necessary
Permits to own or lease its respective properties and to conduct its business
as now being conducted and as proposed to be conducted as described in the
Registration Statement and the Prospectus, except where the failure to have
such Permits would not, individually or in the aggregate, have a Material
Adverse Effect.
4. The authorized capital stock of Company is as set forth in the
Registration Statement and the Prospectus under the caption "Capitalization."
After giving effect to the closing of the Acquisitions and the issuance of the
shares of Common Stock contemplated by the Acquisition Agreements, but without
giving effect to the issuance of the Shares pursuant to the terms of this
Agreement, the Company has issued and outstanding _________ shares of Common
Stock, __________ shares of Restricted Common Stock and no shares of preferred
stock. All of those outstanding shares of Common Stock and Restricted Common
Stock have been duly and validly authorized and issued, are fully paid and
nonassessable and were not issued in violation of or subject to any preemptive
or similar rights under the Company's certificate of incorporation, bylaws or
other organizational documents, the laws of the State of Delaware or, to the
knowledge of such
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counsel, otherwise. The Shares to be delivered on the Firm Shares Closing Date
or the Additional Shares Closing Date, as applicable, have been duly and
validly authorized and, when delivered by the Company in accordance with this
Agreement, will be duly and validly issued, fully paid and nonassessable and
will not have been issued in violation of or subject to any preemptive or
similar rights under the Company's certificate of incorporation, bylaws or
other organizational documents, the laws of the State of Delaware or, to the
knowledge of such counsel, otherwise. The Common Stock and the Restricted
Common Stock conform in all material respects as to legal matters to the
descriptions thereof contained in the Registration Statement and the
Prospectus. The forms of certificate representing shares of Common Stock and
Restricted Common Stock, respectively, conform to the applicable requirements
of the Delaware General Corporation Law.
5. Except as described in the Registration Statement and
Prospectus, such counsel knows of no outstanding securities convertible into or
exchangeable for, and no outstanding options, warrants or other rights to
purchase, and such counsel knows of no agreement, commitment, plan or
arrangement to issue, any shares of capital stock of the Company or any
security convertible into or exchangeable or exercisable for capital stock of
the Company; and, except as described in the Registration Statement and
Prospectus, such counsel does not know of (A) any preemptive or other rights to
subscribe for or to purchase, or any restriction upon the voting or transfer
of, any capital stock of the Company pursuant to the Company's certificate of
incorporation or bylaws or any agreement or other instrument to which the
Company is a party or (B) any holder of any securities of the Company or any
other person who has the right, contractual or otherwise, to cause the Company
to sell or otherwise issue to them, or to permit them to underwrite the sale
of, any of the Shares.
6. All of the issued and outstanding shares of capital stock of
each Subsidiary have been duly authorized and are validly issued, fully paid
and nonassessable and are owned by the Company, directly or indirectly through
another Subsidiary, free and clear of any security interests, pledges, liens,
charges, encumbrances, equities and claims (except as described in the
Registration Statement and the Prospectus).
7. The Company has all requisite power and authority to enter
into this Agreement, to carry out the provisions and conditions hereof and to
issue, sell and deliver the Shares to the Underwriters as provided herein; the
execution and delivery of, and the performance by the Company of its
obligations under, this Agreement have been duly and validly authorized by the
Company; and this Agreement has been duly and validly authorized, executed and
delivered by the Company.
8. The execution and delivery of this Agreement by the Company,
the consummation by the Company of the transactions contemplated herein, in the
Transaction Agreements and in the Prospectus (including the issuance, delivery
and sale of the Shares to be sold by the Company to the Underwriters pursuant
to this Agreement) and compliance by the Company with the terms of this
Agreement (A) do not and will not result in any violation of the certificate of
incorporation or bylaws of the Company and (B) do not and will not conflict
with, result in a breach of or constitute
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<PAGE> 31
a default under the terms of, or result in the creation or imposition of any
lien, charge or encumbrance on any property or assets of the Company or any of
the Subsidiaries under, (i) any agreement, indenture, lease or other instrument
(a) to which the Company or any of the Subsidiaries is a party or by which the
Company or any of the Subsidiaries or any of their respective properties is
bound and (b) which has been described in or filed as an exhibit to the
Registration Statement, (ii) any existing applicable law, order, statute, rule
or regulation (other than Blue Sky laws of the various states or other
jurisdictions, as to which such counsel need express no opinion) or (iii) any
judgment, injunction, order or decree known to such counsel of any government,
governmental instrumentality or court having jurisdiction over the Company or
any of the Subsidiaries or any of their respective properties, except, in each
case referred to in this clause (B), for such conflicts, breaches or defaults
or liens, charges or encumbrances that would not, individually or in the
aggregate, have a Material Adverse Effect.
9. No consent, approval, authorization or order of, or
registration or filing with, any court or any public, governmental or
regulatory agency or body having jurisdiction over the Company or any of its
properties or assets is required for the execution, delivery and performance of
this Agreement or any of the Transaction Agreements or the consummation of the
transactions contemplated hereby and thereby, except for (1) such as may be
required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Underwriters (as to which such
counsel need express no opinion) and (2) such as have been made or obtained
under the Act, the Act Regulations, the Exchange Act and the rules and
regulations thereunder.
10. To the knowledge of such counsel, except as disclosed in the
Prospectus, neither the Company nor any of the Subsidiaries is in violation of
its respective certificate or articles of incorporation, bylaws or other
organizational documents.
11. To such counsel's knowledge, (i) there are no contracts,
indentures, mortgages, loan agreements, notes, leases or other instruments
required by the Act or by the Act Regulations to be described in the
Registration Statement or to be filed or incorporated by reference as exhibits
thereto other than those described or referred to in the Registration Statement
or filed as exhibits thereto, (ii) the descriptions thereof or references
thereto made in the Prospectus, insofar as they purport to summarize the
provisions of contracts, indentures, mortgages, loan agreements, notes, leases
or other instruments, fairly present the information called for with respect
thereto by Form S-1 under the Act and (iii) no default exists in the due
performance or observance of any material obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan agreement, note,
lease or other instrument so described, referred to or filed, except for such
defaults that would not, individually or in the aggregate, have a Material
Adverse Effect.
12. Such counsel does not know of any pending or threatened
litigation or governmental or other action, suit, proceeding or investigation
before any court or before or by any public, regulatory or governmental agency
or body against, or involving the properties or business of, the Company or any
of the Subsidiaries which is of a character required to be disclosed in the
Registration Statement and the Prospectus which has not been properly disclosed
therein.
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<PAGE> 32
13. The Registration Statement and all post-effective amendments,
if any, have become effective under the Act and, to such counsel's knowledge,
no stop order suspending the effectiveness of the Registration Statement or any
post-effective amendment thereto has been issued and no proceeding for that
purpose has been instituted or threatened by the Commission and any required
filing of the Prospectus pursuant to Rule 424(b) has been made in accordance
with Rule 424(b).
14. The Registration Statement, as of its effective date, and the
Prospectus, as of its date, and any supplements or amendments thereto (other
than the financial statements and the notes thereto and the auditors' reports
thereon and the other financial data included therein, as to which such counsel
expresses no opinion), complied as to form in all material respects to the
requirements of the Act and the Act Regulations.
15. The statements under the captions "Risk Factors--Potential
Effect of Shares Eligible for Future Sale," "Risk Factors--Governmental
Regulation," "Risk Factors--Possible Anti-takeover Effects of Certain Charter
Provisions," "The Company--Summary of Terms of the Acquisitions,"
"Business--Facilities," "Business--Governmental Regulation and Environmental
Matters," "Business--Legal Proceedings," "Business-- Insurance,"
"Management--Executive Compensation and Employment Agreements,"
"Management--1997 Stock Option Plan," "Certain Transactions," "Description of
Capital Stock," "Shares Eligible for Future Sale" and "Underwriting" in the
Prospectus and Items 14 and 15 of Part II of the Registration Statement,
insofar as such statements constitute a summary of legal matters, documents or
proceedings referred to therein, are accurate in all material respects and
fairly present the information called for with respect to such legal matters,
documents and proceedings.
16. Each of the Acquisitions has been consummated pursuant to the
terms of the Acquisition Agreement related thereto.
17. The Company is not an "investment company" or a company
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended.
18. The Shares to be sold under this Agreement and the other
shares of Common Stock that will be outstanding on the Closing Date have been
approved for quotation on the Nasdaq National Market.
19. The opinions expressed by such counsel in the Tax Opinion are
reaffirmed.
In addition, Chamberlain, Hrdlicka, White, Williams & Martin shall
state that they have participated in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants of the Company and representatives of the Underwriters, at which
the contents of the Registration Statement and the Prospectus and related
matters were discussed and that no facts have come to their attention that lead
such counsel to believe that the Registration Statement (other than (i) the
financial statements and schedules (including the notes
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<PAGE> 33
thereto and the auditors' reports thereon) included therein or omitted
therefrom and (ii) the other financial information contained therein or omitted
therefrom, as to which such counsel need not comment), as of its effective
date, contained any untrue statement of material fact or omitted to state a
material fact necessary to make the statements therein not misleading, or that
the Prospectus (other than (i) the financial statements and schedules
(including the notes thereto and the auditors' reports thereon) included
therein or omitted therefrom and (ii) the other financial information contained
therein or omitted therefrom, as to which such counsel need not comment), as of
its issue date or the Firm Shares Closing Date or the Additional Shares Closing
Date, as the case may be, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
In rendering the foregoing opinions, such counsel may rely upon any
opinion or opinions, each dated as of the Firm Shares Closing Date or the
Additional Shares Closing Date, as applicable, of local counsel retained by
them or the Company as to laws of any jurisdiction other than the United States
and the States of Texas and Delaware, provided that (i) each such local counsel
is acceptable to the Representatives, (2) such reliance is expressly authorized
by each opinion so relied upon and a copy of each such opinion is addressed and
delivered to the Representatives and is, in form and substance, satisfactory to
them and (3) such counsel shall state in their opinion that they and the
Underwriters are justified in relying thereon. In addition, such counsel may
state that they have relied as to certain matters on information obtained from
public officials, officers of the Company and other sources believed by them to
be responsible. Copies of all such opinions and certificates shall be furnished
to counsel to the Underwriters.
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<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RED FOX INTERNATIONAL, INC.
RED FOX INTERNATIONAL, INC., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
FIRST: The name of the corporation is Red Fox International, Inc. The
date of filing of its original Certificate of Incorporation with the Secretary
of State was the 26th day of February 1997.
SECOND: This Amended and Restated Certificate of Incorporation was
duly adopted in accordance with the provisions of Section 242 and 245 of the
General Corporation Law of the State of Delaware (the "DGCL"), the Board of
Directors having duly adopted resolutions setting forth and declaring advisable
this Amended and Restated Certificate of Incorporation, and in lieu of a
meeting of the stockholders, written consent to this Amended and Restated
Certificate of Incorporation having been given by the holders of all of the
outstanding stock of the Corporation in accordance with Section 228 of the
DGCL.
THIRD: This Amended and Restated Certificate of Incorporation is being
filed pursuant to Sections 242 and 245 of the DGCL in order to restate the
Certificate of Incorporation of the Corporation, and also to amend the
Certificate of Incorporation to, among other things, (i) increase the
authorized capital stock of the Corporation and (ii) authorize the issuance of
preferred stock and restricted common stock by the Corporation.
FOURTH: The Certificate of Incorporation of the Corporation is hereby
amended and restated in its entirety as follows:
ARTICLE ONE
The name of the corporation is TransCoastal Marine Services, Inc.
ARTICLE TWO
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, New Castle County, Wilmington, Delaware 19801.
The name of its registered agent at such address is The Corporation Trust
Company.
ARTICLE THREE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the DGCL.
<PAGE> 2
ARTICLE FOUR
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 25,000,000 shares which shall be
divided into (a) 2,000,000 shares, designated as Preferred Stock, having a par
value of $.001 per share (the "Preferred Stock"), (b) 20,000,000 shares,
designated as Common Stock, having a par value of $.001 per share (the "Common
Stock"), and (c) 3,000,000 shares, designated as Restricted Common Stock,
having a par value of $.001 per share (the "Restricted Common Stock").
Each share of common stock of the Corporation, no par value, issued
and outstanding or held in treasury is hereby reclassified and changed into one
thousand shares of Common Stock, par value $.001 per share.
A statement of the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, in respect of each class
of stock of the Corporation is as follows:
A. PREFERRED STOCK
The Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more classes or series. Subject to the provisions
of this Certificate of Incorporation and the limitations prescribed by law, the
Board of Directors is expressly authorized by adopting resolutions to issue the
shares, fix the number of shares and change the number of shares constituting
any series, and to provide for or change the voting powers, designations,
preferences and relative, participating, optional or other special rights,
qualifications, limitations or restrictions thereof, including dividend rights
(and whether dividends are cumulative), dividend rates, terms of redemption
(including sinking fund provisions), a redemption price or prices, conversion
rights and liquidation preferences of the shares constituting any class or
series of the Preferred Stock, without any further action or vote by the
stockholders.
B. COMMON STOCK
1. DIVIDENDS.
Subject to the preferred rights of the holders of shares of any class
or series of Preferred Stock as provided by the Board of Directors with respect
to any such class or series of Preferred Stock, the holders of the Common Stock
shall be entitled to receive, as and when declared by the Board of Directors
out of the funds of the Corporation legally available therefor, such dividends
(payable in cash, stock or otherwise) as the Board of Directors may from time
to time determine, payable to stockholders of record on such dates, not
exceeding 60 days preceding the dividend payment dates, as shall be fixed for
such purpose by the Board of Directors in advance of payment of each particular
dividend. All dividends on Common Stock shall be paid pari passu with dividends
on Restricted Common Stock.
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<PAGE> 3
2. LIQUIDATION.
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after the distribution or
payment to the holders of shares of any class or series of Preferred Stock as
provided by the Board of Directors with respect to any such class or series of
Preferred Stock, the remaining assets of the Corporation available for
distribution to stockholders shall be distributed among and paid to the holders
of Common Stock and Restricted Common Stock ratably in proportion to the number
of shares of Common Stock and Restricted Common Stock held by them
respectively.
3. VOTING RIGHTS.
Except as otherwise required by law, each holder of shares of Common
Stock shall be entitled to one vote for each share of Common Stock standing in
such holder's name on the books of the Corporation.
C. RESTRICTED COMMON STOCK
1. DIVIDENDS.
Subject to the preferred rights of the holders of shares of any class
or series of Preferred Stock as provided by the Board of Directors with respect
to any such class or series of Preferred Stock, the holders of the Restricted
Common Stock shall be entitled to receive, as and when declared by the Board of
Directors out of the funds of the Corporation legally available therefor, such
dividends (payable in cash, stock or otherwise) as the Board of Directors may
from time to time determine, payable to stockholders of record on such dates,
not exceeding 60 days preceding the dividend payment dates, as shall be fixed
for such purpose by the Board of Directors in advance of payment of each
particular dividend. All dividends on Restricted Common Stock shall be paid
pari passu with dividends on Common Stock.
2. LIQUIDATION.
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after the distribution or
payment to the holders of shares of any class or series of Preferred Stock as
provided by the Board of Directors with respect to any such class or series of
Preferred Stock, the remaining assets of the Corporation available for
distribution to stockholders shall be distributed among and paid to the holders
of Restricted Common Stock and Common Stock ratably in proportion to the number
of shares of Restricted Common Stock and Common Stock held by them
respectively.
3. VOTING RIGHTS.
Holders of Restricted Common Stock shall have no voting rights.
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<PAGE> 4
4. CONVERSION OF THE RESTRICTED COMMON STOCK.
Each share of Restricted Common Stock outstanding shall automatically
convert into Common Stock on a share for share basis (a) in the event any
person acquires beneficial ownership of 25% or more of the outstanding shares
of Common Stock of the Corporation in or as a result of a transaction or a
series of transactions that shall not have been approved or ratified by at
least eighty percent (80%) of the Continuing Directors (as hereinafter
defined), (b) eighteen months after the consummation of the Corporation's
initial public offering of its Common Stock (the "Public Offering"), or (c) in
the event a majority of the aggregate number of votes which may be cast by the
holders of outstanding shares of Common Stock approve such conversion.
ARTICLE FIVE
A. BOARD OF DIRECTORS.
The number of directors shall be fixed from time to time exclusively
by the Board of Directors pursuant to a resolution adopted by a majority of the
directors then in office.
At each annual meeting of stockholders, the successors to the
directors whose term expires at that meeting shall be elected to hold office
for a term expiring at the annual meeting of stockholders held in the year
following the year of their election and until their successors have been duly
elected and qualified. At each annual meeting of stockholders at which a quorum
is present, the persons receiving a plurality of the votes cast shall be
directors. No director may be removed from office by a vote of the stockholders
at any time except for cause. Election of directors need not be by written
ballot unless the Bylaws of the Corporation so provide.
B. VACANCIES.
Any vacancy on the Board of Directors resulting from death,
retirement, resignation, disqualification or removal from office or other
cause, as well as any vacancy resulting from an increase in the number of
directors which occurs between annual meetings of the stockholders at which
directors are elected, shall be filled only by a majority vote of the remaining
directors then in office, though less than a quorum, except that those
vacancies resulting from removal from office by a vote of the stockholders may
be filled by a vote of the stockholders at the same meeting at which such
removal occurs. The directors chosen to fill vacancies shall hold office for a
term expiring at the end of the next annual meeting of stockholders. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
Notwithstanding the foregoing, whenever the holders of one or more
classes or series of Preferred Stock shall have the right, voting separately,
as a class or series, to elect directors, the election, term of office, filling
of vacancies, removal and other features of such directorships shall be
governed by the terms of the resolution or resolutions adopted by the Board of
Directors pursuant to ARTICLE FOUR applicable thereto, and each director so
elected shall not be subject to the provisions of this ARTICLE FIVE unless
otherwise provided therein.
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<PAGE> 5
C. POWER TO MAKE, ALTER AND REPEAL BYLAWS.
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, amend and
repeal the Bylaws of the Corporation subject to the power of the stockholders
of the Corporation to adopt, amend and repeal any Bylaw whether adopted by them
or otherwise.
D. AMENDMENT AND REPEAL OF ARTICLE FIVE.
Notwithstanding any provision of this Certificate of Incorporation and
of the Bylaws, and notwithstanding the fact that a lesser percentage may be
specified by Delaware law, unless such action has been approved by a majority
vote of the full Board of Directors, the affirmative vote of the majority of
the votes which all stockholders of the then outstanding shares of capital
stock of the Corporation would be entitled to cast thereon, voting together as
a single class, shall be required to amend or repeal any provisions of this
ARTICLE FIVE or to adopt any provision inconsistent with this ARTICLE FIVE. In
the event such action has been previously approved by a majority vote of the
full Board of Directors, the affirmative vote of a majority of the outstanding
stock entitled to vote thereon shall be sufficient to amend or repeal any
provision of this ARTICLE FIVE or adopt any provision inconsistent with this
ARTICLE FIVE.
ARTICLE SIX
The Corporation reserves the right to amend, alter, change or repeal
any provision in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute.
ARTICLE SEVEN
No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL or (iv) for any transaction from which
the director derived an improper personal benefit.
ARTICLE EIGHT
The Corporation shall, to the fullest extent permitted by Section 145
of the DGCL, as the same may be amended and supplemented, indemnify each
director and officer of the Corporation from and against any and all of the
expenses, liabilities or other matters referred to in or covered by such
section and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any Bylaw, agreement, vote of stockholders, vote of disinterested directors or
otherwise, and shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of the heirs, executors and
administrators of such persons and the Corporation may purchase and maintain
insurance on behalf of any director or officer to the extent permitted by
Section 145 of the DGCL.
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<PAGE> 6
ARTICLE NINE
Special Meetings of the Corporation's stockholders may be called by
the President, the Board of Directors, or such other person or persons as may
be authorized in the Bylaws.
ARTICLE TEN
A. The Corporation shall not acquire, directly or indirectly, any shares
of the Voting Stock (as hereinafter defined), by purchase, exchange or
otherwise from any Related Person (as hereinafter defined) or any of its
Affiliates (as hereinafter defined) or Associates (as hereinafter defined).
B. This article shall not be applicable to any acquisition of Voting Stock
(i) pursuant to a Tender Offer (as hereinafter defined) made to all holders of
any class of Voting Stock on the same price, terms and conditions and, if for
less than all of the Voting Stock, subject to pro rata acceptance (except as to
holders of fewer than 100 shares), (ii) in compliance with Rule 10b-18 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended ("Exchange Act"), as in effect at the date of adoption of this article,
or (iii) for a total consideration per share, including payment for legal fees,
investment banking fees, brokerage fees and related costs and expenses of the
holder in acquiring such Voting Stock, not in excess of the Fair Market Value
per share, determined as of the Acquisition Date.
C. The term "Acquisition Date" means the date on which the Related Person
became a Related Person.
D. The terms "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Exchange Act as in
effect on the date of adoption of this article.
E. The term "Continuing Director" means any of the following persons: (i)
any member of the Board of Directors of the Corporation prior to the
consummation of the Public Offering, (ii) any member of the Board of Directors
of the Corporation, while such person is a member of the Board of Directors,
who is not a Related Person, an Affiliate or Associate of a Related Person or a
representative of any such person and who was a member of the Board of
Directors prior to the Acquisition Date, or (iii) any successor of a Continuing
Director, while such successor is a member of the Board of Directors, who is
not a Related Person, an Affiliate or Associate of a Related Person or a
representative of any such person and who is recommended or elected to succeed
the Continuing Director by a majority of Continuing Directors.
F. The term "Fair Market Value" means (i) in the case of stock, the
highest closing sales price during the 30-day period immediately preceding the
date in question of a share of such stock on the principal United States
securities exchange registered under the Exchange Act on which such stock is
listed, or, if such stock is not listed on any such exchange, the highest
closing bid quotation with respect to a share of such stock during the 30-day
period preceding the date in question on the National Association of Securities
Dealers, Inc. Automated Quotations System or any similar system then in use, or
if no such quotations are available, the fair market value on the date in
question of a share of such stock as determined by a majority of the Continuing
Directors in good faith; and (ii) in
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<PAGE> 7
the case of property other than stock, the fair market value of such property
on the date in question as determined by a majority of the Continuing Directors
in good faith.
G. The term "Related Person" means any person (other than the Corporation
or any Subsidiary) who or which is the beneficial owner directly or indirectly,
of ten percent or more of the voting power of the then outstanding Voting
Stock; provided, however, the term "Related Person" shall not include any
employee stock ownership or other employee benefit plan of the Corporation or
any Subsidiary, or any trustee of, or fiduciary with respect to, any such plan
when acting in such capacity.
H. The term "Subsidiary" means any company of which a majority of any
class of "Equity Security" (as that term is defined in Section 3(a)(11) of the
Exchange Act on the date this article is adopted) is beneficially owned,
directly or indirectly, by the Corporation.
I. The term "Tender Offer" means any tender offer for, or request or
invitation for tenders of, Voting Stock, within the meaning of Section 14(d)(1)
of the Exchange Act, as amended, as in effect at the date of adoption of this
article, and any purchase or series of purchases of Voting Stock at or above
then prevailing market prices for such Voting Stock pursuant to which more than
ten percent of the outstanding Voting Stock is acquired in any two-year period.
J. The term "Voting Stock" means shares of the capital stock of the
Corporation that are entitled to vote generally in the election of directors.
K. The term "Whole Board" means the total number of directors which this
Corporation would have if there were no vacancies.
L. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser
vote or no vote, but in addition to any affirmative vote of the Board of
Directors and the holders of any particular class or series of the Voting Stock
required by law or this Certificate of Incorporation, in order to alter, amend
or repeal this ARTICLE TEN, as an additional requirement for such action,
either (i) the Continuing Directors who shall at the time constitute at least a
majority of the Whole Board, shall expressly approve such action by at least an
eighty percent (80%) vote of such Continuing Directors; or (ii) such action
shall be adopted or approved by the affirmative vote of the holders of at least
eighty percent (80%) of the voting power of all of the then-outstanding shares
of the Voting Stock, voting together as a single class.
ARTICLE ELEVEN
Any action required or permitted to be taken by the stockholders of
the Corporation at an annual or special meeting of stockholders must be
effected at a duly called meeting and may not be taken or effected by a written
consent of stockholders in lieu thereof.
IN WITNESS WHEREOF, the undersigned have executed this Amended and
Restated Certificate of Incorporation on behalf of the Corporation and have
attested such execution and do
7
<PAGE> 8
verify and affirm, under penalty of perjury, that this Amended and Restated
Certificate of Incorporation is the act and deed of the Corporation and that
the facts stated herein are true as of this 6th day of August, 1997.
RED FOX INTERNATIONAL, INC.
By: /s/ BILL E. STALLWORTH
------------------------------------
Bill E. Stallworth,
Chief Executive Officer
8
<PAGE> 1
EXHIBIT 4.1
THIS CERTIFICATE IS TRANSFERABLE
IN NEW YORK, NY
TRANSCOASTAL MARINE SERVICES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK
SEE REVERSE FOR
CERTAIN DEFINITIONS
AND LEGENDS
CUSIP 893537 10 0
THIS CERTIFIES THAT ___________________________________________________________
IS THE OWNER OF________________________________________________________________
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $.001 PER SHARE OF THE
COMMON STOCK OF
TRANSCOASTAL MARINE SERVICES, INC.
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. This certificate
and the shares represented hereby are issued and shall be held subject to the
provisions of the laws of the State of Delaware and to all of the provisions of
the Restated Certificate of Incorporation and the Bylaws of the Corporation, as
amended from time to time (copies of which are on file at the office of the
Corporation), to all of which the holder of this certificate by acceptance
hereof assents. This certificate is not valid until countersigned by the
Transfer Agent and registered by the Registrar.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by its duly authorized officers and its corporate seal to be hereto
affixed.
Dated CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
SECRETARY
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE> 2
TRANSCOASTAL MARINE SERVICES, INC.
In addition to Common Stock, the Corporation is authorized to issue
Preferred Stock, par value $.001 per share. The Board of Directors of the
Corporation has authority to fix the number of shares and the designation of any
series of Preferred Stock and to determine the powers, designations, preferences
and relative, participating, optional or other special rights between owners of
stock or series thereof of the Corporation, and the qualifications, limitations
or restrictions of such preferences and/or rights. The Corporation will furnish
without charge to each stockholder who so requests a full statement of the
foregoing as established from time to time by the Restated Certificate of
Incorporation of the Corporation and by any certificate of designations. Any
such request should be made to the Secretary of the Corporation at the offices
of the Corporation.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable law or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common.
UNIF GIFT MIN ACT - ________________________ Custodian _______________________
(Cust) (Minor)
Under Uniform Gifts to Minors Act ________________________
(State)
UNIF TRF MIN ACT - ______________________ Custodian (until age __) _______
(Cust) (Minor)
Under Uniform Transfer to Minors Act ___________________
(State)
Additional abbreviations may also be used though not in above list.
For value received, ___________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
------------------------------
| |
| |
| |
------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------- shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ___________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ___________________
NOTICE:
X
THE SIGNATURE(S) TO THIS ASSIGNMENT MUST -----------------------------------
CORRESPOND WITH THE NAME(S) AS WRITTEN ON (SIGNATURE)
THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR X
ENLARGEMENT OR ANY CHANGE WHATEVER. -----------------------------------
(SIGNATURE)
---------------------------------------
THE SIGNATURES(S) SHOULD BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS AND SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS
WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM).
PURSUANT TO S.E.C. RULE 17Ad-15.
---------------------------------------
SIGNATURES(S) GUARANTEED BY:
---------------------------------------
<PAGE> 1
EXHIBIT 4.2
================================================================================
SHARE EXCHANGE AGREEMENT
BY AND AMONG
TRANSCOASTAL MARINE SERVICES, INC.
A DELAWARE CORPORATION
J & D CAPITAL INVESTMENTS, L.C.,
A NEVADA LIMITED LIABILITY COMPANY
JAMES B. THOMPSON
AND
BELDON E. FOX, JR.
_______ ____, 1997
================================================================================
<PAGE> 2
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (this "Agreement") is made this ____ day of
__________, 1997 (the "Effective Date"), between TRANSCOASTAL MARINE SERVICES,
INC., a Delaware corporation (the "Company"), J & D Capital Investments, L.C., a
Nevada limited liability company ("J & D"), James B. Thompson ("Thompson"), and
Beldon E. Fox, Jr. ("Fox") (collectively, J & D, Thompson and Fox shall be
referred to herein as the "Founders").
WHEREAS, each Founder holds shares of the Company's common stock, par
value $.001 per share (collectively, "Founder Common Stock");
WHEREAS, the Company has entered into an Agreement and Plan of Merger
with each of Woodson Construction Company, Inc., a Louisiana corporation
("Woodson"), Kori Corporation, a Louisiana corporation ("Kori"), and
Envirosystems, Inc., a Louisiana corporation ("Envirosystems"), and a Purchase
and Sale Agreement with Laine Construction Company, Inc., a Louisiana
corporation ("Laine") (collectively, Woodson, Kori, Envirosystems and Laine
shall be referred to herein as the "Woodson Companies," the Company's
acquisition of the Woodson Companies is the "Woodson Acquisition"); and
WHEREAS, as consideration for the acquisition of the Woodson Companies,
the Founders have agreed upon the occurrence of certain conditions to exchange
their outstanding common stock, par value $.001 per share ("Common Stock"), of
the Company for restricted common stock of the Company, par value $.001
("Restricted Common Stock");
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, and intending to be legally bound
hereby, the parties agree as follows:
1. THE EXCHANGE
1.1. The Exchange. The Founders hereby agree to exchange any and all
shares of Founders Common Stock for Restricted Common Stock effective
immediately following the Woodson Acquisition (the "Exchange") in the event, but
only in the event that: (i) the Company successfully completes its IPO (as
defined below) within one year from the Effective Date, and (ii) upon
consummation of the Woodson Acquisition, but for the Exchange, the aggregate
voting power of all Founder Common Stock would exceed the aggregate voting power
of all Common Stock received by shareholders of the Woodson Companies in the
Woodson Acquisition. In such event, the Exchange shall be deemed to occur
automatically and without any further action on the part of any person effective
as of the successful completion of the IPO, and thereafter, each certificate
previously representing the outstanding shares of Founder Common Stock shall
thereafter represent the right to receive shares of Restricted Common Stock. The
closing (the "Closing") will take place at 9:00 a.m. at the offices of
Chamberlain, Hrdlicka, White, Williams & Martin in Houston, Texas
contemporaneously with the Closing of the Company's IPO (the "Closing Date").
At the Closing, the Founders shall deliver to the Company certificates
representing the Founder Common Stock, and a completed letter of transmittal for
each Founder, and the Company shall deliver to the Founders, allocated in
proportion to their respective holdings of Founder Common Stock as set forth on
Exhibit 1.1 to this Agreement, certificates evidencing 975,000 shares of
Restricted Common Stock, subject to any adjustments for any stock dividend,
subdivision, reclassification, recapitalization, split-up, combination, or
exchange of shares or the like. For purposes of this Agreement, the term "IPO"
means the first underwritten public offering of the Company's common stock,
$.001 par value ("Common Stock"), other than any offering pursuant to any
registration statement (i) relating to any capital stock of the Company or
options, warrants or other rights to acquire any such capital stock issued or to
be issued primarily to directors, officers or employees of the Company, or any
of its subsidiaries (ii) relating to any employee benefit plan or interest
therein, (iii) relating principally to any preferred stock or debt securities of
the Company, or (iv) filed pursuant to Rule 145 under the Securities Act of
1933, as amended, or any successor or similar provisions.
<PAGE> 3
2. REPRESENTATIONS AND WARRANTIES
OF THE FOUNDERS
2.1. The Founders, jointly and severally, hereby represent and warrant
to the Company as follows:
2.1.1. Stock Ownership. Each Founder owns, beneficially and of
record, with full power to vote, the number of shares of Founder Common Stock
set forth beside such Founder's name on Exhibit 1.1 and such shares are so held
by the Founders free and clear of all liens, encumbrances and claims
whatsoever.
2.1.2. Authority. Each Founder has full right, power, legal
capacity and authority to (i) execute, deliver and perform this Agreement, and
all other documents and instruments referred to herein or contemplated hereby
to be executed, delivered and performed by the Founders (each a "Founder
Related Document") and (ii) consummate the transactions contemplated herein and
thereby. This Agreement has been duly executed and delivered by each Founder
and constitutes, and each Founder Related Document, when duly executed and
delivered by each Founder who is a party thereto will constitute, legal, valid
and binding obligations of such Founder enforceable against such Founder in
accordance with their respective terms and conditions, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether applied in a proceeding
at law or in equity).
2.1.3. Consents. No approval, consent, order or action of or
filing with any court, administrative agency, governmental authority or other
third party is required for the execution, delivery or performance by the
Founders of this Agreement or any Founder Related Document. The execution,
delivery and performance by each Founder of this Agreement and the Founder
Related Documents do not violate any mortgage, indenture, contract, agreement,
lease or commitment or other instrument of any kind to which such Founder is a
party or by which such Founder or such Founder's assets or properties may be
bound or affected or any law, rule or regulation applicable to such Founder or
any court injunction, order or decree or any valid and enforceable order of any
governmental agency in effect as of the date hereof having jurisdiction over
such Founder.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1. Representations and Warranties. The Company hereby represents
and warrants to the Founders as follows:
3.1.1. Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company is duly qualified or licensed as a foreign corporation
authorized to do business in all states in which any of its assets or
properties may be situated or where its business is conducted except where the
failure to obtain such qualification or license would not have a material
adverse effect.
3.1.2. Capitalization of the Company. As of the date hereof, the
total authorized capital stock of the Company is 20,000,000 shares of Common
Stock, of which 1,256,000 shares are issued
<PAGE> 4
and outstanding and of which 0 shares are held in the treasury of the Company,
2,000,000 shares of Preferred Stock, $.001 par value, of which 0 shares are
issued and outstanding and 0 shares are held in the treasury of the Company,
and 3,000,000 shares of Restricted Common Stock, of which 0 shares are issued
and outstanding and 0 shares are held in the treasury of the Company. The
outstanding shares of Common Stock have been duly and validly issued and are
fully paid and non-assessable.
3.1.3. Authority. The Company has full right, power, legal
capacity and authority to execute, deliver and perform this Agreement and all
documents and instruments referred to herein or contemplated hereby and to
consummate the transactions contemplated herein and thereby (the "Company
Related Documents"). This Agreement has been duly executed and delivered by
the Company and constitutes, and all the Company Related Documents, when
executed and delivered by the Company will constitute, legal, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms and conditions except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(whether applied in a proceeding at law or in equity).
3.1.4. Consents. No approval, consent, order or action of or
filing with any court, administrative agency, governmental authority or other
third party is required for the execution, delivery or performance by the
Company of this Agreement or the Company Related Documents or the consummation
by the Company of the transactions contemplated hereby.
4. SURVIVAL, INDEMNIFICATIONS
4.1. Survival. The representations and warranties set forth in this
Agreement and the other documents, instruments and agreements contemplated
hereby shall survive for a period of twelve (12) months after the date hereof
(the "Survival Period"). The liabilities of the parties under their respective
representations and warranties shall expire as of the expiration of the
Survival Period and no claim for indemnification may be made with respect to
any breach of any representation or warranty, except to the extent that written
notice of such breach shall have been given to the party against which such
claim is asserted on or before the date of such expiration. The covenants and
agreements of the parties herein and in other documents and instruments
executed and delivered in connection with the closing of the transactions
contemplated hereby shall survive for the maximum period permitted by law.
4.2. Indemnification.
4.2.1. The Company Indemnified Parties. Subject to the
provisions of Sections 4.1 hereof, the Founders, jointly and severally, shall
indemnify, save and hold harmless the Company and any of its assignees
(including lenders) and all of its respective officers, directors, employees,
representatives, agents, advisors and consultants and all of its respective
heirs, legal representatives, successors and assigns (collectively the "Company
Indemnified Parties") from and against any and all damages, liabilities,
losses, claims, deficiencies, penalties, interest, expenses, fines,
assessments,
<PAGE> 5
charges and costs, including reasonable attorneys' fees and court costs
(collectively "Losses") arising from, out of or in any manner connected with or
based on:
(i) the breach of any covenant of any Founder or the failure
by the Founders to perform any obligation of any Founder contained
herein or in any Founder Related Document; and
(ii) any inaccuracy in or breach of any representation or
warranty of any Founder contained herein or in any Founder Related
Document.
The foregoing indemnities shall not limit or otherwise adversely affect the
rights of indemnity of the Founders Indemnified Parties (as defined below) for
Losses under Section 4.2.2.
4.2.2. The Company Indemnity. Subject to the provisions of
Sections 4.1, the Company shall indemnify, save and hold harmless the Founders
and the Founders' heirs, legal representatives, successors and assigns (the
"Founder Indemnified Parties") from and against all Losses arising from, out of
or in any manner connected with or based on:
(i) any breach of any covenant of the Company or the failure
by the Company to perform any obligation of the Company contained herein
or in the Company Related Documents; and
(ii) any inaccuracy in or breach of any representation or
warranty of the Company contained herein or in the Company Related
Documents.
The foregoing indemnities shall not limit or otherwise adversely affect the
Company Indemnified Parties' rights of indemnity for Losses under Section
4.2.1.
4.3. Notice. The party (the "Indemnified Party") which may be
entitled to indemnity hereunder shall give prompt notice to the party obligated
to give indemnity hereunder (the "Indemnifying Party") of the assertion of any
claim, or the commencement of any suit, action or proceeding in respect of
which indemnity may be sought hereunder. Any failure on the part of any
Indemnified Party to give the notice described in this Section 5.3 shall
relieve the Indemnifying Party of its obligations under this Article 5 only to
the extent that such Indemnifying Party has been prejudiced by the lack of
timely and adequate notice. The Company shall have the obligation to assume
the defense or settlement of any third-party claim, suit, action or proceeding
in respect of which indemnity may be sought hereunder, provided that (i) the
Founders shall at all times have the right, at their option, to participate
fully therein, and (ii) if the Company does not proceed diligently to defend
the third-party claim, suit action or proceeding within ten (10) days after
receipt of notice of such third-party claim, suit, action or proceeding, the
Founders shall have the right, but not the obligation, to undertake the defense
of any such third-party claim, suit, action or proceeding. The Indemnifying
Party shall not be required to indemnify the Indemnified Party with respect to
any amounts paid in settlement of any third-party suit, action, proceeding or
investigation entered into without the written consent of the Indemnifying
Party; provided, however, that if the Indemnified Party is a the Company
Indemnified Party, such third-party suit, action, proceeding or investigation
may be settled without the consent of the Indemnifying Party on ten (10) days'
prior written notice
<PAGE> 6
to the Indemnifying Party if such third-party suit, action, proceeding or
investigation is then unreasonably interfering with the business or operations
of the Company and the settlement is commercially reasonable under the
circumstances; and provided further, that if the Indemnifying Party gives ten
(10) days' prior written notice to the Indemnified Party of a settlement offer
which the Indemnifying Party desires to accept and to pay all Losses with
respect thereto ("Settlement Notice") and the Indemnified Party fails or
refuses to consent to such settlement within ten (10) days after delivery of
the Settlement Notice to the Indemnified Party, and such settlement otherwise
complies with the provisions of this Section 4.3, the Indemnifying Party shall
not be liable for Losses arising from such third-party suit, action, proceeding
or investigation in excess of the amount proposed in such settlement offer.
Notwithstanding the foregoing, no Indemnifying Party will consent to the entry
of any judgment or enter into any settlement without the consent of the
Indemnified Party, if such judgment or settlement imposes any obligation or
liability upon the Indemnified Party other than the execution, delivery or
approval thereof and customary releases of claims with respect to the subject
matter thereof. The parties shall cooperate in defending any such third-party
suit, action, proceeding or investigation, and the defending party shall have
reasonable access to the books and records, and personnel in the possession or
control of the Indemnified Party which are pertinent to the defense. The
parties agree that the Indemnified Party may join the Indemnifying Party in any
suit, action, claim or proceeding brought by a third party, as to which any
right of indemnity created by this Agreement would or might apply, for the
purpose of enforcing any right of the indemnity granted to such Indemnified
Party pursuant to this Agreement.
5. MISCELLANEOUS
5.1. Notice. Any notice, delivery or communication required or
permitted to be given under this Agreement shall be in writing, and shall be
mailed, postage prepaid, or delivered, to the addresses given below, or sent by
telecopy to the telecopy numbers set forth below, as follows:
To the Founders:
J & D Capital Investments, L.C.
c/o Mr. G. Darcy Klug
505 Lorie Avenue, Suite I
Lafayette, Louisiana 70507
Telecopy: (318) 896-0034*
Mr. Beldon E. Fox, Jr.
c/o The Red Fox Companies of New Iberia, Inc.
4506 South Lewis Street
New Iberia, Louisiana 70560
Telecopy: (318) 367-1756
Mr. James B. Thompson
c/o TransCoastal Marine Services, Inc.
3535 Briarpark, Suite 210
Houston, Texas 77042
Telecopy: (713) 781-6364
<PAGE> 7
To the Company:
TransCoastal Marine Services, Inc.
3535 Briarpark, Suite 210
Houston, Texas 77042
Attention: President
Telecopy: (713) 781-6364
or other such address as shall be furnished in writing by any such party to the
other party, and such notice shall be effective and be deemed to have been
given as of the date actually received.
To the extent any notice provision in any other agreement, instrument or
document required to be executed or executed by the parties in connection with
the transactions contemplated herein contains a notice provision which is
different from the notice provision contained in this Section 5.1 with respect
to matters arising under such other agreement, instrument or document, the
notice provision in such other agreement, instrument or document shall control.
5.2. Further Documents. The Founders shall, at any time and from time
to time after the date hereof, upon request by the Company and without further
consideration, execute and deliver such instruments or other documents and take
such further action as may be reasonably required in order to perfect any other
undertaking made by the Founders hereunder.
5.3. Assignability. No Founder shall assign this Agreement in whole
or in part without the prior written consent of the Company, except by the
operation of law. The Company may assign its rights under this Agreement and
the Founder Related Documents without the consent of either Founder.
5.4. Exhibits and Schedules. The Exhibits and Schedules (and any
appendices thereto) referred to in this Agreement are and shall be incorporated
herein and made a part hereof.
5.5. Entire Agreement. This Agreement constitutes the full
understanding of the parties, a complete allocation of risks between them and a
complete and exclusive statement of the terms and conditions of their agreement
relating to the subject matter hereof and supersedes any and all prior
agreements, whether written or oral, that may exist between the parties with
respect thereto. Except as otherwise specifically provided in this Agreement,
no conditions, usage of trade, course of dealing or performance, understanding
or agreement purporting to modify, vary, explain or supplement the terms or
conditions of this Agreement shall be binding unless hereafter made in writing
and signed by the party to be bound, and no modification shall be effected by
the acknowledgment or acceptance of documents containing terms or conditions at
variance with or in addition to those set forth in this Agreement. No waiver
by any party with respect to any breach or default or of any right or remedy
and no course of dealing shall be deemed to constitute a continuing waiver of
any other breach or default or of any other right or remedy, unless such waiver
be expressed in writing signed by the party to be bound. Failure of a party to
exercise any right shall not be deemed a waiver of such right or rights in the
future.
<PAGE> 8
5.6. Headings. Headings as to the contents of particular articles and
sections are for convenience only and are in no way to be construed as part of
this Agreement or as a limitation of the scope of the particular articles or
sections to which they refer.
5.7. CONTROLLING LAW AND JURISDICTION. THE VALIDITY, INTERPRETATION
AND PERFORMANCE OF THIS AGREEMENT AND ANY DISPUTE CONNECTED HEREWITH SHALL BE
GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.
5.8. No Third Party Beneficiaries. No person or entity not a party to
this Agreement shall have rights under this Agreement as a third party
beneficiary or otherwise.
5.9. Amendments and Waivers. This Agreement may be amended by the
Company and the Founders; provided that all amendments to this Agreement must
be by an instrument in writing signed on behalf of the Company and by the
Founders. Any term or provision of this Agreement may be waived in writing at
any time by the party which is entitled to the benefits thereof.
5.10. Non-Recourse. No recourse for the payment of any amounts due
hereunder or for any claim based on this Agreement or the transactions
contemplated hereby or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of the Company in this Agreement
shall be had against any incorporator, organizer, promoter, Founder, officer,
director, employee or representative as such (other than the Founders as set
forth herein), past, present or future, of the Company or of any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Agreement.
5.11. When Effective. This Agreement shall become effective only upon
the execution and delivery of one or more counterparts of this Agreement by
each of the Company and the Founders.
5.12. Number and Gender of Words. Whenever herein the singular number
is used, the same shall include the plural where appropriate and words of any
gender shall include each other gender where appropriate.
5.13. Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid, or unenforceable under present or future laws, such
provisions shall be fully severable as if such invalid or unenforceable
provisions had never comprised a part of the Agreement; and the remaining
provisions of the Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of such illegal, invalid
or unenforceable provision, there shall be automatically as a part of this
Agreement, a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
5.14. Multiple Counterparts. This Agreement may be executed in a
number of identical counterparts. If so executed, each of such counterparts is
to be deemed an original for all purposes
<PAGE> 9
and all such counterparts shall, collectively, constitute one agreement, but,
in making proof of this Agreement, it shall not be necessary to produce or
account for more than one such counterpart.
5.15. No Rule of Construction. All of the parties hereto have been
represented by counsel in the negotiations and preparation of this Agreement;
therefore, this Agreement will be deemed to be drafted by each of the parties
hereto, and no rule of construction will be invoked respecting the authorship
of this Agreement.
5.16. Expenses. Each of the parties shall bear all of their own
expenses in connection with the negotiation and closing of this Agreement and
the transactions contemplated hereby.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered on the
date first hereinabove written.
THE COMPANY:
TRANSCOASTAL MARINE SERVICES, INC., a
Delaware corporation
By:
--------------------------------
Bill Stallworth, Chief
Executive Officer
FOUNDERS:
J & D Capital Investments, L.C.
By:
----------------------------------
G. Darcy Klug, President
-------------------------------------
James B. Thompson (Individually)
-------------------------------------
Beldon E. Fox, Jr. (Individually)
<PAGE> 10
EXHIBIT 1.1
(TO SHARE EXCHANGE AGREEMENT)
HOLDERS OF FOUNDER COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
FOUNDER FOUNDER COMMON STOCK
------- --------------------
<S> <C>
J & D Capital 800,000 shares
Investments, L.C.
James B. Thompson 100,000 shares
Beldon E. Fox, Jr. 75,000 shares
</TABLE>
<PAGE> 1
EXHIBIT 5.1
October 7, 1997
TransCoastal Marine Services, Inc.
3535 Briarpark, Suite 210
Houston, Texas 77042
Gentlemen:
We have acted as counsel to TransCoastal Marine Services, Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing by
the Company of a Registration Statement on Form S-1 and Amendment No. 1 thereto
(the "Registration Statement") under the Securities Act of 1933, as amended,
relating to the proposed offering of up to 5,750,000 shares (the "Shares") of
the common stock, par value $.001 per share, of the Company, to be offered upon
the terms and subject to the conditions set forth in a proposed Underwriting
Agreement by and between Jefferies & Company, Inc. and Johnson Rice & Company
L.L.C., as representatives of the several underwriters, and the Company.
In so acting, we have examined the Registration Statement, originals or
copies, certified or otherwise identified to our satisfaction, of the Amended
and Restated Certificate of Incorporation of the Company, the Bylaws of the
Company, the corporate proceedings with respect to the offering of the Shares,
and such corporate records, agreements, documents and other instruments, and
such certificates or comparable documents of public officials and of officers
and representatives of the Company, and have made such inquiries of such
officers and representatives, as we have deemed relevant and necessary as a
basis for the opinions hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity and completeness of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies, the
authenticity and completeness of the originals of such latter documents, and the
correctness of all statements of fact contained in all documents that we have
examined.
Based on the foregoing, and subject to the qualifications stated herein, we
are of the opinion that the Shares are duly authorized and, when issued and
delivered to the purchasers thereof against payment therefor in accordance with
the terms of the Underwriting Agreement, will be validly issued, fully paid and
non-assessable.
The opinions expressed herein are limited to the corporate laws of the
State of Delaware, and we express no opinion as to the effect on the matters
covered by this letter of the laws of any other jurisdiction.
The opinions expressed herein are rendered solely for your benefit in
connection with the transactions described herein. Those opinions may not be
used or relied upon by any other person, nor may this letter or any copies
thereof be furnished to a third party, filed with a governmental agency, quoted,
cited or otherwise referred to without our prior written consent, except that we
hereby consent to the filing of this opinion as an exhibit to the Registration
Statement and any amendment thereto. Consent also is given to the reference to
this firm under the caption "Legal Matters" in the prospectuses forming a part
of the Registration Statement.
Very truly yours,
CHAMBERLAIN, HRDLICKA, WHITE,
WILLIAMS & MARTIN
<PAGE> 1
EXHIBIT 8.1
October __, 1997
TransCoastal Marine Services, Inc.
3535 Briarpark, Suite 210
Houston, Texas 77042
Ladies and Gentlemen:
This letter states our opinion regarding certain federal income tax
consequences of the proposed merger of Woodson Construction Co., Inc.
("Target") with and into Woodson Acquisition Corp. ("Merger Sub"), a wholly
owned subsidiary of TransCoastal Marine Services, Inc. ("TCMS") pursuant to
that certain Agreement and Plan of Merger dated as of August 28, 1997
("Agreement"). Our conclusions are based solely on the U.S. federal income tax
laws. We are not hereby addressing any other legal consequences arising under
federal, state, local, foreign or other law. All capitalized terms used but not
defined in this letter have the same meanings given to them in the Agreement.
STATEMENT OF FACTS
We have examined such documents, corporate records, and certificates
(copies of which are attached) as we have considered necessary or appropriate
for purposes of rendering our opinion. For purposes of such examination, we
have assumed the authenticity of all original documents, the accuracy of all
copies, and the genuineness of all signatures. Based on such examination, the
facts related to the proposed merger transaction (the "Merger") are as follows:
A. Organizational Matters
1. TCMS is a corporation duly organized and validly
existing under the laws of the State of Delaware. Merger Sub is a
corporation duly organized and validly existing under the laws of the
State of Louisiana. Immediately prior to the Merger, all of Merger
Sub's issued and outstanding shares of stock were owned by TCMS.
2. Target is a corporation duly organized and validly
existing under the laws of the State of Louisiana. Immediately prior
to the Merger, all of Target's issued and outstanding shares of
capital stock were owned by Louis Woodson (the "Shareholder").
<PAGE> 2
TransCoastal Marine Services, Inc.
October __, 1997
Page 2
B. The Merger
1. At the Effective Time, Target will be merged with and
into Merger Sub pursuant to Articles of Merger filed with the State of
Louisiana in compliance with the Louisiana Business Corporation Law,
with Merger Sub surviving the transaction. Such transaction is
structured and intended to satisfy the requirements for tax-free
treatment under sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal
Revenue Code of 1986, as amended (the "Code"), and is referred to as
the "Merger" for purposes of this letter.
2. As part of the Merger, each issued and outstanding
share of Target common stock will be converted into the right to
receive the number of validly issued, fully paid and nonassessable
shares of TCMS Common Stock in an amount equal to the amount
determined by dividing $8,700,000 by the Share Price. The Merger was
structured and intended to provide the Shareholder with stock equal in
value to 100% of the overall consideration provided to the Shareholder
as part of the Merger.
3. All shares of Target common stock held by the Target
as treasury stock will be canceled, retired, and cease to exist, and
no consideration will be delivered in exchange for any such shares.
Additionally, the Shareholder will receive cash in lieu of
certificates or scrip for fractional shares of TCMS Common Stock that
are eliminated by rounding down to the nearest whole share. Each share
of Merger Sub stock issued and outstanding at the Effective Time will
remain outstanding and unchanged following the Merger, and will
constitute all of the issued and outstanding capital stock of Merger
Sub following the Merger.
4. The TCMS Common Stock will not be registered within
the meaning of federal and state securities laws. However, the
Shareholder will have certain "demand" and "piggyback" registration
rights with respect to the TCMS Common Stock.
5. The Agreement provides that the Shareholder generally
cannot dispose of any TCMS Common Stock within the two-year period
following the Merger if the disposition would cause the fair market
value of the TCMS Common Stock (determined as of the Effective Date)
retained by the Shareholder to be less than 50% of the fair market
value of the Target Common Stock held by the Shareholder immediately
prior to the Merger. A disposition is permitted only if the
Shareholder provides TCMS with an opinion of counsel reasonably
satisfactory to TCMS that such disposition would not violate the
continuity of shareholder interest requirement under sections
368(a)(1)(A) and 368(a)(2)(D) of the Code.
6. Neither TCMS nor the Merger Sub will undertake any
obligation to pay, and will not pay, any expenses on behalf of either
Target or the Shareholder as part of the Merger that were not related
to or incurred in the course of accomplishing the Merger.
<PAGE> 3
TransCoastal Marine Services, Inc.
October __, 1997
Page 3
7. Merger Sub will obtain all of Target's historic
business assets, including all of its operating assets (taking into
account the distribution and/or transfer by Target of its assets, if
any, made prior to and in connection with the Merger), as part of the
Merger. At the time of the Merger, TCMS will plan and intend to cause
the Merger Sub to continue conducting Target's historic business
activities, and/or use a significant portion of Target's historic
business assets to conduct a business activity. Additionally, Merger
Sub will, at the time of the Merger, have no plan or intention to
distribute in kind, transfer, sell or otherwise convey any of its
assets to TCMS following the date of the Merger.
C. Related Transactions
1. In connection with the Merger, Merger Sub will enter
into an employment agreement with the Shareholder pursuant to which
the Shareholder will become employed as an executive of Merger Sub for
an initial term of three years.
REPRESENTATIONS
In connection with the Merger and the preparation of this letter, the
following representations have been made to us by management of TCMS and
Target:
1. The ratio for the exchange of Target stock for TCMS
stock as part of the Merger was negotiated through arm's length
bargaining between unrelated parties, neither of whom were acting
under a compulsion to buy or sell.
2. There is no plan or intention by the Shareholder to
sell, exchange, transfer, or otherwise reduce his risk of ownership
with respect to TCMS stock that he receives as part of the Merger.
3. Merger Sub will acquire at least 90% of the fair
market value of the net assets and at least 70% of the fair market
value of the gross assets held by the Target immediately prior to the
Merger, taking into account amounts paid by the Target to the
Shareholder, assets used by the Target to pay its reorganization
expenses, and all redemptions and distributions (except for regular
normal dividends) made by the Target immediately preceding the Merger.
4. The liabilities of the Target assumed by Merger Sub,
and the liabilities to which the assets of the Target transferred to
Merger Sub are subject, were incurred by the Target in the ordinary
course of its business, and the fair market value of the assets of the
Target transferred to Merger Sub as part of the Merger will equal or
exceed the sum of the liabilities assumed by Merger Sub plus the
amount of liabilities, if any, to which the transferred assets are
subject.
<PAGE> 4
TransCoastal Marine Services, Inc.
October __, 1997
Page 4
5. There is no intercorporate indebtedness existing
between TCMS and the Target that was issued, acquired, or will be
settled at a discount.
6. No two parties to the Merger are investment companies
as defined in section 368(a)(2)(F)(iii) and (iv) of the Code.
7. The Target is not under the jurisdiction of a court
in a title 11 or similar case within the meaning of section
368(a)(3)(A) of the Code.
8. The Shareholder and TCMS believe that none of the
compensation to be received by the Shareholder in his capacity as an
employee or consultant of TCMS will constitute separate consideration
for, or be allocable to, any shares of the Target stock owned by the
Shareholder; none of the shares of TCMS stock received by the
Shareholder as part of the Merger will constitute separate
consideration for, or be allocable to, any employment or consulting
agreement of the Shareholder; and the compensation paid to the
Shareholder in his capacity as an employee or consultant of TCMS will
be commensurate with amounts paid to third parties bargaining at
arm's-length for similar services.
9. The payment of cash in lieu of fractional shares of
TCMS stock is solely for the purpose of avoiding the expense and
inconvenience to TCMS of issuing fractional shares and does not
represent separately bargained-for consideration. The total cash
consideration that will be paid in the Merger to the Shareholder
instead of issuing fractional shares of TCMS stock will not exceed one
percent of the total consideration that will be issued in the Merger
to the Shareholder in exchange for his shares of Target stock. The
fractional share interests of the Shareholder will be aggregated, and
the Shareholder will not receive cash for such fractional share
interests in an amount equal to or greater than the value of one full
share of TCMS stock.
10. The Target does not have any outstanding fractional
shares of its stock, and, at the time of the Merger, will not have any
outstanding warrants, options, convertible securities, or any other
type of right pursuant to which any person could acquire stock of the
Target.
11. The Agreement represents the full and complete
agreement between TCMS, Target, and the Shareholder regarding the
Merger.
<PAGE> 5
TransCoastal Marine Services, Inc.
October __, 1997
Page 5
OPINIONS
Based upon the foregoing, we are of the opinion that:
1. The Merger will satisfy the requirements of sections
368(a)(1)(A) and 368(a)(2)(D) of the Code, and thus TCMS, Merger Sub
and Target will each be a "party to a reorganization" within the
meaning of Section 368(b) of the Code.
2. Neither TCMS, Merger Sub, nor Target will recognize
any gain (or loss) in connection with the Merger.
The opinions that we state in this letter represent our best legal
judgment. However, they have no binding effect or official status of any kind.
It is possible that the Internal Revenue Service ("IRS") will disagree with
all, or some, of our conclusions. The opinions are based upon existing
provisions of the Code, the applicable Treasury Department regulations
promulgated thereunder, published rulings, procedures, and pronouncements of
the IRS which are authority, applicable legislative history, and judicial
decisions. All such authorities are subject to change at any time, either
prospectively or retroactively, and any such change could modify the opinions
stated in this letter. In rendering our opinions, we undertake no
responsibility to advise you of any such change in the federal income tax laws.
The opinions may not be relied upon to the extent that there is any such change
in the federal income tax laws that relate to the transactions that are the
subject of this letter.
Our opinions address only the matters expressly set forth in this
letter, and no opinion is to be implied or inferred except as expressly stated
in this letter. The opinions stated in this letter are stated and effective as
of the date first above written. This letter is solely for the benefit of TCMS,
Merger Sub, Target, Jefferies & Company, Inc., Johnson Rice & Company L.L.C.,
and the Shareholder, and may not be relied upon by any other person without our
prior written consent, except we hereby consent to the filing of this opinion
as an exhibit to the Registration Statement on Form S-1 of TCMS filed with the
Securities and Exchange Commission, and any amendment thereto.
Sincerely,
CHAMBERLAIN, HRDLICKA, WHITE,
WILLIAMS & MARTIN
<PAGE> 1
EXHIBIT 8.2
October __, 1997
TransCoastal Marine Services, Inc.
3535 Briarpark, Suite 210
Houston, Texas 77042
Ladies and Gentlemen:
This letter states our opinion regarding certain federal income tax
consequences of the proposed merger of Kori Construction, Inc. ("Target") with
and into Kori Acquisition Corp. ("Merger Sub"), a wholly owned subsidiary of
TransCoastal Marine Services, Inc. ("TCMS") pursuant to that certain Agreement
and Plan of Merger dated as of August 28, 1997 ("Agreement"). Our conclusions
are based solely on the U.S. federal income tax laws. We are not hereby
addressing any other legal consequences arising under federal, state, local,
foreign or other law. All capitalized terms used but not defined in this letter
have the same meanings given to them in the Agreement.
STATEMENT OF FACTS
We have examined such documents, corporate records, and certificates
(copies of which are attached) as we have considered necessary or appropriate
for purposes of rendering our opinion. For purposes of such examination, we
have assumed the authenticity of all original documents, the accuracy of all
copies, and the genuineness of all signatures. Based on such examination, the
facts related to the proposed merger transaction (the "Merger") are as follows:
A. Organizational Matters
1. TCMS is a corporation duly organized and validly
existing under the laws of the State of Delaware. Merger Sub is a
corporation duly organized and validly existing under the laws of the
State of Louisiana. Immediately prior to the Merger, all of Merger
Sub's issued and outstanding shares of stock were owned by TCMS.
2. Target is a corporation duly organized and validly
existing under the laws of the State of Louisiana. Immediately prior
to the Merger, all of Target's issued and outstanding shares of
capital stock were owned in equal parts by Linda Woodson, Cheryl W.
Hendry, and Paula K. Woodson (the "Shareholders").
<PAGE> 2
TransCoastal Marine Services, Inc.
October __, 1997
Page 2
B. The Merger
1. At the Effective Time, Target will be merged with and
into Merger Sub pursuant to Articles of Merger filed with the State of
Louisiana in compliance with the Louisiana Business Corporation Law,
with Merger Sub surviving the transaction. Such transaction is
structured and intended to satisfy the requirements for tax-free
treatment under sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal
Revenue Code of 1986, as amended (the "Code"), and is referred to as
the "Merger" for purposes of this letter.
2. As part of the Merger, each issued and outstanding
share of Target common stock will be converted into the right to
receive the number of validly issued, fully paid and nonassessable
shares of TCMS Common Stock in an amount equal to the amount
determined by dividing $5,100,000 by the Share Price. The Merger was
structured and intended to provide the Shareholder with stock equal in
value to 100% of the overall consideration provided to the Shareholder
as part of the Merger.
3. All shares of Target common stock held by the Target
as treasury stock will be canceled, retired, and cease to exist, and
no consideration will be delivered in exchange for any such shares.
Additionally, the Shareholders will receive cash in lieu of
certificates or scrip for fractional shares of TCMS common stock that
are eliminated by rounding down to the nearest whole share. Each share
of Merger Sub stock issued and outstanding at the Effective Time will
remain outstanding and unchanged following the Merger, and will
constitute all of the issued and outstanding capital stock of Merger
Sub following the Merger.
4. The TCMS Common Stock will not be registered within
the meaning of federal and state securities laws. However, the
Shareholders will have certain "demand" and "piggyback" registration
rights with respect to the TCMS Common Stock.
5. The Agreement provides that the Shareholders
generally cannot dispose of any TCMS Common Stock within the two-year
period following the Merger if the disposition would cause the fair
market value of the TCMS Common Stock (determined as of the Effective
Date) retained by the Shareholders to be less than 50% of the fair
market value of the Target Common Stock held by the Shareholders
immediately prior to the Merger. A disposition is permitted only if
the disposing Shareholder provides TCMS with an opinion of counsel
reasonably satisfactory to TCMS that such disposition would not
violate the continuity of shareholder interest requirement under
sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
6. Neither TCMS nor the Merger Sub will undertake any
obligation to pay, and will not pay, any expenses on behalf of either
Target or the Shareholders as part of the Merger that were not related
to or incurred in the course of accomplishing the Merger.
<PAGE> 3
TransCoastal Marine Services, Inc.
October __, 1997
Page 3
7. Merger Sub will obtain all of Target's historic
business assets, including all of its operating assets (taking into
account the distribution and/or transfer by Target of its assets, if
any, made prior to and in connection with the Merger), as part of the
Merger. At the time of the Merger, TCMS will plan and intend to cause
the Merger Sub to continue conducting Target's historic business
activities, and/or use a significant portion of Target's historic
business assets to conduct a business activity. Additionally, Merger
Sub will, at the time of the Merger, have no plan or intention to
distribute in kind, transfer, sell or otherwise convey any of its
assets to TCMS following the date of the Merger.
C. Related Transactions
1. In connection with the Merger, Merger Sub will enter
into an employment agreement with each of the Shareholders pursuant to
which each of the Shareholders will become employed as an executive of
Merger Sub for an initial term of three years.
REPRESENTATIONS
In connection with the Merger and the preparation of this letter, the
following representations have been made to us by management of TCMS and
Target:
1. The ratio for the exchange of Target stock for TCMS
stock as part of the Merger was negotiated through arm's length
bargaining between unrelated parties, neither of whom were acting
under a compulsion to buy or sell.
2. There is no plan or intention by any of the
Shareholder to sell, exchange, transfer, or otherwise reduce their
risk of ownership with respect to the TCMS stock that they receive as
part of the Merger.
3. Merger Sub will acquire at least 90% of the fair
market value of the net assets and at least 70% of the fair market
value of the gross assets held by the Target immediately prior to the
Merger, taking into account amounts paid by the Target to the
Shareholders, assets used by the Target to pay its reorganization
expenses, and all redemptions and distributions (except for regular
normal dividends) made by the Target immediately preceding the Merger.
4. The liabilities of the Target assumed by Merger Sub,
and the liabilities to which the assets of the Target transferred to
Merger Sub are subject, were incurred by the Target in the ordinary
course of its business, and the fair market value of the assets of the
Target transferred to Merger Sub as part of the Merger will equal or
exceed the sum of the liabilities assumed by Merger Sub plus the
amount of liabilities, if any, to which the transferred assets are
subject.
<PAGE> 4
TransCoastal Marine Services, Inc.
October __, 1997
Page 4
5. There is no intercorporate indebtedness existing
between TCMS and the Target that was issued, acquired, or will be
settled at a discount.
6. No two parties to the Merger are investment companies
as defined in section 368(a)(2)(F)(iii) and (iv) of the Code.
7. The Target is not under the jurisdiction of a court
in a title 11 or similar case within the meaning of section
368(a)(3)(A) of the Code.
8. The Shareholders and TCMS believe that none of the
compensation to be received by any Shareholder in her capacity as an
employee or consultant of TCMS will constitute separate consideration
for, or be allocable to, any shares of the Target stock owned by the
Shareholder; none of the shares of TCMS stock received by any
Shareholder as part of the Merger will constitute separate
consideration for, or be allocable to, any employment or consulting
agreement of the Shareholder; and the compensation paid to any
Shareholder in her capacity as an employee or consultant of TCMS will
be commensurate with amounts paid to third parties bargaining at
arm's-length for similar services.
9. The payment of cash in lieu of fractional shares of
TCMS stock is solely for the purpose of avoiding the expense and
inconvenience to TCMS of issuing fractional shares and does not
represent separately bargained-for consideration. The total cash
consideration that will be paid in the Merger to the Shareholders
instead of issuing fractional shares of TCMS stock will not exceed one
percent of the total consideration that will be issued in the Merger
to the Shareholders in exchange for their shares of Target stock. The
fractional share interests of the Shareholders will be aggregated, and
no Shareholder will receive cash for such fractional share interests
in an amount equal to or greater than the value of one full share of
TCMS stock.
10. The Target does not have any outstanding fractional
shares of its stock, and, at the time of the Merger, will not have any
outstanding warrants, options, convertible securities, or any other
type of right pursuant to which any person could acquire stock of the
Target.
11. The Agreement represents the full and complete
agreement between TCMS, Target, and the Shareholders regarding the
Merger.
<PAGE> 5
TransCoastal Marine Services, Inc.
October __, 1997
Page 5
OPINIONS
Based upon the foregoing, we are of the opinion that:
1. The Merger will satisfy the requirements of sections
368(a)(1)(A) and 368(a)(2)(D) of the Code, and thus TCMS, Merger Sub
and Target will each be a "party to a reorganization" within the
meaning of Section 368(b) of the Code.
2. Neither TCMS, Merger Sub, nor Target will recognize
any gain (or loss) in connection with the Merger.
The opinions that we state in this letter represent our best legal
judgment. However, they have no binding effect or official status of any kind.
It is possible that the Internal Revenue Service ("IRS") will disagree with
all, or some, of our conclusions. The opinions are based upon existing
provisions of the Code, the applicable Treasury Department regulations
promulgated thereunder, published rulings, procedures, and pronouncements of
the IRS which are authority, applicable legislative history, and judicial
decisions. All such authorities are subject to change at any time, either
prospectively or retroactively, and any such change could modify the opinions
stated in this letter. In rendering our opinions, we undertake no
responsibility to advise you of any such change in the federal income tax laws.
The opinions may not be relied upon to the extent that there is any such change
in the federal income tax laws that relate to the transactions that are the
subject of this letter.
Our opinions address only the matters expressly set forth in this
letter, and no opinion is to be implied or inferred except as expressly stated
in this letter. The opinions stated in this letter are stated and effective as
of the date first above written. This letter is solely for the benefit of TCMS,
Merger Sub, Target, Jefferies & Company, Inc., Johnson Rice & Company L.L.C.,
and the Shareholder, and may not be relied upon by any other person without our
prior written consent, except we hereby consent to the filing of this opinion
as an exhibit to the Registration Statement on Form S-1 of TCMS filed with the
Securities and Exchange Commission, and any amendment thereto.
Sincerely,
CHAMBERLAIN, HRDLICKA, WHITE,
WILLIAMS & MARTIN
<PAGE> 1
EXHIBIT 8.3
October __, 1997
TransCoastal Marine Services, Inc.
3535 Briarpark, Suite 210
Houston, Texas 77042
Ladies and Gentlemen:
This letter states our opinion regarding certain federal income tax
consequences of the proposed merger of Enviro Systems, Inc. ("Target") with and
into EnviroSystems Acquisition Corp. ("Merger Sub"), a wholly owned subsidiary
of TransCoastal Marine Services, Inc. ("TCMS") pursuant to that certain
Agreement and Plan of Merger dated as of August 28, 1997 ("Agreement"). Our
conclusions are based solely on the U.S. federal income tax laws. We are not
hereby addressing any other legal consequences arising under federal, state,
local, foreign or other law. All capitalized terms used but not defined in this
letter have the same meanings given to them in the Agreement.
STATEMENT OF FACTS
We have examined such documents, corporate records, and certificates
(copies of which are attached) as we have considered necessary or appropriate
for purposes of rendering our opinion. For purposes of such examination, we
have assumed the authenticity of all original documents, the accuracy of all
copies, and the genuineness of all signatures. Based on such examination, the
facts related to the proposed merger transaction (the "Merger") are as follows:
A. Organizational Matters
1. TCMS is a corporation duly organized and validly
existing under the laws of the State of Delaware. Merger Sub is a
corporation duly organized and validly existing under the laws of the
State of Louisiana. Immediately prior to the Merger, all of Merger
Sub's issued and outstanding shares of stock were owned by TCMS.
2. Target is a corporation duly organized and validly
existing under the laws of the State of Louisiana. Immediately prior
to the Merger, all of Target's issued and outstanding shares of
capital stock were owned in equal parts by Linda Woodson, Cheryl W.
Hendry, and Paula K. Woodson (the "Shareholders").
<PAGE> 2
TransCoastal Marine Services, Inc.
October __, 1997
Page 2
B. The Merger
1. At the Effective Time, Target will be merged with and
into Merger Sub pursuant to Articles of Merger filed with the State of
Louisiana in compliance with the Louisiana Business Corporation Law,
with Merger Sub surviving the transaction. Such transaction is
structured and intended to satisfy the requirements for tax-free
treatment under sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal
Revenue Code of 1986, as amended (the "Code"), and is referred to as
the "Merger" for purposes of this letter.
2. As part of the Merger, each issued and outstanding
share of Target common stock will be converted into the right to
receive the number of validly issued, fully paid and nonassessable
shares of TCMS Common Stock in an amount equal to the amount
determined by dividing $600,000 by the Share Price. The Merger was
structured and intended to provide the Shareholder with stock equal in
value to 100% of the overall consideration provided to the Shareholder
as part of the Merger.
3. All shares of Target common stock held by the Target
as treasury stock will be canceled, retired, and cease to exist, and
no consideration will be delivered in exchange for any such shares.
Additionally, the Shareholders will receive cash in lieu of
certificates or scrip for fractional shares of TCMS common stock that
are eliminated by rounding down to the nearest whole share. Each share
of Merger Sub stock issued and outstanding at the Effective Time will
remain outstanding and unchanged following the Merger, and will
constitute all of the issued and outstanding capital stock of Merger
Sub following the Merger.
4. The TCMS Common Stock will not be registered within
the meaning of federal and state securities laws. However, the
Shareholders will have certain "demand" and "piggyback" registration
rights with respect to the TCMS Common Stock.
5. The Agreement provides that the Shareholders
generally cannot dispose of any TCMS Common Stock within the two-year
period following the Merger if the disposition would cause the fair
market value of the TCMS Common Stock (determined as of the Effective
Date) retained by the Shareholders to be less than 50% of the fair
market value of the Target Common Stock held by the Shareholders
immediately prior to the Merger. A disposition is permitted only if
the disposing Shareholder provides TCMS with an opinion of counsel
reasonably satisfactory to TCMS that such disposition would not
violate the continuity of shareholder interest requirement under
sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
6. Neither TCMS nor the Merger Sub will undertake any
obligation to pay, and will not pay, any expenses on behalf of either
Target or the Shareholders as part of the Merger that were not related
to or incurred in the course of accomplishing the Merger.
<PAGE> 3
TransCoastal Marine Services, Inc.
October __, 1997
Page 3
7. Merger Sub will obtain all of Target's historic
business assets, including all of its operating assets (taking into
account the distribution and/or transfer by Target of its assets, if
any, made prior to and in connection with the Merger), as part of the
Merger. At the time of the Merger, TCMS will plan and intend to cause
the Merger Sub to continue conducting Target's historic business
activities, and/or use a significant portion of Target's historic
business assets to conduct a business activity. Additionally, Merger
Sub will, at the time of the Merger, have no plan or intention to
distribute in kind, transfer, sell or otherwise convey any of its
assets to TCMS following the date of the Merger.
C. Related Transactions
1. In connection with the Merger, Merger Sub will enter
into an employment agreement with each of the Shareholders pursuant to
which each of the Shareholders will become employed as an executive of
Merger Sub for an initial term of three years.
REPRESENTATIONS
In connection with the Merger and the preparation of this letter, the
following representations have been made to us by management of TCMS and
Target:
1. The ratio for the exchange of Target stock for TCMS
stock as part of the Merger was negotiated through arm's length
bargaining between unrelated parties, neither of whom were acting
under a compulsion to buy or sell.
2. There is no plan or intention by any of the
Shareholder to sell, exchange, transfer, or otherwise reduce their
risk of ownership with respect to the TCMS stock that they receive as
part of the Merger.
3. Merger Sub will acquire at least 90% of the fair
market value of the net assets and at least 70% of the fair market
value of the gross assets held by the Target immediately prior to the
Merger, taking into account amounts paid by the Target to the
Shareholders, assets used by the Target to pay its reorganization
expenses, and all redemptions and distributions (except for regular
normal dividends) made by the Target immediately preceding the Merger.
4. The liabilities of the Target assumed by Merger Sub,
and the liabilities to which the assets of the Target transferred to
Merger Sub are subject, were incurred by the Target in the ordinary
course of its business, and the fair market value of the assets of the
Target transferred to Merger Sub as part of the Merger will equal or
exceed the sum of the liabilities assumed by Merger Sub plus the
amount of liabilities, if any, to which the transferred assets are
subject.
<PAGE> 4
TransCoastal Marine Services, Inc.
October __, 1997
Page 4
5. There is no intercorporate indebtedness existing
between TCMS and the Target that was issued, acquired, or will be
settled at a discount.
6. No two parties to the Merger are investment companies
as defined in section 368(a)(2)(F)(iii) and (iv) of the Code.
7. The Target is not under the jurisdiction of a court
in a title 11 or similar case within the meaning of section
368(a)(3)(A) of the Code.
8. The Shareholders and TCMS believe that none of the
compensation to be received by any Shareholder in her capacity as an
employee or consultant of TCMS will constitute separate consideration
for, or be allocable to, any shares of the Target stock owned by the
Shareholder; none of the shares of TCMS stock received by any
Shareholder as part of the Merger will constitute separate
consideration for, or be allocable to, any employment or consulting
agreement of the Shareholder; and the compensation paid to any
Shareholder in her capacity as an employee or consultant of TCMS will
be commensurate with amounts paid to third parties bargaining at
arm's-length for similar services.
9. The payment of cash in lieu of fractional shares of
TCMS stock is solely for the purpose of avoiding the expense and
inconvenience to TCMS of issuing fractional shares and does not
represent separately bargained-for consideration. The total cash
consideration that will be paid in the Merger to the Shareholders
instead of issuing fractional shares of TCMS stock will not exceed one
percent of the total consideration that will be issued in the Merger
to the Shareholders in exchange for their shares of Target stock. The
fractional share interests of the Shareholders will be aggregated, and
no Shareholder will receive cash for such fractional share interests
in an amount equal to or greater than the value of one full share of
TCMS stock.
10. The Target does not have any outstanding fractional
shares of its stock, and, at the time of the Merger, will not have any
outstanding warrants, options, convertible securities, or any other
type of right pursuant to which any person could acquire stock of the
Target.
11. The Agreement represents the full and complete
agreement between TCMS, Target, and the Shareholders regarding the
Merger.
<PAGE> 5
TransCoastal Marine Services, Inc.
October __, 1997
Page 5
OPINIONS
Based upon the foregoing, we are of the opinion that:
1. The Merger will satisfy the requirements of sections
368(a)(1)(A) and 368(a)(2)(D) of the Code, and thus TCMS, Merger Sub
and Target will each be a "party to a reorganization" within the
meaning of Section 368(b) of the Code.
2. Neither TCMS, Merger Sub, nor Target will recognize
any gain (or loss) in connection with the Merger.
The opinions that we state in this letter represent our best legal
judgment. However, they have no binding effect or official status of any kind.
It is possible that the Internal Revenue Service ("IRS") will disagree with
all, or some, of our conclusions. The opinions are based upon existing
provisions of the Code, the applicable Treasury Department regulations
promulgated thereunder, published rulings, procedures, and pronouncements of
the IRS which are authority, applicable legislative history, and judicial
decisions. All such authorities are subject to change at any time, either
prospectively or retroactively, and any such change could modify the opinions
stated in this letter. In rendering our opinions, we undertake no
responsibility to advise you of any such change in the federal income tax laws.
The opinions may not be relied upon to the extent that there is any such change
in the federal income tax laws that relate to the transactions that are the
subject of this letter.
Our opinions address only the matters expressly set forth in this
letter, and no opinion is to be implied or inferred except as expressly stated
in this letter. The opinions stated in this letter are stated and effective as
of the date first above written. This letter is solely for the benefit of TCMS,
Merger Sub, Target, Jefferies & Company, Inc., Johnson Rice & Company L.L.C.,
and the Shareholder, and may not be relied upon by any other person without our
prior written consent, except we hereby consent to the filing of this opinion
as an exhibit to the Registration Statement on Form S-1 of TCMS filed with the
Securities and Exchange Commission, and any amendment thereto.
Sincerely,
CHAMBERLAIN, HRDLICKA, WHITE,
WILLIAMS & MARTIN
<PAGE> 1
EXHIBIT 8.4
October __, 1997
TransCoastal Marine Services, Inc.
3535 Briarpark, Suite 210
Houston, Texas 77042
Ladies and Gentlemen:
This letter states our opinion regarding certain federal income tax
consequences of the proposed merger of Red Fox Companies of New Iberia, Inc.
("Target") with and into RNI Acquisition Corp. ("Merger Sub"), a wholly owned
subsidiary of TransCoastal Marine Services, Inc. ("TCMS") pursuant to that
certain Agreement and Plan of Merger dated as of August 27, 1997 ("Agreement").
Our conclusions are based solely on the U.S. federal income tax laws. We are
not hereby addressing any other legal consequences arising under federal,
state, local, foreign or other law. All capitalized terms used but not defined
in this letter have the same meanings given to them in the Agreement.
STATEMENT OF FACTS
We have examined such documents, corporate records, and certificates
(copies of which are attached) as we have considered necessary or appropriate
for purposes of rendering our opinion. For purposes of such examination, we
have assumed the authenticity of all original documents, the accuracy of all
copies, and the genuineness of all signatures. Based on such examination, the
facts related to the proposed merger transaction (the "Merger") are as follows:
A. Organizational Matters
1. TCMS is a corporation duly organized and validly
existing under the laws of the State of Delaware. Merger Sub is a
corporation duly organized and validly existing under the laws of the
State of Louisiana. Immediately prior to the Merger, all of Merger
Sub's issued and outstanding shares of stock were owned by TCMS.
2. Target is a corporation duly organized and validly
existing under the laws of the State of Louisiana. Immediately prior
to the Merger, all of Target's issued and outstanding shares of
capital stock were owned by the Beldon E. Fox, Sr. Grandchildren's
Trust No. 1 (Allyson B. Fox, Trustee) (the "Shareholder").
<PAGE> 2
TransCoastal Marine Services, Inc.
October __, 1997
Page 2
B. The Merger
1. At the Effective Time, Target will be merged with and
into Merger Sub pursuant to Articles of Merger filed with the State of
Louisiana in compliance with the Louisiana Business Corporation Law,
with Merger Sub surviving the transaction. Such transaction is
structured and intended to satisfy the requirements for tax-free
treatment under sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal
Revenue Code of 1986, as amended (the "Code"), and is referred to as
the "Merger" for purposes of this letter.
2. As part of the Merger, the issued and outstanding
shares of Target common stock will be converted into the right to
receive: (1) a secured promissory note in the principal amount of
$3,000,000; (2) the number of validly issued, fully paid and
nonassessable shares of TCMS Common Stock in an amount equal to the
amount determined by dividing $3,000,000 by the IPO Price; and (3) the
Earn Out. The Merger was structured and intended to provide the
Shareholder with stock equal in value to at least 50% of the overall
consideration provided to the Shareholder as part of the Merger. The
promissory note bears interest at the rate of New York Prime Rate plus
.25% per annum, requires monthly payments of principal in the amount
of $25,000, plus accrued interest, beginning on ____________, 1997,
and may be prepaid in whole or in part by TCMS without penalty or
premium. The Earn Out consideration will be payed in the same
proportion of TCMS stock and cash as the stock and cash consideration
payed at closing (i.e. pursuant to "(1)" and "(2)" above), and thus
will not affect the relative proportion of stock and cash received by
the Shareholder as part of the Merger.
3. All shares of Target common stock held by the Target
as treasury stock will be canceled, retired, and cease to exist, and
no consideration will be delivered in exchange for any such shares.
Additionally, the Shareholder will receive cash in lieu of
certificates or scrip for fractional shares of TCMS common stock that
are eliminated by rounding down to the nearest whole share. Each share
of Merger Sub stock issued and outstanding at the Effective Time will
remain outstanding and unchanged following the Merger, and will
constitute all of the issued and outstanding capital stock of Merger
Sub following the Merger.
4. The TCMS Common Stock will not be registered within
the meaning of federal and state securities laws.
5. The Agreement provides that the Shareholder generally
cannot dispose of any TCMS Common Stock within the two-year period
following the Merger if the disposition would cause the fair market
value of the TCMS Common Stock (determined as of the Effective Date)
retained by the Shareholder to be less than 50% of the fair market
value of the Target Common Stock held by the Shareholder immediately
prior to the Merger. A disposition is permitted only if the
Shareholder provides TCMS with an opinion of counsel
<PAGE> 3
TransCoastal Marine Services, Inc.
October __, 1997
Page 3
reasonably satisfactory to TCMS that such disposition would not
violate the continuity of shareholder interest requirement under
sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
6. Neither TCMS nor the Merger Sub will undertake any
obligation to pay, and will not pay, any expenses on behalf of either
Target or the Shareholder as part of the Merger that were not related
to or incurred in the course of accomplishing the Merger.
7. Merger Sub will obtain all of Target's historic
business assets, including all of its operating assets (taking into
account the distribution and/or transfer by Target of its assets, if
any, made prior to and in connection with the Merger), as part of the
Merger. At the time of the Merger, TCMS will plan and intend to cause
the Merger Sub to continue conducting Target's historic business
activities, and/or use a significant portion of Target's historic
business assets to conduct a business activity. Additionally, Merger
Sub will, at the time of the Merger, have no plan or intention to
distribute in kind, transfer, sell or otherwise convey any of its
assets to TCMS following the date of the Merger.
C. Related Transactions
1. In connection with the Merger, the Shareholder will
sell certain leasehold interests with respect to real property located
in Iberia Parish, Louisiana to either TCMS or Merger Sub (or one of
their affiliates) for a purchase price of $1,500,000 cash.
2. Also in connection with the Merger, Merger Sub will
enter into an employment agreement with Beldon E. Fox, Jr. pursuant to
which Mr. Fox will become employed as an executive of Merger Sub for
an initial term of three years.
REPRESENTATIONS
In connection with the Merger and the preparation of this letter, the
following representations have been made to us by management of TCMS and
Target:
1. The ratio for the exchange of Target stock for TCMS
stock as part of the Merger was negotiated through arm's length
bargaining between unrelated parties, neither of whom were acting
under a compulsion to buy or sell.
2. There is no plan or intention by the Shareholder to
sell, exchange, transfer, or otherwise reduce its risk of ownership
with respect to TCMS stock that it receives as part of the Merger.
3. Merger Sub will acquire at least 90% of the fair
market value of the net assets and at least 70% of the fair market
value of the gross assets held by the Target immediately prior to the
Merger, taking into account amounts paid by the Target to the
Shareholder,
<PAGE> 4
TransCoastal Marine Services, Inc.
October __, 1997
Page 4
assets used by the Target to pay its reorganization expenses, and all
redemptions and distributions (except for regular normal dividends)
made by the Target immediately preceding the Merger.
4. The liabilities of the Target assumed by Merger Sub,
and the liabilities to which the assets of the Target transferred to
Merger Sub are subject, were incurred by the Target in the ordinary
course of its business, and the fair market value of the assets of the
Target transferred to Merger Sub as part of the Merger will equal or
exceed the sum of the liabilities assumed by Merger Sub plus the
amount of liabilities, if any, to which the transferred assets are
subject.
5. There is no intercorporate indebtedness existing
between TCMS and the Target that was issued, acquired, or will be
settled at a discount.
6. No two parties to the Merger are investment companies
as defined in section 368(a)(2)(F)(iii) and (iv) of the Code.
7. The Target is not under the jurisdiction of a court
in a title 11 or similar case within the meaning of section
368(a)(3)(A) of the Code.
8. The Shareholder and TCMS believe that none of the
compensation to be received by Beldon E. Fox, Jr. in his capacity as
an employee or consultant of TCMS will constitute separate
consideration for, or be allocable to, any shares of the Target stock
owned by the Shareholder; none of the shares of TCMS stock received by
any Shareholder as part of the Merger will constitute separate
consideration for, or be allocable to, any employment or consulting
agreement of Beldon E. Fox, Jr.; and the compensation paid to Beldon
E. Fox, Jr. in his capacity as an employee or consultant of TCMS will
be commensurate with amounts paid to third parties bargaining at
arm's-length for similar services.
9. The Shareholder and TCMS believe that none of the
consideration to be received by the Shareholder from TCMS (or any
affiliate of TCMS) with respect to the Shareholder's ownership
interests in any immovable property and/or leasehold interests related
to real property will constitute separate consideration for, or be
allocable to, any shares of the Target stock owned by the Shareholder;
none of the shares of TCMS stock received by the Shareholder as part
of the Merger will constitute separate consideration for, or be
allocable to, any ownership interests of the Shareholder in any
immovable property and/or leasehold interests related to real
property; and the consideration paid to the Shareholder with respect
to the Shareholder's ownership interests in any immovable property
and/or leasehold interests related to real property will be
commensurate with amounts paid by third parties bargaining at
arm's-length for similar ownership interests in immovable property
and/or leasehold interests related to real property.
<PAGE> 5
TransCoastal Marine Services, Inc.
October __, 1997
Page 5
10. The payment of cash in lieu of fractional shares of
TCMS stock is solely for the purpose of avoiding the expense and
inconvenience to TCMS of issuing fractional shares and does not
represent separately bargained-for consideration. The total cash
consideration that will be paid in the Merger to the Shareholders
instead of issuing fractional shares of TCMS stock will not exceed one
percent of the total consideration that will be issued in the Merger
to the Shareholders in exchange for their shares of Target stock. The
fractional share interests of each Shareholder will be aggregated, and
no Shareholder will receive cash for such fractional share interests
in an amount equal to or greater than the value of one full share of
TCMS stock.
11. The Target does not have any outstanding fractional
shares of its stock, and, at the time of the Merger, will not have any
outstanding warrants, options, convertible securities, or any other
type of right pursuant to which any person could acquire stock of the
Target.
12. The Agreement represents the full and complete
agreement between TCMS, Target, and Shareholders regarding the Merger.
OPINIONS
Based upon the foregoing, we are of the opinion that:
1. The Merger will satisfy the requirements of sections
368(a)(1)(A) and 368(a)(2)(D) of the Code, and thus TCMS, Merger Sub
and Target will each be a "party to a reorganization" within the
meaning of Section 368(b) of the Code.
2. Neither TCMS, Merger Sub, nor Target will recognize
any gain (or loss) in connection with the Merger.
The opinions that we state in this letter represent our best legal
judgment. However, they have no binding effect or official status of any kind.
It is possible that the Internal Revenue Service ("IRS") will disagree with
all, or some, of our conclusions. The opinions are based upon existing
provisions of the Code, the applicable Treasury Department regulations
promulgated thereunder, published rulings, procedures, and pronouncements of
the IRS which are authority, applicable legislative history, and judicial
decisions. All such authorities are subject to change at any time, either
prospectively or retroactively, and any such change could modify the opinions
stated in this letter. In rendering our opinions, we undertake no
responsibility to advise you of any such change in the federal income tax laws.
The opinions may not be relied upon to the extent that there is any such change
in the federal income tax laws that relate to the transactions that are the
subject of this letter.
<PAGE> 6
TransCoastal Marine Services, Inc.
October __, 1997
Page 6
Our opinions address only the matters expressly set forth in this
letter, and no opinion is to be implied or inferred except as expressly stated
in this letter. The opinions stated in this letter are stated and effective as
of the date first above written. This letter is solely for the benefit of TCMS,
Merger Sub, Target, Jefferies & Company, Inc., Johnson Rice & Company L.L.C.,
and the Shareholder, and may not be relied upon by any other person without our
prior written consent, except we hereby consent to the filing of this opinion
as an exhibit to the Registration Statement on Form S-1 of TCMS filed with the
Securities and Exchange Commission, and any amendment thereto.
Sincerely,
CHAMBERLAIN, HRDLICKA, WHITE,
WILLIAMS & MARTIN
<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made as of _______________,
1997, by and between HBH, Inc., a Louisiana corporation (the "Company"), and
H. DANIEL HUGHES II, an individual with an address of 5801 Citrus Blvd.,
Harahan, Louisiana 70123 (the "Employee").
1. Employment. The Company hereby agrees to employ the Employee
and the Employee hereby agrees to work for the Company upon the terms and
conditions set forth herein.
2. Term of Employment. The term of employment pursuant to this
Agreement shall begin on the closing of the IPO (as defined below) (the
"Effective Date") of TransCoastal Marine Services, Inc., a Delaware corporation
("TMS"), shall continue in effect for an initial term of three (3) years from
the Effective Date (the "Initial Term"), unless terminated in accordance with
Section 6 and shall be extended from year to year thereafter, unless terminated
effective as of the end of the initial term or any one-year extension thereafter
(each such additional one year term is a "Renewal Term") by written notice from
the Company to Employee, or by written notice of Employee to the Company,
delivered not less than ninety (90) days prior to the end of the Initial Term,
or the end of such Renewal Term, as applicable. The term "IPO" means any
underwritten public offering of TMS' common stock other than any offering
pursuant to any registration statement (i) relating to any capital stock of TMS
or options, warrants or other rights to acquire any such capital stock issued
or to be issued primarily to directors, officers or employees of TMS, or any of
its subsidiaries (ii) relating to any employee benefit plan or interest
therein, (iii) relating principally to any preferred stock or debt securities
of TMS, or (iv) filed pursuant to Rule 145 under the Securities Act of 1933, as
amended, or any successor or similar provisions.
3. Scope of Duties; Representations and Warranties.
(a) The Employee shall be initially employed by the
Company as its President, reporting only to the Board of Directors, and shall
have supervision and control over, and responsibility for, the general
operations of the Company and shall have such other powers, duties, and
authority as are set forth in the Bylaws of the Company or as may from time to
time be prescribed by the Board of Directors, provided that such powers, duties,
and authority are those that are customarily inherent in such a position. At
all times, the Employee shall serve under the direction of the Board of
Directors of the Company and shall perform such services as the Board of
Directors, in its sole discretion, shall deem appropriate.
(b) So long as he is employed by the Company, the Employee
shall devote his skill, energy and best efforts to the faithful discharge of
his duties as an employee of the Company. The Employee agrees that in the
provision of all services to the Company, he will comply with and follow all
directives, policies, standards and regulations from time to time established
by the Board of Directors of the Company.
(c) The Employee represents and warrants that he is under
no contractual or other restrictions or obligations which will significantly
limit his activities on behalf of the Company or
<PAGE> 2
which will prohibit or limit the disclosure or use of by the Employee of any
information which directly or indirectly relates to the nature of the Company
or the services to be rendered by the Employee under this Agreement.
(d) To the extent they relate to, or result from, directly
or indirectly, the actual or anticipated operations of the Company, the
Employee hereby agrees that all patents, trademarks, copyrights, trade secrets,
and other intellectual property rights, all inventions, whether or not
patentable and any product, drawing, design, recording, writing, literary work
or other author's work, in any other tangible form developed in whole or in
part by Employee during the term of this Agreement, or otherwise developed,
purchased or acquired by Employer, shall be the exclusive property of the
Employer ("Intellectual Property"), and unless otherwise agreed by Employer, all
right, title and interest therein shall remain in Employer.
(e) The Employee will hold all Intellectual Property
(defined below) in trust for the Company and will deliver all Intellectual
Property in his possession or control to the Company upon request and, in any
event, at the end of his employment with the Company. The Employee will
promptly disclose to the Company any business opportunity related to the current
or planned operations of the Company which comes to his attention during the
term of his employment with the Company. The Employee will not take advantage
of or divert such business opportunity for the benefit of himself or any other
party without the prior written consent of the Company.
(f) The Employee shall assign and does hereby assign to
the Company all property rights that he may now or hereafter have in the
Intellectual Property. The Employee shall take such action, including, but not
limited to, the execution, acknowledgment, delivery and assistance in
preparation of documents, and the giving of testimony, as may be requested by
the Company to evidence, transfer, vest or confirm the Company's right, title
and interest in the Intellectual Property.
(g) The Employee will not contest the validity of any
invention, any copyright, any trademark or any mask work registration owned by
or vesting in the Company under this Agreement.
(h) The terms and conditions of Sections 3(d), (e), (f),
and (g) will survive the termination of this Agreement for any reason
whatsoever.
4. Compensation.
(a) During the first year, the Company shall pay the
Employee a base salary, payable semi-monthly, in equal installments at a rate
equal to $175,000 per year. In each subsequent year of this Agreement, the
Company shall pay to the Employee a salary equal to the greater of (i) his
salary for the immediately preceding year or (ii) if determined otherwise by
the Board of Directors, a salary determined by the Board of Directors following
its annual salary and performance review.
2
<PAGE> 3
(b) Employee shall receive an annual cash performance
bonus for the calendar year during the term of this Agreement to be determined
according to the following procedure. The Board of Directors of the Company,
or the Compensation Committee of the Board of Directors, if so authorized,
shall establish specific annual performance goals for the Company and for
Employee with respect to each calendar year during the term of this Agreement
commencing on January 1, 1998. Such goals shall be communicated to Employee
not later than the end of the first quarter of the applicable calendar year.
At the end of each calendar year during the term of this Agreement, or within a
reasonable time thereafter, the Board of Directors of the Company, or the
Compensation Committee of the Board of Directors, if so authorized, shall
review the actual performance of the Company and Employee, giving due
consideration to market and other developments outside of the control or
influence of Employee and the Company, and based upon the extent to which the
applicable annual performance goals have been achieved, shall determine in its
sole and absolute discretion, the amount of performance bonus payable to
Employee with respect to such year. If, during the Initial Term or any Renewal
Term, the Employee's employment with the Company is terminated by the Company
prior to the end of a calendar year for any reason other than a termination by
the Company for Cause (as hereafter defined), the Employee shall participate in
the cash performance bonus on a prorated basis based on the number of days in
the calendar year to the date of termination compared to the number of days in
the calendar year. In the event that the Employee's employment with the
Company terminates prior to the end of a calendar year as a result of the
expiration of the Initial Term or any Renewal Term hereof or as a result of the
Employee's resignation with cause for such resignation, the Employee shall
participate in the cash performance bonus on a prorated basis based on the
number of days in the calendar year to the date of termination compared to the
number of days in the calendar year.
(c) On the Effective Date, Employee shall be granted an
option to purchase a number of shares of TMS common stock, par value $.001 per
share ("Common Stock"), equal to $437,500 divided by the initial public
offering price per share of the Common Stock in the IPO (the "IPO Price"). The
option shall be granted pursuant to and in accordance with all terms and
conditions of the TMS 1997 Incentive Stock Option Plan and shall be exercisable
at the IPO Price. The grant of such option shall be pursuant to an Incentive
Stock Option Agreement substantially in the form attached as Attachment 4(c)
hereto.
(d) All payments of salary and other compensation to the
Employee shall be made after deduction of any taxes which are required to be
withheld with respect thereto under applicable federal and state laws.
5. Fringe Benefits. So long as the Employee is employed by the
Company, the Employee shall participate in all employee benefit plans sponsored
by the Company for its executive employees as approved from time to time by the
Board of Directors of the Company or any compensation committee of the board of
directors, if any. Employee shall be reimbursed by the Company for reasonable
out-of-pocket costs in accordance with Company policy and subject to reasonable
and customary documentation of such expenses. Employee shall be entitled to
health and dental insurance benefits for the Employee and the Employee's
dependents that are no less favorable to Employee than the benefits that are
provided to Employee by the Company prior to the Effective Date. In addition,
Employee shall receive an allowance of $750 per month for automobile expenses.
3
<PAGE> 4
6. Termination.
(a) Employee agrees that this Agreement may be terminated
by the Company with or without "Cause" at any time, subject to the terms of
this Section 6. Such termination shall be effective upon delivery of written
notice to Employee of the Company's election to terminate this Agreement under
this Section 6. "Cause" when used in connection with the termination of
employment with the Company, shall mean the termination of the Employee's
employment by the Company by reason of (i) the conviction of the Employee of a
crime involving moral turpitude by a court of competent jurisdiction as to
which no further appeal can be taken; (ii) the proven commission by the
Employee of an act of fraud upon the Company; (iii) the willful and proven
misappropriation of any funds or property of the Company by the Employee; (iv)
the willful, continued and unreasonable failure by the Employee to perform
material duties assigned to him and agreed to by him after reasonable notice
and opportunity to cure such performance; (v) the knowing engagement by the
Employee in any direct, material conflict of interest with the Company without
compliance with the Company's conflict of interest policy, if any, then in
effect; (vi) the knowing engagement by the Employee, without the written
approval of the Board of Directors of the Company, in any activity which
competes with the business of the Company or which would result in a material
injury to the Company; or (vii) the knowing engagement in any activity which
would constitute a material violation of the provisions of the Company's
Insider Trading Policy, if any, then in effect.
If the Employee's employment terminates, unless the Company
terminates the Employee's employment under this Agreement for Cause or the
Employee resigns without cause for such resignation, the Company shall pay to
the Employee an amount equal to twenty-four (24) months of compensation at his
then current salary, payable semimonthly, and shall continue to provide
benefits in the kind and amounts provided up to the date of termination for
such twenty-four (24) month period including, without limitation, continuation
of any Company-paid benefits as described in Section 5 for the Employee and his
family and the automobile allowance described in Section 5 above.
Notwithstanding anything in this Agreement to the contrary, in the event the
Employee's employment terminates within twelve months after (A) a sale of all
or substantially all of the assets of the Company or TMS, or (B) a merger,
consolidation, liquidation or reorganization of the Company or TMS, in which
the purchaser or the surviving entity (if other than the Company or TMS), as
applicable, fails to adopt the Company's obligations under this Agreement, the
Company shall pay to the Employee, an amount equal to thirty six (36) months
compensation at Employee's then current annual salary, payable semimonthly, and
shall continue to provide benefits in the kind and amounts provided up to the
date of termination for such thirty six (36) month period.
In the event that this Agreement is terminated by Company without
Cause, Employee agrees to accept, in full settlement of any and all claims,
losses, damages and other demands which Employee may have arising out of such
termination as liquidated damages and not as a penalty, the applicable amount
which is set out above. Except as provided in section 7 hereof, under no
circumstances shall Employee be entitled to any compensation or confirmation of
any benefits under this Agreement for any period of time following his date of
termination if his termination is for Cause.
4
<PAGE> 5
(b) If at any time during the term of this Agreement,
Employee is unable due to physical or mental disability, to perform effectively
his duties hereunder, the Company shall continue payment of compensation as
provided in Section 4 during the first six (6) month period of such disability
to the extent not covered by the Company's disability insurance policies. Upon
the expiration of such six (6) month period, the Company, at its sole option,
may continue payment of Employee's salary for such additional periods as the
Company elects, or may terminate this Agreement without any further obligations
hereunder. If Employee should die during the term of this Agreement,
Employee's employment and the Company's obligations hereunder shall terminate
as of the end of the month in which Employee's death occurs and there will be
no salary and benefit continuation period pursuant to Section 6(a). Employee
shall be deemed to have incurred a disability if Employee suffers a physical or
mental condition which (i) satisfies the definition of "total disability" in
the Company's disability insurance policies.
7. Covenant Not to Compete.
(a) During the term of this Agreement, Employee will not
compete with the Company or its affiliates, directly or indirectly, either for
himself or as a member of a partnership or as a stockholder (except as a
stockholder of less than two percent (2 %) of the issued and outstanding stock
of a publicly-held company), investor, owner, officer or director of a company
or other entity, or as an employee, agent, associate or consultant of any
person, partnership, corporation or other entity, in any business in
competition with that carried on by the Company or any of its affiliates.
Notwithstanding anything herein to the contrary, Employee's beneficial
ownership interest in and employment as a consultant by Diversified Group, Inc.
shall not constitute a violation of the provisions of this Section 7, so long
as Diversified Group, Inc. does not engage in the marine offshore pipeline
construction business during the term of any covenant not to compete contained
in this agreement.
(b) Employee further agrees that if this Agreement shall
terminate during the Initial Term for any reason other than expiration of the
Initial Term or any Renewal Term without continuation of this Agreement for a
Renewal Term, subject to the provisions contained hereafter, he will neither
represent nor engage in or carry on, directly or indirectly, either for himself
or as a member of a partnership or as a stockholder (other than as a
stockholder of less than two percent (2 %) of the issued and outstanding stock
of a publicly-held company whose gross assets exceed one hundred million
dollars), investor, owner, officer or director of a company or other entity, or
as an employee, agent, associate or consultant of any person, partnership,
corporation or other entity, any business in any State of the United States or
in any other part of the world which directly competes with any services or
products produced, sold, conducted, developed, or in the process of development
by the Company or its affiliates on the date of termination of Employee's
employment. Notwithstanding the foregoing, nothing herein shall prevent
Employee from working in the marsh or marine construction and pipe laying
businesses, industrial diving and offshore products fabrication businesses,
other than as an employee of Company or a subsidiary of Company if such
activities are in areas not in direct competition with any services or products
produced, sold, conducted, developed, or in the process of development by the
Company or its affiliates on the date of termination of Employee's employment.
The period for which Employee shall be subject to the forgoing restrictions on
competition shall be a period equal to twenty-four (24) months.
Notwithstanding anything to the contrary contained in this Agreement, the
restrictions on
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<PAGE> 6
competition by Employee shall only be applicable if the Company shall be in
compliance with its obligations to Employee under this Agreement, including,
without limitation, the obligation to pay Employee during the non-competition
period and to continue the Company-paid benefits as provided in Section 7(a)
hereof. Provided further, in the case of an Employee who has been terminated
for Cause or has resigned during an Initial Term or any Renewal Term without
cause for such resignation, the restrictions on competition shall only be
applicable to the Employee if the Company shall, at its option, elect to treat
the Employee as if he had been terminated by the Company without Cause, in
which event the Company shall be obligated to such Employee in accordance with
the terms applicable to an Employee terminated by the Company without Cause,
including, without limitation, the obligation to pay the Employee and to
continue Company-paid benefits as provided in Section 7(a) hereof. In order to
so exercise this option, the Company shall notify Employee in writing within
three days after termination of Employee's employment under this Agreement.
(c) Employee agrees that the limitations set forth herein
on his rights to compete with the Company and its affiliates are reasonable and
necessary for the protection of the Company and its affiliates. In this
regard, Employee specifically agrees that the limitations as to period of time
and geographic area, as well as all other restrictions on his activities
specified herein, are reasonable and necessary for the protection of the
Company and its affiliates. In particular, Employee acknowledges that the
parties anticipate that the Employee will be actively seeking markets for the
Company's products throughout the United States during his employment with the
Company.
(e) Employee agrees that the remedy at law for any breach
by him of this Section 7 will be inadequate and that the Company shall also be
entitled to injunctive relief.
8. Confidential Information and Results of Services. Employee
agrees that during the term of this Agreement, and for two (2) years after his
termination of employment, in the event of termination of employment with Cause
by the Company or the voluntary resignation of Employee without cause for such
resignation, or for the non- competition period set forth in Section 7 above,
in the event of a termination of employment by the Employer without Cause or
the resignation by the Employee with cause for such resignation, he will not
make use of or disclose, without the prior consent of the Company, Confidential
Information (as hereinafter defined) relating to the Company, or any of its
affiliates, and further agrees, that he will return to the Company, at its
written request, all written materials in his possession embodying such
Confidential Information. For purposes of this Agreement, "Confidential
Information" includes information conveyed or assigned to the Company by
Employee or conceived, compiled, created, developed, discovered or obtained by
Employee from and during his employment relationship with the Company, whether
solely by the Employee or jointly with others, which concerns the affairs of
the Company or its affiliates and which the Company could reasonably be
expected to desire be held in confidence, or the disclosure of which would
likely be embarrassing, detrimental or disadvantageous to the Company or its
affiliates and without limiting the generality of the foregoing includes
information relating to inventions, and the trade secrets, technologies,
algorithms, products, services, finances, business plans, marketing plans,
legal affairs, supplier lists, client lists, potential clients, business
prospects, business opportunities, personnel assignments, contracts and assets
of the Company and information made available to the Company by other parties
under a confidential relationship. Confidential Information, however, shall
not include information (a) which is, at the time in question, in the public
domain through no wrongful act of Employee, (b) which is later disclosed to
Employee by
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<PAGE> 7
one not under obligations of confidentiality to the Company or Employee, (c)
which is required by court or governmental order, law or regulation to be
disclosed, or (d) which the Company has expressly given Employee the right to
disclose pursuant to written agreement. Employee agrees that the remedy at law
for any breach by him of this Section 8 will be inadequate and that the Company
shall also be entitled to injunctive relief.
9. Notice. All notices, requests, demands and other
communications required by or permitted under this Agreement shall be in
writing and shall be sufficiently delivered if delivered by hand, by courier
service, or sent by registered or certified mail, postage prepaid, to the
parties at their respective addresses listed below:
(a) If to the Employee, to the address set out in the
beginning of this Agreement;
(b) If to the Company:
TransCoastal Marine Services, Inc.
3535 Briarpark, Suite 210
Houston, Texas 77042
Either party may change such party's address by such notice to
the other parties.
10. Assignment. This Agreement is personal to the Employee, and
he shall not assign any of his rights or delegate any of his duties hereunder
without the prior written consent of the Company. Neither the employee nor his
spouse will have the right to commute, encumber, or otherwise dispose of any
payments under this Agreement. The Company shall have the right to assign this
Agreement to a successor in interest in connection with a merger, sale of
substantially all assets, or the like; provided however, that an assignment of
this Agreement to an entity with operations, products or services outside of
the industries in which the Company is then active shall not be deemed to
expand the scope of Employee's covenant not to compete with such operations,
products or services without Employee's written consent.
11. Survival. The provisions of this Agreement shall survive the
termination of the Employee's employment hereunder in accordance with their
terms.
12. Applicable Law. The substantive laws of the State of
Louisiana, excluding any law, rule or principle which might refer to the
substantive law of another jurisdiction, will govern the interpretation,
validity and effect of this Agreement without regard to the place of execution
or the place for performance thereof. This Agreement is to be negotiated,
executed and performed in Jefferson Parish, Louisiana, and, as such, the
Company and Employee agree that personal jurisdiction and venue shall be proper
with the state or federal courts situated in Jefferson Parish, Louisiana, to
hear such disputes arising under this Agreement.
13. Binding Upon Successors. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and permitted assigns.
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<PAGE> 8
14. Entire Agreement. This Agreement constitutes the entire
agreement between the Company and the Employee with respect to the terms of
employment of the Employee by the Company and supersedes all prior agreements
and understandings, whether written or oral, between them concerning such terms
of employment.
15. Waiver and Amendments; Cumulative Rights and Remedies.
(a) This Agreement may be amended, modified or
supplemented, and any obligation hereunder may be waived, only by a written
instrument executed by the parties hereto. The waiver by either party of a
breach of any provision of this Agreement shall not operate as a waiver of any
subsequent breach.
(b) No failure on the part of any party to exercise, and
no delay in exercising, any right or remedy hereunder shall operate as a waiver
hereof, nor shall any single or partial exercise of any such right or remedy by
such party preclude any other or further exercise thereof or the exercise of
any other right or remedy. All rights and remedies hereunder are cumulative
and are in addition to all other rights and remedies provided by law, agreement
or otherwise.
(c) The Employee's obligations to the Company and the
Company's rights and remedies hereunder are in addition to all other
obligations of the Employee and rights and remedies of the Company created
pursuant to any other agreement.
16. Construction. Each party to this Agreement has had the
opportunity to review this Agreement with legal counsel. This Agreement shall
not be construed or interpreted against any party on the basis that such party
drafted or authored a particular provision, parts of or the entirety of this
Agreement.
17. Severability. In the event that any provision or provisions
of this Agreement is held to be invalid, illegal or unenforceable by any court
of law or otherwise, the remaining provisions of this Agreement shall
nevertheless continue to be valid, legal and enforceable as though the invalid
or unenforceable parts had not been included therein. In addition, in such
event the parties hereto shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the parties as closely as possible with
respect to those provisions which were held to be invalid, illegal or
unenforceable.
18. Attorney's Fees. In the event that the employment of counsel
by any party becomes necessary to enforce this Agreement, the non-prevailing
party agrees to pay the prevailing party's reasonable attorney's fees, court
costs, and all other reasonable costs and expenses incurred by the prevailing
party as a result of enforcing its rights under this Agreement.
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<PAGE> 9
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement under seal on the date first above written, to be effective as of the
Effective Date.
EMPLOYER:
HBH, INC.
A LOUISIANA CORPORATION
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
EMPLOYEE:
-------------------------------------------
H. DANIEL HUGHES II
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<PAGE> 1
EXHIBIT 10.9
[(FOR DANIEL N. HARGETT, SR.)]
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made as of _______________,
1997, by and between [C.S.I. HYDROSTATIC TESTERS, INC.], a Delaware corporation
(the "Company"), and [EMPLOYEE NAME], an individual with an address of ________
_______________________, ___________, Louisiana __________ (the "Employee").
1. Employment. The Company hereby agrees to employ the Employee
and the Employee hereby agrees to work for the Company upon the terms and
conditions set forth herein.
2. Term of Employment. The term of employment pursuant to this
Agreement shall begin on the closing of the IPO (as defined below) (the
"Effective Date") of Transcoastal Marine Services, Inc., a Delaware corporation
("TMS"), shall continue in effect for an initial term of two (2) years from the
Effective Date (the "Initial Term"), unless terminated in accordance with
Section 5, and shall be extended from year to year thereafter (each such
additional one year term is a "Renewal Term"), unless terminated effective as
of the end of the Initial Term or any Renewal Term thereafter by written notice
from the Company to Employee, or by written notice of Employee to the Company,
delivered not less than ninety (90) days prior to the end of the Initial Term,
or the end of such Renewal Term, as applicable. The term "IPO" means any
underwritten public offering of the TMS' common stock other than any offering
pursuant to any registration statement (i) relating to any capital stock of TMS
or options, warrants or other rights to acquire any such capital stock issued
or to be issued primarily to directors, officers or employees of TMS, or any of
its subsidiaries (ii) relating to any employee benefit plan or interest therein,
(iii) relating principally to any preferred stock or debt securities of TMS, or
(iv) filed pursuant to Rule 145 under the Securities Act of 1933, as amended, or
any successor or similar provisions.
3. Scope of Duties; Representations and Warranties.
(a) The Employee shall be initially employed by the
Company as its ______________________________. At all times, the Employee shall
serve under the direction of the ______________________ of the Company and shall
perform such services as the __________________________ shall deem appropriate.
(b) So long as [he] [she] is employed by the Company, the
Employee shall devote [his] [her] skill, energy and best efforts to the faithful
discharge of [his] [her] duties as an employee of the Company. The Employee
agrees that in the provision of all services to the Company, [he] [she] will
comply with and follow all directives, policies, standards and regulations from
time to time established by the Board of Directors of the Company.
(c) The Employee represents and warrants that [he] [she]
is under no contractual or other restrictions or obligations which will
significantly limit [his] [her] activities on behalf of the
<PAGE> 2
Company or which will prohibit or limit the disclosure or use by the Employee
of any information which directly or indirectly relates to the nature of the
Company or the services to be rendered by the Employee under this Agreement.
(d) To the extent they result from, directly or
indirectly, the actual or anticipated operations of the Company, the Employee
hereby agrees that all patents, trademarks, copyrights, trade secrets, and
other intellectual property rights, all inventions, whether or not patentable
and any product, drawing, design, recording, writing, literary work or other
author's work, in any other tangible form developed in whole or in part by
Employee during the term of this Agreement, or otherwise developed, purchased
or acquired by Employer, shall be the exclusive property of the Employer
("Intellectual Property"), and unless otherwise agreed by Employer, all right,
title and interest therein shall remain in Employer.
(e) The Employee will hold all Intellectual Property in
trust for the Company and will deliver all Intellectual Property in [his] [her]
possession or control to the Company upon request and, in any event, at the end
of [his] [her] employment with the Company. The Employee will promptly disclose
to the Company any business opportunity related to the current or planned
operations of the Company which comes to [his] [her] attention during the term
of [his] [her] employment with the Company. The Employee will not take
advantage of or divert such business opportunity for the benefit of himself or
any other party without the prior written consent of the Company.
(f) The Employee shall assign and does hereby assign to
the Company all property rights that [he] [she] may now or hereafter have in the
Intellectual Property. The Employee shall take such action, including, but not
limited to, the execution, acknowledgment, delivery and assistance in
preparation of documents, and the giving of testimony, as may be requested by
the Company to evidence, transfer, vest or confirm the Company's right, title
and interest in the Intellectual Property.
(g) The Employee will not contest the validity of any
invention, any copyright, any trademark or any mask work registration owned by
or vesting in the Company under this Agreement.
(h) The terms and conditions of Sections 3(d), (e), (f),
and (g) will survive the termination of this Agreement for any reason
whatsoever.
4. Compensation.
(a) During the first year, the Company shall pay the
Employee a base salary, payable semi-monthly, in equal installments at a rate
equal to $200,000 per year with such salary to be increased thereafter in
accordance with the Attachment to Exhibit 1.4.
(b) Employee shall receive an annual cash performance
bonus for the calendar year during the term of this Agreement to be determined
according to the following procedure. The
2
<PAGE> 3
Board of Directors of the Company, or the Compensation Committee of the Board
of Directors, if so authorized, shall establish specific annual performance
goals for the Company and for Employee with respect to each calendar year during
the term of this Agreement commencing on January 1, 1998. Such goals shall be
communicated to Employee not later than the end of the first quarter of the
applicable calendar year. At the end of each calendar year during the term of
this Agreement, or within a reasonable time thereafter, the Board of Directors
of the Company, or the Compensation Committee of the Board of Directors, if so
authorized, shall review the actual performance of the Company and Employee,
giving due consideration to market and other developments outside of the control
or influence of Employee and the Company, and, based upon the extent to which
the applicable annual performance goals have been achieved, shall determine in
its sole and absolute discretion, the amount of performance bonus payable to
Employee with respect to such year. If, during the Initial Term or any Renewal
Term, the Employee's employment with the Company is terminated by the Company
prior to the end of a calendar year for any reason other than a termination by
the Company for Cause (as hereafter defined), the Employee shall participate in
the cash performance bonus on a prorated basis based on the number of days in
the calendar year to the date of termination compared to the number of days in
the calendar year. In the event that the Employee's employment with the Company
terminates prior to the end of a calendar year as a result of the expiration of
the Initial Term or any Renewal Term hereof or as a result of the Employee's
resignation with cause for such resignation, the Employee shall participate in
the cash performance bonus on a prorated basis based on the number of days in
the calendar year to the date of termination compared to the number of days in
the calendar year.
(c) On the Effective Date Employee shall be granted an
option to purchase an aggregate of __________ shares of the Common Stock, $.001
par value, of TMS, under the terms of the TMS 1997 Stock Option Plan, at a
price of $_______ per share [the IPO Price]. The grant of such option shall be
pursuant to the Incentive Stock Option Agreement attached as Exhibit 4(c)
hereto.
(d) All payments of salary and other compensation to the
Employee shall be made after deduction of any taxes which are required to be
withheld with respect thereto under applicable federal and state laws.
5. Fringe Benefits. So long as the Employee is employed by the
Company, the Employee shall participate in all employee benefit plans sponsored
by the Company for its executive employees as approved from time to time by the
Board of Directors of the Company or any compensation committee of the Board of
Directors, if any; provided, however, that the Employee shall be entitled to
health and dental insurance benefits for the Employee and the Employee's
dependents that are no less favorable to Employee than the benefits that are
provided to Employee by the Company prior to the Effective Date.
6. Automobile Allowance. The Company shall provide Employee with
an automobile allowance, payable monthly, in the amount of
$_____________________.
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<PAGE> 4
7. Termination.
(a) Employee agrees that this Agreement may be terminated
by the Company with or without "Cause" at any time, subject to the terms of
this Section 7. Such termination shall be effective upon delivery of written
notice to Employee of the Company's election to terminate this Agreement under
this Section 7. "Cause" when used in connection with the termination of
employment with the Company, shall mean the termination of the Employee's
employment by the Company by reason of (i) the conviction of the Employee of a
crime involving moral turpitude by a court of competent jurisdiction as to which
no further appeal can be taken; (ii) the proven commission by the Employee of an
act of fraud upon the Company; (iii) the willful and proven misappropriation of
any funds or property of the Company by the Employee; (iv) the willful,
continued and unreasonable failure by the Employee to perform material duties
assigned to him and agreed to by him after reasonable notice and opportunity to
cure such performance; (v) the knowing engagement by the Employee in any direct,
material conflict of interest with the Company without compliance with the
Company's conflict of interest policy, if any, then in effect; (vi) the knowing
engagement by the Employee, without the written approval of the Board of
Directors of the Company, in any activity which competes with the business of
the Company; (vii) the knowing engagement in any activity which would
constitute a material violation of the provisions of the Company's Insider
Trading Policy, if any, then in effect; or (viii) the intentional destruction
by Employee of Company property.
If the Employee's employment terminates, unless the Company
terminates the Employee's employment under this Agreement for Cause or the
Employee resigns without cause for such resignation, the Company shall pay to
the Employee an amount equal to twenty-four (24) months of compensation at
[his] [her] then current salary (and any increases in such salary as provided in
the Attachment to Exhibit 1.4 hereto), payable semimonthly, and shall continue
to provide benefits in the kind and amounts provided up to the date of
termination for such twenty-four (24) month period including, without
limitation, continuation of any Company-paid benefits as described in Section 5
for the Employee and [his] [her] family and the automobile allowance described
in Section 6 above. Notwithstanding anything in this Agreement to the contrary,
in the event the Employee's employment terminates within twelve months after (A)
a sale of all or substantially all of the assets of the Company or TMS, or (B) a
merger, consolidation, liquidation or reorganization of the Company or TMS, in
which the purchaser or the surviving entity (if other than the Company or TMS),
as applicable, fails to adopt the Company's obligations under this Agreement,
the Company shall pay to the Employee, an amount equal to thirty six (36)
months compensation at Employee's then current annual salary, payable
semimonthly, and shall continue to provide benefits in the kind and amounts
provided up to the date of termination for such thirty six (36) month period.
In the event that this Agreement is terminated by Company without
Cause, Employee agrees to accept, in full settlement of any and all claims,
losses, damages and other demands which Employee may have arising out of such
termination as liquidated damages and not as a penalty, the applicable amount
which is set out above. Except as provided in Section 8 hereof, under no
4
<PAGE> 5
circumstances shall Employee be entitled to any compensation or confirmation of
any benefits under this Agreement for any period of time following [his] [her]
date of termination if [his] [her] termination is for Cause.
(b) If at any time during the term of this Agreement,
Employee is unable, due to physical or mental disability, to perform effectively
[his] [her] duties hereunder, the Company shall continue payment of compensation
as provided in Section 4 during the first six (6) month period of such
disability to the extent not covered by the Company's disability insurance
policies. Upon the expiration of such six (6) month period, the Company, at
its sole option, may continue payment of Employee's salary for such additional
periods as the Company elects, or may terminate this Agreement without any
further obligations hereunder. If Employee should die during the term of this
Agreement, Employee's employment and the Company's obligations hereunder shall
terminate as of the end of the month in which Employee's death occurs and there
will be no salary and benefit continuation period pursuant to Section 7(a).
Employee shall be deemed to have incurred a disability if Employee suffers a
physical or mental condition which satisfies the definition of "total
disability" in the Company's disability insurance policies.
8. Covenant Not to Compete.
(a) During the term of this Agreement, Employee will not
compete with the Company or its affiliates, directly or indirectly, either for
himself or as a member of a partnership or as a stockholder (except as a
stockholder of less than two percent (2 %) of the issued and outstanding stock
of a publicly-held company, investor, owner, officer or director of a company
or other entity, or as an employee, agent, associate or consultant of any
person, partnership, corporation or other entity, in any business in competition
with that carried on by the Company or any of its affiliates.
(b) Employee further agrees that if this Agreement shall
terminate during the Initial Term for any reason other than expiration of the
Initial Term or any Renewal Term without continuation of this Agreement for a
Renewal Term, subject to the provisions contained hereafter, [he] [she] will
neither represent nor engage in or carry on, directly or indirectly, either for
himself or as a member of a partnership or as a stockholder (other than as a
stockholder of less than two percent (2 %) of the issued and outstanding stock
of a publicly-held company, investor, owner, officer or director of a company
or other entity, or as an employee, agent, associate or consultant of any
person, partnership, corporation or other entity, any business in any State of
the United States or in any other part of the world which directly competes
with any services or products produced, sold, conducted, developed, or in the
process of development by the Company or its affiliates on the date of
termination of Employee's employment. Notwithstanding the foregoing, nothing
herein shall prevent Employee from working in the marsh or marine construction
and pipe laying businesses, industrial diving and offshore products fabrication
businesses, other than as an employee of Company or a subsidiary of Company if
such activities are in areas not in direct competition with any services or
products produced, sold, conducted, developed, or in the process of development
by the Company or its affiliates on the date of termination of Employee's
employment. The period for which
5
<PAGE> 6
Employee shall be subject to the forgoing restrictions on competition shall be
a period equal to twenty-four (24) months. Notwithstanding anything to the
contrary contained in this Agreement, the restrictions on competition by
Employee shall only be applicable if the Company shall be in compliance with
its obligations to Employee under this Agreement, including, without limitation,
the obligation to pay Employee during the non-competition period and to continue
the Company-paid benefits as provided in Section 7(a) hereof. Provided further,
in the case of an Employee who has been terminated for Cause or has resigned
during an Initial Term or any Renewal Term without cause for such resignation,
the restrictions on competition shall only be applicable to the Employee if the
Company shall, at its option, elect to treat the Employee as if [he] [she] had
been terminated by the Company without Cause, in which event the Company shall
be obligated to such Employee in accordance with the terms applicable to an
Employee terminated by the Company without Cause, including, without limitation,
the obligation to pay the Employee and to continue Company-paid benefits as
provided in Section 7(a) hereof. In order to so exercise this option, the
Company shall notify Employee in writing within three days after termination of
Employee's employment under this Agreement.
(c) Employee agrees that the limitations set forth herein
on [his] [her] rights to compete with the Company and its affiliates are
reasonable and necessary for the protection of the Company and its affiliates.
In this regard, Employee specifically agrees that the limitations as to period
of time and geographic area, as well as all other restrictions on [his] [her]
activities specified herein, are reasonable and necessary for the protection of
the Company and its affiliates. In particular, Employee acknowledges that the
parties anticipate that the Employee will be actively seeking markets for the
Company's products throughout the United States during [his] [her] employment
with the Company.
(d) Employee agrees that the remedy at law for any breach
by him of this Section 8 will be inadequate and that the Company shall also be
entitled to injunctive relief.
9. Confidential Information and Results of Services. Employee
agrees that during the term of this Agreement, and for two (2) years after
[his] [her] termination of employment, in the event of termination of employment
with Cause by the Company or the voluntary resignation of Employee without
cause for such resignation, or for the non- competition period set forth in
Section 8 above, in the event of a termination of employment by the Employer
without Cause or the resignation by the Employee with cause for such
resignation, [he] [she] will not make use of or disclose, without the prior
consent of the Company, Confidential Information (as hereinafter defined)
relating to the Company, or any of its affiliates, and further agrees, that
[he] [she] will return to the Company, at its written request, all written
materials in [his] [her] possession embodying such Confidential Information.
For purposes of this Agreement, "Confidential Information" includes information
conveyed or assigned to the Company by Employee or conceived, compiled, created,
developed, discovered or obtained by Employee from and during [his] [her]
employment relationship with the Company, whether solely by the Employee or
jointly with others, which concerns the affairs of the Company or its affiliates
and which the Company could reasonably be expected to desire be held in
confidence, or the disclosure of which would likely be embarrassing, detrimental
or
6
<PAGE> 7
disadvantageous to the Company or its affiliates and without limiting the
generality of the foregoing includes information relating to inventions, and
the trade secrets, technologies, algorithms, products, services, finances,
business plans, marketing plans, legal affairs, supplier lists, client lists,
potential clients, business prospects, business opportunities, personnel
assignments, contracts and assets of the Company and information made available
to the Company by other parties under a confidential relationship. Confidential
Information, however, shall not include information (a) which is, at the time in
question, in the public domain through no wrongful act of Employee, (b) which is
later disclosed to Employee by one not under obligations of confidentiality to
the Company or Employee, (c) which is required by court or governmental order,
law or regulation to be disclosed, (d) which the Company has expressly given
Employee the right to disclose pursuant to written agreement; or (e) which was
known to Employee prior to his employment by the Company. Employee agrees that
the remedy at law for any breach by him of this Section 9 will be inadequate
and that the Company shall also be entitled to injunctive relief.
10. Notice. All notices, requests, demands and other
communications required by or permitted under this Agreement shall be in
writing and shall be sufficiently delivered if delivered by hand, by courier
service, or sent by registered or certified mail, postage prepaid, to the
parties at their respective addresses listed below:
(a) If to the Employee, to the address set out in the
beginning of this Agreement;
(b) If to the Company:
C.S.I. Hydrostatic Testers, Inc.
2205 West Pinhook
Lafayette, Louisiana 70508
With a copy to:
Transcoastal Marine Services, Inc.
3535 Briarpark, Suite 210
Houston, Texas 77042
Either party may change such party's address by such notice to
the other parties.
11. Assignment. This Agreement is personal to the Employee, and
[he] [she] shall not assign any of [his] [her] rights or delegate any of
[his] [her] duties hereunder without the prior written consent of the Company.
Neither the employee nor [his] [her] spouse will have the right to commute,
encumber, or otherwise dispose of any payments under this Agreement. The
Company shall have the right to assign this Agreement to a successor in
interest in connection with a merger, sale of substantially all assets, or the
like; provided however, that an assignment of this Agreement to an entity with
operations, products or services outside of the industries in which the Company
is then
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<PAGE> 8
active shall not be deemed to expand the scope of Employee's covenant not to
compete with such operations, products or services without Employee's written
consent.
12. Survival. The provisions of this Agreement shall survive the
termination of the Employee's employment hereunder in accordance with their
terms.
13. Applicable Law. The substantive laws of the State of
Louisiana, excluding any law, rule or principle which might refer to the
substantive law of another jurisdiction, will govern the interpretation,
validity and effect of this Agreement without regard to the place of execution
or the place for performance thereof. This Agreement is to be negotiated,
executed and performed in Lafayette Parish, Louisiana, and, as such, the Company
and Grantor agree that personal jurisdiction and venue shall be proper with the
state or federal courts situated in Lafayette Parish, Louisiana, to hear such
disputes arising under this Agreement.
14. Binding Upon Successors. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and permitted assigns.
15. Entire Agreement. This Agreement constitutes the entire
agreement between the Company and the Employee with respect to the terms of
employment of the Employee by the Company and supersedes all prior agreements
and understandings, whether written or oral, between them concerning such terms
of employment.
16. Waiver and Amendments; Cumulative Rights and Remedies.
(a) This Agreement may be amended, modified or
supplemented, and any obligation hereunder may be waived, only by a written
instrument executed by the parties hereto. The waiver by either party of a
breach of any provision of this Agreement shall not operate as a waiver of any
subsequent breach.
(b) No failure on the part of any party to exercise, and
no delay in exercising, any right or remedy hereunder shall operate as a waiver
hereof, nor shall any single or partial exercise of any such right or remedy by
such party preclude any other or further exercise thereof or the exercise of
any other right or remedy. All rights and remedies hereunder are cumulative
and are in addition to all other rights and remedies provided by law, agreement
or otherwise.
(c) The Employee's obligations to the Company and the
Company's rights and remedies hereunder are in addition to all other obligations
of the Employee and rights and remedies of the Company created pursuant to any
other agreement.
17. Construction. Each party to this Agreement has had the
opportunity to review this Agreement with legal counsel. This Agreement shall
not be construed or interpreted against any
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party on the basis that such party drafted or authored a particular provision,
parts of or the entirety of this Agreement.
18. Severability. In the event that any provision or provisions
of this Agreement is held to be invalid, illegal or unenforceable by any court
of law or otherwise, the remaining provisions of this Agreement shall
nevertheless continue to be valid, legal and enforceable as though the invalid
or unenforceable parts had not been included therein. In addition, in such
event the parties hereto shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the parties as closely as possible with
respect to those provisions which were held to be invalid, illegal or
unenforceable.
19. Attorney's Fees. In the event that the employment of counsel
by any party becomes necessary to enforce this Agreement, the non-prevailing
party agrees to pay the prevailing party's reasonable attorney's fees, court
costs, and all other reasonable costs and expenses incurred by the prevailing
party as a result of enforcing its rights under this Agreement.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement under seal on the date first above written, to be effective as of the
Effective Date.
EMPLOYER:
C.S.I. HYDROSTATIC TESTERS, INC.
By:
----------------------------------------
----------------------------, President
EMPLOYEE:
------------------------------------------
------------------
(Name)
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<PAGE> 1
EXHIBIT 10.12
THESE SECURITIES (THE "SECURITIES") HAVE BEEN (I) ACQUIRED FOR INVESTMENT; (II)
ISSUED AND SOLD IN RELIANCE UPON THE EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES LAWS OF VARIOUS STATES; AND (III) ISSUED AND SOLD IN RELIANCE UPON
THE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT") PROVIDED BY SECTION 4(2) OF THE 1933 ACT. THE SECURITIES
CANNOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED OTHER THAN PURSUANT TO (A) AN
EFFECTIVE REGISTRATION UNDER THE 1933 ACT OR ANY TRANSACTION WHICH IS OTHERWISE
IN COMPLIANCE WITH THE 1933 ACT; AND (B) EVIDENCE SATISFACTORY TO THE ISSUER OF
COMPLIANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY OTHER JURISDICTION. THE
ISSUER SHALL BE ENTITLED TO RELY UPON AN OPINION OF COUNSEL SATISFACTORY TO IT
WITH RESPECT TO COMPLIANCE WITH THE ABOVE LAWS.
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF NOR ANY
INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED, ENCUMBERED OR IN ANY OTHER MANNER TRANSFERRED OR DISPOSED OF
EXCEPT AS PROVIDED HEREIN. THE HOLDER OF THIS WARRANT AND THE SECURITIES
ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO THE RESTRICTIONS HEREIN SET FORTH.
--------------------------------------------------
Warrant No. ______
WARRANT
TO
PURCHASE SHARES OF COMMON STOCK
OF
RED FOX INTERNATIONAL, INC.
--------------------------------------------------
This Warrant (this "Warrant"), dated as of June 25, 1997 (the
"Issuance Date"), certifies that, for good and valuable consideration, Red Fox
International, Inc., a Delaware corporation (the "Company"), grants to
McFarland, Grossman & Company, Inc. (acting as both a beneficial owner and
nominee) and, together with any transferee of this Warrant or Warrant Shares
(as defined below) (the "Warrantholder" or "Warrantholders"), subject to the
terms and conditions set forth herein, the right to subscribe for and purchase
from the Company the number of shares (the "Warrant Shares") of the Company's
common stock ("Common Stock") which would be equivalent to 50,000 shares of
Common Stock on the closing date of the Company's initial public offering of
its Common Stock (the "IPO") pursuant to the Securities Act of 1933, as
amended, exercisable during the period from and after the Issuance Date (the
"Initial Exercise Date") to and including 5:00 p.m. Houston, Texas
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time on the date that is five years after the Initial Exercise Date (the
"Expiration Date") at a purchase price (the "Exercise Price") equal to the
lesser of (i) $8.00 per share or (ii) 70% of the initial per share public
offering price of common stock sold to the public in the IPO. In the event the
IPO has not been successfully completed on or before the date one year after
the Issuance Date (which, if applicable, shall be deemed the Initial Exercise
Date), then the Warrant shall be exercisable for 50,000 shares at a price of
$8.00 per share for a period of five years after the Initial Exercise Date
(which shall be deemed to be the Expiration Date). The Warrant Shares shall be
identical (in terms of rights and features) to the shares of Common Stock
issued by the Company in the IPO and shall be equivalent to 50,000 shares of
Common Stock issued in the IPO. The Exercise Price and the number of Warrant
Shares are subject to adjustment from time to time, as provided in Section 5.
The Exercise Price may be paid (i) in cash, by certified or official bank check
payable to the order of the Company; or (ii) by the exercise of the Warrant for
"Net Warrant Shares." Net Warrant Shares means a number of whole shares of
Common Stock, and cash in lieu of any fractional share at the MP price (defined
below), determined as described by the following formula: Net Warrant Shares =
[WS x (MP-EP)]/MP. "WS" is the number of Warrant Shares issuable upon exercise
of the Warrant or portion of the Warrant in question. "EP" shall mean the
Exercise Price. "MP" is the Market Price of the Common Stock on the last
trading day preceding the date of the request to exercise the Warrant. "Market
Price" on any day shall mean the average of the closing prices on such day of
the Common Stock on all domestic exchanges on which the Common Stock is then
listed, or, if there shall have been no sales on any such exchange on such day,
the average of the highest bid and lowest asked prices on all such exchanges at
the end of such day, or, if the Common Stock shall not be so listed, the
average of the representative bid and asked prices quoted in the NASDAQ
National Market System as of 3:30 p.m., New York time, on such day, or if the
Common Stock shall not be quoted in the NASDAQ National Market System, the
average of the high and low bid and asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization. Upon the exercise of the
Warrant for Net Warrant Shares, the number of shares for which the Warrant is
thereafter exercisable shall be reduced by the corresponding number of Warrant
Shares determined in accordance with such formula (giving effect to any
fractional Net Warrant Share).
1. Duration and Exercise of Warrant, Limitation on Exercise;
Payment of Taxes.
1.1 Duration and Exercise of Warrant. The rights
represented by this Warrant may be exercised by the Warrantholder of record, in
whole, or from time to time in part (but covering at least the greater of 1,000
shares or the remaining unexercised portion of this Warrant), by surrender of
this Warrant, accompanied by the Exercise Form annexed hereto (the "Exercise
Form") duly executed by the Warrantholder of record and specifying the number
of Warrant Shares to be purchased, to the Company at the office of the Company
located at 3535 Briarpark, Suite 210, Houston, Texas 77042 (or such other
office or agency as it may designate by notice to the Warrantholder at the
address of such Warrantholder appearing on the books of the Company) during
normal business hours on any day (a "Business Day") other than a Saturday,
Sunday or a day on which the Company is otherwise closed for business (a
"Non-business Day") on or after 9:00 a.m., Houston, Texas time on the Initial
Exercise Date but not later than 5:00 p.m. on the Expiration Date (or 5:00 p.m.
on the next succeeding Business Day, if the Expiration Date is a Non-business
Day), delivery of payment to the Company of the Exercise Price for the number
of Warrant Shares specified in the Exercise Form, payable in cash or certified
bank check, and such documentation as
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<PAGE> 3
to the identity and authority of the Warrantholder as the Company may
reasonably request. Such Warrant Shares shall be deemed by the Company to be
issued to the Warrantholder that is the record holder of such Warrant Shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for the Warrant Shares as aforesaid. Certificates
for the Warrant Shares specified in the Exercise Form shall be delivered to the
Warrantholder as promptly as practicable, and in any event within 5 business
days, thereafter. The stock certificates so delivered shall be in
denominations specified by the Warrantholder, and shall be issued in the name
of the Warrantholder or, if permitted by subsection 1.4 and in accordance with
the provisions thereof, such other name as shall be designated in the Exercise
Form. If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of the certificates for the Warrant Shares,
deliver to the Warrantholder a new Warrant evidencing the rights to purchase
the remaining Warrant Shares, which new Warrant shall in all other respects be
identical with this Warrant. No adjustments or payments shall be made on or in
respect of Warrant Shares issuable on the exercise of this Warrant for any cash
dividends paid or payable to holders of record of Common Stock prior to the
date as of which the Warrantholder shall be deemed to be the record holder of
such Warrant Shares.
1.2 Limitation on Exercise. If this Warrant is not
exercised prior to 5:00 p.m. on the Expiration Date (or the next succeeding
Business Day, if the Expiration Date is a Non-business Day), this Warrant, or
any new Warrant issued pursuant to Section 1.1, shall cease to be exercisable
and shall become void and all rights of the Warrantholder hereunder shall
cease. This Warrant shall not be exercisable and no Warrant Shares shall be
issued hereunder, prior to 9:00 a.m. Houston, Texas time on the Initial
Exercise Date.
1.3 Payment of Taxes. The issuance of certificates for
Warrant Shares shall be made without charge to the Warrantholder for any stock
transfer or other issuance tax in respect thereto; provided, however, that the
Warrantholder shall be required to pay any and all taxes which may be payable
in respect of any transfer involved in the issuance and delivery of any
certificates for Warrant Shares in a name other than that of the then
Warrantholder as reflected upon the books of the Company.
1.4 Transfer; Restriction on Transfer and Legend.
(a) Subject to the provisions of Section 1.4(b)
below, this Warrant shall be transferable, in whole
or in part, at any time after the consummation date
of the IPO (the "IPO Date"), without the consent of
the Company, by notice from Warrantholder. The
Company shall keep at its principal office a register
in which, subject to such reasonable regulations as
it may prescribe, the Company shall provide for the
registration, transfer and exchange of this Warrant.
The Company will not at any time, except upon the
dissolution, liquidation or winding up of the
Company, close such register so as to prevent or
delay the exercise or transfer of this Warrant.
(b) Neither this Warrant nor any of the Warrant
Shares, nor any interest or participation in either,
may be in any manner transferred or
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<PAGE> 4
disposed of, in whole or in part, except in
compliance with applicable United States federal and
state securities laws.
Each certificate for Warrant Shares and any Warrant issued at any time
in exchange or substitution for any Warrant bearing such a legend shall bear a
legend similar in effect to the foregoing paragraph unless, in the opinion of
counsel for the Company, the Warrant need no longer be subject to the
restriction contained herein. The provisions of this subsection 1.4 shall be
binding upon all subsequent holders of this Warrant, if any. Warrant Shares
transferred to the public as expressly permitted by, and in accordance with,
the provisions of this Warrant shall thereafter cease to be deemed to be
"Warrant Shares" for purposes hereof.
1.5 Divisibility of Warrant. This Warrant may be divided
into warrants representing one thousand Warrant Shares, multiples thereof or
the remaining unexercised portion of this Warrant, upon surrender at the
principle office of the Company on any Business Day, without charge to any
Warrantholder, except as provided below. Upon any such division, and, if
permitted by subsection 1.4 and in accordance with the provisions thereof, the
Warrants may be transferred of record to a name other than that of the
Warrantholder of record; provided, however, that the Warrantholder shall be
required to pay any and all transfer taxes with respect thereto.
1.6 Representations, Warranties and Covenants of the
Company. The Company hereby represents, warrants and covenants as follows:
(a) Existence. The Company is a corporation duly
organized and validly existing under the laws of the
State of Delaware and is authorized to do business
and is in good standing as a foreign corporation in
every jurisdiction in which it owns or leases real
property or in which the nature of its business
requires it to be so qualified, except where the
failure to so qualify, individually or in the
aggregate, could not reasonably be expected to have a
material adverse effect on the Company.
(b) Power and Authority. The Company has all
requisite corporate power and authority, and has
taken all corporate action necessary, to execute,
deliver and perform this Warrant, to grant, issue and
deliver this Warrant and to authorize and reserve for
issuance and, upon payment from time to time of the
Exercise Price, to issue and deliver the shares of
Common Stock issuable upon exercise of the Warrant.
This Warrant has been duly executed and delivered by
the Company.
(c) Reservation, Issuance and Delivery of Common
Stock. There have been reserved for issuance, and
the Company shall at all times keep reserved, out of
the authorized and unissued shares of Common Stock, a
number of shares sufficient to provide for the
exercise of the rights of purchase represented by
this Warrant, and such shares, when issued upon
receipt of payment therefor in accordance with the
terms
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<PAGE> 5
of this Warrant, will be legally and validly issued,
fully paid and nonassessable and will be free of any
preemptive rights of stockholders.
(d) No Violation. Neither the execution or
delivery of this Warrant nor the consummation of the
transactions herein contemplated does or will result
in a breach or violation of any of the terms or
provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company is
a party or by which the Company is bound or to which
any of the property or assets of the Company is
subject, nor will such action result in any violation
of any provision of the Certificate of Incorporation
or Bylaws of the Company or any statute or any order,
rule or regulation or any court or governmental
agency or body having jurisdiction over the Company
or any of its properties.
(e) Valid and Binding Obligation. This Warrant,
when duly executed and delivered, will constitute
legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to
any applicable bankruptcy, insolvency or other laws
of general application affecting creditors' rights
and judicial decisions interpreting any of the
foregoing.
2. Reservation and Listing of Shares. All Warrant Shares which
are issued upon the exercise of the rights represented by this Warrant shall,
upon issuance and payment of the Exercise Price, be validly issued, fully paid
and nonassessable and free, from all taxes, liens, security interests, charges
and other encumbrances with respect to the issue thereof other than taxes in
respect of any transfer occurring contemporaneously with such issue. During
the period within which this Warrant may be exercised, the Company shall at all
times have authorized and reserved, and keep available free from preemptive
rights, a sufficient number of shares of Common Stock to provide for the
exercise of this Warrant, and shall at its expense procure such listing thereof
(subject to official notice of issuance) as then may be required on all stock
exchanges on which the Common Stock is then listed. The Company shall, from
time to time, take all such action as may be required to assure that the par
value per share of the Warrant Shares is at all time equal to or less than the
then effective Exercise Price.
3. Exchange, Loss or Destruction of Warrant. If permitted by
subsection 1.4 or 1.5 and in accordance with the provisions thereof, upon
surrender of this Warrant to the company with a duly executed instrument of
assignment and funds sufficient to pay any transfer tax, the company shall,
without charge, execute and deliver a new Warrant of like tenor in the name of
the assignee named in such instrument of assignment and this Warrant shall
promptly be canceled. Upon receipt by the Company of evidence satisfactory to
it of the loss, theft, destruction or mutilation of this Warrant, and, in the
case of loss, theft or destruction, of such bond or indemnification as the
Company may reasonably require, and, in the case of such mutilation, upon
surrender and cancellation of this
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<PAGE> 6
Warrant, the Company will execute and deliver a new Warrant of like tenor. The
term "Warrant" as used herein includes any Warrants issued in substitution or
exchange of this Warrant.
4. Ownership of Warrant. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership) or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any
notice to the contrary, until presentation of this Warrant for registration of
transfer as provided in subsections 1.1, 1.4 and 1.5 or in Section 3.
5. Certain Adjustments. The Exercise Price at which Warrant
Shares may be purchased hereunder, and the number of Warrant Shares to be
purchased upon exercise hereof, are subject to change or adjustment after the
Issuance Date as follows:
5.1 General. The number of Warrant Shares purchasable
upon the exercise of this Warrant and the Exercise Price shall be subject to
adjustment as follows:
(a) In the case the Company shall after August
30, 1997 (i) pay a dividend in shares of Common Stock
or make a distribution in shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock
into a greater number of shares of Common Stock,
(iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock or
(iv) issue by reclassification of its shares of
Common Stock other securities of the Company
(including any such reclassification in connection
with a consolidation or merger in which the Company
is the surviving corporation), the number of Warrant
Shares purchasable upon exercise of this Warrant
shall be adjusted so that the Warrantholder shall be
entitled to receive the kind and number of Warrant
Shares or other securities of the Company that the
Warrantholder would have owned or have been entitled
to receive after the happening of any of the events
described above, had this Warrant been exercised
immediately prior to the happening of such event or
any record date with respect thereto. An adjustment
made pursuant to this paragraph 5.1(1) shall become
effective immediately after the effective date of
such event retroactive to the record date, if any,
for such event.
(b) As of the IPO Date, the number of Warrant
Shares purchasable upon exercise of this Warrant
shall be automatically adjusted, without action by
any party, so that the Warrantholder shall be
entitled to receive the equivalent of 50,000 shares
of Common Stock as of the IPO Date.
(c) In the case the Company shall after August
30, 1997:
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<PAGE> 7
(i) issue rights, options or warrants
generally to holders of its outstanding
Common Stock, without any charge to such
holders, entitling them at the time of such
issuance to subscribe for or purchase,
pursuant to such an issuance, shares of
Common Stock at a price per share which is
lower at the record date for the
determination of stockholders entitled to
receive such rights, options or warrants than
the then current Market Price per share of
Common Stock, or
(ii) distribute generally to holders of
its shares of Common Stock evidences of its
indebtedness or assets (excluding cash
dividends or distributions and dividends or
distributions referred to in paragraph 5.1(1)
of this subsection 5.1) or rights, options or
warrants, or convertible or exchangeable
securities containing the right to subscribe
for or purchase shares of Common Stock.
Appropriate adjustments shall be made to the number of Warrant Shares
purchasable upon the exercise of the Warrant and/or the Exercise Price in order
to preserve the relative rights and interests of the Warrantholders, such
adjustments to be made by the good faith determination of the Board of
Directors of the Company; provided, however, that in the event such rights,
options, warrants or distributions (other than cash dividends) are for the
purpose of providing compensation to officers, directors or employees of the
Company and not for the benefit of securities holders generally, no such
adjustment shall be provided.
5.2 Voluntary Adjustment by the Company. The company
may, at its option, at any time during the term of the Warrant, reduce the then
current Exercise Price to any amount consistent with applicable law, deemed
appropriate by the Board of Directors of the Company.
5.3 Notice of Adjustment. Whenever the number of Warrant
Shares or the Exercise Price of such Warrant Shares is adjusted, as herein
provided, the company shall promptly mail first class, postage prepaid, to all
Warrantholders, notice of such adjustment.
5.4 No Adjustment for Cash Dividends. No adjustment in
respect of any cash dividends shall be made during the term of this Warrant or
upon the exercise of this Warrant.
5.5 Preservation of Purchase Rights Upon Merger,
Consolidation, etc. In case of any consolidation of the Company with or merger
of the Company into another person or in case of any sale, transfer or lease to
another corporation of all or substantially all of the assets of the Company,
the company or such successor or purchaser, as the case may be, shall execute
with the Warrantholders an agreement that the Warrantholders shall have the
right thereafter upon payment of the Exercise Price in effect immediately
prior to such action to purchase upon exercise of each Warrant the kind and
amount of shares and other securities and property that the holder thereof
would have owned or have been entitled to receive after the happening of such
consolidation, merger, sale, transfer or lease had such Warrant been exercised
immediately prior to such action; provided, however, that no adjustment in
respect of cash dividends, interest or other income on or
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<PAGE> 8
from such shares or other securities and property shall be made during the term
of this Warrant or upon the exercise of this Warrant. Such agreement shall
provide for adjustment, which shall be as nearly equivalent as practicable to
the adjustments provided for in this Section 5. The provisions of this
subsection 5.5 shall apply similarly to successive consolidations, mergers,
sales, transfers or leases.
6. Registration Rights.
6.1 Piggy-back Registration Rights. The Company
covenants and agrees that in the event the Company proposes to file a
registration statement under the Securities Act of 1933, as amended (the
"Act"), subsequent to the IPO and prior to the Expiration Date, with respect to
the offering of Common Stock (other than in connection with an exchange offer
or a registration statement on Form S-4, Form S-8 or other form of registration
statement not available to register securities so requested to be included),
the Company shall in each case give written notice of such proposed filing to
(i) if this Warrant has been exercised, the holders of the Warrant Shares and
(ii) if this Warrant has not been exercised, the Warrantholders, in each case
at least 20 days before the earlier of the anticipated or the actual effective
date of the registration statement and at least ten days before the initial
filing of such registration statement, and such notice shall offer to such
Warrantholders the opportunity to include in such registration statement such
number of Warrant Shares as they may request. Warrantholders desiring
inclusion of Warrant Shares in such registration statement shall so inform the
Company by written notice, given with 10 days of the giving of such notice by
the Company in accordance with the provisions of Section 8.6 hereof. The
Company shall permit, or shall cause the managing underwriter of a proposed
offering to permit, the holders of Warrant Shares requested to be included in
the registration to include such securities in the proposed offering on the
same terms and conditions as applicable to any similar securities of the
Company, if any, included therein for the account of any person other than the
Company and the holders of Warrants and/or Warrant Shares. The Company shall
continuously maintain in effect any registration statement with respect to
which the Warrant Shares have been requested to be included (and so included)
for a period of not less than (i) 180 days after the effectiveness of such
registration statement of (ii) the consummation of the distribution by the
Warrantholders of the Warrant Shares ("Piggy-back Termination Date"); provided,
however, that if at the Piggy-back Termination Date the Warrant Shares are
covered by a registration statement which is, or is required to remain, in
effect beyond the Piggy-back Termination Date, the company shall maintain in
effect the registration statement as it relates to the Warrant Shares for so
long as such registration statement remains or is required to remain in effect
for any of such other securities. All expenses of such registration shall be
borne by the Company, except that underwriting commissions and expenses
attributable to the Warrant Shares and fees and distributions of counsel (if
any) to the Warrantholders requesting that the Warrant Shares be offered will
be borne by such Warrantholders.
6.2 Other Matters. In connection with the registration
of Warrant Shares in accordance with Section 6.1 above, the Company agrees to:
(a) Use its best efforts to register or qualify
the Warrant Shares for offer or sale under state
securities or Blue Sky laws of such jurisdictions in
which the holders of such Warrants and/or Warrant
Shares shall reasonably designate; provided, that in
no event shall the
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Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to
take any action which would subject it to general
service of process or taxation in any jurisdiction
where it is not now so subject, and use its best
efforts to do any and all other acts and things which
may be necessary or advisable to enable the
Warrantholders to consummate the sale, transfer or
other disposition of such securities in any
jurisdiction.
(b) Enter into indemnity and contribution
agreements, each in customary form, with each
underwriter, if any, and each holder of Warrant
Shares included in such registration statement; and,
if requested, enter into an underwriting agreement
containing customary representations, warranties,
covenants, allocation of expenses, and customary
closing conditions including, but not limited to,
opinions of counsel, and accountants' cold comfort
letters with any underwriter who participates in the
offering of Warrant Shares; and
(c) Pay all expenses in connection with the
registration of the Warrants and/or Warrant Shares
under the Act and compliance with the provisions of
clause 6.2(1) above.
In connection with the registration of
Warrant Shares in accordance with Section 6.1 above,
the Warrantholders agree to enter into an
underwriting agreement containing customary
representations, warranties, covenants, allocation of
expenses (not otherwise inconsistent with this
Warrant), and customary closing conditions, with any
underwriter who participates in the offering of
Warrant Shares.
7. Restriction on Transfer. Not withstanding the registration
rights granted to Warrantholder pursuant to the provisions of Section 6 of this
Warrant, the Warrantholder hereby agrees that for a period of one year
following the date of the IPO, the Warrantholder will not, without the prior
written consent of Jefferies & Company, Inc., directly or indirectly, offer to
sell, assign, pledge, issue, distribute, sell, contract to sell, grant any
option or enter into any contract for the sale of, or otherwise voluntarily
transfer or dispose of, or announce any offer, sale, grant of any option to
purchase or other transfer or disposition of, any Warrant Shares.
8. No Impairment. The Company shall not by any action,
including, without limitation, amending its Certificate of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of the Warrantholders against impairment.
Without limiting the generality of the foregoing, the Company will (a) not
change the par value of any shares of Common Stock receivable upon the exercise
of this Warrant to an amount greater than the amount payable therefor upon such
exercise, (b) take all such action as may be necessary or appropriate in
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order that the Company may validly and legally issue fully paid and
non-assessable shares of Common Stock upon the exercise of this Warrant, (c)
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to person its obligations under this Warrant, and (d) not undertake any
reverse stock split, combination, reorganization or other reclassification of
its capital stock which would have the effect of making this Warrant
exercisable for less than one share of Common Stock.
Upon the request of a Warrantholder, the company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
reasonably satisfactory to such Warrantholder, the continued validity of this
Warrant and the Company's obligations hereunder.
9. Miscellaneous.
9.1 Entire Agreement. This Warrant constitutes the
entire agreement between the Company and the Warrantholders with respect to
this Warrant and the Warrant Shares.
9.2 Binding Effects; Benefits. This Warrant shall inure
to the benefit of and shall be binding upon the Company, the Warrantholders and
holders of Warrant Shares and their respective heirs, legal representatives,
successors and assigns. Nothing in this Warrant, expressed or implied, is
intended to or shall confer on any person other than the Company, the
Warrantholders and holders of Warrant Shares, or their respective heirs, legal
representatives, successors or assigns, any rights, remedies, obligations or
liabilities under or by reason of this Warrant or the Warrant Shares.
9.3 Amendments and Waivers. This Warrant may not be
modified or amended except by an instrument in writing signed by the Company
and the Warrantholders. The company, and Warrantholder or holders of Warrant
Shares may, by an instrument in writing, waive compliance by the other party
with any term or provision of this Warrant on the part of such other party
hereto to be performed or complied with. The waiver by any such party of a
breach of any term or provision of this Warrant shall not be construed as a
waiver of any subsequent breach.
9.4 Section and Other Headings. This section and other
headings contained in this Warrant are for reference purposes only and shall
not be deemed to be a part of this Warrant or to affect the meaning or
interpretation of this Warrant.
9.5 Further Assurances. Each of the Company, the
Warrantholders and holders of Warrant Shares shall do and perform all such
further acts and things and execute and deliver all such other certificates,
instruments and/or powers of attorney as may be necessary or appropriate as any
party hereto may, at any time and from time to time, reasonably request in
connection with the performance of any of the provisions of this Warrant.
9.6 Notices. All demands, requests, notices and other
communications required or permitted to be given under this Warrant shall be in
writing and shall be deemed to have been duly given if delivered personally or
sent by United States certified or registered mail, postage prepaid, to the
parties hereto at the following addresses or at such other address as any party
hereto shall hereafter specify by notice to the other party hereto:
10
<PAGE> 11
(a) if to the Company, addressed to:
Red Fox International, Inc.
3535 Briarpark, Suite 210
Houston, Texas 77042
Attention: President
(b) if to any Warrantholder or holder of Warrant
Shares, addressed to the address of such person
appearing on the books of the Company.
Except as otherwise provided herein, all such
demands, requests, notices and other communications
shall be deemed to have been received on the date of
personal delivery thereof or on the third Business
Day after the mailing thereof.
9.7 Separability. Any term or provision of this Warrant
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable any other term or
provision of this Warrant or affecting the validity or enforceability of any of
the terms or provisions of this Warrant in any other jurisdiction.
9.8 Fractional Shares. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. Except as otherwise provided herein, with respect to any fraction of
a share called for upon any exercise hereof, the Company shall pay to the
Warrantholder an amount in cash equal to such fraction multiplied by the
then-current Market Price.
9.9 Rights of the Holder. No Warrantholder shall, solely
by virtue of this Warrant, be entitled to any rights of a stockholder of the
Company, either at law or in equity.
9.10 Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such State
applicable to contracts made and performed in Delaware.
9.11 Expenses. The Company shall pay all reasonable legal
and other reasonable out-of-pocket expenses of the Warrantholders and their
counsel in connection with the exercise and sale of the Warrant Shares as
contemplated by this Warrant.
9.12 Right to Information. The company will provide to a
Warrantholder and to all holders of Warrant Shares, on a timely basis, copies
of all documents and reports filed with the Securities and Exchange Commission
(the "Commission") and publicly available annual and quarterly financial
statements, as may be requested in writing by the Warrantholder or as otherwise
agreed in another agreement between the Company and the Warrantholder.
9.13 Merger or Consolidation of the Company. So long as
this Warrant remains in effect, the Company will not merge or consolidate with
or into, or sell, transfer or lease all or
11
<PAGE> 12
substantially all of its property to, any other corporation unless the
successor or purchasing corporation, as the case may be (i) shall be the
Company or (ii) if not the Company, shall expressly assume, by supplemental
agreement executed and delivered to the Warrantholders, the performance and
observance of each and every covenant and condition of this Warrant to be
performed and observed by the Company under this Warrant.
9.14 Rule 144. With a view to making available to
Warrantholders the benefits of certain rules of the Commission that may permit
the sale of shares of Common Stock to the public without registration, in the
event that the IPO is successfully completed by the Company, the Company hereby
covenants and agrees to use its reasonable business efforts after the Initial
Exercise Date to file in a timely manner all reports and other documents
required to be filed by it under the Act and the Securities Exchange Act of
1934, as amended, and the rules and regulations adopted by the Commission
thereunder necessary to permit sales under Rule 144 under the Act, and the
Company will take such further action which does not have material costs to the
Company to the extent required form time to time to enable Warrantholders to
sell shares of Common Stock (whether or not any such securities have been the
subject of a piggy-back request pursuant to the agreement set forth in Section
6 hereof) without registration under the Act within the limitation of the
exemptions provided by (a) Rule 144 under the Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the written request of a Warrantholder, the Company will
deliver to such Warrantholder a written statement as to whether it has complied
with such requirements.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer as of the date first written above.
Red Fox International, Inc.
By:
-------------------------------
G. Darcy Klug, President
12
<PAGE> 13
EXERCISE FORM
(To be executed upon exercise of this Warrant)
The undersigned, record holder of this Warrant, hereby irrevocably
elects to exercise the right, represented by this Warrant, to purchase
___________________ of the Warrant Shares and herewith tenders payment for such
Warrant Shares to the order of Red Fox International, Inc. in the amount of
$_________________ in accordance with the terms of this Warrant. The
undersigned requests that a certificate for such Warrant Shares be registered
in the name of _____________________ and that such certificate be delivered to
________________________________________________________ whose address is _____
__________________________________________________________________.
Date: Signature:
-------------------- ------------------------------
------------------------------
(Name Printed)
13
<PAGE> 1
EXHIBIT 10.13
PURCHASE AND SALE AGREEMENT
BY AND AMONG
TRANSCOASTAL MARINE SERVICES, INC.,
LAINE CONSTRUCTION COMPANY, INC.,
AND
THE HOLDERS OF THE
OUTSTANDING CAPITAL STOCK
OF
LAINE CONSTRUCTION COMPANY, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE 1
PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Basic Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Closings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) Preliminary Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) Final Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(c) Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(d) Failure to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(e) IPO Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Additional Acquisition Transactions; Initial Public Offering of Parent Common Stock . . . 3
1.6 Indemnification of Exchange Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
NO FRACTIONAL SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Payment in Full Satisfaction of All Rights . . . . . . . . . . . . . . . . . . . . . . . . 4
1.10 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 2
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Representations and Warranties by the Shareholders . . . . . . . . . . . . . . . . . . . . 4
(a) Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(d) Ownership of Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 6
(e) Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Representations and Warranties of the Shareholders and the Company . . . . . . . . . . . . 7
(a) Organization and Qualification, etc. . . . . . . . . . . . . . . . . . . . . . . 7
(b) Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Qualification of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(e) Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 9
(f) Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(g) Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(h) Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . 10
(i) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(j) Permits and Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(k) Title to Properties; Absence of Liens and Encumbrances, etc. . . . . . . . . . . 14
(l) Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(m) Patent, Trademark, etc. Claims . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
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(n) List of Properties, Contracts and Other Data . . . . . . . . . . . . . . . . . . 15
(o) Use of Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(p) Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(q) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(r) Labor and Employment Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(s) Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(t) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(u) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(v) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(w) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(x) Powers of Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(y) Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.3 Representations and Warranties by the Parent . . . . . . . . . . . . . . . . . . . . . . . 25
(a) Organization and Qualification, etc. . . . . . . . . . . . . . . . . . . . . . . 25
(b) Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(c) Subsidiaries, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(d) Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 26
(e) Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(f) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(g) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(h) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(i) [Intentionally left blank] . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(j) Registration Statement; PPM . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(k) No Undisclosed Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(l) Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(m) Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(n) Parent Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(o) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(p) Other Acquisition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(q) Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.4 Representations and Warranties Concerning Subsidiaries. . . . . . . . . . . . . . . . . 31
(a) Organization and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(b) Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(c) Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 3
ADDITIONAL COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.2 Access to Information by Parent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.3 Access to Information by the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 34
3.4 Amendment to Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.5 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(a) Confidential Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
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(b) Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.6 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.7 The Shareholders' Release of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.8 Real Estate Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(a) Title Insurance Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(b) Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(c) Title Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(d) Phase I Environmental Assessment . . . . . . . . . . . . . . . . . . . . . . . . 38
(e) Title and Environmental Objections . . . . . . . . . . . . . . . . . . . . . . . 38
3.9 PPM; Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(a) Company to Provide Information . . . . . . . . . . . . . . . . . . . . . . . . . 39
(b) Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(c) Further Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(d) Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.10 [Intentionally left blank] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.11 Satisfaction of Conditions by the Company and Shareholders . . . . . . . . . . . . . . . . 41
3.12 Satisfaction of Conditions by Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.13 Amendment of Other Acquisition Agreements . . . . . . . . . . . . . . . . . . . . . . . . 41
3.14 Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.15 Periodic Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.16 Corporate Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.17 Release of Shareholders and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.18 Release and Indemnification from Guaranties . . . . . . . . . . . . . . . . . . . . . . . 42
3.19 Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.20 Nature of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.21 Indemnification of Directors and Officers of the Company . . . . . . . . . . . . . . . . . 43
3.22 Parent's IPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.23 Listing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.24 Principal Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.25 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.26 Certain Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 4
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.1 Conditions Precedent to the Obligations of the Parent . . . . . . . . . . . . . . . . . . 44
(a) Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . 44
(b) Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(c) Legal Actions or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(d) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(e) Real Estate Purchase Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 45
(f) Policies of Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(g) Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
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(h) The Registration Rights Agreements and Shareholders Lock-up Agreements 45
(i) Parent's IPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(j) Lender Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(k) Audit of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(l) Opinion of Counsel for the Company and the Shareholders . . . . . . . . . . . . . 46
(m) The Shareholders Release of the Company; Corporate Records . . . . . . . . . . . 46
(n) All Proceedings to be Satisfactory . . . . . . . . . . . . . . . . . . . . . . . 46
4.2 Conditions Precedent to the Obligations of the Shareholders and the Company. . . . . . . . 46
(a) Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . 46
(b) Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(c) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(d) Delivery of PPM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(e) Real Estate Purchase Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 47
(f) Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(g) Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(h) All Proceedings to be Satisfactory . . . . . . . . . . . . . . . . . . . . . . . 47
(i) Opinion of Counsel for The Parent . . . . . . . . . . . . . . . . . . . . . . . . 47
(j) Legal Actions or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(k) IPO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(l) Release. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(m) Simultaneous Closings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(n) No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(o) Shareholder Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(p) Listing of Parent Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . 48
(q) Reliance Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 5
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.1 Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(a) Prior to the Preliminary Closing. . . . . . . . . . . . . . . . . . . . . . . . . 49
(b) After the Preliminary Closing Date . . . . . . . . . . . . . . . . . . . . . . . 50
5.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 6
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 50
6.2 Indemnification by the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.3 Indemnification by Parent and the Company. . . . . . . . . . . . . . . . . . . . . . . . . 51
6.4 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.5 Time of Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
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<S> <C>
6.6 Limitations on Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.7 Effective Date; Exclusive Remedy. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 7
STOCK TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.1 Compliance with Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.2 Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 8
FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.1 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.2 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 9
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.1 Expenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.2 Execution in Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.4 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.5 Amendments, Supplements, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.6 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.7 Choice of Forum; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.8 Binding Effect, Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.9 Assignability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.10 Invalid Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.11 Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
v
<PAGE> 7
EXHIBITS:
EXHIBIT 1.3(a) - Description of Real Estate
EXHIBIT 1.3(b) - Real Estate Purchase Agreement
EXHIBIT 1.4(b) - Proportion Ownership by Shareholders
EXHIBIT 1.5 - List of Other Companies
EXHIBIT 1.10 - Registration Rights Agreement
EXHIBIT 3.1 - Conduct of Business
EXHIBIT 3.1(l) - Production Bonuses
EXHIBIT 3.1(m) - Assets
EXHIBIT 3.16 - Persons Receiving Corporate Indemnification
EXHIBIT 3.17 - Persons Receiving Releases
EXHIBIT 3.21 - Directors and Officers of the Company Receiving
Indemnification
EXHIBIT 4.1(g)(1) - List of Individuals with Employment Agreements
EXHIBIT 4.1(g)(2)- Employment Agreement
EXHIBIT 4.1(l) - Opinion From Correro Fishman Haygood Phelps
Weiss Walmsley & Casteix L.L.P.
EXHIBIT 4.2(i) - Opinion of Chamberlain, Hrdlicka, White, Williams & Martin
EXHIBIT 9.11 - Shareholders and Other Representatives of the Company
SCHEDULES:
SHAREHOLDERS DISCLOSURE SCHEDULE
Schedule 2.1(b) - Approvals
Schedule 2.1(d) - Holders of Company Common Stock
vi
<PAGE> 8
COMPANY DISCLOSURE SCHEDULE
Schedule 2.2(a) - Jurisdictions Where Qualified
Schedule 2.2(c) - Subsidiaries of the Company
Schedule 2.2(e) - Approvals
Schedule 2.2(h) - Changes and Events since December 31, 1996
Schedule 2.2(h)(1) - Permitted Exceptions
Schedule 2.2(j) - Permits and Legal Compliance
Schedule 2.2(k) - Properties and Assets of the Company
Schedule 2.2(l) - Software
Schedule 2.2(m) - Intellectual Property
Schedule 2.2(n) - List of Real Estate Owned by the Company
Schedule 2.2(n)(1) - Description of Real Estate Owned by the Company
Schedule 2.2(n)(2) - Real Estate Leased by the Company
Schedule 2.2(n)(3) - Contracts and Commitments of the Company
Schedule 2.2(q) - Litigation, Actions and Proceedings
Schedule 2.2(r) - Employment Agreements, Benefit Plans, and Compensation
Schedule 2.2(s) - Accounts Receivable of the Company
Schedule 2.2(t) - Insurance Coverage; Self Insurance
Schedule 2.2(u) - Company Benefit Plan
Schedule 2.2(v) - Tax Audits; Basis in Assets; NOLs
BUYER DISCLOSURE SCHEDULE
Schedule 2.3(a) - Jurisdictions Where Qualified
Schedule 2.3(c) - Subsidiaries of Parent
Schedule 2.3(f) - Approvals
vii
<PAGE> 9
PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT (this "Agreement") made on this 28th
day of August 1997 by and among TRANSCOASTAL MARINE SERVICES, INC., a Delaware
corporation (the "Parent"), LAINE CONSTRUCTION COMPANY, INC., a Louisiana
corporation (the "Company"), and the undersigned holders of all of the
outstanding capital stock of the Company (the "Shareholders").
WHEREAS, the Shareholders own in the aggregate all of the outstanding
shares of Common Stock, $100 par value per share, of the Company ("Company
Common Stock") and wish to sell and transfer to Parent, which wishes to
purchase and acquire from the Shareholders, all of such outstanding shares of
Company Common Stock (the "Company Shares") in return for shares of the common
stock, $.001 par value per share, of the Parent ("Parent Common Stock") and
certain cash consideration, all as provided herein;
WHEREAS, the Shareholders desire to sell to the Parent, and the Parent
desires to purchase, certain real estate used in connection with the Company's
business operations;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 BASIC TRANSACTION. Subject to the terms and conditions of
this Agreement, the Parent agrees to purchase from each of the Shareholders,
and each of the Shareholder agrees to sell and convey to the Parent, all of the
Company Shares owned by such Shareholder, for the consideration specified in
Section 1.2.
1.2 PURCHASE PRICE. Parent agrees to pay and deliver to the
Shareholders an aggregate of $22,000,000 in cash and common stock (the
"Purchase Price") in consideration for delivery of the Company Shares. The
Purchase Price shall be paid to the Shareholders by delivery of (i) $17,836,000
in cash by wire transfer or other delivery of immediately available funds and
(ii) the number of validly issued, fully paid and nonassessable shares of
Parent Common Stock resulting from dividing $4,164,000 by the Share Price (as
defined in Section 1.4(e) below).
1.3 REAL ESTATE PURCHASE. Parent agrees to purchase from the
Shareholders, or to cause its designee to purchase from the Shareholders, and
the Shareholders agree to sell and convey to the Parent or its designee certain
immovable property and leasehold interests located in Lafayette Parish,
Louisiana, described in Exhibit 1.3(a) hereto, together with all improvements
located thereon and all rights and appurtenances thereto (collectively, the
"Real Estate"). At the Final Closing (defined in Section 1.4(b)) the Exchange
Agent (defined in Section 1.4(a)), acting for Parent or its designee,
<PAGE> 10
will pay and deliver to the Shareholders $2,000,000 in cash (the "Real Estate
Purchase Price") in consideration for the purchase and sale of the Real Estate.
The acquisition of the Real Estate shall be subject to terms and conditions of
that certain Real Estate Purchase Agreement to be executed between Shareholders
and Parent in the form attached as Exhibit 1.3(b) (the "Real Estate Purchase
Agreement") on or before the Preliminary Closing (defined in Section 1.4(a)).
1.4 CLOSINGS.
(a) Preliminary Closing. A preliminary closing
("Preliminary Closing") of the transactions contemplated by this Agreement
shall take place at the offices of Chamberlain, Hrdlicka, White, Williams &
Martin, in Houston, Texas, commencing at 9:00 a.m. local time on such date
("Preliminary Closing Date") on which Parent or the Shareholders shall have
notified the other at least three business days in advance, provided that the
Preliminary Closing shall occur simultaneously with the execution and delivery
of the underwriting agreement ("Underwriting Agreement") relating to the
purchase by underwriters of shares of Parent Common Stock for resale to the
public in connection with the IPO (defined in Section 1.5). At the Preliminary
Closing the following deliveries will be made to an exchange agent selected by
Parent and reasonably acceptable to the Shareholders (the "Exchange Agent") to
be held by such Agent in escrow pending disposition in accordance with Section
1.4(b) below: (i) the Shareholders will deliver four multiple originals of the
various certificates, instruments, and documents referred to in Section 4.1
below (except that only the original documents referred to in Section
4.1(m)(ii) need be delivered) and the instrument required to transfer title
under the Real Estate Purchase Agreement, (ii) Parent will deliver four
multiple originals of the various certificates, instruments, and documents
referred to in Section 4.2 below, and (iii) each Shareholder will deliver
certificates representing such Shareholder's shares of Company Common Stock
together with completed (but undated) stock powers transferring the shares to
Parent duly executed by such Shareholder and with signature guaranteed by an
eligible guarantor institution pursuant to any medallion signature guarantee
program (collectively, the "Stock Certificates"). Each of such certificates,
instruments, and documents to be delivered in accordance with clauses (i) and
(ii) that are to be executed by the parties will be fully executed, but dated
in blank, except that the certificates to be delivered in accordance with
Section 4.1(a), 4.1(b), 4.2(a) and 4.2(b) and the instrument required to
transfer title under the Real Estate Purchase Agreement shall be dated the
Preliminary Closing Date.
(b) Final Closing. The closing ("Final Closing") of the
transactions contemplated by this Agreement shall take place at the same place
and hour as hereinabove provided for the Preliminary Closing on such date
("Final Closing Date") as Parent shall determine and of which Parent shall give
Shareholders and the Exchange Agent at least twenty-four hours' advance notice,
provided that the Final Closing shall occur contemporaneously with the closing
of the IPO. At the Final Closing Parent will deposit the Purchase Price and
the Real Estate Purchase Price (each in immediately available funds) with the
Exchange Agent; will deliver, and will cause the managing underwriter of the
IPO to deliver, a certificate to the Exchange Agent to the effect that the
closing of the IPO has occurred or is occurring simultaneously with the Final
Closing; and will deliver a certificate to the Exchange Agent to the effect
that the "final closings" under the Other Acquisition Agreements (defined in
Section 1.5) are occurring simultaneously with the Final Closing. Upon
Laine Purchase and Sale Agreement/Page 2
<PAGE> 11
receipt of the Purchase Price and the Real Estate Purchase Price (each in
immediately available funds to the extent comprised of cash) and the
certificates referred to above (the "Required Deliveries"), the Exchange Agent
shall insert the date of the Final Closing in all of the undated documents held
by the Exchange Agent in accordance with Section 1.4(a) and shall (A) deliver
two complete sets of multiple originals to the Shareholders, on the one hand,
and Parent, on the other hand, (B) deliver the Stock Certificates to Parent,
and (C) deliver the Purchase Price to the Shareholders in proportion to their
ownership of the Company Shares as shown on Exhibit 1.4(b); provided that the
Exchange Agent shall not make such deliveries or take such actions if the
Exchange Agent is aware of any injunction or order that would be breached by
the occurrence of the Final Closing.
(c) Other Actions. In addition to the actions to be
taken at the Preliminary Closing and Final Closing as described herein, the
parties shall take such other customary actions as may be necessary to
effectuate such closings.
(d) Failure to Close. If: (1) the Preliminary Closing
occurs but the Final Closing has not occurred within five business days after
the Preliminary Closing, or (2) the Required Deliveries are not made at the
Final Closing, or (3) the Underwriting Agreement or this Agreement is purported
to be terminated, then the Exchange Agent will not make the deliveries
contemplated by Section 1.4(b) but rather will destroy all of the multiple
originals which were delivered to such Agent in accordance with Section 1.4(a),
except that the Exchange Agent will deliver to the Shareholders the Stock
Certificates and the documents referred to in Section 4.1(m)(ii). In that
event this Agreement will terminate, and such termination will be deemed a
termination under Section 5.1(a)(1).
(e) IPO Statement. At the Preliminary Closing and the
Final Closing, Parent shall deliver to the Shareholders and the Exchange Agent
a statement (the "IPO Statement") reporting (i) the price per share paid or to
be paid by the public for shares of Parent Common Stock (the "IPO Price") in
the IPO, and (ii) the lowest price per share of the Parent Common Stock at
which the Parent has agreed to issue Parent Common Stock pursuant to any of the
Other Acquisition Agreements (the "Lowest Acquisition Price"). The lower of
the IPO Price and the Lowest Acquisition Price is referred to in this Agreement
as the "Share Price." The IPO Statement shall report the quotient resulting
from dividing $5,464,000 by the Share Price. Such quotient shall represent the
number of shares of Parent Common Stock included in the Purchase Price.
1.5 ADDITIONAL ACQUISITION TRANSACTIONS; INITIAL PUBLIC OFFERING
OF PARENT COMMON STOCK. The transactions contemplated by this Agreement are
part of a series of additional transactions that relate to the Parent's intent
to acquire the companies listed on Exhibit 1.5 attached hereto (the "Other
Companies") and to consummate an initial public offering of the Parent Common
Stock resulting in net proceeds to the Parent of at least $45,000,000 on a firm
underwriting basis (the "IPO"). The Parent will acquire the Other Companies
from various parties (the "Other Acquisitions") pursuant to separate
acquisition agreements ("Other Acquisition Agreements") to be executed prior to
or concurrently with this Agreement.
Laine Purchase and Sale Agreement/Page 3
<PAGE> 12
1.6 INDEMNIFICATION OF EXCHANGE AGENT. If the Exchange Agent
becomes involved in any litigation, claim or controversy in connection with its
actions under this Agreement, the Parent shall indemnify, defend and save
Exchange Agent from all losses, costs, damages, expenses and attorneys' fees
suffered or incurred by Exchange Agent as a result thereof, other than those
caused by negligence or misconduct.
1.7 NO FRACTIONAL SHARES. Notwithstanding anything in this
Agreement to the contrary, no certificates or scrip representing fractional
shares of Parent Common Stock shall be issued, and such fractional share
interests will not entitle the owner thereof to vote or to any rights of a
stockholder of the Parent. In lieu of any such fractional shares, each
Shareholder who would otherwise be entitled to a fraction of a share of Parent
Common Stock, after aggregating all fractional shares to which such Shareholder
is entitled under this Agreement and any Other Acquisition Agreements to which
they may be a party, shall be entitled to receive from the Exchange Agent a
cash payment equal to such remaining fraction multiplied by the Share Price.
The Parent shall make available to the Exchange Agent at the Final Closing the
amount of cash required to make any cash payments in lieu of remaining
fractional shares.
1.8 ASSIGNMENTS. No assignment, transfer or other disposition of
record or beneficial ownership of any shares of Company Common Stock may be
made on or after the date hereof without Parent's written consent, which
consent will not be unreasonably withheld or delayed.
1.9 PAYMENT IN FULL SATISFACTION OF ALL RIGHTS. The delivery of
the Purchase Price to the Shareholders with respect to the Company Common Stock
shall be deemed to be payment in full satisfaction of all rights pertaining to
the outstanding Company Common Stock.
1.10 REGISTRATION RIGHTS AGREEMENT. Parent and each Shareholder
shall at the Preliminary Closing execute and deliver to the Exchange Agent a
Registration Rights Agreement in the form attached hereto as Exhibit 1.10.
Provisions of the Registration Rights Agreement shall be no less favorable to
the Shareholders than provisions of any other agreement of the Parent providing
registration rights to the shareholders of any Other Companies.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES BY THE SHAREHOLDERS. Each of
the Shareholders represents and warrants to the Parent that the statements
contained in this Section 2.1 are correct as to himself or herself as of the
date of this Agreement and will be correct as to himself or herself as of the
Preliminary Closing Date and the Final Closing Date (as though made then),
except as set forth in the disclosure schedule delivered by the Shareholders to
the Parent on the date hereof, as supplemented or amended in accordance with
Section 3.4 of this Agreement (such schedule, as so supplemented or amended,
the "Shareholders Disclosure Schedule"). The Shareholders Disclosure Schedule
is arranged in sections and paragraphs corresponding to the lettered and
numbered sections
Laine Purchase and Sale Agreement/Page 4
<PAGE> 13
and paragraphs contained in this Section 2.1. References in Section 2.1 to a
numbered schedule mean the section of the Shareholder Disclosure Schedule that
corresponds with that number; for example, references to "Schedule 2.1(b)" mean
section 2.1(b) of the Shareholder Disclosure Schedule. The Shareholder
Disclosure Schedule constitutes an exception to each warranty or representation
set forth herein, whether or not such warranty or representation specifically
refers to the Shareholder Disclosure Schedule; accordingly each warranty or
representation set forth herein is deemed to be preceded by the clause: "Except
as set forth in the Shareholder Disclosure Schedule . . .".
(a) Qualification. Such Shareholder has the legal power
and authority to own his or her properties and assets.
(b) Authority Relative to Agreement. Such Shareholder
has the full right, power, and legal authority to execute and deliver
this Agreement. Such Shareholder has the full right, power, and legal
authority to perform this Agreement and to consummate the transactions
contemplated on his or her part hereby. No proceeding on the part of
such Shareholder, and, except for those approvals described in
Schedule 2.1(b), no notice, consent, authorization, order or approval
of, filing or registration with, any governmental commission, board or
other regulatory body or any bank, bonding company, lender, surety,
customer, supplier, or any other person whatsoever is required for or
in connection with the execution and delivery of this Agreement by
such Shareholder. No proceeding on the part of such Shareholder, and,
except for those approvals described in Schedule 2.1(b), no notice,
consent, authorization, order or approval of, filing or registration
with, any governmental commission, board or other regulatory body or
any bank, bonding company, lender, surety, customer, supplier, or any
other person whatsoever is required for or in connection with the
performance by such Shareholder of this Agreement and the consummation
by such Shareholder of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by such Shareholder and
is a valid and binding agreement of such Shareholder, enforceable
against such Shareholder in accordance with its terms, except as such
enforcement is subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting
creditors' rights.
(c) Non-Contravention. The execution, delivery and
performance of this Agreement by such Shareholder do not, and the
consummation by such Shareholder of the transactions contemplated
hereby will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation, or acceleration of
any obligation or to the loss of a material benefit under, or result
in the creation or imposition of any material lien, charge, pledge,
security interest or other encumbrance upon any of the property or
assets of such Shareholder pursuant to any provision of, any mortgage,
lien, lease, agreement, license, instrument, law, ordinance,
regulation, order, arbitration award, judgment or decree to which such
Shareholder is a party or by which any of such Shareholder's assets
are bound. The execution, delivery and performance of this Agreement
by such Shareholder do not and the consummation by such Shareholder of
the transactions contemplated hereby will not violate
Laine Purchase and Sale Agreement/Page 5
<PAGE> 14
or conflict with any other restriction of any kind or character to
which such Shareholder is subject or by which any of such
Shareholder's assets may be bound.
(d) Ownership of Company Common Stock. Such Shareholder
holds of record and owns beneficially the number of shares of Company
Common Stock set forth next to his or her name in Schedule 2.1(d).
Such Shareholder is, and as of the Final Closing Date will be (except
as permitted under Section 1.8), the sole and exclusive lawful owner
of such shares of Company Common Stock free and clear of all liens,
claims, encumbrances and rights of others of any nature whatsoever,
with full power to vote all such shares on any matter that may
properly come before shareholders of the Company, and such Shareholder
may exercise such voting power on any matter without violation of the
rights of any person. There are no rights, warrants or options
outstanding with respect to such capital stock, and such Shareholder
has no obligation to deliver capital stock of the Company or any of
its Subsidiaries (as defined below) to any person as of the date
hereof, at any time on or prior to the Final Closing Date, thereafter
or as a result thereof or in connection therewith except as provided
in this Agreement.
(e) Restricted Securities.
(1) Such Shareholder acknowledges that the shares
of Parent Common Stock which such Shareholder shall acquire
pursuant to this Agreement have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and
are being acquired for such Shareholder's own account for
investment and not with a view to the distribution thereof.
The Parent Common Stock will be subject to the stock transfer
restrictions described in Article 7 below.
(2) Such Shareholder has the knowledge and
experience in financial and business matters to enable him or
her to evaluate the merits and risks of approving this
Agreement and the transactions contemplated herein and
acquiring shares of Parent Common Stock.
(3) Such Shareholder is able to bear the economic
risks of his or her investment in the Parent Common Stock.
(4) Such Shareholder has been represented by
legal counsel in this transaction and such Shareholder and his
or her advisors, including such counsel, have been given the
opportunity to ask questions of, and receive answers from, the
officers of the Parent concerning the terms of the
transactions contemplated by this Agreement and the affairs
and the business and financial condition of the Parent.
(5) Such Shareholder has received a confidential
private placement memorandum concerning the Parent and an
investment in shares of Parent Common Stock (the "PPM"), and
such Shareholder and his or her advisors have been given
Laine Purchase and Sale Agreement/Page 6
<PAGE> 15
access to all documents, books and additional information
concerning Parent which they have requested regarding Parent.
(6) Such Shareholder has made such inquiries by
himself or herself and through his or her advisors in making a
decision to approve this Agreement and the transactions
contemplated herein as such Shareholder has deemed necessary
and advisable.
(7) Such Shareholder acknowledges and agrees that
the Parent Common Stock issued to such Shareholder may not be
disposed of except in accordance with the requirements of the
Securities Act and any applicable state securities laws.
(8) None of the representations made by the
Shareholders in this Section 2.1(e) shall affect any of
Shareholders' rights under any other section of this
Agreement.
2.2 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND THE
COMPANY. The Shareholders and the Company represent and warrant to the Parent
that the statements contained in this Section 2.2 are correct as of the date of
this Agreement and will be correct as of the Preliminary Closing Date and the
Final Closing Date (as though made then), except as otherwise set forth in the
disclosure schedule delivered by the Shareholders and the Company to the Parent
on the date hereof, as supplemented or amended in accordance with Section 3.4
of this Agreement (such schedule, as so amended or supplemented, the "Company
Disclosure Schedule"). The Company Disclosure Schedule is arranged in sections
and paragraphs corresponding to the lettered and numbered sections and
paragraphs contained in this Section 2.2. References in Section 2.2 to a
numbered schedule mean the section of the Company Disclosure Schedule that
corresponds with that number; for example, references to "Schedule 2.2(a)" mean
Section 2.2(a) of the Company Disclosure Schedule. The Company Disclosure
Schedule constitutes an exception to each warranty or representation set forth
herein, whether or not such warranty or representation specifically refers to
the Company Disclosure Schedule; accordingly each warranty or representation
set forth herein is deemed to be preceded by the clause: "Except as set forth
in the Company Disclosure Schedule . . .".
(a) Organization and Qualification, etc. The Company is
a corporation duly organized, validly existing and in good standing
under the laws of the State of Louisiana, has the full right, power
and legal authority and, to the knowledge of the Shareholders and the
Company, all licenses, permits, titles and authorizations necessary
to own all of its properties and assets and to carry on its business
as it is now being conducted, and is duly qualified to do business and
is in good standing in each jurisdiction as set forth in Schedule
2.2(a) where, to the reasonable belief of the Shareholders and the
Company, such qualification is appropriate. The copies of the
Company's Articles of Incorporation and Bylaws, as amended to date,
which have been delivered to Parent are complete and correct, and such
instruments, as so amended, are in full force and effect. The Company
is qualified to transact business as a foreign corporation and is in
good standing in all jurisdictions in
Laine Purchase and Sale Agreement/Page 7
<PAGE> 16
which it is engaged in business and in which its properties or assets
are located, which foreign jurisdictions are listed in Schedule
2.2(a).
(b) Capital Stock. The entire authorized capital stock
of the Company consists of 200,000 shares of Company Common Stock of
which 75,000 shares of Company Common Stock are validly issued and
outstanding, fully paid and nonassessable, all of which are held of
record and beneficially by the Shareholders. No shares of the capital
stock of the Company have been issued in violation of the preemptive
rights of any past or present shareholder. No shares of the capital
stock of the Company are in the treasury of the Company. There are no
outstanding subscriptions, shares of capital stock, calls, warrants,
options, contracts, commitments, or demands relating to the capital
stock of the Company or other agreements of any character under which
the Company would be obligated to issue or purchase shares of its
capital stock. There is no voting agreement, voting trust, proxy, or
other agreement or understanding with respect to the voting of the
capital stock of the Company. The Company has no commitments to issue
or sell any securities or obligations convertible into or exchangeable
for, or giving any person any right to subscribe for or acquire from
the Company, any shares of its capital stock and no securities or
obligations evidencing any such rights are outstanding.
(c) Subsidiaries. With respect to each corporation,
firm, partnership or other business entity in which the Company holds
an interest, Schedule 2.2(c) sets forth the name, the interest of the
Company, and the capitalization of such entity (each such entity in
which the Company owns or controls more than 50% of the voting
securities, directly or indirectly, or in which the Company acts as
manager or general partner is hereinafter a "Subsidiary"). Except as
described on Schedule 2.2(c), neither the Company nor any Subsidiary
owns or has any right or obligation to acquire any class of securities
(including, without limitation, debt securities) issued by any person
or company and neither the Company nor any Subsidiary is a party to or
bound to any partnership, joint venture, voluntary association, or
other agreement with any person for the conduct of any business.
(d) Qualification of Subsidiaries. Each Subsidiary is
duly organized, validly existing and in good standing under the laws
of its state of organization, with the corporate or organizational
power to own its property and carry on its business as it is now being
conducted. All of the issued and outstanding shares of capital stock
of each Subsidiary have been duly authorized and are validly issued,
fully paid, and nonassessable, and were not issued in violation of the
preemptive rights of any past or present shareholder. The Company and
its Subsidiaries hold of record and own beneficially all of the
outstanding shares or other interests in each Subsidiary of the
Company held by them, 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 any of the Company and its Subsidiaries to sell,
transfer, or otherwise dispose of any capital stock of any of its
Subsidiaries or that could require any Subsidiary to issue, sell, or
Laine Purchase and Sale Agreement/Page 8
<PAGE> 17
otherwise cause to become outstanding any of its own capital stock.
There are no outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to any Subsidiary.
There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of any capital stock of any
Subsidiary. None of the Company and its Subsidiaries controls
directly or indirectly or has any direct or indirect equity
participation in any corporation, partnership, trust, or other
business association which is not a Subsidiary of the Company.
(e) Authority Relative to Agreement. The Company has the
full right, power, and legal authority to execute and deliver this
Agreement. The Company has the full right, power, and legal authority
to perform this Agreement and to consummate the transactions
contemplated on the part of the Company hereby. The execution and
delivery by the Company of this Agreement and the consummation by the
Company of the transactions contemplated on its part hereby have been
duly authorized by its Board of Directors and the Shareholders in
their capacity as the holders of all of the capital stock of the
Company. To the knowledge of the Shareholders and the Company, no
proceeding on the part of the Company, and, except for those approvals
described in Schedule 2.2(e), no notice, consent, authorization, order
or approval of, filing or registration with, any governmental
commission, board or other regulatory body, or any bank, bonding
company, lender, surety, customer, supplier, or any other person
whatsoever is required for or in connection with the Company's
execution and delivery of this Agreement. This Agreement has been
duly executed and delivered by the Company and is a valid and binding
agreement of the Company, enforceable against the Company in
accordance with its terms, except as such enforcement is subject to
the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws relating to or affecting creditors' rights.
(f) Non-Contravention. The execution, delivery, and
performance of this Agreement by the Company do not and the
consummation by the Company of the transactions contemplated hereby
will not (1) to the knowledge of the Shareholders and the Company,
violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, government agency, or court to which the Company or any of
its assets is subject or (2) violate any provision of the Articles of
Incorporation or Bylaws of the Company or any Subsidiary, or (3) to
the knowledge of the Shareholders and the Company, violate or result
in, with the giving of notice or the lapse of time or both, the
violation of any provision of, or result in the acceleration of or
entitle any party to accelerate (whether after the giving of notice or
lapse of time or both) any obligation under, or result in the creation
or imposition of any lien, charge, pledge, security interest or other
encumbrance upon any of the property of the Company or any Subsidiary
pursuant to any provision of any mortgage, lien, lease, contract,
agreement, license, or instrument to which the Company or any
Subsidiary is a party or by which any of their respective assets are
bound. The execution, delivery and performance of this Agreement by
the Company do not and will not violate or conflict with any other
restriction of any kind or character to which the Company or any
Subsidiary is subject or by which any of their respective assets may
be bound, and the same do not and will not
Laine Purchase and Sale Agreement/Page 9
<PAGE> 18
constitute an event permitting termination of any such mortgage, lien,
lease, agreement, license or instrument to which the Company or any
Subsidiary is a party or by which any of their respective assets are
bound.
(g) Financial Information. The Shareholders have
previously furnished Parent with true and complete copies of the
balance sheets of the Company and its Subsidiaries as of December 31,
1996 and December 31, 1995, and the related statements of income,
retained earnings and cash flows for each of the three years in the
period ended December 31, 1996, together with the report of Phillips,
Goodson & Co., the independent accountants of the Company, with
respect to such financial statements. Such financial statements have
been prepared in conformity with Generally Accepted Accounting
Principals ("GAAP") consistently applied and, to the knowledge of the
Shareholders and the Company, present fairly the financial position
and results of operations of the Company and its consolidated
Subsidiaries as of and for the respective periods then ended. The
Shareholders have also previously furnished the Parent with a copy of
the unaudited monthly balance sheets of the Company as of the last day
of each month from January through June 1997, and the related monthly
unaudited statement of income, retained earnings and cash flows of the
Company with respect to each month from January through June 1997
certified by the chief executive officer and the chief accounting
officer of the Company (including such certificates, the "Unaudited
Monthly Financial Statements"). To the knowledge of Shareholders and
the Company, such financial statements have been prepared in
conformity with GAAP consistently applied and present fairly the
financial position and results of operations of the Company and its
consolidated Subsidiaries as of and for the subject periods, except
for normal recurring year-end adjustments and except for the absence
of footnotes. The Company and its Subsidiaries do not have any
liabilities or obligations of a type which should be included in or
reflected as such in financial statements prepared in accordance with
GAAP, whether related to tax or non-tax matters, accrued or
contingent, due or not yet due, liquidated or unliquidated, or
otherwise, except as and to the extent disclosed or reflected in such
financial statements. Collectively, the financial statements
described in this Section 2.2(g) are the "Company Financial
Statements."
(h) Absence of Certain Changes or Events. Since December
31, 1996, except to the extent described in Schedule 2.2(h) of the
Company Disclosure Schedule, and except as contemplated by this
Agreement or in connection with the transactions contemplated by this
Agreement:
(1) none of the Company and its Subsidiaries 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;
(2) none of the Company and its Subsidiaries has
entered into any agreement, contract, lease, permit or license
(or series of related agreements, contracts, leases, permits
and licenses) either involving more than $20,000 or outside
the ordinary course of business;
Laine Purchase and Sale Agreement/Page 10
<PAGE> 19
(3) to the knowledge of the Shareholders and the
Company, no party (including any of the Company and its
Subsidiaries) has breached, accelerated, terminated, modified,
or canceled any agreement, contract, lease, permit or license
(or series of related agreements, contracts, leases, permits
and licenses) involving more than $20,000 to which any of the
Company and its Subsidiaries is a party or by which any of
them is bound ("Company Contracts");
(4) none of the Company and its Subsidiaries has
imposed or suffered to exist any lien, encumbrance or security
interest upon any of its assets, tangible or intangible (other
than the Permitted Exceptions, as defined below);
(5) none of the Company and its Subsidiaries has
made any capital expenditure (or series of related capital
expenditures) either involving more than $20,000 or outside
the ordinary course of business;
(6) none of the Company and its Subsidiaries has
made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other
corporation, partnership, limited liability company or other
person (or series of related capital investments, loans, and
acquisitions) either involving more than $20,000 or outside
the ordinary course of business;
(7) none of the Company and its Subsidiaries 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 $25,000 singly or $50,000 in the aggregate;
(8) none of the Company and its Subsidiaries has
delayed or postponed the payment of accounts payable and other
liabilities outside the ordinary course of business;
(9) none of the Company and its Subsidiaries has
canceled, compromised, satisfied, settled, waived, or released
any right or claim (or series of related rights and claims)
either involving more than $20,000 or outside the ordinary
course of business;
(10) none of the Company and its Subsidiaries has
granted any license or sublicense of any rights under or with
respect to any Intellectual Property (as defined in Section
2.2(m) below);
(11) there has been no change made or authorized in
the Articles of Incorporation or bylaws of any of the Company
and its Subsidiaries (except that the Articles may be changed
to include the exculpation provisions permitted by law);
Laine Purchase and Sale Agreement/Page 11
<PAGE> 20
(12) none of the Company and its Subsidiaries 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;
(13) none of the Company and its Subsidiaries 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, except for dividends and
distributions to shareholders of S-corporations which in the
aggregate do not exceed 43.2% of the Company's pre-tax net
income during 1997 through the date of the latest such
distribution and except as permitted by Section 3.1(m);
(14) none of the Company and its Subsidiaries has
experienced any damage, destruction, or loss to its property
in excess of $20,000 which is not covered by insurance;
(15) none of the Company and its Subsidiaries 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;
(16) none of the Company and its Subsidiaries has
entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(17) none of the Company and its Subsidiaries has
granted any increase in compensation to any of its directors,
officers, employees, consultants or agents in excess of five
percent of such person's base compensation and discretionary
bonuses to officers and employees in the aggregate amount of
up to 10% of the pre-tax net income of the Company during 1997
up to the date of the latest such payment;
(18) none of the Company and its Subsidiaries 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 other employee benefit plan);
(19) none of the Company and its Subsidiaries has
made any other change in employment terms for any of its
directors, officers, and employees outside the ordinary course
of business;
(20) none of the Company and its Subsidiaries has
made or pledged to make any material charitable or other
contribution outside the ordinary course of business;
Laine Purchase and Sale Agreement/Page 12
<PAGE> 21
(21) to the knowledge of the Shareholders and the
Company, 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
Company or its Subsidiaries;
(22) to the knowledge of the Shareholders and the
Company, there has not been any material adverse change in the
business, financial condition, operation, results of
operation, or future prospects of the Company and its
Subsidiaries;
(23) there have not been any work interruptions, or
to the knowledge of the Shareholders and the Company, labor
grievances or employee claims filed (the existence of which is
known, or under the normal course of business should be known,
to the Company) against the Company or its Subsidiaries;
(24) there has not been any merger or consolidation
or agreement to merge or consolidate with or into any other
corporations; and
(25) none of the Company and its Subsidiaries has
committed to do any of the foregoing.
"Permitted Exceptions" shall mean (i) mechanic's,
materialman's, warehouseman's and carrier's liens and purchase money
security interests arising in the ordinary course of business, a
correct and complete list of which is set forth on Schedule 2.2 of the
Company Disclosure Schedule or arising by operation of law; (ii) liens
for taxes and assessments not yet payable; (iii) liens for taxes,
assessments and charges and other claims, the validity of which the
Company or the Shareholders are contesting in good faith, a correct
and complete list of which is set forth on Schedule 2.2; and (iv)
imperfections of title, liens, security interests, claims and other
charges and encumbrances the existence of which does not adversely
affect the operation, value, use or enjoyment of the affected asset or
property.
(i) Undisclosed Liabilities. To the knowledge of the
Shareholders and the Company, the Company and its Subsidiaries have no
liabilities (and there is no known basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against the Company or its Subsidiaries giving rise
to any liability), except for (i) liabilities set forth on the face of
the Company Financial Statements (rather than in any notes thereto)
and (ii) liabilities which have arisen after May 31, 1997 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).
(j) Permits and Legal Compliance. To the knowledge of
the Shareholders and the Company, the Company and its Subsidiaries
have all permits, licenses, orders, qualifications, and approvals of
all governmental and regulatory authorities material to the conduct of
their business, a correct and complete list of which is set forth in
Schedule 2.2. To the knowledge of the Shareholders and the Company,
all such permits, licenses, orders
Laine Purchase and Sale Agreement/Page 13
<PAGE> 22
and approvals are in full force and effect, and no suspension or
cancellation of any of them is pending or threatened. To the
knowledge of the Shareholders and the Company, none of such permits,
licenses, orders or approvals, and no application for any of such
permits, licenses, orders or approvals, will be adversely affected by
the consummation of the transactions contemplated by this Agreement.
To the knowledge of the Shareholders and the Company, the Company and
its Subsidiaries have 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 the Company or
its Subsidiaries alleging any failure so to comply.
(k) Title to Properties; Absence of Liens and
Encumbrances, etc. To the knowledge of the Shareholders and the
Company, the Company and its Subsidiaries have good and marketable
title to all of the real, tangible personal and mixed properties and
assets owned by it and used in its business, free and clear of any
liens, charges, pledges, mortgages, conditional sales contracts,
security interests or other encumbrances (other than Permitted
Exceptions), except as reflected in the Company Financial Statements.
A correct and complete list of all such properties and assets (other
than properties and assets described in Sections 2.2(l), 2.2(m) and
2.2(n)) with a historical cost in excess of $5,000 is set forth on
Schedule 2.2(k). The properties and assets of the Company and its
Subsidiaries (other than the properties and assets described in
Sections 2.2(l), 2.2(m) and 2.2(n), which sections contain the
Company's and Shareholders' representations and warranties with
respect to intangible properties and assets) are free and clear of any
liens, charges, pledges, mortgages, conditional sales contracts,
security interests or other encumbrances (other than Permitted
Exceptions), except as reflected in the Company Financial Statements.
(l) Software. Schedule 2.2(l) contains a list or
description by type of all operating and applications computer
programs and data bases ("Software") which the Company or any
Subsidiary uses or has available for use and plans to use, and such
Software constitutes all the Software which is used to operate the
business of the Company and its Subsidiaries as currently conducted.
All such Software is owned outright by the Company or its Subsidiaries
except as indicated on Schedule 2.2(l). As to any Software which
Schedule 2.2(l) indicates is not owned by the Company or its
Subsidiaries, the owner of such Software is identified on Schedule
2.2(l) and the Company and its Subsidiaries have the right to use the
same pursuant to valid leases or licenses therefor. To the knowledge
of the Shareholders and the Company, none of the Software used by or
available to the Company or its Subsidiaries, and no use thereof,
infringes upon or violates any patent, copyright, trade secret or
other proprietary right of anyone else and no claim with respect to
any such infringement or violation is known to be threatened.
(m) Patent, Trademark, etc. Claims. To the knowledge of
the Shareholders and the Company, the Company or its Subsidiaries is
the owner or licensee of all patents, patent licenses,
trademarks/servicemarks/trade names, trademark/servicemark/trade name
Laine Purchase and Sale Agreement/Page 14
<PAGE> 23
registrations, copyrights, and copyright registrations or any other
intellectual property ("Intellectual Property") used in the operation
of the Company's business as presently conducted and purported to be
owned or licensed by it; and a correct and complete list of such
Intellectual Property is set forth in Schedule 2.2(m) of the Company
Disclosure Schedule. Each item of Intellectual Property owned or used
by the Company or its Subsidiaries immediately prior to the Final
Closing will be owned or available for use by the Company or its
Subsidiaries on the same terms and conditions immediately after the
Final Closing. To the knowledge of the Shareholders and the Company,
each of the Company and its Subsidiaries owns or has the right to use
all such Intellectual Property. To the knowledge of the Shareholders
and the Company, each of the Company and its Subsidiaries has not
infringed, and is not now infringing, on any trade name, trademark,
service mark, or copyright belonging to any other person, firm or
corporation and has not received any notice of such infringement.
Neither the Company nor any Subsidiary is a party to any license,
sublicense, agreement or arrangement pursuant to which the Company or
its Subsidiaries uses Intellectual Property except as shown in
Schedule 2.2(m). With respect to each such license, sublicense,
agreement or arrangement set forth in Schedule 2.2(m), to the
knowledge of the Shareholders and the Company:
(1) the license, sublicense, agreement or
arrangement covering the item is legal, valid, binding,
enforceable, and in full force and effect;
(2) the license, sublicense, agreement or
arrangement will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms
immediately following the Final Closing;
(3) no party to such license, sublicense,
agreement or arrangement 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; and
(4) no party to the license, sublicense,
agreement or arrangement has repudiated any provision thereof.
Each of the Company and its Subsidiaries owns, or holds adequate
licenses or other rights to use, its trade names in the business as
now conducted by it, and such use does not, and will not, conflict
with, infringe on, or otherwise violate any rights of others. The
Shareholders have delivered to Parent correct and complete copies of
all such licenses, sublicenses agreements and arrangements (as amended
to date) disclosed on Schedule 2.2(m).
(n) List of Properties, Contracts and Other Data. The
Company and its Subsidiaries own or lease all property and tangible
assets used in the conduct of their business as presently conducted.
To the knowledge of the Shareholders and the Company, and except as
reflected in such Schedule 2.2(n), all of the property of the Company
and its Subsidiaries is in existence and is in good condition and
repair, except for reasonable wear
Laine Purchase and Sale Agreement/Page 15
<PAGE> 24
and tear, and in conformity in all material respects with all
building, zoning, OSHA, Coast Guard, safety, or other applicable
ordinances, regulations, or laws. Schedule 2.2(n) contains a list
setting forth with respect to the Company and its Subsidiaries as of
the date hereof the following:
(1) Schedule 2.2(n)(1) lists and describes briefly
all real property which the Company and each Subsidiary owns.
With respect to each such parcel of owned real property
(collectively, the "Owned Real Property"):
(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 Owned Real
Property subject thereto and except as set forth on
Schedule 2.2(n)(1);
(ii) there are no pending or, to the knowledge of
the Shareholders and the Company, threatened
condemnation proceedings, lawsuits, or administrative
actions or other matters relating to the Owned Real
Property which could reasonably be expected to
adversely affect the current ownership, maintenance,
use, occupancy, or value thereof;
(iii) to the knowledge of the Shareholders and the
Company, 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 is 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, except
as described on Schedule 2.2(n)(1), the land does not
serve any adjoining property for any purpose
inconsistent with the use of the land, and the Owned
Real 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) to the knowledge of the Shareholders and the
Company, 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 such approvals and
applicable laws, rules, and regulations;
Laine Purchase and Sale Agreement/Page 16
<PAGE> 25
(v) except as described on Schedule 2.2(n)(2) 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 Company
and its Subsidiaries) in possession of the parcel of
real property, other than tenants in possession of
property leased or subleased by the Company or any of
its Subsidiaries under any leases or subleases
disclosed on Schedule 2.2(n)(2) which tenants are in
possession of space to which they are entitled;
(viii) to the knowledge of the Shareholders and the
Company, except as described on Schedule 2.2(n)(1),
to the extent necessary or desirable for the use or
operation of facilities located on real property
owned by the Company or any Subsidiary, such
facilities are supplied with utilities and other
services, including gas, electricity, water,
telephone, sanitary sewer, and storm sewer, all of
which services are adequate in accordance with all
applicable laws, ordinances, rules, and regulations;
(ix) to the knowledge of the Shareholders and the
Company, except as described on Schedule 2.2(n)(1),
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;
(x) Except as described on Schedule 2.2(n)(1), the
Owned Real Property is not located within an area
that has been designated by the Federal Insurance
Administration, the Army Corps of Engineers or any
other governmental agency or body as being subject to
special flooding hazards; and
(xi) Except as described on Schedule 2.2(n)(1), the
improvements on the Property (A) have been
constructed in a good and workmanlike manner, free
from defects in workmanship and material and, to the
best of Shareholders' and Company's knowledge, do not
require any repair or replacement other than minor,
routine maintenance; and (B) have been constructed
and are being occupied, maintained, and operated in
compliance with all applicable laws, regulations,
insurance requirements, contracts, leases, permits,
licenses, ordinances, restrictions, building setback
lines, covenants, reservations, and easements, and
the Shareholders and Company have received no notice,
written or oral, claiming any violation of any of the
same or requesting or
Laine Purchase and Sale Agreement/Page 17
<PAGE> 26
requiring the performance of any repairs,
alterations, or other work in order to so comply.
(2) Schedule 2.2(n)(2) of the Company Disclosure
Schedule lists and describes briefly all real property leased
or subleased by or to the Company or any of its Subsidiaries
(whether as lessor or as lessee). Schedule 2.2(n)(2) also
identifies the properties leased or subleased to the Company
or any of its Subsidiaries for which title insurance policies
are to be procured as provided in Section 3.8 below. The
Shareholders have delivered to the Parent correct and complete
copies of the leases and subleases listed in Schedule
2.2(n)(2) (as amended to date) . With respect to each lease
and sublease listed in Schedule 2.2(n)(2);
(i) to the knowledge of the Shareholders and the
Company, the lease or sublease is legal, valid,
binding, enforceable, and in full force and effect;
(ii) to the knowledge of the Shareholders and the
Company, the lease or sublease will continue to be
legal, valid, binding, enforceable, and in full force
and effect on identical terms immediately following
the consummation of the transactions contemplated
hereby;
(iii) to the knowledge of the Shareholders and the
Company, 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) to the knowledge of the Shareholders and the
Company, no party to the lease or sublease has
repudiated any provision thereof;
(v) to the knowledge of the Shareholders and the
Company, except as described on Schedule 2.2(n)(2),
there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or
sublease;
(vi) to the knowledge of the Shareholders and the
Company, with respect to each sublease, the
representations and warranties set forth in
subsections (i) through (v) above are correct and
complete with respect to the underlying lease;
(vii) none of the Company and its Subsidiaries has
assigned, transferred, conveyed, mortgaged, deeded in
trust, or encumbered any interest in the leasehold or
subleasehold;
(viii) to the knowledge of the Shareholders and the
Company, all facilities leased or subleased
thereunder have received all approvals of
governmental authorities (including licenses and
permits) required in connection with the
Laine Purchase and Sale Agreement/Page 18
<PAGE> 27
operation thereof and have been operated and
maintained in accordance with applicable laws, rules,
and regulations; and
(ix) to the knowledge of the Shareholders and the
Company, all facilities leased or subleased
thereunder are supplied with utilities and other
services necessary for the operation of said
facilities.
(3) Schedule 2.2(n)(3) of the Company Disclosure
Schedule lists and describes briefly all contracts and
commitments (including, without limitation, mortgages,
indentures and loan agreements) to which the Company or any
Subsidiary is a party, or to which it or any of its assets or
properties are subject and which are not specifically referred
to elsewhere in Section 2.2, provided that there need not be
listed in the Company Disclosure Schedule (unless required
pursuant to the preceding subsections of this Section 2.2(n))
any contract or commitment incurred in the ordinary course of
business which requires payments to or by the Company and its
Subsidiaries during its remaining life aggregating less than
$25,000 or which is terminable by the Company or any
Subsidiary within thirty days without payment of a premium or
penalty.
Correct and complete copies of all documents, and descriptions
complete in all material respects of all oral agreements or
commitments (if any), referred to in this Section 2.2(n) have been
provided to Parent or its counsel. To the knowledge of the
Shareholders and the Company, none of the Company, the Shareholders
and the Subsidiaries has been notified of any claim that any contract
listed in Schedule 2.2(n)(3) of the Company Disclosure Schedule is not
valid and enforceable in accordance with its terms for the periods
stated therein, or that there is under any such contract any existing
material default or event of default or event which with notice or
lapse of time or both would constitute such a default.
(o) Use of Real Property. None of the Shareholders, the
Company and the Subsidiaries has received notice of violation of any
applicable zoning or building regulation, ordinance or other law,
order, regulation or requirement relating to the operations of the
Company or its Subsidiaries, or any notice of default under any
material lease, contract, commitment, license or permit, relating to
the use and operation of the owned or leased real property listed in
the Company Disclosure Schedules. To the knowledge of the
Shareholders and the Company, none of the Shareholders, the Company
and the Subsidiaries has received notice that any plant, facility or
other building which is owned or covered by a lease set forth in the
Company Disclosure Schedule does not substantially conform in all
material respects with all applicable ordinances, codes, regulations
and requirements, and none of the Shareholders, the Company and the
Subsidiaries has received notice that any law or regulation presently
in effect or condition precludes or restricts continuation of the
present use of such properties.
(p) Environmental Laws. To the knowledge of the
Shareholders and the Company, (i) the Company and its Subsidiaries,
including, without limitation, their
Laine Purchase and Sale Agreement/Page 19
<PAGE> 28
businesses, facilities, property, vessels, and equipment have been and
are currently in compliance, in all material respects, with all
applicable federal, state, and local laws, rules, and regulations of
all authorities, including without limitation, applicable
Environmental Laws (as hereinafter defined), and (ii) the Company and
its Subsidiaries have all permits, certificates, and licenses required
to operate their businesses, facilities, property, vessels, and
equipment, including, without limitation, any relating to the
generation, processing, treatment, discharge, storage, transport,
disposal, or other management of chemicals and other hazardous
materials, of waste materials of any kind, and those relating to the
protection of environmentally sensitive areas. To the knowledge of
the Shareholders and the Company, there is no material adverse effect
on any of the facilities, properties, vessels or equipment of the
Companies, or with respect to function, use, or value of any such
assets, resulting from any hazardous or toxic substance, or any
pollutant or contaminant, or as a result of exposure to petroleum or
any by-product thereof. "Environmental Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the
Resource Conservation and Recovery Act of 1976, and the Occupational
Safety and Health Act of 1970, each as amended, together with all
other 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) concerning pollution or protection of the environment, public
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 in
ambient air, 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.
(q) Litigation. Except as provided on Schedule 2.2(q),
there are no actions, suits, audits, investigations, unfair labor
practices charges, complaints, claims, grievances or proceedings or,
to the knowledge of the Shareholders and the Company, any audits or
investigations with respect to the Company or any Subsidiary pending
against the Company or any Subsidiary at law or in equity, or before
or by any federal, state, municipal, foreign or other governmental
department, commission, board, bureau, agency or instrumentality, nor
to the knowledge of the Shareholders and the Company, are there any
such actions, suits, audits, investigations, unfair labor practices
charges, complaints, claims, grievances or proceedings that are known
to be threatened against the Company or any Subsidiary.
(r) Labor and Employment Matters.
(1) Schedule 2.2(r) of the Company Disclosure
Schedule sets forth all collective bargaining agreements,
employment and consulting agreements (other than consulting
agreements terminable by the Company or any Subsidiary within
60 days without payment of a premium or a penalty), executive
compensation plans, bonus plans, deferred compensation
agreements, employee pension plans or retirement plans,
employee profit sharing plans, employee stock purchase and
stock option
Laine Purchase and Sale Agreement/Page 20
<PAGE> 29
plans, group life insurance, hospitalization insurance or
other plans or arrangements providing for benefits to
employees of the Company or any Subsidiary.
(2) To the knowledge of the Shareholders and the
Company, there are no controversies between the Company (or
any Subsidiary) and any employees or any unresolved labor
union grievances or unfair labor practice or labor arbitration
proceedings pending or threatened, related to the Company (or
any Subsidiary) and there are not any organizational efforts
presently being made or threatened in an organized fashion
involving any of the employees of the Company or any
Subsidiary.
(3) None of the Shareholders, the Company and the
Subsidiaries has received notice of any claim that it has not
complied with any laws relating to the employment of labor,
including any provisions thereof relating to wages, hours,
collective bargaining, the payment of social security and
similar taxes, equal employment opportunity, employment
discrimination and employment safety, or that it is liable for
any arrears of wages or any taxes or penalties for failure to
comply with any of the foregoing.
(4) Schedule 2.2(r) of the Company Disclosure
Schedule sets forth the current annual compensation (or basis
thereof) of all employees of the Company and its Subsidiaries
(by position or by department) as of June 30, 1997.
(s) Accounts Receivable. To the knowledge of the
Shareholders and the Company (A) the accounts receivable reflected on
the balance sheet of the Company as of December 31, 1996, and all
accounts receivable arising between December 31, 1996 and the date
hereof, arose from bona fide transactions in the ordinary course of
business; (B) the services involved have been provided to the account
obligor and no further services are required to be provided in order
to entitle the Company or its assignees to collect the accounts
receivable in full; (C) no such account has been assigned or pledged
to any other person, firm or corporation; and (D) unless paid prior to
the Preliminary Closing Date, the accounts receivable are or will be
as of the Preliminary Closing Date current and collectible net of the
respective reserves, if any, shown on the Company Financial Statements
(which reserves are adequate and calculated consistent with past
practices). There is no contest, claim or right of set-off, other
than in the ordinary course of business, under any of the Company
Contracts with any obligor of an account receivable relating to the
amount or validity of such account receivable. Schedule 2.2(s) sets
forth a complete and accurate list of all accounts receivable as of
June 30, 1997, which list indicates the aging of such accounts
receivable.
(t) Insurance. Schedule 2.2(t) 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 the Company and
its Subsidiaries have been a party, a named insured, or otherwise the
beneficiary of coverage at any time within the past year (except as to
insurance policies owned by third
Laine Purchase and Sale Agreement/Page 21
<PAGE> 30
party vendors, contractors and clients of the Company which have
contractually named the Company or its Subsidiaries as insured or
provided other benefits of coverage as a result of contractual
liability coverage, which policies need not be listed on Schedule
2.2(t) but shall be made available for inspection by Parent's
representatives):
(1) the name, address, and telephone number of the agent;
(2) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(3) the policy number and the period of coverage;
(4) 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
(5) a description of any retroactive or "swing"
premium adjustments or other loss-sharing arrangements.
To the knowledge of the Shareholders and the Company, with respect to
each such insurance policy owned by the Company or any of its
Subsidiaries: (A) the policy is legal, valid, binding, enforceable,
and in full force and effect with respect to the periods and risks
which such policy purports to insure; (B) the policy will continue to
be legal, valid, binding, enforceable, and in full force and effect in
accordance with its terms on the same terms immediately following the
consummation of the transactions contemplated hereby; (C) neither the
Company nor any of its Subsidiaries 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 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 (D) no party to the policy has repudiated any
provision thereof. To the knowledge of the Shareholders and the
Company, the Company and each of its Subsidiaries has been covered
during the past five years by insurance in scope and amount customary
and reasonable for the businesses in which it has engaged during the
aforementioned period. Schedule 2.2(t) of the Company Disclosure
Schedule describes any self-insurance arrangements affecting the
Company and its Subsidiaries. "Self insurance arrangements" means any
arrangement by which the Company or its Subsidiaries has assumed risks
in scope and amount customarily insured by businesses in the Company's
industry and geographic region.
(u) Employee Benefits.
(1) To the knowledge of the Shareholders and the
Company, the Company and its Subsidiaries have complied and
currently are in compliance, both as to form and operation, in
all material respects with the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Internal
Laine Purchase and Sale Agreement/Page 22
<PAGE> 31
Revenue Codes of 1954 and/or 1986, as amended, respectively
(for purposes of this Section 2.2(u) only, the "Code"), with
respect to each "employee benefit plan" as defined under
Section 3(3) of ERISA. Each employee benefit plan of the
Company and its Subsidiaries ("Plan") is described in Schedule
2.2(u) of the Company Disclosure Schedule, and a copy of each
Plan is attached thereto.
(2) The Company and its Subsidiaries have never
maintained, adopted or established, contributed or been
required to contribute to, or otherwise participated or been
required to participate in, a "multiemployer plan" (as defined
in Section 3(37) of ERISA). No amount is due as owing from
the Company or any Subsidiary on account of a "multiemployer
plan" (as defined in Section 3(37) of ERISA) or on account of
any withdrawal therefrom.
(3) The Company and its Subsidiaries have not
incurred any liability with respect to a Plan including,
without limitation, under ERISA (including, without
limitation, Title I or Title IV of ERISA, other than liability
for premiums due to the Pension Benefit Guaranty Corporation
("PBGC")), the Code or other applicable law, which has not
been satisfied in full, and, to the knowledge of the
Shareholders and the Company, no event has occurred, and
there exists no known condition or set of circumstances, which
could result in the imposition of any liability with respect
to a Plan, including, without limitation, under ERISA
(including, without limitation, Title I or Title IV of ERISA),
the Code or other applicable law with respect to the Plan.
(4) The Company and its Subsidiaries have no
outstanding commitments to provide or to cause to be provided
any severance or other post-employment benefit, salary
continuation, termination, disability, death, retirement,
health or medical benefit or similar benefit to any person
(including, without limitation, any former or current
employee) that has not been reflected in the Company Financial
Statements or is not included in any Plan disclosed in
Schedule 2.2(u).
(v) Tax Matters.
(1) To the knowledge of the Shareholders and the
Company, all federal, state, local and foreign tax returns
required to be filed by the Company and its Subsidiaries prior
to the date hereof have been filed on a timely basis with the
appropriate governmental authorities in all jurisdictions in
which such tax returns are required to be filed, and all such
returns are correct and complete. Shareholders have delivered
to Parent correct and complete copies of all federal income
tax returns, examination reports, and statements of
deficiencies asserted against or agreed to by the Company or
any Subsidiary since January 1, 1992. To the knowledge of the
Shareholders and the Company, neither the Company nor its
Subsidiaries are currently the subject of any audit,
examination or any similar investigation by any governmental
authority. Schedule 2.2(v) of the Company Disclosure Schedule
sets
Laine Purchase and Sale Agreement/Page 23
<PAGE> 32
forth all audits, examinations or similar investigations of
the Company and its Subsidiaries by any governmental authority
since January 1, 1992.
(2) To the knowledge of the Shareholders and the
Company, all federal, state, local and foreign income,
franchise, sales, use, property, and all other taxes, fees,
assessments, or other governmental charges (including
withholding taxes), and all interest and penalties thereon
(all of the foregoing collectively, "Taxes") due from or
properly accruable by the Company and its Subsidiaries have
been fully and timely paid or, in the cases of Taxes for which
payment is not yet required, properly and fully accrued for on
the Company Financial Statements or in Schedule 2.2(v) with
respect to all taxable periods ending on or prior to the date
of this Agreement and interim periods through the date of this
Agreement.
(3) None of the Company and its Subsidiaries has
filed a consent under Section 341(f) of the Code concerning
collapsible corporations. None of the Shareholders, the
Company or any Subsidiary is a party to any agreement,
contract or arrangement that would, by reason of the
consummation of any of the transactions contemplated by this
Agreement, individually or in the aggregate, result in the
payment of any "excess parachute payment" within the meaning
of Section 280G of the Code. None of the assets of the
Company or any Subsidiary is required to be treated as being
owned by any other person pursuant to the "safe harbor"
leasing provisions of Section 168 of the Internal Revenue Code
of 1954, as in effect prior to the repeal of said leasing
provisions.
(4) None of the Company and its Subsidiaries is a
party to any Tax allocation or sharing agreement. None of the
Company and its Subsidiaries (A) has been a member of an
affiliated group filing a consolidated federal income tax
return (other than a group the common parent of which was the
Company or a Related Company) or (B) has any liability for the
taxes of any person (other than any of the Company or a
Related Company and their respective Subsidiaries) under
Treas. Reg. Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor,
by contract, or otherwise.
(5) Schedule 2.2(v) sets forth the following
information with respect to each of the Company and its
Subsidiaries (or, in the case of clause (B) below, with
respect to each of the Subsidiaries) as of the most recent
practicable date: (A) the basis of the Company or Subsidiary
in its assets; (B) the basis of the stockholder(s) of the
Subsidiary in its stock (or the amount of any excess loss
account); (C) the amount of any net operating loss, net
capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to
the Company or Subsidiary; and (D) the amount of any deferred
gain or loss allocable to the Company or Subsidiary arising
out of any Deferred Intercompany Transaction (as defined in
Treas. Reg. Section 1.1502-13).
Laine Purchase and Sale Agreement/Page 24
<PAGE> 33
(w) Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by the
Shareholders and the Company directly with the Parent, without the
intervention of any other person on behalf of the Shareholders or the
Company in such manner as to give rise to any valid claim by any other
person against the Shareholders or the Company for a finder's fee,
brokerage commissions, or similar payment.
(x) Powers of Attorney. There are no outstanding powers
of attorney executed on behalf of the Company.
(y) Investment Company. Each of the Company or its
Subsidiaries is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "holding company", a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding
company" or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
2.3 REPRESENTATIONS AND WARRANTIES BY THE PARENT. The Parent
represents and warrants to the Shareholders and the Company that the statements
contained in this Section 2.3 are correct as of the date of this Agreement and
will be correct as of the Preliminary Closing Date and the Final Closing Date
(as though made then), except as set forth in the disclosure schedule delivered
by the Parent to the Shareholders and the Company on the date hereof , as
supplemented or amended in accordance with Section 3.4 of this Agreement (such
schedule, as so supplemented or amended, the "Parent Disclosure Schedule").
The Parent Disclosure Schedule will be arranged in sections and paragraphs
corresponding to the lettered and numbered sections and paragraphs contained in
this Section 2.3. References in Section 2.3 to a numbered schedule mean the
section of the Parent Disclosure Schedule that corresponds with that number;
for example, references to "Schedule 2.3(a)" mean Section 2.3(a) of the Parent
Disclosure Schedule. The Parent Disclosure Schedule constitutes an exception
to each warranty or representation set forth herein, whether or not such
warranty or representation specifically refers to the Parent Disclosure
Schedule; accordingly each warranty or representation set forth herein is
deemed to be preceded by the clause: "Except as set forth in the Parent
Disclosure Schedule . . .".
(a) Organization and Qualification, etc. The Parent is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, has corporate power and
authority to own all of its properties and assets and to carry on its
business as it is now being conducted, and is duly qualified to do
business and is in good standing in Louisiana and each other
jurisdiction where, to the reasonable belief of Parent, such
qualification is necessary or appropriate. Each such jurisdiction is
identified in Schedule 2.3(a). The copies of the Parent's Certificate
of Incorporation and Bylaws, as amended to date, which have been
delivered to the Shareholders are complete and correct, and such
instruments, as so amended, are in full force and effect.
Laine Purchase and Sale Agreement/Page 25
<PAGE> 34
(b) Capital Stock. The entire authorized capital of
Parent consists of 25,000,000 shares of capital stock which is divided
into (1) 3,000,000 shares of restricted common stock having a par
value of $.001 per share, (ii) 20,000,000 shares of common stock
having a par value of $.001 per share (i.e., Parent Common Stock), and
(3) 2,000,000 shares of preferred stock having a par value of $.001
per share.
(c) Subsidiaries, etc. Except (i) as set forth in
Schedule 2.3(c) and (ii) for Parent's interest in the transactions
described in this Agreement and the Other Acquisition Agreements
(collectively, the "Consolidation Agreements"), the Parent does not
own of record or beneficially, directly or indirectly, (1) any shares
of outstanding capital stock or securities convertible into capital
stock of any other corporation or (2) any participating interest in
any partnership, joint venture or other non-corporate business
enterprise. Any corporate or non-corporate business entity listed in
Schedule 2.3(c) are in Sections 2.3 and 2.4 collectively called the
"Subsidiaries." None of the Subsidiaries has any material assets or
liabilities.
(d) Authority Relative to Agreement. Parent has the
corporate power and authority to execute, deliver and perform this
Agreement, the other Consolidation Agreements and any amendments
thereto and all agreements and instruments to be executed and
delivered by Parent or any of its Subsidiaries in accordance with this
Agreement or any other Consolidation Agreement or any amendments
hereto or thereto and to consummate the transactions contemplated on
the part of Parent hereby and thereby. The execution and delivery by
Parent of this Agreement, the other Consolidation Agreements and any
amendments thereto and all agreements and instruments to be executed
and delivered by Parent or any of its Subsidiaries in accordance with
this Agreement or any other Consolidation Agreement or any amendments
hereto or thereto and the consummation by Parent of the transactions
contemplated on its part hereby and thereby have been duly authorized
by its Board of Directors. No other corporate proceedings on the part
of Parent are necessary to authorize the execution and delivery of
this Agreement, the other Consolidation Agreements and any amendments
thereto and all agreements and instruments to be executed and
delivered by Parent or any of its Subsidiaries in accordance with this
Agreement or any other Consolidation Agreement or any amendments
hereto or thereto by Parent. Except for corporate action related to
the IPO and described in Schedule 2.3(d), no other corporate
proceedings on the part of Parent are necessary to authorize the
performance of this Agreement, the other Consolidation Agreements and
any amendments thereto and all agreements and instruments to be
executed and delivered by Parent or any of its Subsidiaries in
accordance with this Agreement or any other Consolidation Agreement or
any amendments hereto or thereto by Parent or the consummation by
Parent of the transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by Parent and is, and
upon their due execution and delivery by the parties thereto the other
Consolidation Agreements and any amendments thereto and all agreements
and instruments to be executed and delivered by Parent or any of its
Subsidiaries in accordance with this Agreement or any other
Consolidation Agreement and any amendments hereto or thereto will be,
enforceable against Parent in accordance with their respective terms,
except as such
Laine Purchase and Sale Agreement/Page 26
<PAGE> 35
enforcement is subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting
creditors' rights. The Consolidation Agreements (other than this
Agreement and the Related Agreements) and any amendments thereto are
enforceable against the other parties thereto in accordance with their
respective terms, in each case except as such enforcement is subject
to the effect of any applicable bankruptcy, insolvency, reorganization
or similar law relating to or affecting creditors' rights.
(e) Non-Contravention. The execution, delivery and
performance of this Agreement, the other Consolidation Agreements and
any amendments thereto and all agreements and instruments to be
executed and delivered by Parent or any of its Subsidiaries in
accordance with this Agreement or any other Consolidation Agreement or
any amendments hereto or thereto by Parent do not and the consummation
by Parent of the transactions contemplated hereby and thereby will not
(1) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling change, or other restriction of any
government, government agency, or court to which Parent is subject, or
(2) violate any provision of the Articles of Incorporation or Bylaws
of Parent, or (3) violate or result in, with the giving of notice or
the lapse of time or both, the violation of any provision of, or
result in the acceleration of or entitle any party to accelerate
(whether after the giving of notice or lapse of time or both) any
obligation under, or result in the creation or imposition of any lien,
charge, pledge, security interest or other encumbrance upon any of the
property of Parent pursuant to, any provision of any mortgage, lien,
lease, agreement, contract, license, or instrument to which Parent is
a party or by which any of its assets are bound. The execution,
delivery and performance of this Agreement, the other Consolidation
Agreements and any amendments thereto and all agreements and
instruments to be executed and delivered by Parent or any of its
Subsidiaries in accordance with this Agreement or any other
Consolidation Agreement or any amendments hereto or thereto by Parent
do not and will not violate or conflict with any other restriction of
any kind or character to which Parent is subject or by which any of
its assets may be bound, and the same does not and will not constitute
an event permitting termination of any such mortgage, lien, lease,
agreement, license or instrument to which Parent is a party or by
which any of its assets is bound.
(f) Approvals. Except for the declaration of
effectiveness of the registration statement (the "Registration
Statement") filed in connection with Parent's IPO by the U.S.
Securities and Exchange Commission ("SEC") pursuant to the Securities
Act, and the consents and approvals required pursuant to state
securities laws with respect to the IPO, and except as set forth in
Schedule 2.3(f), no consent, authorization, order or approval of, or
filing or registration with, any governmental commission, board or
other regulatory body or any other person is required for the
execution and delivery of this Agreement and the other Consolidation
Agreements and any amendments thereto and the consummation by Parent
of the transactions contemplated hereby and thereby.
(g) Litigation. There are no actions, suits, audits,
investigations, unfair labor practices charges, complaints, claims,
grievances or proceedings with respect to the Parent or any of its
subsidiaries pending against the Parent or any of its Subsidiaries at
law or in
Laine Purchase and Sale Agreement/Page 27
<PAGE> 36
equity, or before or by any federal, state, municipal, foreign or
other governmental department, commission, board, bureau, agency or
instrumentality, nor are there any such actions, suits, audits,
investigations, unfair labor practice charges, complaints, grievances
or proceedings that are known to be threatened against the Parent or
any of its Subsidiaries.
(h) Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by
Parent directly with Shareholders and the Company, without the
intervention of any person on behalf of Parent in such manner as to
give rise to any valid claim by any person (other than McFarland,
Grossman & Company, Inc.) against Parent for a finder's fee, brokerage
commission, or similar payment.
(i) [Intentionally left blank]
(j) Registration Statement; PPM. Each of (i) the PPM,
(ii) the Registration Statement, (iii) the prospectus forming part of
the Registration Statement (the "Prospectus"), and (iv) any amendment
or supplement to any of the foregoing complies as to form with all
requirements of the Securities Act and regulations thereunder
(assuming, in the case of the PPM, that there is at least one
non-accredited investor (as such term is defined in Regulation D under
the Securities Act) to whom the PPM must be delivered), and none of
the foregoing misstates any material fact or omits to state a material
fact required to make the statements made therein, in light of the
circumstances under which they are made, not misleading, except for
any such misstatement or omission that is caused by any misstatement
or omission of material fact contained in (A) any material submitted
by the Shareholders to Parent in writing with the Information Letter
contemplated by Section 3.9(b) specifically for inclusion in the
Registration Statement or Prospectus or PPM or any amendment or
supplement thereto or (B) the Shareholder Disclosure Schedule or
Company Disclosure Schedule.
(k) No Undisclosed Agreements. There do not exist any
agreements, understandings or commitments by Parent or any of the
Subsidiaries or any of the Other Companies, which provide any material
benefit or other thing of value to any officer, director or
shareholder of any Other Company, or that vary the express terms of
the Consolidation Agreements, or that provide material benefits or any
other thing of value to any officer, director or promoter of Parent
("Parent Insiders") except as set forth in any of the Other
Acquisition Agreements or any employment or consultant agreement that
is appended thereto as an exhibit, or, in the case of the Parent
Insiders, except as described in the PPM.
(l) Financial Statements. The financial statements of
Parent and its Subsidiaries set forth in the PPM and those set forth
in the Prospectus, including (without limitation) the combined
proforma financial statements of Parent, the Company and the Other
Companies, have been prepared in conformity with GAAP consistently
applied and present fairly the financial position and results of
operations of the entities covered thereby as of the end of and for
the respective periods presented. There has been no material adverse
change in the business, financial condition, or results of operations
of Parent, the Company, and the Other Companies on a combined basis
since March 31, 1997.
Laine Purchase and Sale Agreement/Page 28
<PAGE> 37
(m) Remedies. Parent has an adequate remedy in damages,
and will diligently pursue same, for any loss or damage sustained by
it by reason of any breach of a warranty, representation or covenant
by any of the Other Companies or their shareholders under the Other
Acquisition Agreements, except: (i) to the extent of any deductible or
threshold amount that limits Parent's entitlement to indemnification
from shareholders of the Other Companies under the Other Acquisition
Agreements (none of which amounts is more, as a percentage of the
total consideration payable to the shareholders under any such Other
Acquisition Agreement, than the comparable percentage under this
Agreement); (ii) to the extent of any limitation on the maximum
aggregate liability of such shareholders, none of such maximums is
less than the comparable maximum under this Agreement), and (iii) to
the extent that claims for such remedies are limited by a period of
time (none of which limitations are shorter than the comparable
limitations under this Agreement).
(n) Parent Stock. The Parent Common Stock to be issued
to the Shareholders pursuant to this Agreement will, when so issued,
be validly and legally issued, fully paid and nonassessable, and will
be identical to the Parent Common Stock issued under the Other
Acquisition Agreements. The issuance, sale and delivery of Parent
Common Stock to the Shareholders pursuant to this Agreement will be
exempt from registration under the Securities Act by reason of the
exemption from registration set forth in Section 4(2) of the
Securities Act.
(o) Taxes.
(1) All federal, state, local and foreign tax
returns required to be filed by Parent and its Subsidiaries
prior to the date hereof have been filed on a timely basis
with the appropriate governmental authorities in all
jurisdictions in which such tax returns are required to be
filed and all such returns are correct and complete. Neither
the Parent nor any of its Subsidiaries has ever been the
subject of any audit, examination or any similar investigation
by any governmental authority.
(2) All Taxes due from or properly accruable by
Parent or any of its Subsidiaries have been fully and timely
paid or, in the case of Taxes for which payment is not yet
required, properly and fully accrued for with respect to all
taxable periods ending on or prior to the date of this
Agreement and interim periods through the date of this
Agreement.
(p) Other Acquisition Agreements. Parent does not know,
after reasonable inquiry, of the incorrectness of any representation
or warranty of any Other Company or its shareholders under any Other
Acquisition Agreement; and Parent will give the Shareholders prompt
notice of any such incorrectness upon learning of same.
(q) Investment Intent.
Laine Purchase and Sale Agreement/Page 29
<PAGE> 38
(1) Parent is acquiring the Company Common Stock
solely for the purpose of investment, for its own account, and
not with a view to or for sale in connection with any
distribution thereof within the meaning of Section 2(11) of
the Securities Act. Parent acknowledges that the Company
Common Stock is being sold to Parent by each of the
Shareholders in reliance upon one or more exemptions from
registration contained in the Securities Act and applicable
state securities laws. The reliance by Shareholders upon such
exemptions is based in part upon the representations set forth
in this Section 2.3(q).
(2) Parent understands that the Company Common
Stock has not been registered under the Securities Act, that
there is no established market for the Company Common Stock,
and that the Company Common Stock must be held indefinitely
and cannot be transferred unless it is subsequently registered
under the Securities Act or an exemption from such
registration is available with respect to such transfer.
(3) Parent has such knowledge and experience in
financial and business matters that it is capable of
evaluating the merits and risks of an investment in the
Company Common Stock and of making an informed investment
decision.
(4) Parent is able to bear the economic risk of
its investment in the Company Common Stock, to hold the
Company Common Stock for an indefinite period of time and to
afford a complete loss of its investment in the Company Common
Stock .
(5) Parent and its representatives have been
given access to all documents, books and additional
information concerning the Company which they have requested.
(6) Parent has been represented by legal counsel
in this transaction and Parent and its representatives,
including such counsel, have been given the opportunity to ask
questions of, and receive answers from, the officers of the
Company and the Shareholders concerning the terms of the
transactions contemplated by this Agreement and the affairs
and the business and financial condition of the Company.
(7) Parent has conducted such investigations in
making a decision to enter into this Agreement and the
transactions contemplated herein as Parent has deemed
necessary and advisable.
(8) None of the representations made by Parent in
this Section 2.3(q) shall affect any of Parent's rights under
any other section of this Agreement.
Laine Purchase and Sale Agreement/Page 30
<PAGE> 39
2.4 REPRESENTATIONS AND WARRANTIES CONCERNING SUBSIDIARIES. The
Parent hereby represents and warrants to the Shareholders and the Company as
follows as of the date of this Agreement, the Preliminary Closing Date and the
Final Closing Date:
(a) Organization and Standing. Each of Parent's
Subsidiaries is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Louisiana.
(b) Capital Structure. The authorized capital stock of
each of Parent's Subsidiaries consists of 5,000 shares of common
stock, par value $.01 per share, 1,000 of which are validly issued and
outstanding, fully paid and nonassessable and are owned by the Parent
free and clear of all liens, encumbrances and adverse claims.
(c) Authority. Each of Parent's Subsidiaries has the
corporate power and authority to execute, deliver and perform this
Agreement and the Other Acquisition Agreements to which such
Subsidiary is or will be a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this
Agreement and the Other Acquisition Agreements to which such
Subsidiary is or will be a party, the performance by such Subsidiary
of its obligations hereunder and the consummation of the transactions
contemplated hereby have been duly authorized by its Board of
Directors and the Parent as its sole shareholder, and, except for the
corporate filings described in Schedule 2.4(c), no other corporate
proceedings on the part of any Subsidiary are necessary to authorize
this Agreement and the Other Acquisition Agreements, and the
transaction contemplated hereby and thereby.
ARTICLE 3
ADDITIONAL COVENANTS AND AGREEMENTS
3.1 CONDUCT OF BUSINESS. During the period from the date hereof
to the Final Closing Date, except as otherwise contemplated by this Agreement
and except as described on Exhibit 3.1 hereto, the Shareholders shall cause the
Company to, and the Company shall, conduct its operations according to its
ordinary and usual course of business, and shall use its best efforts to
preserve substantially intact its business organization, keep available the
services of its officers and employees, and maintain its present relationships
with licensors, suppliers, distributors, customers and others having
significant business relationships with it. Representatives of the Company
will on request confer during such period with representatives of Parent to
keep it informed with respect to the general status of the on-going operations
of the business of the Company. Without limiting the generality of the
foregoing and except as otherwise affected by matters contemplated by this
Agreement or in connection with the transactions contemplated by this
Agreement, the Shareholders will cause the Company during such period to:
Laine Purchase and Sale Agreement/Page 31
<PAGE> 40
(a) carry on the business in substantially the same
manner as heretofore carried on and not introduce any material new
method of management, operation or accounting, nor provide discounted
services outside the ordinary course of business;
(b) maintain its properties, facilities, equipment and
other assets, including those held under leases, in good working order,
condition and repair, ordinary wear and tear excepted;
(c) perform all of its obligations under all debt and
lease instruments and other agreements relating to or affecting its
business, assets, properties, equipment and rights, and pay all
vendors, suppliers, and other third parties (including mechanics and
materialmen) as and when their bills are due, except to the extent
that such payments may be subject to undisputed claims of offset or
reimbursement in favor of the Company, and pay in full all payroll
obligations when due;
(d) maintain its present debt and lease instruments
(unless same are otherwise mature) and refrain from entering into new
or amended debt or lease instruments, except for debt incurred or
leases entered into in the ordinary course of business which involve
a total liability of the Company not in excess of $20,000 per
instance or $50,000 in the aggregate, without prior written notice to
Parent;
(e) not incur any indebtedness other than ordinary trade
accounts payable at market rates with no prepayment penalty which are
used to fund operations in the ordinary course of business;
(f) keep in full force and effect its present insurance
policies or other comparable insurance coverage;
(g) use its best efforts to maintain and preserve its
business organization intact, retain its present employees and
maintain its relationship with suppliers, customers and others having
business relations with the Company;
(h) refrain from effecting any change in the articles of
incorporation, bylaws or capital structure of the Company and refrain
from entering into or agreeing to enter into any merger or
consolidation by the Company with or into, and refrain from acquiring
all or substantially all of the assets, capital stock or business of
any person, corporation, partnership, association or other business
organization or division of any thereof;
(i) refrain from incurring any expenditures outside the
normal course of business, including any capital expenditures (or
series of related expenditures) in excess of $50,000, without prior
written notification to Parent;
(j) refrain from starting or acquiring any new businesses
without the prior written notification to Parent;
Laine Purchase and Sale Agreement/Page 32
<PAGE> 41
(k) maintain its present salaries and commission levels
for all officers, directors, employees or agents, except for raises
that may be awarded to employees at or below the level of supervisor
in keeping with past practices of the Company in the ordinary course
of its business, refrain from entering into employment agreements
except in the ordinary course of business, and refrain from
entering into any collective bargaining agreement; and
(l) refrain from declaring or paying any fees,
commissions or loans outside the ordinary course of business, and
refrain from declaring or paying any bonuses except discretionary
bonuses to officers and employees to the extent that the aggregate
amount of all such discretionary bonuses paid or declared during 1997
do not exceed, in the aggregate, 10% of the Company's pre-tax net
income during 1997 through the date of the latest such payment
(exclusive of production, incentive or safety bonuses previously
committed in connection with contracts currently being performed
which are described on Exhibit 3.1(l) attached hereto); and
(m) refrain from declaring or paying any dividends or
distributions to Shareholders, except for those assets listed on
Exhibit 3.1(m) attached hereto and except as contemplated by Section
2.2(h)(13)
(n) promptly notify Parent of any claim or litigation
threatened or instituted, or any other material adverse event or
occurrence involving or affecting the Company or any of its assets,
properties, operations, businesses or employees;
(o) comply with and cause to be complied with all
applicable laws, rules, regulations and orders of all federal, state
and local governments or governmental agencies affecting or relating
to the Company or its assets, properties, operations, businesses or
employees except where the failure to comply will not have a material
adverse effect on the Company;
(p) other than in the ordinary course of business,
refrain from any sale, disposition, distribution or encumbrance of any
of its properties or assets and refrain from entering into any
agreement or commitment with respect to any such sale, disposition,
distribution or encumbrance (other than the sale or use of inventories
in the ordinary course of business);
(q) refrain from any purchase or redemption of any
capital stock or other voting interest of the Company and refrain from
issuing any capital stock or other voting interest;
(r) refrain from making any change in any accounting
principle, classification, policy or practice, except as required by
GAAP; and
(s) manage working capital in the ordinary course
consistent with past practice.
Laine Purchase and Sale Agreement/Page 33
<PAGE> 42
3.2 ACCESS TO INFORMATION BY PARENT. Until the Final Closing Date
or termination of this Agreement, Shareholders will furnish Parent with the
Unaudited Monthly Financial Statements for each month following May 1997
promptly as available. Parent may prior to the Final Closing have access to
the business and properties of the Company and information concerning its
financial and legal condition as Parent deems necessary or advisable in
connection with the consummation of the transactions contemplated hereby,
provided that such access shall not interfere with normal operations of the
Company. The Shareholders and the Company agree to permit Parent and its
authorized representatives, or cause them to be permitted, to have, after the
date hereof and until the Final Closing Date, full access to the premises,
books and records of the Company during normal business hours, and the officers
of the Company will furnish Parent with such financial and operating data and
other information with respect to the business and properties of the Company as
Parent shall from time to time reasonably request. No investigation by Parent
heretofore or hereafter made shall affect the representations and warranties of
the Shareholders and the Company, and each such representation and warranty
shall survive any such investigation.
3.3 ACCESS TO INFORMATION BY THE SHAREHOLDERS. Until the Final
Closing Date or the termination of this Agreement, the Shareholders shall have
access to the books, records, operating data, and any other information
concerning the financial and legal condition of the Parent and the Other
Companies as the Shareholders deem necessary or advisable in connection with
the transactions contemplated hereby; provided that the Shareholders shall not
have access to any information, the disclosure of which by Parent would
constitute a violation of any of the confidentiality agreements between the
Parent and any of the Other Companies (the "Confidentiality Agreements") unless
the Shareholders have entered into confidentiality agreements with Parent or
those of the Other Companies to whose information the Shareholders seek access.
In no event shall the Shareholders be denied access to financial information
(including pro forma information) regarding Parent. All requests by the
Shareholders for information pursuant to this Section 3.3 shall be directed to
the Parent and the Parent shall furnish such information as is reasonably
obtainable from the Other Companies in accordance with the terms of the
Confidentiality Agreements. No investigation by the Shareholders heretofore or
hereafter made shall affect the representations and warranties of Parent, and
each such representation and warranty shall survive any such investigation.
3.4 AMENDMENT TO SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the right and continuing obligation until the
Final Closing to supplement or amend promptly the Disclosure Schedules with
respect to any matter that would have been or would be required to be set forth
or described in the Disclosure Schedules in order to not materially breach any
representation, warranty or covenant of such party contained herein. Each
amendment or supplement to any Disclosure Schedule shall be clearly marked so
as to indicate the amending or supplemental information contained therein,
which shall be presented in appropriate detail, and shall be delivered prior to
the Final Closing and in the manner provided in Section 9.3. For all purposes
of this Agreement, including without limitation for purposes of determining
whether the conditions set forth in Section 4.1 and Section 4.2 have been
fulfilled, whether any party has breached any of its representations and
warranties herein, and for the purposes of Article 6, the Disclosure Schedules
hereto shall be deemed to be the Disclosure Schedules as amended or
supplemented pursuant to this
Laine Purchase and Sale Agreement/Page 34
<PAGE> 43
Section. In the event that the Company or Shareholders amend or supplement a
Disclosure Schedule pursuant to this Section 3.4 and such amendment or
supplement constitutes or reflects, individually or in the aggregate, a
material adverse change to the business, assets or prospects of the Company or
the Shareholders (all as determined in good faith by Parent) then Parent may,
by notice to the Company and the Shareholders given within three business days
after the amendment or supplement is delivered to it, terminate this Agreement.
In the event that Parent amends or supplements a Disclosure Schedule pursuant
to this Section 3.4 and the amendment or supplement constitutes or reflects,
individually or in the aggregate, a material adverse change to the business,
assets or prospects of Parent or any Other Company or materially changes the
content of the PPM, the Registration Statement or the Prospectus or requires
such a material change (all as determined in good faith by the Required
Shareholders (defined below)) then Shareholders holding a majority of the
Company Common Stock ("Required Shareholders") may, by notice to Parent given
within three business days after the amendment or supplement is delivered to
the Shareholders, terminate this Agreement. Any termination pursuant to this
Section 3.4 shall have the same effect as a termination by mutual written
consent pursuant to Section 5.1(a)(1) of this Agreement. If this Agreement is
not terminated within the allotted time, or if the Final Closing should occur
before the allotted time has run, then the supplemented or amended Disclosure
Schedule, as so amended or supplemented, shall be deemed to be and to have at
all times been the Disclosure Schedule under this Agreement for all purposes
hereof.
3.5 CONFIDENTIALITY. The provisions of this Section 3.5 shall
supersede and replace all prior agreements and understandings of the parties
with respect to the subject matter hereof.
(a) Confidential Information. Until the Final Closing of
the transactions contemplated herein, all Confidential Information, as
hereinafter defined, acquired by Parent with respect to the
Shareholders or the Company, or by the Shareholders or the Company
with respect to Parent, shall be (i) maintained in strict confidence,
(ii) used only for the purpose of and in connection with evaluating
the transactions contemplated herein, and (iii) disclosed only (A) to
employees and duly authorized agents and representatives who have been
informed of the obligations of the parties under this Agreement with
respect to such Confidential Information, who have a need to know the
information in connection with consummating the transactions
contemplated herein, and who agree to keep such information
confidential, or (B) as required by legal process (of which the other
parties shall be given prompt notice). Parent, the Shareholders and
the Company shall be responsible for any breach of this Section by any
of their respective representatives and each agrees to take all
reasonable measures to restrain its representatives from prohibited or
unauthorized disclosure of the Confidential Information. For the
purpose of this Agreement, the term "Confidential Information" shall
mean all information acquired by any party from another party hereto
or its representatives pursuant to Section 3.2 hereof or otherwise
with respect to the business or operations of such other party, other
than (A) information generally available to the public which has not
become available as a result of disclosure in violation of this
Section and (B) information which becomes available on a
nonconfidential basis from a source other than a party to this
Agreement or its representatives, provided that such source is not
known by the party to this Agreement receiving such information to be
bound by a confidentiality
Laine Purchase and Sale Agreement/Page 35
<PAGE> 44
agreement or other obligation of secrecy to another party to this
Agreement or its representatives. If the transactions contemplated
herein are not consummated, all Confidential Information in written or
printed or other tangible form (whether copies or originals) shall be
returned to the party of origin, and all documents, memoranda, notes
and other writings whatsoever prepared by any party or its
representatives based on Confidential Information shall be destroyed;
and Parent and its representatives will thereafter hold all
Confidential Information concerning the Company or the Shareholders in
strict confidence.
(b) Public Announcements. No press release, public
announcement, confirmation or other information regarding this
Agreement or the contents hereof shall be made by Parent, the
Shareholders or the Company without prior consultation with the Parent
and the Company, except as may be necessary in the opinion of counsel
to any party to meet the requirements of any applicable law or
regulations, the determination of any court, or the requirements of
any stock exchange on which the securities of such party may be
listed. Notwithstanding the foregoing, the Company may make
appropriate disclosures of the general nature of the transaction
contemplated hereby to its employees, vendors and customers to protect
the Company's goodwill and to facilitate the consummation of the
transactions contemplated hereby, and Parent may disclose pertinent
information regarding the transaction contemplated hereby to its
existing and prospective investors, lenders or investment bankers or
financial advisors for the purposes of obtaining financing (including
the contemplated IPO). Parent may also make appropriate disclosures
of the general nature of the transaction contemplated hereby and the
identity, nature and scope of the Company's operations to prospective
acquisition candidates, including the Other Companies, in its efforts
to attract additional acquisitions for Parent. Subject to prior
review, revision and approval by the Company of disclosure with
respect to matters relating to the Company, Parent may also make
appropriate disclosure as required in connection with any registration
statement or confidential information memorandum prepared by Parent,
but in that event will give the Shareholders prompt notice thereof.
Prior to the Final Closing, the Parent and the Company shall jointly
approve the contents of any press releases, written employee
presentations, or other comparable materials of potentially wide
distribution that disclose or refer to the transaction contemplated
hereby, except for such press releases or other communications
required by law. If the transactions contemplated herein are not
consummated, neither the Parent nor the Shareholders shall disclose to
any third party or publicly announce the proposed transaction
contemplated hereby, except as otherwise permitted hereinabove and
except as agreed in advance, in writing, by the parties or otherwise
required by law, in which case the party so compelled will give
reasonable written notice in advance to the other parties.
3.6 EXCLUSIVITY. After the signing of this Agreement until the
Final Closing Date or the termination of this Agreement, no Shareholder shall
(i) solicit, initiate, or encourage the submission of any proposal or offer
from any person or entity relating to the acquisition of any capital stock or
other voting securities of, or any substantial portion of the assets of, the
Company (including any acquisition structured as a merger, consolidation, or
share exchange) or (ii) participate in any negotiations or discussions
regarding, furnish any information with respect to, assist or participate
Laine Purchase and Sale Agreement/Page 36
<PAGE> 45
in, or facilitate in any other manner any effort or attempt by any person or
entity in favor of such acquisition (including any acquisition structured as a
merger, consolidation, or share exchange). The Shareholders will (and shall
cause the Company to) notify Parent if any person or entity makes any proposal,
offer, inquiry, or contact with respect to any of the foregoing.
3.7 THE SHAREHOLDERS' RELEASE OF CLAIMS. Effective as of the
Final Closing, each Shareholder hereby (i) releases, acquits and forever
discharges the Company and its Subsidiaries from any and all liabilities,
obligations, indebtedness, claims, demands, actions or causes of action arising
from or relating to any event, occurrence, act, omission or condition occurring
or existing on or prior to the Final Closing, including, without limitation,
any claim for indemnity or contribution from the Company or any of its
Subsidiaries in connection with the obligations or liabilities of the
Shareholders hereunder, except for (A) the indemnification provided by Sections
3.16 and 3.21 hereof and any other contractual obligations in this Agreement,
(B) salary and expense reimbursement payable to the Shareholders as an officer,
director or employee in the ordinary course of business, and (C) all benefits
(including interests in benefit plans) and fringe benefits to which the
Shareholders are entitled; (ii) waives all breaches, defaults or violations of
each agreement, if any, among or between Shareholders applicable to the
Company Common Stock or the Real Estate and agrees that any and all such
agreements are terminated as of the Final Closing, and (iii) waives any and all
preemptive or other rights to acquire any shares of capital stock of the
Company and releases any and all claims arising in connection with any prior
default, violation or failure to comply with or satisfy any such preemptive or
other rights.
3.8 REAL ESTATE MATTERS.
(a) Title Insurance Commitments. The Parent, in its sole
discretion, may elect to obtain title insurance with respect to any or
all real estate that the Company owns or leases listed on Schedule
2.2(n)(1) or Schedule 2.2(n)(2) of the Company Disclosure Schedule
(the "Title Insurance Property"). If Parent elects to obtain title
insurance Company will obtain and deliver to Parent, as soon as
practicable, and in any event on or before September 10, 1997,
commitments for title insurance ("Title Commitments") issued by title
insurance company(ies) reasonably acceptable to Parent with respect to
the Title Insurance Property, Surveys (defined below) of the Title
Insurance Property reasonably acceptable to the Parent and one set of
legible copies of title exception documents with respect to any
exceptions set forth in the commitments. The Title Commitments shall
set forth the status of title to the Title Insurance Property together
with all exceptions or conditions to such title, including, but not
limited to, all easements, restrictions, rights-of-way, covenants,
reservations and all other encumbrances affecting the Title Insurance
Property which would appear in an Owner's Policy of Title Insurance
(as defined below), if issued. The Title Commitments shall contain
the express commitment of the title underwriter to issue the Owner's
Policies of Title Insurance to the Parent and the Company with the
standard printed exceptions endorsed or deleted in accordance with
this Section 3.8. Parent shall bear the cost of any title insurance
premiums actually paid for title insurance obtained under this
Section.
Laine Purchase and Sale Agreement/Page 37
<PAGE> 46
(b) Surveys. With respect to each Title Insurance
Property, if requested by Parent, the Shareholders will cause the
Company to procure in preparation for the Preliminary Closing a
current survey of such real property, prepared by a licensed surveyor
and conforming to current ALTA Minimum Detail Requirements for Land
Title Surveys, disclosing the location of all improvements, easements,
party walls, sidewalks, roadways, utility lines, and other matters
shown customarily on such surveys, and showing access affirmatively to
public streets and roads (the "Survey"). The Survey shall disclose
any survey defect or encroachment from or onto the real property.
Parent shall bear the cost of fees actually paid for the preparation
of any Survey required under this Section.
(c) Title Insurance Policies. At the Preliminary
Closing, the Company shall deliver to Parent title insurance policies
("Policies of Title Insurance") requested pursuant to Section 3.8(a)
with respect to the Title Insurance Property, in an amount reasonably
acceptable to Parent, issued by such title insurance company(ies),
subject to those easements, reservations, restrictions, covenants,
conditions and other matters therein specified to the extent that the
same do not, in the reasonable judgment of Parent, render title
unmarketable or adversely affect the operation, value, use or
enjoyment of the Title Insurance Property affected thereby ("Real
Property Title Exceptions"). The Policies of Title Insurance may be
subject to the Real Property Title Exceptions but shall contain no
additional exceptions other than the standard preprinted exceptions
reasonably acceptable to Parent; provided that (i) the standard
preprinted exception, if any, for restrictive covenants shall be
deleted, except for Real Property Title Exceptions, (ii) the standard
preprinted survey exception, if any, shall be revised to read
"shortages in area" only, (iii) there shall be no exception as to
easements, or claims of easements, not shown by the public records,
nor any exception as to parties in possession, and (iv) the exception
as to the lien for taxes will be limited to the year in which the
Preliminary Closing occurs. The Policies of Title Insurance delivered
under this Section 3.8 shall insure title to the real property and all
recorded easements benefitting such real property.
(d) Phase I Environmental Assessment. The Company will
obtain and deliver to Parent, as soon as practicable, and in any event
on or before September 15, 1997, a Phase I environmental assessment
prepared by environmental engineers reasonably acceptable to Parent
with respect to all of the real estate owned or leased by the Company
listed on Schedule 2.2(n)(1) or Schedule 2.2(n)(2) of the Company
Disclosure Schedule (the "Environmental Assessment Property"). Each
of the Company and Parent shall pay one-half of the expenses incurred
by the Company in obtaining such assessments. Also during the period
prior to Final Closing, the Shareholders and the Company shall afford
Parent and its representatives the continuing right to inspect, during
the Company's normal business hours, the Environmental Assessment
Property and all books, records, contacts, documents and other data
pertaining to the use, ownership, operation, or maintenance of the
Environmental Assessment Property (collectively with the Phase I
assessment, the "Studies").
(e) Title and Environmental Objections. If for any
reason Parent, in its sole and absolute discretion, is not satisfied
with any matter contained in the Studies, any survey, or
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<PAGE> 47
the Real Property title exceptions, or is otherwise not satisfied with
the real property owned or leased by the Company for any reason
whatsoever, then Parent may, prior to the Preliminary Closing, notify
the Company and the Shareholders in writing of its objection (the
"Objections"), describing with specificity the subject real property
and the Objections thereto, failing which Parent shall be deemed to
have waived all such objections and all remedies therefor pursuant to
this Agreement. If Parent shall request that the Company cure such
Objections and the Company or the Shareholders have not cured such
Objections to Parent's satisfaction by the Preliminary Closing Date,
Parent shall have the right to terminate this Agreement in accordance
with Section 5.1(a)(2) hereof or enter into negotiations with the
Company to lease any real property which is the subject of the
Objections.
3.9 PPM; REGISTRATION STATEMENT.
(a) Company to Provide Information. Prior to the Final
Closing, the Shareholders and the Company shall cooperate with Parent
to promptly provide such information as reasonably requested by Parent
to enable Parent to (i) prepare the PPM and all appropriate
supplements thereto, pursuant to Rule 506 of Regulation D promulgated
by the SEC under the Securities Act, for dissemination to the Other
Companies and their respective shareholders, including the
Shareholders, and (ii) prepare and file with the SEC the Registration
Statement to be filed by Parent under the Securities Act in connection
with its IPO (including the prospectus constituting a part thereof).
Parent shall obtain all necessary state securities law or "Blue Sky"
permits and approvals required to carry out the transactions
contemplated by this Agreement, the PPM and the Registration
Statement, and the Shareholders and the Company shall furnish all
information concerning them as may be reasonably requested in
connection with any such action.
(b) Accuracy of Information. Parent represents and
warrants that neither the PPM or any amendment or supplement thereto,
at the time distributed, nor the Registration Statement or any
amendment or supplement thereto, at the time the Registration
Statement becomes effective under the Securities Act or any such
amendment or supplement is distributed, nor any prospectus filed in
accordance with Rule 424(b) under the Securities Act, at the time when
filed or distributed, will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. This
representation is in addition to that set forth in Section 2.3(j). If
requested by Parent prior to the Final Closing, the Shareholders and
the Company, respectively, shall use their reasonable best efforts to
agree with Parent as to the information and documents supplied by the
Shareholders and the Company for inclusion in the Registration
Statement and each shall indicate such information and documents in a
letter (the "Information Letter") to be delivered (i) prior to the
filing of the Registration Statement with the SEC, and (ii) prior to
filing any amendment to the Registration Statement with the SEC (other
than any prospectus filed with the SEC pursuant to Rule 424(b)). The
Shareholders and the Company shall each be entitled to review the PPM,
the Registration Statement and each amendment or supplement thereto,
if any, prior to delivery of the Information Letter. From the date of
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<PAGE> 48
this Agreement through the Final Closing Date, the Shareholders and
the Company shall immediately notify Parent in the event of any
development or occurrence involving or pertaining to either the
Company or any Shareholder that would cause matters referenced in the
Information Letter to be inaccurate, incomplete or misleading in any
material respect. The Shareholders and the Company acknowledge that
Parent has relied on the accuracy of factual information provided in
the Disclosure Schedules in preparing the PPM and the Registration
Statement. Except for the accuracy of such information in the
Disclosure Schedules, neither the Shareholders nor the Company takes
responsibility or shall be deemed responsible for (1) the presentation
or omission of any such information in or from the PPM or the
Registration Statement or (2) the factual adequacy or legal
sufficiency of disclosures contained therein.
(c) Further Information. Prior to the Final Closing, the
Shareholders and the Company, respectively, shall promptly upon
request, furnish Parent with all information concerning themselves or
itself as may be reasonably requested by Parent in connection with the
preparation of the PPM, the Registration Statement and each amendment
or supplement thereto, or any other statement, filing, notice or
application made by or Parent to any governmental entity in connection
with the transactions contemplated by this Agreement.
(d) Indemnification. Parent will indemnify and hold
harmless each of the Shareholders, the Company, and each of the
Company's directors, officers and other persons, if any, who control
the Company within the meaning of the Securities Act from and against
any losses, claims, damages, liabilities or judgments, joint or
several, to which they or any of them may become subject, under the
Securities Act or any state securities or blue sky laws or otherwise,
insofar as such losses, claims, damages, liabilities, or judgments (or
actions in respect thereof) are caused by an untrue statement or
alleged untrue statement of a material fact contained in the PPM,
Registration Statement, or the Prospectus, or in any amendment or
supplement thereto, or in any state application for qualification,
permit, exemption or registration as a broker/dealer, or in any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each such person for any legal expenses
reasonably incurred by such person in connection with investigating or
defending any such action or claim; provided, however, that Parent
shall not be liable, in any such case, to the extent that any such
loss, claim, damage, liability, or judgment (or action in respect
thereof) was caused by any untrue statement or alleged untrue
statement or omission or alleged omission made in the PPM,
Registration Statement, or the Prospectus, or any such amendment or
supplement thereto, or in any such state application, or in any
amendment or supplement thereto, in reliance upon and in conformity
with information furnished pursuant to the Information Letter
contemplated by Section 3.9(b) in writing to Parent by the Company or
the Shareholders specifically for inclusion therein. If
indemnification hereunder is not available, then Parent will provide
contribution to the parties who would have been indemnified, which
contribution shall be based on the relative benefits derived from the
PPM, Registration Statement or Prospectus, as the case may be, by
Parent on the one hand, and such indemnified persons on the other.
Laine Purchase and Sale Agreement/Page 40
<PAGE> 49
(e) Parent shall use its best efforts, at its expense, to
have the directors, officers and controlling persons of the Company,
the Shareholders, and the persons listed on Exhibit 3.21, added as
additional named insureds to any insurance coverage maintained by
Parent (or its directors and officers) against liabilities under the
Securities Act.
(f) Parent will deliver to the Shareholders, with the
PPM, each of the Other Acquisition Agreements.
3.10 [Intentionally left blank]
3.11 SATISFACTION OF CONDITIONS BY THE COMPANY AND SHAREHOLDERS.
The Company and the Shareholders shall (i) use their reasonable efforts to
obtain, as soon as possible, all governmental approvals required to be obtained
by the Company and make, as soon as possible, all filings with any governmental
authority required on the part of the Company to consummate the transactions
contemplated hereby, (ii) use their reasonable efforts to obtain, as soon as
possible, all other consents to and approvals required to be obtained by the
Company to consummate the transactions contemplated hereby, and (iii) otherwise
use their reasonable efforts to satisfy the conditions set forth in Article 4
of this Agreement to the extent that such satisfaction is within their control;
provided, however, that this Section 3.11 shall not be construed to limit the
rights of Shareholders to terminate this Agreement as provided in Article 5 of
this Agreement.
3.12 SATISFACTION OF CONDITIONS BY PARENT. Parent shall (i) use
its reasonable efforts to obtain, as soon as possible, all governmental
approvals required to be obtained by the Parent and make, as soon as possible,
all filings with any governmental authority required on the part of the Parent
to consummate the transactions contemplated hereby, (ii) use its reasonable
efforts to obtain, as soon as possible, all of the consents to and approvals
required to be obtained by the Parent to consummate the transactions
contemplated hereby, and (iii) otherwise use its reasonable efforts to satisfy
the conditions set forth in Article 4 of this Agreement to the extent that such
satisfaction is within its control; provided, however, that this Section 3.11
shall not be construed to limit the rights of Parent to terminate this
Agreement as provided in Article 5 of this Agreement.
3.13 AMENDMENT OF OTHER ACQUISITION AGREEMENTS. Parent will not
enter into any amendment to any Other Acquisition Agreement unless the
Shareholders have previously consented thereto in writing, which consent may
not be unreasonably withheld or delayed unless (i) the Shareholders are not
given, simultaneously with the execution of any such amendment, all of the
benefits accorded thereby to the Other Company and its shareholders, or (ii)
the amendment is materially unfavorable to Parent in the reasonable belief of
the Shareholders.
3.14 DELIVERIES. Parent will promptly deliver, as soon as they are
available to Parent, all exhibits and schedules (including the disclosure
schedules) to each Other Acquisition Agreement and all amendments and
supplements to those exhibits and schedules.
Laine Purchase and Sale Agreement/Page 41
<PAGE> 50
3.15 PERIODIC REPORTS. Parent will, following the effective date
of the Registration Statement, timely file all periodic reports required to be
filed by it pursuant to the Securities Act or the Securities Exchange Act of
1934, and take all such other action as may be required of it, to the extent
the failure to timely file such reports or the failure to take such other
action would adversely affect the availability to the Shareholders of the
exemption from registration contained in Rules 144 or 145 under the Securities
Act with respect to resales of Parent Common Stock.
3.16 CORPORATE INDEMNIFICATION. From and after the Final Closing,
the Company will, to the maximum extent permitted by the Louisiana Business
Corporation Law, indemnify (including, without limitation, advancement of
expenses) each of the Shareholders and the persons identified in Exhibit 3.16
who was or is or becomes a party or is or becomes threatened to be made a party
to any action, suit or proceeding, whether civil, criminal, administrative, or
investigative, including any action by or in the right of the corporation, by
reason of the fact that he or she is or was a director, officer, employee or
agent of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another business, foreign or non-profit
corporation, partnership, joint venture, or other enterprise, against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement in
connection therewith.
3.17 RELEASE OF SHAREHOLDERS AND OTHERS. Effective at the Final
Closing, each of the Company and Parent hereby releases, acquits and forever
discharges the Shareholders and the persons listed on Exhibit 3.17 from (i) any
and all liabilities, obligations, indebtedness, claims, demands, actions or
causes of action arising from or relating to any event, occurrence, act,
omission or condition occurring or existing on or prior to the Final Closing,
or (ii) any claim for indemnity or contribution from the Shareholders in
connection with any liability of the Company under this Agreement; provided
that Shareholders shall not be released by this Section 3.17 from (a) any
liability or claims arising from any action taken or omitted by the
Shareholders as officers, directors, employees or agents of the Company
involving willful misconduct or (b) claims pursuant to Article 6 of this
Agreement. THE FOREGOING PROVISION IS SPECIFICALLY INTENDED TO RELEASE THE
RELEASED PERSONS FROM LIABILITY FOR (AMONG OTHER THINGS) THEIR OWN NEGLIGENCE
OR GROSS NEGLIGENCE.
3.18 RELEASE AND INDEMNIFICATION FROM GUARANTIES. Parent will use
its best efforts to have the Shareholders released, at the earliest possible
time, from all guaranties (including any pledges of assets) by any of them of
debts or obligations of the Company, including by repayment of such debt or
obligation if necessary to effect such release. From and after the Final
Closing, Parent will defend, indemnify and hold each Shareholder harmless of
and from any claims made or threatened to be made, or loss incurred, in
connection with any such guarantee.
3.19 BENEFIT PLANS. Neither Parent nor, following the Final
Closing, the Company shall terminate any health or medical insurance, life
insurance, 401(k) plan or other benefit plan in effect with respect to the
Company until such time as Parent replaces such plan with a plan that is
applicable to Parent and all of its then subsidiaries. Any such replacement
plan shall give the officers and employees of the Company full credit for the
period of time each has been employed by the Company prior to the Final Closing
and for the period of time each is employed by the
Laine Purchase and Sale Agreement/Page 42
<PAGE> 51
Company after the Final Closing. Each such former officer and employee shall
become fully vested under each such plan in effect with respect to the Company
that is terminated after the Final Closing in accordance with this Section,
including (without limitation) those former officers and employees who may have
been terminated after the Final Closing but before termination of such plan.
Any new health insurance plan shall provide for coverage for pre-existing
conditions. Parent will provide officers and employees of the Company with
benefits that, in the aggregate, are not less favorable than those provided to
any of the Other Companies.
3.20 NATURE OF OBLIGATIONS. All obligations of Parent in this
Agreement to be performed after the Final Closing are guaranteed jointly and
severally by the Company, and vice-versa.
3.21 INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY.
(a) From and after the Final Closing Date, Parent and the
Company, jointly and severally, agree to indemnify, defend and hold
harmless the former directors and officers of the Company and the
persons listed on Exhibit 3.21 (as used in this Section, each an
"Indemnified Person") from and against all losses, claims, damages,
liabilities and judgments (and related expenses including, but not
limited to, attorney's fees and amounts paid in settlement), and any
action or other proceeding in respect thereof, to which any
Indemnified Person becomes subject, based upon or arising out of
actions or omissions or alleged actions or omissions of such persons
occurring (or alleged to have occurred) at or prior to the Final
Closing Date, to the fullest extent (including the advancement of
expenses) permitted under (1) the Delaware General Corporation Law or
the Louisiana Business Corporation Law, as applicable, or (2) the
certificate of incorporation, bylaws or other governing documents of
the Company as in effect on the date of this Agreement, whichever of
(1) or (2) is greater.
(b) From and after the Final Closing Date, Parent shall
not amend, alter or repeal those provisions of the certificate of
incorporation, bylaws or other governing documents of the Company
relating to liability or indemnification of directors and officers,
except as required by law, if the effect of such amendment, alteration
or repeal would be to increase the potential liability of a director
or officer of the Company to the Company or to its stockholders for
monetary damages for breach of fiduciary duty, or to lessen or
otherwise adversely affect the indemnification rights of directors and
officers of the Company as provided in such certificate of
incorporation, bylaws or other governing documents as in effect on the
date of this Agreement.
(c) The rights granted to the Indemnified Persons hereby
shall be contractual rights inuring to the benefit of all Indemnified
Persons and shall survive this Agreement and the Final Closing. They
are in addition to the indemnification provided pursuant to Section
3.16.
3.22 PARENT'S IPO. Parent shall use its best efforts to cause the
Registration Statement to become effective, and to complete its IPO, as soon as
practicable. To the extent permitted by applicable law, Parent shall keep the
Company informed regarding the status of Parent's IPO.
Laine Purchase and Sale Agreement/Page 43
<PAGE> 52
3.23 LISTING. Parent shall use its best efforts to cause the
Parent Common Stock to be listed on a national securities exchange or a
national computerized quotation and trading system after the IPO.
3.24 PRINCIPAL OFFICE. Parent agrees that it will maintain the
principal office of the Company (or other entity or division operating the
Company's assets) at 183 South Beadle Road, Lafayette, Louisiana for a period
of 12 months after the Final Closing Date, and represents and warrants to the
Shareholders that it has no present plans or intentions to move such principal
office after such time.
3.25 DISTRIBUTIONS. The Company will, not later than immediately
before the Final Closing (except as otherwise provided by Section 8.2(b)), make
the distributions contemplated by Sections 2.2(h)(13) and 3.1(m).
3.26 CERTAIN ACTIONS. Parent will not declare or pay, following
the Preliminary Closing and prior to the Final Closing, any stock dividend,
subdivision, reclassification, recapitalization, split-up, combination, or
exchange of shares or the like.
ARTICLE 4
CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARENT. The
obligations of the Parent to consummate the Preliminary Closing under this
Agreement are subject to the satisfaction in all material respects of each of
the following conditions, unless waived by the Parent:
(a) Accuracy of Representations and Warranties. Except
for such changes as are permitted pursuant to Section 3.4 of this
Agreement, the representations and warranties of the Shareholders and
the Company contained in this Agreement, in the Shareholders
Disclosure Schedule, the Company Disclosure Schedule and in each
closing certificate and document delivered to Parent by the Company or
the Shareholders pursuant hereto shall be correct in all material
respects at and as of the Preliminary Closing Date as though made at
and as of the Preliminary Closing Date, other than such
representations and warranties as are specifically made as of another
date which shall be correct at and as of such other date; and the
Shareholders and the Company shall each have delivered to Parent a
certificate to the effect set forth in this Section.
(b) Performance of Covenants. The Shareholders and the
Company shall have performed and complied with all covenants of this
Agreement to be performed or complied with by them at or prior to the
Preliminary Closing Date (except where the failure to so perform or
comply would not have an adverse effect on Parent or prevent the
Shareholders or Parent from consummating the transactions contemplated
hereby), and the Shareholders and the Company shall each have
delivered to Parent a certificate to that effect.
Laine Purchase and Sale Agreement/Page 44
<PAGE> 53
(c) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted after the date hereof against
the Shareholders or the Company, or against Parent, arising by reason
of the acquisition of the Company pursuant to this Agreement, which is
reasonably likely (1) to restrain, prohibit or invalidate the
consummation of the transactions contemplated by this Agreement, (2)
to have a material adverse effect on the Company or (3) to have a
material adverse effect on the results of operations or financial
condition of Parent and its subsidiaries, taken as a whole, after
giving effect to the consummation of the transactions contemplated by
this Agreement and the Other Acquisition Agreements.
(d) Approvals. The Company and the Shareholders shall
have procured all of the consents, approvals and waivers specified in
Sections 2.1(b) and 2.2(e), and the Shareholders and the Company shall
each have delivered the same to Parent.
(e) Real Estate Purchase Agreement. The Shareholders
shall have executed and delivered to Parent the Real Estate Purchase
Agreement, and the Shareholders shall execute and deliver to the
Exchange Agent at the Preliminary Closing a Transfer of Immovable
Property (or other appropriate instrument) conveying title in the Real
Estate to Parent or such other entity designated by it, together with
the other certificates, instruments and documents provided for it in
the Real Estate Purchase Agreement.
(f) Policies of Title Insurance. The Shareholders shall
have delivered Policies of Title Insurance insuring the Company's
ownership or leasehold interest in the Title Insurance Property.
(g) Employment Agreements. Each of the individuals
specified on Exhibit 4.1(g)(1) shall have executed and delivered an
Employment Agreement with the Company substantially in the form
attached as Exhibit 4.1(g)(2) hereto.
(h) The Registration Rights Agreements and Shareholders
Lock-up Agreements. The Shareholders shall have executed and
delivered the Registration Rights Agreements and any lock-up agreement
reasonably requested by the managing underwriter of Parent's IPO which
restricts the sale or other disposition of Parent Common Stock for a
reasonable and customary period not exceeding 365 days following the
effectiveness of the Registration Statement.
(i) Parent's IPO. Parent and the underwriters shall have
executed and delivered the Underwriting Agreement.
(j) Lender Approval. Parent shall have secured a
commitment for approximately $25,000,000 in senior indebtedness.
(k) Audit of the Company. Parent shall have received the
results of an audit of the Company's financial statements by the
certified public accounting firm regularly engaged by Parent or such
other independent public accountant as agreed by the parties.
Laine Purchase and Sale Agreement/Page 45
<PAGE> 54
(l) Opinion of Counsel for the Company and the
Shareholders. Parent shall have received the favorable opinion of
Correro Fishman Haygood Phelps Weiss Walmsley & Casteix, L.L.P.,
counsel for the Company and the Shareholders, dated the Preliminary
Closing Date, substantially in the form and to the effect set forth in
Exhibit 4.1(l) hereto.
(m) The Shareholders Release of the Company; Corporate
Records. The Shareholders shall have delivered to the Exchange Agent
(i) a release that effectuates Section 3.7 of this Agreement, and (ii)
the corporate records and books of Company, including the minute book,
the stock transfer books, and the corporate seal of the Company (of
any of which the Shareholders may retain copies for any proper
purpose).
(n) All Proceedings to be Satisfactory. All necessary
director and shareholder resolutions, waivers and consents and all
other actions to be taken by the Shareholders and the Company in
connection with the consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby
shall be satisfactory in form and substance to Parent and its counsel.
4.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SHAREHOLDERS
AND THE COMPANY. The obligations of the Shareholders and the Company to
consummate the Preliminary Closing under this Agreement are subject to the
satisfaction in all material respects or waiver by the Shareholders of each of
the following conditions:
(a) Accuracy of Representations and Warranties. Except
for such changes as are permitted pursuant to Section 3.4 of this
Agreement, the representations and warranties of Parent contained in
this Agreement, in the Parent Disclosure Schedule and in each closing
certificate and document delivered by the Parent to the Shareholders
or the Company pursuant hereto shall be correct in all material
respects at and as of the Preliminary Closing Date, as though made at
and as of the Preliminary Closing Date, other than such
representations and warranties as are specifically made as of another
date which shall be correct at and as of such other date; and Parent
shall have delivered to the Shareholders and the Company a certificate
to the effect set forth in this Section.
(b) Performance of Covenants. Parent shall have
performed and complied with all covenants of this Agreement to be
performed or complied with by them at or prior to the Preliminary
Closing Date (except where the failure to so perform or comply would
not have a material adverse effect on the Shareholders or the Company
or prevent Parent or the Shareholders from consummating the
transactions contemplated hereby), and Parent shall each have
delivered to the Shareholders and the Company a certificate to such
effect.
(c) Approvals. Parent shall have procured all of the
consents, approvals and waivers specified in Section 2.3(f), and
Parent shall deliver the same to the Shareholders and the Company.
Laine Purchase and Sale Agreement/Page 46
<PAGE> 55
(d) Delivery of PPM. Parent shall have delivered the
PPM to the Shareholders.
(e) Real Estate Purchase Agreement. Parent shall have
executed and delivered the Real Estate Purchase Agreement.
(f) Employment Agreements. The Company shall have
executed and delivered to the Exchange Agent an Employment Agreement
with each of the individuals specified on Exhibit 4.1(g)(1) in the
form attached as Exhibit 4.1(g)(2) hereto.
(g) Registration Rights Agreement. Parent and each of
the Shareholders shall have executed and delivered to the Exchange
Agent a Registration Rights Agreement in the form attached as Exhibit
1.10 hereto.
(h) All Proceedings to be Satisfactory. The Shareholders
and their counsel shall have received Parent's PPM describing Parent
and the Parent Common Stock to be delivered as a part of the Purchase
Price together with all such counterpart originals or certified or
other copies of all documents relating to Parent incident to the
transactions contemplated hereby as the Shareholders or such counsel
may reasonably request; and the PPM, the Registration Statement (each
as amended or supplemented) and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby shall be satisfactory in form and substance to
Shareholders, the Company and their counsel.
(i) Opinion of Counsel for The Parent. The Shareholders
and the Company shall have received the favorable opinion of
Chamberlain, Hrdlicka, White, Williams & Martin, counsel for Parent,
dated the Preliminary Closing Date, substantially in the form and to
the effect set forth in Exhibit 4.2(i) hereto.
(j) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted after the date hereof against
the Parent, or against the Shareholders or the Company, arising by
reason of the acquisition of the Company pursuant to this Agreement,
which is reasonably likely (1) to restrain, prohibit or invalidate the
consummation of the transactions contemplated by this Agreement, (2)
to have a material adverse effect on the Company or (3) to have a
material adverse effect on the results of operations or financial
condition of Parent and its subsidiaries, taken as a whole, after
giving effect to the consummation of the transactions contemplated by
this Agreement and the Other Acquisition Agreements.
(k) IPO. The Registration Statement shall have been
declared effective by the SEC and shall relate to the public offering
for cash of at least $45,000,000 from the sale of shares of Parent
Common Stock that do not exceed approximately 50% of the total number
of shares to be outstanding immediately following the closing of the
IPO and the Other Acquisition Agreements (in each case excluding any
shares sold under an over-allotment option and the proceeds therefrom)
and shall not be subject to any stop order or similar
Laine Purchase and Sale Agreement/Page 47
<PAGE> 56
proceeding; and the Underwriting Agreement shall have been executed
and delivered by the parties thereto.
(l) Release. The Company and Parent shall have delivered
to the Exchange Agent a release that effectuates Section 3.17 of this
Agreement.
(m) Simultaneous Closings. The "preliminary closings"
under the Other Acquisition Agreements shall occur simultaneously with
or prior to the Preliminary Closing under this Agreement.
(n) No Material Adverse Change. There shall have been no
material adverse change in the business, financial condition or
prospects of Parent combined with the Other Companies on a proforma
basis.
(o) Shareholder Agreement. The Shareholders, the Parent
Insiders and their affiliates and Parent shall have entered into a
shareholder agreement with respect to, among other things, (i) mutual
"tag along" rights for the Shareholders and the Parent Insiders
applicable to sales of more than 75,000 shares of Parent Common Stock
(to be adjusted for stock splits and dividends occurring after the
date hereof) in private placement transactions, or in the alternative
an additional demand registration for the Shareholders under the
Registration Rights Agreement, (ii) restrictions on Parent Insiders
and their affiliates selling shares of Parent Common Stock for 2 years
following the Final Closing, and (iii) permitted sales of Parent
Common Stock in private sales by the Parent Insiders after one year
from the Final Closing in amounts not to exceed the lesser of the
90-day Rule 144 limits on affiliates of companies, or 10% of the
personal holding of each such Parent Insider, in any 6-month period;
which agreement shall be reasonably acceptable to the Shareholders,
the Parent Insiders and Parent.
(p) Listing of Parent Common Stock. The Parent Common
Stock shall have been accepted for listing, subject only to issuance,
on a national securities exchange or the NASDAQ Stock Market (national
market system).
(q) Reliance Letters. The Shareholders shall have
received letters addressed to them by Arthur Andersen LLP and
Chamberlain, Hrdlicka, White, Williams & Martin, permitting the
shareholders to rely on the comfort or opinion letters to be delivered
by those firms to the underwriters at the closing of the IPO, to the
extent such letters bear upon the accuracy or completeness of the
Registration Statement or its compliance with the Securities Act and
other applicable law.
Laine Purchase and Sale Agreement/Page 48
<PAGE> 57
ARTICLE 5
TERMINATION
5.1 TERMINATION OF AGREEMENT. The Parties may terminate this
Agreement as provided below:
(a) Prior to the Preliminary Closing. The Parties may
terminate this Agreement at any time prior to the Preliminary Closing
as provided below:
(1) Mutual Consent. The Parent and the
Shareholders may terminate this Agreement by mutual written
consent of Parent and Required Shareholders at any time prior
to the Preliminary Closing;
(2) Termination by Parent. The Parent may
terminate this Agreement by giving written notice to the
Shareholders at any time prior to the consummation of the
Preliminary Closing (1) in the event the Shareholders or the
Company has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect,
the Parent has notified the Shareholders of the breach, and
the breach has continued without cure until the earlier of (A)
20 days after the notice of such breach or (B) the Preliminary
Closing Date or (C) the date set forth below in this Section,
whichever is earlier, or (2) if the Preliminary Closing shall
not have occurred on or before December 31, 1997, by reason of
the failure of any condition precedent under Section 4.1
hereof (unless the failure results primarily from the Parent
itself breaching an obligation to proceed with the Preliminary
Closing hereunder); and
(3) Termination by the Shareholders. The
Required Shareholders may terminate this Agreement by giving
written notice to the Parent at any time prior to the
consummation of the Preliminary Closing (1) in the event the
Parent has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect,
the Shareholders have notified the Parent of the breach, and
the breach has continued without cure until the earlier of (A)
20 days after the notice of such breach or (B) the Preliminary
Closing Date or (C) the date set forth below in this Section,
whichever is earlier, or (2) after execution of this
Agreement, within three business days after each date
following the date of this Agreement on which the Shareholders
receive the PPM or any amendment or supplement thereto, or any
Other Acquisition Agreement or exhibit or schedule thereto or
any amendment to any thereof, if any such document constitutes
or reflects, individually or in the aggregate, a material
adverse change to the business, assets or prospects of Parent
and its subsidiaries in the aggregate, including the Other
Companies, or materially changes, in a manner that is adverse
to the Shareholders, the content of the PPM, the Registration
Statement or the Prospectus or requires such a material change
(all of the matters set forth in clause (2) as determined in
good faith by the Required
Laine Purchase and Sale Agreement/Page 49
<PAGE> 58
Shareholders), or (3) if the Preliminary Closing shall not
have occurred on or before December 31, 1997 (or such earlier
comparable date as may be set forth in any Other Acquisition
Agreement), or (4) if any of the Other Acquisition Agreements
are terminated.
(b) After the Preliminary Closing Date. This Agreement
may be terminated after the Preliminary Closing only as provided in
Section 1.4(d) or 3.4.
5.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 5.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto, except
that (1) Section 3.5, Section 9.1, Section 9.6, Section 9.7, Section 9.8,
Section 9.10 and Section 9.11 hereof shall survive such termination and (2)
nothing herein shall relieve any party from liability for (A) any willful and
intentional breach in bad faith that preceded such termination and continued
prior to such termination despite reasonable notice, except that this clause
(A) will not apply to a termination under Section 5.1(a)(1); or (B) any willful
breach of any such surviving Section hereof. In addition, the Real Estate
Purchase Agreement shall terminate without liability of any party thereunder.
ARTICLE 6
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Subject to the
limitations of Section 6.6, the respective representations and warranties of
the parties contained in this Agreement shall survive the Preliminary Closing
Date and the Final Closing Date, regardless of any investigation made by or on
behalf of any party.
6.2 INDEMNIFICATION BY THE SHAREHOLDERS. Subject to the
limitations of Section 6.6, the Shareholders hereby agree to indemnify and hold
harmless Parent and the Company in respect of any losses, claims, damages,
liabilities or related expenses (including, but not limited to, all litigation
costs but net of all available proceeds of insurance) (collectively, "Losses")
which Parent or the Company (but without duplication) incurs as a result of the
breach of: (A) any of the representations or warranties made by the
Shareholders in or pursuant to this Agreement, except that the Shareholders
shall have no obligation to indemnify and hold harmless with respect to (i) a
breach of the representations or warranties set forth in Section 2.2(p)
("Environmental Laws") to the extent that the Company has insurance to
adequately cover potential liabilities for environmental matters, or (ii) any
representation or warranty that any property is in good condition or repair or
otherwise fit for the purposes for which the property is intended; or (B) any
of the covenants made by the Shareholders in this Agreement which are to be
performed at or after the Final Closing; or (C) any of the covenants made by
the Shareholders in this Agreement which are to be performed at or after the
Preliminary Closing and prior to the Final Closing but only if the breach
thereof is willful and intentional and involves self-dealing or bad faith. The
indemnification obligations of the Shareholders under this Section 6.2 shall
survive the Preliminary Closing and the Final Closing and will terminate at the
time specified in Section 6.6.
Laine Purchase and Sale Agreement/Page 50
<PAGE> 59
6.3 INDEMNIFICATION BY PARENT AND THE COMPANY. Parent and the
Company, jointly and severally, agree to indemnify and hold harmless the
Shareholders in respect of any losses, claims, damages, liabilities or related
expenses (including, but not limited to, all litigation costs) which the
Shareholders incur as a result of the breach of (A) any of the representations
or warranties made by Parent in or pursuant to this Agreement or (B) any of the
covenants made by Parent in this or any related Agreement which are to be
performed at or after the Preliminary Closing or the Final Closing or (C) any
of the covenants made by the Company in this or any related agreement which are
to be performed at or after the Final Closing. The indemnification obligations
of Parent and the Company under this Section 6.3 shall survive the Preliminary
Closing and the Final Closing.
6.4 NOTICE. Promptly after any party hereto (in Article 6, the
"Indemnified Party") has received notice or has knowledge of the occurrence of
any event which the Indemnified Party asserts is an indemnifiable event or
after the threat or commencement of any action, claim or proceeding commenced
against the Indemnified Party by a third party that might result in any claim
for indemnity pursuant to this Agreement (a "Third Party Claim"), the
Indemnified Party shall provide the party obligated to provide indemnification
hereunder (in Article 6, the "Indemnifying Party") written notice of such claim
or the threat of commencement of such action or proceeding. Promptly after
receipt by an Indemnifying Party of any such notice, the Indemnifying Party
shall, within ten business days of receipt of such notice, either: (i)
acknowledge the debt, liability or obligation for which indemnity is sought as
a valid claim and forthwith pay (except as payment is deferred pursuant to
Section 6.5) the Indemnified Party an amount sufficient to discharge such debt,
liability or obligation; (ii) in the event of a Third Party Claim which is not
acknowledged by the Indemnifying Party to be owing, notify the Indemnified
Party whether the Indemnifying Party elects to undertake the defense thereof
and, if so, thereupon promptly assume and diligently contest such Third Party
Claim with counsel reasonably satisfactory to the Indemnified Party; or (iii)
in the event of a claim by the Indemnified Party for indemnity hereunder which
is challenged by the Indemnifying Party, notify the Indemnified Party of such
challenge. Failure to respond within the appropriate time period following the
receipt of a notice hereunder shall be deemed to constitute a challenge by the
Indemnifying Party of the claims to indemnification by the Indemnified Party.
In the event of such a challenge, the Indemnified Party shall, if the claim is
a Third Party Claim, defend against such claim subject to such Party's right to
be indemnified for all litigation costs to the extent it is ultimately
determined that the Indemnifying Party was obligated (after applying the
limitations of Section 6.6) to provide indemnification with respect to such
Third Party Claim. The Indemnified Party shall not compromise a Third Party
Claim without the prior written consent of the Indemnifying Party (which
consent may not be unreasonably withheld or delayed if the Indemnifying Party
has challenged the claim to indemnification by the Indemnified Party). The
Indemnifying Party shall not compromise a Third Party Claim unless the
compromise includes a complete release of the Indemnified Party and does not
create any obligations of the Indemnified Party.
6.5 TIME OF PAYMENT. The Shareholders may defer any payment due
under Article 6 to the Indemnified Parties, in an amount up to 50% of the
aggregate amount of indemnification (including such deferred payment) which
Shareholders are at the time obligated to pay or have paid, until the date that
is two years after the Final Closing Date, on which date any such deferred
payments shall become due without interest.
Laine Purchase and Sale Agreement/Page 51
<PAGE> 60
6.6 LIMITATIONS ON INDEMNIFICATION.
(a) No Indemnified Party shall be entitled to
indemnification from a Shareholder pursuant to Article 6 unless and until the
aggregate of all Losses for which indemnification would (but for the limitation
of this sentence) be required to be paid under Article 6 exceeds $450,000 (the
"Loss Threshold"), provided that if the aggregate Losses for which
indemnification is required to be paid shall exceed such sum then only those
Losses in excess thereof shall be payable (subject to the further limitations
set forth below). If an Indemnifying Party pays indemnification (including
without limitation, the cost of defending a Third Party Claim) that was not
required to be paid due to any limitation set forth in this Section 6.6, then
the Indemnified Party shall, promptly after demand by the Indemnifying Party,
reimburse the latter for such payments without interest. Losses for which
indemnification is required to be paid under Article 6 by reason of any breach
of the representations and warranties of Section 2.1 ("Section 2.1 Losses")
shall not be subject to the Loss Threshold, but the amount of Section 2.1
Losses shall not be counted toward meeting that threshold with respect to other
indemnification claims. If an Indemnified Party's right to indemnification
arises by reason of the breach of any representation or warranty set forth in
Section 2.2 of this Agreement, then each Shareholder will be liable solely for
his or her proportionate share of such indemnification based on the proportion
that the Purchase Price received by such Shareholder bears to the total
Purchase Price received by all Shareholders. If an Indemnified Party's right
to indemnification arises by reason of the breach of any representation or
warranty of a Shareholder other than those set forth in Section 2.2 or by
reason of the breach of a covenant of a Shareholder, then (i) the Shareholder
who breached such representation or warranty shall be solely liable for
indemnification for Losses attributable to such breach, and (ii) the
Shareholder who breached such covenant shall be solely liable for
indemnification for Losses attributable to such breach, except that if more
than one Shareholder participated in such breach of a representation, warranty
or covenant then the participating Shareholders, jointly in the proportion that
the Purchase Price received by each of them bears to the total Purchase Price
received by all of such participating Shareholders, shall be liable for
indemnification for Losses attributable to such breach of a representation,
warranty or covenant. The maximum liability of any Shareholder pursuant to
Article 6 of this Agreement shall not exceed $1,500,000 in the aggregate (the
"Individual Limitation"). In addition, the maximum aggregate liability of the
Shareholders under Article 6 of this Agreement shall not exceed $3,000,000 in
the aggregate (the "Aggregate Limitation"). A Shareholder shall have no
further obligations under Article 6 of this Agreement at the earlier of (i) the
time when such Shareholder has paid and/or is obligated to pay indemnification
under Article 6 of this Agreement (including, without limitation, payments in
respect of defending against Third Party Claims and payments that are deferred
to a future date under Section 6.5) equal to the Individual Limitation, or (ii)
the time when all Shareholders have paid and/or are obligated to pay
indemnification under Article 6 of this Agreement (including, without
limitation, payments in respect of defending against Third Party Claims and
payments that are deferred to a future date under Section 6.5) equal in the
aggregate to the Aggregate Limitation. Upon reaching either limitation, a
Shareholder who is then defending against a Third Party Claim shall turn the
defense thereof over to any other Shareholder who then remains liable for
indemnification with respect thereto or, if there is no such other Shareholder,
to the Indemnified Parties, which shall thereafter undertake such defense at
their sole expense.
Laine Purchase and Sale Agreement/Page 52
<PAGE> 61
(b) An Indemnified Party shall not be entitled to make
any claim for indemnification against a Shareholder under this Article 6 unless
notice of such claim describing such claim with particularity is given prior to
the date that is 18 months after the Final Closing Date, or, with respect to
the warranties and representations in Section 2.2(v) ("Tax Matters"), the date
that is not later than the expiration of the applicable statute of limitations
for a claim by a taxing authority for any taxes, penalties or interest.
(c) In no event will an Indemnified Party be entitled to
make a claim under Article 6 against a Shareholder for the breach of any
representation, warranty, or covenant if, at or prior to the Final Closing,
such Indemnified Party had knowledge of facts constituting such breach and
failed to notify the Shareholders thereof prior to the Final Closing.
6.7 EFFECTIVE DATE; EXCLUSIVE REMEDY. The obligations of the
parties under Article 6 shall only become effective from and after the Final
Closing. Upon becoming effective, the right to indemnification set forth in
this Article 6 shall be the sole and exclusive remedy of the parties for breach
of any representation, warranty, covenant or agreement set forth in or made
pursuant to this Agreement, and each party covenants and agrees not to seek or
assert any other remedy following the Final Closing, except that any party may
seek such injunctive relief as may be available. Parent acknowledges that,
except as expressly set forth in this Agreement, there are no other
representations or warranties of the Shareholders or the Company in connection
with the transactions contemplated hereby, all such other representations and
warranties being expressly disclaimed.
ARTICLE 7
STOCK TRANSFER RESTRICTIONS
7.1 COMPLIANCE WITH SECURITIES LAWS. The Shareholders acknowledge
and agree with Parent that the shares of Parent Common Stock issued pursuant to
this Agreement (the "Restricted Shares") to the Shareholders shall not be
transferable except upon the conditions specified in this Article 7, which
conditions are intended, among other things, to ensure compliance with the
provisions of the Securities Act and any applicable state securities laws in
respect of the transfer of such Restricted Shares. The Shareholders
acknowledge and agree that the certificates representing the Restricted Shares
will contain a restrictive legend to the effect that transfer of such shares is
prohibited unless the shares are registered under the Securities Act and
applicable state securities laws, or in the event that such transfer is, in the
opinion of counsel to Parent or counsel to the Shareholders which is reasonably
satisfactory to the Parent, exempt from the registration provisions of the
Securities Act and applicable state securities laws.
7.2 RESTRICTIONS ON TRANSFER. Prior to any transfer or attempted
transfer of Restricted Shares other than the sale of such shares pursuant to
registration under the Securities Act, the Shareholders agree to give written
notice to Parent of its intention to effect such transfer. The notice shall
describe the manner and circumstances of the proposed transfer in detail and
shall contain an undertaking to furnish such other information as may be
required to enable Parent's counsel to render the opinions referred to below,
and shall give the identity and address of the Shareholders' counsel.
Laine Purchase and Sale Agreement/Page 53
<PAGE> 62
Parent shall promptly submit a copy of the notice to its counsel, and the
following provisions shall apply:
(a) If, in the opinion of the Parent's counsel or counsel
to the Shareholders which is reasonably satisfactory to the Parent, the
proposed transfer may be effected without registration of the Restricted Shares
under the Securities Act, Parent shall, as promptly as practicable, so notify
the Shareholders who will then be entitled to transfer the Parent Common Stock
in accordance with the terms of the notice delivered by the Shareholders to
Parent.
(b) If, in the opinion of the Parent's counsel or counsel
to the Shareholders which is reasonably satisfactory to the Parent, the
proposed transfer of the Parent Common Stock may not be effected without
registration under the Securities Act, Parent shall, as promptly as
practicable, so notify the Shareholders, and the Shareholders shall not be
allowed to effect the proposed transfer except pursuant to an offering
registered under the Securities Act.
(c) The Shareholders understand and agree that except as
set forth in the Registration Rights Agreement or any similar agreement or this
Agreement, Parent is not obligated to furnish a registration statement under
the Act or any state securities laws covering the Restricted Shares nor is
Parent under any obligation to aid the Shareholders in obtaining any exemption
from any such registration requirements. Each Shareholder also acknowledges
that they shall be responsible for compliance with all conditions of transfer
of the Restricted Shares imposed by any administrator of any state and for the
fees of their counsel. Parent shall be responsible for the fees and expenses
incurred by Parent for legal or accounting services in connection with
reviewing such proposed transfer and issuing opinions in connection therewith.
(d) The Shareholders understand and agree that transfer
of the Restricted Shares may be effected only on the books of Parent, and that
stop transfer instructions will be issued to the transfer agent of Parent
Common Stock in accordance with the legend on any certificate representing the
Restricted Shares. The transfer agent will not remove the legend from any
certificate representing the Restricted Shares without either registration of
the Restricted Shares under the Securities Act and applicable state securities
laws or an opinion of the Parent's counsel or counsel to the Shareholders which
is reasonably satisfactory to the Parent stating that the transfer of the
Restricted Shares is exempt from such registration requirements by reason of
Rule 144(k) under the Securities Act or other exemption.
(e) The foregoing restrictions on transfer of Restricted
Shares shall terminate as to any Shareholder as soon as the provisions of Rule
144(k) under the Securities Act (or any successor rule) become available to
such Shareholder and Parent shall at that time, upon request of any
Shareholder, cause Parent's transfer agent to reissue certificates to such
Shareholder not containing any legend relating to resales of unregistered
securities.
Laine Purchase and Sale Agreement/Page 54
<PAGE> 63
ARTICLE 8
FURTHER ASSURANCES
8.1 FURTHER ASSURANCES. At any time and from time to time on and
after the Final Closing Date (a) at the request and expense of Parent, the
Shareholders shall deliver to Parent (but may retain copies for any proper
purpose) any records, documents and data possessed by the Shareholders and not
previously delivered to Parent to which Parent is entitled and execute and
deliver or cause to be executed and delivered all such deeds, assignments,
consents, documents and further instruments of transfer and conveyance, and
take or cause to be taken all such other actions, as Parent may reasonably deem
necessary or desirable in order to fully and effectively vest in Parent, or to
confirm its title to and possession of, the Company Common Stock or to assist
Parent in exercising rights with respect thereto which Parent is entitled to
exercise pursuant to the terms of this Agreement; and (b) Parent shall execute
and deliver or cause to be executed and delivered such further instruments and
take or cause to be taken such further actions as the Shareholders may
reasonably deem necessary or desirable to carry out the terms and provisions of
this Agreement.
8.2 BOOKS AND RECORDS.
(a) Parent agrees that it shall preserve and keep all
books and records relating to the Company in Parent's possession until
the later of December 31, 2003, or six months following the expiration
of the statute of limitations (including extensions thereof)
applicable to the tax returns filed by or with respect to the Company
for taxable periods ending prior to or on the Final Closing Date to
which such books or records are relevant. After such time, before
Parent shall dispose of any of such books and records, at least 90
calendar days' prior written notice to such effect shall be given by
Parent to the Shareholders, and the Shareholders shall be given an
opportunity, at Parent's cost and expense, to remove all or any part
of such books and records as the Shareholders may select, and the
Shareholders may retain copies thereof. Duly authorized
representatives of the Shareholders shall, upon reasonable notice,
have access at any time to such books and records during normal
business hours to examine, inspect and copy such books and records.
(b) In any instance in which any Shareholder or Parent,
as the case may be, is required to prepare or file (or cause to be
filed) tax returns which cover a period that includes the Final
Closing Date or to respond to an audit by the Internal Revenue Service
or other governmental agency with respect to a period prior to the
Final Closing Date, each Shareholder or Parent, as the case may be,
will furnish all information and records reasonably available to it
and reasonably requested of him, her or it and necessary or
appropriate for use in preparing such returns or responding to such
audit. The Shareholders shall at Parent's expense prepare and file,
subject to giving Parent a reasonable opportunity to comment on, tax
returns covering periods ending on the Final Closing Date. The amount
of any dividends permitted by Section 3.25 hereof but not taken by the
Final Closing shall be paid by the Company to the Shareholders in
proportion to their ownership of Company Common Stock as soon
thereafter as the unpaid amount thereof is made known to it by the
Shareholders.
Laine Purchase and Sale Agreement/Page 55
<PAGE> 64
(c) Parent, the Company and the Shareholders shall
cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the filing of tax returns and any
audit, litigation or other proceeding with respect to taxes. Such
cooperation shall include the provision of records and information
which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any
material provided hereunder.
ARTICLE 9
MISCELLANEOUS
9.1 EXPENSES, ETC. Whether or not the transactions contemplated
by this Agreement are consummated, none of the parties hereto shall have any
obligation to pay any of the fees and expenses of the other parties incident to
the negotiation, preparation and execution of this Agreement, including the
fees and expenses of counsel, accountants and other experts. The Company shall
pay its own fees and expenses. The Shareholders, the Company, and Parent will
indemnify the other parties, and hold them harmless from and against any claims
for finders' fees or brokerage commissions in relation to or in connection with
such transactions as a result of any agreement or understanding between such
indemnifying party and any third party. The Shareholders shall pay and be
responsible for any stock transfer Taxes with respect to the Company Common
Stock incident to the transfer thereof to Parent. Parent shall pay and be
responsible for any stock transfer Taxes arising from the issuance and sale of
shares of Parent Common Stock hereunder.
9.2 EXECUTION IN COUNTERPARTS. For the convenience of the
parties, this Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
9.3 NOTICES. All notices which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given in writing and delivered or mailed by
registered or certified mail postage prepaid, or sent by telex, telecopier,
facsimile transmission or telegraph as follows:
If to the Shareholders or, prior With a copy to:
to the Final Closing, to the Company:
Linda C. Woodson Louis Y. Fishman
122 Shannon Rd. Correro Fishman Haygood
Lafayette, LA 70503 Phelps Weiss Walmsley &
Casteix, L.L.P.
201 St. Charles Avenue, 47th Floor
Cheryl L. Woodson New Orleans, Louisiana 70170
102 Shannon Rd. Facsimile: (504) 586-5250
Lafayette, LA 70503
Laine Purchase and Sale Agreement/Page 56
<PAGE> 65
Paula K. Woodson
501 Woodvale
Lafayette, LA 70503
If to Parent or, following the Final With a copy to:
Closing, to the Company, to:
James J. Spring, III
TransCoastal Marine Services, Inc. Chamberlain, Hrdlicka, White,
505 Lorie Avenue, Suite I Williams & Martin
Lafayette, Louisiana 70507 1200 Smith Street, Suite 1400
Attention: President Houston, Texas 77002-4310
Facsimile No. (318) 896-0034 Facsimile No. (713) 658-2553
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto. Any notice or other
communication pursuant to this Agreement shall be deemed to have been duly
given or made and to have become effective upon the earliest of (a) when
delivered in hand to the party to which directed, or (b) if sent by first-class
mail postage prepaid, certified mail, return receipt requested, or by telex,
telecopier, facsimile transmission or telegraph and properly addressed as set
forth above, at the time when received by the addressee or (c) with respect to
delivery by certified mail, return receipt requested, when delivery thereof,
properly addressed as set forth above, is made by the U.S. Postal Service.
9.4 WAIVERS. Any party hereto (as to itself, but not as to other
parties without their consent) may, by written notice to the other parties
hereto, (a) extend the time for the performance of any of the obligations or
other actions of the other parties under this Agreement; (b) waive any
inaccuracies in the representations or warranties of another party contained in
this Agreement or in any document delivered pursuant to this Agreement; (c)
waive compliance with any of the conditions or covenants of another party
contained in this Agreement; or (d) waive performance of any of the obligations
of another party under this Agreement. Except as otherwise provided in the
preceding sentence, no action taken pursuant to this Agreement, including
without limitation any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance
with any representation, warranty, covenant or agreement contained in this
Agreement. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed a waiver of any subsequent breach.
9.5 AMENDMENTS, SUPPLEMENTS, ETC. At any time this Agreement may
be amended or supplemented by such additional agreements, articles or
certificates, as may be determined by the parties hereto to be necessary,
desirable or expedient to further the purposes of the Agreement, or to clarify
the intention of the parties hereto, or to add to or modify the covenants,
terms or conditions hereof or to effect or facilitate any governmental approval
or acceptance of this Agreement or to effect or facilitate the filing or
recording of this Agreement or the consummation of any of the transactions
contemplated hereby. Any such instrument must be in writing and signed by all
parties.
Laine Purchase and Sale Agreement/Page 57
<PAGE> 66
9.6 ENTIRE AGREEMENT. This Agreement, its Exhibits and Disclosure
Schedules and the documents executed on the Preliminary Closing Date and the
Final Closing Date in connection herewith, constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral and written, between
the parties hereto with respect to the subject matter hereof. No
representation, warranty, promise, inducement or statement of intention has
been made by any party hereto which is not embodied in this Agreement or such
other documents, and no party hereto shall be bound by, or be liable for, any
alleged representation, warranty, promise, inducement or statement of intention
not embodied herein or therein.
9.7 CHOICE OF FORUM; CONSENT TO JURISDICTION. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Texas. Any suit, action or proceeding arising with respect to the validity,
construction, enforcement or interpretation of this Agreement, and all issues
relating in any matter hereto, shall be brought in the United States District
Court for the Western District of Louisiana, or in the event that federal
jurisdiction does not pertain, in the state courts of the State of Louisiana in
Lafayette Parish. Each of the parties hereto hereby submits and consents to
the jurisdiction of such courts for the purpose of any such suit, action or
proceeding and hereby irrevocably waives (a) any objection which any of them
may now or hereafter have to the laying of venue in such courts, and (b) any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
9.8 BINDING EFFECT, BENEFITS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors, assigns, heirs and legatees. Nothing in this Agreement, expressed
or implied, is intended to confer on any person other than the parties hereto
or their respective successors and assigns, and third parties who are expressly
given rights hereunder, any rights, remedies, obligations or liabilities under
or by reason of this Agreement. In particular, but without limitation, no
representation, warranty or covenant of the Company or Shareholders herein or
in any related document shall confer on any present or future shareholder of
Parent or any of the Other Companies any rights or remedies except as is
expressly granted to Relatives.
9.9 ASSIGNABILITY. Neither this Agreement nor any of the parties'
rights hereunder shall be assignable by any party hereto without the prior
written consent of the other parties hereto.
9.10 INVALID PROVISIONS. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future law,
rule or regulation, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof. The remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance herefrom.
Furthermore, in lieu of such illegal, invalid or unenforceable provision, there
shall be added automatically as a part of this Agreement a legal, valid and
enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.
Laine Purchase and Sale Agreement/Page 58
<PAGE> 67
9.11 KNOWLEDGE. As used in this Agreement and the Disclosure
Schedules, the phrase "to the knowledge" of the Company and the Shareholders
means to the actual knowledge of the Shareholders or other representatives of
the Company listed on Exhibit 9.11.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed effective as of the date first above written.
PARENT:
TRANSCOASTAL MARINE SERVICES, INC.,
A DELAWARE CORPORATION
By: /s/ G. DARCY KLUG
------------------------------------
G. Darcy Klug, Vice President
SHAREHOLDERS:
/s/ LINDA C. WOODSON
---------------------------------------
Linda C. Woodson
/s/ CHERYL L. WOODSON
---------------------------------------
Cheryl L. Woodson
/s/ PAULA K. WOODSON
---------------------------------------
Paula K. Woodson
THE COMPANY:
LAINE CONSTRUCTION COMPANY, INC., A
LOUISIANA CORPORATION
By: /s/ PAULA K. WOODSON
------------------------------------
Paula K. Woodson, Vice President
Laine Purchase and Sale Agreement/Page 59
<PAGE> 1
EXHIBIT 10.14
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TRANSCOASTAL MARINE SERVICES, INC.,
WOODSON ACQUISITION CORP.,
WOODSON CONSTRUCTION COMPANY, INC.,
AND
THE HOLDERS OF THE
OUTSTANDING CAPITAL STOCK
OF
WOODSON CONSTRUCTION COMPANY, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
ARTICLE 1
BASIC TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Closings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) Preliminary Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Final Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(c) Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(d) Failure to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Certificates of Merger and Termination; Effective Time . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Delivery of Certificates of Merger and Termination . . . . . . . . . . . . . . . . . . . . . 3
(b) Filing Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Additional Acquisition Transactions; Initial Public Offering of Parent Common Stock . . . . . . . . . 4
1.6 Conversion of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Merger Sub Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Cancellation of the Company Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(d) IPO Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.7 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Delivery of Company Common Stock and Merger Consideration . . . . . . . . . . . . . . . . . . 5
(b) Payment of Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Indemnification of Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(d) No Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(e) Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(f) Payment in Full Satisfaction of All Rights . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.8 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 2
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Representations and Warranties by the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Ownership of Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(e) Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Representations and Warranties of the Shareholders and the Company . . . . . . . . . . . . . . . . . . 9
(a) Organization and Qualification, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
(c) Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(d) Qualification of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(e) Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(f) Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(g) Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(h) Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(i) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(j) Permits and Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(k) Title to Properties; Absence of Liens and Encumbrances, etc. . . . . . . . . . . . . . . . 16
(l) Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(m) Patent, Trademark, etc. Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(n) List of Properties, Contracts and Other Data . . . . . . . . . . . . . . . . . . . . . . . 18
(o) Use of Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(p) Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(q) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(r) Labor and Employment Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(s) Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(t) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(u) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(v) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(w) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(x) Powers of Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(y) Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(z) Tax-Free Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.3 Representations and Warranties by the Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(a) Organization and Qualification, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(b) Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(c) Subsidiaries, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(d) Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(e) Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(f) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(g) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(h) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(i) Tax-Free Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(j) Registration Statement; PPM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(k) No Undisclosed Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(l) Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(m) Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(n) Parent Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(o) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(p) Other Acquisition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(q) Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.4 Representations and Warranties Concerning the Merger Sub. . . . . . . . . . . . . . . . . . . . . . 34
(a) Organization and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(b) Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
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(c) Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 3
ADDITIONAL COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.2 Access to Information by Parent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.3 Access to Information by the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.4 Amendment to Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.5 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(a) Confidential Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(b) Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.6 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.7 The Shareholders' Release of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.8 Real Estate Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(a) Title Insurance Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(b) Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(c) Title Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(d) Phase I Environmental Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(e) Title and Environmental Objections . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.9 PPM; Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(a) Company to Provide Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(b) Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(c) Further Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(d) Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.10 Tax-Free Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(a) No Acts Jeopardizing Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(b) Two-Year Holding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.11 Satisfaction of Conditions by the Company and Shareholders . . . . . . . . . . . . . . . . . . . . . 45
3.12 Satisfaction of Conditions by Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
3.13 Amendment of Other Acquisition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
3.14 Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
3.15 Periodic Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
3.16 Corporate Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.17 Release of Shareholders and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.18 Release and Indemnification from Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.19 Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.20 Nature of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.21 Indemnification of Directors and Officers of the Company . . . . . . . . . . . . . . . . . . . . . . 47
3.22 Parent's IPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.23 Listing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.24 Principal Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
3.25 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
3.26 Certain Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
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ARTICLE 4
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.1 Conditions Precedent to the Obligations of the Parent . . . . . . . . . . . . . . . . . . . . . . . 48
(a) Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 48
(b) Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(c) Legal Actions or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(d) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(e) [Intentionally left blank] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(f) Policies of Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(g) Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(h) The Registration Rights Agreements and Shareholders Lock-up Agreements . . . . . . . . . . 49
(i) Parent's IPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(j) Lender Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(k) Audit of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(l) Opinion of Counsel for the Company and the Shareholders . . . . . . . . . . . . . . . . . . 49
(m) The Shareholders Release of the Company; Corporate Records . . . . . . . . . . . . . . . . 49
(n) All Proceedings to be Satisfactory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.2 Conditions Precedent to the Obligations of the Shareholders and the Company. . . . . . . . . . . . . 50
(a) Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 50
(b) Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(c) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(d) Delivery of PPM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(e) [Intentionally left blank] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(f) Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(g) Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(h) All Proceedings to be Satisfactory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(i) Opinion of Counsel for The Parent and the Merger Sub . . . . . . . . . . . . . . . . . . . 51
(j) Legal Actions or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(k) IPO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(l) Release. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(m) Simultaneous Closings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(n) No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(o) Shareholder Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(p) Listing of Parent Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(q) Reliance Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(r) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 5
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.1 Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(a) Prior to the Preliminary Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
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(b) After the Preliminary Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE 6
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.2 Indemnification by the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.3 Indemnification by Parent and Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . 54
6.4 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.5 Time of Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.6 Limitations on Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
6.7 Effective Date; Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 7
STOCK TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.1 Compliance with Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.2 Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 8
FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.1 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.2 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 9
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.1 Expenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.2 Execution in Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.4 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.5 Amendments, Supplements, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.7 Choice of Forum; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.8 Binding Effect, Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.9 Assignability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.10 Invalid Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.11 Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
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EXHIBITS:
EXHIBIT 1.3(a)(1) - Advance Certificate of Merger
EXHIBIT 1.3(a)(2) - Certificate of Termination
EXHIBIT 1.5 - List of Other Companies
EXHIBIT 1.7 - Letter of Transmittal
EXHIBIT 1.8 - Registration Rights Agreement
EXHIBIT 3.1 - Conduct of Business
EXHIBIT 3.1(l) - Production Bonuses
EXHIBIT 3.1(m) - Assets
EXHIBIT 3.16 - Persons Receiving Corporate Indemnification
EXHIBIT 3.17 - Persons Receiving Releases
EXHIBIT 3.21 - Directors and Officers of the Company Receiving
Indemnification
EXHIBIT 4.1(g)(1) - List of Individuals with Employment Agreements
EXHIBIT 4.1(g)(2) - Form of Employment Agreement
EXHIBIT 4.1(l) - Form of Opinion From Correro Fishman Haygood Phelps
Weiss Walmsley & Casteix L.L.P.
EXHIBIT 4.2(i) - Opinion of Chamberlain, Hrdlicka, White, Williams &
Martin
EXHIBIT 9.11 - Shareholders and Other Representatives of the Company
SCHEDULES:
SHAREHOLDERS DISCLOSURE SCHEDULE
Schedule 2.1(b) - Approvals
Schedule 2.1(d) - Holders of Company Common Stock
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<PAGE> 8
COMPANY DISCLOSURE SCHEDULE
Schedule 2.2(a) - Jurisdictions Where Qualified
Schedule 2.2(c) - Subsidiaries of the Company
Schedule 2.2(e) - Approvals
Schedule 2.2(h) - Changes and Events since December 31, 1996
Schedule 2.2(h)(1) - Permitted Exceptions
Schedule 2.2(j) - Permits and Legal Compliance
Schedule 2.2(k) - Properties and Assets of the Company
Schedule 2.2(l) - Software
Schedule 2.2(m) - Intellectual Property
Schedule 2.2(n) - List of Real Estate Owned by the Company
Schedule 2.2(n)(1) - Description of Real Estate Owned by the Company
Schedule 2.2(n)(2) - Real Estate Leased by the Company
Schedule 2.2(n)(3) - Contracts and Commitments of the Company
Schedule 2.2(q) - Litigation, Actions and Proceedings
Schedule 2.2(r) - Employment Agreements, Benefit Plans, and Compensation
Schedule 2.2(s) - Accounts Receivable of the Company
Schedule 2.2(t) - Insurance Coverage; Self Insurance
Schedule 2.2(u) - Company Benefit Plan
Schedule 2.2(v) - Tax Audits; Basis in Assets; NOLs
BUYER DISCLOSURE SCHEDULE
Schedule 2.3(a) - Jurisdictions Where Qualified
Schedule 2.3(c) - Subsidiaries of Parent
Schedule 2.3(f) - Approvals
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") made on this 28th
day of August 1997 by and among TRANSCOASTAL MARINE SERVICES, INC., a Delaware
corporation (the "Parent"),WOODSON ACQUISITION CORP., a Louisiana corporation
(the "Merger Sub"), WOODSON CONSTRUCTION COMPANY, INC., a Louisiana corporation
(the "Company"), and the undersigned holders of all of the outstanding capital
stock of the Company (the "Shareholders").
WHEREAS, the respective Boards of Directors of the Parent, Merger Sub
and the Company have each approved the merger of the Company with and into
Merger Sub (the "Merger") pursuant to this Agreement and the applicable
statutes of the State of Louisiana whereby each issued and outstanding share of
Common Stock, $1.00 par value per share, of the Company ("Company Common
Stock") will be converted into the right to receive certain shares of common
stock, $.001 par value per share, of the Parent ("Parent Common Stock"), all as
provided herein;
WHEREAS, the Merger has been approved, as required by applicable law,
by the Parent, acting as sole shareholder of Merger Sub, and by the
Shareholders, as the holders of all of the outstanding capital stock of the
Company;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization pursuant to Section 368(a)(2)(D) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
ARTICLE 1
BASIC TRANSACTION
1.1 MERGER. Subject to the terms and conditions of this Agreement
and in accordance with the Louisiana Business Corporation Law ("Applicable
Corporate Law"), at the Effective Time (as defined in Section 1.3(c)) the
Company shall be merged with and into the Merger Sub. Merger Sub, as the
surviving entity following the Merger, is sometimes referred to in this
Agreement as the "Surviving Corporation."
1.2 CLOSINGS.
(a) Preliminary Closing. A preliminary closing
("Preliminary Closing") of the transactions contemplated by this Agreement
shall take place at the offices of Chamberlain, Hrdlicka, White, Williams &
Martin, in Houston, Texas, commencing at 9:00 a.m. local time on such date
("Preliminary Closing Date") on which Parent or the Shareholders shall have
notified the other at least three business days in advance, provided that the
Preliminary Closing shall occur
Woodson Construction Merger Agreement/Page 1
<PAGE> 10
simultaneously with the execution and delivery of the underwriting agreement
("Underwriting Agreement") relating to the purchase by the underwriters of
shares of Parent Common Stock for resale to the public in connection with the
IPO (defined in Section 1.5). At the Preliminary Closing the following
deliveries will be made to the Exchange Agent (defined in Section 1.7) to be
held by such Agent in escrow pending disposition in accordance with Section
1.2(b) below: (i) the Shareholders will deliver four multiple originals of the
various certificates, instruments, and documents referred to in Section 4.1
below (except that only the original documents referred to in Section
4.1(m)(ii) need be delivered), (ii) Parent will deliver four multiple originals
of the various certificates, instruments, and documents referred to in Section
4.2 below, and (iii) Parent will make the deliveries contemplated by Section
1.3(a). Each of such certificates, instruments, and documents to be delivered
in accordance with clauses (i) and (ii) that are to be executed by the parties
will be fully executed, but dated in blank, except that the certificates to be
delivered in accordance with Section 4.1(a), 4.1(b), 4.2(a) and 4.2(b) shall be
dated the Preliminary Closing Date.
(b) Final Closing. The closing ("Final Closing") of the
transactions contemplated by this Agreement shall take place at the same place
and hour as hereinabove provided for the Preliminary Closing on such date
("Final Closing Date") as Parent shall determine and of which Parent shall give
Shareholders and the Exchange Agent at least twenty-four hours' advance notice,
provided that the Final Closing shall occur contemporaneously with the closing
of the IPO. At the Final Closing Parent will deposit the Merger Consideration
(defined in Section 1.6(c)) with the Exchange Agent; will deliver, and will
cause the managing underwriter of the IPO to deliver, a certificate to the
Exchange Agent to the effect that the closing of the IPO has occurred or is
occurring simultaneously with the Final Closing; and will deliver a certificate
to the Exchange Agent to the effect that the "final closings" under the Other
Acquisition Agreements are occurring simultaneously with the Final Closing.
Upon receipt of the Merger Consideration and the certificates referred to above
(the "Required Deliveries"), the Exchange Agent shall insert the date of the
Final Closing in all of the undated documents held by the Exchange Agent in
accordance with Section 1.2(a) and shall (A) deliver two complete sets of
multiple originals to the Shareholders, on the one hand, and Parent, on the
other hand, (B) take such action as may be required by Section 1.3(b), and (C)
destroy the Certificate of Termination (defined in Section 1.3(a)); provided
that the Exchange Agent shall not make such deliveries or take such actions if
the Exchange Agent is aware of any injunction or order that would be breached
by the occurrence of the Final Closing.
(c) Other Actions. In addition to the actions to be
taken at the Preliminary Closing and Final Closing as described herein, the
parties shall take such other customary actions as may be necessary to
effectuate such closings.
(d) Failure to Close. If: (1) the Preliminary Closing
occurs but the Final Closing has not occurred by the earlier of (i) five
business days after the Preliminary Closing or (ii) 11:00 a.m. Houston, Texas
time on the effective date specified in the Advance Certificate of Merger
(defined in Section 1.3(a)), or (2) the Required Deliveries are not made at the
Final Closing, or (3) the Underwriting Agreement or this Agreement is purported
to be terminated, then the Exchange Agent will not make the deliveries
contemplated by Section 1.2(b) but rather will destroy all of the multiple
originals which were delivered to such Agent in accordance with Sections 1.2(a)
and 1.3(a), except that the Exchange Agent will deliver to the Shareholders the
documents referred to in Section
Woodson Construction Merger Agreement/Page 2
<PAGE> 11
4.1(m)(ii) and further except that if the Exchange Agent has by then previously
filed the Advance Certificate of Merger it shall promptly (and in no event
later than 11:30 a.m. Houston, Texas time on the effective date specified in
the Advance Certificate of Merger) date (with the then current date) and file
the Certificate of Termination with the Louisiana Secretary of State. In that
event this Agreement will terminate, and such termination will be deemed a
termination under Section 5.1(a)(1).
1.3 CERTIFICATES OF MERGER AND TERMINATION; EFFECTIVE TIME
(a) Delivery of Certificates of Merger and Termination.
At the Preliminary Closing Parent will deliver to the Exchange Agent a
certificate of merger in the form of Exhibit 1.3(a)(1) (the "Advance
Certificate of Merger"), which specifies that the effective time of the Merger
is 12:00 noon Houston, Texas time on the Specified Date (defined in Section
1.3(b)), and a certificate of termination in the form of Exhibit 1.3(a)(2) (the
"Certificate of Termination"). Each instrument will be a fully executed
original but will be undated, and the date on which the Merger becomes
effective will be left blank in the Advance Certificate of Merger.
(b) Filing Certificate of Merger. Upon receiving a
request made by the managing underwriter or its counsel not sooner than the
second business day following the Preliminary Closing Date that states that the
underwriters have confirmed to their customers sales of shares of Parent Common
Stock in the IPO, that the closing of the IPO is scheduled for a specified date
(the "Specified Date") not later than the fifth business day following the
Preliminary Closing, and that such underwriter has no reason to believe that
such closing will not occur, the Exchange Agent will, as promptly as possible,
date the Advance Certificate of Merger the then current date, fill in therein
the Specified Date as the effective date of the Merger, file the Advance
Certificate of Merger with the Louisiana Secretary of State and promptly notify
Parent and the Shareholders of the making of such filing.
(c) Effective Time. The effective time of the Merger
("Effective Time") will be the time specified in the Advance Certificate of
Merger filed with the Louisiana Secretary of State.
1.4 EFFECTS OF THE MERGER.
(a) At the Effective Time, (i) the Company shall merge
with and into the Merger Sub and as a result thereof, the separate existence of
the Company shall cease; (ii) the Articles of Incorporation of the Merger Sub,
as in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation, except that the Articles of
Incorporation of the Merger Sub shall be amended to provide that the name of
the Surviving Corporation shall be changed to "Woodson Construction Company,
Inc.," (iii) the Bylaws of the Merger Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, and (iv) the
directors and officers of the Merger Sub immediately prior to the Effective
Time shall become the directors and officers of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected or appointed, as the case may be.
Woodson Construction Merger Agreement/Page 3
<PAGE> 12
(b) At and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, immunities and
franchises, of a public as well as of a private nature, previously belonging to
the Company and Merger Sub; and all property (real, personal and mixed), and
all debts due on whatever account, including subscriptions to shares, and all
other choses in action, and all and every other interest of or belonging to or
due to each of the Company and Merger Sub shall be transferred to, and vested
in, the Surviving Corporation without further act or deed; and all such
property, rights and privileges, powers and franchises and all and every other
interest shall be thereafter the property of the Surviving Corporation as they
were of the Company and Merger Sub; and the title to any immovable property, or
interest therein, whether by deed or otherwise, shall not revert or be in any
way impaired by reason of the Merger. The Surviving Corporation shall be
responsible and liable for all the liabilities and obligations of the Company
and Merger Sub and any claim existing, or action or proceeding pending, by or
against the Company or Merger Sub may be prosecuted against the Surviving
Corporation. Neither the rights of creditors nor any liens upon the property
of the Company or Merger Sub shall be impaired by the Merger, and all debts,
liabilities and duties of each of the Company and Merger Sub shall attach to
the Surviving Corporation, and may be enforced against it to the same extent as
if such debts, liabilities and duties had been incurred or contracted by it,
all in accordance with provisions of the Applicable Corporate Law and the terms
of this Agreement.
1.5 ADDITIONAL ACQUISITION TRANSACTIONS; INITIAL PUBLIC OFFERING
OF PARENT COMMON STOCK. The Merger is part of a series of additional
transactions that relate to the Parent's intent to acquire the companies listed
on Exhibit 1.5 attached hereto (the "Other Companies") and to consummate an
initial public offering of the Parent Common Stock resulting in net proceeds to
the Parent of at least $45,000,000 on a firm underwriting basis (the "IPO").
The Parent will acquire the Other Companies from various parties (the "Other
Acquisitions") pursuant to separate acquisition agreements ("Other Acquisition
Agreements") to be executed prior to or concurrently with this Agreement.
1.6 CONVERSION OF STOCK. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Company Common Stock or capital stock of the Merger Sub:
(a) Merger Sub Capital Stock. Each share of capital
stock of the Merger Sub issued and outstanding at the Effective Time, shall
remain outstanding and shall be unchanged after the Merger and shall thereafter
constitute all of the issued and outstanding capital stock of the Surviving
Corporation.
(b) Cancellation of the Company Treasury Stock. All
shares of Company Common Stock that are owned by the Company as treasury stock
shall be canceled and retired and shall cease to exist and no stock of the
Parent or other consideration shall be delivered in exchange therefor.
(c) Merger Consideration. Each share of the Company
Common Stock (other than shares to be canceled in accordance with Section
1.6(b)), shall be converted at the Effective Time into the right to receive the
number of validly issued, fully paid and nonassessable shares of
Woodson Construction Merger Agreement/Page 4
<PAGE> 13
Parent Common Stock resulting from dividing $116.00 by the Share Price (as
defined below). The total consideration payable to the Shareholders with
respect to all of their shares of Company Common Stock is sometimes called the
"Merger Consideration". The aggregate amount of the Merger Consideration
(valuing shares of Parent Common Stock at the Share Price) is $8,700,000. The
Merger Consideration per share shall be adjusted as necessary so that the
aggregate Merger Consideration totals the foregoing amount. The Shareholders
shall also be entitled to cash in lieu of a fractional share pursuant to
Section 1.7(d) below. If between the date of this Agreement and the Effective
Time, the outstanding shares of Parent Common Stock or Company Common Stock
shall have been changed into a different number of shares or a different class,
by reason of any stock dividend, subdivision, reclassification,
recapitalization, split-up, combination, or exchange of shares or the like, the
conversion formula in this Section 1.6(c) shall be correspondingly adjusted to
reflect such stock dividend, subdivision, reclassification, recapitalization,
split-up, combination or exchange of shares. All such converted shares of
Company Common Stock shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration upon the
surrender of such certificate in accordance with Section 1.7, without interest.
(d) IPO Statement. At the Preliminary Closing and the
Final Closing, Parent shall deliver to the Shareholders and the Exchange Agent
a statement (the "IPO Statement") reporting (i) the price per share paid or to
be paid by the public for shares of Parent Common Stock (the "IPO Price") in
the IPO, and (ii) the lowest price per share of the Parent Common Stock at
which the Parent has agreed to issue Parent Common Stock pursuant to any of the
Other Acquisition Agreements (the "Lowest Acquisition Price"). The lower of
the IPO Price and the Lowest Acquisition Price is referred to in this Agreement
as the "Share Price." The IPO Statement shall report the quotient resulting
from dividing $8,700,000 by the Share Price. Such quotient shall represent the
number of shares of Parent Common Stock included in the Merger Consideration.
1.7 EXCHANGE OF CERTIFICATES.
(a) Delivery of Company Common Stock and Merger
Consideration. Prior to the Preliminary Closing, the Parent will deliver to
each of the Shareholders a letter of transmittal, in substantially the form
attached hereto as Exhibit 1.7, to be used for the purpose of surrendering all
certificates representing Company Common Stock in exchange for the right to
receive the Merger Consideration. As provided in Section 1.2(b), Parent shall
at the Final Closing deposit the Merger Consideration with an exchange agent
selected by Parent and reasonably acceptable to the Shareholders (the "Exchange
Agent"), and each Shareholder shall at or after the Final Closing surrender for
exchange certificates which prior to the Effective Time represent shares of
Company Common Stock, together with a properly completed and executed letter of
transmittal (with such Shareholder's signature guaranteed by an eligible
guarantor institution pursuant to any medallion signature guarantee program),
to the Exchange Agent. At the time of such surrender of Company Common Stock
to the Exchange Agent, each Shareholder shall be entitled to receive in
exchange therefor the Merger Consideration. If such surrender is made at or
prior to the Final Closing, then the Shareholder shall receive the Merger
Consideration from the Exchange Agent at the Final Closing. After the
Effective Time and until the outstanding certificates formerly representing
shares
Woodson Construction Merger Agreement/Page 5
<PAGE> 14
of the Company Common Stock are so surrendered, each outstanding certificate
which, prior to the Effective Time, represented the Company Common Stock shall
be deemed for all corporate purposes (except the payment of dividends) to
evidence ownership of the Merger Consideration into which the shares of the
Company Common Stock represented thereby prior to such Effective Time shall
have been converted.
(b) Payment of Dividends. Until certificates
representing shares of Company Common Stock have been surrendered, no dividend
payable to holders of record of the Parent Common Stock shall be paid to the
holders of such outstanding stock certificates of the Company in respect
thereof. Upon surrender of such outstanding certificates, however, there shall
be paid to the holders of the certificates for the Parent Common Stock issued
in exchange therefor the amount of dividends, if any, which theretofore became
payable with respect to such full shares of the Parent Common Stock, but which
have not theretofore been paid on such stock. No interest shall be payable
with respect to the payment of any dividends unless the Parent shall fail to
make payment in accordance with this Section 1.7(b).
(c) Indemnification of Exchange Agent . If the Exchange
Agent becomes involved in any litigation, claim or controversy in connection
with its actions under this Agreement, the Parent shall indemnify, defend and
save Exchange Agent from all losses, costs, damages, expenses and attorneys'
fees suffered or incurred by Exchange Agent as a result thereof, other than
those caused by negligence or misconduct.
(d) No Fractional Shares. Notwithstanding anything in
this Agreement to the contrary, no certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of certificates representing Company Common Stock, and such fractional
share interests will not entitle the owner thereof to vote or to any rights of
a stockholder of the Parent. In lieu of any such fractional shares, each
Shareholder who would otherwise be entitled to a fraction of a share of Parent
Common Stock, after aggregating all fractional shares to which such Shareholder
is entitled under this Agreement and any Other Acquisition Agreements to which
they may be a party, shall be entitled to receive from the Exchange Agent a
cash payment equal to such remaining fraction multiplied by the Share Price.
The Parent shall make available to the Exchange Agent at the Final Closing the
amount of cash required to make any cash payments in lieu of remaining
fractional shares.
(e) Assignments. No assignment, transfer or other
disposition of record or beneficial ownership of any shares of Company Common
Stock may be made on or after the date hereof without Parent's written consent,
which consent will not be unreasonably withheld or delayed.
(f) Payment in Full Satisfaction of All Rights. The
delivery of the Merger Consideration to the Shareholders with respect to the
Company Common Stock shall be deemed to be payment in full satisfaction of all
rights pertaining to the outstanding Company Common Stock.
1.8 REGISTRATION RIGHTS AGREEMENT. Parent and each Shareholder
shall at the Preliminary Closing execute and deliver to the Exchange Agent a
Registration Rights Agreement
Woodson Construction Merger Agreement/Page 6
<PAGE> 15
in the form attached hereto as Exhibit 1.8. Provisions of the Registration
Rights Agreement shall be no less favorable to the Shareholders than provisions
of any other agreement of the Parent providing registration rights to the
shareholders of any Other Companies.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES BY THE SHAREHOLDERS. Each of
the Shareholders represents and warrants to the Parent and the Merger Sub that
the statements contained in this Section 2.1 are correct as to himself or
herself as of the date of this Agreement and will be correct as to himself or
herself as of the Preliminary Closing Date and the Final Closing Date (as
though made then), except as set forth in the disclosure schedule delivered by
the Shareholders to the Parent and the Merger Sub on the date hereof, as
supplemented or amended in accordance with Section 3.4 of this Agreement (such
schedule, as so supplemented or amended, the "Shareholders Disclosure
Schedule"). The Shareholders Disclosure Schedule is arranged in sections and
paragraphs corresponding to the lettered and numbered sections and paragraphs
contained in this Section 2.1. References in Section 2.1 to a numbered
schedule mean the section of the Shareholder Disclosure Schedule that
corresponds with that number; for example, references to "Schedule 2.1(b)" mean
section 2.1(b) of the Shareholder Disclosure Schedule. The Shareholder
Disclosure Schedule constitutes an exception to each warranty or representation
set forth herein, whether or not such warranty or representation specifically
refers to the Shareholder Disclosure Schedule; accordingly each warranty or
representation set forth herein is deemed to be preceded by the clause: "Except
as set forth in the Shareholder Disclosure Schedule . . .".
(a) Qualification. Such Shareholder has the legal power
and authority to own his or her properties and assets.
(b) Authority Relative to Agreement. Such Shareholder
has the full right, power, and legal authority to execute and deliver
this Agreement. Such Shareholder has the full right, power, and legal
authority to perform this Agreement and to consummate the transactions
contemplated on his or her part hereby. No proceeding on the part of
such Shareholder, and, except for those approvals described in
Schedule 2.1(b), no notice, consent, authorization, order or approval
of, filing or registration with, any governmental commission, board or
other regulatory body or any bank, bonding company, lender, surety,
customer, supplier, or any other person whatsoever is required for or
in connection with the execution and delivery of this Agreement by
such Shareholder. No proceeding on the part of such Shareholder, and,
except for those approvals described in Schedule 2.1(b), no notice,
consent, authorization, order or approval of, filing or registration
with, any governmental commission, board or other regulatory body or
any bank, bonding company, lender, surety, customer, supplier, or any
other person whatsoever is required for or in connection with the
performance by such Shareholder of this Agreement and the consummation
by such Shareholder of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by such Shareholder and
is a valid and binding agreement of such Shareholder, enforceable
against such Shareholder in accordance with its terms, except as
Woodson Construction Merger Agreement/Page 7
<PAGE> 16
such enforcement is subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws relating to or
affecting creditors' rights.
(c) Non-Contravention. The execution, delivery and
performance of this Agreement by such Shareholder do not, and the
consummation by such Shareholder of the transactions contemplated
hereby will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation, or acceleration of
any obligation or to the loss of a material benefit under, or result
in the creation or imposition of any material lien, charge, pledge,
security interest or other encumbrance upon any of the property or
assets of such Shareholder pursuant to any provision of, any mortgage,
lien, lease, agreement, license, instrument, law, ordinance,
regulation, order, arbitration award, judgment or decree to which such
Shareholder is a party or by which any of such Shareholder's assets
are bound. The execution, delivery and performance of this Agreement
by such Shareholder do not and the consummation by such Shareholder of
the transactions contemplated hereby will not violate or conflict with
any other restriction of any kind or character to which such
Shareholder is subject or by which any of such Shareholder's assets
may be bound.
(d) Ownership of Company Common Stock. Such Shareholder
holds of record and owns beneficially the number of shares of Company
Common Stock set forth next to his or her name in Schedule 2.1(d).
Such Shareholder is, and as of the Final Closing Date will be (except
as permitted under Section 1.7(e)), the sole and exclusive lawful
owner of such shares of Company Common Stock free and clear of all
liens, claims, encumbrances and rights of others of any nature
whatsoever, with full power to vote all such shares on any matter that
may properly come before shareholders of the Company, and such
Shareholder may exercise such voting power on any matter without
violation of the rights of any person. There are no rights, warrants
or options outstanding with respect to such capital stock, and such
Shareholder has no obligation to deliver capital stock of the Company
or any of its Subsidiaries (as defined below) to any person as of the
date hereof, at any time on or prior to the Final Closing Date,
thereafter or as a result thereof or in connection therewith except as
provided in this Agreement.
(e) Restricted Securities.
(1) Such Shareholder acknowledges that the shares
of Parent Common Stock which such Shareholder shall acquire
pursuant to the Merger and this Agreement have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), and are being acquired for such
Shareholder's own account for investment and not with a view
to the distribution thereof. The Parent Common Stock will be
subject to the stock transfer restrictions described in
Article 7 below.
(2) Such Shareholder has the knowledge and
experience in financial and business matters to enable him or
her to evaluate the merits and risks of approving this
Agreement and the transactions contemplated herein and
acquiring shares of Parent Common Stock.
Woodson Construction Merger Agreement/Page 8
<PAGE> 17
(3) Such Shareholder is able to bear the economic
risks of his or her investment in the Parent Common Stock.
(4) Such Shareholder has been represented by
legal counsel in this transaction and such Shareholder and his
or her advisors, including such counsel, have been given the
opportunity to ask questions of, and receive answers from, the
officers of the Parent concerning the terms of the
transactions contemplated by this Agreement and the affairs
and the business and financial condition of the Parent.
(5) Such Shareholder has received a confidential
private placement memorandum concerning the Parent and an
investment in shares of Parent Common Stock (the "PPM"), and
such Shareholder and his or her advisors have been given
access to all documents, books and additional information
concerning Parent which they have requested regarding Parent.
(6) Such Shareholder has made such inquiries by
himself or herself and through his or her advisors in making a
decision to approve this Agreement and the transactions
contemplated herein as such Shareholder has deemed necessary
and advisable.
(7) Such Shareholder acknowledges and agrees that
the Parent Common Stock issued to such Shareholder may not be
disposed of except in accordance with the requirements of the
Securities Act and any applicable state securities laws.
(8) None of the representations made by the
Shareholders in this Section 2.1(e) shall affect any of
Shareholders' rights under any other section of this
Agreement.
2.2 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND THE
COMPANY. The Shareholders and the Company represent and warrant to the Parent
and the Merger Sub that the statements contained in this Section 2.2 are
correct as of the date of this Agreement and will be correct as of the
Preliminary Closing Date and the Final Closing Date (as though made then),
except as otherwise set forth in the disclosure schedule delivered by the
Shareholders and the Company to the Parent and the Merger Sub on the date
hereof, as supplemented or amended in accordance with Section 3.4 of this
Agreement (such schedule, as so amended or supplemented, the "Company
Disclosure Schedule"). The Company Disclosure Schedule is arranged in sections
and paragraphs corresponding to the lettered and numbered sections and
paragraphs contained in this Section 2.2. References in Section 2.2 to a
numbered schedule mean the section of the Company Disclosure Schedule that
corresponds with that number; for example, references to "Schedule 2.2(a)" mean
Section 2.2(a) of the Company Disclosure Schedule. The Company Disclosure
Schedule constitutes an exception to each warranty or representation set forth
herein, whether or not such warranty or representation specifically refers to
the Company Disclosure Schedule; accordingly each warranty or representation
set forth herein is deemed to be preceded by the clause: "Except as set forth
in the Company Disclosure Schedule . . .".
Woodson Construction Merger Agreement/Page 9
<PAGE> 18
(a) Organization and Qualification, etc. The Company is
a corporation duly organized, validly existing and in good standing
under the laws of the State of Louisiana, has the full right, power
and legal authority and, to the knowledge of the Shareholders and the
Company, all licenses, permits, titles and authorizations necessary
to own all of its properties and assets and to carry on its business
as it is now being conducted, and is duly qualified to do business and
is in good standing in each jurisdiction as set forth in Schedule
2.2(a) where, to the reasonable belief of the Shareholders and the
Company, such qualification is appropriate. The copies of the
Company's Articles of Incorporation and Bylaws, as amended to date,
which have been delivered to Parent are complete and correct, and such
instruments, as so amended, are in full force and effect. The Company
is qualified to transact business as a foreign corporation and is in
good standing in all jurisdictions in which it is engaged in business
and in which its properties or assets are located, which foreign
jurisdictions are listed in Schedule 2.2(a).
(b) Capital Stock. The entire authorized capital stock
of the Company consists of 200,000 shares of Company Common Stock of
which 75,000 shares of Company Common Stock are validly issued and
outstanding, fully paid and nonassessable, all of which are held of
record and beneficially by the Shareholders. No shares of the capital
stock of the Company have been issued in violation of the preemptive
rights of any past or present shareholder. No shares of the capital
stock of the Company are in the treasury of the Company. There are no
outstanding subscriptions, shares of capital stock, calls, warrants,
options, contracts, commitments, or demands relating to the capital
stock of the Company or other agreements of any character under which
the Company would be obligated to issue or purchase shares of its
capital stock. There is no voting agreement, voting trust, proxy, or
other agreement or understanding with respect to the voting of the
capital stock of the Company. The Company has no commitments to issue
or sell any securities or obligations convertible into or exchangeable
for, or giving any person any right to subscribe for or acquire from
the Company, any shares of its capital stock and no securities or
obligations evidencing any such rights are outstanding.
(c) Subsidiaries. With respect to each corporation,
firm, partnership or other business entity in which the Company holds
an interest, Schedule 2.2(c) sets forth the name, the interest of the
Company, and the capitalization of such entity (each such entity in
which the Company owns or controls more than 50% of the voting
securities, directly or indirectly, or in which the Company acts as
manager or general partner is hereinafter a "Subsidiary"). Except as
described on Schedule 2.2(c), neither the Company nor any Subsidiary
owns or has any right or obligation to acquire any class of securities
(including, without limitation, debt securities) issued by any person
or company and neither the Company nor any Subsidiary is a party to or
bound to any partnership, joint venture, voluntary association, or
other agreement with any person for the conduct of any business.
(d) Qualification of Subsidiaries. Each Subsidiary is
duly organized, validly existing and in good standing under the laws
of its state of organization, with the corporate or organizational
power to own its property and carry on its business as it is now being
conducted. All of the issued and outstanding shares of capital stock
of each Subsidiary have
Woodson Construction Merger Agreement/Page 10
<PAGE> 19
been duly authorized and are validly issued, fully paid, and
nonassessable, and were not issued in violation of the preemptive
rights of any past or present shareholder. The Company and its
Subsidiaries hold of record and own beneficially all of the
outstanding shares or other interests in each Subsidiary of the
Company held by them, 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 any of the Company and its Subsidiaries to sell,
transfer, or otherwise dispose of any capital stock of any of its
Subsidiaries or that could require any Subsidiary to issue, sell, or
otherwise cause to become outstanding any of its own capital stock.
There are no outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to any Subsidiary.
There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of any capital stock of any
Subsidiary. None of the Company and its Subsidiaries controls
directly or indirectly or has any direct or indirect equity
participation in any corporation, partnership, trust, or other
business association which is not a Subsidiary of the Company.
(e) Authority Relative to Agreement. The Company has the
full right, power, and legal authority to execute and deliver this
Agreement. The Company has the full right, power, and legal authority
to perform this Agreement and to consummate the transactions
contemplated on the part of the Company hereby. The execution and
delivery by the Company of this Agreement and the consummation by the
Company of the transactions contemplated on its part hereby have been
duly authorized by its Board of Directors and the Shareholders in
their capacity as the holders of all of the capital stock of the
Company. To the knowledge of the Shareholders and the Company, no
proceeding on the part of the Company, and, except for those approvals
described in Schedule 2.2(e), no notice, consent, authorization, order
or approval of, filing or registration with, any governmental
commission, board or other regulatory body, or any bank, bonding
company, lender, surety, customer, supplier, or any other person
whatsoever is required for or in connection with the Company's
execution and delivery of this Agreement. This Agreement has been
duly executed and delivered by the Company and is a valid and binding
agreement of the Company, enforceable against the Company in
accordance with its terms, except as such enforcement is subject to
the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws relating to or affecting creditors' rights.
(f) Non-Contravention. The execution, delivery, and
performance of this Agreement by the Company do not and the
consummation by the Company of the transactions contemplated hereby
will not (1) to the knowledge of the Shareholders and the Company,
violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, government agency, or court to which the Company or any of
its assets is subject or (2) violate any provision of the Articles of
Incorporation or Bylaws of the Company or any Subsidiary, or (3) to
the knowledge of the Shareholders and the Company, violate or result
in, with the giving of notice or the lapse of time or both, the
violation of any provision of, or result in the
Woodson Construction Merger Agreement/Page 11
<PAGE> 20
acceleration of or entitle any party to accelerate (whether after the
giving of notice or lapse of time or both) any obligation under, or
result in the creation or imposition of any lien, charge, pledge,
security interest or other encumbrance upon any of the property of the
Company or any Subsidiary pursuant to any provision of any mortgage,
lien, lease, contract, agreement, license, or instrument to which the
Company or any Subsidiary is a party or by which any of their
respective assets are bound. The execution, delivery and performance
of this Agreement by the Company do not and will not violate or
conflict with any other restriction of any kind or character to which
the Company or any Subsidiary is subject or by which any of their
respective assets may be bound, and the same do not and will not
constitute an event permitting termination of any such mortgage, lien,
lease, agreement, license or instrument to which the Company or any
Subsidiary is a party or by which any of their respective assets are
bound.
(g) Financial Information. The Shareholders have
previously furnished Parent with true and complete copies of the
balance sheets of the Company and its Subsidiaries as of December 31,
1996 and December 31, 1995, and the related statements of income,
retained earnings and cash flows for each of the three years in the
period ended December 31, 1996, together with the report of Phillips,
Goodson & Co., the independent accountants of the Company, with
respect to such financial statements. Such financial statements have
been prepared in conformity with Generally Accepted Accounting
Principals ("GAAP") consistently applied and, to the knowledge of the
Shareholders and the Company, present fairly the financial position
and results of operations of the Company and its consolidated
Subsidiaries as of and for the respective periods then ended. The
Shareholders have also previously furnished the Parent with a copy of
the unaudited monthly balance sheets of the Company as of the last day
of each month from January through June 1997, and the related monthly
unaudited statement of income, retained earnings and cash flows of the
Company with respect to each month from January through June 1997
certified by the chief executive officer and the chief accounting
officer of the Company (including such certificates, the "Unaudited
Monthly Financial Statements"). To the knowledge of Shareholders and
the Company, such financial statements have been prepared in
conformity with GAAP consistently applied and present fairly the
financial position and results of operations of the Company and its
consolidated Subsidiaries as of and for the subject periods, except
for normal recurring year-end adjustments and except for the absence
of footnotes. The Company and its Subsidiaries do not have any
liabilities or obligations of a type which should be included in or
reflected as such in financial statements prepared in accordance with
GAAP, whether related to tax or non-tax matters, accrued or
contingent, due or not yet due, liquidated or unliquidated, or
otherwise, except as and to the extent disclosed or reflected in such
financial statements. Collectively, the financial statements
described in this Section 2.2(g) are the "Company Financial
Statements."
Woodson Construction Merger Agreement/Page 12
<PAGE> 21
(h) Absence of Certain Changes or Events. Since December
31, 1996, except to the extent described in Schedule 2.2(h) of the
Company Disclosure Schedule, and except as contemplated by this
Agreement or in connection with the transactions contemplated by this
Agreement:
(1) none of the Company and its Subsidiaries 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;
(2) none of the Company and its Subsidiaries has
entered into any agreement, contract, lease, permit or license
(or series of related agreements, contracts, leases, permits
and licenses) either involving more than $20,000 or outside
the ordinary course of business;
(3) to the knowledge of the Shareholders and the
Company, no party (including any of the Company and its
Subsidiaries) has breached, accelerated, terminated, modified,
or canceled any agreement, contract, lease, permit or license
(or series of related agreements, contracts, leases, permits
and licenses) involving more than $20,000 to which any of the
Company and its Subsidiaries is a party or by which any of
them is bound ("Company Contracts");
(4) none of the Company and its Subsidiaries has
imposed or suffered to exist any lien, encumbrance or security
interest upon any of its assets, tangible or intangible (other
than the Permitted Exceptions, as defined below);
(5) none of the Company and its Subsidiaries has
made any capital expenditure (or series of related capital
expenditures) either involving more than $20,000 or outside
the ordinary course of business;
(6) none of the Company and its Subsidiaries has
made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other
corporation, partnership, limited liability company or other
person (or series of related capital investments, loans, and
acquisitions) either involving more than $20,000 or outside
the ordinary course of business;
(7) none of the Company and its Subsidiaries 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 $25,000 singly or $50,000 in the aggregate;
(8) none of the Company and its Subsidiaries has
delayed or postponed the payment of accounts payable and other
liabilities outside the ordinary course of business;
Woodson Construction Merger Agreement/Page 13
<PAGE> 22
(9) none of the Company and its Subsidiaries has
canceled, compromised, satisfied, settled, waived, or released
any right or claim (or series of related rights and claims)
either involving more than $20,000 or outside the ordinary
course of business;
(10) none of the Company and its Subsidiaries has
granted any license or sublicense of any rights under or with
respect to any Intellectual Property (as defined in Section
2.2(m) below);
(11) there has been no change made or authorized in
the Articles of Incorporation or bylaws of any of the Company
and its Subsidiaries (except that the Articles may be changed
to include the exculpation provisions permitted by law);
(12) none of the Company and its Subsidiaries 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;
(13) none of the Company and its Subsidiaries 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, except for dividends and
distributions to shareholders of S-corporations which in the
aggregate do not exceed 43.2% of the Company's pre-tax net
income during 1997 through the date of the latest such
distribution and except as permitted by Section 3.1(m);
(14) none of the Company and its Subsidiaries has
experienced any damage, destruction, or loss to its property
in excess of $20,000 which is not covered by insurance;
(15) none of the Company and its Subsidiaries 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;
(16) none of the Company and its Subsidiaries has
entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(17) none of the Company and its Subsidiaries has
granted any increase in compensation to any of its directors,
officers, employees, consultants or agents in excess of five
percent of such person's base compensation and discretionary
bonuses to officers and employees in the aggregate amount of
up to 10% of the pre-tax net income of the Company during 1997
up to the date of the latest such payment;
Woodson Construction Merger Agreement/Page 14
<PAGE> 23
(18) none of the Company and its Subsidiaries 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 other employee benefit plan);
(19) none of the Company and its Subsidiaries has
made any other change in employment terms for any of its
directors, officers, and employees outside the ordinary course
of business;
(20) none of the Company and its Subsidiaries has
made or pledged to make any material charitable or other
contribution outside the ordinary course of business;
(21) to the knowledge of the Shareholders and the
Company, 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
Company or its Subsidiaries;
(22) to the knowledge of the Shareholders and the
Company, there has not been any material adverse change in the
business, financial condition, operation, results of
operation, or future prospects of the Company and its
Subsidiaries;
(23) there have not been any work interruptions, or
to the knowledge of the Shareholders and the Company, labor
grievances or employee claims filed (the existence of which is
known, or under the normal course of business should be known,
to the Company) against the Company or its Subsidiaries;
(24) there has not been any merger or consolidation
or agreement to merge or consolidate with or into any other
corporations; and
(25) none of the Company and its Subsidiaries has
committed to do any of the foregoing.
"Permitted Exceptions" shall mean (i) mechanic's,
materialman's, warehouseman's and carrier's liens and purchase money
security interests arising in the ordinary course of business, a
correct and complete list of which is set forth on Schedule 2.2 of the
Company Disclosure Schedule or arising by operation of law; (ii) liens
for taxes and assessments not yet payable; (iii) liens for taxes,
assessments and charges and other claims, the validity of which the
Company or the Shareholders are contesting in good faith, a correct
and complete list of which is set forth on Schedule 2.2; and (iv)
imperfections of title, liens, security interests, claims and other
charges and encumbrances the existence of which does not adversely
affect the operation, value, use or enjoyment of the affected asset or
property.
(i) Undisclosed Liabilities. To the knowledge of the
Shareholders and the Company, the Company and its Subsidiaries have no
liabilities (and there is no known basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint,
Woodson Construction Merger Agreement/Page 15
<PAGE> 24
claim, or demand against the Company or its Subsidiaries giving rise
to any liability), except for (i) liabilities set forth on the face of
the Company Financial Statements (rather than in any notes thereto)
and (ii) liabilities which have arisen after May 31, 1997 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).
(j) Permits and Legal Compliance. To the knowledge of
the Shareholders and the Company, the Company and its Subsidiaries
have all permits, licenses, orders, qualifications, and approvals of
all governmental and regulatory authorities material to the conduct of
their business, a correct and complete list of which is set forth in
Schedule 2.2. To the knowledge of the Shareholders and the Company,
all such permits, licenses, orders and approvals are in full force and
effect, and no suspension or cancellation of any of them is pending or
threatened. To the knowledge of the Shareholders and the Company,
none of such permits, licenses, orders or approvals, and no
application for any of such permits, licenses, orders or approvals,
will be adversely affected by the consummation of the transactions
contemplated by this Agreement. To the knowledge of the Shareholders
and the Company, the Company and its Subsidiaries have 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 the Company or its Subsidiaries alleging
any failure so to comply.
(k) Title to Properties; Absence of Liens and
Encumbrances, etc. To the knowledge of the Shareholders and the
Company, the Company and its Subsidiaries have good and marketable
title to all of the real, tangible personal and mixed properties and
assets owned by it and used in its business, free and clear of any
liens, charges, pledges, mortgages, conditional sales contracts,
security interests or other encumbrances (other than Permitted
Exceptions), except as reflected in the Company Financial Statements.
A correct and complete list of all such properties and assets (other
than properties and assets described in Sections 2.2(l), 2.2(m) and
2.2(n)) with a historical cost in excess of $5,000 is set forth on
Schedule 2.2(k). The properties and assets of the Company and its
Subsidiaries (other than the properties and assets described in
Sections 2.2(l), 2.2(m) and 2.2(n), which sections contain the
Company's and Shareholders' representations and warranties with
respect to intangible properties and assets) are free and clear of any
liens, charges, pledges, mortgages, conditional sales contracts,
security interests or other encumbrances (other than Permitted
Exceptions), except as reflected in the Company Financial Statements.
(l) Software. Schedule 2.2(l) contains a list or
description by type of all operating and applications computer
programs and data bases ("Software") which the Company or any
Subsidiary uses or has available for use and plans to use, and such
Software constitutes all the Software which is used to operate the
business of the Company and its Subsidiaries as currently conducted.
All such Software is owned outright by the Company or its Subsidiaries
except as indicated on Schedule 2.2(l). As to any Software which
Schedule 2.2(l) indicates is not owned by the Company or its
Subsidiaries, the owner of such Software is identified
Woodson Construction Merger Agreement/Page 16
<PAGE> 25
on Schedule 2.2(l) and the Company and its Subsidiaries have the right
to use the same pursuant to valid leases or licenses therefor. To the
knowledge of the Shareholders and the Company, none of the Software
used by or available to the Company or its Subsidiaries, and no use
thereof, infringes upon or violates any patent, copyright, trade
secret or other proprietary right of anyone else and no claim with
respect to any such infringement or violation is known to be
threatened.
(m) Patent, Trademark, etc. Claims. To the knowledge of
the Shareholders and the Company, the Company or its Subsidiaries is
the owner or licensee of all patents, patent licenses,
trademarks/servicemarks/trade names, trademark/servicemark/trade name
registrations, copyrights, and copyright registrations or any other
intellectual property ("Intellectual Property") used in the operation
of the Company's business as presently conducted and purported to be
owned or licensed by it; and a correct and complete list of such
Intellectual Property is set forth in Schedule 2.2(m) of the Company
Disclosure Schedule. Each item of Intellectual Property owned or used
by the Company or its Subsidiaries immediately prior to the Final
Closing will be owned or available for use by the Company or its
Subsidiaries on the same terms and conditions immediately after the
Final Closing. To the knowledge of the Shareholders and the Company,
each of the Company and its Subsidiaries owns or has the right to use
all such Intellectual Property. To the knowledge of the Shareholders
and the Company, each of the Company and its Subsidiaries has not
infringed, and is not now infringing, on any trade name, trademark,
service mark, or copyright belonging to any other person, firm or
corporation and has not received any notice of such infringement.
Neither the Company nor any Subsidiary is a party to any license,
sublicense, agreement or arrangement pursuant to which the Company or
its Subsidiaries uses Intellectual Property except as shown in
Schedule 2.2(m). With respect to each such license, sublicense,
agreement or arrangement set forth in Schedule 2.2(m), to the
knowledge of the Shareholders and the Company:
(1) the license, sublicense, agreement or
arrangement covering the item is legal, valid, binding,
enforceable, and in full force and effect;
(2) the license, sublicense, agreement or
arrangement will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms
immediately following the Final Closing;
(3) no party to such license, sublicense,
agreement or arrangement 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; and
(4) no party to the license, sublicense,
agreement or arrangement has repudiated any provision thereof.
Each of the Company and its Subsidiaries owns, or holds adequate
licenses or other rights to use, its trade names in the business as
now conducted by it, and such use does not, and will
Woodson Construction Merger Agreement/Page 17
<PAGE> 26
not, conflict with, infringe on, or otherwise violate any rights of
others. The Shareholders have delivered to Parent correct and
complete copies of all such licenses, sublicenses agreements and
arrangements (as amended to date) disclosed on Schedule 2.2(m).
(n) List of Properties, Contracts and Other Data. The
Company and its Subsidiaries own or lease all property and tangible
assets used in the conduct of their business as presently conducted.
To the knowledge of the Shareholders and the Company, and except as
reflected in such Schedule 2.2(n), all of the property of the Company
and its Subsidiaries is in existence and is in good condition and
repair, except for reasonable wear and tear, and in conformity in all
material respects with all building, zoning, OSHA, Coast Guard,
safety, or other applicable ordinances, regulations, or laws.
Schedule 2.2(n) contains a list setting forth with respect to the
Company and its Subsidiaries as of the date hereof the following:
(1) Schedule 2.2(n)(1) lists and describes briefly
all real property which the Company and each Subsidiary owns.
With respect to each such parcel of owned real property
(collectively, the "Owned Real Property"):
(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 Owned Real
Property subject thereto and except as set forth on
Schedule 2.2(n)(1);
(ii) there are no pending or, to the knowledge of
the Shareholders and the Company, threatened
condemnation proceedings, lawsuits, or administrative
actions or other matters relating to the Owned Real
Property which could reasonably be expected to
adversely affect the current ownership, maintenance,
use, occupancy, or value thereof;
(iii) to the knowledge of the Shareholders and the
Company, 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 is 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, except
as described on Schedule 2.2(n)(1), the land does not
serve any adjoining property for any purpose
inconsistent with the use of the land, and the Owned
Real 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;
Woodson Construction Merger Agreement/Page 18
<PAGE> 27
(iv) to the knowledge of the Shareholders and the
Company, 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 such approvals and
applicable laws, rules, and regulations;
(v) except as described on Schedule 2.2(n)(2) 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 Company
and its Subsidiaries) in possession of the parcel of
real property, other than tenants in possession of
property leased or subleased by the Company or any of
its Subsidiaries under any leases or subleases
disclosed on Schedule 2.2(n)(2) which tenants are in
possession of space to which they are entitled;
(viii) to the knowledge of the Shareholders and the
Company, except as described on Schedule 2.2(n)(1),
to the extent necessary or desirable for the use or
operation of facilities located on real property
owned by the Company or any Subsidiary, such
facilities are supplied with utilities and other
services, including gas, electricity, water,
telephone, sanitary sewer, and storm sewer, all of
which services are adequate in accordance with all
applicable laws, ordinances, rules, and regulations;
(ix) to the knowledge of the Shareholders and the
Company, except as described on Schedule 2.2(n)(1),
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;
(x) Except as described on Schedule 2.2(n)(1), the
Owned Real Property is not located within an area
that has been designated by the Federal Insurance
Administration, the Army Corps of Engineers or any
other governmental agency or body as being subject to
special flooding hazards; and
(xi) Except as described on Schedule 2.2(n)(1), the
improvements on the Property (A) have been
constructed in a good and workmanlike manner, free
from defects in workmanship and material and, to the
best of Shareholders' and Company's knowledge, do not
require any repair or replacement other than minor,
routine maintenance; and (B) have been constructed
and are
Woodson Construction Merger Agreement/Page 19
<PAGE> 28
being occupied, maintained, and operated in
compliance with all applicable laws, regulations,
insurance requirements, contracts, leases, permits,
licenses, ordinances, restrictions, building setback
lines, covenants, reservations, and easements, and
the Shareholders and Company have received no notice,
written or oral, claiming any violation of any of the
same or requesting or requiring the performance of
any repairs, alterations, or other work in order to
so comply.
(2) Schedule 2.2(n)(2) of the Company Disclosure
Schedule lists and describes briefly all real property leased
or subleased by or to the Company or any of its Subsidiaries
(whether as lessor or as lessee). Schedule 2.2(n)(2) also
identifies the properties leased or subleased to the Company
or any of its Subsidiaries for which title insurance policies
are to be procured as provided in Section 3.8 below. The
Shareholders have delivered to the Parent correct and complete
copies of the leases and subleases listed in Schedule
2.2(n)(2) (as amended to date) . With respect to each lease
and sublease listed in Schedule 2.2(n)(2);
(i) to the knowledge of the Shareholders and the
Company, the lease or sublease is legal, valid,
binding, enforceable, and in full force and effect;
(ii) to the knowledge of the Shareholders and the
Company, the lease or sublease will continue to be
legal, valid, binding, enforceable, and in full force
and effect on identical terms immediately following
the consummation of the transactions contemplated
hereby;
(iii) to the knowledge of the Shareholders and the
Company, 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) to the knowledge of the Shareholders and the
Company, no party to the lease or sublease has
repudiated any provision thereof;
(v) to the knowledge of the Shareholders and the
Company, except as described on Schedule 2.2(n)(2),
there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or
sublease;
(vi) to the knowledge of the Shareholders and the
Company, with respect to each sublease, the
representations and warranties set forth in
subsections (i) through (v) above are correct and
complete with respect to the underlying lease;
(vii) none of the Company and its Subsidiaries has
assigned, transferred, conveyed, mortgaged, deeded in
trust, or encumbered any interest in the leasehold or
subleasehold;
Woodson Construction Merger Agreement/Page 20
<PAGE> 29
(viii) to the knowledge of the Shareholders and the
Company, 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; and
(ix) to the knowledge of the Shareholders and the
Company, all facilities leased or subleased
thereunder are supplied with utilities and other
services necessary for the operation of said
facilities.
(3) Schedule 2.2(n)(3) of the Company Disclosure
Schedule lists and describes briefly all contracts and
commitments (including, without limitation, mortgages,
indentures and loan agreements) to which the Company or any
Subsidiary is a party, or to which it or any of its assets or
properties are subject and which are not specifically referred
to elsewhere in Section 2.2, provided that there need not be
listed in the Company Disclosure Schedule (unless required
pursuant to the preceding subsections of this Section 2.2(n))
any contract or commitment incurred in the ordinary course of
business which requires payments to or by the Company and its
Subsidiaries during its remaining life aggregating less than
$25,000 or which is terminable by the Company or any
Subsidiary within thirty days without payment of a premium or
penalty.
Correct and complete copies of all documents, and descriptions
complete in all material respects of all oral agreements or
commitments (if any), referred to in this Section 2.2(n) have been
provided to Parent or its counsel. To the knowledge of the
Shareholders and the Company, none of the Company, the Shareholders
and the Subsidiaries has been notified of any claim that any contract
listed in Schedule 2.2(n)(3) of the Company Disclosure Schedule is not
valid and enforceable in accordance with its terms for the periods
stated therein, or that there is under any such contract any existing
material default or event of default or event which with notice or
lapse of time or both would constitute such a default.
(o) Use of Real Property. None of the Shareholders, the
Company and the Subsidiaries has received notice of violation of any
applicable zoning or building regulation, ordinance or other law,
order, regulation or requirement relating to the operations of the
Company or its Subsidiaries, or any notice of default under any
material lease, contract, commitment, license or permit, relating to
the use and operation of the owned or leased real property listed in
the Company Disclosure Schedules. To the knowledge of the
Shareholders and the Company, none of the Shareholders, the Company
and the Subsidiaries has received notice that any plant, facility or
other building which is owned or covered by a lease set forth in the
Company Disclosure Schedule does not substantially conform in all
material respects with all applicable ordinances, codes, regulations
and requirements, and none of the Shareholders, the Company and the
Subsidiaries has received notice that any law or regulation presently
in effect or condition precludes or restricts continuation of the
present use of such properties.
Woodson Construction Merger Agreement/Page 21
<PAGE> 30
(p) Environmental Laws. To the knowledge of the
Shareholders and the Company, (i) the Company and its Subsidiaries,
including, without limitation, their businesses, facilities, property,
vessels, and equipment have been and are currently in compliance, in
all material respects, with all applicable federal, state, and local
laws, rules, and regulations of all authorities, including without
limitation, applicable Environmental Laws (as hereinafter defined),
and (ii) the Company and its Subsidiaries have all permits,
certificates, and licenses required to operate their businesses,
facilities, property, vessels, and equipment, including, without
limitation, any relating to the generation, processing, treatment,
discharge, storage, transport, disposal, or other management of
chemicals and other hazardous materials, of waste materials of any
kind, and those relating to the protection of environmentally
sensitive areas. To the knowledge of the Shareholders and the
Company, there is no material adverse effect on any of the facilities,
properties, vessels or equipment of the Companies, or with respect to
function, use, or value of any such assets, resulting from any
hazardous or toxic substance, or any pollutant or contaminant, or as a
result of exposure to petroleum or any by-product thereof.
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, and the Occupational Safety and Health Act of
1970, each as amended, together with all other 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) concerning pollution or
protection of the environment, public 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 in ambient air, 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.
(q) Litigation. Except as provided on Schedule 2.2(q),
there are no actions, suits, audits, investigations, unfair labor
practices charges, complaints, claims, grievances or proceedings or,
to the knowledge of the Shareholders and the Company, any audits or
investigations with respect to the Company or any Subsidiary pending
against the Company or any Subsidiary at law or in equity, or before
or by any federal, state, municipal, foreign or other governmental
department, commission, board, bureau, agency or instrumentality, nor
to the knowledge of the Shareholders and the Company, are there any
such actions, suits, audits, investigations, unfair labor practices
charges, complaints, claims, grievances or proceedings that are known
to be threatened against the Company or any Subsidiary.
(r) Labor and Employment Matters.
(1) Schedule 2.2(r) of the Company Disclosure
Schedule sets forth all collective bargaining agreements,
employment and consulting agreements (other than consulting
agreements terminable by the Company or any Subsidiary within
60 days without payment of a premium or a penalty), executive
compensation plans, bonus plans, deferred compensation
agreements, employee pension plans or retirement plans,
employee profit sharing plans, employee stock purchase and
stock option
Woodson Construction Merger Agreement/Page 22
<PAGE> 31
plans, group life insurance, hospitalization insurance or
other plans or arrangements providing for benefits to
employees of the Company or any Subsidiary.
(2) To the knowledge of the Shareholders and the
Company, there are no controversies between the Company (or
any Subsidiary) and any employees or any unresolved labor
union grievances or unfair labor practice or labor arbitration
proceedings pending or threatened, related to the Company (or
any Subsidiary) and there are not any organizational efforts
presently being made or threatened in an organized fashion
involving any of the employees of the Company or any
Subsidiary.
(3) None of the Shareholders, the Company and the
Subsidiaries has received notice of any claim that it has not
complied with any laws relating to the employment of labor,
including any provisions thereof relating to wages, hours,
collective bargaining, the payment of social security and
similar taxes, equal employment opportunity, employment
discrimination and employment safety, or that it is liable for
any arrears of wages or any taxes or penalties for failure to
comply with any of the foregoing.
(4) Schedule 2.2(r) of the Company Disclosure
Schedule sets forth the current annual compensation (or basis
thereof) of all employees of the Company and its Subsidiaries
(by position or by department) as of June 30, 1997.
(s) Accounts Receivable. To the knowledge of the
Shareholders and the Company (A) the accounts receivable reflected on
the balance sheet of the Company as of December 31, 1996, and all
accounts receivable arising between December 31, 1996 and the date
hereof, arose from bona fide transactions in the ordinary course of
business; (B) the services involved have been provided to the account
obligor and no further services are required to be provided in order
to entitle the Company or its assignees to collect the accounts
receivable in full; (C) no such account has been assigned or pledged
to any other person, firm or corporation; and (D) unless paid prior to
the Preliminary Closing Date, the accounts receivable are or will be
as of the Preliminary Closing Date current and collectible net of the
respective reserves, if any, shown on the Company Financial Statements
(which reserves are adequate and calculated consistent with past
practices). There is no contest, claim or right of set-off, other
than in the ordinary course of business, under any of the Company
Contracts with any obligor of an account receivable relating to the
amount or validity of such account receivable. Schedule 2.2(s) sets
forth a complete and accurate list of all accounts receivable as of
June 30, 1997, which list indicates the aging of such accounts
receivable.
(t) Insurance. Schedule 2.2(t) 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 the Company and
its Subsidiaries have been a party, a named insured, or otherwise the
beneficiary of coverage at any time within the past year (except as to
insurance policies owned by third party vendors, contractors and
clients of the Company which have contractually named the
Woodson Construction Merger Agreement/Page 23
<PAGE> 32
Company or its Subsidiaries as insured or provided other benefits of
coverage as a result of contractual liability coverage, which policies
need not be listed on Schedule 2.2(t) but shall be made available for
inspection by Parent's representatives):
(1) the name, address, and telephone number of
the agent;
(2) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(3) the policy number and the period of coverage;
(4) 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
(5) a description of any retroactive or "swing"
premium adjustments or other loss-sharing arrangements.
To the knowledge of the Shareholders and the Company, with respect to
each such insurance policy owned by the Company or any of its
Subsidiaries: (A) the policy is legal, valid, binding, enforceable,
and in full force and effect with respect to the periods and risks
which such policy purports to insure; (B) the policy will continue to
be legal, valid, binding, enforceable, and in full force and effect in
accordance with its terms on the same terms immediately following the
consummation of the transactions contemplated hereby; (C) neither the
Company nor any of its Subsidiaries 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 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 (D) no party to the policy has repudiated any
provision thereof. To the knowledge of the Shareholders and the
Company, the Company and each of its Subsidiaries has been covered
during the past five years by insurance in scope and amount customary
and reasonable for the businesses in which it has engaged during the
aforementioned period. Schedule 2.2(t) of the Company Disclosure
Schedule describes any self-insurance arrangements affecting the
Company and its Subsidiaries. "Self insurance arrangements" means any
arrangement by which the Company or its Subsidiaries has assumed risks
in scope and amount customarily insured by businesses in the Company's
industry and geographic region.
(u) Employee Benefits.
(1) To the knowledge of the Shareholders and the
Company, the Company and its Subsidiaries have complied and
currently are in compliance, both as to form and operation, in
all material respects with the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Internal Revenue Codes of 1954 and/or 1986,
as amended, respectively (for purposes of this Section 2.2(u)
only, the "Code"), with respect to each "employee benefit
plan" as
Woodson Construction Merger Agreement/Page 24
<PAGE> 33
defined under Section 3(3) of ERISA. Each employee benefit
plan of the Company and its Subsidiaries ("Plan") is described
in Schedule 2.2(u) of the Company Disclosure Schedule, and a
copy of each Plan is attached thereto.
(2) The Company and its Subsidiaries have never
maintained, adopted or established, contributed or been
required to contribute to, or otherwise participated or been
required to participate in, a "multiemployer plan" (as defined
in Section 3(37) of ERISA). No amount is due as owing from
the Company or any Subsidiary on account of a "multiemployer
plan" (as defined in Section 3(37) of ERISA) or on account of
any withdrawal therefrom.
(3) The Company and its Subsidiaries have not
incurred any liability with respect to a Plan including,
without limitation, under ERISA (including, without
limitation, Title I or Title IV of ERISA, other than liability
for premiums due to the Pension Benefit Guaranty Corporation
("PBGC")), the Code or other applicable law, which has not
been satisfied in full, and, to the knowledge of the
Shareholders and the Company, no event has occurred, and
there exists no known condition or set of circumstances, which
could result in the imposition of any liability with respect
to a Plan, including, without limitation, under ERISA
(including, without limitation, Title I or Title IV of ERISA),
the Code or other applicable law with respect to the Plan.
(4) The Company and its Subsidiaries have no
outstanding commitments to provide or to cause to be provided
any severance or other post-employment benefit, salary
continuation, termination, disability, death, retirement,
health or medical benefit or similar benefit to any person
(including, without limitation, any former or current
employee) that has not been reflected in the Company Financial
Statements or is not included in any Plan disclosed in
Schedule 2.2(u).
(v) Tax Matters.
(1) To the knowledge of the Shareholders and the
Company, all federal, state, local and foreign tax returns
required to be filed by the Company and its Subsidiaries prior
to the date hereof have been filed on a timely basis with the
appropriate governmental authorities in all jurisdictions in
which such tax returns are required to be filed, and all such
returns are correct and complete. Shareholders have delivered
to Parent correct and complete copies of all federal income
tax returns, examination reports, and statements of
deficiencies asserted against or agreed to by the Company or
any Subsidiary since January 1, 1992. To the knowledge of the
Shareholders and the Company, neither the Company nor its
Subsidiaries are currently the subject of any audit,
examination or any similar investigation by any governmental
authority. Schedule 2.2(v) of the Company Disclosure Schedule
sets forth all audits, examinations or similar investigations
of the Company and its Subsidiaries by any governmental
authority since January 1, 1992.
Woodson Construction Merger Agreement/Page 25
<PAGE> 34
(2) To the knowledge of the Shareholders and the
Company, all federal, state, local and foreign income,
franchise, sales, use, property, and all other taxes, fees,
assessments, or other governmental charges (including
withholding taxes), and all interest and penalties thereon
(all of the foregoing collectively, "Taxes") due from or
properly accruable by the Company and its Subsidiaries have
been fully and timely paid or, in the cases of Taxes for which
payment is not yet required, properly and fully accrued for on
the Company Financial Statements or in Schedule 2.2(v) with
respect to all taxable periods ending on or prior to the date
of this Agreement and interim periods through the date of this
Agreement.
(3) None of the Company and its Subsidiaries has
filed a consent under Section 341(f) of the Code concerning
collapsible corporations. None of the Shareholders, the
Company or any Subsidiary is a party to any agreement,
contract or arrangement that would, by reason of the
consummation of any of the transactions contemplated by this
Agreement, individually or in the aggregate, result in the
payment of any "excess parachute payment" within the meaning
of Section 280G of the Code. None of the assets of the
Company or any Subsidiary is required to be treated as being
owned by any other person pursuant to the "safe harbor"
leasing provisions of Section 168 of the Internal Revenue Code
of 1954, as in effect prior to the repeal of said leasing
provisions.
(4) None of the Company and its Subsidiaries is a
party to any Tax allocation or sharing agreement. None of the
Company and its Subsidiaries (A) has been a member of an
affiliated group filing a consolidated federal income tax
return (other than a group the common parent of which was the
Company or a Related Company) or (B) has any liability for the
taxes of any person (other than any of the Company or a
Related Company and their respective Subsidiaries) under
Treas. Reg. Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor,
by contract, or otherwise.
(5) Schedule 2.2(v) sets forth the following
information with respect to each of the Company and its
Subsidiaries (or, in the case of clause (B) below, with
respect to each of the Subsidiaries) as of the most recent
practicable date: (A) the basis of the Company or Subsidiary
in its assets; (B) the basis of the stockholder(s) of the
Subsidiary in its stock (or the amount of any excess loss
account); (C) the amount of any net operating loss, net
capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to
the Company or Subsidiary; and (D) the amount of any deferred
gain or loss allocable to the Company or Subsidiary arising
out of any Deferred Intercompany Transaction (as defined in
Treas. Reg. Section 1.1502-13).
(w) Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by the
Shareholders and the Company directly with the Parent, without the
intervention of any other person on behalf of the Shareholders or the
Company in such manner as to give rise to any valid claim by any other
person against
Woodson Construction Merger Agreement/Page 26
<PAGE> 35
the Shareholders or the Company for a finder's fee, brokerage
commissions, or similar payment.
(x) Powers of Attorney. There are no outstanding powers
of attorney executed on behalf of the Company.
(y) Investment Company. Each of the Company or its
Subsidiaries is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "holding company", a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding
company" or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(z) Tax-Free Reorganization. With respect to the
qualification of the Merger as a reorganization pursuant to Section
368(a)(2)(D) of the Code:
(1) There is no plan or intention on the part of
Shareholders to sell, exchange or otherwise dispose of a
number of shares of Parent Common Stock received in the Merger
which would reduce the Shareholders' aggregate ownership of
such Parent Common Stock to a number of shares having a value,
as of the Effective Time, of less than fifty percent of the
value of all of the formerly outstanding capital stock of the
Company as of the same date.
(2) Immediately following the Merger, the
Surviving Corporation will hold at least 90 percent of the
fair market value of the Company's net assets and at least 70%
of the fair market value of the Company's gross assets.
(3) The liabilities of the Company assumed by the
Surviving Corporation and the liabilities to which the assets
of the Company are subject were incurred in the Company's
ordinary course of business.
(4) If the Merger is effected, the Company and
the Shareholders will each pay their respective expenses, if
any, incurred in connection with the Merger, and neither the
Company nor the Shareholders will pay any Parent or Merger Sub
expenses incurred in connection with the Merger.
(5) At the Effective Time, the Company will not
have any outstanding warrants, options, convertible
securities, or any other right pursuant to which any person
could acquire stock in the Company that, if exercised or
converted, would affect the Parent's retention of control of
the Surviving Corporation.
(6) The Company is not an investment company
within the meaning of Section 368(a)(2)(F) of the Code.
Woodson Construction Merger Agreement/Page 27
<PAGE> 36
(7) At the Effective Time, the fair market value
of the assets of the Company will exceed the sum of its
liabilities, plus the amount of liabilities, if any, to which
its assets are subject.
(8) The Company is not under the jurisdiction of
a court in a case under Title 11 of the United States Code, or
a receivership, foreclosure, or similar proceeding in a
federal or state court.
2.3 REPRESENTATIONS AND WARRANTIES BY THE PARENT. The Parent
represents and warrants to the Shareholders and the Company that the statements
contained in this Section 2.3 are correct as of the date of this Agreement and
will be correct as of the Preliminary Closing Date and the Final Closing Date
(as though made then), except as set forth in the disclosure schedule delivered
by the Parent to the Shareholders and the Company on the date hereof , as
supplemented or amended in accordance with Section 3.4 of this Agreement (such
schedule, as so supplemented or amended, the "Parent Disclosure Schedule").
The Parent Disclosure Schedule will be arranged in sections and paragraphs
corresponding to the lettered and numbered sections and paragraphs contained in
this Section 2.3. References in Section 2.3 to a numbered schedule mean the
section of the Parent Disclosure Schedule that corresponds with that number;
for example, references to "Schedule 2.3(a)" mean Section 2.3(a) of the Parent
Disclosure Schedule. The Parent Disclosure Schedule constitutes an exception
to each warranty or representation set forth herein, whether or not such
warranty or representation specifically refers to the Parent Disclosure
Schedule; accordingly each warranty or representation set forth herein is
deemed to be preceded by the clause: "Except as set forth in the Parent
Disclosure Schedule . . .".
(a) Organization and Qualification, etc. The Parent is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, has corporate power and
authority to own all of its properties and assets and to carry on its
business as it is now being conducted, and is duly qualified to do
business and is in good standing in Louisiana and each other
jurisdiction where, to the reasonable belief of Parent, such
qualification is necessary or appropriate. Each such jurisdiction is
identified in Schedule 2.3(a). The copies of the Parent's Certificate
of Incorporation and Bylaws, as amended to date, which have been
delivered to the Shareholders are complete and correct, and such
instruments, as so amended, are in full force and effect.
(b) Capital Stock. The entire authorized capital of
Parent consists of 25,000,000 shares of capital stock which is divided
into (1) 3,000,000 shares of restricted common stock having a par
value of $.001 per share, (ii) 20,000,000 shares of common stock
having a par value of $.001 per share (i.e., Parent Common Stock), and
(3) 2,000,000 shares of preferred stock having a par value of $.001
per share.
(c) Subsidiaries, etc. Other than the Merger Sub, and
except (i) as set forth in Schedule 2.3(c) and (ii) for Parent's
interest in the transactions described in this Agreement and the Other
Acquisition Agreements (collectively, the "Consolidation Agreements"),
the Parent does not own of record or beneficially, directly or
indirectly, (1) any shares of outstanding capital stock or securities
convertible into capital stock of any other corporation
Woodson Construction Merger Agreement/Page 28
<PAGE> 37
or (2) any participating interest in any partnership, joint venture or
other non-corporate business enterprise. Merger Sub and any corporate
or non-corporate business entity listed in Schedule 2.3(c) are in
Sections 2.3 and 2.4 collectively called the "Subsidiaries." None of
the Subsidiaries has any material assets or liabilities.
(d) Authority Relative to Agreement. Parent has the
corporate power and authority to execute, deliver and perform this
Agreement, the other Consolidation Agreements and any amendments
thereto and all agreements and instruments to be executed and
delivered by Parent or any of its Subsidiaries in accordance with this
Agreement or any other Consolidation Agreement or any amendments
hereto or thereto and to consummate the transactions contemplated on
the part of Parent hereby and thereby. The execution and delivery by
Parent of this Agreement, the other Consolidation Agreements and any
amendments thereto and all agreements and instruments to be executed
and delivered by Parent or any of its Subsidiaries in accordance with
this Agreement or any other Consolidation Agreement or any amendments
hereto or thereto and the consummation by Parent of the transactions
contemplated on its part hereby and thereby have been duly authorized
by its Board of Directors. No other corporate proceedings on the part
of Parent are necessary to authorize the execution and delivery of
this Agreement, the other Consolidation Agreements and any amendments
thereto and all agreements and instruments to be executed and
delivered by Parent or any of its Subsidiaries in accordance with this
Agreement or any other Consolidation Agreement or any amendments
hereto or thereto by Parent. Except for corporate action related to
the IPO and described in Schedule 2.3(d), no other corporate
proceedings on the part of Parent are necessary to authorize the
performance of this Agreement, the other Consolidation Agreements and
any amendments thereto and all agreements and instruments to be
executed and delivered by Parent or any of its Subsidiaries in
accordance with this Agreement or any other Consolidation Agreement or
any amendments hereto or thereto by Parent or the consummation by
Parent of the transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by Parent and is, and
upon their due execution and delivery by the parties thereto the other
Consolidation Agreements and any amendments thereto and all agreements
and instruments to be executed and delivered by Parent or any of its
Subsidiaries in accordance with this Agreement or any other
Consolidation Agreement and any amendments hereto or thereto will be,
enforceable against Parent in accordance with their respective terms,
except as such enforcement is subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws relating to or
affecting creditors' rights. The Consolidation Agreements (other than
this Agreement and the Related Agreements) and any amendments thereto
are enforceable against the other parties thereto in accordance with
their respective terms, in each case except as such enforcement is
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar law relating to or affecting creditors'
rights.
(e) Non-Contravention. The execution, delivery and
performance of this Agreement, the other Consolidation Agreements and
any amendments thereto and all agreements and instruments to be
executed and delivered by Parent or any of its Subsidiaries in
accordance with this Agreement or any other Consolidation Agreement or
any amendments hereto or thereto by Parent do not and the consummation
by Parent of the
Woodson Construction Merger Agreement/Page 29
<PAGE> 38
transactions contemplated hereby and thereby will not (1) violate any
constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling change, or other restriction of any government,
government agency, or court to which Parent is subject, or (2) violate
any provision of the Articles of Incorporation or Bylaws of Parent, or
(3) violate or result in, with the giving of notice or the lapse of
time or both, the violation of any provision of, or result in the
acceleration of or entitle any party to accelerate (whether after the
giving of notice or lapse of time or both) any obligation under, or
result in the creation or imposition of any lien, charge, pledge,
security interest or other encumbrance upon any of the property of
Parent pursuant to, any provision of any mortgage, lien, lease,
agreement, contract, license, or instrument to which Parent is a party
or by which any of its assets are bound. The execution, delivery and
performance of this Agreement, the other Consolidation Agreements and
any amendments thereto and all agreements and instruments to be
executed and delivered by Parent or any of its Subsidiaries in
accordance with this Agreement or any other Consolidation Agreement or
any amendments hereto or thereto by Parent do not and will not violate
or conflict with any other restriction of any kind or character to
which Parent is subject or by which any of its assets may be bound,
and the same does not and will not constitute an event permitting
termination of any such mortgage, lien, lease, agreement, license or
instrument to which Parent is a party or by which any of its assets is
bound.
(f) Approvals. Except for the declaration of
effectiveness of the registration statement (the "Registration
Statement") filed in connection with Parent's IPO by the U.S.
Securities and Exchange Commission ("SEC") pursuant to the Securities
Act, and the consents and approvals required pursuant to state
securities laws with respect to the IPO, and except as set forth in
Schedule 2.3(f), no consent, authorization, order or approval of, or
filing or registration with, any governmental commission, board or
other regulatory body or any other person is required for the
execution and delivery of this Agreement and the other Consolidation
Agreements and any amendments thereto and the consummation by Parent
of the transactions contemplated hereby and thereby.
(g) Litigation. There are no actions, suits, audits,
investigations, unfair labor practices charges, complaints, claims,
grievances or proceedings with respect to the Parent or any of its
subsidiaries pending against the Parent or any of its Subsidiaries at
law or in equity, or before or by any federal, state, municipal,
foreign or other governmental department, commission, board, bureau,
agency or instrumentality, nor are there any such actions, suits,
audits, investigations, unfair labor practice charges, complaints,
grievances or proceedings that are known to be threatened against the
Parent or any of its Subsidiaries.
(h) Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by
Parent directly with Shareholders and the Company, without the
intervention of any person on behalf of Parent in such manner as to
give rise to any valid claim by any person (other than McFarland,
Grossman & Company, Inc.) against Parent for a finder's fee, brokerage
commission, or similar payment.
(i) Tax-Free Reorganization. With respect to the
qualification of the Merger as a reorganization pursuant to Section
368(a)(2)(D) of the Code:
Woodson Construction Merger Agreement/Page 30
<PAGE> 39
(1) The Parent has no plan or intention to sell,
exchange or otherwise dispose or liquidate the Surviving
Corporation, to merge the Surviving Corporation with or into
any other corporation, to sell or otherwise dispose of any
capital stock of the Surviving Corporation except for
transfers of such capital stock to corporations of which the
Parent has control (within the meaning of Section 368(a) of
the Code) at the time of such transfer, or to cause the
Surviving Corporation to sell or otherwise dispose of any of
its assets or of any assets acquired in the Merger, except for
dispositions made in the ordinary course of business or
transfers of assets to a corporation of which the Surviving
Corporation has control (within the meaning of Section 368(a)
of the Code) at the time of such transfer.
(2) The Parent has no plan or intention to cause
the Surviving Corporation, after the Merger, to issue
additional shares of its stock that would result in the Parent
losing control of the Surviving Corporation within the meaning
of Section 368(c) of the Code.
(3) Following the Merger, the Surviving Corporation
will continue the Company's historic business or use a
significant portion of its historic business assets in a
business.
(4) If the Merger is effected, the Parent and the
Merger Sub will each pay their respective expenses, if any,
incurred in connection with the Merger.
(5) The Parent Common Stock that will be exchanged
in the Merger is voting stock within the meaning of Section
368(c) of the Code.
(6) At the time of the Merger, neither the Parent
nor Merger Sub will have any outstanding warrants, options,
convertible securities, or any other right pursuant to which
any person could acquire stock in the Parent or Merger Sub
which, if exercised or converted, would affect Parent's
acquisition or retention of control of the Surviving
Corporation.
(7) The Parent and the Merger Sub are not investment
companies as defined in Section 368(a)(2)(F) of the Code.
(8) None of the Parent Common Stock received by
Shareholders as a part of the Merger Consideration will be
separate consideration for, or allocable to, any employment
agreement.
(9) Neither the Parent nor the Merger Sub is under
the jurisdiction of a court in a case under Title 11 of the
United States Code, or a receivership, foreclosure, or similar
proceeding in a federal or state court.
(j) Registration Statement; PPM. Each of (i) the PPM,
(ii) the Registration Statement, (iii) the prospectus forming part of
the Registration Statement (the "Prospectus"),
Woodson Construction Merger Agreement/Page 31
<PAGE> 40
and (iv) any amendment or supplement to any of the foregoing complies
as to form with all requirements of the Securities Act and regulations
thereunder (assuming, in the case of the PPM, that there is at least
one non- accredited investor (as such term is defined in Regulation D
under the Securities Act) to whom the PPM must be delivered), and none
of the foregoing misstates any material fact or omits to state a
material fact required to make the statements made therein, in light
of the circumstances under which they are made, not misleading, except
for any such misstatement or omission that is caused by any
misstatement or omission of material fact contained in (A) any
material submitted by the Shareholders to Parent in writing with the
Information Letter contemplated by Section 3.9(b) specifically for
inclusion in the Registration Statement or Prospectus or PPM or any
amendment or supplement thereto or (B) the Shareholder Disclosure
Schedule or Company Disclosure Schedule.
(k) No Undisclosed Agreements. There do not exist any
agreements, understandings or commitments by Parent or any of the
Subsidiaries or any of the Other Companies, which provide any material
benefit or other thing of value to any officer, director or
shareholder of any Other Company, or that vary the express terms of
the Consolidation Agreements, or that provide material benefits or any
other thing of value to any officer, director or promoter of Parent
("Parent Insiders") except as set forth in any of the Other
Acquisition Agreements or any employment or consultant agreement that
is appended thereto as an exhibit, or, in the case of the Parent
Insiders, except as described in the PPM.
(l) Financial Statements. The financial statements of
Parent and its Subsidiaries set forth in the PPM and those set forth
in the Prospectus, including (without limitation) the combined
proforma financial statements of Parent, the Company and the Other
Companies, have been prepared in conformity with GAAP consistently
applied and present fairly the financial position and results of
operations of the entities covered thereby as of the end of and for
the respective periods presented. There has been no material adverse
change in the business, financial condition, or results of operations
of Parent, the Company, and the Other Companies on a combined basis
since March 31, 1997.
(m) Remedies. Parent has an adequate remedy in damages,
and will diligently pursue same, for any loss or damage sustained by
it by reason of any breach of a warranty, representation or covenant
by any of the Other Companies or their shareholders under the Other
Acquisition Agreements, except: (i) to the extent of any deductible or
threshold amount that limits Parent's entitlement to indemnification
from shareholders of the Other Companies under the Other Acquisition
Agreements (none of which amounts is more, as a percentage of the
total consideration payable to the shareholders under any such Other
Acquisition Agreement, than the comparable percentage under this
Agreement); (ii) to the extent of any limitation on the maximum
aggregate liability of such shareholders, none of such maximums is
less than the comparable maximum under this Agreement), and (iii) to
the extent that claims for such remedies are limited by a period of
time (none of which limitations are shorter than the comparable
limitations under this Agreement).
(n) Parent Stock. The Parent Common Stock to be issued
to the Shareholders pursuant to this Agreement will, when so issued,
be validly and legally issued, fully paid and
Woodson Construction Merger Agreement/Page 32
<PAGE> 41
nonassessable, and will be identical to the Parent Common Stock issued
under the Other Acquisition Agreements. The issuance, sale and
delivery of Parent Common Stock to the Shareholders pursuant to this
Agreement will be exempt from registration under the Securities Act by
reason of the exemption from registration set forth in Section 4(2) of
the Securities Act.
(o) Taxes.
(1) All federal, state, local and foreign tax
returns required to be filed by Parent and its Subsidiaries
prior to the date hereof have been filed on a timely basis
with the appropriate governmental authorities in all
jurisdictions in which such tax returns are required to be
filed and all such returns are correct and complete. Neither
the Parent nor any of its Subsidiaries has ever been the
subject of any audit, examination or any similar investigation
by any governmental authority.
(2) All Taxes due from or properly accruable by
Parent or any of its Subsidiaries have been fully and timely
paid or, in the case of Taxes for which payment is not yet
required, properly and fully accrued for with respect to all
taxable periods ending on or prior to the date of this
Agreement and interim periods through the date of this
Agreement.
(p) Other Acquisition Agreements. Parent does not know,
after reasonable inquiry, of the incorrectness of any representation
or warranty of any Other Company or its shareholders under any Other
Acquisition Agreement; and Parent will give the Shareholders prompt
notice of any such incorrectness upon learning of same.
(q) Investment Intent.
(1) Parent is acquiring the Company Common Stock
solely for the purpose of investment, for its own account, and
not with a view to or for sale in connection with any
distribution thereof within the meaning of Section 2(11) of
the Securities Act. Parent acknowledges that the Company
Common Stock is being sold to Parent by each of the
Shareholders in reliance upon one or more exemptions from
registration contained in the Securities Act and applicable
state securities laws. The reliance by Shareholders upon such
exemptions is based in part upon the representations set forth
in this Section 2.3(q).
(2) Parent understands that the Company Common
Stock has not been registered under the Securities Act, that
there is no established market for the Company Common Stock,
and that the Company Common Stock must be held indefinitely
and cannot be transferred unless it is subsequently registered
under the Securities Act or an exemption from such
registration is available with respect to such transfer.
Woodson Construction Merger Agreement/Page 33
<PAGE> 42
(3) Parent has such knowledge and experience in
financial and business matters that it is capable of
evaluating the merits and risks of an investment in the
Company Common Stock and of making an informed investment
decision.
(4) Parent is able to bear the economic risk of
its investment in the Company Common Stock, to hold the
Company Common Stock for an indefinite period of time and to
afford a complete loss of its investment in the Company Common
Stock .
(5) Parent and its representatives have been
given access to all documents, books and additional
information concerning the Company which they have requested.
(6) Parent has been represented by legal counsel
in this transaction and Parent and its representatives,
including such counsel, have been given the opportunity to ask
questions of, and receive answers from, the officers of the
Company and the Shareholders concerning the terms of the
transactions contemplated by this Agreement and the affairs
and the business and financial condition of the Company.
(7) Parent has conducted such investigations in
making a decision to enter into this Agreement and the
transactions contemplated herein as Parent has deemed
necessary and advisable.
(8) None of the representations made by Parent in
this Section 2.3(q) shall affect any of Parent's rights under
any other section of this Agreement.
2.4 REPRESENTATIONS AND WARRANTIES CONCERNING THE MERGER SUB. The
Parent and Merger Sub, jointly and severally, hereby represent and warrant to
the Shareholders and the Company as follows as of the date of this Agreement,
the Preliminary Closing Date and the Final Closing Date:
(a) Organization and Standing. Each of Merger Sub and
Parent's other Subsidiaries is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Louisiana. The copies of Merger Sub's Articles of Incorporation and
Bylaws, as amended to date, which have been delivered to the
Shareholders are complete and correct, and such instruments, as so
amended, are in full force and effect.
(b) Capital Structure. The authorized capital stock of
each of Merger Sub and Parent's other Subsidiaries consists of 5,000
shares of common stock, par value $.01 per share, 1,000 of which are
validly issued and outstanding, fully paid and nonassessable and are
owned by the Parent free and clear of all liens, encumbrances and
adverse claims.
(c) Authority. Each of Merger Sub and Parent's other
Subsidiaries has the corporate power and authority to execute, deliver
and perform this Agreement and the Other
Woodson Construction Merger Agreement/Page 34
<PAGE> 43
Acquisition Agreements to which such Subsidiary is or will be a party
and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Other Acquisition
Agreements to which such Subsidiary is or will be a party, the
performance by such Subsidiary of its obligations hereunder and the
consummation of the transactions contemplated hereby have been duly
authorized by its Board of Directors and the Parent as its sole
shareholder, and, except for the corporate filings described in
Schedule 2.4(c), no other corporate proceedings on the part of any
Subsidiary are necessary to authorize this Agreement and the Other
Acquisition Agreements, and the transaction contemplated hereby and
thereby. This Agreement has been duly and validly executed and
delivered by Merger Sub and (assuming the due authorization, execution
and delivery hereof by the Company) is a valid and binding obligation
of Merger Sub, enforceable against Merger Sub in accordance with its
terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
the enforcement of creditors' rights generally and by general
principles of equity (whether applied in a proceeding at law or in
equity).
ARTICLE 3
ADDITIONAL COVENANTS AND AGREEMENTS
3.1 CONDUCT OF BUSINESS. During the period from the date hereof
to the Final Closing Date, except as otherwise contemplated by this Agreement
and except as described on Exhibit 3.1 hereto, the Shareholders shall cause the
Company to, and the Company shall, conduct its operations according to its
ordinary and usual course of business, and shall use its best efforts to
preserve substantially intact its business organization, keep available the
services of its officers and employees, and maintain its present relationships
with licensors, suppliers, distributors, customers and others having
significant business relationships with it. Representatives of the Company
will on request confer during such period with representatives of Parent to
keep it informed with respect to the general status of the on-going operations
of the business of the Company. Without limiting the generality of the
foregoing and except as otherwise affected by matters contemplated by this
Agreement or in connection with the transactions contemplated by this
Agreement, the Shareholders will cause the Company during such period to:
(a) carry on the business in substantially the same manner as
heretofore carried on and not introduce any material new method of
management, operation or accounting, nor provide discounted services
outside the ordinary course of business;
(b) maintain its properties, facilities, equipment and other
assets, including those held under leases, in good working order,
condition and repair, ordinary wear and tear excepted;
(c) perform all of its obligations under all debt and lease
instruments and other agreements relating to or affecting its
business, assets, properties, equipment and rights, and pay all
vendors, suppliers, and other third parties (including mechanics and
materialmen) as and when their bills are due, except to the extent
that such payments may be subject to
Woodson Construction Merger Agreement/Page 35
<PAGE> 44
undisputed claims of offset or reimbursement in favor of the Company,
and pay in full all payroll obligations when due;
(d) maintain its present debt and lease instruments (unless
same are otherwise mature) and refrain from entering into new or
amended debt or lease instruments, except for debt incurred or leases
entered into in the ordinary course of business which involve a total
liability of the Company not in excess of $20,000 per instance or
$50,000 in the aggregate, without prior written notice to Parent;
(e) not incur any indebtedness other than ordinary trade
accounts payable at market rates with no prepayment penalty which are
used to fund operations in the ordinary course of business;
(f) keep in full force and effect its present insurance
policies or other comparable insurance coverage;
(g) use its best efforts to maintain and preserve its
business organization intact, retain its present employees and
maintain its relationship with suppliers, customers and others having
business relations with the Company;
(h) refrain from effecting any change in the articles of
incorporation, bylaws or capital structure of the Company and refrain
from entering into or agreeing to enter into any merger or
consolidation by the Company with or into, and refrain from acquiring
all or substantially all of the assets, capital stock or business of
any person, corporation, partnership, association or other business
organization or division of any thereof;
(i) refrain from incurring any expenditures outside the
normal course of business, including any capital expenditures (or
series of related expenditures) in excess of $50,000, without prior
written notification to Parent;
(j) refrain from starting or acquiring any new businesses
without the prior written notification to Parent;
(k) maintain its present salaries and commission levels for
all officers, directors, employees or agents, except for raises that
may be awarded to employees at or below the level of supervisor in
keeping with past practices of the Company in the ordinary course of
its business, refrain from entering into employment agreements except
in the ordinary course of business, and refrain from entering into any
collective bargaining agreement; and
(l) refrain from declaring or paying any fees, commissions or
loans outside the ordinary course of business, and refrain from
declaring or paying any bonuses except discretionary bonuses to
officers and employees to the extent that the aggregate amount of all
such discretionary bonuses paid or declared during 1997 do not exceed,
in the aggregate, 10% of the Company's pre-tax net income during 1997
through the date of the latest such payment (exclusive of production,
incentive or safety bonuses previously committed in
Woodson Construction Merger Agreement/Page 36
<PAGE> 45
connection with contracts currently being performed which are
described on Exhibit 3.1(l) attached hereto); and
(m) refrain from declaring or paying any dividends or
distributions to Shareholders, except for those assets listed on
Exhibit 3.1(m) attached hereto and except as contemplated by Section
2.2(h)(13)
(n) promptly notify Parent of any claim or litigation
threatened or instituted, or any other material adverse event or
occurrence involving or affecting the Company or any of its assets,
properties, operations, businesses or employees;
(o) comply with and cause to be complied with all
applicable laws, rules, regulations and orders of all federal, state
and local governments or governmental agencies affecting or relating
to the Company or its assets, properties, operations, businesses or
employees except where the failure to comply will not have a material
adverse effect on the Company;
(p) other than in the ordinary course of business,
refrain from any sale, disposition, distribution or encumbrance of any
of its properties or assets and refrain from entering into any
agreement or commitment with respect to any such sale, disposition,
distribution or encumbrance (other than the sale or use of inventories
in the ordinary course of business);
(q) refrain from any purchase or redemption of any
capital stock or other voting interest of the Company and refrain from
issuing any capital stock or other voting interest;
(r) refrain from making any change in any accounting
principle, classification, policy or practice, except as required by
GAAP; and
(s) manage working capital in the ordinary course
consistent with past practice.
3.2 ACCESS TO INFORMATION BY PARENT. Until the Final Closing Date
or termination of this Agreement, Shareholders will furnish Parent with the
Unaudited Monthly Financial Statements for each month following May 1997
promptly as available. Parent may prior to the Final Closing have access to
the business and properties of the Company and information concerning its
financial and legal condition as Parent deems necessary or advisable in
connection with the consummation of the transactions contemplated hereby,
provided that such access shall not interfere with normal operations of the
Company. The Shareholders and the Company agree to permit Parent and its
authorized representatives, or cause them to be permitted, to have, after the
date hereof and until the Final Closing Date, full access to the premises,
books and records of the Company during normal business hours, and the officers
of the Company will furnish Parent with such financial and operating data and
other information with respect to the business and properties of the Company as
Parent shall from time to time reasonably request. No investigation by Parent
heretofore or hereafter made shall affect the representations and warranties of
the Shareholders and the Company, and each such representation and warranty
shall survive any such investigation.
Woodson Construction Merger Agreement/Page 37
<PAGE> 46
3.3 ACCESS TO INFORMATION BY THE SHAREHOLDERS. Until the Final
Closing Date or the termination of this Agreement, the Shareholders shall have
access to the books, records, operating data, and any other information
concerning the financial and legal condition of the Parent and the Other
Companies as the Shareholders deem necessary or advisable in connection with
the transactions contemplated hereby; provided that the Shareholders shall not
have access to any information, the disclosure of which by Parent would
constitute a violation of any of the confidentiality agreements between the
Parent and any of the Other Companies (the "Confidentiality Agreements") unless
the Shareholders have entered into confidentiality agreements with Parent or
those of the Other Companies to whose information the Shareholders seek access.
In no event shall the Shareholders be denied access to financial information
(including pro forma information) regarding Parent. All requests by the
Shareholders for information pursuant to this Section 3.3 shall be directed to
the Parent and the Parent shall furnish such information as is reasonably
obtainable from the Other Companies in accordance with the terms of the
Confidentiality Agreements. No investigation by the Shareholders heretofore or
hereafter made shall affect the representations and warranties of Parent, and
each such representation and warranty shall survive any such investigation.
3.4 AMENDMENT TO SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the right and continuing obligation until the
Final Closing to supplement or amend promptly the Disclosure Schedules with
respect to any matter that would have been or would be required to be set forth
or described in the Disclosure Schedules in order to not materially breach any
representation, warranty or covenant of such party contained herein. Each
amendment or supplement to any Disclosure Schedule shall be clearly marked so
as to indicate the amending or supplemental information contained therein,
which shall be presented in appropriate detail, and shall be delivered prior to
the Final Closing and in the manner provided in Section 9.3. For all purposes
of this Agreement, including without limitation for purposes of determining
whether the conditions set forth in Section 4.1 and Section 4.2 have been
fulfilled, whether any party has breached any of its representations and
warranties herein, and for the purposes of Article 6, the Disclosure Schedules
hereto shall be deemed to be the Disclosure Schedules as amended or
supplemented pursuant to this Section. In the event that the Company or
Shareholders amend or supplement a Disclosure Schedule pursuant to this Section
3.4 and such amendment or supplement constitutes or reflects, individually or
in the aggregate, a material adverse change to the business, assets or
prospects of the Company or the Shareholders (all as determined in good faith
by Parent) then Parent may, by notice to the Company and the Shareholders given
within three business days after the amendment or supplement is delivered to
it, terminate this Agreement. In the event that Parent or Merger Sub amends or
supplements a Disclosure Schedule pursuant to this Section 3.4 and the
amendment or supplement constitutes or reflects, individually or in the
aggregate, a material adverse change to the business, assets or prospects of
Parent, Merger Sub or any Other Company or materially changes the content of
the PPM, the Registration Statement or the Prospectus or requires such a
material change (all as determined in good faith by the Required Shareholders
(defined below)) then Shareholders holding a majority of the Company Common
Stock ("Required Shareholders") may, by notice to Parent given within three
business days after the amendment or supplement is delivered to the
Shareholders, terminate this Agreement. Any termination pursuant to this
Section 3.4 shall have the same effect as a termination by mutual written
consent pursuant to Section 5.1(a)(1) of this Agreement. If this Agreement is
not terminated within the allotted time, or if the Final Closing should occur
before the
Woodson Construction Merger Agreement/Page 38
<PAGE> 47
allotted time has run, then the supplemented or amended Disclosure Schedule, as
so amended or supplemented, shall be deemed to be and to have at all times been
the Disclosure Schedule under this Agreement for all purposes hereof.
3.5 CONFIDENTIALITY. The provisions of this Section 3.5 shall
supersede and replace all prior agreements and understandings of the parties
with respect to the subject matter hereof.
(a) Confidential Information. Until the Final Closing of
the transactions contemplated herein, all Confidential Information, as
hereinafter defined, acquired by Parent or Merger Sub with respect to
the Shareholders or the Company, or by the Shareholders or the Company
with respect to Parent, shall be (i) maintained in strict confidence,
(ii) used only for the purpose of and in connection with evaluating
the transactions contemplated herein, and (iii) disclosed only (A) to
employees and duly authorized agents and representatives who have been
informed of the obligations of the parties under this Agreement with
respect to such Confidential Information, who have a need to know the
information in connection with consummating the transactions
contemplated herein, and who agree to keep such information
confidential, or (B) as required by legal process (of which the other
parties shall be given prompt notice). Parent, Merger Sub, the
Shareholders and the Company shall be responsible for any breach of
this Section by any of their respective representatives and each
agrees to take all reasonable measures to restrain its representatives
from prohibited or unauthorized disclosure of the Confidential
Information. For the purpose of this Agreement, the term
"Confidential Information" shall mean all information acquired by any
party from another party hereto or its representatives pursuant to
Section 3.2 hereof or otherwise with respect to the business or
operations of such other party, other than (A) information generally
available to the public which has not become available as a result of
disclosure in violation of this Section and (B) information which
becomes available on a nonconfidential basis from a source other than
a party to this Agreement or its representatives, provided that such
source is not known by the party to this Agreement receiving such
information to be bound by a confidentiality agreement or other
obligation of secrecy to another party to this Agreement or its
representatives. If the transactions contemplated herein are not
consummated, all Confidential Information in written or printed or
other tangible form (whether copies or originals) shall be returned to
the party of origin, and all documents, memoranda, notes and other
writings whatsoever prepared by any party or its representatives based
on Confidential Information shall be destroyed; and Parent, Merger Sub
and their representatives will thereafter hold all Confidential
Information concerning the Company or the Shareholders in strict
confidence.
(b) Public Announcements. No press release, public
announcement, confirmation or other information regarding this
Agreement or the contents hereof shall be made by Parent, the
Shareholders or the Company without prior consultation with the Parent
and the Company, except as may be necessary in the opinion of counsel
to any party to meet the requirements of any applicable law or
regulations, the determination of any court, or the requirements of
any stock exchange on which the securities of such party may be
listed. Notwithstanding the foregoing, the Company may make
appropriate disclosures of the general nature of the transaction
contemplated hereby to its employees, vendors and
Woodson Construction Merger Agreement/Page 39
<PAGE> 48
customers to protect the Company's goodwill and to facilitate the
consummation of the transactions contemplated hereby, and Parent may
disclose pertinent information regarding the transaction contemplated
hereby to its existing and prospective investors, lenders or
investment bankers or financial advisors for the purposes of obtaining
financing (including the contemplated IPO). Parent may also make
appropriate disclosures of the general nature of the transaction
contemplated hereby and the identity, nature and scope of the
Company's operations to prospective acquisition candidates, including
the Other Companies, in its efforts to attract additional acquisitions
for Parent. Subject to prior review, revision and approval by the
Company of disclosure with respect to matters relating to the Company,
Parent may also make appropriate disclosure as required in connection
with any registration statement or confidential information memorandum
prepared by Parent, but in that event will give the Shareholders
prompt notice thereof. Prior to the Effective Time, the Parent and
the Company shall jointly approve the contents of any press releases,
written employee presentations, or other comparable materials of
potentially wide distribution that disclose or refer to the
transaction contemplated hereby, except for such press releases or
other communications required by law. If the transactions
contemplated herein are not consummated, neither the Parent nor the
Shareholders shall disclose to any third party or publicly announce
the proposed transaction contemplated hereby, except as otherwise
permitted hereinabove and except as agreed in advance, in writing, by
the parties or otherwise required by law, in which case the party so
compelled will give reasonable written notice in advance to the other
parties.
3.6 EXCLUSIVITY. After the signing of this Agreement until the
Final Closing Date or the termination of this Agreement, no Shareholder shall
(i) solicit, initiate, or encourage the submission of any proposal or offer
from any person or entity relating to the acquisition of any capital stock or
other voting securities of, or any substantial portion of the assets of, the
Company (including any acquisition structured as a merger, consolidation, or
share exchange) or (ii) participate in any negotiations or discussions
regarding, furnish any information with respect to, assist or participate in,
or facilitate in any other manner any effort or attempt by any person or entity
in favor of such acquisition (including any acquisition structured as a merger,
consolidation, or share exchange). The Shareholders will (and shall cause the
Company to) notify Parent if any person or entity makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing.
3.7 THE SHAREHOLDERS' RELEASE OF CLAIMS. Effective as of the
Final Closing, each Shareholder hereby (i) releases, acquits and forever
discharges the Company and its Subsidiaries from any and all liabilities,
obligations, indebtedness, claims, demands, actions or causes of action arising
from or relating to any event, occurrence, act, omission or condition occurring
or existing on or prior to the Final Closing, including, without limitation,
any claim for indemnity or contribution from the Company or any of its
Subsidiaries in connection with the obligations or liabilities of the
Shareholders hereunder, except for (A) the indemnification provided by Sections
3.16 and 3.21 hereof and any other contractual obligations in this Agreement,
(B) salary and expense reimbursement payable to the Shareholders as an officer,
director or employee in the ordinary course of business, and (C) all benefits
(including interests in benefit plans) and fringe benefits to which the
Shareholders are entitled; (ii) waives all breaches, defaults or violations of
each agreement, if any, among or between Shareholders applicable to the
Company Common Stock and agrees that any
Woodson Construction Merger Agreement/Page 40
<PAGE> 49
and all such agreements are terminated as of the Final Closing, and (iii)
waives any and all preemptive or other rights to acquire any shares of capital
stock of the Company and releases any and all claims arising in connection with
any prior default, violation or failure to comply with or satisfy any such
preemptive or other rights.
3.8 REAL ESTATE MATTERS.
(a) Title Insurance Commitments. The Parent, in its sole
discretion, may elect to obtain title insurance with respect to any or
all real estate that the Company owns or leases listed on Schedule
2.2(n)(1) or Schedule 2.2(n)(2) of the Company Disclosure Schedule
(the "Title Insurance Property"). If Parent elects to obtain title
insurance Company will obtain and deliver to Parent, as soon as
practicable, and in any event on or before September 10, 1997,
commitments for title insurance ("Title Commitments") issued by title
insurance company(ies) reasonably acceptable to Parent with respect to
the Title Insurance Property, Surveys (defined below) of the Title
Insurance Property reasonably acceptable to the Parent and one set of
legible copies of title exception documents with respect to any
exceptions set forth in the commitments. The Title Commitments shall
set forth the status of title to the Title Insurance Property together
with all exceptions or conditions to such title, including, but not
limited to, all easements, restrictions, rights-of-way, covenants,
reservations and all other encumbrances affecting the Title Insurance
Property which would appear in an Owner's Policy of Title Insurance
(as defined below), if issued. The Title Commitments shall contain
the express commitment of the title underwriter to issue the Owner's
Policies of Title Insurance to the Parent and the Company with the
standard printed exceptions endorsed or deleted in accordance with
this Section 3.8. Parent shall bear the cost of any title insurance
premiums actually paid for title insurance obtained under this
Section.
(b) Surveys. With respect to each Title Insurance
Property, if requested by Parent, the Shareholders will cause the
Company to procure in preparation for the Preliminary Closing a
current survey of such real property, prepared by a licensed surveyor
and conforming to current ALTA Minimum Detail Requirements for Land
Title Surveys, disclosing the location of all improvements, easements,
party walls, sidewalks, roadways, utility lines, and other matters
shown customarily on such surveys, and showing access affirmatively to
public streets and roads (the "Survey"). The Survey shall disclose
any survey defect or encroachment from or onto the real property.
Parent shall bear the cost of fees actually paid for the preparation
of any Survey required under this Section.
(c) Title Insurance Policies. At the Preliminary
Closing, the Company shall deliver to Parent title insurance policies
("Policies of Title Insurance") requested pursuant to Section 3.8(a)
with respect to the Title Insurance Property, in an amount reasonably
acceptable to Parent, issued by such title insurance company(ies),
subject to those easements, reservations, restrictions, covenants,
conditions and other matters therein specified to the extent that the
same do not, in the reasonable judgment of Parent, render title
unmarketable or adversely affect the operation, value, use or
enjoyment of the Title Insurance Property affected thereby ("Real
Property Title Exceptions"). The Policies of Title Insurance may be
subject to the Real Property Title Exceptions but shall contain no
additional exceptions other
Woodson Construction Merger Agreement/Page 41
<PAGE> 50
than the standard preprinted exceptions reasonably acceptable to
Parent; provided that (i) the standard preprinted exception, if any,
for restrictive covenants shall be deleted, except for Real Property
Title Exceptions, (ii) the standard preprinted survey exception, if
any, shall be revised to read "shortages in area" only, (iii) there
shall be no exception as to easements, or claims of easements, not
shown by the public records, nor any exception as to parties in
possession, and (iv) the exception as to the lien for taxes will be
limited to the year in which the Preliminary Closing occurs. The
Policies of Title Insurance delivered under this Section 3.8 shall
insure title to the real property and all recorded easements
benefitting such real property.
(d) Phase I Environmental Assessment. The Company will
obtain and deliver to Parent, as soon as practicable, and in any event
on or before September 15, 1997, a Phase I environmental assessment
prepared by environmental engineers reasonably acceptable to Parent
with respect to all of the real estate owned or leased by the Company
listed on Schedule 2.2(n)(1) or Schedule 2.2(n)(2) of the Company
Disclosure Schedule (the "Environmental Assessment Property"). Each
of the Company and Parent shall pay one-half of the expenses incurred
by the Company in obtaining such assessments. Also during the period
prior to Final Closing, the Shareholders and the Company shall afford
Parent and its representatives the continuing right to inspect, during
the Company's normal business hours, the Environmental Assessment
Property and all books, records, contacts, documents and other data
pertaining to the use, ownership, operation, or maintenance of the
Environmental Assessment Property (collectively with the Phase I
assessment, the "Studies").
(e) Title and Environmental Objections. If for any
reason Parent, in its sole and absolute discretion, is not satisfied
with any matter contained in the Studies, any survey, or the Real
Property title exceptions, or is otherwise not satisfied with the real
property owned or leased by the Company for any reason whatsoever,
then Parent may, prior to the Preliminary Closing, notify the Company
and the Shareholders in writing of its objection (the "Objections"),
describing with specificity the subject real property and the
Objections thereto, failing which Merger Sub and Parent shall be
deemed to have waived all such objections and all remedies therefor
pursuant to this Agreement. If Parent shall request that the Company
cure such Objections and the Company or the Shareholders have not
cured such Objections to Parent's satisfaction by the Preliminary
Closing Date, Parent shall have the right to terminate this Agreement
in accordance with Section 5.1(a)(2) hereof or enter into negotiations
with the Company to lease any real property which is the subject of
the Objections.
3.9 PPM; REGISTRATION STATEMENT.
(a) Company to Provide Information. Prior to the Final
Closing, the Shareholders and the Company shall cooperate with Parent
to promptly provide such information as reasonably requested by Parent
to enable Parent to (i) prepare the PPM and all appropriate
supplements thereto, pursuant to Rule 506 of Regulation D promulgated
by the SEC under the Securities Act, for dissemination to the Other
Companies and their respective shareholders, including the
Shareholders, and (ii) prepare and file with the SEC the
Woodson Construction Merger Agreement/Page 42
<PAGE> 51
Registration Statement to be filed by Parent under the Securities Act
in connection with its IPO (including the prospectus constituting a
part thereof). Parent shall obtain all necessary state securities law
or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement, the PPM and the
Registration Statement, and the Shareholders and the Company shall
furnish all information concerning them as may be reasonably requested
in connection with any such action.
(b) Accuracy of Information. Parent represents and
warrants that neither the PPM or any amendment or supplement thereto,
at the time distributed, nor the Registration Statement or any
amendment or supplement thereto, at the time the Registration
Statement becomes effective under the Securities Act or any such
amendment or supplement is distributed, nor any prospectus filed in
accordance with Rule 424(b) under the Securities Act, at the time when
filed or distributed, will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. This
representation is in addition to that set forth in Section 2.3(j). If
requested by Parent prior to the Final Closing, the Shareholders and
the Company, respectively, shall use their reasonable best efforts to
agree with Parent as to the information and documents supplied by the
Shareholders and the Company for inclusion in the Registration
Statement and each shall indicate such information and documents in a
letter (the "Information Letter") to be delivered (i) prior to the
filing of the Registration Statement with the SEC, and (ii) prior to
filing any amendment to the Registration Statement with the SEC (other
than any prospectus filed with the SEC pursuant to Rule 424(b)). The
Shareholders and the Company shall each be entitled to review the PPM,
the Registration Statement and each amendment or supplement thereto,
if any, prior to delivery of the Information Letter. From the date of
this Agreement through the Final Closing Date, the Shareholders and
the Company shall immediately notify Parent in the event of any
development or occurrence involving or pertaining to either the
Company or any Shareholder that would cause matters referenced in the
Information Letter to be inaccurate, incomplete or misleading in any
material respect. The Shareholders and the Company acknowledge that
Parent has relied on the accuracy of factual information provided in
the Disclosure Schedules in preparing the PPM and the Registration
Statement. Except for the accuracy of such information in the
Disclosure Schedules, neither the Shareholders nor the Company takes
responsibility or shall be deemed responsible for (1) the presentation
or omission of any such information in or from the PPM or the
Registration Statement or (2) the factual adequacy or legal
sufficiency of disclosures contained therein.
(c) Further Information. Prior to the Final Closing, the
Shareholders and the Company, respectively, shall promptly upon
request, furnish Parent with all information concerning themselves or
itself as may be reasonably requested by Parent in connection with the
preparation of the PPM, the Registration Statement and each amendment
or supplement thereto, or any other statement, filing, notice or
application made by or Parent to any governmental entity in connection
with the transactions contemplated by this Agreement.
Woodson Construction Merger Agreement/Page 43
<PAGE> 52
(d) Indemnification. Parent will indemnify and hold
harmless each of the Shareholders, the Company, and each of the
Company's directors, officers and other persons, if any, who control
the Company within the meaning of the Securities Act from and against
any losses, claims, damages, liabilities or judgments, joint or
several, to which they or any of them may become subject, under the
Securities Act or any state securities or blue sky laws or otherwise,
insofar as such losses, claims, damages, liabilities, or judgments (or
actions in respect thereof) are caused by an untrue statement or
alleged untrue statement of a material fact contained in the PPM,
Registration Statement, or the Prospectus, or in any amendment or
supplement thereto, or in any state application for qualification,
permit, exemption or registration as a broker/dealer, or in any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each such person for any legal expenses
reasonably incurred by such person in connection with investigating or
defending any such action or claim; provided, however, that Parent
shall not be liable, in any such case, to the extent that any such
loss, claim, damage, liability, or judgment (or action in respect
thereof) was caused by any untrue statement or alleged untrue
statement or omission or alleged omission made in the PPM,
Registration Statement, or the Prospectus, or any such amendment or
supplement thereto, or in any such state application, or in any
amendment or supplement thereto, in reliance upon and in conformity
with information furnished pursuant to the Information Letter
contemplated by Section 3.9(b) in writing to Parent by the Company or
the Shareholders specifically for inclusion therein. If
indemnification hereunder is not available, then Parent will provide
contribution to the parties who would have been indemnified, which
contribution shall be based on the relative benefits derived from the
PPM, Registration Statement or Prospectus, as the case may be, by
Parent on the one hand, and such indemnified persons on the other.
(e) Parent and Merger Sub shall use their best efforts,
at their expense, to have the directors, officers and controlling
persons of the Company, the Shareholders, and the persons listed on
Exhibit 3.21, added as additional named insureds to any insurance
coverage maintained by Parent (or its directors and officers) against
liabilities under the Securities Act.
(f) Parent will deliver to the Shareholders, with the
PPM, each of the Other Acquisition Agreements.
3.10 TAX-FREE REORGANIZATION.
(a) No Acts Jeopardizing Merger. Unless the other
parties shall otherwise agree in writing, none of the Shareholders,
the Parent, the Merger Sub, the Company or the Surviving Corporation
shall knowingly take or fail to take any action, which action or
failure to act would jeopardize the qualification of the Merger as a
reorganization pursuant to Section 368(a)(2)(D) of the Code.
(b) Two-Year Holding Period. No Shareholder will dispose
of any of the Parent Common Stock received in the Merger within two
years following the Effective Time if such disposition would reduce
the fair value of the Parent Common Stock (evaluated as of the
Woodson Construction Merger Agreement/Page 44
<PAGE> 53
Effective Date) retained by such Shareholder to an amount less than
50% of the fair value of the Company Common Stock held by the
Shareholder immediately prior to the Merger, unless the Shareholder
obtains an opinion of counsel or of an accounting firm of national
standing, which counsel or firm is reasonably satisfactory to Parent,
that such transfer will not violate the continuity of shareholder
interest requirement set forth in Treasury Regulation Section 1.368-1.
3.11 SATISFACTION OF CONDITIONS BY THE COMPANY AND SHAREHOLDERS.
The Company and the Shareholders shall (i) use their reasonable efforts to
obtain, as soon as possible, all governmental approvals required to be obtained
by the Company and make, as soon as possible, all filings with any governmental
authority required on the part of the Company to consummate the transactions
contemplated hereby, (ii) use their reasonable efforts to obtain, as soon as
possible, all other consents to and approvals required to be obtained by the
Company to consummate the transactions contemplated hereby, and (iii) otherwise
use their reasonable efforts to satisfy the conditions set forth in Article 4
of this Agreement to the extent that such satisfaction is within their control;
provided, however, that this Section 3.11 shall not be construed to limit the
rights of Shareholders to terminate this Agreement as provided in Article 5 of
this Agreement.
3.12 SATISFACTION OF CONDITIONS BY PARENT. Parent shall (i) use
its reasonable efforts to obtain, as soon as possible, all governmental
approvals required to be obtained by the Parent and make, as soon as possible,
all filings with any governmental authority required on the part of the Parent
to consummate the transactions contemplated hereby, (ii) use its reasonable
efforts to obtain, as soon as possible, all of the consents to and approvals
required to be obtained by the Parent to consummate the transactions
contemplated hereby, and (iii) otherwise use its reasonable efforts to satisfy
the conditions set forth in Article 4 of this Agreement to the extent that such
satisfaction is within its control; provided, however, that this Section 3.11
shall not be construed to limit the rights of Parent to terminate this
Agreement as provided in Article 5 of this Agreement.
3.13 AMENDMENT OF OTHER ACQUISITION AGREEMENTS. Parent will not
enter into any amendment to any Other Acquisition Agreement unless the
Shareholders have previously consented thereto in writing, which consent may
not be unreasonably withheld or delayed unless (i) the Shareholders are not
given, simultaneously with the execution of any such amendment, all of the
benefits accorded thereby to the Other Company and its shareholders, or (ii)
the amendment is materially unfavorable to Parent and/or Merger Sub in the
reasonable belief of the Shareholders.
3.14 DELIVERIES. Parent will promptly deliver, as soon as they are
available to Parent, all exhibits and schedules (including the disclosure
schedules) to each Other Acquisition Agreement and all amendments and
supplements to those exhibits and schedules.
3.15 PERIODIC REPORTS. Parent will, following the effective date
of the Registration Statement, timely file all periodic reports required to be
filed by it pursuant to the Securities Act or the Securities Exchange Act of
1934, and take all such other action as may be required of it, to the extent
the failure to timely file such reports or the failure to take such other
action would adversely affect the availability to the Shareholders of the
exemption from registration contained in Rules 144 or 145 under the Securities
Act with respect to resales of Parent Common Stock.
Woodson Construction Merger Agreement/Page 45
<PAGE> 54
3.16 CORPORATE INDEMNIFICATION. From and after the Effective Time,
Merger Sub (as then successor to the Company) will, to the maximum extent
permitted by the Louisiana Business Corporation Law, indemnify (including,
without limitation, advancement of expenses) each of the Shareholders and the
persons identified in Exhibit 3.16 who was or is or becomes a party or is or
becomes threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative, or investigative, including any action
by or in the right of the corporation, by reason of the fact that he or she is
or was a director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
of another business, foreign or non-profit corporation, partnership, joint
venture, or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement in connection therewith.
3.17 RELEASE OF SHAREHOLDERS AND OTHERS. Effective at the Final
Closing (with respect to the Company) and at the Effective Time (with respect
to Parent and Merger Sub), each of the Company, Parent and Merger Sub (acting
as the then-successor of the Company) hereby releases, acquits and forever
discharges the Shareholders and the persons listed on Exhibit 3.17 from (i) any
and all liabilities, obligations, indebtedness, claims, demands, actions or
causes of action arising from or relating to any event, occurrence, act,
omission or condition occurring or existing on or prior to the Final Closing,
or (ii) any claim for indemnity or contribution from the Shareholders in
connection with any liability of the Company under this Agreement; provided
that Shareholders shall not be released by this Section 3.17 from (a) any
liability or claims arising from any action taken or omitted by the
Shareholders as officers, directors, employees or agents of the Company
involving willful misconduct or (b) claims pursuant to Article 6 of this
Agreement. THE FOREGOING PROVISION IS SPECIFICALLY INTENDED TO RELEASE THE
RELEASED PERSONS FROM LIABILITY FOR (AMONG OTHER THINGS) THEIR OWN NEGLIGENCE
OR GROSS NEGLIGENCE.
3.18 RELEASE AND INDEMNIFICATION FROM GUARANTIES. Parent will use
its best efforts to have the Shareholders released, at the earliest possible
time, from all guaranties (including any pledges of assets) by any of them of
debts or obligations of the Company, including by repayment of such debt or
obligation if necessary to effect such release. From and after the Final
Closing, Parent and Merger Sub will defend, indemnify and hold each Shareholder
harmless of and from any claims made or threatened to be made, or loss
incurred, in connection with any such guarantee.
3.19 BENEFIT PLANS. Neither Parent nor Merger Sub shall terminate
any health or medical insurance, life insurance, 401(k) plan or other benefit
plan in effect with respect to the Company until such time as Parent replaces
such plan with a plan that is applicable to Parent and all of its then
subsidiaries. Any such replacement plan shall give the former officers and
employees of the Company full credit for the period of time each was employed
by the Company prior to the Effective Time and for the period of time each is
employed by the Surviving Corporation after the Effective Time. Each such
former officer and employee shall become fully vested under each such plan in
effect with respect to the Company that is terminated after the Effective Time
in accordance with this Section, including (without limitation) those former
officers and employees who may have been terminated after the Effective Time
but before termination of such plan. Any new health insurance plan shall
provide for coverage for pre-existing conditions. Parent and Merger Sub will
provide
Woodson Construction Merger Agreement/Page 46
<PAGE> 55
officers and employees of the Company with benefits that, in the aggregate, are
not less favorable than those provided to any of the Other Companies.
3.20 NATURE OF OBLIGATIONS. All obligations of Parent in this
Agreement are guaranteed jointly and severally by Merger Sub, and vice-versa.
Where both Parent and Merger Sub are bound with respect to the same obligation,
the obligation is joint and several.
3.21 INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY.
(a) From and after the Final Closing Date, Parent and the
Surviving Corporation agree to indemnify, defend and hold harmless the
former directors and officers of the Company and the persons listed on
Exhibit 3.21 (as used in this Section, each an "Indemnified Person")
from and against all losses, claims, damages, liabilities and
judgments (and related expenses including, but not limited to,
attorney's fees and amounts paid in settlement), and any action or
other proceeding in respect thereof, to which any Indemnified Person
becomes subject, based upon or arising out of actions or omissions or
alleged actions or omissions of such persons occurring (or alleged to
have occurred) at or prior to the Final Closing Date, to the fullest
extent (including the advancement of expenses) permitted under (1) the
Delaware General Corporation Law or the Louisiana Business Corporation
Law, as applicable, or (2) the certificate of incorporation, bylaws or
other governing documents of the Company as in effect on the date of
this Agreement, whichever of (1) or (2) is greater.
(b) From and after the Final Closing Date, Parent shall
not amend, alter or repeal those provisions of the certificate of
incorporation, bylaws or other governing documents of the Company
relating to liability or indemnification of directors and officers,
except as required by law, if the effect of such amendment, alteration
or repeal would be to increase the potential liability of a director
or officer of the Company to the Company or to its stockholders for
monetary damages for breach of fiduciary duty, or to lessen or
otherwise adversely affect the indemnification rights of directors and
officers of the Company as provided in such certificate of
incorporation, bylaws or other governing documents as in effect on the
date of this Agreement.
(c) The rights granted to the Indemnified Persons hereby
shall be contractual rights inuring to the benefit of all Indemnified
Persons and shall survive this Agreement and the Final Closing. They
are in addition to the indemnification provided pursuant to Section
3.16.
3.22 PARENT'S IPO. Parent shall use its best efforts to cause the
Registration Statement to become effective, and to complete its IPO, as soon as
practicable. To the extent permitted by applicable law, Parent shall keep the
Company informed regarding the status of Parent's IPO.
3.23 LISTING. Parent shall use its best efforts to cause the
Parent Common Stock to be listed on a national securities exchange or a
national computerized quotation and trading system after the IPO.
Woodson Construction Merger Agreement/Page 47
<PAGE> 56
3.24 PRINCIPAL OFFICE. Parent agrees that it will maintain the
principal office of the Surviving Corporation (or other entity or division
operating the Company's assets) at 183 South Beadle Road, Lafayette, Louisiana
for a period of 12 months after the Final Closing Date, and represents and
warrants to the Shareholders that it has no present plans or intentions to move
such principal office after such time.
3.25 DISTRIBUTIONS. The Company will, not later than immediately
before the Final Closing (except as otherwise provided by Section 8.2(b)), make
the distributions contemplated by Sections 2.2(h)(13) and 3.1(m).
3.26 CERTAIN ACTIONS. Parent will not (a) declare or pay,
following the Preliminary Closing and prior to the Final Closing, any stock
dividend, subdivision, reclassification, recapitalization, split-up,
combination, or exchange of shares or the like; and (b) take any action to
terminate the effectiveness of the Merger following the Final Closing and prior
to the Effective Time.
ARTICLE 4
CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARENT. The
obligations of the Parent to consummate the Preliminary Closing under this
Agreement are subject to the satisfaction in all material respects of each of
the following conditions, unless waived by the Parent:
(a) Accuracy of Representations and Warranties. Except
for such changes as are permitted pursuant to Section 3.4 of this
Agreement, the representations and warranties of the Shareholders and
the Company contained in this Agreement, in the Shareholders
Disclosure Schedule, the Company Disclosure Schedule and in each
closing certificate and document delivered to Parent by the Company or
the Shareholders pursuant hereto shall be correct in all material
respects at and as of the Preliminary Closing Date as though made at
and as of the Preliminary Closing Date, other than such
representations and warranties as are specifically made as of another
date which shall be correct at and as of such other date; and the
Shareholders and the Company shall each have delivered to Parent a
certificate to the effect set forth in this Section.
(b) Performance of Covenants. The Shareholders and the
Company shall have performed and complied with all covenants of this
Agreement to be performed or complied with by them at or prior to the
Preliminary Closing Date (except where the failure to so perform or
comply would not have an adverse effect on Parent or prevent the
Shareholders or Parent from consummating the transactions contemplated
hereby), and the Shareholders and the Company shall each have
delivered to Parent a certificate to that effect.
(c) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted after the date hereof against
the Shareholders or the Company, or against Parent, arising by reason
of the acquisition of the Company pursuant to this Agreement, which is
Woodson Construction Merger Agreement/Page 48
<PAGE> 57
reasonably likely (1) to restrain, prohibit or invalidate the
consummation of the transactions contemplated by this Agreement, (2)
to have a material adverse effect on the Company or (3) to have a
material adverse effect on the results of operations or financial
condition of Parent and its subsidiaries, taken as a whole, after
giving effect to the consummation of the transactions contemplated by
this Agreement and the Other Acquisition Agreements.
(d) Approvals. The Company and the Shareholders shall
have procured all of the consents, approvals and waivers specified in
Sections 2.1(b) and 2.2(e), and the Shareholders and the Company shall
each have delivered the same to Parent.
(e) [Intentionally left blank]
(f) Policies of Title Insurance. The Shareholders shall
have delivered Policies of Title Insurance insuring the Company's
ownership or leasehold interest in the Title Insurance Property.
(g) Employment Agreements. Each of the individuals
specified on Exhibit 4.1(g)(1) shall have executed and delivered an
Employment Agreement with the Company substantially in the form
attached as Exhibit 4.1(g)(2) hereto.
(h) The Registration Rights Agreements and Shareholders
Lock-up Agreements. The Shareholders shall have executed and
delivered the Registration Rights Agreements and any lock-up agreement
reasonably requested by the managing underwriter of Parent's IPO which
restricts the sale or other disposition of Parent Common Stock for a
reasonable and customary period not exceeding 365 days following the
effectiveness of the Registration Statement.
(i) Parent's IPO. Parent and the underwriters shall have
executed and delivered the Underwriting Agreement.
(j) Lender Approval. Parent shall have secured a
commitment for approximately $25,000,000 in senior indebtedness.
(k) Audit of the Company. Parent shall have received the
results of an audit of the Company's financial statements by the
certified public accounting firm regularly engaged by Parent or such
other independent public accountant as agreed by the parties.
(l) Opinion of Counsel for the Company and the
Shareholders. Parent and the Merger Sub shall have received the
favorable opinion of Correro Fishman Haygood Phelps Weiss Walmsley &
Casteix, L.L.P., counsel for the Company and the Shareholders, dated
the Preliminary Closing Date, substantially in the form and to the
effect set forth in Exhibit 4.1(l) hereto.
(m) The Shareholders Release of the Company; Corporate
Records. The Shareholders shall have delivered to the Exchange Agent
(i) a release that effectuates
Woodson Construction Merger Agreement/Page 49
<PAGE> 58
Section 3.7 of this Agreement, and (ii) the corporate records and
books of Company, including the minute book, the stock transfer books,
and the corporate seal of the Company (of any of which the
Shareholders may retain copies for any proper purpose).
(n) All Proceedings to be Satisfactory. All necessary
director and shareholder resolutions, waivers and consents and all
other actions to be taken by the Shareholders and the Company in
connection with the consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby
shall be satisfactory in form and substance to Parent and the Merger
Sub and their counsel.
4.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SHAREHOLDERS
AND THE COMPANY. The obligations of the Shareholders and the Company to
consummate the Preliminary Closing under this Agreement are subject to the
satisfaction in all material respects or waiver by the Shareholders of each of
the following conditions:
(a) Accuracy of Representations and Warranties. Except
for such changes as are permitted pursuant to Section 3.4 of this
Agreement, the representations and warranties of Parent and the Merger
Sub contained in this Agreement, in the Parent Disclosure Schedule and
in each closing certificate and document delivered by the Parent or
the Merger Sub to the Shareholders or the Company pursuant hereto
shall be correct in all material respects at and as of the Preliminary
Closing Date, as though made at and as of the Preliminary Closing
Date, other than such representations and warranties as are
specifically made as of another date which shall be correct at and as
of such other date; and Parent and the Merger Sub shall have delivered
to the Shareholders and the Company a certificate to the effect set
forth in this Section.
(b) Performance of Covenants. Parent and the Merger Sub
shall have performed and complied with all covenants of this Agreement
to be performed or complied with by them at or prior to the
Preliminary Closing Date (except where the failure to so perform or
comply would not have a material adverse effect on the Shareholders or
the Company or prevent Parent, Merger Sub or the Shareholders from
consummating the transactions contemplated hereby), and Parent and the
Merger Sub shall each have delivered to the Shareholders and the
Company a certificate to such effect.
(c) Approvals. Parent shall have procured all of the
consents, approvals and waivers specified in Section 2.3(f), and
Parent shall deliver the same to the Shareholders and the Company.
(d) Delivery of PPM. Parent shall have delivered the PPM
to the Shareholders.
(e) [Intentionally left blank]
Woodson Construction Merger Agreement/Page 50
<PAGE> 59
(f) Employment Agreements. The Company shall have
executed and delivered to the Exchange Agent an Employment Agreement
with each of the individuals specified on Exhibit 4.1(g)(1) in the
form attached as Exhibit 4.1(g)(2) hereto.
(g) Registration Rights Agreement. Parent and each of
the Shareholders shall have executed and delivered to the Exchange
Agent a Registration Rights Agreement in the form attached as Exhibit
1.8 hereto.
(h) All Proceedings to be Satisfactory. The Shareholders
and their counsel shall have received Parent's PPM describing Parent
and the Parent Common Stock to be delivered as a part of the Merger
Consideration together with all such counterpart originals or
certified or other copies of all documents relating to Parent incident
to the transactions contemplated hereby as the Shareholders or such
counsel may reasonably request; and the PPM, the Registration
Statement (each as amended or supplemented) and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby shall be satisfactory in form and
substance to Shareholders, the Company and their counsel.
(i) Opinion of Counsel for The Parent and the Merger Sub.
The Shareholders and the Company shall have received the favorable
opinion of Chamberlain, Hrdlicka, White, Williams & Martin, counsel
for Parent and the Merger Sub, dated the Preliminary Closing Date,
substantially in the form and to the effect set forth in Exhibit
4.2(i) hereto.
(j) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted after the date hereof against
the Parent, or against the Shareholders or the Company, arising by
reason of the acquisition of the Company pursuant to this Agreement,
which is reasonably likely (1) to restrain, prohibit or invalidate the
consummation of the transactions contemplated by this Agreement, (2)
to have a material adverse effect on the Company or (3) to have a
material adverse effect on the results of operations or financial
condition of Parent and its subsidiaries, taken as a whole, after
giving effect to the consummation of the transactions contemplated by
this Agreement and the Other Acquisition Agreements.
(k) IPO. The Registration Statement shall have been
declared effective by the SEC and shall relate to the public offering
for cash of at least $45,000,000 from the sale of shares of Parent
Common Stock that do not exceed approximately 50% of the total number
of shares to be outstanding immediately following the closing of the
IPO and the Other Acquisition Agreements (in each case excluding any
shares sold under an over-allotment option and the proceeds therefrom)
and shall not be subject to any stop order or similar proceeding; and
the Underwriting Agreement shall have been executed and delivered by
the parties thereto.
(l) Release. The Company, Parent and Merger Sub shall
have delivered to the Exchange Agent a release that effectuates
Section 3.17 of this Agreement.
Woodson Construction Merger Agreement/Page 51
<PAGE> 60
(m) Simultaneous Closings. The "preliminary closings"
under the Other Acquisition Agreements shall occur simultaneously with
or prior to the Preliminary Closing under this Agreement.
(n) No Material Adverse Change. There shall have been no
material adverse change in the business, financial condition or
prospects of Parent combined with the Other Companies on a proforma
basis.
(o) Shareholder Agreement. The Shareholders, the Parent
Insiders and their affiliates and Parent shall have entered into a
shareholder agreement with respect to, among other things, (i) mutual
"tag along" rights for the Shareholders and the Parent Insiders
applicable to sales of more than 75,000 shares of Parent Common Stock
(to be adjusted for stock splits and dividends occurring after the
date hereof) in private placement transactions, or in the alternative
an additional demand registration for the Shareholders under the
Registration Rights Agreement, (ii) restrictions on Parent Insiders
and their affiliates selling shares of Parent Common Stock for 2 years
following the Final Closing, and (iii) permitted sales of Parent
Common Stock in private sales by the Parent Insiders after one year
from the Final Closing in amounts not to exceed the lesser of the
90-day Rule 144 limits on affiliates of companies, or 10% of the
personal holding of each such Parent Insider, in any 6-month period;
which agreement shall be reasonably acceptable to the Shareholders,
the Parent Insiders and Parent.
(p) Listing of Parent Common Stock. The Parent Common
Stock shall have been accepted for listing, subject only to issuance,
on a national securities exchange or the NASDAQ Stock Market (national
market system).
(q) Reliance Letters. The Shareholders shall have
received letters addressed to them by Arthur Andersen LLP and
Chamberlain, Hrdlicka, White, Williams & Martin, permitting the
shareholders to rely on the comfort or opinion letters to be delivered
by those firms to the underwriters at the closing of the IPO, to the
extent such letters bear upon tax matters relating to the Merger, and
the accuracy or completeness of the Registration Statement or its
compliance with the Securities Act and other applicable law.
(r) Tax Opinion. The Shareholders shall have received a
favorable tax opinion from KPMG Peat Marwick LLP to the effect that
the Merger qualifies as a reorganization under Section 368(a)(2)(D) of
the Code.
Woodson Construction Merger Agreement/Page 52
<PAGE> 61
ARTICLE 5
TERMINATION
5.1 TERMINATION OF AGREEMENT. The Parties may terminate this
Agreement as provided below:
(a) Prior to the Preliminary Closing. The Parties may
terminate this Agreement at any time prior to the Preliminary Closing
as provided below:
(1) Mutual Consent. The Parent and the
Shareholders may terminate this Agreement by mutual written
consent of Parent and Required Shareholders at any time prior
to the Preliminary Closing;
(2) Termination by Parent. The Parent may
terminate this Agreement by giving written notice to the
Shareholders at any time prior to the consummation of the
Preliminary Closing (1) in the event the Shareholders or the
Company has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect,
the Parent has notified the Shareholders of the breach, and
the breach has continued without cure until the earlier of (A)
20 days after the notice of such breach or (B) the Preliminary
Closing Date or (C) the date set forth below in this Section,
whichever is earlier, or (2) if the Preliminary Closing shall
not have occurred on or before December 31, 1997, by reason of
the failure of any condition precedent under Section 4.1
hereof (unless the failure results primarily from the Parent
itself breaching an obligation to proceed with the Preliminary
Closing hereunder); and
(3) Termination by the Shareholders. The
Required Shareholders may terminate this Agreement by giving
written notice to the Parent at any time prior to the
consummation of the Preliminary Closing (1) in the event the
Parent or the Merger Sub has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, the Shareholders have
notified the Parent of the breach, and the breach has
continued without cure until the earlier of (A) 20 days after
the notice of such breach or (B) the Preliminary Closing Date
or (C) the date set forth below in this Section, whichever is
earlier, or (2) after execution of this Agreement, within
three business days after each date following the date of this
Agreement on which the Shareholders receive the PPM or any
amendment or supplement thereto, or any Other Acquisition
Agreement or exhibit or schedule thereto or any amendment to
any thereof, if any such document constitutes or reflects,
individually or in the aggregate, a material adverse change to
the business, assets or prospects of Parent and its
subsidiaries in the aggregate, including the Other Companies,
or materially changes, in a manner that is adverse to the
Shareholders, the content of the PPM, the Registration
statement or the Prospectus or requires such a material change
(all of the matters set forth in clause (2) as determined in
good faith by the Required Shareholders), or (3) if the
Preliminary Closing shall not have
Woodson Construction Merger Agreement/Page 53
<PAGE> 62
occurred on or before December 31, 1997 (or such earlier
comparable date as may be set forth in any Other Acquisition
Agreement), or (4) if any of the Other Acquisition Agreements
are terminated.
(b) After the Preliminary Closing Date. This Agreement
may be terminated after the Preliminary Closing only as provided in
Section 1.2(d) or 3.4.
5.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 5.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto, except
that (1) Section 3.5, Section 9.1, Section 9.6, Section 9.7, Section 9.8,
Section 9.10 and Section 9.11 hereof shall survive such termination and (2)
nothing herein shall relieve any party from liability for (A) any willful and
intentional breach in bad faith that preceded such termination and continued
prior to such termination despite reasonable notice, except that this clause
(A) will not apply to a termination under Section 5.1(a)(1); or (B) any willful
breach of any such surviving Section hereof.
ARTICLE 6
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Subject to the
limitations of Section 6.6, the respective representations and warranties of
the parties contained in this Agreement shall survive the Preliminary Closing
Date and the Final Closing Date, regardless of any investigation made by or on
behalf of any party.
6.2 INDEMNIFICATION BY THE SHAREHOLDERS. Subject to the
limitations of Section 6.6, the Shareholders hereby agree to indemnify and hold
harmless the Surviving Corporation and Parent in respect of any losses, claims,
damages, liabilities or related expenses (including, but not limited to, all
litigation costs but net of all available proceeds of insurance) (collectively,
"Losses") which the Surviving Corporation or Parent (but without duplication)
incurs as a result of the breach of: (A) any of the representations or
warranties made by the Shareholders in or pursuant to this Agreement, except
that the Shareholders shall have no obligation to indemnify and hold harmless
with respect to (i) a breach of the representations or warranties set forth in
Section 2.2(p) ("Environmental Laws") to the extent that the Company has
insurance to adequately cover potential liabilities for environmental matters,
or (ii) any representation or warranty that any property is in good condition
or repair or otherwise fit for the purposes for which the property is intended;
or (B) any of the covenants made by the Shareholders in this Agreement which
are to be performed at or after the Final Closing; or (C) any of the covenants
made by the Shareholders in this Agreement which are to be performed at or
after the Preliminary Closing and prior to the Final Closing but only if the
breach thereof is willful and intentional and involves self-dealing or bad
faith. The indemnification obligations of the Shareholders under this Section
6.2 shall survive the Preliminary Closing and the Final Closing and will
terminate at the time specified in Section 6.6.
6.3 INDEMNIFICATION BY PARENT AND SURVIVING CORPORATION. Parent
and Surviving Corporation, jointly and severally, agree to indemnify and hold
harmless the Shareholders in respect
Woodson Construction Merger Agreement/Page 54
<PAGE> 63
of any losses, claims, damages, liabilities or related expenses (including, but
not limited to, all litigation costs) which the Shareholders incur as a result
of the breach of any of the representations or warranties made by Parent in or
pursuant to this Agreement or any of the covenants made by Parent or the
Surviving Corporation in this or any related Agreement which are to be
performed at or after the Preliminary Closing or the Final Closing. The
indemnification obligations of Parent and Surviving Corporation under this
Section 6.3 shall survive the Preliminary Closing and the Final Closing.
6.4 NOTICE. Promptly after any party hereto (in Article 6, the
"Indemnified Party") has received notice or has knowledge of the occurrence of
any event which the Indemnified Party asserts is an indemnifiable event or
after the threat or commencement of any action, claim or proceeding commenced
against the Indemnified Party by a third party that might result in any claim
for indemnity pursuant to this Agreement (a "Third Party Claim"), the
Indemnified Party shall provide the party obligated to provide indemnification
hereunder (in Article 6, the "Indemnifying Party") written notice of such claim
or the threat of commencement of such action or proceeding. Promptly after
receipt by an Indemnifying Party of any such notice, the Indemnifying Party
shall, within ten business days of receipt of such notice, either: (i)
acknowledge the debt, liability or obligation for which indemnity is sought as
a valid claim and forthwith pay (except as payment is deferred pursuant to
Section 6.5) the Indemnified Party an amount sufficient to discharge such debt,
liability or obligation; (ii) in the event of a Third Party Claim which is not
acknowledged by the Indemnifying Party to be owing, notify the Indemnified
Party whether the Indemnifying Party elects to undertake the defense thereof
and, if so, thereupon promptly assume and diligently contest such Third Party
Claim with counsel reasonably satisfactory to the Indemnified Party; or (iii)
in the event of a claim by the Indemnified Party for indemnity hereunder which
is challenged by the Indemnifying Party, notify the Indemnified Party of such
challenge. Failure to respond within the appropriate time period following the
receipt of a notice hereunder shall be deemed to constitute a challenge by the
Indemnifying Party of the claims to indemnification by the Indemnified Party.
In the event of such a challenge, the Indemnified Party shall, if the claim is
a Third Party Claim, defend against such claim subject to such Party's right to
be indemnified for all litigation costs to the extent it is ultimately
determined that the Indemnifying Party was obligated (after applying the
limitations of Section 6.6) to provide indemnification with respect to such
Third Party Claim. The Indemnified Party shall not compromise a Third Party
Claim without the prior written consent of the Indemnifying Party (which
consent may not be unreasonably withheld or delayed if the Indemnifying Party
has challenged the claim to indemnification by the Indemnified Party). The
Indemnifying Party shall not compromise a Third Party Claim unless the
compromise includes a complete release of the Indemnified Party and does not
create any obligations of the Indemnified Party.
6.5 TIME OF PAYMENT. The Shareholders may defer any payment due
under Article 6 to the Indemnified Parties, in an amount up to 50% of the
aggregate amount of indemnification (including such deferred payment) which
Shareholders are at the time obligated to pay or have paid, until the date that
is two years after the Final Closing Date, on which date any such deferred
payments shall become due without interest.
Woodson Construction Merger Agreement/Page 55
<PAGE> 64
6.6 LIMITATIONS ON INDEMNIFICATION.
(a) No Indemnified Party shall be entitled to
indemnification from a Shareholder pursuant to Article 6 unless and until the
aggregate of all Losses for which indemnification would (but for the limitation
of this sentence) be required to be paid under Article 6 exceeds $180,000 (the
"Loss Threshold"), provided that if the aggregate Losses for which
indemnification is required to be paid shall exceed such sum then only those
Losses in excess thereof shall be payable (subject to the further limitations
set forth below). If an Indemnifying Party pays indemnification (including
without limitation, the cost of defending a Third Party Claim) that was not
required to be paid due to any limitation set forth in this Section 6.6, then
the Indemnified Party shall, promptly after demand by the Indemnifying Party,
reimburse the latter for such payments without interest. Losses for which
indemnification is required to be paid under Article 6 by reason of any breach
of the representations and warranties of Section 2.1 ("Section 2.1 Losses")
shall not be subject to the Loss Threshold, but the amount of Section 2.1
Losses shall not be counted toward meeting that threshold with respect to other
indemnification claims. If an Indemnified Party's right to indemnification
arises by reason of the breach of any representation or warranty set forth in
Section 2.2 of this Agreement, then each Shareholder will be liable solely for
his or her proportionate share of such indemnification based on the proportion
that the Merger Consideration received by such Shareholder bears to the total
Merger Consideration received by all Shareholders. If an Indemnified Party's
right to indemnification arises by reason of the breach of any representation
or warranty of a Shareholder other than those set forth in Section 2.2 or by
reason of the breach of a covenant of a Shareholder, then (i) the Shareholder
who breached such representation or warranty shall be solely liable for
indemnification for Losses attributable to such breach, and (ii) the
Shareholder who breached such covenant shall be solely liable for
indemnification for Losses attributable to such breach, except that if more
than one Shareholder participated in such breach of a representation, warranty
or covenant then the participating Shareholders, jointly in the proportion that
the Merger Consideration received by each of them bears to the total Merger
Consideration received by all of such participating Shareholders, shall be
liable for indemnification for Losses attributable to such breach of a
representation, warranty or covenant. The maximum liability of any Shareholder
pursuant to Article 6 of this Agreement shall not exceed $600,000 in the
aggregate (the "Individual Limitation"). In addition, the maximum aggregate
liability of the Shareholders under Article 6 of this Agreement shall not
exceed $1,200,000 in the aggregate (the "Aggregate Limitation"). A Shareholder
shall have no further obligations under Article 6 of this Agreement at the
earlier of (i) the time when such Shareholder has paid and/or is obligated to
pay indemnification under Article 6 of this Agreement (including, without
limitation, payments in respect of defending against Third Party Claims and
payments that are deferred to a future date under Section 6.5) equal to the
Individual Limitation, or (ii) the time when all Shareholders have paid and/or
are obligated to pay indemnification under Article 6 of this Agreement
(including, without limitation, payments in respect of defending against Third
Party Claims and payments that are deferred to a future date under Section 6.5)
equal in the aggregate to the Aggregate Limitation. Upon reaching either
limitation, a Shareholder who is then defending against a Third Party Claim
shall turn the defense thereof over to any other Shareholder who then remains
liable for indemnification with respect thereto or, if there is no such other
Shareholder, to the Indemnified Parties, which shall thereafter undertake such
defense at their sole expense.
Woodson Construction Merger Agreement/Page 56
<PAGE> 65
(b) An Indemnified Party shall not be entitled to make
any claim for indemnification against a Shareholder under this Article 6 unless
notice of such claim describing such claim with particularity is given prior to
the date that is 18 months after the Final Closing Date, or, with respect to
the warranties and representations in Section 2.2(v) ("Tax Matters"), the date
that is not later than the expiration of the applicable statute of limitations
for a claim by a taxing authority for any taxes, penalties or interest.
(c) In no event will an Indemnified Party be entitled to
make a claim under Article 6 against a Shareholder for the breach of any
representation, warranty, or covenant if, at or prior to the Final Closing,
such Indemnified Party had knowledge of facts constituting such breach and
failed to notify the Shareholders thereof prior to the Final Closing.
6.7 EFFECTIVE DATE; EXCLUSIVE REMEDY. The obligations of the
parties under Article 6 shall only become effective from and after the Final
Closing. Upon becoming effective, the right to indemnification set forth in
this Article 6 shall be the sole and exclusive remedy of the parties for breach
of any representation, warranty, covenant or agreement set forth in or made
pursuant to this Agreement, and each party covenants and agrees not to seek or
assert any other remedy following the Final Closing, except that any party may
seek such injunctive relief as may be available. Parent and Merger Sub
acknowledge that, except as expressly set forth in this Agreement, there are no
other representations or warranties of the Shareholders or the Company in
connection with the transactions contemplated hereby, all such other
representations and warranties being expressly disclaimed.
ARTICLE 7
STOCK TRANSFER RESTRICTIONS
7.1 COMPLIANCE WITH SECURITIES LAWS. The Shareholders acknowledge
and agree with Parent that the shares of Parent Common Stock issued pursuant to
this Agreement (the "Restricted Shares") to the Shareholders shall not be
transferable except upon the conditions specified in this Article 7, which
conditions are intended, among other things, to ensure compliance with the
provisions of the Securities Act and any applicable state securities laws in
respect of the transfer of such Restricted Shares. The Shareholders
acknowledge and agree that the certificates representing the Restricted Shares
will contain a restrictive legend to the effect that transfer of such shares is
prohibited unless the shares are registered under the Securities Act and
applicable state securities laws, or in the event that such transfer is, in the
opinion of counsel to Parent or counsel to the Shareholders which is reasonably
satisfactory to the Parent, exempt from the registration provisions of the
Securities Act and applicable state securities laws.
7.2 RESTRICTIONS ON TRANSFER. Prior to any transfer or attempted
transfer of Restricted Shares other than the sale of such shares pursuant to
registration under the Securities Act, the Shareholders agree to give written
notice to Parent of its intention to effect such transfer. The notice shall
describe the manner and circumstances of the proposed transfer in detail and
shall contain an undertaking to furnish such other information as may be
required to enable Parent's counsel to render the opinions referred to below,
and shall give the identity and address of the Shareholders' counsel.
Woodson Construction Merger Agreement/Page 57
<PAGE> 66
Parent shall promptly submit a copy of the notice to its counsel, and the
following provisions shall apply:
(a) If, in the opinion of the Parent's counsel or counsel
to the Shareholders which is reasonably satisfactory to the Parent, the
proposed transfer may be effected without registration of the Restricted Shares
under the Securities Act, Parent shall, as promptly as practicable, so notify
the Shareholders who will then be entitled to transfer the Parent Common Stock
in accordance with the terms of the notice delivered by the Shareholders to
Parent.
(b) If, in the opinion of the Parent's counsel or counsel
to the Shareholders which is reasonably satisfactory to the Parent, the
proposed transfer of the Parent Common Stock may not be effected without
registration under the Securities Act, Parent shall, as promptly as
practicable, so notify the Shareholders, and the Shareholders shall not be
allowed to effect the proposed transfer except pursuant to an offering
registered under the Securities Act.
(c) The Shareholders understand and agree that except as
set forth in the Registration Rights Agreement or any similar agreement or this
Agreement, Parent is not obligated to furnish a registration statement under
the Act or any state securities laws covering the Restricted Shares nor is
Parent under any obligation to aid the Shareholders in obtaining any exemption
from any such registration requirements. Each Shareholder also acknowledges
that they shall be responsible for compliance with all conditions of transfer
of the Restricted Shares imposed by any administrator of any state and for the
fees of their counsel. Parent shall be responsible for the fees and expenses
incurred by Parent for legal or accounting services in connection with
reviewing such proposed transfer and issuing opinions in connection therewith.
(d) The Shareholders understand and agree that transfer
of the Restricted Shares may be effected only on the books of Parent, and that
stop transfer instructions will be issued to the transfer agent of Parent
Common Stock in accordance with the legend on any certificate representing the
Restricted Shares. The transfer agent will not remove the legend from any
certificate representing the Restricted Shares without either registration of
the Restricted Shares under the Securities Act and applicable state securities
laws or an opinion of the Parent's counsel or counsel to the Shareholders which
is reasonably satisfactory to the Parent stating that the transfer of the
Restricted Shares is exempt from such registration requirements by reason of
Rule 144(k) under the Securities Act or other exemption.
(e) The foregoing restrictions on transfer of Restricted
Shares shall terminate as to any Shareholder as soon as the provisions of Rule
144(k) under the Securities Act (or any successor rule) become available to
such Shareholder and Parent shall at that time, upon request of any
Shareholder, cause Parent's transfer agent to reissue certificates to such
Shareholder not containing any legend relating to resales of unregistered
securities.
Woodson Construction Merger Agreement/Page 58
<PAGE> 67
ARTICLE 8
FURTHER ASSURANCES
8.1 FURTHER ASSURANCES. At any time and from time to time on and
after the Final Closing Date (a) at the request and expense of Parent or the
Surviving Corporation, the Shareholders shall deliver to Parent (but may retain
copies for any proper purpose) any records, documents and data possessed by the
Shareholders and not previously delivered to Parent or the Surviving
Corporation to which Parent or the Surviving Corporation is entitled and
execute and deliver or cause to be executed and delivered all such deeds,
assignments, consents, documents and further instruments of transfer and
conveyance, and take or cause to be taken all such other actions, as Parent or
the Surviving Corporation may reasonably deem necessary or desirable in order
to fully and effectively vest in Parent or the Surviving Corporation, or to
confirm its title to and possession of, the Company Common Stock or to assist
Parent in exercising rights with respect thereto which Parent or the Surviving
Corporation is entitled to exercise pursuant to the terms of this Agreement;
and (b) Parent or the Surviving Corporation shall execute and deliver or cause
to be executed and delivered such further instruments and take or cause to be
taken such further actions as the Shareholders may reasonably deem necessary or
desirable to carry out the terms and provisions of this Agreement.
8.2 BOOKS AND RECORDS.
(a) Parent agrees that it shall preserve and keep all
books and records relating to the Company in Parent's possession until
the later of December 31, 2003, or six months following the expiration
of the statute of limitations (including extensions thereof)
applicable to the tax returns filed by or with respect to the Company
for taxable periods ending prior to or on the Final Closing Date to
which such books or records are relevant. After such time, before
Parent shall dispose of any of such books and records, at least 90
calendar days' prior written notice to such effect shall be given by
Parent to the Shareholders, and the Shareholders shall be given an
opportunity, at Parent's cost and expense, to remove all or any part
of such books and records as the Shareholders may select, and the
Shareholders may retain copies thereof. Duly authorized
representatives of the Shareholders shall, upon reasonable notice,
have access at any time to such books and records during normal
business hours to examine, inspect and copy such books and records.
(b) In any instance in which any Shareholder or Parent,
as the case may be, is required to prepare or file (or cause to be
filed) tax returns which cover a period that includes the Final
Closing Date or to respond to an audit by the Internal Revenue Service
or other governmental agency with respect to a period prior to the
Final Closing Date, each Shareholder or Parent, as the case may be,
will furnish all information and records reasonably available to it
and reasonably requested of him, her or it and necessary or
appropriate for use in preparing such returns or responding to such
audit. The Shareholders shall at Parent's expense prepare and file,
subject to giving Parent a reasonable opportunity to comment on, tax
returns covering periods ending on the Final Closing Date. The amount
of any dividends permitted by Section 3.25 hereof but not taken by the
Final Closing shall be paid by the
Woodson Construction Merger Agreement/Page 59
<PAGE> 68
Surviving Corporation to the Shareholders in proportion to their
ownership of Company Common Stock as soon thereafter as the unpaid
amount thereof is made known to it by the Shareholders.
(c) Parent, Merger Sub and the Shareholders shall
cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the filing of tax returns and any
audit, litigation or other proceeding with respect to taxes. Such
cooperation shall include the provision of records and information
which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any
material provided hereunder.
ARTICLE 9
MISCELLANEOUS
9.1 EXPENSES, ETC. Whether or not the transactions contemplated
by this Agreement are consummated, none of the parties hereto shall have any
obligation to pay any of the fees and expenses of the other parties incident to
the negotiation, preparation and execution of this Agreement, including the
fees and expenses of counsel, accountants and other experts. The Company shall
pay its own fees and expenses. The Shareholders, the Company, Parent, and the
Surviving Corporation will indemnify the other parties, and hold them harmless
from and against any claims for finders' fees or brokerage commissions in
relation to or in connection with such transactions as a result of any
agreement or understanding between such indemnifying party and any third party.
The Shareholders shall pay and be responsible for any stock transfer Taxes with
respect to the Company Common Stock incident to the Merger. Parent shall pay
and be responsible for any stock transfer Taxes arising from the issuance and
sale of shares of Parent Common Stock hereunder.
9.2 EXECUTION IN COUNTERPARTS. For the convenience of the
parties, this Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
9.3 NOTICES. All notices which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given in writing and delivered or mailed by
registered or certified mail postage prepaid, or sent by telex, telecopier,
facsimile transmission or telegraph as follows:
If to the Shareholders or, prior With a copy to:
to the Final Closing, to the Company:
Louis Y. Fishman
Mr. Louis Woodson Correro Fishman Haygood Phelps
205 Shannon Rd. Weiss Walmsley & Casteix, L.L.P.
Lafayette, LA 70503 201 St. Charles Avenue, 47th Floor
New Orleans, Louisiana 70170
Facsimile: (504) 586-5250
Woodson Construction Merger Agreement/Page 60
<PAGE> 69
If to Parent or the Surviving With a copy to:
Corporation, to:
TransCoastal Marine Services, Inc. James J. Spring, III
505 Lorie Avenue, Suite I Chamberlain, Hrdlicka, White,
Lafayette, Louisiana 70507 Williams & Martin
Attention: President 1200 Smith Street, Suite 1400
Facsimile No. (318) 896-0034 Houston, Texas 77002-4310
Facsimile No. (713) 658-2553
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto. Any notice or other
communication pursuant to this Agreement shall be deemed to have been duly
given or made and to have become effective upon the earliest of (a) when
delivered in hand to the party to which directed, or (b) if sent by first-class
mail postage prepaid, certified mail, return receipt requested, or by telex,
telecopier, facsimile transmission or telegraph and properly addressed as set
forth above, at the time when received by the addressee or (c) with respect to
delivery by certified mail, return receipt requested, when delivery thereof,
properly addressed as set forth above, is made by the U.S. Postal Service.
9.4 WAIVERS. Any party hereto (as to itself, but not as to other
parties without their consent) may, by written notice to the other parties
hereto, (a) extend the time for the performance of any of the obligations or
other actions of the other parties under this Agreement; (b) waive any
inaccuracies in the representations or warranties of another party contained in
this Agreement or in any document delivered pursuant to this Agreement; (c)
waive compliance with any of the conditions or covenants of another party
contained in this Agreement; or (d) waive performance of any of the obligations
of another party under this Agreement. Except as otherwise provided in the
preceding sentence, no action taken pursuant to this Agreement, including
without limitation any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance
with any representation, warranty, covenant or agreement contained in this
Agreement. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed a waiver of any subsequent breach.
9.5 AMENDMENTS, SUPPLEMENTS, ETC. At any time this Agreement may
be amended or supplemented by such additional agreements, articles or
certificates, as may be determined by the parties hereto to be necessary,
desirable or expedient to further the purposes of the Agreement, or to clarify
the intention of the parties hereto, or to add to or modify the covenants,
terms or conditions hereof or to effect or facilitate any governmental approval
or acceptance of this Agreement or to effect or facilitate the filing or
recording of this Agreement or the consummation of any of the transactions
contemplated hereby. Any such instrument must be in writing and signed by all
parties.
9.6 ENTIRE AGREEMENT. This Agreement, its Exhibits and Disclosure
Schedules and the documents executed on the Preliminary Closing Date and the
Final Closing Date in connection herewith, constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral and written, between
the parties hereto with respect to the subject matter hereof. No
representation, warranty, promise, inducement or statement of intention has
been made by any party hereto which is not embodied in this
Woodson Construction Merger Agreement/Page 61
<PAGE> 70
Agreement or such other documents, and no party hereto shall be bound by, or be
liable for, any alleged representation, warranty, promise, inducement or
statement of intention not embodied herein or therein.
9.7 CHOICE OF FORUM; CONSENT TO JURISDICTION. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Texas. Any suit, action or proceeding arising with respect to the validity,
construction, enforcement or interpretation of this Agreement, and all issues
relating in any matter hereto, shall be brought in the United States District
Court for the Western District of Louisiana, or in the event that federal
jurisdiction does not pertain, in the state courts of the State of Louisiana in
Lafayette Parish. Each of the parties hereto hereby submits and consents to
the jurisdiction of such courts for the purpose of any such suit, action or
proceeding and hereby irrevocably waives (a) any objection which any of them
may now or hereafter have to the laying of venue in such courts, and (b) any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
9.8 BINDING EFFECT, BENEFITS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors, assigns, heirs and legatees. Nothing in this Agreement, expressed
or implied, is intended to confer on any person other than the parties hereto
or their respective successors and assigns, and third parties who are expressly
given rights hereunder, any rights, remedies, obligations or liabilities under
or by reason of this Agreement. In particular, but without limitation, no
representation, warranty or covenant of the Company or Shareholders herein or
in any related document shall confer on any present or future shareholder of
Parent or any of the Other Companies any rights or remedies except as is
expressly granted to Relatives.
9.9 ASSIGNABILITY. Neither this Agreement nor any of the parties'
rights hereunder shall be assignable by any party hereto without the prior
written consent of the other parties hereto.
9.10 INVALID PROVISIONS. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future law,
rule or regulation, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof. The remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance herefrom.
Furthermore, in lieu of such illegal, invalid or unenforceable provision, there
shall be added automatically as a part of this Agreement a legal, valid and
enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.
9.11 KNOWLEDGE. As used in this Agreement and the Disclosure
Schedules, the phrase "to the knowledge" of the Company and the Shareholders
means to the actual knowledge of the Shareholders or other representatives of
the Company listed on Exhibit 9.11.
Woodson Construction Merger Agreement/Page 62
<PAGE> 71
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed effective as of the date first above written.
PARENT:
TRANSCOASTAL MARINE SERVICES, INC.,
A DELAWARE CORPORATION
By: /s/ G. DARCY KLUG
-----------------------------
G. Darcy Klug, Vice President
SHAREHOLDERS:
/s/ LOUIS WOODSON
--------------------------------
Louis Woodson
THE COMPANY:
WOODSON CONSTRUCTION COMPANY, INC., A
LOUISIANA CORPORATION
By: /s/ LOUIS WOODSON
-----------------------------
Louis Woodson, President
Woodson Construction Merger Agreement/Page 63
<PAGE> 1
EXHIBIT 10.15
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TRANSCOASTAL MARINE SERVICES, INC.,
KORI ACQUISITION CORP.,
KORI CORPORATION
AND
THE HOLDERS OF THE
OUTSTANDING CAPITAL STOCK
OF
KORI CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE 1
PAGE
<S> <C> <C>
BASIC TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Closings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) Preliminary Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Final Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(c) Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(d) Failure to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Certificates of Merger and Termination; Effective Time . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Delivery of Certificates of Merger and Termination . . . . . . . . . . . . . . . . . . . . . 3
(b) Filing Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Additional Acquisition Transactions; Initial Public Offering of Parent Common Stock . . . . . . . . . 4
1.6 Conversion of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Merger Sub Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Cancellation of the Company Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(d) IPO Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.7 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Delivery of Company Common Stock and Merger Consideration . . . . . . . . . . . . . . . . . . 6
(b) Payment of Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Indemnification of Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(d) No Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(e) Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(f) Payment in Full Satisfaction of All Rights . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.8 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 2
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Representations and Warranties by the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Ownership of Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(e) Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Representations and Warranties of the Shareholders and the Company . . . . . . . . . . . . . . . . . 10
(a) Organization and Qualification, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
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(c) Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(d) Qualification of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(e) Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(f) Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(g) Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(h) Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(i) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(j) Permits and Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(k) Title to Properties; Absence of Liens and Encumbrances, etc. . . . . . . . . . . . . . . . 17
(l) Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(m) Patent, Trademark, etc. Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(n) List of Properties, Contracts and Other Data . . . . . . . . . . . . . . . . . . . . . . . 19
(o) Use of Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(p) Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(q) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(r) Labor and Employment Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(s) Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(t) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(u) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(v) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(w) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(x) Powers of Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(y) Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(z) Tax-Free Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.3 Representations and Warranties by the Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(a) Organization and Qualification, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(b) Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(c) Subsidiaries, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(d) Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(e) Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(f) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(g) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(h) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(i) Tax-Free Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(j) Registration Statement; PPM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(k) No Undisclosed Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(l) Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(m) Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(n) Parent Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(o) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(p) Other Acquisition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(q) Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.4 Representations and Warranties Concerning the Merger Sub. . . . . . . . . . . . . . . . . . . . . . 37
(a) Organization and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(b) Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
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(c) Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 3
ADDITIONAL COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.2 Access to Information by Parent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.3 Access to Information by the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.4 Amendment to Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.5 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(a) Confidential Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(b) Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.6 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.7 The Shareholders' Release of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.8 Real Estate Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(a) Title Insurance Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(b) Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(c) Title Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(d) Phase I Environmental Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(e) Title and Environmental Objections . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
3.9 PPM; Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(a) Company to Provide Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(b) Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(c) Further Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(d) Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.10 Tax-Free Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(a) No Acts Jeopardizing Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(b) Two-Year Holding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
3.11 Satisfaction of Conditions by the Company and Shareholders . . . . . . . . . . . . . . . . . . . . . 48
3.12 Satisfaction of Conditions by Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
3.13 Amendment of Other Acquisition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
3.14 Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.15 Periodic Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.16 Corporate Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.17 Release of Shareholders and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.18 Release and Indemnification from Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.19 Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
3.20 Nature of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
3.21 Indemnification of Directors and Officers of the Company . . . . . . . . . . . . . . . . . . . . . . 50
3.22 Parent's IPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
3.23 Listing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
3.24 Principal Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
3.25 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
3.26 Certain Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
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ARTICLE 4
<S> <C> <C>
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
4.1 Conditions Precedent to the Obligations of the Parent . . . . . . . . . . . . . . . . . . . . . . . 51
(a) Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 52
(b) Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(c) Legal Actions or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(d) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(e) [Intentionally left blank] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(f) Policies of Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(g) Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(h) The Registration Rights Agreements and Shareholders Lock-up Agreements 53
(i) Parent's IPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(j) Lender Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(k) Audit of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(l) Opinion of Counsel for the Company and the Shareholders . . . . . . . . . . . . . . . . . . 53
(m) The Shareholders Release of the Company; Corporate Records . . . . . . . . . . . . . . . . 53
(n) All Proceedings to be Satisfactory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
4.2 Conditions Precedent to the Obligations of the Shareholders and the Company. . . . . . . . . . . . . 53
(a) Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 54
(b) Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(c) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(d) Delivery of PPM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(e) [Intentionally left blank] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(f) Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(g) Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(h) All Proceedings to be Satisfactory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(i) Opinion of Counsel for The Parent and the Merger Sub . . . . . . . . . . . . . . . . . . . 55
(j) Legal Actions or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(k) IPO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(l) Release. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(m) Simultaneous Closings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(n) No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(o) Shareholder Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(p) Listing of Parent Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
(q) Reliance Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
(r) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 5
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.1 Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
(a) Prior to the Preliminary Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
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(b) After the Preliminary Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 6
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
6.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
6.2 Indemnification by the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
6.3 Indemnification by Parent and Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . 58
6.4 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
6.5 Time of Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.6 Limitations on Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.7 Effective Date; Exclusive Remedy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE 7
STOCK TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.1 Compliance with Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.2 Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE 8
FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.1 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.2 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE 9
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.1 Expenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.2 Execution in Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.4 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.5 Amendments, Supplements, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.6 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.7 Choice of Forum; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.8 Binding Effect, Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.9 Assignability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.10 Invalid Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
9.11 Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
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EXHIBITS:
EXHIBIT 1.3(a)(1) - Advance Certificate of Merger
EXHIBIT 1.3(a)(2) - Certificate of Termination
EXHIBIT 1.5 - List of Other Companies
EXHIBIT 1.7 - Letter of Transmittal
EXHIBIT 1.8 - Registration Rights Agreement
EXHIBIT 3.1 - Conduct of Business
EXHIBIT 3.1(l) - Production Bonuses
EXHIBIT 3.1(m) - Assets
EXHIBIT 3.16 - Persons Receiving Corporate Indemnification
EXHIBIT 3.17 - Persons Receiving Releases
EXHIBIT 3.21 - Directors and Officers of the Company Receiving
Indemnification
EXHIBIT 4.1(g)(1) - List of Individuals with Employment Agreements
EXHIBIT 4.1(g)(2) - Form of Employment Agreement
EXHIBIT 4.1(l) - Form of Opinion From Correro Fishman Haygood Phelps Weiss
Walmsley & Casteix L.L.P.
EXHIBIT 4.2(i) - Opinion of Chamberlain, Hrdlicka, White, Williams & Martin
EXHIBIT 9.11 - Shareholders and Other Representatives of the Company
SCHEDULES:
SHAREHOLDERS DISCLOSURE SCHEDULE
Schedule 2.1(b) - Approvals
Schedule 2.1(d) - Holders of Company Common Stock
vi
<PAGE> 8
COMPANY DISCLOSURE SCHEDULE
Schedule 2.2(a) - Jurisdictions Where Qualified
Schedule 2.2(c) - Subsidiaries of the Company
Schedule 2.2(e) - Approvals
Schedule 2.2(h) - Changes and Events since December 31, 1996
Schedule 2.2(h)(1) - Permitted Exceptions
Schedule 2.2(j) - Permits and Legal Compliance
Schedule 2.2(k) - Properties and Assets of the Company
Schedule 2.2(l) - Software
Schedule 2.2(m) - Intellectual Property
Schedule 2.2(n) - List of Real Estate Owned by the Company
Schedule 2.2(n)(1) - Description of Real Estate Owned by the Company
Schedule 2.2(n)(2) - Real Estate Leased by the Company
Schedule 2.2(n)(3) - Contracts and Commitments of the Company
Schedule 2.2(q) - Litigation, Actions and Proceedings
Schedule 2.2(r) - Employment Agreements, Benefit Plans, and Compensation
Schedule 2.2(s) - Accounts Receivable of the Company
Schedule 2.2(t) - Insurance Coverage; Self Insurance
Schedule 2.2(u) - Company Benefit Plan
Schedule 2.2(v) - Tax Audits; Basis in Assets; NOLs
BUYER DISCLOSURE SCHEDULE
Schedule 2.3(a) - Jurisdictions Where Qualified
Schedule 2.3(c) - Subsidiaries of Parent
Schedule 2.3(f) - Approvals
vii
<PAGE> 9
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") made on this 28th
day of August 1997 by and among TRANSCOASTAL MARINE SERVICES, INC., a Delaware
corporation (the KORI ACQUISITION CORP., a Louisiana corporation (the "Merger
Sub"), KORI CORPORATION, a Louisiana corporation (the "Company"), and the
undersigned holders of all of the outstanding capital stock of the Company (the
"Shareholders").
WHEREAS, the respective Boards of Directors of the Parent, Merger Sub
and the Company have each approved the merger of the Company with and into
Merger Sub (the "Merger") pursuant to this Agreement and the applicable
statutes of the State of Louisiana whereby each issued and outstanding share of
Common Stock, $10.00 par value per share, of the Company ("Company Common
Stock") will be converted into the right to receive certain shares of common
stock, $.001 par value per share, of the Parent ("Parent Common Stock"), all as
provided herein;
WHEREAS, the Merger has been approved, as required by applicable law,
by the Parent, acting as sole shareholder of Merger Sub, and by the
Shareholders, as the holders of all of the outstanding capital stock of the
Company;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization pursuant to Section 368(a)(2)(D) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
ARTICLE 1
BASIC TRANSACTION
1.1 MERGER. Subject to the terms and conditions of this Agreement
and in accordance with the Louisiana Business Corporation Law ("Applicable
Corporate Law"), at the Effective Time (as defined in Section 1.3(c)) the
Company shall be merged with and into the Merger Sub. Merger Sub, as the
surviving entity following the Merger, is sometimes referred to in this
Agreement as the "Surviving Corporation."
1.2 CLOSINGS.
(a) Preliminary Closing. A preliminary closing
("Preliminary Closing") of the transactions contemplated by this
Agreement shall take place at the offices of Chamberlain, Hrdlicka,
Kori Agreement and Plan of Merger//Page 1
<PAGE> 10
White, Williams & Martin, in Houston, Texas, commencing at 9:00 a.m.
local time on such date ("Preliminary Closing Date") on which Parent
or the Shareholders shall have notified the other at least three
business days in advance, provided that the Preliminary Closing shall
occur simultaneously with the execution and delivery of the
underwriting agreement ("Underwriting Agreement") relating to the
purchase by the underwriters of shares of Parent Common Stock for
resale to the public in connection with the IPO (defined in Section
1.5). At the Preliminary Closing the following deliveries will be
made to the Exchange Agent (defined in Section 1.7) to be held by such
Agent in escrow pending disposition in accordance with Section 1.2(b)
below: (i) the Shareholders will deliver four multiple originals of
the various certificates, instruments, and documents referred to in
Section 4.1 below (except that only the original documents referred to
in Section 4.1(m)(ii) need be delivered), (ii) Parent will deliver
four multiple originals of the various certificates, instruments, and
documents referred to in Section 4.2 below, and (iii) Parent will make
the deliveries contemplated by Section 1.3(a). Each of such
certificates, instruments, and documents to be delivered in accordance
with clauses (i) and (ii) that are to be executed by the parties will
be fully executed, but dated in blank, except that the certificates to
be delivered in accordance with Section 4.1(a), 4.1(b), 4.2(a) and
4.2(b) shall be dated the Preliminary Closing Date.
(b) Final Closing. The closing ("Final Closing") of the
transactions contemplated by this Agreement shall take place at the
same place and hour as hereinabove provided for the Preliminary
Closing on such date ("Final Closing Date") as Parent shall determine
and of which Parent shall give Shareholders and the Exchange Agent at
least twenty-four hours' advance notice, provided that the Final
Closing shall occur contemporaneously with the closing of the IPO. At
the Final Closing Parent will deposit the Merger Consideration
(defined in Section 1.6(c)) with the Exchange Agent; will deliver, and
will cause the managing underwriter of the IPO to deliver, a
certificate to the Exchange Agent to the effect that the closing of
the IPO has occurred or is occurring simultaneously with the Final
Closing; and will deliver a certificate to the Exchange Agent to the
effect that the "final closings" under the Other Acquisition
Agreements are occurring simultaneously with the Final Closing. Upon
receipt of the Merger Consideration and the certificates referred to
above (the "Required Deliveries"), the Exchange Agent shall insert the
date of the Final Closing in all of the undated documents held by the
Exchange Agent in accordance with Section 1.2(a) and shall (A) deliver
two complete sets of multiple originals to the Shareholders, on the
one hand, and Parent, on the other hand, (B) take such action as may
be required by Section 1.3(b), and (C) destroy the Certificate of
Termination (defined in Section 1.3(a)); provided that the Exchange
Agent shall not make such deliveries or take such actions if the
Exchange Agent is aware of any injunction or order that would be
breached by the occurrence of the Final Closing.
(c) Other Actions. In addition to the actions to be
taken at the Preliminary Closing and Final Closing as described
herein, the parties shall take such other customary actions as may be
necessary to effectuate such closings.
(d) Failure to Close. If: (1) the Preliminary Closing
occurs but the Final Closing has not occurred by the earlier of (i)
five business days after the Preliminary Closing or (ii) 11:00
Kori Agreement and Plan of Merger//Page 2
<PAGE> 11
a.m. Houston, Texas time on the effective date specified in the
Advance Certificate of Merger (defined in Section 1.3(a)), or (2) the
Required Deliveries are not made at the Final Closing, or (3) the
Underwriting Agreement or this Agreement is purported to be
terminated, then the Exchange Agent will not make the deliveries
contemplated by Section 1.2(b) but rather will destroy all of the
multiple originals which were delivered to such Agent in accordance
with Sections 1.2(a) and 1.3(a), except that the Exchange Agent will
deliver to the Shareholders the documents referred to in Section
4.1(m)(ii) and further except that if the Exchange Agent has by then
previously filed the Advance Certificate of Merger it shall promptly
(and in no event later than 11:30 a.m. Houston, Texas time on the
effective date specified in the Advance Certificate of Merger) date
(with the then current date) and file the Certificate of Termination
with the Louisiana Secretary of State. In that event this Agreement
will terminate, and such termination will be deemed a termination
under Section 5.1(a)(1).
1.3 CERTIFICATES OF MERGER AND TERMINATION; EFFECTIVE TIME
(a) Delivery of Certificates of Merger and Termination.
At the Preliminary Closing Parent will deliver to the Exchange Agent a
certificate of merger in the form of Exhibit 1.3(a)(1) (the "Advance
Certificate of Merger"), which specifies that the effective time of
the Merger is 12:00 noon Houston, Texas time on the Specified Date
(defined in Section 1.3(b)), and a certificate of termination in the
form of Exhibit 1.3(a)(2) (the "Certificate of Termination"). Each
instrument will be a fully executed original but will be undated, and
the date on which the Merger becomes effective will be left blank in
the Advance Certificate of Merger.
(b) Filing Certificate of Merger. Upon receiving a
request made by the managing underwriter or its counsel not sooner
than the second business day following the Preliminary Closing Date
that states that the underwriters have confirmed to their customers
sales of shares of Parent Common Stock in the IPO, that the closing of
the IPO is scheduled for a specified date (the "Specified Date") not
later than the fifth business day following the Preliminary Closing,
and that such underwriter has no reason to believe that such closing
will not occur, the Exchange Agent will, as promptly as possible, date
the Advance Certificate of Merger the then current date, fill in
therein the Specified Date as the effective date of the Merger, file
the Advance Certificate of Merger with the Louisiana Secretary of
State and promptly notify Parent and the Shareholders of the making of
such filing.
(c) Effective Time. The effective time of the Merger
("Effective Time") will be the time specified in the Advance
Certificate of Merger filed with the Louisiana Secretary of State.
1.4 EFFECTS OF THE MERGER.
(a) At the Effective Time, (i) the Company shall merge
with and into the Merger Sub and as a result thereof, the separate
existence of the Company shall cease; (ii) the Articles of
Incorporation of the Merger Sub, as in effect immediately prior to the
Effective Time, shall be the
Kori Agreement and Plan of Merger//Page 3
<PAGE> 12
Articles of Incorporation of the Surviving Corporation, except that
the Articles of Incorporation of the Merger Sub shall be amended to
provide that the name of the Surviving Corporation shall be changed to
"Woodson Construction Company, Inc.," (iii) the Bylaws of the Merger
Sub as in effect immediately prior to the Effective Time shall be the
Bylaws of the Surviving Corporation, and (iv) the directors and
officers of the Merger Sub immediately prior to the Effective Time
shall become the directors and officers of the Surviving Corporation,
until the earlier of their resignation or removal or until their
respective successors are duly elected or appointed, as the case may
be.
(b) At and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, immunities and
franchises, of a public as well as of a private nature, previously
belonging to the Company and Merger Sub; and all property (real,
personal and mixed), and all debts due on whatever account, including
subscriptions to shares, and all other choses in action, and all and
every other interest of or belonging to or due to each of the Company
and Merger Sub shall be transferred to, and vested in, the Surviving
Corporation without further act or deed; and all such property, rights
and privileges, powers and franchises and all and every other interest
shall be thereafter the property of the Surviving Corporation as they
were of the Company and Merger Sub; and the title to any immovable
property, or interest therein, whether by deed or otherwise, shall not
revert or be in any way impaired by reason of the Merger. The
Surviving Corporation shall be responsible and liable for all the
liabilities and obligations of the Company and Merger Sub and any
claim existing, or action or proceeding pending, by or against the
Company or Merger Sub may be prosecuted against the Surviving
Corporation. Neither the rights of creditors nor any liens upon the
property of the Company or Merger Sub shall be impaired by the Merger,
and all debts, liabilities and duties of each of the Company and
Merger Sub shall attach to the Surviving Corporation, and may be
enforced against it to the same extent as if such debts, liabilities
and duties had been incurred or contracted by it, all in accordance
with provisions of the Applicable Corporate Law and the terms of this
Agreement.
1.5 ADDITIONAL ACQUISITION TRANSACTIONS; INITIAL PUBLIC OFFERING
OF PARENT COMMON STOCK. The Merger is part of a series of additional
transactions that relate to the Parent's intent to acquire the companies listed
on Exhibit 1.5 attached hereto (the "Other Companies") and to consummate an
initial public offering of the Parent Common Stock resulting in net proceeds to
the Parent of at least $45,000,000 on a firm underwriting basis (the "IPO").
The Parent will acquire the Other Companies from various parties (the "Other
Acquisitions") pursuant to separate acquisition agreements ("Other Acquisition
Agreements") to be executed prior to or concurrently with this Agreement.
1.6 CONVERSION OF STOCK. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Company Common Stock or capital stock of the Merger Sub:
(a) Merger Sub Capital Stock. Each share of capital
stock of the Merger Sub issued and outstanding at the Effective Time,
shall remain outstanding and shall be unchanged after
Kori Agreement and Plan of Merger//Page 4
<PAGE> 13
the Merger and shall thereafter constitute all of the issued and
outstanding capital stock of the Surviving Corporation.
(b) Cancellation of the Company Treasury Stock. All
shares of Company Common Stock that are owned by the Company as
treasury stock shall be canceled and retired and shall cease to exist
and no stock of the Parent or other consideration shall be delivered
in exchange therefor.
(c) Merger Consideration. Each share of the Company
Common Stock (other than shares to be canceled in accordance with
Section 1.6(b)), shall be converted at the Effective Time into the
right to receive the number of validly issued, fully paid and
nonassessable shares of Parent Common Stock resulting from dividing
$6,800 by the Share Price (as defined below). The total consideration
payable to the Shareholders with respect to all of their shares of
Company Common Stock is sometimes called the "Merger Consideration".
The aggregate amount of the Merger Consideration (valuing shares of
Parent Common Stock at the Share Price) is $5,100,000. The Merger
Consideration per share shall be adjusted as necessary so that the
aggregate Merger Consideration totals the foregoing amount. The
Shareholders shall also be entitled to cash in lieu of a fractional
share pursuant to Section 1.7(d) below. If between the date of this
Agreement and the Effective Time, the outstanding shares of Parent
Common Stock or Company Common Stock shall have been changed into a
different number of shares or a different class, by reason of any
stock dividend, subdivision, reclassification, recapitalization,
split-up, combination, or exchange of shares or the like, the
conversion formula in this Section 1.6(c) shall be correspondingly
adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split-up, combination or exchange
of shares. All such converted shares of Company Common Stock shall no
longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration
upon the surrender of such certificate in accordance with Section 1.7,
without interest.
(d) IPO Statement. At the Preliminary Closing and the
Final Closing, Parent shall deliver to the Shareholders and the
Exchange Agent a statement (the "IPO Statement") reporting (i) the
price per share paid or to be paid by the public for shares of Parent
Common Stock (the "IPO Price") in the IPO, and (ii) the lowest price
per share of the Parent Common Stock at which the Parent has agreed to
issue Parent Common Stock pursuant to any of the Other Acquisition
Agreements (the "Lowest Acquisition Price"). The lower of the IPO
Price and the Lowest Acquisition Price is referred to in this
Agreement as the "Share Price." The IPO Statement shall report the
quotient resulting from dividing $5,100,000 by the Share Price. Such
quotient shall represent the number of shares of Parent Common Stock
included in the Merger Consideration.
Kori Agreement and Plan of Merger//Page 5
<PAGE> 14
1.7 EXCHANGE OF CERTIFICATES.
(a) Delivery of Company Common Stock and Merger
Consideration. Prior to the Preliminary Closing, the Parent will
deliver to each of the Shareholders a letter of transmittal, in
substantially the form attached hereto as Exhibit 1.7, to be used for
the purpose of surrendering all certificates representing Company
Common Stock in exchange for the right to receive the Merger
Consideration. As provided in Section 1.2(b), Parent shall at the
Final Closing deposit the Merger Consideration with an exchange agent
selected by Parent and reasonably acceptable to the Shareholders (the
"Exchange Agent"), and each Shareholder shall at or after the Final
Closing surrender for exchange certificates which prior to the
Effective Time represent shares of Company Common Stock, together with
a properly completed and executed letter of transmittal (with such
Shareholder's signature guaranteed by an eligible guarantor
institution pursuant to any medallion signature guarantee program), to
the Exchange Agent. At the time of such surrender of Company Common
Stock to the Exchange Agent, each Shareholder shall be entitled to
receive in exchange therefor the Merger Consideration. If such
surrender is made at or prior to the Final Closing, then the
Shareholder shall receive the Merger Consideration from the Exchange
Agent at the Final Closing. After the Effective Time and until the
outstanding certificates formerly representing shares of the Company
Common Stock are so surrendered, each outstanding certificate which,
prior to the Effective Time, represented the Company Common Stock
shall be deemed for all corporate purposes (except the payment of
dividends) to evidence ownership of the Merger Consideration into
which the shares of the Company Common Stock represented thereby prior
to such Effective Time shall have been converted.
(b) Payment of Dividends. Until certificates
representing shares of Company Common Stock have been surrendered, no
dividend payable to holders of record of the Parent Common Stock shall
be paid to the holders of such outstanding stock certificates of the
Company in respect thereof. Upon surrender of such outstanding
certificates, however, there shall be paid to the holders of the
certificates for the Parent Common Stock issued in exchange therefor
the amount of dividends, if any, which theretofore became payable with
respect to such full shares of the Parent Common Stock, but which have
not theretofore been paid on such stock. No interest shall be payable
with respect to the payment of any dividends unless the Parent shall
fail to make payment in accordance with this Section 1.7(b).
(c) Indemnification of Exchange Agent . If the Exchange
Agent becomes involved in any litigation, claim or controversy in
connection with its actions under this Agreement, the Parent shall
indemnify, defend and save Exchange Agent from all losses, costs,
damages, expenses and attorneys' fees suffered or incurred by Exchange
Agent as a result thereof, other than those caused by negligence or
misconduct.
(d) No Fractional Shares. Notwithstanding anything in
this Agreement to the contrary, no certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of certificates representing Company Common
Stock, and
Kori Agreement and Plan of Merger//Page 6
<PAGE> 15
such fractional share interests will not entitle the owner thereof to
vote or to any rights of a stockholder of the Parent. In lieu of any
such fractional shares, each Shareholder who would otherwise be
entitled to a fraction of a share of Parent Common Stock, after
aggregating all fractional shares to which such Shareholder is
entitled under this Agreement and any Other Acquisition Agreements to
which they may be a party, shall be entitled to receive from the
Exchange Agent a cash payment equal to such remaining fraction
multiplied by the Share Price. The Parent shall make available to the
Exchange Agent at the Final Closing the amount of cash required to
make any cash payments in lieu of remaining fractional shares.
(e) Assignments. No assignment, transfer or other
disposition of record or beneficial ownership of any shares of Company
Common Stock may be made on or after the date hereof without Parent's
written consent, which consent will not be unreasonably withheld or
delayed.
(f) Payment in Full Satisfaction of All Rights. The
delivery of the Merger Consideration to the Shareholders with respect
to the Company Common Stock shall be deemed to be payment in full
satisfaction of all rights pertaining to the outstanding Company
Common Stock.
1.8 REGISTRATION RIGHTS AGREEMENT. Parent and each Shareholder
shall at the Preliminary Closing execute and deliver to the Exchange Agent a
Registration Rights Agreement in the form attached hereto as Exhibit 1.8.
Provisions of the Registration Rights Agreement shall be no less favorable to
the Shareholders than provisions of any other agreement of the Parent providing
registration rights to the shareholders of any Other Companies.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES BY THE SHAREHOLDERS. Each of
the Shareholders represents and warrants to the Parent and the Merger Sub that
the statements contained in this Section 2.1 are correct as to himself or
herself as of the date of this Agreement and will be correct as to himself or
herself as of the Preliminary Closing Date and the Final Closing Date (as
though made then), except as set forth in the disclosure schedule delivered by
the Shareholders to the Parent and the Merger Sub on the date hereof, as
supplemented or amended in accordance with Section 3.4 of this Agreement (such
schedule, as so supplemented or amended, the "Shareholders Disclosure
Schedule"). The Shareholders Disclosure Schedule is arranged in sections and
paragraphs corresponding to the lettered and numbered sections and paragraphs
contained in this Section 2.1. References in Section 2.1 to a numbered
schedule mean the section of the Shareholder Disclosure Schedule that
corresponds with that number; for example, references to "Schedule 2.1(b)" mean
section 2.1(b) of the Shareholder Disclosure Schedule. The Shareholder
Disclosure Schedule constitutes an exception to each warranty or representation
set forth herein, whether or not such warranty or representation specifically
refers to the Shareholder Disclosure Schedule; accordingly
Kori Agreement and Plan of Merger//Page 7
<PAGE> 16
each warranty or representation set forth herein is deemed to be preceded by
the clause: "Except as set forth in the Shareholder Disclosure Schedule . . .".
(a) Qualification. Such Shareholder has the legal power
and authority to own his or her properties and assets.
(b) Authority Relative to Agreement. Such Shareholder
has the full right, power, and legal authority to execute and deliver
this Agreement. Such Shareholder has the full right, power, and legal
authority to perform this Agreement and to consummate the transactions
contemplated on his or her part hereby. No proceeding on the part of
such Shareholder, and, except for those approvals described in
Schedule 2.1(b), no notice, consent, authorization, order or approval
of, filing or registration with, any governmental commission, board or
other regulatory body or any bank, bonding company, lender, surety,
customer, supplier, or any other person whatsoever is required for or
in connection with the execution and delivery of this Agreement by
such Shareholder. No proceeding on the part of such Shareholder, and,
except for those approvals described in Schedule 2.1(b), no notice,
consent, authorization, order or approval of, filing or registration
with, any governmental commission, board or other regulatory body or
any bank, bonding company, lender, surety, customer, supplier, or any
other person whatsoever is required for or in connection with the
performance by such Shareholder of this Agreement and the consummation
by such Shareholder of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by such Shareholder and
is a valid and binding agreement of such Shareholder, enforceable
against such Shareholder in accordance with its terms, except as such
enforcement is subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting
creditors' rights.
(c) Non-Contravention. The execution, delivery and
performance of this Agreement by such Shareholder do not, and the
consummation by such Shareholder of the transactions contemplated
hereby will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation, or acceleration of
any obligation or to the loss of a material benefit under, or result
in the creation or imposition of any material lien, charge, pledge,
security interest or other encumbrance upon any of the property or
assets of such Shareholder pursuant to any provision of, any mortgage,
lien, lease, agreement, license, instrument, law, ordinance,
regulation, order, arbitration award, judgment or decree to which such
Shareholder is a party or by which any of such Shareholder's assets
are bound. The execution, delivery and performance of this Agreement
by such Shareholder do not and the consummation by such Shareholder of
the transactions contemplated hereby will not violate or conflict with
any other restriction of any kind or character to which such
Shareholder is subject or by which any of such Shareholder's assets
may be bound.
Kori Agreement and Plan of Merger//Page 8
<PAGE> 17
(d) Ownership of Company Common Stock. Such Shareholder
holds of record and owns beneficially the number of shares of Company
Common Stock set forth next to his or her name in Schedule 2.1(d).
Such Shareholder is, and as of the Final Closing Date will be (except
as permitted under Section 1.7(e)), the sole and exclusive lawful
owner of such shares of Company Common Stock free and clear of all
liens, claims, encumbrances and rights of others of any nature
whatsoever, with full power to vote all such shares on any matter that
may properly come before shareholders of the Company, and such
Shareholder may exercise such voting power on any matter without
violation of the rights of any person. There are no rights, warrants
or options outstanding with respect to such capital stock, and such
Shareholder has no obligation to deliver capital stock of the Company
or any of its Subsidiaries (as defined below) to any person as of the
date hereof, at any time on or prior to the Final Closing Date,
thereafter or as a result thereof or in connection therewith except as
provided in this Agreement.
(e) Restricted Securities.
(1) Such Shareholder acknowledges that the shares
of Parent Common Stock which such Shareholder shall acquire
pursuant to the Merger and this Agreement have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), and are being acquired for such
Shareholder's own account for investment and not with a view
to the distribution thereof. The Parent Common Stock will be
subject to the stock transfer restrictions described in
Article 7 below.
(2) Such Shareholder has the knowledge and
experience in financial and business matters to enable him or
her to evaluate the merits and risks of approving this
Agreement and the transactions contemplated herein and
acquiring shares of Parent Common Stock.
(3) Such Shareholder is able to bear the economic
risks of his or her investment in the Parent Common Stock.
(4) Such Shareholder has been represented by
legal counsel in this transaction and such Shareholder and his
or her advisors, including such counsel, have been given the
opportunity to ask questions of, and receive answers from, the
officers of the Parent concerning the terms of the
transactions contemplated by this Agreement and the affairs
and the business and financial condition of the Parent.
(5) Such Shareholder has received a confidential
private placement memorandum concerning the Parent and an
investment in shares of Parent Common Stock (the "PPM"), and
such Shareholder and his or her advisors have been given
access to all documents, books and additional information
concerning Parent which they have requested regarding Parent.
Kori Agreement and Plan of Merger//Page 9
<PAGE> 18
(6) Such Shareholder has made such inquiries by
himself or herself and through his or her advisors in making a
decision to approve this Agreement and the transactions
contemplated herein as such Shareholder has deemed necessary
and advisable.
(7) Such Shareholder acknowledges and agrees that
the Parent Common Stock issued to such Shareholder may not be
disposed of except in accordance with the requirements of the
Securities Act and any applicable state securities laws.
(8) None of the representations made by the
Shareholders in this Section 2.1(e) shall affect any of
Shareholders' rights under any other section of this
Agreement.
2.2 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND THE
COMPANY. The Shareholders and the Company represent and warrant to the Parent
and the Merger Sub that the statements contained in this Section 2.2 are correct
as of the date of this Agreement and will be correct as of the Preliminary
Closing Date and the Final Closing Date (as though made then), except as
otherwise set forth in the disclosure schedule delivered by the Shareholders
and the Company to the Parent and the Merger Sub on the date hereof, as
supplemented or amended in accordance with Section 3.4 of this Agreement (such
schedule, as so amended or supplemented, the "Company Disclosure Schedule").
The Company Disclosure Schedule is arranged in sections and paragraphs
corresponding to the lettered and numbered sections and paragraphs contained in
this Section 2.2. References in Section 2.2 to a numbered schedule mean the
section of the Company Disclosure Schedule that corresponds with that number;
for example, references to "Schedule 2.2(a)" mean Section 2.2(a) of the Company
Disclosure Schedule. The Company Disclosure Schedule constitutes an exception
to each warranty or representation set forth herein, whether or not such
warranty or representation specifically refers to the Company Disclosure
Schedule; accordingly each warranty or representation set forth herein is
deemed to be preceded by the clause: "Except as set forth in the Company
Disclosure Schedule . . .".
(a) Organization and Qualification, etc. The Company is
a corporation duly organized, validly existing and in good standing
under the laws of the State of Louisiana, has the full right, power
and legal authority and, to the knowledge of the Shareholders and the
Company, all licenses, permits, titles and authorizations necessary
to own all of its properties and assets and to carry on its business
as it is now being conducted, and is duly qualified to do business and
is in good standing in each jurisdiction as set forth in Schedule
2.2(a) where, to the reasonable belief of the Shareholders and the
Company, such qualification is appropriate. The copies of the
Company's Articles of Incorporation and Bylaws, as amended to date,
which have been delivered to Parent are complete and correct, and such
instruments, as so amended, are in full force and effect. The Company
is qualified to transact business as a foreign corporation and is in
good standing in all jurisdictions in
Kori Agreement and Plan of Merger//Page 10
<PAGE> 19
which it is engaged in business and in which its properties or assets
are located, which foreign jurisdictions are listed in Schedule
2.2(a).
(b) Capital Stock. The entire authorized capital stock
of the Company consists of 5,000 shares of Company Common Stock of
which 750 shares of Company Common Stock are validly issued and
outstanding, fully paid and nonassessable, all of which are held of
record and beneficially by the Shareholders. No shares of the capital
stock of the Company have been issued in violation of the preemptive
rights of any past or present shareholder. No shares of the capital
stock of the Company are in the treasury of the Company. There are no
outstanding subscriptions, shares of capital stock, calls, warrants,
options, contracts, commitments, or demands relating to the capital
stock of the Company or other agreements of any character under which
the Company would be obligated to issue or purchase shares of its
capital stock. There is no voting agreement, voting trust, proxy, or
other agreement or understanding with respect to the voting of the
capital stock of the Company. The Company has no commitments to issue
or sell any securities or obligations convertible into or exchangeable
for, or giving any person any right to subscribe for or acquire from
the Company, any shares of its capital stock and no securities or
obligations evidencing any such rights are outstanding.
(c) Subsidiaries. With respect to each corporation,
firm, partnership or other business entity in which the Company holds
an interest, Schedule 2.2(c) sets forth the name, the interest of the
Company, and the capitalization of such entity (each such entity in
which the Company owns or controls more than 50% of the voting
securities, directly or indirectly, or in which the Company acts as
manager or general partner is hereinafter a "Subsidiary"). Except as
described on Schedule 2.2(c), neither the Company nor any Subsidiary
owns or has any right or obligation to acquire any class of securities
(including, without limitation, debt securities) issued by any person
or company and neither the Company nor any Subsidiary is a party to or
bound to any partnership, joint venture, voluntary association, or
other agreement with any person for the conduct of any business.
(d) Qualification of Subsidiaries. Each Subsidiary is
duly organized, validly existing and in good standing under the laws
of its state of organization, with the corporate or organizational
power to own its property and carry on its business as it is now being
conducted. All of the issued and outstanding shares of capital stock
of each Subsidiary have been duly authorized and are validly issued,
fully paid, and nonassessable, and were not issued in violation of the
preemptive rights of any past or present shareholder. The Company and
its Subsidiaries hold of record and own beneficially all of the
outstanding shares or other interests in each Subsidiary of the
Company held by them, 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
Kori Agreement and Plan of Merger//Page 11
<PAGE> 20
require any of the Company and its Subsidiaries to sell, transfer, or
otherwise dispose of any capital stock of any of its Subsidiaries or
that could require any Subsidiary to issue, sell, or otherwise cause
to become outstanding any of its own capital stock. There are no
outstanding stock appreciation, phantom stock, profit participation,
or similar rights with respect to any Subsidiary. There are no voting
trusts, proxies, or other agreements or understandings with respect to
the voting of any capital stock of any Subsidiary. None of the
Company and its Subsidiaries controls directly or indirectly or has
any direct or indirect equity participation in any corporation,
partnership, trust, or other business association which is not a
Subsidiary of the Company.
(e) Authority Relative to Agreement. The Company has the
full right, power, and legal authority to execute and deliver this
Agreement. The Company has the full right, power, and legal authority
to perform this Agreement and to consummate the transactions
contemplated on the part of the Company hereby. The execution and
delivery by the Company of this Agreement and the consummation by the
Company of the transactions contemplated on its part hereby have been
duly authorized by its Board of Directors and the Shareholders in
their capacity as the holders of all of the capital stock of the
Company. To the knowledge of the Shareholders and the Company, no
proceeding on the part of the Company, and, except for those approvals
described in Schedule 2.2(e), no notice, consent, authorization, order
or approval of, filing or registration with, any governmental
commission, board or other regulatory body, or any bank, bonding
company, lender, surety, customer, supplier, or any other person
whatsoever is required for or in connection with the Company's
execution and delivery of this Agreement. This Agreement has been
duly executed and delivered by the Company and is a valid and binding
agreement of the Company, enforceable against the Company in
accordance with its terms, except as such enforcement is subject to
the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws relating to or affecting creditors' rights.
(f) Non-Contravention. The execution, delivery, and
performance of this Agreement by the Company do not and the
consummation by the Company of the transactions contemplated hereby
will not (1) to the knowledge of the Shareholders and the Company,
violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, government agency, or court to which the Company or any of
its assets is subject or (2) violate any provision of the Articles of
Incorporation or Bylaws of the Company or any Subsidiary, or (3) to
the knowledge of the Shareholders and the Company, violate or result
in, with the giving of notice or the lapse of time or both, the
violation of any provision of, or result in the acceleration of or
entitle any party to accelerate (whether after the giving of notice or
lapse of time or both) any obligation under, or result in the creation
or imposition of any lien, charge, pledge, security interest or other
encumbrance upon any of the property of the Company or any Subsidiary
pursuant to any provision of any mortgage, lien, lease, contract,
agreement, license, or instrument to which the Company or any
Subsidiary is a party or by
Kori Agreement and Plan of Merger//Page 12
<PAGE> 21
which any of their respective assets are bound. The execution,
delivery and performance of this Agreement by the Company do not and
will not violate or conflict with any other restriction of any kind or
character to which the Company or any Subsidiary is subject or by
which any of their respective assets may be bound, and the same do not
and will not constitute an event permitting termination of any such
mortgage, lien, lease, agreement, license or instrument to which the
Company or any Subsidiary is a party or by which any of their
respective assets are bound.
(g) Financial Information. The Shareholders have
previously furnished Parent with true and complete copies of the
balance sheets of the Company and its Subsidiaries as of December 31,
1996 and December 31, 1995, and the related statements of income,
retained earnings and cash flows for each of the three years in the
period ended December 31, 1996, together with the report of Phillips,
Goodson & Co., the independent accountants of the Company, with
respect to such financial statements. Such financial statements have
been prepared in conformity with Generally Accepted Accounting
Principals ("GAAP") consistently applied and, to the knowledge of the
Shareholders and the Company, present fairly the financial position
and results of operations of the Company and its consolidated
Subsidiaries as of and for the respective periods then ended. The
Shareholders have also previously furnished the Parent with a copy of
the unaudited monthly balance sheets of the Company as of the last day
of each month from January through June 1997, and the related monthly
unaudited statement of income, retained earnings and cash flows of the
Company with respect to each month from January through June 1997
certified by the chief executive officer and the chief accounting
officer of the Company (including such certificates, the "Unaudited
Monthly Financial Statements"). To the knowledge of Shareholders and
the Company, such financial statements have been prepared in
conformity with GAAP consistently applied and present fairly the
financial position and results of operations of the Company and its
consolidated Subsidiaries as of and for the subject periods, except
for normal recurring year-end adjustments and except for the absence
of footnotes. The Company and its Subsidiaries do not have any
liabilities or obligations of a type which should be included in or
reflected as such in financial statements prepared in accordance with
GAAP, whether related to tax or non-tax matters, accrued or
contingent, due or not yet due, liquidated or unliquidated, or
otherwise, except as and to the extent disclosed or reflected in such
financial statements. Collectively, the financial statements
described in this Section 2.2(g) are the "Company Financial
Statements."
(h) Absence of Certain Changes or Events. Since December
31, 1996, except to the extent described in Schedule 2.2(h) of the
Company Disclosure Schedule, and except as contemplated by this
Agreement or in connection with the transactions contemplated by this
Agreement:
Kori Agreement and Plan of Merger//Page 13
<PAGE> 22
(1) none of the Company and its Subsidiaries 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;
(2) none of the Company and its Subsidiaries has
entered into any agreement, contract, lease, permit or license
(or series of related agreements, contracts, leases, permits
and licenses) either involving more than $20,000 or outside
the ordinary course of business;
(3) to the knowledge of the Shareholders and the
Company, no party (including any of the Company and its
Subsidiaries) has breached, accelerated, terminated, modified,
or canceled any agreement, contract, lease, permit or license
(or series of related agreements, contracts, leases, permits
and licenses) involving more than $20,000 to which any of the
Company and its Subsidiaries is a party or by which any of
them is bound ("Company Contracts");
(4) none of the Company and its Subsidiaries has
imposed or suffered to exist any lien, encumbrance or security
interest upon any of its assets, tangible or intangible (other
than the Permitted Exceptions, as defined below);
(5) none of the Company and its Subsidiaries has
made any capital expenditure (or series of related capital
expenditures) either involving more than $20,000 or outside
the ordinary course of business;
(6) none of the Company and its Subsidiaries has
made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other
corporation, partnership, limited liability company or other
person (or series of related capital investments, loans, and
acquisitions) either involving more than $20,000 or outside
the ordinary course of business;
(7) none of the Company and its Subsidiaries 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 $25,000 singly or $50,000 in the aggregate;
(8) none of the Company and its Subsidiaries has
delayed or postponed the payment of accounts payable and other
liabilities outside the ordinary course of business;
(9) none of the Company and its Subsidiaries has
canceled, compromised, satisfied, settled, waived, or released
any right or claim (or series of related rights
Kori Agreement and Plan of Merger//Page 14
<PAGE> 23
and claims) either involving more than $20,000 or outside the
ordinary course of business;
(10) none of the Company and its Subsidiaries has
granted any license or sublicense of any rights under or with
respect to any Intellectual Property (as defined in Section
2.2(m) below);
(11) there has been no change made or authorized in
the Articles of Incorporation or bylaws of any of the Company
and its Subsidiaries (except that the Articles may be changed
to include the exculpation provisions permitted by law);
(12) none of the Company and its Subsidiaries 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;
(13) none of the Company and its Subsidiaries 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, except for dividends and
distributions to shareholders of S-corporations which in the
aggregate do not exceed 43.2% of the Company's pre-tax net
income during 1997 through the date of the latest such
distribution and except as permitted by Section 3.1(m);
(14) none of the Company and its Subsidiaries has
experienced any damage, destruction, or loss to its property
in excess of $20,000 which is not covered by insurance;
(15) none of the Company and its Subsidiaries 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;
(16) none of the Company and its Subsidiaries has
entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(17) none of the Company and its Subsidiaries has
granted any increase in compensation to any of its directors,
officers, employees, consultants or agents in excess of five
percent of such person's base compensation and discretionary
bonuses to officers and employees in the aggregate amount of
up to 10% of the pre-tax net income of the Company during 1997
up to the date of the latest such payment;
Kori Agreement and Plan of Merger//Page 15
<PAGE> 24
(18) none of the Company and its Subsidiaries 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 other employee benefit plan);
(19) none of the Company and its Subsidiaries has
made any other change in employment terms for any of its
directors, officers, and employees outside the ordinary course
of business;
(20) none of the Company and its Subsidiaries has
made or pledged to make any material charitable or other
contribution outside the ordinary course of business;
(21) to the knowledge of the Shareholders and the
Company, 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
Company or its Subsidiaries;
(22) to the knowledge of the Shareholders and the
Company, there has not been any material adverse change in the
business, financial condition, operation, results of
operation, or future prospects of the Company and its
Subsidiaries;
(23) there have not been any work interruptions, or
to the knowledge of the Shareholders and the Company, labor
grievances or employee claims filed (the existence of which is
known, or under the normal course of business should be known,
to the Company) against the Company or its Subsidiaries;
(24) there has not been any merger or consolidation
or agreement to merge or consolidate with or into any other
corporations; and
(25) none of the Company and its Subsidiaries has
committed to do any of the foregoing.
"Permitted Exceptions" shall mean (i) mechanic's,
materialman's, warehouseman's and carrier's liens and purchase money
security interests arising in the ordinary course of business, a
correct and complete list of which is set forth on Schedule 2.2 of the
Company Disclosure Schedule or arising by operation of law; (ii) liens
for taxes and assessments not yet payable; (iii) liens for taxes,
assessments and charges and other claims, the validity of which the
Company or the Shareholders are contesting in good faith, a correct
and complete list of which is set forth on Schedule 2.2; and (iv)
imperfections of title, liens, security interests, claims and other
charges and encumbrances the existence of which does not adversely
affect the operation, value, use or enjoyment of the affected asset or
property.
Kori Agreement and Plan of Merger//Page 16
<PAGE> 25
(i) Undisclosed Liabilities. To the knowledge of the
Shareholders and the Company, the Company and its Subsidiaries have no
liabilities (and there is no known basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against the Company or its Subsidiaries giving rise
to any liability), except for (i) liabilities set forth on the face of
the Company Financial Statements (rather than in any notes thereto)
and (ii) liabilities which have arisen after May 31, 1997 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).
(j) Permits and Legal Compliance. To the knowledge of
the Shareholders and the Company, the Company and its Subsidiaries
have all permits, licenses, orders, qualifications, and approvals of
all governmental and regulatory authorities material to the conduct of
their business, a correct and complete list of which is set forth in
Schedule 2.2. To the knowledge of the Shareholders and the Company,
all such permits, licenses, orders and approvals are in full force and
effect, and no suspension or cancellation of any of them is pending or
threatened. To the knowledge of the Shareholders and the Company,
none of such permits, licenses, orders or approvals, and no
application for any of such permits, licenses, orders or approvals,
will be adversely affected by the consummation of the transactions
contemplated by this Agreement. To the knowledge of the Shareholders
and the Company, the Company and its Subsidiaries have 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 the Company or its Subsidiaries alleging
any failure so to comply.
(k) Title to Properties; Absence of Liens and
Encumbrances, etc. To the knowledge of the Shareholders and the
Company, the Company and its Subsidiaries have good and marketable
title to all of the real, tangible personal and mixed properties and
assets owned by it and used in its business, free and clear of any
liens, charges, pledges, mortgages, conditional sales contracts,
security interests or other encumbrances (other than Permitted
Exceptions), except as reflected in the Company Financial Statements.
A correct and complete list of all such properties and assets (other
than properties and assets described in Sections 2.2(l), 2.2(m) and
2.2(n)) with a historical cost in excess of $5,000 is set forth on
Schedule 2.2(k). The properties and assets of the Company and its
Subsidiaries (other than the properties and assets described in
Sections 2.2(l), 2.2(m) and 2.2(n), which sections contain the
Company's and Shareholders' representations and warranties with
respect to intangible properties and assets) are free and clear of any
liens, charges, pledges, mortgages, conditional sales contracts,
security interests or other encumbrances (other than Permitted
Exceptions), except as reflected in the Company Financial Statements.
Kori Agreement and Plan of Merger//Page 17
<PAGE> 26
(l) Software. Schedule 2.2(l) contains a list or
description by type of all operating and applications computer
programs and data bases ("Software") which the Company or any
Subsidiary uses or has available for use and plans to use, and such
Software constitutes all the Software which is used to operate the
business of the Company and its Subsidiaries as currently conducted.
All such Software is owned outright by the Company or its Subsidiaries
except as indicated on Schedule 2.2(l). As to any Software which
Schedule 2.2(l) indicates is not owned by the Company or its
Subsidiaries, the owner of such Software is identified on Schedule
2.2(l) and the Company and its Subsidiaries have the right to use the
same pursuant to valid leases or licenses therefor. To the knowledge
of the Shareholders and the Company, none of the Software used by or
available to the Company or its Subsidiaries, and no use thereof,
infringes upon or violates any patent, copyright, trade secret or
other proprietary right of anyone else and no claim with respect to
any such infringement or violation is known to be threatened.
(m) Patent, Trademark, etc. Claims. To the knowledge of
the Shareholders and the Company, the Company or its Subsidiaries is
the owner or licensee of all patents, patent licenses,
trademarks/servicemarks/trade names, trademark/servicemark/trade name
registrations, copyrights, and copyright registrations or any other
intellectual property ("Intellectual Property") used in the operation
of the Company's business as presently conducted and purported to be
owned or licensed by it; and a correct and complete list of such
Intellectual Property is set forth in Schedule 2.2(m) of the Company
Disclosure Schedule. Each item of Intellectual Property owned or used
by the Company or its Subsidiaries immediately prior to the Final
Closing will be owned or available for use by the Company or its
Subsidiaries on the same terms and conditions immediately after the
Final Closing. To the knowledge of the Shareholders and the Company,
each of the Company and its Subsidiaries owns or has the right to use
all such Intellectual Property. To the knowledge of the Shareholders
and the Company, each of the Company and its Subsidiaries has not
infringed, and is not now infringing, on any trade name, trademark,
service mark, or copyright belonging to any other person, firm or
corporation and has not received any notice of such infringement.
Neither the Company nor any Subsidiary is a party to any license,
sublicense, agreement or arrangement pursuant to which the Company or
its Subsidiaries uses Intellectual Property except as shown in
Schedule 2.2(m). With respect to each such license, sublicense,
agreement or arrangement set forth in Schedule 2.2(m), to the
knowledge of the Shareholders and the Company:
(1) the license, sublicense, agreement or
arrangement covering the item is legal, valid, binding,
enforceable, and in full force and effect;
(2) the license, sublicense, agreement or
arrangement will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms
immediately following the Final Closing;
Kori Agreement and Plan of Merger//Page 18
<PAGE> 27
(3) no party to such license, sublicense,
agreement or arrangement 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; and
(4) no party to the license, sublicense,
agreement or arrangement has repudiated any provision thereof.
Each of the Company and its Subsidiaries owns, or holds adequate
licenses or other rights to use, its trade names in the business as
now conducted by it, and such use does not, and will not, conflict
with, infringe on, or otherwise violate any rights of others. The
Shareholders have delivered to Parent correct and complete copies of
all such licenses, sublicenses agreements and arrangements (as amended
to date) disclosed on Schedule 2.2(m).
(n) List of Properties, Contracts and Other Data. The
Company and its Subsidiaries own or lease all property and tangible
assets used in the conduct of their business as presently conducted.
To the knowledge of the Shareholders and the Company, and except as
reflected in such Schedule 2.2(n), all of the property of the Company
and its Subsidiaries is in existence and is in good condition and
repair, except for reasonable wear and tear, and in conformity in all
material respects with all building, zoning, OSHA, Coast Guard,
safety, or other applicable ordinances, regulations, or laws.
Schedule 2.2(n) contains a list setting forth with respect to the
Company and its Subsidiaries as of the date hereof the following:
(1) Schedule 2.2(n)(1) lists and describes briefly
all real property which the Company and each Subsidiary owns.
With respect to each such parcel of owned real property
(collectively, the "Owned Real Property"):
(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 Owned Real
Property subject thereto and except as set forth on
Schedule 2.2(n)(1);
(ii) there are no pending or, to the knowledge of
the Shareholders and the Company, threatened
condemnation proceedings, lawsuits, or administrative
actions or other matters relating to the Owned Real
Property which could reasonably be expected to
adversely affect the current ownership, maintenance,
use, occupancy, or value thereof;
Kori Agreement and Plan of Merger//Page 19
<PAGE> 28
(iii) to the knowledge of the Shareholders and the
Company, 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 is 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, except
as described on Schedule 2.2(n)(1), the land does not
serve any adjoining property for any purpose
inconsistent with the use of the land, and the Owned
Real 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) to the knowledge of the Shareholders and the
Company, 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 such approvals and
applicable laws, rules, and regulations;
(v) except as described on Schedule 2.2(n)(2) 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 Company
and its Subsidiaries) in possession of the parcel of
real property, other than tenants in possession of
property leased or subleased by the Company or any of
its Subsidiaries under any leases or subleases
disclosed on Schedule 2.2(n)(2) which tenants are in
possession of space to which they are entitled;
(viii) to the knowledge of the Shareholders and the
Company, except as described on Schedule 2.2(n)(1),
to the extent necessary or desirable for the use or
operation of facilities located on real property
owned by the Company or any Subsidiary, such
facilities are supplied with utilities and other
services, including gas, electricity, water,
telephone, sanitary sewer, and storm sewer, all of
which services are adequate in accordance with all
applicable laws, ordinances, rules, and regulations;
Kori Agreement and Plan of Merger//Page 20
<PAGE> 29
(ix) to the knowledge of the Shareholders and the
Company, except as described on Schedule 2.2(n)(1),
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;
(x) Except as described on Schedule 2.2(n)(1), the
Owned Real Property is not located within an area
that has been designated by the Federal Insurance
Administration, the Army Corps of Engineers or any
other governmental agency or body as being subject to
special flooding hazards; and
(xi) Except as described on Schedule 2.2(n)(1), the
improvements on the Property (A) have been
constructed in a good and workmanlike manner, free
from defects in workmanship and material and, to the
best of Shareholders' and Company's knowledge, do not
require any repair or replacement other than minor,
routine maintenance; and (B) have been constructed
and are being occupied, maintained, and operated in
compliance with all applicable laws, regulations,
insurance requirements, contracts, leases, permits,
licenses, ordinances, restrictions, building setback
lines, covenants, reservations, and easements, and
the Shareholders and Company have received no notice,
written or oral, claiming any violation of any of the
same or requesting or requiring the performance of
any repairs, alterations, or other work in order to
so comply.
(2) Schedule 2.2(n)(2) of the Company Disclosure
Schedule lists and describes briefly all real property leased
or subleased by or to the Company or any of its Subsidiaries
(whether as lessor or as lessee). Schedule 2.2(n)(2) also
identifies the properties leased or subleased to the Company
or any of its Subsidiaries for which title insurance policies
are to be procured as provided in Section 3.8 below. The
Shareholders have delivered to the Parent correct and complete
copies of the leases and subleases listed in Schedule
2.2(n)(2) (as amended to date) . With respect to each lease
and sublease listed in Schedule 2.2(n)(2);
(i) to the knowledge of the Shareholders and the
Company, the lease or sublease is legal, valid,
binding, enforceable, and in full force and effect;
(ii) to the knowledge of the Shareholders and the
Company, the lease or sublease will continue to be
legal, valid, binding, enforceable, and in full force
and effect on identical terms immediately following
the consummation of the transactions contemplated
hereby;
Kori Agreement and Plan of Merger//Page 21
<PAGE> 30
(iii) to the knowledge of the Shareholders and the
Company, 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) to the knowledge of the Shareholders and the
Company, no party to the lease or sublease has
repudiated any provision thereof;
(v) to the knowledge of the Shareholders and the
Company, except as described on Schedule 2.2(n)(2),
there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or
sublease;
(vi) to the knowledge of the Shareholders and the
Company, with respect to each sublease, the
representations and warranties set forth in
subsections (i) through (v) above are correct and
complete with respect to the underlying lease;
(vii) none of the Company and its Subsidiaries has
assigned, transferred, conveyed, mortgaged, deeded in
trust, or encumbered any interest in the leasehold or
subleasehold;
(viii) to the knowledge of the Shareholders and the
Company, 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; and
(ix) to the knowledge of the Shareholders and the
Company, all facilities leased or subleased
thereunder are supplied with utilities and other
services necessary for the operation of said
facilities.
(3) Schedule 2.2(n)(3) of the Company Disclosure
Schedule lists and describes briefly all contracts and
commitments (including, without limitation, mortgages,
indentures and loan agreements) to which the Company or any
Subsidiary is a party, or to which it or any of its assets or
properties are subject and which are not specifically referred
to elsewhere in Section 2.2, provided that there need not be
listed in the Company Disclosure Schedule (unless required
pursuant to the preceding subsections of this Section 2.2(n))
any contract or commitment incurred in the ordinary course of
business which requires payments to or by the Company and its
Subsidiaries during its remaining life aggregating less than
$25,000 or which is terminable by the Company or any
Subsidiary within thirty days without payment of a premium or
penalty.
Kori Agreement and Plan of Merger//Page 22
<PAGE> 31
Correct and complete copies of all documents, and descriptions
complete in all material respects of all oral agreements or
commitments (if any), referred to in this Section 2.2(n) have been
provided to Parent or its counsel. To the knowledge of the
Shareholders and the Company, none of the Company, the Shareholders
and the Subsidiaries has been notified of any claim that any contract
listed in Schedule 2.2(n)(3) of the Company Disclosure Schedule is not
valid and enforceable in accordance with its terms for the periods
stated therein, or that there is under any such contract any existing
material default or event of default or event which with notice or
lapse of time or both would constitute such a default.
(o) Use of Real Property. None of the Shareholders, the
Company and the Subsidiaries has received notice of violation of any
applicable zoning or building regulation, ordinance or other law,
order, regulation or requirement relating to the operations of the
Company or its Subsidiaries, or any notice of default under any
material lease, contract, commitment, license or permit, relating to
the use and operation of the owned or leased real property listed in
the Company Disclosure Schedules. To the knowledge of the
Shareholders and the Company, none of the Shareholders, the Company
and the Subsidiaries has received notice that any plant, facility or
other building which is owned or covered by a lease set forth in the
Company Disclosure Schedule does not substantially conform in all
material respects with all applicable ordinances, codes, regulations
and requirements, and none of the Shareholders, the Company and the
Subsidiaries has received notice that any law or regulation presently
in effect or condition precludes or restricts continuation of the
present use of such properties.
(p) Environmental Laws. To the knowledge of the
Shareholders and the Company, (i) the Company and its Subsidiaries,
including, without limitation, their businesses, facilities, property,
vessels, and equipment have been and are currently in compliance, in
all material respects, with all applicable federal, state, and local
laws, rules, and regulations of all authorities, including without
limitation, applicable Environmental Laws (as hereinafter defined),
and (ii) the Company and its Subsidiaries have all permits,
certificates, and licenses required to operate their businesses,
facilities, property, vessels, and equipment, including, without
limitation, any relating to the generation, processing, treatment,
discharge, storage, transport, disposal, or other management of
chemicals and other hazardous materials, of waste materials of any
kind, and those relating to the protection of environmentally
sensitive areas. To the knowledge of the Shareholders and the
Company, there is no material adverse effect on any of the facilities,
properties, vessels or equipment of the Companies, or with respect to
function, use, or value of any such assets, resulting from any
hazardous or toxic substance, or any pollutant or contaminant, or as a
result of exposure to petroleum or any by-product thereof.
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, and the Occupational Safety and Health Act of
1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal,
Kori Agreement and Plan of Merger//Page 23
<PAGE> 32
state, local, and foreign governments (and all agencies thereof)
concerning pollution or protection of the environment, public 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 in ambient air,
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.
(q) Litigation. Except as provided on Schedule 2.2(q),
there are no actions, suits, audits, investigations, unfair labor
practices charges, complaints, claims, grievances or proceedings or,
to the knowledge of the Shareholders and the Company, any audits or
investigations with respect to the Company or any Subsidiary pending
against the Company or any Subsidiary at law or in equity, or before
or by any federal, state, municipal, foreign or other governmental
department, commission, board, bureau, agency or instrumentality, nor
to the knowledge of the Shareholders and the Company, are there any
such actions, suits, audits, investigations, unfair labor practices
charges, complaints, claims, grievances or proceedings that are known
to be threatened against the Company or any Subsidiary.
(r) Labor and Employment Matters.
(1) Schedule 2.2(r) of the Company Disclosure
Schedule sets forth all collective bargaining agreements,
employment and consulting agreements (other than consulting
agreements terminable by the Company or any Subsidiary within
60 days without payment of a premium or a penalty), executive
compensation plans, bonus plans, deferred compensation
agreements, employee pension plans or retirement plans,
employee profit sharing plans, employee stock purchase and
stock option plans, group life insurance, hospitalization
insurance or other plans or arrangements providing for
benefits to employees of the Company or any Subsidiary.
(2) To the knowledge of the Shareholders and the
Company, there are no controversies between the Company (or
any Subsidiary) and any employees or any unresolved labor
union grievances or unfair labor practice or labor arbitration
proceedings pending or threatened, related to the Company (or
any Subsidiary) and there are not any organizational efforts
presently being made or threatened in an organized fashion
involving any of the employees of the Company or any
Subsidiary.
(3) None of the Shareholders, the Company and the
Subsidiaries has received notice of any claim that it has not
complied with any laws relating to the employment of labor,
including any provisions thereof relating to wages, hours,
collective bargaining, the payment of social security and
similar taxes, equal employment opportunity, employment
discrimination and employment safety, or that it is liable
Kori Agreement and Plan of Merger//Page 24
<PAGE> 33
for any arrears of wages or any taxes or penalties for failure
to comply with any of the foregoing.
(4) Schedule 2.2(r) of the Company Disclosure
Schedule sets forth the current annual compensation (or basis
thereof) of all employees of the Company and its Subsidiaries
(by position or by department) as of June 30, 1997.
(s) Accounts Receivable. To the knowledge of the
Shareholders and the Company (A) the accounts receivable reflected on
the balance sheet of the Company as of December 31, 1996, and all
accounts receivable arising between December 31, 1996 and the date
hereof, arose from bona fide transactions in the ordinary course of
business; (B) the services involved have been provided to the account
obligor and no further services are required to be provided in order
to entitle the Company or its assignees to collect the accounts
receivable in full; (C) no such account has been assigned or pledged
to any other person, firm or corporation; and (D) unless paid prior to
the Preliminary Closing Date, the accounts receivable are or will be
as of the Preliminary Closing Date current and collectible net of the
respective reserves, if any, shown on the Company Financial Statements
(which reserves are adequate and calculated consistent with past
practices). There is no contest, claim or right of set-off, other
than in the ordinary course of business, under any of the Company
Contracts with any obligor of an account receivable relating to the
amount or validity of such account receivable. Schedule 2.2(s) sets
forth a complete and accurate list of all accounts receivable as of
June 30, 1997, which list indicates the aging of such accounts
receivable.
(t) Insurance. Schedule 2.2(t) 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 the Company and
its Subsidiaries have been a party, a named insured, or otherwise the
beneficiary of coverage at any time within the past year (except as to
insurance policies owned by third party vendors, contractors and
clients of the Company which have contractually named the Company or
its Subsidiaries as insured or provided other benefits of coverage as
a result of contractual liability coverage, which policies need not be
listed on Schedule 2.2(t) but shall be made available for inspection
by Parent's representatives):
(1) the name, address, and telephone number of the
agent;
(2) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(3) the policy number and the period of coverage;
Kori Agreement and Plan of Merger//Page 25
<PAGE> 34
(4) 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
(5) a description of any retroactive or "swing"
premium adjustments or other loss-sharing arrangements.
To the knowledge of the Shareholders and the Company, with respect to
each such insurance policy owned by the Company or any of its
Subsidiaries: (A) the policy is legal, valid, binding, enforceable,
and in full force and effect with respect to the periods and risks
which such policy purports to insure; (B) the policy will continue to
be legal, valid, binding, enforceable, and in full force and effect in
accordance with its terms on the same terms immediately following the
consummation of the transactions contemplated hereby; (C) neither the
Company nor any of its Subsidiaries 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 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 (D) no party to the policy has repudiated any
provision thereof. To the knowledge of the Shareholders and the
Company, the Company and each of its Subsidiaries has been covered
during the past five years by insurance in scope and amount customary
and reasonable for the businesses in which it has engaged during the
aforementioned period. Schedule 2.2(t) of the Company Disclosure
Schedule describes any self-insurance arrangements affecting the
Company and its Subsidiaries. "Self insurance arrangements" means any
arrangement by which the Company or its Subsidiaries has assumed risks
in scope and amount customarily insured by businesses in the Company's
industry and geographic region.
(u) Employee Benefits.
(1) To the knowledge of the Shareholders and the
Company, the Company and its Subsidiaries have complied and
currently are in compliance, both as to form and operation, in
all material respects with the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Internal Revenue Codes of 1954 and/or 1986,
as amended, respectively (for purposes of this Section 2.2(u)
only, the "Code"), with respect to each "employee benefit
plan" as defined under Section 3(3) of ERISA. Each employee
benefit plan of the Company and its Subsidiaries ("Plan") is
described in Schedule 2.2(u) of the Company Disclosure
Schedule, and a copy of each Plan is attached thereto.
(2) The Company and its Subsidiaries have never
maintained, adopted or established, contributed or been
required to contribute to, or otherwise participated or been
required to participate in, a "multiemployer plan" (as defined
in Section 3(37) of ERISA). No amount is due as owing from
the Company or any Subsidiary
Kori Agreement and Plan of Merger//Page 26
<PAGE> 35
on account of a "multiemployer plan" (as defined in Section
3(37) of ERISA) or on account of any withdrawal therefrom.
(3) The Company and its Subsidiaries have not
incurred any liability with respect to a Plan including,
without limitation, under ERISA (including, without
limitation, Title I or Title IV of ERISA, other than liability
for premiums due to the Pension Benefit Guaranty Corporation
("PBGC")), the Code or other applicable law, which has not
been satisfied in full, and, to the knowledge of the
Shareholders and the Company, no event has occurred, and
there exists no known condition or set of circumstances, which
could result in the imposition of any liability with respect
to a Plan, including, without limitation, under ERISA
(including, without limitation, Title I or Title IV of ERISA),
the Code or other applicable law with respect to the Plan.
(4) The Company and its Subsidiaries have no
outstanding commitments to provide or to cause to be provided
any severance or other post-employment benefit, salary
continuation, termination, disability, death, retirement,
health or medical benefit or similar benefit to any person
(including, without limitation, any former or current
employee) that has not been reflected in the Company Financial
Statements or is not included in any Plan disclosed in
Schedule 2.2(u).
(v) Tax Matters.
(1) To the knowledge of the Shareholders and the
Company, all federal, state, local and foreign tax returns
required to be filed by the Company and its Subsidiaries prior
to the date hereof have been filed on a timely basis with the
appropriate governmental authorities in all jurisdictions in
which such tax returns are required to be filed, and all such
returns are correct and complete. Shareholders have delivered
to Parent correct and complete copies of all federal income
tax returns, examination reports, and statements of
deficiencies asserted against or agreed to by the Company or
any Subsidiary since January 1, 1992. To the knowledge of the
Shareholders and the Company, neither the Company nor its
Subsidiaries are currently the subject of any audit,
examination or any similar investigation by any governmental
authority. Schedule 2.2(v) of the Company Disclosure Schedule
sets forth all audits, examinations or similar investigations
of the Company and its Subsidiaries by any governmental
authority since January 1, 1992.
(2) To the knowledge of the Shareholders and the
Company, all federal, state, local and foreign income,
franchise, sales, use, property, and all other taxes, fees,
assessments, or other governmental charges (including
withholding taxes), and all interest and penalties thereon
(all of the foregoing collectively, "Taxes") due from or
properly accruable by the Company and its Subsidiaries have
been fully and timely
Kori Agreement and Plan of Merger//Page 27
<PAGE> 36
paid or, in the cases of Taxes for which payment is not yet
required, properly and fully accrued for on the Company
Financial Statements or in Schedule 2.2(v) with respect to all
taxable periods ending on or prior to the date of this
Agreement and interim periods through the date of this
Agreement.
(3) None of the Company and its Subsidiaries has
filed a consent under Section 341(f) of the Code concerning
collapsible corporations. None of the Shareholders, the
Company or any Subsidiary is a party to any agreement,
contract or arrangement that would, by reason of the
consummation of any of the transactions contemplated by this
Agreement, individually or in the aggregate, result in the
payment of any "excess parachute payment" within the meaning
of Section 280G of the Code. None of the assets of the
Company or any Subsidiary is required to be treated as being
owned by any other person pursuant to the "safe harbor"
leasing provisions of Section 168 of the Internal Revenue Code
of 1954, as in effect prior to the repeal of said leasing
provisions.
(4) None of the Company and its Subsidiaries is a
party to any Tax allocation or sharing agreement. None of the
Company and its Subsidiaries (A) has been a member of an
affiliated group filing a consolidated federal income tax
return (other than a group the common parent of which was the
Company or a Related Company) or (B) has any liability for the
taxes of any person (other than any of the Company or a
Related Company and their respective Subsidiaries) under
Treas. Reg. Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor,
by contract, or otherwise.
(5) Schedule 2.2(v) sets forth the following
information with respect to each of the Company and its
Subsidiaries (or, in the case of clause (B) below, with
respect to each of the Subsidiaries) as of the most recent
practicable date: (A) the basis of the Company or Subsidiary
in its assets; (B) the basis of the stockholder(s) of the
Subsidiary in its stock (or the amount of any excess loss
account); (C) the amount of any net operating loss, net
capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to
the Company or Subsidiary; and (D) the amount of any deferred
gain or loss allocable to the Company or Subsidiary arising
out of any Deferred Intercompany Transaction (as defined in
Treas. Reg. Section 1.1502-13).
(w) Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by the
Shareholders and the Company directly with the Parent, without the
intervention of any other person on behalf of the Shareholders or the
Company in such manner as to give rise to any valid claim by any other
person against the Shareholders or the Company for a finder's fee,
brokerage commissions, or similar payment.
Kori Agreement and Plan of Merger//Page 28
<PAGE> 37
(x) Powers of Attorney. There are no outstanding powers
of attorney executed on behalf of the Company.
(y) Investment Company. Each of the Company or its
Subsidiaries is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "holding company", a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding
company" or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(z) Tax-Free Reorganization. With respect to the
qualification of the Merger as a reorganization pursuant to Section
368(a)(2)(D) of the Code:
(1) There is no plan or intention on the part of
Shareholders to sell, exchange or otherwise dispose of a
number of shares of Parent Common Stock received in the Merger
which would reduce the Shareholders' aggregate ownership of
such Parent Common Stock to a number of shares having a value,
as of the Effective Time, of less than fifty percent of the
value of all of the formerly outstanding capital stock of the
Company as of the same date.
(2) Immediately following the Merger, the
Surviving Corporation will hold at least 90 percent of the
fair market value of the Company's net assets and at least 70%
of the fair market value of the Company's gross assets.
(3) The liabilities of the Company assumed by the
Surviving Corporation and the liabilities to which the assets
of the Company are subject were incurred in the Company's
ordinary course of business.
(4) If the Merger is effected, the Company and
the Shareholders will each pay their respective expenses, if
any, incurred in connection with the Merger, and neither the
Company nor the Shareholders will pay any Parent or Merger Sub
expenses incurred in connection with the Merger.
(5) At the Effective Time, the Company will not
have any outstanding warrants, options, convertible
securities, or any other right pursuant to which any person
could acquire stock in the Company that, if exercised or
converted, would affect the Parent's retention of control of
the Surviving Corporation.
(6) The Company is not an investment company
within the meaning of Section 368(a)(2)(F) of the Code.
Kori Agreement and Plan of Merger//Page 29
<PAGE> 38
(7) At the Effective Time, the fair market value
of the assets of the Company will exceed the sum of its
liabilities, plus the amount of liabilities, if any, to which
its assets are subject.
(8) The Company is not under the jurisdiction of
a court in a case under Title 11 of the United States Code, or
a receivership, foreclosure, or similar proceeding in a
federal or state court.
2.3 REPRESENTATIONS AND WARRANTIES BY THE PARENT. The Parent
represents and warrants to the Shareholders and the Company that the statements
contained in this Section 2.3 are correct as of the date of this Agreement and
will be correct as of the Preliminary Closing Date and the Final Closing Date
(as though made then), except as set forth in the disclosure schedule delivered
by the Parent to the Shareholders and the Company on the date hereof , as
supplemented or amended in accordance with Section 3.4 of this Agreement (such
schedule, as so supplemented or amended, the "Parent Disclosure Schedule").
The Parent Disclosure Schedule will be arranged in sections and paragraphs
corresponding to the lettered and numbered sections and paragraphs contained in
this Section 2.3. References in Section 2.3 to a numbered schedule mean the
section of the Parent Disclosure Schedule that corresponds with that number;
for example, references to "Schedule 2.3(a)" mean Section 2.3(a) of the Parent
Disclosure Schedule. The Parent Disclosure Schedule constitutes an exception
to each warranty or representation set forth herein, whether or not such
warranty or representation specifically refers to the Parent Disclosure
Schedule; accordingly each warranty or representation set forth herein is
deemed to be preceded by the clause: "Except as set forth in the Parent
Disclosure Schedule . . .".
(a) Organization and Qualification, etc. The Parent is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, has corporate power and
authority to own all of its properties and assets and to carry on its
business as it is now being conducted, and is duly qualified to do
business and is in good standing in Louisiana and each other
jurisdiction where, to the reasonable belief of Parent, such
qualification is necessary or appropriate. Each such jurisdiction is
identified in Schedule 2.3(a). The copies of the Parent's Certificate
of Incorporation and Bylaws, as amended to date, which have been
delivered to the Shareholders are complete and correct, and such
instruments, as so amended, are in full force and effect.
(b) Capital Stock. The entire authorized capital of
Parent consists of 25,000,000 shares of capital stock which is divided
into (1) 3,000,000 shares of restricted common stock having a par
value of $.001 per share, (ii) 20,000,000 shares of common stock
having a par value of $.001 per share (i.e., Parent Common Stock), and
(3) 2,000,000 shares of preferred stock having a par value of $.001
per share.
(c) Subsidiaries, etc. Other than the Merger Sub, and
except (i) as set forth in Schedule 2.3(c) and (ii) for Parent's
interest in the transactions described in this Agreement
Kori Agreement and Plan of Merger//Page 30
<PAGE> 39
and the Other Acquisition Agreements (collectively, the "Consolidation
Agreements"), the Parent does not own of record or beneficially,
directly or indirectly, (1) any shares of outstanding capital stock or
securities convertible into capital stock of any other corporation or
(2) any participating interest in any partnership, joint venture or
other non-corporate business enterprise. Merger Sub and any corporate
or non-corporate business entity listed in Schedule 2.3(c) are in
Sections 2.3 and 2.4 collectively called the "Subsidiaries." None of
the Subsidiaries has any material assets or liabilities.
(d) Authority Relative to Agreement. Parent has the
corporate power and authority to execute, deliver and perform this
Agreement, the other Consolidation Agreements and any amendments
thereto and all agreements and instruments to be executed and
delivered by Parent or any of its Subsidiaries in accordance with this
Agreement or any other Consolidation Agreement or any amendments
hereto or thereto and to consummate the transactions contemplated on
the part of Parent hereby and thereby. The execution and delivery by
Parent of this Agreement, the other Consolidation Agreements and any
amendments thereto and all agreements and instruments to be executed
and delivered by Parent or any of its Subsidiaries in accordance with
this Agreement or any other Consolidation Agreement or any amendments
hereto or thereto and the consummation by Parent of the transactions
contemplated on its part hereby and thereby have been duly authorized
by its Board of Directors. No other corporate proceedings on the part
of Parent are necessary to authorize the execution and delivery of
this Agreement, the other Consolidation Agreements and any amendments
thereto and all agreements and instruments to be executed and
delivered by Parent or any of its Subsidiaries in accordance with this
Agreement or any other Consolidation Agreement or any amendments
hereto or thereto by Parent. Except for corporate action related to
the IPO and described in Schedule 2.3(d), no other corporate
proceedings on the part of Parent are necessary to authorize the
performance of this Agreement, the other Consolidation Agreements and
any amendments thereto and all agreements and instruments to be
executed and delivered by Parent or any of its Subsidiaries in
accordance with this Agreement or any other Consolidation Agreement or
any amendments hereto or thereto by Parent or the consummation by
Parent of the transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by Parent and is, and
upon their due execution and delivery by the parties thereto the other
Consolidation Agreements and any amendments thereto and all agreements
and instruments to be executed and delivered by Parent or any of its
Subsidiaries in accordance with this Agreement or any other
Consolidation Agreement and any amendments hereto or thereto will be,
enforceable against Parent in accordance with their respective terms,
except as such enforcement is subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws relating to or
affecting creditors' rights. The Consolidation Agreements (other than
this Agreement and the Related Agreements) and any amendments thereto
are enforceable against the other parties thereto in accordance with
their respective terms, in each case except as such enforcement is
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar law relating to or affecting creditors'
rights.
Kori Agreement and Plan of Merger//Page 31
<PAGE> 40
(e) Non-Contravention. The execution, delivery and
performance of this Agreement, the other Consolidation Agreements and
any amendments thereto and all agreements and instruments to be
executed and delivered by Parent or any of its Subsidiaries in
accordance with this Agreement or any other Consolidation Agreement or
any amendments hereto or thereto by Parent do not and the consummation
by Parent of the transactions contemplated hereby and thereby will not
(1) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling change, or other restriction of any
government, government agency, or court to which Parent is subject, or
(2) violate any provision of the Articles of Incorporation or Bylaws
of Parent, or (3) violate or result in, with the giving of notice or
the lapse of time or both, the violation of any provision of, or
result in the acceleration of or entitle any party to accelerate
(whether after the giving of notice or lapse of time or both) any
obligation under, or result in the creation or imposition of any lien,
charge, pledge, security interest or other encumbrance upon any of the
property of Parent pursuant to, any provision of any mortgage, lien,
lease, agreement, contract, license, or instrument to which Parent is
a party or by which any of its assets are bound. The execution,
delivery and performance of this Agreement, the other Consolidation
Agreements and any amendments thereto and all agreements and
instruments to be executed and delivered by Parent or any of its
Subsidiaries in accordance with this Agreement or any other
Consolidation Agreement or any amendments hereto or thereto by Parent
do not and will not violate or conflict with any other restriction of
any kind or character to which Parent is subject or by which any of
its assets may be bound, and the same does not and will not constitute
an event permitting termination of any such mortgage, lien, lease,
agreement, license or instrument to which Parent is a party or by
which any of its assets is bound.
(f) Approvals. Except for the declaration of
effectiveness of the registration statement (the "Registration
Statement") filed in connection with Parent's IPO by the U.S.
Securities and Exchange Commission ("SEC") pursuant to the Securities
Act, and the consents and approvals required pursuant to state
securities laws with respect to the IPO, and except as set forth in
Schedule 2.3(f), no consent, authorization, order or approval of, or
filing or registration with, any governmental commission, board or
other regulatory body or any other person is required for the
execution and delivery of this Agreement and the other Consolidation
Agreements and any amendments thereto and the consummation by Parent
of the transactions contemplated hereby and thereby.
(g) Litigation. There are no actions, suits, audits,
investigations, unfair labor practices charges, complaints, claims,
grievances or proceedings with respect to the Parent or any of its
subsidiaries pending against the Parent or any of its Subsidiaries at
law or in equity, or before or by any federal, state, municipal,
foreign or other governmental department, commission, board, bureau,
agency or instrumentality, nor are there any such actions, suits,
audits, investigations, unfair labor practice charges, complaints,
grievances or proceedings that are known to be threatened against the
Parent or any of its Subsidiaries.
Kori Agreement and Plan of Merger//Page 32
<PAGE> 41
(h) Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by
Parent directly with Shareholders and the Company, without the
intervention of any person on behalf of Parent in such manner as to
give rise to any valid claim by any person (other than McFarland,
Grossman & Company, Inc.) against Parent for a finder's fee, brokerage
commission, or similar payment.
(i) Tax-Free Reorganization. With respect to the
qualification of the Merger as a reorganization pursuant to Section
368(a)(2)(D) of the Code:
(1) The Parent has no plan or intention to sell,
exchange or otherwise dispose or liquidate the Surviving
Corporation, to merge the Surviving Corporation with or into
any other corporation, to sell or otherwise dispose of any
capital stock of the Surviving Corporation except for
transfers of such capital stock to corporations of which the
Parent has control (within the meaning of Section 368(a) of
the Code) at the time of such transfer, or to cause the
Surviving Corporation to sell or otherwise dispose of any of
its assets or of any assets acquired in the Merger, except for
dispositions made in the ordinary course of business or
transfers of assets to a corporation of which the Surviving
Corporation has control (within the meaning of Section 368(a)
of the Code) at the time of such transfer.
(2) The Parent has no plan or intention to cause
the Surviving Corporation, after the Merger, to issue
additional shares of its stock that would result in the Parent
losing control of the Surviving Corporation within the meaning
of Section 368(c) of the Code.
(3) Following the Merger, the Surviving Corporation
will continue the Company's historic business or use a
significant portion of its historic business assets in a
business.
(4) If the Merger is effected, the Parent and the
Merger Sub will each pay their respective expenses, if any,
incurred in connection with the Merger.
(5) The Parent Common Stock that will be exchanged
in the Merger is voting stock within the meaning of Section
368(c) of the Code.
(6) At the time of the Merger, neither the Parent
nor Merger Sub will have any outstanding warrants, options,
convertible securities, or any other right pursuant to which
any person could acquire stock in the Parent or Merger Sub
which, if exercised or converted, would affect Parent's
acquisition or retention of control of the Surviving
Corporation.
Kori Agreement and Plan of Merger//Page 33
<PAGE> 42
(7) The Parent and the Merger Sub are not investment
companies as defined in Section 368(a)(2)(F) of the Code.
(8) None of the Parent Common Stock received by
Shareholders as a part of the Merger Consideration will be
separate consideration for, or allocable to, any employment
agreement.
(9) Neither the Parent nor the Merger Sub is under
the jurisdiction of a court in a case under Title 11 of the
United States Code, or a receivership, foreclosure, or similar
proceeding in a federal or state court.
(j) Registration Statement; PPM. Each of (i) the PPM,
(ii) the Registration Statement, (iii) the prospectus forming part of
the Registration Statement (the "Prospectus"), and (iv) any amendment
or supplement to any of the foregoing complies as to form with all
requirements of the Securities Act and regulations thereunder
(assuming, in the case of the PPM, that there is at least one
non-accredited investor (as such term is defined in Regulation D under
the Securities Act) to whom the PPM must be delivered), and none of
the foregoing misstates any material fact or omits to state a material
fact required to make the statements made therein, in light of the
circumstances under which they are made, not misleading, except for
any such misstatement or omission that is caused by any misstatement
or omission of material fact contained in (A) any material submitted
by the Shareholders to Parent in writing with the Information Letter
contemplated by Section 3.9(b) specifically for inclusion in the
Registration Statement or Prospectus or PPM or any amendment or
supplement thereto or (B) the Shareholder Disclosure Schedule or
Company Disclosure Schedule.
(k) No Undisclosed Agreements. There do not exist any
agreements, understandings or commitments by Parent or any of the
Subsidiaries or any of the Other Companies, which provide any material
benefit or other thing of value to any officer, director or
shareholder of any Other Company, or that vary the express terms of
the Consolidation Agreements, or that provide material benefits or any
other thing of value to any officer, director or promoter of Parent
("Parent Insiders") except as set forth in any of the Other
Acquisition Agreements or any employment or consultant agreement that
is appended thereto as an exhibit, or, in the case of the Parent
Insiders, except as described in the PPM.
(l) Financial Statements. The financial statements of
Parent and its Subsidiaries set forth in the PPM and those set forth
in the Prospectus, including (without limitation) the combined
proforma financial statements of Parent, the Company and the Other
Companies, have been prepared in conformity with GAAP consistently
applied and present fairly the financial position and results of
operations of the entities covered thereby as of the end of and for
the respective periods presented. There has been no material adverse
change in the business, financial condition, or results of operations
of Parent, the Company, and the Other Companies on a combined basis
since March 31, 1997.
Kori Agreement and Plan of Merger//Page 34
<PAGE> 43
(m) Remedies. Parent has an adequate remedy in damages,
and will diligently pursue same, for any loss or damage sustained by
it by reason of any breach of a warranty, representation or covenant
by any of the Other Companies or their shareholders under the Other
Acquisition Agreements, except: (i) to the extent of any deductible or
threshold amount that limits Parent's entitlement to indemnification
from shareholders of the Other Companies under the Other Acquisition
Agreements (none of which amounts is more, as a percentage of the
total consideration payable to the shareholders under any such Other
Acquisition Agreement, than the comparable percentage under this
Agreement); (ii) to the extent of any limitation on the maximum
aggregate liability of such shareholders, none of such maximums is
less than the comparable maximum under this Agreement), and (iii) to
the extent that claims for such remedies are limited by a period of
time (none of which limitations are shorter than the comparable
limitations under this Agreement).
(n) Parent Stock. The Parent Common Stock to be issued
to the Shareholders pursuant to this Agreement will, when so issued,
be validly and legally issued, fully paid and nonassessable, and will
be identical to the Parent Common Stock issued under the Other
Acquisition Agreements. The issuance, sale and delivery of Parent
Common Stock to the Shareholders pursuant to this Agreement will be
exempt from registration under the Securities Act by reason of the
exemption from registration set forth in Section 4(2) of the
Securities Act.
(o) Taxes.
(1) All federal, state, local and foreign tax
returns required to be filed by Parent and its Subsidiaries
prior to the date hereof have been filed on a timely basis
with the appropriate governmental authorities in all
jurisdictions in which such tax returns are required to be
filed and all such returns are correct and complete. Neither
the Parent nor any of its Subsidiaries has ever been the
subject of any audit, examination or any similar investigation
by any governmental authority.
(2) All Taxes due from or properly accruable by
Parent or any of its Subsidiaries have been fully and timely
paid or, in the case of Taxes for which payment is not yet
required, properly and fully accrued for with respect to all
taxable periods ending on or prior to the date of this
Agreement and interim periods through the date of this
Agreement.
(p) Other Acquisition Agreements. Parent does not know,
after reasonable inquiry, of the incorrectness of any representation
or warranty of any Other Company or its shareholders under any Other
Acquisition Agreement; and Parent will give the Shareholders prompt
notice of any such incorrectness upon learning of same.
(q) Investment Intent.
Kori Agreement and Plan of Merger//Page 35
<PAGE> 44
(1) Parent is acquiring the Company Common Stock
solely for the purpose of investment, for its own account, and
not with a view to or for sale in connection with any
distribution thereof within the meaning of Section 2(11) of
the Securities Act. Parent acknowledges that the Company
Common Stock is being sold to Parent by each of the
Shareholders in reliance upon one or more exemptions from
registration contained in the Securities Act and applicable
state securities laws. The reliance by Shareholders upon such
exemptions is based in part upon the representations set forth
in this Section 2.3(q).
(2) Parent understands that the Company Common
Stock has not been registered under the Securities Act, that
there is no established market for the Company Common Stock,
and that the Company Common Stock must be held indefinitely
and cannot be transferred unless it is subsequently registered
under the Securities Act or an exemption from such
registration is available with respect to such transfer.
(3) Parent has such knowledge and experience in
financial and business matters that it is capable of
evaluating the merits and risks of an investment in the
Company Common Stock and of making an informed investment
decision.
(4) Parent is able to bear the economic risk of
its investment in the Company Common Stock, to hold the
Company Common Stock for an indefinite period of time and to
afford a complete loss of its investment in the Company Common
Stock .
(5) Parent and its representatives have been
given access to all documents, books and additional
information concerning the Company which they have requested.
(6) Parent has been represented by legal counsel
in this transaction and Parent and its representatives,
including such counsel, have been given the opportunity to ask
questions of, and receive answers from, the officers of the
Company and the Shareholders concerning the terms of the
transactions contemplated by this Agreement and the affairs
and the business and financial condition of the Company.
(7) Parent has conducted such investigations in
making a decision to enter into this Agreement and the
transactions contemplated herein as Parent has deemed
necessary and advisable.
(8) None of the representations made by Parent in
this Section 2.3(q) shall affect any of Parent's rights under
any other section of this Agreement.
Kori Agreement and Plan of Merger//Page 36
<PAGE> 45
2.4 REPRESENTATIONS AND WARRANTIES CONCERNING THE MERGER SUB. The
Parent and Merger Sub, jointly and severally, hereby represent and warrant to
the Shareholders and the Company as follows as of the date of this Agreement,
the Preliminary Closing Date and the Final Closing Date:
(a) Organization and Standing. Each of Merger Sub and
Parent's other Subsidiaries is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Louisiana. The copies of Merger Sub's Articles of Incorporation and
Bylaws, as amended to date, which have been delivered to the
Shareholders are complete and correct, and such instruments, as so
amended, are in full force and effect.
(b) Capital Structure. The authorized capital stock of
each of Merger Sub and Parent's other Subsidiaries consists of 5,000
shares of common stock, par value $.01 per share, 1,000 of which are
validly issued and outstanding, fully paid and nonassessable and are
owned by the Parent free and clear of all liens, encumbrances and
adverse claims.
(c) Authority. Each of Merger Sub and Parent's other
Subsidiaries has the corporate power and authority to execute, deliver
and perform this Agreement and the Other Acquisition Agreements to
which such Subsidiary is or will be a party and to consummate the
transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Other Acquisition Agreements to
which such Subsidiary is or will be a party, the performance by such
Subsidiary of its obligations hereunder and the consummation of the
transactions contemplated hereby have been duly authorized by its
Board of Directors and the Parent as its sole shareholder, and, except
for the corporate filings described in Schedule 2.4(c), no other
corporate proceedings on the part of any Subsidiary are necessary to
authorize this Agreement and the Other Acquisition Agreements, and the
transaction contemplated hereby and thereby. This Agreement has been
duly and validly executed and delivered by Merger Sub and (assuming
the due authorization, execution and delivery hereof by the Company)
is a valid and binding obligation of Merger Sub, enforceable against
Merger Sub in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether applied in a
proceeding at law or in equity).
ARTICLE 3
ADDITIONAL COVENANTS AND AGREEMENTS
3.1 CONDUCT OF BUSINESS. During the period from the date hereof
to the Final Closing Date, except as otherwise contemplated by this Agreement
and except as described on Exhibit 3.1 hereto, the Shareholders shall cause the
Company to, and the Company shall, conduct its operations according to its
ordinary and usual course of business, and shall use its best efforts to
preserve
Kori Agreement and Plan of Merger//Page 37
<PAGE> 46
substantially intact its business organization, keep available the services of
its officers and employees, and maintain its present relationships with
licensors, suppliers, distributors, customers and others having significant
business relationships with it. Representatives of the Company will on request
confer during such period with representatives of Parent to keep it informed
with respect to the general status of the on-going operations of the business
of the Company. Without limiting the generality of the foregoing and except as
otherwise affected by matters contemplated by this Agreement or in connection
with the transactions contemplated by this Agreement, the Shareholders will
cause the Company during such period to:
(a) carry on the business in substantially the same manner as
heretofore carried on and not introduce any material new method of
management, operation or accounting, nor provide discounted services
outside the ordinary course of business;
(b) maintain its properties, facilities, equipment and other
assets, including those held under leases, in good working order,
condition and repair, ordinary wear and tear excepted;
(c) perform all of its obligations under all debt and lease
instruments and other agreements relating to or affecting its
business, assets, properties, equipment and rights, and pay all
vendors, suppliers, and other third parties (including mechanics and
materialmen) as and when their bills are due, except to the extent
that such payments may be subject to undisputed claims of offset or
reimbursement in favor of the Company, and pay in full all payroll
obligations when due;
(d) maintain its present debt and lease instruments (unless
same are otherwise mature) and refrain from entering into new or
amended debt or lease instruments, except for debt incurred or leases
entered into in the ordinary course of business which involve a total
liability of the Company not in excess of $20,000 per instance or
$50,000 in the aggregate, without prior written notice to Parent;
(e) not incur any indebtedness other than ordinary trade
accounts payable at market rates with no prepayment penalty which are
used to fund operations in the ordinary course of business;
(f) keep in full force and effect its present insurance
policies or other comparable insurance coverage;
(g) use its best efforts to maintain and preserve its
business organization intact, retain its present employees and
maintain its relationship with suppliers, customers and others having
business relations with the Company;
Kori Agreement and Plan of Merger//Page 38
<PAGE> 47
(h) refrain from effecting any change in the articles of
incorporation, bylaws or capital structure of the Company and refrain
from entering into or agreeing to enter into any merger or
consolidation by the Company with or into, and refrain from acquiring
all or substantially all of the assets, capital stock or business of
any person, corporation, partnership, association or other business
organization or division of any thereof;
(i) refrain from incurring any expenditures outside the
normal course of business, including any capital expenditures (or
series of related expenditures) in excess of $50,000, without prior
written notification to Parent;
(j) refrain from starting or acquiring any new businesses
without the prior written notification to Parent;
(k) maintain its present salaries and commission levels for
all officers, directors, employees or agents, except for raises that
may be awarded to employees at or below the level of supervisor in
keeping with past practices of the Company in the ordinary course of
its business, refrain from entering into employment agreements except
in the ordinary course of business, and refrain from entering into any
collective bargaining agreement; and
(l) refrain from declaring or paying any fees, commissions or
loans outside the ordinary course of business, and refrain from
declaring or paying any bonuses except discretionary bonuses to
officers and employees to the extent that the aggregate amount of all
such discretionary bonuses paid or declared during 1997 do not exceed,
in the aggregate, 10% of the Company's pre-tax net income during 1997
through the date of the latest such payment (exclusive of production,
incentive or safety bonuses previously committed in connection with
contracts currently being performed which are described on Exhibit
3.1(l) attached hereto); and
(m) refrain from declaring or paying any dividends or
distributions to Shareholders, except for those assets listed on
Exhibit 3.1(m) attached hereto and except as contemplated by Section
2.2(h)(13)
(n) promptly notify Parent of any claim or litigation
threatened or instituted, or any other material adverse event or
occurrence involving or affecting the Company or any of its assets,
properties, operations, businesses or employees;
(o) comply with and cause to be complied with all
applicable laws, rules, regulations and orders of all federal, state
and local governments or governmental agencies affecting or relating
to the Company or its assets, properties, operations, businesses or
employees except where the failure to comply will not have a material
adverse effect on the Company;
Kori Agreement and Plan of Merger//Page 39
<PAGE> 48
(p) other than in the ordinary course of business,
refrain from any sale, disposition, distribution or encumbrance of any
of its properties or assets and refrain from entering into any
agreement or commitment with respect to any such sale, disposition,
distribution or encumbrance (other than the sale or use of inventories
in the ordinary course of business);
(q) refrain from any purchase or redemption of any
capital stock or other voting interest of the Company and refrain from
issuing any capital stock or other voting interest;
(r) refrain from making any change in any accounting
principle, classification, policy or practice, except as required by
GAAP; and
(s) manage working capital in the ordinary course
consistent with past practice.
3.2 ACCESS TO INFORMATION BY PARENT. Until the Final Closing Date
or termination of this Agreement, Shareholders will furnish Parent with the
Unaudited Monthly Financial Statements for each month following May 1997
promptly as available. Parent may prior to the Final Closing have access to
the business and properties of the Company and information concerning its
financial and legal condition as Parent deems necessary or advisable in
connection with the consummation of the transactions contemplated hereby,
provided that such access shall not interfere with normal operations of the
Company. The Shareholders and the Company agree to permit Parent and its
authorized representatives, or cause them to be permitted, to have, after the
date hereof and until the Final Closing Date, full access to the premises,
books and records of the Company during normal business hours, and the officers
of the Company will furnish Parent with such financial and operating data and
other information with respect to the business and properties of the Company as
Parent shall from time to time reasonably request. No investigation by Parent
heretofore or hereafter made shall affect the representations and warranties of
the Shareholders and the Company, and each such representation and warranty
shall survive any such investigation.
3.3 ACCESS TO INFORMATION BY THE SHAREHOLDERS. Until the Final
Closing Date or the termination of this Agreement, the Shareholders shall have
access to the books, records, operating data, and any other information
concerning the financial and legal condition of the Parent and the Other
Companies as the Shareholders deem necessary or advisable in connection with
the transactions contemplated hereby; provided that the Shareholders shall not
have access to any information, the disclosure of which by Parent would
constitute a violation of any of the confidentiality agreements between the
Parent and any of the Other Companies (the "Confidentiality Agreements") unless
the Shareholders have entered into confidentiality agreements with Parent or
those of the Other Companies to whose information the Shareholders seek access.
In no event shall the Shareholders be denied access to financial information
(including pro forma information) regarding Parent. All requests by the
Shareholders for information pursuant to this Section 3.3 shall be directed to
the Parent and the Parent shall furnish such information as is reasonably
obtainable from the Other Companies in accordance with the terms of the
Confidentiality Agreements. No
Kori Agreement and Plan of Merger//Page 40
<PAGE> 49
investigation by the Shareholders heretofore or hereafter made shall affect the
representations and warranties of Parent, and each such representation and
warranty shall survive any such investigation.
3.4 AMENDMENT TO SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the right and continuing obligation until the
Final Closing to supplement or amend promptly the Disclosure Schedules with
respect to any matter that would have been or would be required to be set forth
or described in the Disclosure Schedules in order to not materially breach any
representation, warranty or covenant of such party contained herein. Each
amendment or supplement to any Disclosure Schedule shall be clearly marked so
as to indicate the amending or supplemental information contained therein,
which shall be presented in appropriate detail, and shall be delivered prior to
the Final Closing and in the manner provided in Section 9.3. For all purposes
of this Agreement, including without limitation for purposes of determining
whether the conditions set forth in Section 4.1 and Section 4.2 have been
fulfilled, whether any party has breached any of its representations and
warranties herein, and for the purposes of Article 6, the Disclosure Schedules
hereto shall be deemed to be the Disclosure Schedules as amended or
supplemented pursuant to this Section. In the event that the Company or
Shareholders amend or supplement a Disclosure Schedule pursuant to this Section
3.4 and such amendment or supplement constitutes or reflects, individually or
in the aggregate, a material adverse change to the business, assets or
prospects of the Company or the Shareholders (all as determined in good faith
by Parent) then Parent may, by notice to the Company and the Shareholders given
within three business days after the amendment or supplement is delivered to
it, terminate this Agreement. In the event that Parent or Merger Sub amends or
supplements a Disclosure Schedule pursuant to this Section 3.4 and the
amendment or supplement constitutes or reflects, individually or in the
aggregate, a material adverse change to the business, assets or prospects of
Parent, Merger Sub or any Other Company or materially changes the content of
the PPM, the Registration Statement or the Prospectus or requires such a
material change (all as determined in good faith by the Required Shareholders
(defined below)) then Shareholders holding a majority of the Company Common
Stock ("Required Shareholders") may, by notice to Parent given within three
business days after the amendment or supplement is delivered to the
Shareholders, terminate this Agreement. Any termination pursuant to this
Section 3.4 shall have the same effect as a termination by mutual written
consent pursuant to Section 5.1(a)(1) of this Agreement. If this Agreement is
not terminated within the allotted time, or if the Final Closing should occur
before the allotted time has run, then the supplemented or amended Disclosure
Schedule, as so amended or supplemented, shall be deemed to be and to have at
all times been the Disclosure Schedule under this Agreement for all purposes
hereof.
3.5 CONFIDENTIALITY. The provisions of this Section 3.5 shall
supersede and replace all prior agreements and understandings of the parties
with respect to the subject matter hereof.
(a) Confidential Information. Until the Final Closing of
the transactions contemplated herein, all Confidential Information, as
hereinafter defined, acquired by Parent or Merger Sub with respect to
the Shareholders or the Company, or by the Shareholders or
Kori Agreement and Plan of Merger//Page 41
<PAGE> 50
the Company with respect to Parent, shall be (i) maintained in strict
confidence, (ii) used only for the purpose of and in connection with
evaluating the transactions contemplated herein, and (iii) disclosed
only (A) to employees and duly authorized agents and representatives
who have been informed of the obligations of the parties under this
Agreement with respect to such Confidential Information, who have a
need to know the information in connection with consummating the
transactions contemplated herein, and who agree to keep such
information confidential, or (B) as required by legal process (of
which the other parties shall be given prompt notice). Parent, Merger
Sub, the Shareholders and the Company shall be responsible for any
breach of this Section by any of their respective representatives and
each agrees to take all reasonable measures to restrain its
representatives from prohibited or unauthorized disclosure of the
Confidential Information. For the purpose of this Agreement, the term
"Confidential Information" shall mean all information acquired by any
party from another party hereto or its representatives pursuant to
Section 3.2 hereof or otherwise with respect to the business or
operations of such other party, other than (A) information generally
available to the public which has not become available as a result of
disclosure in violation of this Section and (B) information which
becomes available on a nonconfidential basis from a source other than
a party to this Agreement or its representatives, provided that such
source is not known by the party to this Agreement receiving such
information to be bound by a confidentiality agreement or other
obligation of secrecy to another party to this Agreement or its
representatives. If the transactions contemplated herein are not
consummated, all Confidential Information in written or printed or
other tangible form (whether copies or originals) shall be returned to
the party of origin, and all documents, memoranda, notes and other
writings whatsoever prepared by any party or its representatives based
on Confidential Information shall be destroyed; and Parent, Merger Sub
and their representatives will thereafter hold all Confidential
Information concerning the Company or the Shareholders in strict
confidence.
(b) Public Announcements. No press release, public
announcement, confirmation or other information regarding this
Agreement or the contents hereof shall be made by Parent, the
Shareholders or the Company without prior consultation with the Parent
and the Company, except as may be necessary in the opinion of counsel
to any party to meet the requirements of any applicable law or
regulations, the determination of any court, or the requirements of
any stock exchange on which the securities of such party may be
listed. Notwithstanding the foregoing, the Company may make
appropriate disclosures of the general nature of the transaction
contemplated hereby to its employees, vendors and customers to protect
the Company's goodwill and to facilitate the consummation of the
transactions contemplated hereby, and Parent may disclose pertinent
information regarding the transaction contemplated hereby to its
existing and prospective investors, lenders or investment bankers or
financial advisors for the purposes of obtaining financing (including
the contemplated IPO). Parent may also make appropriate disclosures
of the general nature of the transaction contemplated hereby and the
identity, nature and scope of the Company's operations to prospective
acquisition candidates, including the Other Companies, in its
Kori Agreement and Plan of Merger//Page 42
<PAGE> 51
efforts to attract additional acquisitions for Parent. Subject to
prior review, revision and approval by the Company of disclosure with
respect to matters relating to the Company, Parent may also make
appropriate disclosure as required in connection with any registration
statement or confidential information memorandum prepared by Parent,
but in that event will give the Shareholders prompt notice thereof.
Prior to the Effective Time, the Parent and the Company shall jointly
approve the contents of any press releases, written employee
presentations, or other comparable materials of potentially wide
distribution that disclose or refer to the transaction contemplated
hereby, except for such press releases or other communications
required by law. If the transactions contemplated herein are not
consummated, neither the Parent nor the Shareholders shall disclose to
any third party or publicly announce the proposed transaction
contemplated hereby, except as otherwise permitted hereinabove and
except as agreed in advance, in writing, by the parties or otherwise
required by law, in which case the party so compelled will give
reasonable written notice in advance to the other parties.
3.6 EXCLUSIVITY. After the signing of this Agreement until the
Final Closing Date or the termination of this Agreement, no Shareholder shall
(i) solicit, initiate, or encourage the submission of any proposal or offer
from any person or entity relating to the acquisition of any capital stock or
other voting securities of, or any substantial portion of the assets of, the
Company (including any acquisition structured as a merger, consolidation, or
share exchange) or (ii) participate in any negotiations or discussions
regarding, furnish any information with respect to, assist or participate in,
or facilitate in any other manner any effort or attempt by any person or entity
in favor of such acquisition (including any acquisition structured as a merger,
consolidation, or share exchange). The Shareholders will (and shall cause the
Company to) notify Parent if any person or entity makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing.
3.7 THE SHAREHOLDERS' RELEASE OF CLAIMS. Effective as of the
Final Closing, each Shareholder hereby (i) releases, acquits and forever
discharges the Company and its Subsidiaries from any and all liabilities,
obligations, indebtedness, claims, demands, actions or causes of action arising
from or relating to any event, occurrence, act, omission or condition occurring
or existing on or prior to the Final Closing, including, without limitation,
any claim for indemnity or contribution from the Company or any of its
Subsidiaries in connection with the obligations or liabilities of the
Shareholders hereunder, except for (A) the indemnification provided by Sections
3.16 and 3.21 hereof and any other contractual obligations in this Agreement,
(B) salary and expense reimbursement payable to the Shareholders as an officer,
director or employee in the ordinary course of business, and (C) all benefits
(including interests in benefit plans) and fringe benefits to which the
Shareholders are entitled; (ii) waives all breaches, defaults or violations of
each agreement, if any, among or between Shareholders applicable to the
Company Common Stock and agrees that any and all such agreements are terminated
as of the Final Closing, and (iii) waives any and all preemptive or other
rights to acquire any shares of capital stock of the Company and releases any
and all claims arising in connection with any prior default, violation or
failure to comply with or satisfy any such preemptive or other rights.
Kori Agreement and Plan of Merger//Page 43
<PAGE> 52
3.8 REAL ESTATE MATTERS.
(a) Title Insurance Commitments. The Parent, in its sole
discretion, may elect to obtain title insurance with respect to any or
all real estate that the Company owns or leases listed on Schedule
2.2(n)(1) or Schedule 2.2(n)(2) of the Company Disclosure Schedule
(the "Title Insurance Property"). If Parent elects to obtain title
insurance Company will obtain and deliver to Parent, as soon as
practicable, and in any event on or before September 10, 1997,
commitments for title insurance ("Title Commitments") issued by title
insurance company(ies) reasonably acceptable to Parent with respect to
the Title Insurance Property, Surveys (defined below) of the Title
Insurance Property reasonably acceptable to the Parent and one set of
legible copies of title exception documents with respect to any
exceptions set forth in the commitments. The Title Commitments shall
set forth the status of title to the Title Insurance Property together
with all exceptions or conditions to such title, including, but not
limited to, all easements, restrictions, rights-of-way, covenants,
reservations and all other encumbrances affecting the Title Insurance
Property which would appear in an Owner's Policy of Title Insurance
(as defined below), if issued. The Title Commitments shall contain
the express commitment of the title underwriter to issue the Owner's
Policies of Title Insurance to the Parent and the Company with the
standard printed exceptions endorsed or deleted in accordance with
this Section 3.8. Parent shall bear the cost of any title insurance
premiums actually paid for title insurance obtained under this
Section.
(b) Surveys. With respect to each Title Insurance
Property, if requested by Parent, the Shareholders will cause the
Company to procure in preparation for the Preliminary Closing a
current survey of such real property, prepared by a licensed surveyor
and conforming to current ALTA Minimum Detail Requirements for Land
Title Surveys, disclosing the location of all improvements, easements,
party walls, sidewalks, roadways, utility lines, and other matters
shown customarily on such surveys, and showing access affirmatively to
public streets and roads (the "Survey"). The Survey shall disclose
any survey defect or encroachment from or onto the real property.
Parent shall bear the cost of fees actually paid for the preparation
of any Survey required under this Section.
(c) Title Insurance Policies. At the Preliminary
Closing, the Company shall deliver to Parent title insurance policies
("Policies of Title Insurance") requested pursuant to Section 3.8(a)
with respect to the Title Insurance Property, in an amount reasonably
acceptable to Parent, issued by such title insurance company(ies),
subject to those easements, reservations, restrictions, covenants,
conditions and other matters therein specified to the extent that the
same do not, in the reasonable judgment of Parent, render title
unmarketable or adversely affect the operation, value, use or
enjoyment of the Title Insurance Property affected thereby ("Real
Property Title Exceptions"). The Policies of Title Insurance may be
subject to the Real Property Title Exceptions but shall contain no
additional exceptions other than the standard preprinted exceptions
reasonably acceptable to Parent; provided that (i) the standard
preprinted exception, if any, for restrictive covenants shall be
deleted, except for
Kori Agreement and Plan of Merger//Page 44
<PAGE> 53
Real Property Title Exceptions, (ii) the standard preprinted survey
exception, if any, shall be revised to read "shortages in area" only,
(iii) there shall be no exception as to easements, or claims of
easements, not shown by the public records, nor any exception as to
parties in possession, and (iv) the exception as to the lien for taxes
will be limited to the year in which the Preliminary Closing occurs.
The Policies of Title Insurance delivered under this Section 3.8 shall
insure title to the real property and all recorded easements
benefitting such real property.
(d) Phase I Environmental Assessment. The Company will
obtain and deliver to Parent, as soon as practicable, and in any event
on or before September 15, 1997, a Phase I environmental assessment
prepared by environmental engineers reasonably acceptable to Parent
with respect to all of the real estate owned or leased by the Company
listed on Schedule 2.2(n)(1) or Schedule 2.2(n)(2) of the Company
Disclosure Schedule (the "Environmental Assessment Property"). Each
of the Company and Parent shall pay one-half of the expenses incurred
by the Company in obtaining such assessments. Also during the period
prior to Final Closing, the Shareholders and the Company shall afford
Parent and its representatives the continuing right to inspect, during
the Company's normal business hours, the Environmental Assessment
Property and all books, records, contacts, documents and other data
pertaining to the use, ownership, operation, or maintenance of the
Environmental Assessment Property (collectively with the Phase I
assessment, the "Studies").
(e) Title and Environmental Objections. If for any
reason Parent, in its sole and absolute discretion, is not satisfied
with any matter contained in the Studies, any survey, or the Real
Property title exceptions, or is otherwise not satisfied with the real
property owned or leased by the Company for any reason whatsoever,
then Parent may, prior to the Preliminary Closing, notify the Company
and the Shareholders in writing of its objection (the "Objections"),
describing with specificity the subject real property and the
Objections thereto, failing which Merger Sub and Parent shall be
deemed to have waived all such objections and all remedies therefor
pursuant to this Agreement. If Parent shall request that the Company
cure such Objections and the Company or the Shareholders have not
cured such Objections to Parent's satisfaction by the Preliminary
Closing Date, Parent shall have the right to terminate this Agreement
in accordance with Section 5.1(a)(2) hereof or enter into negotiations
with the Company to lease any real property which is the subject of
the Objections.
3.9 PPM; REGISTRATION STATEMENT.
(a) Company to Provide Information. Prior to the Final
Closing, the Shareholders and the Company shall cooperate with Parent
to promptly provide such information as reasonably requested by Parent
to enable Parent to (i) prepare the PPM and all appropriate
supplements thereto, pursuant to Rule 506 of Regulation D promulgated
by the SEC under the Securities Act, for dissemination to the Other
Companies and their respective
Kori Agreement and Plan of Merger//Page 45
<PAGE> 54
shareholders, including the Shareholders, and (ii) prepare and file
with the SEC the Registration Statement to be filed by Parent under
the Securities Act in connection with its IPO (including the
prospectus constituting a part thereof). Parent shall obtain all
necessary state securities law or "Blue Sky" permits and approvals
required to carry out the transactions contemplated by this Agreement,
the PPM and the Registration Statement, and the Shareholders and the
Company shall furnish all information concerning them as may be
reasonably requested in connection with any such action.
(b) Accuracy of Information. Parent represents and
warrants that neither the PPM or any amendment or supplement thereto,
at the time distributed, nor the Registration Statement or any
amendment or supplement thereto, at the time the Registration
Statement becomes effective under the Securities Act or any such
amendment or supplement is distributed, nor any prospectus filed in
accordance with Rule 424(b) under the Securities Act, at the time when
filed or distributed, will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. This
representation is in addition to that set forth in Section 2.3(j). If
requested by Parent prior to the Final Closing, the Shareholders and
the Company, respectively, shall use their reasonable best efforts to
agree with Parent as to the information and documents supplied by the
Shareholders and the Company for inclusion in the Registration
Statement and each shall indicate such information and documents in a
letter (the "Information Letter") to be delivered (i) prior to the
filing of the Registration Statement with the SEC, and (ii) prior to
filing any amendment to the Registration Statement with the SEC (other
than any prospectus filed with the SEC pursuant to Rule 424(b)). The
Shareholders and the Company shall each be entitled to review the PPM,
the Registration Statement and each amendment or supplement thereto,
if any, prior to delivery of the Information Letter. From the date of
this Agreement through the Final Closing Date, the Shareholders and
the Company shall immediately notify Parent in the event of any
development or occurrence involving or pertaining to either the
Company or any Shareholder that would cause matters referenced in the
Information Letter to be inaccurate, incomplete or misleading in any
material respect. The Shareholders and the Company acknowledge that
Parent has relied on the accuracy of factual information provided in
the Disclosure Schedules in preparing the PPM and the Registration
Statement. Except for the accuracy of such information in the
Disclosure Schedules, neither the Shareholders nor the Company takes
responsibility or shall be deemed responsible for (1) the presentation
or omission of any such information in or from the PPM or the
Registration Statement or (2) the factual adequacy or legal
sufficiency of disclosures contained therein.
(c) Further Information. Prior to the Final Closing, the
Shareholders and the Company, respectively, shall promptly upon
request, furnish Parent with all information concerning themselves or
itself as may be reasonably requested by Parent in connection with the
preparation of the PPM, the Registration Statement and each amendment
or supplement
Kori Agreement and Plan of Merger//Page 46
<PAGE> 55
thereto, or any other statement, filing, notice or application made by
or Parent to any governmental entity in connection with the
transactions contemplated by this Agreement.
(d) Indemnification. Parent will indemnify and hold
harmless each of the Shareholders, the Company, and each of the
Company's directors, officers and other persons, if any, who control
the Company within the meaning of the Securities Act from and against
any losses, claims, damages, liabilities or judgments, joint or
several, to which they or any of them may become subject, under the
Securities Act or any state securities or blue sky laws or otherwise,
insofar as such losses, claims, damages, liabilities, or judgments (or
actions in respect thereof) are caused by an untrue statement or
alleged untrue statement of a material fact contained in the PPM,
Registration Statement, or the Prospectus, or in any amendment or
supplement thereto, or in any state application for qualification,
permit, exemption or registration as a broker/dealer, or in any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each such person for any legal expenses
reasonably incurred by such person in connection with investigating or
defending any such action or claim; provided, however, that Parent
shall not be liable, in any such case, to the extent that any such
loss, claim, damage, liability, or judgment (or action in respect
thereof) was caused by any untrue statement or alleged untrue
statement or omission or alleged omission made in the PPM,
Registration Statement, or the Prospectus, or any such amendment or
supplement thereto, or in any such state application, or in any
amendment or supplement thereto, in reliance upon and in conformity
with information furnished pursuant to the Information Letter
contemplated by Section 3.9(b) in writing to Parent by the Company or
the Shareholders specifically for inclusion therein. If
indemnification hereunder is not available, then Parent will provide
contribution to the parties who would have been indemnified, which
contribution shall be based on the relative benefits derived from the
PPM, Registration Statement or Prospectus, as the case may be, by
Parent on the one hand, and such indemnified persons on the other.
(e) Parent and Merger Sub shall use their best efforts,
at their expense, to have the directors, officers and controlling
persons of the Company, the Shareholders, and the persons listed on
Exhibit 3.21, added as additional named insureds to any insurance
coverage maintained by Parent (or its directors and officers) against
liabilities under the Securities Act.
(f) Parent will deliver to the Shareholders, with the
PPM, each of the Other Acquisition Agreements.
3.10 TAX-FREE REORGANIZATION.
(a) No Acts Jeopardizing Merger. Unless the other
parties shall otherwise agree in writing, none of the Shareholders,
the Parent, the Merger Sub, the Company or the Surviving Corporation
shall knowingly take or fail to take any action, which action or
failure
Kori Agreement and Plan of Merger//Page 47
<PAGE> 56
to act would jeopardize the qualification of the Merger as a
reorganization pursuant to Section 368(a)(2)(D) of the Code.
(b) Two-Year Holding Period. No Shareholder will dispose
of any of the Parent Common Stock received in the Merger within two
years following the Effective Time if such disposition would reduce
the fair value of the Parent Common Stock (evaluated as of the
Effective Date) retained by such Shareholder to an amount less than
50% of the fair value of the Company Common Stock held by the
Shareholder immediately prior to the Merger, unless the Shareholder
obtains an opinion of counsel or of an accounting firm of national
standing, which counsel or firm is reasonably satisfactory to Parent,
that such transfer will not violate the continuity of shareholder
interest requirement set forth in Treasury Regulation Section 1.368-1.
3.11 SATISFACTION OF CONDITIONS BY THE COMPANY AND SHAREHOLDERS.
The Company and the Shareholders shall (i) use their reasonable efforts to
obtain, as soon as possible, all governmental approvals required to be obtained
by the Company and make, as soon as possible, all filings with any governmental
authority required on the part of the Company to consummate the transactions
contemplated hereby, (ii) use their reasonable efforts to obtain, as soon as
possible, all other consents to and approvals required to be obtained by the
Company to consummate the transactions contemplated hereby, and (iii) otherwise
use their reasonable efforts to satisfy the conditions set forth in Article 4
of this Agreement to the extent that such satisfaction is within their control;
provided, however, that this Section 3.11 shall not be construed to limit the
rights of Shareholders to terminate this Agreement as provided in Article 5 of
this Agreement.
3.12 SATISFACTION OF CONDITIONS BY PARENT. Parent shall (i) use
its reasonable efforts to obtain, as soon as possible, all governmental
approvals required to be obtained by the Parent and make, as soon as possible,
all filings with any governmental authority required on the part of the Parent
to consummate the transactions contemplated hereby, (ii) use its reasonable
efforts to obtain, as soon as possible, all of the consents to and approvals
required to be obtained by the Parent to consummate the transactions
contemplated hereby, and (iii) otherwise use its reasonable efforts to satisfy
the conditions set forth in Article 4 of this Agreement to the extent that such
satisfaction is within its control; provided, however, that this Section 3.11
shall not be construed to limit the rights of Parent to terminate this
Agreement as provided in Article 5 of this Agreement.
3.13 AMENDMENT OF OTHER ACQUISITION AGREEMENTS. Parent will not
enter into any amendment to any Other Acquisition Agreement unless the
Shareholders have previously consented thereto in writing, which consent may
not be unreasonably withheld or delayed unless (i) the Shareholders are not
given, simultaneously with the execution of any such amendment, all of the
benefits accorded thereby to the Other Company and its shareholders, or (ii)
the amendment is materially unfavorable to Parent and/or Merger Sub in the
reasonable belief of the Shareholders.
Kori Agreement and Plan of Merger//Page 48
<PAGE> 57
3.14 DELIVERIES. Parent will promptly deliver, as soon as they are
available to Parent, all exhibits and schedules (including the disclosure
schedules) to each Other Acquisition Agreement and all amendments and
supplements to those exhibits and schedules.
3.15 PERIODIC REPORTS. Parent will, following the effective date
of the Registration Statement, timely file all periodic reports required to be
filed by it pursuant to the Securities Act or the Securities Exchange Act of
1934, and take all such other action as may be required of it, to the extent
the failure to timely file such reports or the failure to take such other
action would adversely affect the availability to the Shareholders of the
exemption from registration contained in Rules 144 or 145 under the Securities
Act with respect to resales of Parent Common Stock.
3.16 CORPORATE INDEMNIFICATION. From and after the Effective Time,
Merger Sub (as then successor to the Company) will, to the maximum extent
permitted by the Louisiana Business Corporation Law, indemnify (including,
without limitation, advancement of expenses) each of the Shareholders and the
persons identified in Exhibit 3.16 who was or is or becomes a party or is or
becomes threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative, or investigative, including any action
by or in the right of the corporation, by reason of the fact that he or she is
or was a director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
of another business, foreign or non-profit corporation, partnership, joint
venture, or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement in connection therewith.
3.17 RELEASE OF SHAREHOLDERS AND OTHERS. Effective at the Final
Closing (with respect to the Company) and at the Effective Time (with respect
to Parent and Merger Sub), each of the Company, Parent and Merger Sub (acting
as the then-successor of the Company) hereby releases, acquits and forever
discharges the Shareholders and the persons listed on Exhibit 3.17 from (i) any
and all liabilities, obligations, indebtedness, claims, demands, actions or
causes of action arising from or relating to any event, occurrence, act,
omission or condition occurring or existing on or prior to the Final Closing,
or (ii) any claim for indemnity or contribution from the Shareholders in
connection with any liability of the Company under this Agreement; provided
that Shareholders shall not be released by this Section 3.17 from (a) any
liability or claims arising from any action taken or omitted by the
Shareholders as officers, directors, employees or agents of the Company
involving willful misconduct or (b) claims pursuant to Article 6 of this
Agreement. THE FOREGOING PROVISION IS SPECIFICALLY INTENDED TO RELEASE THE
RELEASED PERSONS FROM LIABILITY FOR (AMONG OTHER THINGS) THEIR OWN NEGLIGENCE
OR GROSS NEGLIGENCE.
3.18 RELEASE AND INDEMNIFICATION FROM GUARANTIES. Parent will use
its best efforts to have the Shareholders released, at the earliest possible
time, from all guaranties (including any pledges of assets) by any of them of
debts or obligations of the Company, including by repayment of such debt or
obligation if necessary to effect such release. From and after the Final
Closing,
Kori Agreement and Plan of Merger//Page 49
<PAGE> 58
Parent and Merger Sub will defend, indemnify and hold each Shareholder harmless
of and from any claims made or threatened to be made, or loss incurred, in
connection with any such guarantee.
3.19 BENEFIT PLANS. Neither Parent nor Merger Sub shall terminate
any health or medical insurance, life insurance, 401(k) plan or other benefit
plan in effect with respect to the Company until such time as Parent replaces
such plan with a plan that is applicable to Parent and all of its then
subsidiaries. Any such replacement plan shall give the former officers and
employees of the Company full credit for the period of time each was employed
by the Company prior to the Effective Time and for the period of time each is
employed by the Surviving Corporation after the Effective Time. Each such
former officer and employee shall become fully vested under each such plan in
effect with respect to the Company that is terminated after the Effective Time
in accordance with this Section, including (without limitation) those former
officers and employees who may have been terminated after the Effective Time
but before termination of such plan. Any new health insurance plan shall
provide for coverage for pre-existing conditions. Parent and Merger Sub will
provide officers and employees of the Company with benefits that, in the
aggregate, are not less favorable than those provided to any of the Other
Companies.
3.20 NATURE OF OBLIGATIONS. All obligations of Parent in this
Agreement are guaranteed jointly and severally by Merger Sub, and vice-versa.
Where both Parent and Merger Sub are bound with respect to the same obligation,
the obligation is joint and several.
3.21 INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY.
(a) From and after the Final Closing Date, Parent and the
Surviving Corporation agree to indemnify, defend and hold harmless the
former directors and officers of the Company and the persons listed on
Exhibit 3.21 (as used in this Section, each an "Indemnified Person")
from and against all losses, claims, damages, liabilities and
judgments (and related expenses including, but not limited to,
attorney's fees and amounts paid in settlement), and any action or
other proceeding in respect thereof, to which any Indemnified Person
becomes subject, based upon or arising out of actions or omissions or
alleged actions or omissions of such persons occurring (or alleged to
have occurred) at or prior to the Final Closing Date, to the fullest
extent (including the advancement of expenses) permitted under (1) the
Delaware General Corporation Law or the Louisiana Business Corporation
Law, as applicable, or (2) the certificate of incorporation, bylaws or
other governing documents of the Company as in effect on the date of
this Agreement, whichever of (1) or (2) is greater.
(b) From and after the Final Closing Date, Parent shall
not amend, alter or repeal those provisions of the certificate of
incorporation, bylaws or other governing documents of the Company
relating to liability or indemnification of directors and officers,
except as required by law, if the effect of such amendment, alteration
or repeal would be to increase the potential liability of a director
or officer of the Company to the Company or to its stockholders for
monetary damages for breach of fiduciary duty, or to lessen or
otherwise
Kori Agreement and Plan of Merger//Page 50
<PAGE> 59
adversely affect the indemnification rights of directors and officers
of the Company as provided in such certificate of incorporation,
bylaws or other governing documents as in effect on the date of this
Agreement.
(c) The rights granted to the Indemnified Persons hereby
shall be contractual rights inuring to the benefit of all Indemnified
Persons and shall survive this Agreement and the Final Closing. They
are in addition to the indemnification provided pursuant to Section
3.16.
3.22 PARENT'S IPO. Parent shall use its best efforts to cause the
Registration Statement to become effective, and to complete its IPO, as soon as
practicable. To the extent permitted by applicable law, Parent shall keep the
Company informed regarding the status of Parent's IPO.
3.23 LISTING. Parent shall use its best efforts to cause the
Parent Common Stock to be listed on a national securities exchange or a
national computerized quotation and trading system after the IPO.
3.24 PRINCIPAL OFFICE. Parent agrees that it will maintain the
principal office of the Surviving Corporation (or other entity or division
operating the Company's assets) at 183 South Beadle Road, Lafayette, Louisiana
for a period of 12 months after the Final Closing Date, and represents and
warrants to the Shareholders that it has no present plans or intentions to move
such principal office after such time.
3.25 DISTRIBUTIONS. The Company will, not later than immediately
before the Final Closing (except as otherwise provided by Section 8.2(b)), make
the distributions contemplated by Sections 2.2(h)(13) and 3.1(m).
3.26 CERTAIN ACTIONS. Parent will not (a) declare or pay,
following the Preliminary Closing and prior to the Final Closing, any stock
dividend, subdivision, reclassification, recapitalization, split-up,
combination, or exchange of shares or the like; and (b) take any action to
terminate the effectiveness of the Merger following the Final Closing and prior
to the Effective Time.
ARTICLE 4
CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARENT. The
obligations of the Parent to consummate the Preliminary Closing under this
Agreement are subject to the satisfaction in all material respects of each of
the following conditions, unless waived by the Parent:
Kori Agreement and Plan of Merger//Page 51
<PAGE> 60
(a) Accuracy of Representations and Warranties. Except
for such changes as are permitted pursuant to Section 3.4 of this
Agreement, the representations and warranties of the Shareholders and
the Company contained in this Agreement, in the Shareholders
Disclosure Schedule, the Company Disclosure Schedule and in each
closing certificate and document delivered to Parent by the Company or
the Shareholders pursuant hereto shall be correct in all material
respects at and as of the Preliminary Closing Date as though made at
and as of the Preliminary Closing Date, other than such
representations and warranties as are specifically made as of another
date which shall be correct at and as of such other date; and the
Shareholders and the Company shall each have delivered to Parent a
certificate to the effect set forth in this Section.
(b) Performance of Covenants. The Shareholders and the
Company shall have performed and complied with all covenants of this
Agreement to be performed or complied with by them at or prior to the
Preliminary Closing Date (except where the failure to so perform or
comply would not have an adverse effect on Parent or prevent the
Shareholders or Parent from consummating the transactions contemplated
hereby), and the Shareholders and the Company shall each have
delivered to Parent a certificate to that effect.
(c) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted after the date hereof against
the Shareholders or the Company, or against Parent, arising by reason
of the acquisition of the Company pursuant to this Agreement, which is
reasonably likely (1) to restrain, prohibit or invalidate the
consummation of the transactions contemplated by this Agreement, (2)
to have a material adverse effect on the Company or (3) to have a
material adverse effect on the results of operations or financial
condition of Parent and its subsidiaries, taken as a whole, after
giving effect to the consummation of the transactions contemplated by
this Agreement and the Other Acquisition Agreements.
(d) Approvals. The Company and the Shareholders shall
have procured all of the consents, approvals and waivers specified in
Sections 2.1(b) and 2.2(e), and the Shareholders and the Company shall
each have delivered the same to Parent.
(e) [Intentionally left blank]
(f) Policies of Title Insurance. The Shareholders shall
have delivered Policies of Title Insurance insuring the Company's
ownership or leasehold interest in the Title Insurance Property.
(g) Employment Agreements. Each of the individuals
specified on Exhibit 4.1(g)(1) shall have executed and delivered an
Employment Agreement with the Company substantially in the form
attached as Exhibit 4.1(g)(2) hereto.
Kori Agreement and Plan of Merger//Page 52
<PAGE> 61
(h) The Registration Rights Agreements and Shareholders
Lock-up Agreements. The Shareholders shall have executed and
delivered the Registration Rights Agreements and any lock-up agreement
reasonably requested by the managing underwriter of Parent's IPO which
restricts the sale or other disposition of Parent Common Stock for a
reasonable and customary period not exceeding 365 days following the
effectiveness of the Registration Statement.
(i) Parent's IPO. Parent and the underwriters shall have
executed and delivered the Underwriting Agreement.
(j) Lender Approval. Parent shall have secured a
commitment for approximately $25,000,000 in senior indebtedness.
(k) Audit of the Company. Parent shall have received the
results of an audit of the Company's financial statements by the
certified public accounting firm regularly engaged by Parent or such
other independent public accountant as agreed by the parties.
(l) Opinion of Counsel for the Company and the
Shareholders. Parent and the Merger Sub shall have received the
favorable opinion of Correro Fishman Haygood Phelps Weiss Walmsley &
Casteix, L.L.P., counsel for the Company and the Shareholders, dated
the Preliminary Closing Date, substantially in the form and to the
effect set forth in Exhibit 4.1(l) hereto.
(m) The Shareholders Release of the Company; Corporate
Records. The Shareholders shall have delivered to the Exchange Agent
(i) a release that effectuates Section 3.7 of this Agreement, and (ii)
the corporate records and books of Company, including the minute book,
the stock transfer books, and the corporate seal of the Company (of
any of which the Shareholders may retain copies for any proper
purpose).
(n) All Proceedings to be Satisfactory. All necessary
director and shareholder resolutions, waivers and consents and all
other actions to be taken by the Shareholders and the Company in
connection with the consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby
shall be satisfactory in form and substance to Parent and the Merger
Sub and their counsel.
4.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SHAREHOLDERS
AND THE COMPANY. The obligations of the Shareholders and the Company to
consummate the Preliminary Closing under this Agreement are subject to the
satisfaction in all material respects or waiver by the Shareholders of each of
the following conditions:
Kori Agreement and Plan of Merger//Page 53
<PAGE> 62
(a) Accuracy of Representations and Warranties. Except
for such changes as are permitted pursuant to Section 3.4 of this
Agreement, the representations and warranties of Parent and the Merger
Sub contained in this Agreement, in the Parent Disclosure Schedule and
in each closing certificate and document delivered by the Parent or
the Merger Sub to the Shareholders or the Company pursuant hereto
shall be correct in all material respects at and as of the Preliminary
Closing Date, as though made at and as of the Preliminary Closing
Date, other than such representations and warranties as are
specifically made as of another date which shall be correct at and as
of such other date; and Parent and the Merger Sub shall have delivered
to the Shareholders and the Company a certificate to the effect set
forth in this Section.
(b) Performance of Covenants. Parent and the Merger Sub
shall have performed and complied with all covenants of this Agreement
to be performed or complied with by them at or prior to the
Preliminary Closing Date (except where the failure to so perform or
comply would not have a material adverse effect on the Shareholders or
the Company or prevent Parent, Merger Sub or the Shareholders from
consummating the transactions contemplated hereby), and Parent and the
Merger Sub shall each have delivered to the Shareholders and the
Company a certificate to such effect.
(c) Approvals. Parent shall have procured all of the
consents, approvals and waivers specified in Section 2.3(f), and
Parent shall deliver the same to the Shareholders and the Company.
(d) Delivery of PPM. Parent shall have delivered the PPM
to the Shareholders.
(e) [Intentionally left blank]
(f) Employment Agreements. The Company shall have
executed and delivered to the Exchange Agent an Employment Agreement
with each of the individuals specified on Exhibit 4.1(g)(1) in the
form attached as Exhibit 4.1(g)(2) hereto.
(g) Registration Rights Agreement. Parent and each of
the Shareholders shall have executed and delivered to the Exchange
Agent a Registration Rights Agreement in the form attached as Exhibit
1.8 hereto.
(h) All Proceedings to be Satisfactory. The Shareholders
and their counsel shall have received Parent's PPM describing Parent
and the Parent Common Stock to be delivered as a part of the Merger
Consideration together with all such counterpart originals or
certified or other copies of all documents relating to Parent incident
to the transactions contemplated hereby as the Shareholders or such
counsel may reasonably request; and the PPM, the Registration
Statement (each as amended or supplemented) and all certificates,
opinions,
Kori Agreement and Plan of Merger//Page 54
<PAGE> 63
instruments, and other documents required to effect the transactions
contemplated hereby shall be satisfactory in form and substance to
Shareholders, the Company and their counsel.
(i) Opinion of Counsel for The Parent and the Merger Sub.
The Shareholders and the Company shall have received the favorable
opinion of Chamberlain, Hrdlicka, White, Williams & Martin, counsel
for Parent and the Merger Sub, dated the Preliminary Closing Date,
substantially in the form and to the effect set forth in Exhibit
4.2(i) hereto.
(j) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted after the date hereof against
the Parent, or against the Shareholders or the Company, arising by
reason of the acquisition of the Company pursuant to this Agreement,
which is reasonably likely (1) to restrain, prohibit or invalidate the
consummation of the transactions contemplated by this Agreement, (2)
to have a material adverse effect on the Company or (3) to have a
material adverse effect on the results of operations or financial
condition of Parent and its subsidiaries, taken as a whole, after
giving effect to the consummation of the transactions contemplated by
this Agreement and the Other Acquisition Agreements.
(k) IPO. The Registration Statement shall have been
declared effective by the SEC and shall relate to the public offering
for cash of at least $45,000,000 from the sale of shares of Parent
Common Stock that do not exceed approximately 50% of the total number
of shares to be outstanding immediately following the closing of the
IPO and the Other Acquisition Agreements (in each case excluding any
shares sold under an over-allotment option and the proceeds therefrom)
and shall not be subject to any stop order or similar proceeding; and
the Underwriting Agreement shall have been executed and delivered by
the parties thereto.
(l) Release. The Company, Parent and Merger Sub shall
have delivered to the Exchange Agent a release that effectuates
Section 3.17 of this Agreement.
(m) Simultaneous Closings. The "preliminary closings"
under the Other Acquisition Agreements shall occur simultaneously with
or prior to the Preliminary Closing under this Agreement.
(n) No Material Adverse Change. There shall have been no
material adverse change in the business, financial condition or
prospects of Parent combined with the Other Companies on a proforma
basis.
(o) Shareholder Agreement. The Shareholders, the Parent
Insiders and their affiliates and Parent shall have entered into a
shareholder agreement with respect to, among other things, (i) mutual
"tag along" rights for the Shareholders and the Parent Insiders
applicable to sales of more than 75,000 shares of Parent Common Stock
(to be adjusted for
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<PAGE> 64
stock splits and dividends occurring after the date hereof) in private
placement transactions, or in the alternative an additional demand
registration for the Shareholders under the Registration Rights
Agreement, (ii) restrictions on Parent Insiders and their affiliates
selling shares of Parent Common Stock for 2 years following the Final
Closing, and (iii) permitted sales of Parent Common Stock in private
sales by the Parent Insiders after one year from the Final Closing in
amounts not to exceed the lesser of the 90-day Rule 144 limits on
affiliates of companies, or 10% of the personal holding of each such
Parent Insider, in any 6-month period; which agreement shall be
reasonably acceptable to the Shareholders, the Parent Insiders and
Parent.
(p) Listing of Parent Common Stock. The Parent Common
Stock shall have been accepted for listing, subject only to issuance,
on a national securities exchange or the NASDAQ Stock Market (national
market system).
(q) Reliance Letters. The Shareholders shall have
received letters addressed to them by Arthur Andersen LLP and
Chamberlain, Hrdlicka, White, Williams & Martin, permitting the
shareholders to rely on the comfort or opinion letters to be delivered
by those firms to the underwriters at the closing of the IPO, to the
extent such letters bear upon tax matters relating to the Merger, and
the accuracy or completeness of the Registration Statement or its
compliance with the Securities Act and other applicable law.
(r) Tax Opinion. The Shareholders shall have received a
favorable tax opinion from KPMG Peat Marwick LLP to the effect that
the Merger qualifies as a reorganization under Section 368(a)(2)(D) of
the Code.
ARTICLE 5
TERMINATION
5.1 TERMINATION OF AGREEMENT. The Parties may terminate this
Agreement as provided below:
(a) Prior to the Preliminary Closing. The Parties may
terminate this Agreement at any time prior to the Preliminary Closing
as provided below:
(1) Mutual Consent. The Parent and the
Shareholders may terminate this Agreement by mutual written
consent of Parent and Required Shareholders at any time prior
to the Preliminary Closing;
(2) Termination by Parent. The Parent may
terminate this Agreement by giving written notice to the
Shareholders at any time prior to the consummation of
Kori Agreement and Plan of Merger//Page 56
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the Preliminary Closing (1) in the event the Shareholders or
the Company has breached any material representation,
warranty, or covenant contained in this Agreement in any
material respect, the Parent has notified the Shareholders of
the breach, and the breach has continued without cure until
the earlier of (A) 20 days after the notice of such breach or
(B) the Preliminary Closing Date or (C) the date set forth
below in this Section, whichever is earlier, or (2) if the
Preliminary Closing shall not have occurred on or before
December 31, 1997, by reason of the failure of any condition
precedent under Section 4.1 hereof (unless the failure results
primarily from the Parent itself breaching an obligation to
proceed with the Preliminary Closing hereunder); and
(3) Termination by the Shareholders. The
Required Shareholders may terminate this Agreement by giving
written notice to the Parent at any time prior to the
consummation of the Preliminary Closing (1) in the event the
Parent or the Merger Sub has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, the Shareholders have
notified the Parent of the breach, and the breach has
continued without cure until the earlier of (A) 20 days after
the notice of such breach or (B) the Preliminary Closing Date
or (C) the date set forth below in this Section, whichever is
earlier, or (2) after execution of this Agreement, within
three business days after each date following the date of this
Agreement on which the Shareholders receive the PPM or any
amendment or supplement thereto, or any Other Acquisition
Agreement or exhibit or schedule thereto or any amendment to
any thereof, if any such document constitutes or reflects,
individually or in the aggregate, a material adverse change to
the business, assets or prospects of Parent and its
subsidiaries in the aggregate, including the Other Companies,
or materially changes, in a manner that is adverse to the
Shareholders, the content of the PPM, the Registration
Statement or the Prospectus or requires such a material change
(all of the matters set forth in clause (2) as determined in
good faith by the Required Shareholders), or (3) if the
Preliminary Closing shall not have occurred on or before
December 31, 1997 (or such earlier comparable date as may be
set forth in any Other Acquisition Agreement), or (4) if any
of the Other Acquisition Agreements are terminated.
(b) After the Preliminary Closing Date. This Agreement
may be terminated after the Preliminary Closing only as provided in
Section 1.2(d) or 3.4.
5.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 5.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto, except
that (1) Section 3.5, Section 9.1, Section 9.6, Section 9.7, Section 9.8,
Section 9.10 and Section 9.11 hereof shall survive such termination and (2)
nothing herein shall relieve any party from liability for (A) any willful and
intentional breach in bad faith that preceded such termination and continued
prior to such termination despite reasonable notice, except that this
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<PAGE> 66
clause (A) will not apply to a termination under Section 5.1(a)(1); or (B) any
willful breach of any such surviving Section hereof.
ARTICLE 6
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Subject to the
limitations of Section 6.6, the respective representations and warranties of
the parties contained in this Agreement shall survive the Preliminary Closing
Date and the Final Closing Date, regardless of any investigation made by or on
behalf of any party.
6.2 INDEMNIFICATION BY THE SHAREHOLDERS. Subject to the
limitations of Section 6.6, the Shareholders hereby agree to indemnify and hold
harmless the Surviving Corporation and Parent in respect of any losses, claims,
damages, liabilities or related expenses (including, but not limited to, all
litigation costs but net of all available proceeds of insurance) (collectively,
"Losses") which the Surviving Corporation or Parent (but without duplication)
incurs as a result of the breach of: (A) any of the representations or
warranties made by the Shareholders in or pursuant to this Agreement, except
that the Shareholders shall have no obligation to indemnify and hold harmless
with respect to (i) a breach of the representations or warranties set forth in
Section 2.2(p) ("Environmental Laws") to the extent that the Company has
insurance to adequately cover potential liabilities for environmental matters,
or (ii) any representation or warranty that any property is in good condition
or repair or otherwise fit for the purposes for which the property is intended;
or (B) any of the covenants made by the Shareholders in this Agreement which
are to be performed at or after the Final Closing; or (C) any of the covenants
made by the Shareholders in this Agreement which are to be performed at or
after the Preliminary Closing and prior to the Final Closing but only if the
breach thereof is willful and intentional and involves self-dealing or bad
faith. The indemnification obligations of the Shareholders under this Section
6.2 shall survive the Preliminary Closing and the Final Closing and will
terminate at the time specified in Section 6.6.
6.3 INDEMNIFICATION BY PARENT AND SURVIVING CORPORATION. Parent
and Surviving Corporation, jointly and severally, agree to indemnify and hold
harmless the Shareholders in respect of any losses, claims, damages,
liabilities or related expenses (including, but not limited to, all litigation
costs) which the Shareholders incur as a result of the breach of any of the
representations or warranties made by Parent in or pursuant to this Agreement
or any of the covenants made by Parent or the Surviving Corporation in this or
any related Agreement which are to be performed at or after the Preliminary
Closing or the Final Closing. The indemnification obligations of Parent and
Surviving Corporation under this Section 6.3 shall survive the Preliminary
Closing and the Final Closing.
6.4 NOTICE. Promptly after any party hereto (in Article 6, the
"Indemnified Party") has received notice or has knowledge of the occurrence of
any event which the Indemnified Party asserts
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is an indemnifiable event or after the threat or commencement of any action,
claim or proceeding commenced against the Indemnified Party by a third party
that might result in any claim for indemnity pursuant to this Agreement (a
"Third Party Claim"), the Indemnified Party shall provide the party obligated
to provide indemnification hereunder (in Article 6, the "Indemnifying Party")
written notice of such claim or the threat of commencement of such action or
proceeding. Promptly after receipt by an Indemnifying Party of any such
notice, the Indemnifying Party shall, within ten business days of receipt of
such notice, either: (i) acknowledge the debt, liability or obligation for
which indemnity is sought as a valid claim and forthwith pay (except as payment
is deferred pursuant to Section 6.5) the Indemnified Party an amount sufficient
to discharge such debt, liability or obligation; (ii) in the event of a Third
Party Claim which is not acknowledged by the Indemnifying Party to be owing,
notify the Indemnified Party whether the Indemnifying Party elects to undertake
the defense thereof and, if so, thereupon promptly assume and diligently
contest such Third Party Claim with counsel reasonably satisfactory to the
Indemnified Party; or (iii) in the event of a claim by the Indemnified Party
for indemnity hereunder which is challenged by the Indemnifying Party, notify
the Indemnified Party of such challenge. Failure to respond within the
appropriate time period following the receipt of a notice hereunder shall be
deemed to constitute a challenge by the Indemnifying Party of the claims to
indemnification by the Indemnified Party. In the event of such a challenge,
the Indemnified Party shall, if the claim is a Third Party Claim, defend
against such claim subject to such Party's right to be indemnified for all
litigation costs to the extent it is ultimately determined that the
Indemnifying Party was obligated (after applying the limitations of Section
6.6) to provide indemnification with respect to such Third Party Claim. The
Indemnified Party shall not compromise a Third Party Claim without the prior
written consent of the Indemnifying Party (which consent may not be
unreasonably withheld or delayed if the Indemnifying Party has challenged the
claim to indemnification by the Indemnified Party). The Indemnifying Party
shall not compromise a Third Party Claim unless the compromise includes a
complete release of the Indemnified Party and does not create any obligations
of the Indemnified Party.
6.5 TIME OF PAYMENT. The Shareholders may defer any payment due
under Article 6 to the Indemnified Parties, in an amount up to 50% of the
aggregate amount of indemnification (including such deferred payment) which
Shareholders are at the time obligated to pay or have paid, until the date that
is two years after the Final Closing Date, on which date any such deferred
payments shall become due without interest.
6.6 LIMITATIONS ON INDEMNIFICATION.
(a) No Indemnified Party shall be entitled to
indemnification from a Shareholder pursuant to Article 6 unless and until the
aggregate of all Losses for which indemnification would (but for the limitation
of this sentence) be required to be paid under Article 6 exceeds $105,000 (the
"Loss Threshold"), provided that if the aggregate Losses for which
indemnification is required to be paid shall exceed such sum then only those
Losses in excess thereof shall be payable (subject to the further limitations
set forth below). If an Indemnifying Party pays indemnification (including
without limitation, the cost of defending a Third Party Claim) that was not
required to be paid due
Kori Agreement and Plan of Merger//Page 59
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to any limitation set forth in this Section 6.6, then the Indemnified Party
shall, promptly after demand by the Indemnifying Party, reimburse the latter
for such payments without interest. Losses for which indemnification is
required to be paid under Article 6 by reason of any breach of the
representations and warranties of Section 2.1 ("Section 2.1 Losses") shall not
be subject to the Loss Threshold, but the amount of Section 2.1 Losses shall
not be counted toward meeting that threshold with respect to other
indemnification claims. If an Indemnified Party's right to indemnification
arises by reason of the breach of any representation or warranty set forth in
Section 2.2 of this Agreement, then each Shareholder will be liable solely for
his or her proportionate share of such indemnification based on the proportion
that the Merger Consideration received by such Shareholder bears to the total
Merger Consideration received by all Shareholders. If an Indemnified Party's
right to indemnification arises by reason of the breach of any representation
or warranty of a Shareholder other than those set forth in Section 2.2 or by
reason of the breach of a covenant of a Shareholder, then (i) the Shareholder
who breached such representation or warranty shall be solely liable for
indemnification for Losses attributable to such breach, and (ii) the
Shareholder who breached such covenant shall be solely liable for
indemnification for Losses attributable to such breach, except that if more
than one Shareholder participated in such breach of a representation, warranty
or covenant then the participating Shareholders, jointly in the proportion that
the Merger Consideration received by each of them bears to the total Merger
Consideration received by all of such participating Shareholders, shall be
liable for indemnification for Losses attributable to such breach of a
representation, warranty or covenant. The maximum liability of any Shareholder
pursuant to Article 6 of this Agreement shall not exceed $350,000 in the
aggregate (the "Individual Limitation"). In addition, the maximum aggregate
liability of the Shareholders under Article 6 of this Agreement shall not
exceed $700,000 in the aggregate (the "Aggregate Limitation"). A Shareholder
shall have no further obligations under Article 6 of this Agreement at the
earlier of (i) the time when such Shareholder has paid and/or is obligated to
pay indemnification under Article 6 of this Agreement (including, without
limitation, payments in respect of defending against Third Party Claims and
payments that are deferred to a future date under Section 6.5) equal to the
Individual Limitation, or (ii) the time when all Shareholders have paid and/or
are obligated to pay indemnification under Article 6 of this Agreement
(including, without limitation, payments in respect of defending against Third
Party Claims and payments that are deferred to a future date under Section 6.5)
equal in the aggregate to the Aggregate Limitation. Upon reaching either
limitation, a Shareholder who is then defending against a Third Party Claim
shall turn the defense thereof over to any other Shareholder who then remains
liable for indemnification with respect thereto or, if there is no such other
Shareholder, to the Indemnified Parties, which shall thereafter undertake such
defense at their sole expense.
(b) An Indemnified Party shall not be entitled to make
any claim for indemnification against a Shareholder under this Article 6 unless
notice of such claim describing such claim with particularity is given prior to
the date that is 18 months after the Final Closing Date, or, with respect to
the warranties and representations in Section 2.2(v) ("Tax Matters"), the date
that is not later than the expiration of the applicable statute of limitations
for a claim by a taxing authority for any taxes, penalties or interest.
Kori Agreement and Plan of Merger//Page 60
<PAGE> 69
(c) In no event will an Indemnified Party be entitled to
make a claim under Article 6 against a Shareholder for the breach of any
representation, warranty, or covenant if, at or prior to the Final Closing,
such Indemnified Party had knowledge of facts constituting such breach and
failed to notify the Shareholders thereof prior to the Final Closing.
6.7 EFFECTIVE DATE; EXCLUSIVE REMEDY. The obligations of the
parties under Article 6 shall only become effective from and after the Final
Closing. Upon becoming effective, the right to indemnification set forth in
this Article 6 shall be the sole and exclusive remedy of the parties for breach
of any representation, warranty, covenant or agreement set forth in or made
pursuant to this Agreement, and each party covenants and agrees not to seek or
assert any other remedy following the Final Closing, except that any party may
seek such injunctive relief as may be available. Parent and Merger Sub
acknowledge that, except as expressly set forth in this Agreement, there are no
other representations or warranties of the Shareholders or the Company in
connection with the transactions contemplated hereby, all such other
representations and warranties being expressly disclaimed.
ARTICLE 7
STOCK TRANSFER RESTRICTIONS
7.1 COMPLIANCE WITH SECURITIES LAWS. The Shareholders acknowledge
and agree with Parent that the shares of Parent Common Stock issued pursuant to
this Agreement (the "Restricted Shares") to the Shareholders shall not be
transferable except upon the conditions specified in this Article 7, which
conditions are intended, among other things, to ensure compliance with the
provisions of the Securities Act and any applicable state securities laws in
respect of the transfer of such Restricted Shares. The Shareholders
acknowledge and agree that the certificates representing the Restricted Shares
will contain a restrictive legend to the effect that transfer of such shares is
prohibited unless the shares are registered under the Securities Act and
applicable state securities laws, or in the event that such transfer is, in the
opinion of counsel to Parent or counsel to the Shareholders which is reasonably
satisfactory to the Parent, exempt from the registration provisions of the
Securities Act and applicable state securities laws.
7.2 RESTRICTIONS ON TRANSFER. Prior to any transfer or attempted
transfer of Restricted Shares other than the sale of such shares pursuant to
registration under the Securities Act, the Shareholders agree to give written
notice to Parent of its intention to effect such transfer. The notice shall
describe the manner and circumstances of the proposed transfer in detail and
shall contain an undertaking to furnish such other information as may be
required to enable Parent's counsel to render the opinions referred to below,
and shall give the identity and address of the Shareholders' counsel. Parent
shall promptly submit a copy of the notice to its counsel, and the following
provisions shall apply:
(a) If, in the opinion of the Parent's counsel or counsel
to the Shareholders which is reasonably satisfactory to the Parent, the
proposed transfer may be effected without registration
Kori Agreement and Plan of Merger//Page 61
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of the Restricted Shares under the Securities Act, Parent shall, as promptly as
practicable, so notify the Shareholders who will then be entitled to transfer
the Parent Common Stock in accordance with the terms of the notice delivered by
the Shareholders to Parent.
(b) If, in the opinion of the Parent's counsel or counsel
to the Shareholders which is reasonably satisfactory to the Parent, the
proposed transfer of the Parent Common Stock may not be effected without
registration under the Securities Act, Parent shall, as promptly as
practicable, so notify the Shareholders, and the Shareholders shall not be
allowed to effect the proposed transfer except pursuant to an offering
registered under the Securities Act.
(c) The Shareholders understand and agree that except as
set forth in the Registration Rights Agreement or any similar agreement or this
Agreement, Parent is not obligated to furnish a registration statement under
the Act or any state securities laws covering the Restricted Shares nor is
Parent under any obligation to aid the Shareholders in obtaining any exemption
from any such registration requirements. Each Shareholder also acknowledges
that they shall be responsible for compliance with all conditions of transfer
of the Restricted Shares imposed by any administrator of any state and for the
fees of their counsel. Parent shall be responsible for the fees and expenses
incurred by Parent for legal or accounting services in connection with
reviewing such proposed transfer and issuing opinions in connection therewith.
(d) The Shareholders understand and agree that transfer
of the Restricted Shares may be effected only on the books of Parent, and that
stop transfer instructions will be issued to the transfer agent of Parent
Common Stock in accordance with the legend on any certificate representing the
Restricted Shares. The transfer agent will not remove the legend from any
certificate representing the Restricted Shares without either registration of
the Restricted Shares under the Securities Act and applicable state securities
laws or an opinion of the Parent's counsel or counsel to the Shareholders which
is reasonably satisfactory to the Parent stating that the transfer of the
Restricted Shares is exempt from such registration requirements by reason of
Rule 144(k) under the Securities Act or other exemption.
(e) The foregoing restrictions on transfer of Restricted
Shares shall terminate as to any Shareholder as soon as the provisions of Rule
144(k) under the Securities Act (or any successor rule) become available to
such Shareholder and Parent shall at that time, upon request of any
Shareholder, cause Parent's transfer agent to reissue certificates to such
Shareholder not containing any legend relating to resales of unregistered
securities.
Kori Agreement and Plan of Merger//Page 62
<PAGE> 71
ARTICLE 8
FURTHER ASSURANCES
8.1 FURTHER ASSURANCES. At any time and from time to time on and
after the Final Closing Date (a) at the request and expense of Parent or the
Surviving Corporation, the Shareholders shall deliver to Parent (but may retain
copies for any proper purpose) any records, documents and data possessed by the
Shareholders and not previously delivered to Parent or the Surviving
Corporation to which Parent or the Surviving Corporation is entitled and
execute and deliver or cause to be executed and delivered all such deeds,
assignments, consents, documents and further instruments of transfer and
conveyance, and take or cause to be taken all such other actions, as Parent or
the Surviving Corporation may reasonably deem necessary or desirable in order
to fully and effectively vest in Parent or the Surviving Corporation, or to
confirm its title to and possession of, the Company Common Stock or to assist
Parent in exercising rights with respect thereto which Parent or the Surviving
Corporation is entitled to exercise pursuant to the terms of this Agreement;
and (b) Parent or the Surviving Corporation shall execute and deliver or cause
to be executed and delivered such further instruments and take or cause to be
taken such further actions as the Shareholders may reasonably deem necessary or
desirable to carry out the terms and provisions of this Agreement.
8.2 BOOKS AND RECORDS.
(a) Parent agrees that it shall preserve and keep all
books and records relating to the Company in Parent's possession until
the later of December 31, 2003, or six months following the expiration
of the statute of limitations (including extensions thereof)
applicable to the tax returns filed by or with respect to the Company
for taxable periods ending prior to or on the Final Closing Date to
which such books or records are relevant. After such time, before
Parent shall dispose of any of such books and records, at least 90
calendar days' prior written notice to such effect shall be given by
Parent to the Shareholders, and the Shareholders shall be given an
opportunity, at Parent's cost and expense, to remove all or any part
of such books and records as the Shareholders may select, and the
Shareholders may retain copies thereof. Duly authorized
representatives of the Shareholders shall, upon reasonable notice,
have access at any time to such books and records during normal
business hours to examine, inspect and copy such books and records.
(b) In any instance in which any Shareholder or Parent,
as the case may be, is required to prepare or file (or cause to be
filed) tax returns which cover a period that includes the Final
Closing Date or to respond to an audit by the Internal Revenue Service
or other governmental agency with respect to a period prior to the
Final Closing Date, each Shareholder or Parent, as the case may be,
will furnish all information and records reasonably available to it
and reasonably requested of him, her or it and necessary or
appropriate for use in preparing such returns or responding to such
audit. The Shareholders shall at Parent's
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expense prepare and file, subject to giving Parent a reasonable
opportunity to comment on, tax returns covering periods ending on the
Final Closing Date. The amount of any dividends permitted by Section
3.25 hereof but not taken by the Final Closing shall be paid by the
Surviving Corporation to the Shareholders in proportion to their
ownership of Company Common Stock as soon thereafter as the unpaid
amount thereof is made known to it by the Shareholders.
(c) Parent, Merger Sub and the Shareholders shall
cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the filing of tax returns and any
audit, litigation or other proceeding with respect to taxes. Such
cooperation shall include the provision of records and information
which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any
material provided hereunder.
ARTICLE 9
MISCELLANEOUS
9.1 EXPENSES, ETC. Whether or not the transactions contemplated
by this Agreement are consummated, none of the parties hereto shall have any
obligation to pay any of the fees and expenses of the other parties incident to
the negotiation, preparation and execution of this Agreement, including the
fees and expenses of counsel, accountants and other experts. The Company shall
pay its own fees and expenses. The Shareholders, the Company, Parent, and the
Surviving Corporation will indemnify the other parties, and hold them harmless
from and against any claims for finders' fees or brokerage commissions in
relation to or in connection with such transactions as a result of any
agreement or understanding between such indemnifying party and any third party.
The Shareholders shall pay and be responsible for any stock transfer Taxes with
respect to the Company Common Stock incident to the Merger. Parent shall pay
and be responsible for any stock transfer Taxes arising from the issuance and
sale of shares of Parent Common Stock hereunder.
9.2 EXECUTION IN COUNTERPARTS. For the convenience of the
parties, this Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
9.3 NOTICES. All notices which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given in writing and delivered or mailed by
registered or certified mail postage prepaid, or sent by telex, telecopier,
facsimile transmission or telegraph as follows:
Kori Agreement and Plan of Merger//Page 64
<PAGE> 73
If to the Shareholders or, prior With a copy to:
to the Final Closing, to the Company:
Linda C. Woodson Louis Y. Fishman
122 Shannon Rd. Correro Fishman
Haygood
Lafayette, LA 70503 Phelps Weiss
Walmsley & Casteix, L.L.P.
201 St. Charles Avenue, 47th Floor
Cheryl L. Woodson New Orleans, Louisiana 70170
102 Shannon Rd. Facsimile: (504) 586-5250
Lafayette, LA 70503
Paula K. Woodson
501 Woodvale
Lafayette, LA 70503
If to Parent or the Surviving
Corporation, to: With a copy to:
TransCoastal Marine Services, Inc. James J. Spring, III
505 Lorie Avenue, Suite I Chamberlain, Hrdlicka, White,
Lafayette, Louisiana 70507 Williams & Martin
Attention: President 1200 Smith Street, Suite 1400
Facsimile No. (318) 896-0034 Houston, Texas 77002-4310
Facsimile No. (713) 658-2553
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto. Any notice or other
communication pursuant to this Agreement shall be deemed to have been duly
given or made and to have become effective upon the earliest of (a) when
delivered in hand to the party to which directed, or (b) if sent by first-class
mail postage prepaid, certified mail, return receipt requested, or by telex,
telecopier, facsimile transmission or telegraph and properly addressed as set
forth above, at the time when received by the addressee or (c) with respect to
delivery by certified mail, return receipt requested, when delivery thereof,
properly addressed as set forth above, is made by the U.S. Postal Service.
9.4 WAIVERS. Any party hereto (as to itself, but not as to other
parties without their consent) may, by written notice to the other parties
hereto, (a) extend the time for the performance of any of the obligations or
other actions of the other parties under this Agreement; (b) waive any
inaccuracies in the representations or warranties of another party contained in
this Agreement or in any document delivered pursuant to this Agreement; (c)
waive compliance with any of the conditions or covenants of another party
contained in this Agreement; or (d) waive performance of any of the obligations
of another party under this Agreement. Except as otherwise provided in the
preceding sentence, no action taken pursuant to this Agreement, including
without limitation any investigation
Kori Agreement and Plan of Merger//Page 65
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by or on behalf of any party, shall be deemed to constitute a waiver by the
party taking such action of compliance with any representation, warranty,
covenant or agreement contained in this Agreement. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed a waiver of any subsequent breach.
9.5 AMENDMENTS, SUPPLEMENTS, ETC. At any time this Agreement may
be amended or supplemented by such additional agreements, articles or
certificates, as may be determined by the parties hereto to be necessary,
desirable or expedient to further the purposes of the Agreement, or to clarify
the intention of the parties hereto, or to add to or modify the covenants,
terms or conditions hereof or to effect or facilitate any governmental approval
or acceptance of this Agreement or to effect or facilitate the filing or
recording of this Agreement or the consummation of any of the transactions
contemplated hereby. Any such instrument must be in writing and signed by all
parties.
9.6 ENTIRE AGREEMENT. This Agreement, its Exhibits and Disclosure
Schedules and the documents executed on the Preliminary Closing Date and the
Final Closing Date in connection herewith, constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral and written, between
the parties hereto with respect to the subject matter hereof. No
representation, warranty, promise, inducement or statement of intention has
been made by any party hereto which is not embodied in this Agreement or such
other documents, and no party hereto shall be bound by, or be liable for, any
alleged representation, warranty, promise, inducement or statement of intention
not embodied herein or therein.
9.7 CHOICE OF FORUM; CONSENT TO JURISDICTION. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Texas. Any suit, action or proceeding arising with respect to the validity,
construction, enforcement or interpretation of this Agreement, and all issues
relating in any matter hereto, shall be brought in the United States District
Court for the Western District of Louisiana, or in the event that federal
jurisdiction does not pertain, in the state courts of the State of Louisiana in
Lafayette Parish. Each of the parties hereto hereby submits and consents to
the jurisdiction of such courts for the purpose of any such suit, action or
proceeding and hereby irrevocably waives (a) any objection which any of them
may now or hereafter have to the laying of venue in such courts, and (b) any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
9.8 BINDING EFFECT, BENEFITS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors, assigns, heirs and legatees. Nothing in this Agreement, expressed
or implied, is intended to confer on any person other than the parties hereto
or their respective successors and assigns, and third parties who are expressly
given rights hereunder, any rights, remedies, obligations or liabilities under
or by reason of this Agreement. In particular, but without limitation, no
representation, warranty or covenant of the Company or Shareholders herein or
in any related document shall confer on any present or future shareholder of
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<PAGE> 75
Parent or any of the Other Companies any rights or remedies except as is
expressly granted to Relatives.
9.9 ASSIGNABILITY. Neither this Agreement nor any of the parties'
rights hereunder shall be assignable by any party hereto without the prior
written consent of the other parties hereto.
9.10 INVALID PROVISIONS. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future law,
rule or regulation, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof. The remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance herefrom.
Furthermore, in lieu of such illegal, invalid or unenforceable provision, there
shall be added automatically as a part of this Agreement a legal, valid and
enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.
9.11 KNOWLEDGE. As used in this Agreement and the Disclosure
Schedules, the phrase "to the knowledge" of the Company and the Shareholders
means to the actual knowledge of the Shareholders or other representatives of
the Company listed on Exhibit 9.11.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed effective as of the date first above written.
PARENT:
TRANSCOASTAL MARINE SERVICES, INC.,
A DELAWARE CORPORATION
By: /s/ G. DARCY KLUG
------------------------------------
Name: G. Darcy Klug
-------------------------------
Title: Vice President
------------------------------
SHAREHOLDERS:
/s/ LINDA C. WOODSON
---------------------------------------
Linda C. Woodson
/s/ CHERYL L. WOODSON
-----------------------------------------
Cheryl L. Woodson
/s PAULA K. WOODSON
-----------------------------------------
Paula K. Woodson
THE COMPANY:
KORI CORPORATION, A LOUISIANA CORPORATION
By: /s/ LINDA C. WOODSON
--------------------------------------
Linda C. Woodson, Vice President
Kori Agreement and Plan of Merger//Page 67
<PAGE> 1
EXHIBIT 10.16
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TRANSCOASTAL MARINE SERVICES, INC.,
ENVIROSYSTEMS ACQUISITION CORP.,
ENVIROSYSTEMS, INC.,
AND
THE HOLDERS OF THE
OUTSTANDING CAPITAL STOCK
OF
ENVIROSYSTEMS, INC.
<PAGE> 2
TABLE OF CONTENTS
PAGE
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<CAPTION>
<S> <C>
ARTICLE 1
BASIC TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Merger. . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Closings. . . . . . . . . . . . . . . . . . . . . . 1
(a) Preliminary Closing . . . . . . . . . . . . . . 1
(b) Final Closing . . . . . . . . . . . . . 2
(c) Other Actions . . . . . . . . . . . . . 2
(d) Failure to Close . . . . . . . . . . . . 2
1.3 Certificates of Merger and Termination;
Effective Time. . . . . . . . . . . . . . . . . . . . 3
(a) Delivery of Certificates of Merger and
Termination . . . . . . . . . . . . . . . . . . 3
(b) Filing Certificate of Merger . . . . . . . . . . 3
(c) Effective Time . . . . . . . . . . . . . . . . . 3
1.4 Effects of the Merger . . . . . . . . . . . . . . . . 3
1.5 Additional Acquisition Transactions; Initial
Public Offering of Parent Common Stock . . .. . . . . 4
1.6 Conversion of Stock . . . . . . . . . . . . . . . . . 4
(a) Merger Sub Capital Stock . . . . . . . . . . . . 4
(b) Cancellation of the Company Treasury Stock . . . 4
(c) Merger Consideration . . . . . . . . . . . . . . 4
(d) IPO Statement . . . . . . . . . . . . . . . . . 5
1.7 Exchange of Certificates . . . . . . . . . . . . . . 5
(a) Delivery of Company Common Stock and
Merger Consideration . . . . . . . . . . . . . . 5
(b) Payment of Dividends . . . . . . . . . . . . . . 6
(c) Indemnification of Exchange Agent . . . . . . . 6
(d) No Fractional Shares . . . . . . . . . . . . . . 6
(e) Assignments . . . . . . . . . . . . . . . . . . 6
(f) Payment in Full Satisfaction of All Rights . . . 6
1.8 Registration Rights Agreement . . . . . . . . . . . . 6
ARTICLE 2
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 7
2.1 Representations and Warranties by the Shareholders . 7
(a) Qualification . . . . . . . . . . . . . . . . . 7
(b) Authority Relative to Agreement . . . . . . . . 7
(c) Non-Contravention . . . . . . . . . . . . . . . 8
(d) Ownership of Company Common Stock . . . . . . . 8
(e) Restricted Securities . . . . . . . . . . . . . 8
2.2 Representations and Warranties of the Shareholders
and the Company . . . . . . . . . . . . . . . . . . 9
(a) Organization and Qualification, etc. . . . . . 10
(b) Capital Stock . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE> 3
<TABLE>
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(c) Subsidiaries. . . . . . . . . . . . . . . . 10
(d) Qualification of Subsidiaries . . . . . . . . 10
(e) Authority Relative to Agreement . . . . . . . 11
(f) Non-Contravention . . . . . . . . . . . . . . 11
(g) Financial Information . . . . . . . . . . . . 12
(h) Absence of Certain Changes or Events . . . . . 13
(i) Undisclosed Liabilities . . . . . . . . . . . 15
(j) Permits and Legal Compliance . . . . . . . . . 16
(k) Title to Properties; Absence of Liens and
Encumbrances, etc. . . . . . . . . . . . . . . 16
(l) Software . . . . . . . . . . . . . . . . . . . 16
(m) Patent, Trademark, etc. Claims . . . . . . . . 17
(n) List of Properties, Contracts and Other Data . 18
(o) Use of Real Property . . . . . . . . . . . . . 21
(p) Environmental Laws . . . . . . . . . . . . . . 22
(q) Litigation . . . . . . . . . . . . . . . . . . 22
(r) Labor and Employment Matters . . . . . . . . . 22
(s) Accounts Receivable . . . . . . . . . . . . . 23
(t) Insurance . . . . . . . . . . . . . . . . . . 23
(u) Employee Benefits . . . . . . . . . . . . . . 24
(v) Tax Matters . . . . . . . . . . . . . . . . . 25
(w) Brokers . . . . . . . . . . . . . . . . . . . 26
(x) Powers of Attorney . . . . . . . . . . . . . . 27
(y) Investment Company . . . . . . . . . . . . . . 27
(z) Tax-Free Reorganization . . . . . . . . . . . 27
2.3 Representations and Warranties by the Parent . . . 28
(a) Organization and Qualification, etc. . . . . . 28
(b) Capital Stock . . . . . . . . . . . . . . . . 28
(c) Subsidiaries, etc. . . . . . . . . . . . . . . 28
(d) Authority Relative to Agreement . . . . . . . 29
(e) Non-Contravention . . . . . . . . . . . . . . 29
(f) Approvals . . . . . . . . . . . . . . . . . . 30
(g) Litigation . . . . . . . . . . . . . . . . . . 30
(h) Brokers . . . . . . . . . . . . . . . . . . . 30
(i) Tax-Free Reorganization . . . . . . . . . . . 30
(j) Registration Statement; PPM . . . . . . . . . 31
(k) No Undisclosed Agreements . . . . . . . . . . 32
(l) Financial Statements . . . . . . . . . . . . . 32
(m) Remedies . . . . . . . . . . . . . . . . . . . 32
(n) Parent Stock . . . . . . . . . . . . . . . . . 32
(o) Taxes . . . . . . . . . . . . . . . . . . . . 33
(p) Other Acquisition Agreements . . . . . . . . . 33
(q) Investment Intent . . . . . . . . . . . . . . 33
2.4 Representations and Warranties Concerning
the Merger Sub. . . . . . . . . . . . . . . . . . . 34
(a) Organization and Standing . . . . . . . . . . 34
(b) Capital Structure . . . . . . . . . . . . . . 34
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
(c) Authority . . . . . . . . . . . . . . . . . . 34
ARTICLE 3
ADDITIONAL COVENANTS AND AGREEMENTS . . . . . . . . . . . . . 35
3.1 Conduct of Business . . . . . . . . . . . . . . . . 35
3.2 Access to Information by Parent. . . . . . . . . . 37
3.3 Access to Information by the Shareholders . . . . . 38
3.4 Amendment to Schedules . . . . . . . . . . . . . . 38
3.5 Confidentiality . . . . . . . . . . . . . . . . . . 39
(a) Confidential Information. . . . . . . . . . . 39
(b) Public Announcements . . . . . . . . . . . . . 39
3.6 Exclusivity . . . . . . . . . . . . . . . . . . . . 40
3.7 The Shareholders' Release of Claims . . . . . . . . 40
3.8 Real Estate Matters . . . . . . . . . . . . . . . . 41
(a) Title Insurance Commitments . . . . . . . . . 41
(b) Surveys . . . . . . . . . . . . . . . . . . . 41
(c) Title Insurance Policies . . . . . . . . . . . 41
(d) Phase I Environmental Assessment . . . . . . . 42
(e) Title and Environmental Objections . . . . . . 42
3.9 PPM; Registration Statement. . . . . . . . . . . . 42
(a) Company to Provide Information . . . . . . . . 42
(b) Accuracy of Information . . . . . . . . . . . 43
(c) Further Information . . . . . . . . . . . . . 43
(d) Indemnification . . . . . . . . . . . . . . . 44
3.10 Tax-Free Reorganization . . . . . . . . . . . . . . 44
(a) No Acts Jeopardizing Merger . . . . . . . . . 44
(b) Two-Year Holding Period . . . . . . . . . . . 44
3.11 Satisfaction of Conditions by the Company and
Shareholders . . . . . . . . . . . . . . . . . . . 45
3.12 Satisfaction of Conditions by Parent . . . . . . . 45
3.13 Amendment of Other Acquisition Agreements . . . . . 45
3.14 Deliveries . . . . . . . . . . . . . . . . . . . . 45
3.15 Periodic Reports . . . . . . . . . . . . . . . . . 45
3.16 Corporate Indemnification . . . . . . . . . . . . . 46
3.17 Release of Shareholders and Others . . . . . . . . 46
3.18 Release and Indemnification from Guaranties . . . . 46
3.19 Benefit Plans . . . . . . . . . . . . . . . . . . . 46
3.20 Nature of Obligations . . . . . . . . . . . . . . . 47
3.21 Indemnification of Directors and Officers
of the Company. . . . . . . . . . . . . . . . . . . 47
3.22 Parent's IPO . . . . . . . . . . . . . . . . . . . 47
3.23 Listing. . . . . . . . . . . . . . . . . . . . . . 47
3.24 Principal Office. . . . . . . . . . . . . . . . . . 48
3.25 Distributions. . . . . . . . . . . . . . . . . . . 48
3.26 Certain Actions. . . . . . . . . . . . . . . . . . 48
</TABLE>
iii
<PAGE> 5
<TABLE>
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ARTICLE 4
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . 48
4.1 Conditions Precedent to the Obligations
of the Parent . . . . . . . . . . . . . . . . . . . 48
(a) Accuracy of Representations and Warranties . . 48
(b) Performance of Covenants . . . . . . . . . . . 48
(c) Legal Actions or Proceedings . . . . . . . . . 48
(d) Approvals . . . . . . . . . . . . . . . . . . 49
(e) [Intentionally left blank] . . . . . . . . . . 49
(f) Policies of Title Insurance . . . . . . . . . 49
(g) Employment Agreements . . . . . . . . . . . . 49
(h) The Registration Rights Agreements and
Shareholders Lock-up Agreements. . . . . . . . 49
(i) Parent's IPO . . . . . . . . . . . . . . . . . 49
(j) Lender Approval . . . . . . . . . . . . . . . 49
(k) Audit of the Company . . . . . . . . . . . . . 49
(l) Opinion of Counsel for the Company and the
Shareholders . . . . . . . . . . . . . . . . . 49
(m) The Shareholders Release of the Company;
Corporate Records . . . . . . . . . . . . . . 49
(n) All Proceedings to be Satisfactory . . . . . . 50
4.2 Conditions Precedent to the Obligations of the
Shareholders and the Company. . . . . . . . . . . . 50
(a) Accuracy of Representations and Warranties . . 50
(b) Performance of Covenants . . . . . . . . . . . 50
(c) Approvals . . . . . . . . . . . . . . . . . . 50
(d) Delivery of PPM . . . . . . . . . . . . . . . 50
(e) [Intentionally left blank] . . . . . . . . . . 50
(f) Employment Agreements . . . . . . . . . . . . 51
(g) Registration Rights Agreement . . . . . . . . 51
(h) All Proceedings to be Satisfactory . . . . . . 51
(i) Opinion of Counsel for The Parent and
the Merger Sub . . . . . . . . . . . . . . . . 51
(j) Legal Actions or Proceedings . . . . . . . . . 51
(k) IPO. . . . . . . . . . . . . . . . . . . . . . 51
(l) Release. . . . . . . . . . . . . . . . . . . . 51
(m) Simultaneous Closings. . . . . . . . . . . . . 52
(n) No Material Adverse Change . . . . . . . . . . 52
(o) Shareholder Agreement . . . . . . . . . . . . 52
(p) Listing of Parent Common Stock . . . . . . . . 52
(q) Reliance Letters . . . . . . . . . . . . . . . 52
(r) . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 5
TERMINATION . . . . . .. . . . . . . . . . . . . . . . . . . 53
5.1 Termination of Agreement . . . . . . . . . . . . . 53
(a) Prior to the Preliminary Closing. . . . . . . 53
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C>
(b) After the Preliminary Closing Date . . . . . . 54
5.2 Effect of Termination. . . . . . . . . . . . . . . 54
ARTICLE 6
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION . . . . . . . . 54
6.1 Survival of Representations and Warranties . . . . 54
6.2 Indemnification by the Shareholders . . . . . . . . 54
6.3 Indemnification by Parent and Surviving
Corporation . . . . . . . . . . . . . . . . . . . . 54
6.4 Notice . . . . . . . . . . . . . . . . . . . . . . 55
6.5 Time of Payment. . . . . . . . . . . . . . . . . . 55
6.6 Limitations on Indemnification. . . . . . . . . . . 56
6.7 Effective Date; Exclusive Remedy. . . . . . . . . 57
ARTICLE 7
STOCK TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . 57
7.1 Compliance with Securities Laws . . . . . . . . . . 57
7.2 Restrictions on Transfer . . . . . . . . . . . . . 57
ARTICLE 8
FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 59
8.1 Further Assurances. . . . . . . . . . . . . . . . . 59
8.2 Books and Records. . . . . . . . . . . . . . . . . 59
ARTICLE 9
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 60
9.1 Expenses, etc. . . . . . . . . . . . . . . . . . . 60
9.2 Execution in Counterparts. . . . . . . . . . . . . 60
9.3 Notices. . . . . . . . . . . . . . . . . . . . . . 60
9.4 Waivers. . . . . . . . . . . . . . . . . . . . . . 61
9.5 Amendments, Supplements, etc. . . . . . . . . . . . 62
9.6 Entire Agreement. . . . . . . . . . . . . . . . . . 62
9.7 Choice of Forum; Consent to Jurisdiction . . . . . 62
9.8 Binding Effect, Benefits. . . . . . . . . . . . . . 62
9.9 Assignability. . . . . . . . . . . . . . . . . . . 62
9.10 Invalid Provisions. . . . . . . . . . . . . . . . . 63
9.11 Knowledge. . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
v
<PAGE> 7
EXHIBITS:
EXHIBIT 1.3(a)(1) - Advance Certificate of Merger
EXHIBIT 1.3(a)(2) - Certificate of Termination
EXHIBIT 1.5 - List of Other Companies
EXHIBIT 1.7 - Letter of Transmittal
EXHIBIT 1.8 - Registration Rights Agreement
EXHIBIT 3.1 - Conduct of Business
EXHIBIT 3.1(l) - Production Bonuses
EXHIBIT 3.1(m) - Assets
EXHIBIT 3.16 - Persons Receiving Corporate Indemnification
EXHIBIT 3.17 - Persons Receiving Releases
EXHIBIT 3.21 - Directors and Officers of the Company Receiving
Indemnification
EXHIBIT 4.1(g)(1) - List of Individuals with Employment Agreements
EXHIBIT 4.1(g)(2) - Form of Employment Agreement
EXHIBIT 4.1(l) - Form of Opinion From Correro Fishman
Haygood Phelps Weiss Walmsley & Casteix L.L.P.
EXHIBIT 4.2(i) - Opinion of Chamberlain, Hrdlicka, White,
Williams & Martin
EXHIBIT 9.11 - Shareholders and Other Representatives of the
Company
SCHEDULES:
SHAREHOLDERS DISCLOSURE SCHEDULE
Schedule 2.1(b) - Approvals
Schedule 2.1(d) - Holders of Company Common Stock
COMPANY DISCLOSURE SCHEDULE
vi
<PAGE> 8
Schedule 2.2(a) - Jurisdictions Where Qualified
Schedule 2.2(c) - Subsidiaries of the Company
Schedule 2.2(e) - Approvals
Schedule 2.2(h) - Changes and Events since December 31, 1996
Schedule 2.2(h)(1) - Permitted Exceptions
Schedule 2.2(j) - Permits and Legal Compliance
Schedule 2.2(k) - Properties and Assets of the Company
Schedule 2.2(l) - Software
Schedule 2.2(m) - Intellectual Property
Schedule 2.2(n) - List of Real Estate Owned by the Company
Schedule 2.2(n)(1) - Description of Real Estate Owned by the
Company
Schedule 2.2(n)(2) - Real Estate Leased by the Company
Schedule 2.2(n)(3) - Contracts and Commitments of the Company
Schedule 2.2(q) - Litigation, Actions and Proceedings
Schedule 2.2(r) - Employment Agreements, Benefit Plans, and
Compensation
Schedule 2.2(s) - Accounts Receivable of the Company
Schedule 2.2(t) - Insurance Coverage; Self Insurance
Schedule 2.2(u) - Company Benefit Plan
Schedule 2.2(v) - Tax Audits; Basis in Assets; NOLs
BUYER DISCLOSURE SCHEDULE
Schedule 2.3(a) - Jurisdictions Where Qualified
Schedule 2.3(c) - Subsidiaries of Parent
Schedule 2.3(f) - Approvals
vii
<PAGE> 9
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") made on this 28th
day of August 1997 by and among TRANSCOASTAL MARINE SERVICES, INC., a Delaware
corporation (the ENVIROSYSTEMS ACQUISITION CORP., a Louisiana corporation (the
"Merger Sub"), ENVIROSYSTEMS, INC., a Louisiana corporation (the "Company"),
and the undersigned holders of all of the outstanding capital stock of the
Company (the "Shareholders").
WHEREAS, the respective Boards of Directors of the Parent, Merger Sub
and the Company have each approved the merger of the Company with and into
Merger Sub (the "Merger") pursuant to this Agreement and the applicable
statutes of the State of Louisiana whereby each issued and outstanding share of
Common Stock, no par value, of the Company ("Company Common Stock") will be
converted into the right to receive certain shares of common stock, $.001 par
value per share, of the Parent ("Parent Common Stock"), all as provided herein;
WHEREAS, the Merger has been approved, as required by applicable law,
by the Parent, acting as sole shareholder of Merger Sub, and by the
Shareholders, as the holders of all of the outstanding capital stock of the
Company;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization pursuant to Section 368(a)(2)(D) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
ARTICLE 1
BASIC TRANSACTION
1.1 MERGER. Subject to the terms and conditions of this Agreement
and in accordance with the Louisiana Business Corporation Law ("Applicable
Corporate Law"), at the Effective Time (as defined in Section 1.3(c)) the
Company shall be merged with and into the Merger Sub. Merger Sub, as the
surviving entity following the Merger, is sometimes referred to in this
Agreement as the "Surviving Corporation."
1.2 CLOSINGS.
(a) Preliminary Closing. A preliminary closing
("Preliminary Closing") of the transactions contemplated by this
Agreement shall take place at the offices of Chamberlain, Hrdlicka,
White, Williams & Martin, in Houston, Texas, commencing at 9:00 a.m.
local time on such date ("Preliminary Closing Date") on which Parent
or the Shareholders shall have notified the other at least three
business days in advance, provided that the Preliminary Closing shall
occur
EnviroSystems Agreement and Plan of Merger/Page 1
<PAGE> 10
simultaneously with the execution and delivery of the underwriting
agreement ("Underwriting Agreement") relating to the purchase by the
underwriters of shares of Parent Common Stock for resale to the public
in connection with the IPO (defined in Section 1.5). At the
Preliminary Closing the following deliveries will be made to the
Exchange Agent (defined in Section 1.7) to be held by such Agent in
escrow pending disposition in accordance with Section 1.2(b) below:
(i) the Shareholders will deliver four multiple originals of the
various certificates, instruments, and documents referred to in
Section 4.1 below (except that only the original documents referred to
in Section 4.1(m)(ii) need be delivered), (ii) Parent will deliver
four multiple originals of the various certificates, instruments, and
documents referred to in Section 4.2 below, and (iii) Parent will make
the deliveries contemplated by Section 1.3(a). Each of such
certificates, instruments, and documents to be delivered in accordance
with clauses (i) and (ii) that are to be executed by the parties will
be fully executed, but dated in blank, except that the certificates to
be delivered in accordance with Section 4.1(a), 4.1(b), 4.2(a) and
4.2(b) shall be dated the Preliminary Closing Date.
(b) Final Closing. The closing ("Final Closing") of the
transactions contemplated by this Agreement shall take place at the
same place and hour as hereinabove provided for the Preliminary
Closing on such date ("Final Closing Date") as Parent shall determine
and of which Parent shall give Shareholders and the Exchange Agent at
least twenty-four hours' advance notice, provided that the Final
Closing shall occur contemporaneously with the closing of the IPO. At
the Final Closing Parent will deposit the Merger Consideration
(defined in Section 1.6(c)) with the Exchange Agent; will deliver, and
will cause the managing underwriter of the IPO to deliver, a
certificate to the Exchange Agent to the effect that the closing of
the IPO has occurred or is occurring simultaneously with the Final
Closing; and will deliver a certificate to the Exchange Agent to the
effect that the "final closings" under the Other Acquisition
Agreements are occurring simultaneously with the Final Closing. Upon
receipt of the Merger Consideration and the certificates referred to
above (the "Required Deliveries"), the Exchange Agent shall insert the
date of the Final Closing in all of the undated documents held by the
Exchange Agent in accordance with Section 1.2(a) and shall (A) deliver
two complete sets of multiple originals to the Shareholders, on the
one hand, and Parent, on the other hand, (B) take such action as may
be required by Section 1.3(b), and (C) destroy the Certificate of
Termination (defined in Section 1.3(a)); provided that the Exchange
Agent shall not make such deliveries or take such actions if the
Exchange Agent is aware of any injunction or order that would be
breached by the occurrence of the Final Closing.
(c) Other Actions. In addition to the actions to be
taken at the Preliminary Closing and Final Closing as described
herein, the parties shall take such other customary actions as may be
necessary to effectuate such closings.
(d) Failure to Close. If: (1) the Preliminary Closing
occurs but the Final Closing has not occurred by the earlier of (i)
five business days after the Preliminary Closing or (ii) 11:00 a.m.
Houston, Texas time on the effective date specified in the Advance
Certificate of Merger (defined in Section 1.3(a)), or (2) the Required
Deliveries are not made at the Final Closing, or (3) the Underwriting
Agreement or this Agreement is purported to be terminated, then the
Exchange Agent will not make the deliveries contemplated by Section
1.2(b) but rather will destroy all of the multiple originals which
were delivered to such Agent in accordance with Sections 1.2(a) and
1.3(a), except that the Exchange Agent will deliver to the
Shareholders the documents referred to in Section
EnviroSystems Agreement and Plan of Merger/Page 2
<PAGE> 11
4.1(m)(ii) and further except that if the Exchange Agent has by then
previously filed the Advance Certificate of Merger it shall promptly
(and in no event later than 11:30 a.m. Houston, Texas time on the
effective date specified in the Advance Certificate of Merger) date
(with the then current date) and file the Certificate of Termination
with the Louisiana Secretary of State. In that event this Agreement
will terminate, and such termination will be deemed a termination
under Section 5.1(a)(1).
1.3 CERTIFICATES OF MERGER AND TERMINATION; EFFECTIVE TIME
(a) Delivery of Certificates of Merger and Termination.
At the Preliminary Closing Parent will deliver to the Exchange Agent a
certificate of merger in the form of Exhibit 1.3(a)(1) (the "Advance
Certificate of Merger"), which specifies that the effective time of
the Merger is 12:00 noon Houston, Texas time on the Specified Date
(defined in Section 1.3(b)), and a certificate of termination in the
form of Exhibit 1.3(a)(2) (the "Certificate of Termination"). Each
instrument will be a fully executed original but will be undated, and
the date on which the Merger becomes effective will be left blank in
the Advance Certificate of Merger.
(b) Filing Certificate of Merger. Upon receiving a
request made by the managing underwriter or its counsel not sooner
than the second business day following the Preliminary Closing Date
that states that the underwriters have confirmed to their customers
sales of shares of Parent Common Stock in the IPO, that the closing of
the IPO is scheduled for a specified date (the "Specified Date") not
later than the fifth business day following the Preliminary Closing,
and that such underwriter has no reason to believe that such closing
will not occur, the Exchange Agent will, as promptly as possible, date
the Advance Certificate of Merger the then current date, fill in
therein the Specified Date as the effective date of the Merger, file
the Advance Certificate of Merger with the Louisiana Secretary of
State and promptly notify Parent and the Shareholders of the making of
such filing.
(c) Effective Time. The effective time of the Merger
("Effective Time") will be the time specified in the Advance
Certificate of Merger filed with the Louisiana Secretary of State.
1.4 EFFECTS OF THE MERGER.
(a) At the Effective Time, (i) the Company shall merge
with and into the Merger Sub and as a result thereof, the separate
existence of the Company shall cease; (ii) the Articles of
Incorporation of the Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the
Surviving Corporation, except that the Articles of Incorporation of
the Merger Sub shall be amended to provide that the name of the
Surviving Corporation shall be changed to "Woodson Construction
Company, Inc.," (iii) the Bylaws of the Merger Sub as in effect
immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation, and (iv) the directors and officers of the
Merger Sub immediately prior to the Effective Time shall become the
directors and officers of the Surviving Corporation, until the earlier
of their resignation or removal or until their respective successors
are duly elected or appointed, as the case may be.
EnviroSystems Agreement and Plan of Merger/Page 3
<PAGE> 12
(b) At and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, immunities and
franchises, of a public as well as of a private nature, previously
belonging to the Company and Merger Sub; and all property (real,
personal and mixed), and all debts due on whatever account, including
subscriptions to shares, and all other choses in action, and all and
every other interest of or belonging to or due to each of the Company
and Merger Sub shall be transferred to, and vested in, the Surviving
Corporation without further act or deed; and all such property, rights
and privileges, powers and franchises and all and every other interest
shall be thereafter the property of the Surviving Corporation as they
were of the Company and Merger Sub; and the title to any immovable
property, or interest therein, whether by deed or otherwise, shall not
revert or be in any way impaired by reason of the Merger. The
Surviving Corporation shall be responsible and liable for all the
liabilities and obligations of the Company and Merger Sub and any
claim existing, or action or proceeding pending, by or against the
Company or Merger Sub may be prosecuted against the Surviving
Corporation. Neither the rights of creditors nor any liens upon the
property of the Company or Merger Sub shall be impaired by the Merger,
and all debts, liabilities and duties of each of the Company and
Merger Sub shall attach to the Surviving Corporation, and may be
enforced against it to the same extent as if such debts, liabilities
and duties had been incurred or contracted by it, all in accordance
with provisions of the Applicable Corporate Law and the terms of this
Agreement.
1.5 ADDITIONAL ACQUISITION TRANSACTIONS; INITIAL PUBLIC OFFERING
OF PARENT COMMON STOCK. The Merger is part of a series of additional
transactions that relate to the Parent's intent to acquire the companies listed
on Exhibit 1.5 attached hereto (the "Other Companies") and to consummate an
initial public offering of the Parent Common Stock resulting in net proceeds to
the Parent of at least $45,000,000 on a firm underwriting basis (the "IPO").
The Parent will acquire the Other Companies from various parties (the "Other
Acquisitions") pursuant to separate acquisition agreements ("Other Acquisition
Agreements") to be executed prior to or concurrently with this Agreement.
1.6 CONVERSION OF STOCK. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Company Common Stock or capital stock of the Merger Sub:
(a) Merger Sub Capital Stock. Each share of capital
stock of the Merger Sub issued and outstanding at the Effective Time,
shall remain outstanding and shall be unchanged after the Merger and
shall thereafter constitute all of the issued and outstanding capital
stock of the Surviving Corporation.
(b) Cancellation of the Company Treasury Stock. All
shares of Company Common Stock that are owned by the Company as
treasury stock shall be canceled and retired and shall cease to exist
and no stock of the Parent or other consideration shall be delivered
in exchange therefor.
(c) Merger Consideration. Each share of the Company
Common Stock (other than shares to be canceled in accordance with
Section 1.6(b)), shall be converted at the Effective Time into the
right to receive the number of validly issued, fully paid and
nonassessable shares of
EnviroSystems Agreement and Plan of Merger/Page 4
<PAGE> 13
Parent Common Stock resulting from dividing $2,000 by the Share Price
(as defined below). The total consideration payable to the
Shareholders with respect to all of their shares of Company Common
Stock is sometimes called the "Merger Consideration". The aggregate
amount of the Merger Consideration (valuing shares of Parent Common
Stock at the Share Price) is $600,000. The Merger Consideration per
share shall be adjusted as necessary so that the aggregate Merger
Consideration totals the foregoing amount. The Shareholders shall
also be entitled to cash in lieu of a fractional share pursuant to
Section 1.7(d) below. If between the date of this Agreement and the
Effective Time, the outstanding shares of Parent Common Stock or
Company Common Stock shall have been changed into a different number
of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split-up,
combination, or exchange of shares or the like, the conversion formula
in this Section 1.6(c) shall be correspondingly adjusted to reflect
such stock dividend, subdivision, reclassification, recapitalization,
split-up, combination or exchange of shares. All such converted
shares of Company Common Stock shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist,
and each holder of a certificate representing any such shares shall
cease to have any rights with respect thereto, except the right to
receive the Merger Consideration upon the surrender of such
certificate in accordance with Section 1.7, without interest.
(d) IPO Statement. At the Preliminary Closing and the
Final Closing, Parent shall deliver to the Shareholders and the
Exchange Agent a statement (the "IPO Statement") reporting (i) the
price per share paid or to be paid by the public for shares of Parent
Common Stock (the "IPO Price") in the IPO, and (ii) the lowest price
per share of the Parent Common Stock at which the Parent has agreed to
issue Parent Common Stock pursuant to any of the Other Acquisition
Agreements (the "Lowest Acquisition Price"). The lower of the IPO
Price and the Lowest Acquisition Price is referred to in this
Agreement as the "Share Price." The IPO Statement shall report the
quotient resulting from dividing $600,000 by the Share Price. Such
quotient shall represent the number of shares of Parent Common Stock
included in the Merger Consideration.
1.7 EXCHANGE OF CERTIFICATES.
(a) Delivery of Company Common Stock and Merger
Consideration. Prior to the Preliminary Closing, the Parent will
deliver to each of the Shareholders a letter of transmittal, in
substantially the form attached hereto as Exhibit 1.7, to be used for
the purpose of surrendering all certificates representing Company
Common Stock in exchange for the right to receive the Merger
Consideration. As provided in Section 1.2(b), Parent shall at the
Final Closing deposit the Merger Consideration with an exchange agent
selected by Parent and reasonably acceptable to the Shareholders (the
"Exchange Agent"), and each Shareholder shall at or after the Final
Closing surrender for exchange certificates which prior to the
Effective Time represent shares of Company Common Stock, together with
a properly completed and executed letter of transmittal (with such
Shareholder's signature guaranteed by an eligible guarantor
institution pursuant to any medallion signature guarantee program), to
the Exchange Agent. At the time of such surrender of Company Common
Stock to the Exchange Agent, each Shareholder shall be entitled to
receive in exchange therefor the Merger Consideration. If such
surrender is made at or prior to the Final Closing, then the
Shareholder shall receive the Merger Consideration from the Exchange
Agent at the Final Closing. After the Effective Time and until the
outstanding certificates formerly representing shares
EnviroSystems Agreement and Plan of Merger/Page 5
<PAGE> 14
of the Company Common Stock are so surrendered, each outstanding
certificate which, prior to the Effective Time, represented the
Company Common Stock shall be deemed for all corporate purposes
(except the payment of dividends) to evidence ownership of the Merger
Consideration into which the shares of the Company Common Stock
represented thereby prior to such Effective Time shall have been
converted.
(b) Payment of Dividends. Until certificates
representing shares of Company Common Stock have been surrendered, no
dividend payable to holders of record of the Parent Common Stock shall
be paid to the holders of such outstanding stock certificates of the
Company in respect thereof. Upon surrender of such outstanding
certificates, however, there shall be paid to the holders of the
certificates for the Parent Common Stock issued in exchange therefor
the amount of dividends, if any, which theretofore became payable with
respect to such full shares of the Parent Common Stock, but which have
not theretofore been paid on such stock. No interest shall be payable
with respect to the payment of any dividends unless the Parent shall
fail to make payment in accordance with this Section 1.7(b).
(c) Indemnification of Exchange Agent . If the Exchange
Agent becomes involved in any litigation, claim or controversy in
connection with its actions under this Agreement, the Parent shall
indemnify, defend and save Exchange Agent from all losses, costs,
damages, expenses and attorneys' fees suffered or incurred by Exchange
Agent as a result thereof, other than those caused by negligence or
misconduct.
(d) No Fractional Shares. Notwithstanding anything in
this Agreement to the contrary, no certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of certificates representing Company Common
Stock, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of the Parent. In
lieu of any such fractional shares, each Shareholder who would
otherwise be entitled to a fraction of a share of Parent Common Stock,
after aggregating all fractional shares to which such Shareholder is
entitled under this Agreement and any Other Acquisition Agreements to
which they may be a party, shall be entitled to receive from the
Exchange Agent a cash payment equal to such remaining fraction
multiplied by the Share Price. The Parent shall make available to the
Exchange Agent at the Final Closing the amount of cash required to
make any cash payments in lieu of remaining fractional shares.
(e) Assignments. No assignment, transfer or other
disposition of record or beneficial ownership of any shares of Company
Common Stock may be made on or after the date hereof without Parent's
written consent, which consent will not be unreasonably withheld or
delayed.
(f) Payment in Full Satisfaction of All Rights. The
delivery of the Merger Consideration to the Shareholders with respect
to the Company Common Stock shall be deemed to be payment in full
satisfaction of all rights pertaining to the outstanding Company
Common Stock.
1.8 REGISTRATION RIGHTS AGREEMENT. Parent and each Shareholder
shall at the Preliminary Closing execute and deliver to the Exchange Agent a
Registration Rights Agreement
EnviroSystems Agreement and Plan of Merger/Page 6
<PAGE> 15
in the form attached hereto as Exhibit 1.8. Provisions of the Registration
Rights Agreement shall be no less favorable to the Shareholders than provisions
of any other agreement of the Parent providing registration rights to the
shareholders of any Other Companies.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES BY THE SHAREHOLDERS. Each of
the Shareholders represents and warrants to the Parent and the Merger Sub that
the statements contained in this Section 2.1 are correct as to himself or
herself as of the date of this Agreement and will be correct as to himself or
herself as of the Preliminary Closing Date and the Final Closing Date (as
though made then), except as set forth in the disclosure schedule delivered by
the Shareholders to the Parent and the Merger Sub on the date hereof, as
supplemented or amended in accordance with Section 3.4 of this Agreement (such
schedule, as so supplemented or amended, the "Shareholders Disclosure
Schedule"). The Shareholders Disclosure Schedule is arranged in sections and
paragraphs corresponding to the lettered and numbered sections and paragraphs
contained in this Section 2.1. References in Section 2.1 to a numbered
schedule mean the section of the Shareholder Disclosure Schedule that
corresponds with that number; for example, references to "Schedule 2.1(b)" mean
section 2.1(b) of the Shareholder Disclosure Schedule. The Shareholder
Disclosure Schedule constitutes an exception to each warranty or representation
set forth herein, whether or not such warranty or representation specifically
refers to the Shareholder Disclosure Schedule; accordingly each warranty or
representation set forth herein is deemed to be preceded by the clause: "Except
as set forth in the Shareholder Disclosure Schedule . . .".
(a) Qualification. Such Shareholder has the legal power
and authority to own his or her properties and assets.
(b) Authority Relative to Agreement. Such Shareholder
has the full right, power, and legal authority to execute and deliver
this Agreement. Such Shareholder has the full right, power, and legal
authority to perform this Agreement and to consummate the transactions
contemplated on his or her part hereby. No proceeding on the part of
such Shareholder, and, except for those approvals described in
Schedule 2.1(b), no notice, consent, authorization, order or approval
of, filing or registration with, any governmental commission, board or
other regulatory body or any bank, bonding company, lender, surety,
customer, supplier, or any other person whatsoever is required for or
in connection with the execution and delivery of this Agreement by
such Shareholder. No proceeding on the part of such Shareholder, and,
except for those approvals described in Schedule 2.1(b), no notice,
consent, authorization, order or approval of, filing or registration
with, any governmental commission, board or other regulatory body or
any bank, bonding company, lender, surety, customer, supplier, or any
other person whatsoever is required for or in connection with the
performance by such Shareholder of this Agreement and the consummation
by such Shareholder of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by such Shareholder and
is a valid and binding agreement of such Shareholder, enforceable
against such Shareholder in accordance with its terms, except as
EnviroSystems Agreement and Plan of Merger/Page 7
<PAGE> 16
such enforcement is subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting
creditors' rights.
(c) Non-Contravention. The execution, delivery and
performance of this Agreement by such Shareholder do not, and the
consummation by such Shareholder of the transactions contemplated
hereby will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation, or acceleration of
any obligation or to the loss of a material benefit under, or result
in the creation or imposition of any material lien, charge, pledge,
security interest or other encumbrance upon any of the property or
assets of such Shareholder pursuant to any provision of, any mortgage,
lien, lease, agreement, license, instrument, law, ordinance,
regulation, order, arbitration award, judgment or decree to which such
Shareholder is a party or by which any of such Shareholder's assets
are bound. The execution, delivery and performance of this Agreement
by such Shareholder do not and the consummation by such Shareholder of
the transactions contemplated hereby will not violate or conflict with
any other restriction of any kind or character to which such
Shareholder is subject or by which any of such Shareholder's assets
may be bound.
(d) Ownership of Company Common Stock. Such Shareholder
holds of record and owns beneficially the number of shares of Company
Common Stock set forth next to his or her name in Schedule 2.1(d).
Such Shareholder is, and as of the Final Closing Date will be (except
as permitted under Section 1.7(e)), the sole and exclusive lawful
owner of such shares of Company Common Stock free and clear of all
liens, claims, encumbrances and rights of others of any nature
whatsoever, with full power to vote all such shares on any matter that
may properly come before shareholders of the Company, and such
Shareholder may exercise such voting power on any matter without
violation of the rights of any person. There are no rights, warrants
or options outstanding with respect to such capital stock, and such
Shareholder has no obligation to deliver capital stock of the Company
or any of its Subsidiaries (as defined below) to any person as of the
date hereof, at any time on or prior to the Final Closing Date,
thereafter or as a result thereof or in connection therewith except as
provided in this Agreement.
(e) Restricted Securities.
(1) Such Shareholder acknowledges that the shares
of Parent Common Stock which such Shareholder shall acquire
pursuant to the Merger and this Agreement have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), and are being acquired for such
Shareholder's own account for investment and not with a view
to the distribution thereof. The Parent Common Stock will be
subject to the stock transfer restrictions described in
Article 7 below.
(2) Such Shareholder has the knowledge and
experience in financial and business matters to enable him or
her to evaluate the merits and risks of approving this
Agreement and the transactions contemplated herein and
acquiring shares of Parent Common Stock.
EnviroSystems Agreement and Plan of Merger/Page 8
<PAGE> 17
(3) Such Shareholder is able to bear the economic
risks of his or her investment in the Parent Common Stock.
(4) Such Shareholder has been represented by
legal counsel in this transaction and such Shareholder and his
or her advisors, including such counsel, have been given the
opportunity to ask questions of, and receive answers from, the
officers of the Parent concerning the terms of the
transactions contemplated by this Agreement and the affairs
and the business and financial condition of the Parent.
(5) Such Shareholder has received a confidential
private placement memorandum concerning the Parent and an
investment in shares of Parent Common Stock (the "PPM"), and
such Shareholder and his or her advisors have been given
access to all documents, books and additional information
concerning Parent which they have requested regarding Parent.
(6) Such Shareholder has made such inquiries by
himself or herself and through his or her advisors in making a
decision to approve this Agreement and the transactions
contemplated herein as such Shareholder has deemed necessary
and advisable.
(7) Such Shareholder acknowledges and agrees that
the Parent Common Stock issued to such Shareholder may not be
disposed of except in accordance with the requirements of the
Securities Act and any applicable state securities laws.
(8) None of the representations made by the
Shareholders in this Section 2.1(e) shall affect any of
Shareholders' rights under any other section of this
Agreement.
2.2 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND THE
COMPANY. The Shareholders and the Company represent and warrant to the Parent
and the Merger Sub that the statements contained in this Section 2.2 are
correct as of the date of this Agreement and will be correct as of the
Preliminary Closing Date and the Final Closing Date (as though made then),
except as otherwise set forth in the disclosure schedule delivered by the
Shareholders and the Company to the Parent and the Merger Sub on the date
hereof, as supplemented or amended in accordance with Section 3.4 of this
Agreement (such schedule, as so amended or supplemented, the "Company
Disclosure Schedule"). The Company Disclosure Schedule is arranged in sections
and paragraphs corresponding to the lettered and numbered sections and
paragraphs contained in this Section 2.2. References in Section 2.2 to a
numbered schedule mean the section of the Company Disclosure Schedule that
corresponds with that number; for example, references to "Schedule 2.2(a)" mean
Section 2.2(a) of the Company Disclosure Schedule. The Company Disclosure
Schedule constitutes an exception to each warranty or representation set forth
herein, whether or not such warranty or representation specifically refers to
the Company Disclosure Schedule; accordingly each warranty or representation
set forth herein is deemed to be preceded by the clause: "Except as set forth
in the Company Disclosure Schedule . . .".
EnviroSystems Agreement and Plan of Merger/Page 9
<PAGE> 18
(a) Organization and Qualification, etc. The Company is
a corporation duly organized, validly existing and in good standing
under the laws of the State of Louisiana, has the full right, power
and legal authority and, to the knowledge of the Shareholders and the
Company, all licenses, permits, titles and authorizations necessary
to own all of its properties and assets and to carry on its business
as it is now being conducted, and is duly qualified to do business and
is in good standing in each jurisdiction as set forth in Schedule
2.2(a) where, to the reasonable belief of the Shareholders and the
Company, such qualification is appropriate. The copies of the
Company's Articles of Incorporation and Bylaws, as amended to date,
which have been delivered to Parent are complete and correct, and such
instruments, as so amended, are in full force and effect. The Company
is qualified to transact business as a foreign corporation and is in
good standing in all jurisdictions in which it is engaged in business
and in which its properties or assets are located, which foreign
jurisdictions are listed in Schedule 2.2(a).
(b) Capital Stock. The entire authorized capital stock
of the Company consists of 10,000 shares of Company Common Stock of
which 300 shares of Company Common Stock are validly issued and
outstanding, fully paid and nonassessable, all of which are held of
record and beneficially by the Shareholders. No shares of the capital
stock of the Company have been issued in violation of the preemptive
rights of any past or present shareholder. No shares of the capital
stock of the Company are in the treasury of the Company. There are no
outstanding subscriptions, shares of capital stock, calls, warrants,
options, contracts, commitments, or demands relating to the capital
stock of the Company or other agreements of any character under which
the Company would be obligated to issue or purchase shares of its
capital stock. There is no voting agreement, voting trust, proxy, or
other agreement or understanding with respect to the voting of the
capital stock of the Company. The Company has no commitments to issue
or sell any securities or obligations convertible into or exchangeable
for, or giving any person any right to subscribe for or acquire from
the Company, any shares of its capital stock and no securities or
obligations evidencing any such rights are outstanding.
(c) Subsidiaries. With respect to each corporation,
firm, partnership or other business entity in which the Company holds
an interest, Schedule 2.2(c) sets forth the name, the interest of the
Company, and the capitalization of such entity (each such entity in
which the Company owns or controls more than 50% of the voting
securities, directly or indirectly, or in which the Company acts as
manager or general partner is hereinafter a "Subsidiary"). Except as
described on Schedule 2.2(c), neither the Company nor any Subsidiary
owns or has any right or obligation to acquire any class of securities
(including, without limitation, debt securities) issued by any person
or company and neither the Company nor any Subsidiary is a party to or
bound to any partnership, joint venture, voluntary association, or
other agreement with any person for the conduct of any business.
(d) Qualification of Subsidiaries. Each Subsidiary is
duly organized, validly existing and in good standing under the laws
of its state of organization, with the corporate or organizational
power to own its property and carry on its business as it is now being
conducted. All of the issued and outstanding shares of capital stock
of each Subsidiary have
EnviroSystems Agreement and Plan of Merger/Page 10
<PAGE> 19
been duly authorized and are validly issued, fully paid, and
nonassessable, and were not issued in violation of the preemptive
rights of any past or present shareholder. The Company and its
Subsidiaries hold of record and own beneficially all of the
outstanding shares or other interests in each Subsidiary of the
Company held by them, 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 any of the Company and its Subsidiaries to sell,
transfer, or otherwise dispose of any capital stock of any of its
Subsidiaries or that could require any Subsidiary to issue, sell, or
otherwise cause to become outstanding any of its own capital stock.
There are no outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to any Subsidiary.
There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of any capital stock of any
Subsidiary. None of the Company and its Subsidiaries controls
directly or indirectly or has any direct or indirect equity
participation in any corporation, partnership, trust, or other
business association which is not a Subsidiary of the Company.
(e) Authority Relative to Agreement. The Company has the
full right, power, and legal authority to execute and deliver this
Agreement. The Company has the full right, power, and legal authority
to perform this Agreement and to consummate the transactions
contemplated on the part of the Company hereby. The execution and
delivery by the Company of this Agreement and the consummation by the
Company of the transactions contemplated on its part hereby have been
duly authorized by its Board of Directors and the Shareholders in
their capacity as the holders of all of the capital stock of the
Company. To the knowledge of the Shareholders and the Company, no
proceeding on the part of the Company, and, except for those approvals
described in Schedule 2.2(e), no notice, consent, authorization, order
or approval of, filing or registration with, any governmental
commission, board or other regulatory body, or any bank, bonding
company, lender, surety, customer, supplier, or any other person
whatsoever is required for or in connection with the Company's
execution and delivery of this Agreement. This Agreement has been
duly executed and delivered by the Company and is a valid and binding
agreement of the Company, enforceable against the Company in
accordance with its terms, except as such enforcement is subject to
the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws relating to or affecting creditors' rights.
(f) Non-Contravention. The execution, delivery, and
performance of this Agreement by the Company do not and the
consummation by the Company of the transactions contemplated hereby
will not (1) to the knowledge of the Shareholders and the Company,
violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, government agency, or court to which the Company or any of
its assets is subject or (2) violate any provision of the Articles of
Incorporation or Bylaws of the Company or any Subsidiary, or (3) to
the knowledge of the Shareholders and the Company, violate or result
in, with the giving of notice or the lapse of time or both, the
violation of any provision of, or result in the
EnviroSystems Agreement and Plan of Merger/Page 11
<PAGE> 20
acceleration of or entitle any party to accelerate (whether after the
giving of notice or lapse of time or both) any obligation under, or
result in the creation or imposition of any lien, charge, pledge,
security interest or other encumbrance upon any of the property of the
Company or any Subsidiary pursuant to any provision of any mortgage,
lien, lease, contract, agreement, license, or instrument to which the
Company or any Subsidiary is a party or by which any of their
respective assets are bound. The execution, delivery and performance
of this Agreement by the Company do not and will not violate or
conflict with any other restriction of any kind or character to which
the Company or any Subsidiary is subject or by which any of their
respective assets may be bound, and the same do not and will not
constitute an event permitting termination of any such mortgage, lien,
lease, agreement, license or instrument to which the Company or any
Subsidiary is a party or by which any of their respective assets are
bound.
(g) Financial Information. The Shareholders have
previously furnished Parent with true and complete copies of the
balance sheets of the Company and its Subsidiaries as of December 31,
1996 and December 31, 1995, and the related statements of income,
retained earnings and cash flows for each of the three years in the
period ended December 31, 1996, together with the report of Phillips,
Goodson & Co., the independent accountants of the Company, with
respect to such financial statements. Such financial statements have
been prepared in conformity with Generally Accepted Accounting
Principals ("GAAP") consistently applied and, to the knowledge of the
Shareholders and the Company, present fairly the financial position
and results of operations of the Company and its consolidated
Subsidiaries as of and for the respective periods then ended. The
Shareholders have also previously furnished the Parent with a copy of
the unaudited monthly balance sheets of the Company as of the last day
of each month from January through June 1997, and the related monthly
unaudited statement of income, retained earnings and cash flows of the
Company with respect to each month from January through June 1997
certified by the chief executive officer and the chief accounting
officer of the Company (including such certificates, the "Unaudited
Monthly Financial Statements"). To the knowledge of Shareholders and
the Company, such financial statements have been prepared in
conformity with GAAP consistently applied and present fairly the
financial position and results of operations of the Company and its
consolidated Subsidiaries as of and for the subject periods, except
for normal recurring year-end adjustments and except for the absence
of footnotes. The Company and its Subsidiaries do not have any
liabilities or obligations of a type which should be included in or
reflected as such in financial statements prepared in accordance with
GAAP, whether related to tax or non-tax matters, accrued or
contingent, due or not yet due, liquidated or unliquidated, or
otherwise, except as and to the extent disclosed or reflected in such
financial statements. Collectively, the financial statements
described in this Section 2.2(g) are the "Company Financial
Statements."
EnviroSystems Agreement and Plan of Merger/Page 12
<PAGE> 21
(h) Absence of Certain Changes or Events. Since December
31, 1996, except to the extent described in Schedule 2.2(h) of the
Company Disclosure Schedule, and except as contemplated by this
Agreement or in connection with the transactions contemplated by this
Agreement:
(1) none of the Company and its Subsidiaries 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;
(2) none of the Company and its Subsidiaries has
entered into any agreement, contract, lease, permit or license
(or series of related agreements, contracts, leases, permits
and licenses) either involving more than $20,000 or outside
the ordinary course of business;
(3) to the knowledge of the Shareholders and the
Company, no party (including any of the Company and its
Subsidiaries) has breached, accelerated, terminated, modified,
or canceled any agreement, contract, lease, permit or license
(or series of related agreements, contracts, leases, permits
and licenses) involving more than $20,000 to which any of the
Company and its Subsidiaries is a party or by which any of
them is bound ("Company Contracts");
(4) none of the Company and its Subsidiaries has
imposed or suffered to exist any lien, encumbrance or security
interest upon any of its assets, tangible or intangible (other
than the Permitted Exceptions, as defined below);
(5) none of the Company and its Subsidiaries has
made any capital expenditure (or series of related capital
expenditures) either involving more than $20,000 or outside
the ordinary course of business;
(6) none of the Company and its Subsidiaries has
made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other
corporation, partnership, limited liability company or other
person (or series of related capital investments, loans, and
acquisitions) either involving more than $20,000 or outside
the ordinary course of business;
(7) none of the Company and its Subsidiaries 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 $25,000 singly or $50,000 in the aggregate;
(8) none of the Company and its Subsidiaries has
delayed or postponed the payment of accounts payable and other
liabilities outside the ordinary course of business;
EnviroSystems Agreement and Plan of Merger/Page 13
<PAGE> 22
(9) none of the Company and its Subsidiaries has
canceled, compromised, satisfied, settled, waived, or released
any right or claim (or series of related rights and claims)
either involving more than $20,000 or outside the ordinary
course of business;
(10) none of the Company and its Subsidiaries has
granted any license or sublicense of any rights under or with
respect to any Intellectual Property (as defined in Section
2.2(m) below);
(11) there has been no change made or authorized in
the Articles of Incorporation or bylaws of any of the Company
and its Subsidiaries (except that the Articles may be changed
to include the exculpation provisions permitted by law);
(12) none of the Company and its Subsidiaries 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;
(13) none of the Company and its Subsidiaries 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, except for dividends and
distributions to shareholders of S-corporations which in the
aggregate do not exceed 43.2% of the Company's pre-tax net
income during 1997 through the date of the latest such
distribution and except as permitted by Section 3.1(m);
(14) none of the Company and its Subsidiaries has
experienced any damage, destruction, or loss to its property
in excess of $20,000 which is not covered by insurance;
(15) none of the Company and its Subsidiaries 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;
(16) none of the Company and its Subsidiaries has
entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(17) none of the Company and its Subsidiaries has
granted any increase in compensation to any of its directors,
officers, employees, consultants or agents in excess of five
percent of such person's base compensation and discretionary
bonuses to officers and employees in the aggregate amount of
up to 10% of the pre-tax net income of the Company during 1997
up to the date of the latest such payment;
EnviroSystems Agreement and Plan of Merger/Page 14
<PAGE> 23
(18) none of the Company and its Subsidiaries 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 other employee benefit plan);
(19) none of the Company and its Subsidiaries has
made any other change in employment terms for any of its
directors, officers, and employees outside the ordinary course
of business;
(20) none of the Company and its Subsidiaries has
made or pledged to make any material charitable or other
contribution outside the ordinary course of business;
(21) to the knowledge of the Shareholders and the
Company, 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
Company or its Subsidiaries;
(22) to the knowledge of the Shareholders and the
Company, there has not been any material adverse change in the
business, financial condition, operation, results of
operation, or future prospects of the Company and its
Subsidiaries;
(23) there have not been any work interruptions, or
to the knowledge of the Shareholders and the Company, labor
grievances or employee claims filed (the existence of which is
known, or under the normal course of business should be known,
to the Company) against the Company or its Subsidiaries;
(24) there has not been any merger or consolidation
or agreement to merge or consolidate with or into any other
corporations; and
(25) none of the Company and its Subsidiaries has
committed to do any of the foregoing.
"Permitted Exceptions" shall mean (i) mechanic's,
materialman's, warehouseman's and carrier's liens and purchase money
security interests arising in the ordinary course of business, a
correct and complete list of which is set forth on Schedule 2.2 of the
Company Disclosure Schedule or arising by operation of law; (ii) liens
for taxes and assessments not yet payable; (iii) liens for taxes,
assessments and charges and other claims, the validity of which the
Company or the Shareholders are contesting in good faith, a correct
and complete list of which is set forth on Schedule 2.2; and (iv)
imperfections of title, liens, security interests, claims and other
charges and encumbrances the existence of which does not adversely
affect the operation, value, use or enjoyment of the affected asset or
property.
(i) Undisclosed Liabilities. To the knowledge of the
Shareholders and the Company, the Company and its Subsidiaries have no
liabilities (and there is no known basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint,
EnviroSystems Agreement and Plan of Merger/Page 15
<PAGE> 24
claim, or demand against the Company or its Subsidiaries giving rise
to any liability), except for (i) liabilities set forth on the face of
the Company Financial Statements (rather than in any notes thereto)
and (ii) liabilities which have arisen after May 31, 1997 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).
(j) Permits and Legal Compliance. To the knowledge of
the Shareholders and the Company, the Company and its Subsidiaries
have all permits, licenses, orders, qualifications, and approvals of
all governmental and regulatory authorities material to the conduct of
their business, a correct and complete list of which is set forth in
Schedule 2.2. To the knowledge of the Shareholders and the Company,
all such permits, licenses, orders and approvals are in full force and
effect, and no suspension or cancellation of any of them is pending or
threatened. To the knowledge of the Shareholders and the Company,
none of such permits, licenses, orders or approvals, and no
application for any of such permits, licenses, orders or approvals,
will be adversely affected by the consummation of the transactions
contemplated by this Agreement. To the knowledge of the Shareholders
and the Company, the Company and its Subsidiaries have 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 the Company or its Subsidiaries alleging
any failure so to comply.
(k) Title to Properties; Absence of Liens and
Encumbrances, etc. To the knowledge of the Shareholders and the
Company, the Company and its Subsidiaries have good and marketable
title to all of the real, tangible personal and mixed properties and
assets owned by it and used in its business, free and clear of any
liens, charges, pledges, mortgages, conditional sales contracts,
security interests or other encumbrances (other than Permitted
Exceptions), except as reflected in the Company Financial Statements.
A correct and complete list of all such properties and assets (other
than properties and assets described in Sections 2.2(l), 2.2(m) and
2.2(n)) with a historical cost in excess of $5,000 is set forth on
Schedule 2.2(k). The properties and assets of the Company and its
Subsidiaries (other than the properties and assets described in
Sections 2.2(l), 2.2(m) and 2.2(n), which sections contain the
Company's and Shareholders' representations and warranties with
respect to intangible properties and assets) are free and clear of any
liens, charges, pledges, mortgages, conditional sales contracts,
security interests or other encumbrances (other than Permitted
Exceptions), except as reflected in the Company Financial Statements.
(l) Software. Schedule 2.2(l) contains a list or
description by type of all operating and applications computer
programs and data bases ("Software") which the Company or any
Subsidiary uses or has available for use and plans to use, and such
Software constitutes all the Software which is used to operate the
business of the Company and its Subsidiaries as currently conducted.
All such Software is owned outright by the Company or its Subsidiaries
except as indicated on Schedule 2.2(l). As to any Software which
Schedule 2.2(l) indicates is not owned by the Company or its
Subsidiaries, the owner of such Software is identified
EnviroSystems Agreement and Plan of Merger/Page 16
<PAGE> 25
on Schedule 2.2(l) and the Company and its Subsidiaries have the right
to use the same pursuant to valid leases or licenses therefor. To the
knowledge of the Shareholders and the Company, none of the Software
used by or available to the Company or its Subsidiaries, and no use
thereof, infringes upon or violates any patent, copyright, trade
secret or other proprietary right of anyone else and no claim with
respect to any such infringement or violation is known to be
threatened.
(m) Patent, Trademark, etc. Claims. To the knowledge of
the Shareholders and the Company, the Company or its Subsidiaries is
the owner or licensee of all patents, patent licenses,
trademarks/servicemarks/trade names, trademark/servicemark/trade name
registrations, copyrights, and copyright registrations or any other
intellectual property ("Intellectual Property") used in the operation
of the Company's business as presently conducted and purported to be
owned or licensed by it; and a correct and complete list of such
Intellectual Property is set forth in Schedule 2.2(m) of the Company
Disclosure Schedule. Each item of Intellectual Property owned or used
by the Company or its Subsidiaries immediately prior to the Final
Closing will be owned or available for use by the Company or its
Subsidiaries on the same terms and conditions immediately after the
Final Closing. To the knowledge of the Shareholders and the Company,
each of the Company and its Subsidiaries owns or has the right to use
all such Intellectual Property. To the knowledge of the Shareholders
and the Company, each of the Company and its Subsidiaries has not
infringed, and is not now infringing, on any trade name, trademark,
service mark, or copyright belonging to any other person, firm or
corporation and has not received any notice of such infringement.
Neither the Company nor any Subsidiary is a party to any license,
sublicense, agreement or arrangement pursuant to which the Company or
its Subsidiaries uses Intellectual Property except as shown in
Schedule 2.2(m). With respect to each such license, sublicense,
agreement or arrangement set forth in Schedule 2.2(m), to the
knowledge of the Shareholders and the Company:
(1) the license, sublicense, agreement or
arrangement covering the item is legal, valid, binding,
enforceable, and in full force and effect;
(2) the license, sublicense, agreement or
arrangement will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms
immediately following the Final Closing;
(3) no party to such license, sublicense,
agreement or arrangement 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; and
(4) no party to the license, sublicense,
agreement or arrangement has repudiated any provision thereof.
Each of the Company and its Subsidiaries owns, or holds adequate
licenses or other rights to use, its trade names in the business as
now conducted by it, and such use does not, and will
EnviroSystems Agreement and Plan of Merger/Page 17
<PAGE> 26
not, conflict with, infringe on, or otherwise violate any rights of
others. The Shareholders have delivered to Parent correct and
complete copies of all such licenses, sublicenses agreements and
arrangements (as amended to date) disclosed on Schedule 2.2(m).
(n) List of Properties, Contracts and Other Data. The
Company and its Subsidiaries own or lease all property and tangible
assets used in the conduct of their business as presently conducted.
To the knowledge of the Shareholders and the Company, and except as
reflected in such Schedule 2.2(n), all of the property of the Company
and its Subsidiaries is in existence and is in good condition and
repair, except for reasonable wear and tear, and in conformity in all
material respects with all building, zoning, OSHA, Coast Guard,
safety, or other applicable ordinances, regulations, or laws.
Schedule 2.2(n) contains a list setting forth with respect to the
Company and its Subsidiaries as of the date hereof the following:
(1) Schedule 2.2(n)(1) lists and describes briefly
all real property which the Company and each Subsidiary owns.
With respect to each such parcel of owned real property
(collectively, the "Owned Real Property"):
(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 Owned Real
Property subject thereto and except as set forth on
Schedule 2.2(n)(1);
(ii) there are no pending or, to the knowledge of
the Shareholders and the Company, threatened
condemnation proceedings, lawsuits, or administrative
actions or other matters relating to the Owned Real
Property which could reasonably be expected to
adversely affect the current ownership, maintenance,
use, occupancy, or value thereof;
(iii) to the knowledge of the Shareholders and the
Company, 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 is 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, except
as described on Schedule 2.2(n)(1), the land does not
serve any adjoining property for any purpose
inconsistent with the use of the land, and the Owned
Real 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;
EnviroSystems Agreement and Plan of Merger/Page 18
<PAGE> 27
(iv) to the knowledge of the Shareholders and the
Company, 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 such approvals and
applicable laws, rules, and regulations;
(v) except as described on Schedule 2.2(n)(2) 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 Company
and its Subsidiaries) in possession of the parcel of
real property, other than tenants in possession of
property leased or subleased by the Company or any of
its Subsidiaries under any leases or subleases
disclosed on Schedule 2.2(n)(2) which tenants are in
possession of space to which they are entitled;
(viii) to the knowledge of the Shareholders and the
Company, except as described on Schedule 2.2(n)(1),
to the extent necessary or desirable for the use or
operation of facilities located on real property
owned by the Company or any Subsidiary, such
facilities are supplied with utilities and other
services, including gas, electricity, water,
telephone, sanitary sewer, and storm sewer, all of
which services are adequate in accordance with all
applicable laws, ordinances, rules, and regulations;
(ix) to the knowledge of the Shareholders and the
Company, except as described on Schedule 2.2(n)(1),
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;
(x) Except as described on Schedule 2.2(n)(1), the
Owned Real Property is not located within an area
that has been designated by the Federal Insurance
Administration, the Army Corps of Engineers or any
other governmental agency or body as being subject to
special flooding hazards; and
(xi) Except as described on Schedule 2.2(n)(1), the
improvements on the Property (A) have been
constructed in a good and workmanlike manner, free
from defects in workmanship and material and, to the
best of Shareholders' and Company's knowledge, do not
require any repair or replacement other than minor,
routine maintenance; and (B) have been constructed
and are
EnviroSystems Agreement and Plan of Merger/Page 19
<PAGE> 28
being occupied, maintained, and operated in
compliance with all applicable laws, regulations,
insurance requirements, contracts, leases, permits,
licenses, ordinances, restrictions, building setback
lines, covenants, reservations, and easements, and
the Shareholders and Company have received no notice,
written or oral, claiming any violation of any of the
same or requesting or requiring the performance of
any repairs, alterations, or other work in order to
so comply.
(2) Schedule 2.2(n)(2) of the Company Disclosure
Schedule lists and describes briefly all real property leased
or subleased by or to the Company or any of its Subsidiaries
(whether as lessor or as lessee). Schedule 2.2(n)(2) also
identifies the properties leased or subleased to the Company
or any of its Subsidiaries for which title insurance policies
are to be procured as provided in Section 3.8 below. The
Shareholders have delivered to the Parent correct and complete
copies of the leases and subleases listed in Schedule
2.2(n)(2) (as amended to date). With respect to each lease
and sublease listed in Schedule 2.2(n)(2);
(i) to the knowledge of the Shareholders and the
Company, the lease or sublease is legal, valid,
binding, enforceable, and in full force and effect;
(ii) to the knowledge of the Shareholders and the
Company, the lease or sublease will continue to be
legal, valid, binding, enforceable, and in full force
and effect on identical terms immediately following
the consummation of the transactions contemplated
hereby;
(iii) to the knowledge of the Shareholders and the
Company, 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) to the knowledge of the Shareholders and the
Company, no party to the lease or sublease has
repudiated any provision thereof;
(v) to the knowledge of the Shareholders and the
Company, except as described on Schedule 2.2(n)(2),
there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or
sublease;
(vi) to the knowledge of the Shareholders and the
Company, with respect to each sublease, the
representations and warranties set forth in
subsections (i) through (v) above are correct and
complete with respect to the underlying lease;
(vii) none of the Company and its Subsidiaries has
assigned, transferred, conveyed, mortgaged, deeded in
trust, or encumbered any interest in the leasehold or
subleasehold;
EnviroSystems Agreement and Plan of Merger/Page 20
<PAGE> 29
(viii) to the knowledge of the Shareholders and the
Company, 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; and
(ix) to the knowledge of the Shareholders and the
Company, all facilities leased or subleased
thereunder are supplied with utilities and other
services necessary for the operation of said
facilities.
(3) Schedule 2.2(n)(3) of the Company Disclosure
Schedule lists and describes briefly all contracts and
commitments (including, without limitation, mortgages,
indentures and loan agreements) to which the Company or any
Subsidiary is a party, or to which it or any of its assets or
properties are subject and which are not specifically referred
to elsewhere in Section 2.2, provided that there need not be
listed in the Company Disclosure Schedule (unless required
pursuant to the preceding subsections of this Section 2.2(n))
any contract or commitment incurred in the ordinary course of
business which requires payments to or by the Company and its
Subsidiaries during its remaining life aggregating less than
$25,000 or which is terminable by the Company or any
Subsidiary within thirty days without payment of a premium or
penalty.
Correct and complete copies of all documents, and descriptions
complete in all material respects of all oral agreements or
commitments (if any), referred to in this Section 2.2(n) have been
provided to Parent or its counsel. To the knowledge of the
Shareholders and the Company, none of the Company, the Shareholders
and the Subsidiaries has been notified of any claim that any contract
listed in Schedule 2.2(n)(3) of the Company Disclosure Schedule is not
valid and enforceable in accordance with its terms for the periods
stated therein, or that there is under any such contract any existing
material default or event of default or event which with notice or
lapse of time or both would constitute such a default.
(o) Use of Real Property. None of the Shareholders, the
Company and the Subsidiaries has received notice of violation of any
applicable zoning or building regulation, ordinance or other law,
order, regulation or requirement relating to the operations of the
Company or its Subsidiaries, or any notice of default under any
material lease, contract, commitment, license or permit, relating to
the use and operation of the owned or leased real property listed in
the Company Disclosure Schedules. To the knowledge of the
Shareholders and the Company, none of the Shareholders, the Company
and the Subsidiaries has received notice that any plant, facility or
other building which is owned or covered by a lease set forth in the
Company Disclosure Schedule does not substantially conform in all
material respects with all applicable ordinances, codes, regulations
and requirements, and none of the Shareholders, the Company and the
Subsidiaries has received notice that any law or regulation presently
in effect or condition precludes or restricts continuation of the
present use of such properties.
EnviroSystems Agreement and Plan of Merger/Page 21
<PAGE> 30
(p) Environmental Laws. To the knowledge of the
Shareholders and the Company, (i) the Company and its Subsidiaries,
including, without limitation, their businesses, facilities, property,
vessels, and equipment have been and are currently in compliance, in
all material respects, with all applicable federal, state, and local
laws, rules, and regulations of all authorities, including without
limitation, applicable Environmental Laws (as hereinafter defined),
and (ii) the Company and its Subsidiaries have all permits,
certificates, and licenses required to operate their businesses,
facilities, property, vessels, and equipment, including, without
limitation, any relating to the generation, processing, treatment,
discharge, storage, transport, disposal, or other management of
chemicals and other hazardous materials, of waste materials of any
kind, and those relating to the protection of environmentally
sensitive areas. To the knowledge of the Shareholders and the
Company, there is no material adverse effect on any of the facilities,
properties, vessels or equipment of the Companies, or with respect to
function, use, or value of any such assets, resulting from any
hazardous or toxic substance, or any pollutant or contaminant, or as a
result of exposure to petroleum or any by-product thereof.
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, and the Occupational Safety and Health Act of
1970, each as amended, together with all other 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) concerning pollution or
protection of the environment, public 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 in ambient air, 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.
(q) Litigation. Except as provided on Schedule 2.2(q),
there are no actions, suits, audits, investigations, unfair labor
practices charges, complaints, claims, grievances or proceedings or,
to the knowledge of the Shareholders and the Company, any audits or
investigations with respect to the Company or any Subsidiary pending
against the Company or any Subsidiary at law or in equity, or before
or by any federal, state, municipal, foreign or other governmental
department, commission, board, bureau, agency or instrumentality, nor
to the knowledge of the Shareholders and the Company, are there any
such actions, suits, audits, investigations, unfair labor practices
charges, complaints, claims, grievances or proceedings that are known
to be threatened against the Company or any Subsidiary.
(r) Labor and Employment Matters.
(1) Schedule 2.2(r) of the Company Disclosure
Schedule sets forth all collective bargaining agreements,
employment and consulting agreements (other than consulting
agreements terminable by the Company or any Subsidiary within
60 days without payment of a premium or a penalty), executive
compensation plans, bonus plans, deferred compensation
agreements, employee pension plans or retirement plans,
employee profit sharing plans, employee stock purchase and
stock option
EnviroSystems Agreement and Plan of Merger/Page 22
<PAGE> 31
plans, group life insurance, hospitalization insurance or
other plans or arrangements providing for benefits to
employees of the Company or any Subsidiary.
(2) To the knowledge of the Shareholders and the
Company, there are no controversies between the Company (or
any Subsidiary) and any employees or any unresolved labor
union grievances or unfair labor practice or labor arbitration
proceedings pending or threatened, related to the Company (or
any Subsidiary) and there are not any organizational efforts
presently being made or threatened in an organized fashion
involving any of the employees of the Company or any
Subsidiary.
(3) None of the Shareholders, the Company and the
Subsidiaries has received notice of any claim that it has not
complied with any laws relating to the employment of labor,
including any provisions thereof relating to wages, hours,
collective bargaining, the payment of social security and
similar taxes, equal employment opportunity, employment
discrimination and employment safety, or that it is liable for
any arrears of wages or any taxes or penalties for failure to
comply with any of the foregoing.
(4) Schedule 2.2(r) of the Company Disclosure
Schedule sets forth the current annual compensation (or basis
thereof) of all employees of the Company and its Subsidiaries
(by position or by department) as of June 30, 1997.
(s) Accounts Receivable. To the knowledge of the
Shareholders and the Company (A) the accounts receivable reflected on
the balance sheet of the Company as of December 31, 1996, and all
accounts receivable arising between December 31, 1996 and the date
hereof, arose from bona fide transactions in the ordinary course of
business; (B) the services involved have been provided to the account
obligor and no further services are required to be provided in order
to entitle the Company or its assignees to collect the accounts
receivable in full; (C) no such account has been assigned or pledged
to any other person, firm or corporation; and (D) unless paid prior to
the Preliminary Closing Date, the accounts receivable are or will be
as of the Preliminary Closing Date current and collectible net of the
respective reserves, if any, shown on the Company Financial Statements
(which reserves are adequate and calculated consistent with past
practices). There is no contest, claim or right of set-off, other
than in the ordinary course of business, under any of the Company
Contracts with any obligor of an account receivable relating to the
amount or validity of such account receivable. Schedule 2.2(s) sets
forth a complete and accurate list of all accounts receivable as of
June 30, 1997, which list indicates the aging of such accounts
receivable.
(t) Insurance. Schedule 2.2(t) 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 the Company and
its Subsidiaries have been a party, a named insured, or otherwise the
beneficiary of coverage at any time within the past year (except as to
insurance policies owned by third party vendors, contractors and
clients of the Company which have contractually named the
EnviroSystems Agreement and Plan of Merger/Page 23
<PAGE> 32
Company or its Subsidiaries as insured or provided other benefits of
coverage as a result of contractual liability coverage, which policies
need not be listed on Schedule 2.2(t) but shall be made available for
inspection by Parent's representatives):
(1) the name, address, and telephone number of
the agent;
(2) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(3) the policy number and the period of coverage;
(4) 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
(5) a description of any retroactive or "swing"
premium adjustments or other loss-sharing arrangements.
To the knowledge of the Shareholders and the Company, with respect to
each such insurance policy owned by the Company or any of its
Subsidiaries: (A) the policy is legal, valid, binding, enforceable,
and in full force and effect with respect to the periods and risks
which such policy purports to insure; (B) the policy will continue to
be legal, valid, binding, enforceable, and in full force and effect in
accordance with its terms on the same terms immediately following the
consummation of the transactions contemplated hereby; (C) neither the
Company nor any of its Subsidiaries 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 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 (D) no party to the policy has repudiated any
provision thereof. To the knowledge of the Shareholders and the
Company, the Company and each of its Subsidiaries has been covered
during the past five years by insurance in scope and amount customary
and reasonable for the businesses in which it has engaged during the
aforementioned period. Schedule 2.2(t) of the Company Disclosure
Schedule describes any self-insurance arrangements affecting the
Company and its Subsidiaries. "Self insurance arrangements" means any
arrangement by which the Company or its Subsidiaries has assumed risks
in scope and amount customarily insured by businesses in the Company's
industry and geographic region.
(u) Employee Benefits.
(1) To the knowledge of the Shareholders and the
Company, the Company and its Subsidiaries have complied and
currently are in compliance, both as to form and operation, in
all material respects with the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Internal Revenue Codes of 1954 and/or 1986,
as amended, respectively (for purposes of this Section 2.2(u)
only, the "Code"), with respect to each "employee benefit
plan" as
EnviroSystems Agreement and Plan of Merger/Page 24
<PAGE> 33
defined under Section 3(3) of ERISA. Each employee benefit
plan of the Company and its Subsidiaries ("Plan") is described
in Schedule 2.2(u) of the Company Disclosure Schedule, and a
copy of each Plan is attached thereto.
(2) The Company and its Subsidiaries have never
maintained, adopted or established, contributed or been
required to contribute to, or otherwise participated or been
required to participate in, a "multiemployer plan" (as defined
in Section 3(37) of ERISA). No amount is due as owing from
the Company or any Subsidiary on account of a "multiemployer
plan" (as defined in Section 3(37) of ERISA) or on account of
any withdrawal therefrom.
(3) The Company and its Subsidiaries have not
incurred any liability with respect to a Plan including,
without limitation, under ERISA (including, without
limitation, Title I or Title IV of ERISA, other than liability
for premiums due to the Pension Benefit Guaranty Corporation
("PBGC")), the Code or other applicable law, which has not
been satisfied in full, and, to the knowledge of the
Shareholders and the Company, no event has occurred, and
there exists no known condition or set of circumstances, which
could result in the imposition of any liability with respect
to a Plan, including, without limitation, under ERISA
(including, without limitation, Title I or Title IV of ERISA),
the Code or other applicable law with respect to the Plan.
(4) The Company and its Subsidiaries have no
outstanding commitments to provide or to cause to be provided
any severance or other post-employment benefit, salary
continuation, termination, disability, death, retirement,
health or medical benefit or similar benefit to any person
(including, without limitation, any former or current
employee) that has not been reflected in the Company Financial
Statements or is not included in any Plan disclosed in
Schedule 2.2(u).
(v) Tax Matters.
(1) To the knowledge of the Shareholders and the
Company, all federal, state, local and foreign tax returns
required to be filed by the Company and its Subsidiaries prior
to the date hereof have been filed on a timely basis with the
appropriate governmental authorities in all jurisdictions in
which such tax returns are required to be filed, and all such
returns are correct and complete. Shareholders have delivered
to Parent correct and complete copies of all federal income
tax returns, examination reports, and statements of
deficiencies asserted against or agreed to by the Company or
any Subsidiary since January 1, 1992. To the knowledge of the
Shareholders and the Company, neither the Company nor its
Subsidiaries are currently the subject of any audit,
examination or any similar investigation by any governmental
authority. Schedule 2.2(v) of the Company Disclosure Schedule
sets forth all audits, examinations or similar investigations
of the Company and its Subsidiaries by any governmental
authority since January 1, 1992.
EnviroSystems Agreement and Plan of Merger/Page 25
<PAGE> 34
(2) To the knowledge of the Shareholders and the
Company, all federal, state, local and foreign income,
franchise, sales, use, property, and all other taxes, fees,
assessments, or other governmental charges (including
withholding taxes), and all interest and penalties thereon
(all of the foregoing collectively, "Taxes") due from or
properly accruable by the Company and its Subsidiaries have
been fully and timely paid or, in the cases of Taxes for which
payment is not yet required, properly and fully accrued for on
the Company Financial Statements or in Schedule 2.2(v) with
respect to all taxable periods ending on or prior to the date
of this Agreement and interim periods through the date of this
Agreement.
(3) None of the Company and its Subsidiaries has
filed a consent under Section 341(f) of the Code concerning
collapsible corporations. None of the Shareholders, the
Company or any Subsidiary is a party to any agreement,
contract or arrangement that would, by reason of the
consummation of any of the transactions contemplated by this
Agreement, individually or in the aggregate, result in the
payment of any "excess parachute payment" within the meaning
of Section 280G of the Code. None of the assets of the
Company or any Subsidiary is required to be treated as being
owned by any other person pursuant to the "safe harbor"
leasing provisions of Section 168 of the Internal Revenue Code
of 1954, as in effect prior to the repeal of said leasing
provisions.
(4) None of the Company and its Subsidiaries is a
party to any Tax allocation or sharing agreement. None of the
Company and its Subsidiaries (A) has been a member of an
affiliated group filing a consolidated federal income tax
return (other than a group the common parent of which was the
Company or a Related Company) or (B) has any liability for the
taxes of any person (other than any of the Company or a
Related Company and their respective Subsidiaries) under
Treas. Reg. Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor,
by contract, or otherwise.
(5) Schedule 2.2(v) sets forth the following
information with respect to each of the Company and its
Subsidiaries (or, in the case of clause (B) below, with
respect to each of the Subsidiaries) as of the most recent
practicable date: (A) the basis of the Company or Subsidiary
in its assets; (B) the basis of the stockholder(s) of the
Subsidiary in its stock (or the amount of any excess loss
account); (C) the amount of any net operating loss, net
capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to
the Company or Subsidiary; and (D) the amount of any deferred
gain or loss allocable to the Company or Subsidiary arising
out of any Deferred Intercompany Transaction (as defined in
Treas. Reg. Section 1.1502-13).
(w) Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by the
Shareholders and the Company directly with the Parent, without the
intervention of any other person on behalf of the Shareholders or the
Company in such manner as to give rise to any valid claim by any other
person against
EnviroSystems Agreement and Plan of Merger/Page 26
<PAGE> 35
the Shareholders or the Company for a finder's fee, brokerage
commissions, or similar payment.
(x) Powers of Attorney. There are no outstanding powers
of attorney executed on behalf of the Company.
(y) Investment Company. Each of the Company or its
Subsidiaries is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "holding company", a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding
company" or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(z) Tax-Free Reorganization. With respect to the
qualification of the Merger as a reorganization pursuant to Section
368(a)(2)(D) of the Code:
(1) There is no plan or intention on the part of
Shareholders to sell, exchange or otherwise dispose of a
number of shares of Parent Common Stock received in the Merger
which would reduce the Shareholders' aggregate ownership of
such Parent Common Stock to a number of shares having a value,
as of the Effective Time, of less than fifty percent of the
value of all of the formerly outstanding capital stock of the
Company as of the same date.
(2) Immediately following the Merger, the
Surviving Corporation will hold at least 90 percent of the
fair market value of the Company's net assets and at least 70%
of the fair market value of the Company's gross assets.
(3) The liabilities of the Company assumed by the
Surviving Corporation and the liabilities to which the assets
of the Company are subject were incurred in the Company's
ordinary course of business.
(4) If the Merger is effected, the Company and
the Shareholders will each pay their respective expenses, if
any, incurred in connection with the Merger, and neither the
Company nor the Shareholders will pay any Parent or Merger Sub
expenses incurred in connection with the Merger.
(5) At the Effective Time, the Company will not
have any outstanding warrants, options, convertible
securities, or any other right pursuant to which any person
could acquire stock in the Company that, if exercised or
converted, would affect the Parent's retention of control of
the Surviving Corporation.
(6) The Company is not an investment company
within the meaning of Section 368(a)(2)(F) of the Code.
EnviroSystems Agreement and Plan of Merger/Page 27
<PAGE> 36
(7) At the Effective Time, the fair market value
of the assets of the Company will exceed the sum of its
liabilities, plus the amount of liabilities, if any, to which
its assets are subject.
(8) The Company is not under the jurisdiction of
a court in a case under Title 11 of the United States Code, or
a receivership, foreclosure, or similar proceeding in a
federal or state court.
2.3 REPRESENTATIONS AND WARRANTIES BY THE PARENT. The Parent
represents and warrants to the Shareholders and the Company that the statements
contained in this Section 2.3 are correct as of the date of this Agreement and
will be correct as of the Preliminary Closing Date and the Final Closing Date
(as though made then), except as set forth in the disclosure schedule delivered
by the Parent to the Shareholders and the Company on the date hereof, as
supplemented or amended in accordance with Section 3.4 of this Agreement (such
schedule, as so supplemented or amended, the "Parent Disclosure Schedule").
The Parent Disclosure Schedule will be arranged in sections and paragraphs
corresponding to the lettered and numbered sections and paragraphs contained in
this Section 2.3. References in Section 2.3 to a numbered schedule mean the
section of the Parent Disclosure Schedule that corresponds with that number;
for example, references to "Schedule 2.3(a)" mean Section 2.3(a) of the Parent
Disclosure Schedule. The Parent Disclosure Schedule constitutes an exception
to each warranty or representation set forth herein, whether or not such
warranty or representation specifically refers to the Parent Disclosure
Schedule; accordingly each warranty or representation set forth herein is
deemed to be preceded by the clause: "Except as set forth in the Parent
Disclosure Schedule . . .".
(a) Organization and Qualification, etc. The Parent is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, has corporate power and
authority to own all of its properties and assets and to carry on its
business as it is now being conducted, and is duly qualified to do
business and is in good standing in Louisiana and each other
jurisdiction where, to the reasonable belief of Parent, such
qualification is necessary or appropriate. Each such jurisdiction is
identified in Schedule 2.3(a). The copies of the Parent's Certificate
of Incorporation and Bylaws, as amended to date, which have been
delivered to the Shareholders are complete and correct, and such
instruments, as so amended, are in full force and effect.
(b) Capital Stock. The entire authorized capital of
Parent consists of 25,000,000 shares of capital stock which is divided
into (1) 3,000,000 shares of restricted common stock having a par
value of $.001 per share, (ii) 20,000,000 shares of common stock
having a par value of $.001 per share (i.e., Parent Common Stock), and
(3) 2,000,000 shares of preferred stock having a par value of $.001
per share.
(c) Subsidiaries, etc. Other than the Merger Sub, and
except (i) as set forth in Schedule 2.3(c) and (ii) for Parent's
interest in the transactions described in this Agreement and the Other
Acquisition Agreements (collectively, the "Consolidation Agreements"),
the Parent does not own of record or beneficially, directly or
indirectly, (1) any shares of outstanding capital stock or securities
convertible into capital stock of any other corporation
EnviroSystems Agreement and Plan of Merger/Page 28
<PAGE> 37
or (2) any participating interest in any partnership, joint venture or
other non-corporate business enterprise. Merger Sub and any corporate
or non-corporate business entity listed in Schedule 2.3(c) are in
Sections 2.3 and 2.4 collectively called the "Subsidiaries." None of
the Subsidiaries has any material assets or liabilities.
(d) Authority Relative to Agreement. Parent has the
corporate power and authority to execute, deliver and perform this
Agreement, the other Consolidation Agreements and any amendments
thereto and all agreements and instruments to be executed and
delivered by Parent or any of its Subsidiaries in accordance with this
Agreement or any other Consolidation Agreement or any amendments
hereto or thereto and to consummate the transactions contemplated on
the part of Parent hereby and thereby. The execution and delivery by
Parent of this Agreement, the other Consolidation Agreements and any
amendments thereto and all agreements and instruments to be executed
and delivered by Parent or any of its Subsidiaries in accordance with
this Agreement or any other Consolidation Agreement or any amendments
hereto or thereto and the consummation by Parent of the transactions
contemplated on its part hereby and thereby have been duly authorized
by its Board of Directors. No other corporate proceedings on the part
of Parent are necessary to authorize the execution and delivery of
this Agreement, the other Consolidation Agreements and any amendments
thereto and all agreements and instruments to be executed and
delivered by Parent or any of its Subsidiaries in accordance with this
Agreement or any other Consolidation Agreement or any amendments
hereto or thereto by Parent. Except for corporate action related to
the IPO and described in Schedule 2.3(d), no other corporate
proceedings on the part of Parent are necessary to authorize the
performance of this Agreement, the other Consolidation Agreements and
any amendments thereto and all agreements and instruments to be
executed and delivered by Parent or any of its Subsidiaries in
accordance with this Agreement or any other Consolidation Agreement or
any amendments hereto or thereto by Parent or the consummation by
Parent of the transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by Parent and is, and
upon their due execution and delivery by the parties thereto the other
Consolidation Agreements and any amendments thereto and all agreements
and instruments to be executed and delivered by Parent or any of its
Subsidiaries in accordance with this Agreement or any other
Consolidation Agreement and any amendments hereto or thereto will be,
enforceable against Parent in accordance with their respective terms,
except as such enforcement is subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws relating to or
affecting creditors' rights. The Consolidation Agreements (other than
this Agreement and the Related Agreements) and any amendments thereto
are enforceable against the other parties thereto in accordance with
their respective terms, in each case except as such enforcement is
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar law relating to or affecting creditors'
rights.
(e) Non-Contravention. The execution, delivery and
performance of this Agreement, the other Consolidation Agreements and
any amendments thereto and all agreements and instruments to be
executed and delivered by Parent or any of its Subsidiaries in
accordance with this Agreement or any other Consolidation Agreement or
any amendments hereto or thereto by Parent do not and the consummation
by Parent of the
EnviroSystems Agreement and Plan of Merger/Page 29
<PAGE> 38
transactions contemplated hereby and thereby will not (1) violate any
constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling change, or other restriction of any government,
government agency, or court to which Parent is subject, or (2) violate
any provision of the Articles of Incorporation or Bylaws of Parent, or
(3) violate or result in, with the giving of notice or the lapse of
time or both, the violation of any provision of, or result in the
acceleration of or entitle any party to accelerate (whether after the
giving of notice or lapse of time or both) any obligation under, or
result in the creation or imposition of any lien, charge, pledge,
security interest or other encumbrance upon any of the property of
Parent pursuant to, any provision of any mortgage, lien, lease,
agreement, contract, license, or instrument to which Parent is a party
or by which any of its assets are bound. The execution, delivery and
performance of this Agreement, the other Consolidation Agreements and
any amendments thereto and all agreements and instruments to be
executed and delivered by Parent or any of its Subsidiaries in
accordance with this Agreement or any other Consolidation Agreement or
any amendments hereto or thereto by Parent do not and will not violate
or conflict with any other restriction of any kind or character to
which Parent is subject or by which any of its assets may be bound,
and the same does not and will not constitute an event permitting
termination of any such mortgage, lien, lease, agreement, license or
instrument to which Parent is a party or by which any of its assets is
bound.
(f) Approvals. Except for the declaration of
effectiveness of the registration statement (the "Registration
Statement") filed in connection with Parent's IPO by the U.S.
Securities and Exchange Commission ("SEC") pursuant to the Securities
Act, and the consents and approvals required pursuant to state
securities laws with respect to the IPO, and except as set forth in
Schedule 2.3(f), no consent, authorization, order or approval of, or
filing or registration with, any governmental commission, board or
other regulatory body or any other person is required for the
execution and delivery of this Agreement and the other Consolidation
Agreements and any amendments thereto and the consummation by Parent
of the transactions contemplated hereby and thereby.
(g) Litigation. There are no actions, suits, audits,
investigations, unfair labor practices charges, complaints, claims,
grievances or proceedings with respect to the Parent or any of its
subsidiaries pending against the Parent or any of its Subsidiaries at
law or in equity, or before or by any federal, state, municipal,
foreign or other governmental department, commission, board, bureau,
agency or instrumentality, nor are there any such actions, suits,
audits, investigations, unfair labor practice charges, complaints,
grievances or proceedings that are known to be threatened against the
Parent or any of its Subsidiaries.
(h) Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by
Parent directly with Shareholders and the Company, without the
intervention of any person on behalf of Parent in such manner as to
give rise to any valid claim by any person (other than McFarland,
Grossman & Company, Inc.) against Parent for a finder's fee, brokerage
commission, or similar payment.
(i) Tax-Free Reorganization. With respect to the
qualification of the Merger as a reorganization pursuant to Section
368(a)(2)(D) of the Code:
EnviroSystems Agreement and Plan of Merger/Page 30
<PAGE> 39
(1) The Parent has no plan or intention to sell,
exchange or otherwise dispose or liquidate the Surviving
Corporation, to merge the Surviving Corporation with or into
any other corporation, to sell or otherwise dispose of any
capital stock of the Surviving Corporation except for
transfers of such capital stock to corporations of which the
Parent has control (within the meaning of Section 368(a) of
the Code) at the time of such transfer, or to cause the
Surviving Corporation to sell or otherwise dispose of any of
its assets or of any assets acquired in the Merger, except for
dispositions made in the ordinary course of business or
transfers of assets to a corporation of which the Surviving
Corporation has control (within the meaning of Section 368(a)
of the Code) at the time of such transfer.
(2) The Parent has no plan or intention to cause
the Surviving Corporation, after the Merger, to issue
additional shares of its stock that would result in the Parent
losing control of the Surviving Corporation within the meaning
of Section 368(c) of the Code.
(3) Following the Merger, the Surviving Corporation
will continue the Company's historic business or use a
significant portion of its historic business assets in a
business.
(4) If the Merger is effected, the Parent and the
Merger Sub will each pay their respective expenses, if any,
incurred in connection with the Merger.
(5) The Parent Common Stock that will be exchanged
in the Merger is voting stock within the meaning of Section
368(c) of the Code.
(6) At the time of the Merger, neither the Parent
nor Merger Sub will have any outstanding warrants, options,
convertible securities, or any other right pursuant to which
any person could acquire stock in the Parent or Merger Sub
which, if exercised or converted, would affect Parent's
acquisition or retention of control of the Surviving
Corporation.
(7) The Parent and the Merger Sub are not investment
companies as defined in Section 368(a)(2)(F) of the Code.
(8) None of the Parent Common Stock received by
Shareholders as a part of the Merger Consideration will be
separate consideration for, or allocable to, any employment
agreement.
(9) Neither the Parent nor the Merger Sub is under
the jurisdiction of a court in a case under Title 11 of the
United States Code, or a receivership, foreclosure, or similar
proceeding in a federal or state court.
(j) Registration Statement; PPM. Each of (i) the PPM,
(ii) the Registration Statement, (iii) the prospectus forming part of
the Registration Statement (the "Prospectus"),
EnviroSystems Agreement and Plan of Merger/Page 31
<PAGE> 40
and (iv) any amendment or supplement to any of the foregoing complies
as to form with all requirements of the Securities Act and regulations
thereunder (assuming, in the case of the PPM, that there is at least
one non- accredited investor (as such term is defined in Regulation D
under the Securities Act) to whom the PPM must be delivered), and none
of the foregoing misstates any material fact or omits to state a
material fact required to make the statements made therein, in light
of the circumstances under which they are made, not misleading, except
for any such misstatement or omission that is caused by any
misstatement or omission of material fact contained in (A) any
material submitted by the Shareholders to Parent in writing with the
Information Letter contemplated by Section 3.9(b) specifically for
inclusion in the Registration Statement or Prospectus or PPM or any
amendment or supplement thereto or (B) the Shareholder Disclosure
Schedule or Company Disclosure Schedule.
(k) No Undisclosed Agreements. There do not exist any
agreements, understandings or commitments by Parent or any of the
Subsidiaries or any of the Other Companies, which provide any material
benefit or other thing of value to any officer, director or
shareholder of any Other Company, or that vary the express terms of
the Consolidation Agreements, or that provide material benefits or any
other thing of value to any officer, director or promoter of Parent
("Parent Insiders") except as set forth in any of the Other
Acquisition Agreements or any employment or consultant agreement that
is appended thereto as an exhibit, or, in the case of the Parent
Insiders, except as described in the PPM.
(l) Financial Statements. The financial statements of
Parent and its Subsidiaries set forth in the PPM and those set forth
in the Prospectus, including (without limitation) the combined
proforma financial statements of Parent, the Company and the Other
Companies, have been prepared in conformity with GAAP consistently
applied and present fairly the financial position and results of
operations of the entities covered thereby as of the end of and for
the respective periods presented. There has been no material adverse
change in the business, financial condition, or results of operations
of Parent, the Company, and the Other Companies on a combined basis
since March 31, 1997.
(m) Remedies. Parent has an adequate remedy in damages,
and will diligently pursue same, for any loss or damage sustained by
it by reason of any breach of a warranty, representation or covenant
by any of the Other Companies or their shareholders under the Other
Acquisition Agreements, except: (i) to the extent of any deductible or
threshold amount that limits Parent's entitlement to indemnification
from shareholders of the Other Companies under the Other Acquisition
Agreements (none of which amounts is more, as a percentage of the
total consideration payable to the shareholders under any such Other
Acquisition Agreement, than the comparable percentage under this
Agreement); (ii) to the extent of any limitation on the maximum
aggregate liability of such shareholders, none of such maximums is
less than the comparable maximum under this Agreement), and (iii) to
the extent that claims for such remedies are limited by a period of
time (none of which limitations are shorter than the comparable
limitations under this Agreement).
(n) Parent Stock. The Parent Common Stock to be issued
to the Shareholders pursuant to this Agreement will, when so issued,
be validly and legally issued, fully paid and
EnviroSystems Agreement and Plan of Merger/Page 32
<PAGE> 41
nonassessable, and will be identical to the Parent Common Stock issued
under the Other Acquisition Agreements. The issuance, sale and
delivery of Parent Common Stock to the Shareholders pursuant to this
Agreement will be exempt from registration under the Securities Act by
reason of the exemption from registration set forth in Section 4(2) of
the Securities Act.
(o) Taxes.
(1) All federal, state, local and foreign tax
returns required to be filed by Parent and its Subsidiaries
prior to the date hereof have been filed on a timely basis
with the appropriate governmental authorities in all
jurisdictions in which such tax returns are required to be
filed and all such returns are correct and complete. Neither
the Parent nor any of its Subsidiaries has ever been the
subject of any audit, examination or any similar investigation
by any governmental authority.
(2) All Taxes due from or properly accruable by
Parent or any of its Subsidiaries have been fully and timely
paid or, in the case of Taxes for which payment is not yet
required, properly and fully accrued for with respect to all
taxable periods ending on or prior to the date of this
Agreement and interim periods through the date of this
Agreement.
(p) Other Acquisition Agreements. Parent does not know,
after reasonable inquiry, of the incorrectness of any representation
or warranty of any Other Company or its shareholders under any Other
Acquisition Agreement; and Parent will give the Shareholders prompt
notice of any such incorrectness upon learning of same.
(q) Investment Intent.
(1) Parent is acquiring the Company Common Stock
solely for the purpose of investment, for its own account, and
not with a view to or for sale in connection with any
distribution thereof within the meaning of Section 2(11) of
the Securities Act. Parent acknowledges that the Company
Common Stock is being sold to Parent by each of the
Shareholders in reliance upon one or more exemptions from
registration contained in the Securities Act and applicable
state securities laws. The reliance by Shareholders upon such
exemptions is based in part upon the representations set forth
in this Section 2.3(q).
(2) Parent understands that the Company Common Stock
has not been registered under the Securities Act, that there
is no established market for the Company Common Stock, and
that the Company Common Stock must be held indefinitely and
cannot be transferred unless it is subsequently registered
under the Securities Act or an exemption from such
registration is available with respect to such transfer.
EnviroSystems Agreement and Plan of Merger/Page 33
<PAGE> 42
(3) Parent has such knowledge and experience in
financial and business matters that it is capable of
evaluating the merits and risks of an investment in the
Company Common Stock and of making an informed investment
decision.
(4) Parent is able to bear the economic risk of its
investment in the Company Common Stock, to hold the Company
Common Stock for an indefinite period of time and to afford a
complete loss of its investment in the Company Common Stock .
(5) Parent and its representatives have been given
access to all documents, books and additional information
concerning the Company which they have requested.
(6) Parent has been represented by legal counsel in
this transaction and Parent and its representatives, including
such counsel, have been given the opportunity to ask questions
of, and receive answers from, the officers of the Company and
the Shareholders concerning the terms of the transactions
contemplated by this Agreement and the affairs and the
business and financial condition of the Company.
(7) Parent has conducted such investigations in
making a decision to enter into this Agreement and the
transactions contemplated herein as Parent has deemed
necessary and advisable.
(8) None of the representations made by Parent in
this Section 2.3(q) shall affect any of Parent's rights under
any other section of this Agreement.
2.4 REPRESENTATIONS AND WARRANTIES CONCERNING THE MERGER SUB. The
Parent and Merger Sub, jointly and severally, hereby represent and warrant to
the Shareholders and the Company as follows as of the date of this Agreement,
the Preliminary Closing Date and the Final Closing Date:
(a) Organization and Standing. Each of Merger Sub and
Parent's other Subsidiaries is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Louisiana. The copies of Merger Sub's Articles of Incorporation and
Bylaws, as amended to date, which have been delivered to the
Shareholders are complete and correct, and such instruments, as so
amended, are in full force and effect.
(b) Capital Structure. The authorized capital stock of
each of Merger Sub and Parent's other Subsidiaries consists of 5,000
shares of common stock, par value $.01 per share, 1,000 of which are
validly issued and outstanding, fully paid and nonassessable and are
owned by the Parent free and clear of all liens, encumbrances and
adverse claims.
(c) Authority. Each of Merger Sub and Parent's other
Subsidiaries has the corporate power and authority to execute, deliver
and perform this Agreement and the Other
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<PAGE> 43
Acquisition Agreements to which such Subsidiary is or will be a party
and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Other Acquisition
Agreements to which such Subsidiary is or will be a party, the
performance by such Subsidiary of its obligations hereunder and the
consummation of the transactions contemplated hereby have been duly
authorized by its Board of Directors and the Parent as its sole
shareholder, and, except for the corporate filings described in
Schedule 2.4(c), no other corporate proceedings on the part of any
Subsidiary are necessary to authorize this Agreement and the Other
Acquisition Agreements, and the transaction contemplated hereby and
thereby. This Agreement has been duly and validly executed and
delivered by Merger Sub and (assuming the due authorization, execution
and delivery hereof by the Company) is a valid and binding obligation
of Merger Sub, enforceable against Merger Sub in accordance with its
terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
the enforcement of creditors' rights generally and by general
principles of equity (whether applied in a proceeding at law or in
equity).
ARTICLE 3
ADDITIONAL COVENANTS AND AGREEMENTS
3.1 CONDUCT OF BUSINESS. During the period from the date hereof
to the Final Closing Date, except as otherwise contemplated by this Agreement
and except as described on Exhibit 3.1 hereto, the Shareholders shall cause the
Company to, and the Company shall, conduct its operations according to its
ordinary and usual course of business, and shall use its best efforts to
preserve substantially intact its business organization, keep available the
services of its officers and employees, and maintain its present relationships
with licensors, suppliers, distributors, customers and others having
significant business relationships with it. Representatives of the Company
will on request confer during such period with representatives of Parent to
keep it informed with respect to the general status of the on-going operations
of the business of the Company. Without limiting the generality of the
foregoing and except as otherwise affected by matters contemplated by this
Agreement or in connection with the transactions contemplated by this
Agreement, the Shareholders will cause the Company during such period to:
(a) carry on the business in substantially the same
manner as heretofore carried on and not introduce any material new
method of management, operation or accounting, nor provide discounted
services outside the ordinary course of business;
(b) maintain its properties, facilities, equipment and
other assets, including those held under leases, in good working
order, condition and repair, ordinary wear and tear excepted;
(c) perform all of its obligations under all debt and
lease instruments and other agreements relating to or affecting its
business, assets, properties, equipment and rights, and pay all
vendors, suppliers, and other third parties (including mechanics and
materialmen) as and when their bills are due, except to the extent
that such payments may be subject to
EnviroSystems Agreement and Plan of Merger/Page 35
<PAGE> 44
undisputed claims of offset or reimbursement in favor of the Company,
and pay in full all payroll obligations when due;
(d) maintain its present debt and lease instruments
(unless same are otherwise mature) and refrain from entering into new
or amended debt or lease instruments, except for debt incurred or
leases entered into in the ordinary course of business which involve a
total liability of the Company not in excess of $20,000 per instance
or $50,000 in the aggregate, without prior written notice to Parent;
(e) not incur any indebtedness other than ordinary trade
accounts payable at market rates with no prepayment penalty which are
used to fund operations in the ordinary course of business;
(f) keep in full force and effect its present insurance
policies or other comparable insurance coverage;
(g) use its best efforts to maintain and preserve its
business organization intact, retain its present employees and
maintain its relationship with suppliers, customers and others having
business relations with the Company;
(h) refrain from effecting any change in the articles of
incorporation, bylaws or capital structure of the Company and refrain
from entering into or agreeing to enter into any merger or
consolidation by the Company with or into, and refrain from acquiring
all or substantially all of the assets, capital stock or business of
any person, corporation, partnership, association or other business
organization or division of any thereof;
(i) refrain from incurring any expenditures outside the
normal course of business, including any capital expenditures (or
series of related expenditures) in excess of $50,000, without prior
written notification to Parent;
(j) refrain from starting or acquiring any new businesses
without the prior written notification to Parent;
(k) maintain its present salaries and commission levels
for all officers, directors, employees or agents, except for raises
that may be awarded to employees at or below the level of supervisor
in keeping with past practices of the Company in the ordinary course
of its business, refrain from entering into employment agreements
except in the ordinary course of business, and refrain from entering
into any collective bargaining agreement; and
(l) refrain from declaring or paying any fees,
commissions or loans outside the ordinary course of business, and
refrain from declaring or paying any bonuses except discretionary
bonuses to officers and employees to the extent that the aggregate
amount of all such discretionary bonuses paid or declared during 1997
do not exceed, in the aggregate, 10% of the Company's pre-tax net
income during 1997 through the date of the latest such payment
(exclusive of production, incentive or safety bonuses previously
committed in
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<PAGE> 45
connection with contracts currently being performed which are described
on Exhibit 3.1(l) attached hereto); and
(m) refrain from declaring or paying any dividends or
distributions to Shareholders, except for those assets listed on
Exhibit 3.1(m) attached hereto and except as contemplated by Section
2.2(h)(13)
(n) promptly notify Parent of any claim or litigation
threatened or instituted, or any other material adverse event or
occurrence involving or affecting the Company or any of its assets,
properties, operations, businesses or employees;
(o) comply with and cause to be complied with all
applicable laws, rules, regulations and orders of all federal, state
and local governments or governmental agencies affecting or relating
to the Company or its assets, properties, operations, businesses or
employees except where the failure to comply will not have a material
adverse effect on the Company;
(p) other than in the ordinary course of business,
refrain from any sale, disposition, distribution or encumbrance of any
of its properties or assets and refrain from entering into any
agreement or commitment with respect to any such sale, disposition,
distribution or encumbrance (other than the sale or use of inventories
in the ordinary course of business);
(q) refrain from any purchase or redemption of any
capital stock or other voting interest of the Company and refrain from
issuing any capital stock or other voting interest;
(r) refrain from making any change in any accounting
principle, classification, policy or practice, except as required by
GAAP; and
(s) manage working capital in the ordinary course
consistent with past practice.
3.2 ACCESS TO INFORMATION BY PARENT. Until the Final Closing Date
or termination of this Agreement, Shareholders will furnish Parent with the
Unaudited Monthly Financial Statements for each month following May 1997
promptly as available. Parent may prior to the Final Closing have access to
the business and properties of the Company and information concerning its
financial and legal condition as Parent deems necessary or advisable in
connection with the consummation of the transactions contemplated hereby,
provided that such access shall not interfere with normal operations of the
Company. The Shareholders and the Company agree to permit Parent and its
authorized representatives, or cause them to be permitted, to have, after the
date hereof and until the Final Closing Date, full access to the premises,
books and records of the Company during normal business hours, and the officers
of the Company will furnish Parent with such financial and operating data and
other information with respect to the business and properties of the Company as
Parent shall from time to time reasonably request. No investigation by Parent
heretofore or hereafter made shall affect the representations and warranties of
the Shareholders and the Company, and each such representation and warranty
shall survive any such investigation.
EnviroSystems Agreement and Plan of Merger/Page 37
<PAGE> 46
3.3 ACCESS TO INFORMATION BY THE SHAREHOLDERS. Until the Final
Closing Date or the termination of this Agreement, the Shareholders shall have
access to the books, records, operating data, and any other information
concerning the financial and legal condition of the Parent and the Other
Companies as the Shareholders deem necessary or advisable in connection with
the transactions contemplated hereby; provided that the Shareholders shall not
have access to any information, the disclosure of which by Parent would
constitute a violation of any of the confidentiality agreements between the
Parent and any of the Other Companies (the "Confidentiality Agreements") unless
the Shareholders have entered into confidentiality agreements with Parent or
those of the Other Companies to whose information the Shareholders seek access.
In no event shall the Shareholders be denied access to financial information
(including pro forma information) regarding Parent. All requests by the
Shareholders for information pursuant to this Section 3.3 shall be directed to
the Parent and the Parent shall furnish such information as is reasonably
obtainable from the Other Companies in accordance with the terms of the
Confidentiality Agreements. No investigation by the Shareholders heretofore or
hereafter made shall affect the representations and warranties of Parent, and
each such representation and warranty shall survive any such investigation.
3.4 AMENDMENT TO SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the right and continuing obligation until the
Final Closing to supplement or amend promptly the Disclosure Schedules with
respect to any matter that would have been or would be required to be set forth
or described in the Disclosure Schedules in order to not materially breach any
representation, warranty or covenant of such party contained herein. Each
amendment or supplement to any Disclosure Schedule shall be clearly marked so
as to indicate the amending or supplemental information contained therein,
which shall be presented in appropriate detail, and shall be delivered prior to
the Final Closing and in the manner provided in Section 9.3. For all purposes
of this Agreement, including without limitation for purposes of determining
whether the conditions set forth in Section 4.1 and Section 4.2 have been
fulfilled, whether any party has breached any of its representations and
warranties herein, and for the purposes of Article 6, the Disclosure Schedules
hereto shall be deemed to be the Disclosure Schedules as amended or
supplemented pursuant to this Section. In the event that the Company or
Shareholders amend or supplement a Disclosure Schedule pursuant to this Section
3.4 and such amendment or supplement constitutes or reflects, individually or
in the aggregate, a material adverse change to the business, assets or
prospects of the Company or the Shareholders (all as determined in good faith
by Parent) then Parent may, by notice to the Company and the Shareholders given
within three business days after the amendment or supplement is delivered to
it, terminate this Agreement. In the event that Parent or Merger Sub amends or
supplements a Disclosure Schedule pursuant to this Section 3.4 and the
amendment or supplement constitutes or reflects, individually or in the
aggregate, a material adverse change to the business, assets or prospects of
Parent, Merger Sub or any Other Company or materially changes the content of
the PPM, the Registration Statement or the Prospectus or requires such a
material change (all as determined in good faith by the Required Shareholders
(defined below)) then Shareholders holding a majority of the Company Common
Stock ("Required Shareholders") may, by notice to Parent given within three
business days after the amendment or supplement is delivered to the
Shareholders, terminate this Agreement. Any termination pursuant to this
Section 3.4 shall have the same effect as a termination by mutual written
consent pursuant to Section 5.1(a)(1) of this Agreement. If this Agreement is
not terminated within the allotted time, or if the Final Closing should occur
before the
EnviroSystems Agreement and Plan of Merger/Page 38
<PAGE> 47
allotted time has run, then the supplemented or amended Disclosure Schedule, as
so amended or supplemented, shall be deemed to be and to have at all times been
the Disclosure Schedule under this Agreement for all purposes hereof.
3.5 CONFIDENTIALITY. The provisions of this Section 3.5 shall
supersede and replace all prior agreements and understandings of the parties
with respect to the subject matter hereof.
(a) Confidential Information. Until the Final Closing of
the transactions contemplated herein, all Confidential Information, as
hereinafter defined, acquired by Parent or Merger Sub with respect to
the Shareholders or the Company, or by the Shareholders or the Company
with respect to Parent, shall be (i) maintained in strict confidence,
(ii) used only for the purpose of and in connection with evaluating
the transactions contemplated herein, and (iii) disclosed only (A) to
employees and duly authorized agents and representatives who have been
informed of the obligations of the parties under this Agreement with
respect to such Confidential Information, who have a need to know the
information in connection with consummating the transactions
contemplated herein, and who agree to keep such information
confidential, or (B) as required by legal process (of which the other
parties shall be given prompt notice). Parent, Merger Sub, the
Shareholders and the Company shall be responsible for any breach of
this Section by any of their respective representatives and each
agrees to take all reasonable measures to restrain its representatives
from prohibited or unauthorized disclosure of the Confidential
Information. For the purpose of this Agreement, the term
"Confidential Information" shall mean all information acquired by any
party from another party hereto or its representatives pursuant to
Section 3.2 hereof or otherwise with respect to the business or
operations of such other party, other than (A) information generally
available to the public which has not become available as a result of
disclosure in violation of this Section and (B) information which
becomes available on a nonconfidential basis from a source other than
a party to this Agreement or its representatives, provided that such
source is not known by the party to this Agreement receiving such
information to be bound by a confidentiality agreement or other
obligation of secrecy to another party to this Agreement or its
representatives. If the transactions contemplated herein are not
consummated, all Confidential Information in written or printed or
other tangible form (whether copies or originals) shall be returned to
the party of origin, and all documents, memoranda, notes and other
writings whatsoever prepared by any party or its representatives based
on Confidential Information shall be destroyed; and Parent, Merger Sub
and their representatives will thereafter hold all Confidential
Information concerning the Company or the Shareholders in strict
confidence.
(b) Public Announcements. No press release, public
announcement, confirmation or other information regarding this
Agreement or the contents hereof shall be made by Parent, the
Shareholders or the Company without prior consultation with the Parent
and the Company, except as may be necessary in the opinion of counsel
to any party to meet the requirements of any applicable law or
regulations, the determination of any court, or the requirements of
any stock exchange on which the securities of such party may be
listed. Notwithstanding the foregoing, the Company may make
appropriate disclosures of the general nature of the transaction
contemplated hereby to its employees, vendors and
EnviroSystems Agreement and Plan of Merger/Page 39
<PAGE> 48
customers to protect the Company's goodwill and to facilitate the
consummation of the transactions contemplated hereby, and Parent may
disclose pertinent information regarding the transaction contemplated
hereby to its existing and prospective investors, lenders or
investment bankers or financial advisors for the purposes of obtaining
financing (including the contemplated IPO). Parent may also make
appropriate disclosures of the general nature of the transaction
contemplated hereby and the identity, nature and scope of the
Company's operations to prospective acquisition candidates, including
the Other Companies, in its efforts to attract additional acquisitions
for Parent. Subject to prior review, revision and approval by the
Company of disclosure with respect to matters relating to the Company,
Parent may also make appropriate disclosure as required in connection
with any registration statement or confidential information memorandum
prepared by Parent, but in that event will give the Shareholders
prompt notice thereof. Prior to the Effective Time, the Parent and
the Company shall jointly approve the contents of any press releases,
written employee presentations, or other comparable materials of
potentially wide distribution that disclose or refer to the
transaction contemplated hereby, except for such press releases or
other communications required by law. If the transactions
contemplated herein are not consummated, neither the Parent nor the
Shareholders shall disclose to any third party or publicly announce
the proposed transaction contemplated hereby, except as otherwise
permitted hereinabove and except as agreed in advance, in writing, by
the parties or otherwise required by law, in which case the party so
compelled will give reasonable written notice in advance to the other
parties.
3.6 EXCLUSIVITY. After the signing of this Agreement until the
Final Closing Date or the termination of this Agreement, no Shareholder shall
(i) solicit, initiate, or encourage the submission of any proposal or offer
from any person or entity relating to the acquisition of any capital stock or
other voting securities of, or any substantial portion of the assets of, the
Company (including any acquisition structured as a merger, consolidation, or
share exchange) or (ii) participate in any negotiations or discussions
regarding, furnish any information with respect to, assist or participate in,
or facilitate in any other manner any effort or attempt by any person or entity
in favor of such acquisition (including any acquisition structured as a merger,
consolidation, or share exchange). The Shareholders will (and shall cause the
Company to) notify Parent if any person or entity makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing.
3.7 THE SHAREHOLDERS' RELEASE OF CLAIMS. Effective as of the
Final Closing, each Shareholder hereby (i) releases, acquits and forever
discharges the Company and its Subsidiaries from any and all liabilities,
obligations, indebtedness, claims, demands, actions or causes of action arising
from or relating to any event, occurrence, act, omission or condition occurring
or existing on or prior to the Final Closing, including, without limitation,
any claim for indemnity or contribution from the Company or any of its
Subsidiaries in connection with the obligations or liabilities of the
Shareholders hereunder, except for (A) the indemnification provided by Sections
3.16 and 3.21 hereof and any other contractual obligations in this Agreement,
(B) salary and expense reimbursement payable to the Shareholders as an officer,
director or employee in the ordinary course of business, and (C) all benefits
(including interests in benefit plans) and fringe benefits to which the
Shareholders are entitled; (ii) waives all breaches, defaults or violations of
each agreement, if any, among or between Shareholders applicable to the
Company Common Stock and agrees that any
EnviroSystems Agreement and Plan of Merger/Page 40
<PAGE> 49
and all such agreements are terminated as of the Final Closing, and (iii)
waives any and all preemptive or other rights to acquire any shares of capital
stock of the Company and releases any and all claims arising in connection with
any prior default, violation or failure to comply with or satisfy any such
preemptive or other rights.
3.8 REAL ESTATE MATTERS.
(a) Title Insurance Commitments. The Parent, in its sole
discretion, may elect to obtain title insurance with respect to any or
all real estate that the Company owns or leases listed on Schedule
2.2(n)(1) or Schedule 2.2(n)(2) of the Company Disclosure Schedule
(the "Title Insurance Property"). If Parent elects to obtain title
insurance Company will obtain and deliver to Parent, as soon as
practicable, and in any event on or before September 10, 1997,
commitments for title insurance ("Title Commitments") issued by title
insurance company(ies) reasonably acceptable to Parent with respect to
the Title Insurance Property, Surveys (defined below) of the Title
Insurance Property reasonably acceptable to the Parent and one set of
legible copies of title exception documents with respect to any
exceptions set forth in the commitments. The Title Commitments shall
set forth the status of title to the Title Insurance Property together
with all exceptions or conditions to such title, including, but not
limited to, all easements, restrictions, rights-of-way, covenants,
reservations and all other encumbrances affecting the Title Insurance
Property which would appear in an Owner's Policy of Title Insurance
(as defined below), if issued. The Title Commitments shall contain
the express commitment of the title underwriter to issue the Owner's
Policies of Title Insurance to the Parent and the Company with the
standard printed exceptions endorsed or deleted in accordance with
this Section 3.8. Parent shall bear the cost of any title insurance
premiums actually paid for title insurance obtained under this
Section.
(b) Surveys. With respect to each Title Insurance
Property, if requested by Parent, the Shareholders will cause the
Company to procure in preparation for the Preliminary Closing a
current survey of such real property, prepared by a licensed surveyor
and conforming to current ALTA Minimum Detail Requirements for Land
Title Surveys, disclosing the location of all improvements, easements,
party walls, sidewalks, roadways, utility lines, and other matters
shown customarily on such surveys, and showing access affirmatively to
public streets and roads (the "Survey"). The Survey shall disclose
any survey defect or encroachment from or onto the real property.
Parent shall bear the cost of fees actually paid for the preparation
of any Survey required under this Section.
(c) Title Insurance Policies. At the Preliminary
Closing, the Company shall deliver to Parent title insurance policies
("Policies of Title Insurance") requested pursuant to Section 3.8(a)
with respect to the Title Insurance Property, in an amount reasonably
acceptable to Parent, issued by such title insurance company(ies),
subject to those easements, reservations, restrictions, covenants,
conditions and other matters therein specified to the extent that the
same do not, in the reasonable judgment of Parent, render title
unmarketable or adversely affect the operation, value, use or
enjoyment of the Title Insurance Property affected thereby ("Real
Property Title Exceptions"). The Policies of Title Insurance may be
subject to the Real Property Title Exceptions but shall contain no
additional exceptions other
EnviroSystems Agreement and Plan of Merger/Page 41
<PAGE> 50
than the standard preprinted exceptions reasonably acceptable to
Parent; provided that (i) the standard preprinted exception, if any,
for restrictive covenants shall be deleted, except for Real Property
Title Exceptions, (ii) the standard preprinted survey exception, if
any, shall be revised to read "shortages in area" only, (iii) there
shall be no exception as to easements, or claims of easements, not
shown by the public records, nor any exception as to parties in
possession, and (iv) the exception as to the lien for taxes will be
limited to the year in which the Preliminary Closing occurs. The
Policies of Title Insurance delivered under this Section 3.8 shall
insure title to the real property and all recorded easements
benefitting such real property.
(d) Phase I Environmental Assessment. The Company will
obtain and deliver to Parent, as soon as practicable, and in any event
on or before September 15, 1997, a Phase I environmental assessment
prepared by environmental engineers reasonably acceptable to Parent
with respect to all of the real estate owned or leased by the Company
listed on Schedule 2.2(n)(1) or Schedule 2.2(n)(2) of the Company
Disclosure Schedule (the "Environmental Assessment Property"). Each
of the Company and Parent shall pay one-half of the expenses incurred
by the Company in obtaining such assessments. Also during the period
prior to Final Closing, the Shareholders and the Company shall afford
Parent and its representatives the continuing right to inspect, during
the Company's normal business hours, the Environmental Assessment
Property and all books, records, contacts, documents and other data
pertaining to the use, ownership, operation, or maintenance of the
Environmental Assessment Property (collectively with the Phase I
assessment, the "Studies").
(e) Title and Environmental Objections. If for any
reason Parent, in its sole and absolute discretion, is not satisfied
with any matter contained in the Studies, any survey, or the Real
Property title exceptions, or is otherwise not satisfied with the real
property owned or leased by the Company for any reason whatsoever,
then Parent may, prior to the Preliminary Closing, notify the Company
and the Shareholders in writing of its objection (the "Objections"),
describing with specificity the subject real property and the
Objections thereto, failing which Merger Sub and Parent shall be
deemed to have waived all such objections and all remedies therefor
pursuant to this Agreement. If Parent shall request that the Company
cure such Objections and the Company or the Shareholders have not
cured such Objections to Parent's satisfaction by the Preliminary
Closing Date, Parent shall have the right to terminate this Agreement
in accordance with Section 5.1(a)(2) hereof or enter into negotiations
with the Company to lease any real property which is the subject of
the Objections.
3.9 PPM; REGISTRATION STATEMENT.
(a) Company to Provide Information. Prior to the Final
Closing, the Shareholders and the Company shall cooperate with Parent
to promptly provide such information as reasonably requested by Parent
to enable Parent to (i) prepare the PPM and all appropriate
supplements thereto, pursuant to Rule 506 of Regulation D promulgated
by the SEC under the Securities Act, for dissemination to the Other
Companies and their respective shareholders, including the
Shareholders, and (ii) prepare and file with the SEC the
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<PAGE> 51
Registration Statement to be filed by Parent under the Securities Act
in connection with its IPO (including the prospectus constituting a
part thereof). Parent shall obtain all necessary state securities law
or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement, the PPM and the
Registration Statement, and the Shareholders and the Company shall
furnish all information concerning them as may be reasonably requested
in connection with any such action.
(b) Accuracy of Information. Parent represents and
warrants that neither the PPM or any amendment or supplement thereto,
at the time distributed, nor the Registration Statement or any
amendment or supplement thereto, at the time the Registration
Statement becomes effective under the Securities Act or any such
amendment or supplement is distributed, nor any prospectus filed in
accordance with Rule 424(b) under the Securities Act, at the time when
filed or distributed, will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. This
representation is in addition to that set forth in Section 2.3(j). If
requested by Parent prior to the Final Closing, the Shareholders and
the Company, respectively, shall use their reasonable best efforts to
agree with Parent as to the information and documents supplied by the
Shareholders and the Company for inclusion in the Registration
Statement and each shall indicate such information and documents in a
letter (the "Information Letter") to be delivered (i) prior to the
filing of the Registration Statement with the SEC, and (ii) prior to
filing any amendment to the Registration Statement with the SEC (other
than any prospectus filed with the SEC pursuant to Rule 424(b)). The
Shareholders and the Company shall each be entitled to review the PPM,
the Registration Statement and each amendment or supplement thereto,
if any, prior to delivery of the Information Letter. From the date of
this Agreement through the Final Closing Date, the Shareholders and
the Company shall immediately notify Parent in the event of any
development or occurrence involving or pertaining to either the
Company or any Shareholder that would cause matters referenced in the
Information Letter to be inaccurate, incomplete or misleading in any
material respect. The Shareholders and the Company acknowledge that
Parent has relied on the accuracy of factual information provided in
the Disclosure Schedules in preparing the PPM and the Registration
Statement. Except for the accuracy of such information in the
Disclosure Schedules, neither the Shareholders nor the Company takes
responsibility or shall be deemed responsible for (1) the presentation
or omission of any such information in or from the PPM or the
Registration Statement or (2) the factual adequacy or legal
sufficiency of disclosures contained therein.
(c) Further Information. Prior to the Final Closing, the
Shareholders and the Company, respectively, shall promptly upon
request, furnish Parent with all information concerning themselves or
itself as may be reasonably requested by Parent in connection with the
preparation of the PPM, the Registration Statement and each amendment
or supplement thereto, or any other statement, filing, notice or
application made by or Parent to any governmental entity in connection
with the transactions contemplated by this Agreement.
EnviroSystems Agreement and Plan of Merger/Page 43
<PAGE> 52
(d) Indemnification. Parent will indemnify and hold
harmless each of the Shareholders, the Company, and each of the
Company's directors, officers and other persons, if any, who control
the Company within the meaning of the Securities Act from and against
any losses, claims, damages, liabilities or judgments, joint or
several, to which they or any of them may become subject, under the
Securities Act or any state securities or blue sky laws or otherwise,
insofar as such losses, claims, damages, liabilities, or judgments (or
actions in respect thereof) are caused by an untrue statement or
alleged untrue statement of a material fact contained in the PPM,
Registration Statement, or the Prospectus, or in any amendment or
supplement thereto, or in any state application for qualification,
permit, exemption or registration as a broker/dealer, or in any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each such person for any legal expenses
reasonably incurred by such person in connection with investigating or
defending any such action or claim; provided, however, that Parent
shall not be liable, in any such case, to the extent that any such
loss, claim, damage, liability, or judgment (or action in respect
thereof) was caused by any untrue statement or alleged untrue
statement or omission or alleged omission made in the PPM,
Registration Statement, or the Prospectus, or any such amendment or
supplement thereto, or in any such state application, or in any
amendment or supplement thereto, in reliance upon and in conformity
with information furnished pursuant to the Information Letter
contemplated by Section 3.9(b) in writing to Parent by the Company or
the Shareholders specifically for inclusion therein. If
indemnification hereunder is not available, then Parent will provide
contribution to the parties who would have been indemnified, which
contribution shall be based on the relative benefits derived from the
PPM, Registration Statement or Prospectus, as the case may be, by
Parent on the one hand, and such indemnified persons on the other.
(e) Parent and Merger Sub shall use their best efforts,
at their expense, to have the directors, officers and controlling
persons of the Company, the Shareholders, and the persons listed on
Exhibit 3.21, added as additional named insureds to any insurance
coverage maintained by Parent (or its directors and officers) against
liabilities under the Securities Act.
(f) Parent will deliver to the Shareholders, with the
PPM, each of the Other Acquisition Agreements.
3.10 TAX-FREE REORGANIZATION.
(a) No Acts Jeopardizing Merger. Unless the other
parties shall otherwise agree in writing, none of the Shareholders,
the Parent, the Merger Sub, the Company or the Surviving Corporation
shall knowingly take or fail to take any action, which action or
failure to act would jeopardize the qualification of the Merger as a
reorganization pursuant to Section 368(a)(2)(D) of the Code.
(b) Two-Year Holding Period. No Shareholder will dispose
of any of the Parent Common Stock received in the Merger within two
years following the Effective Time if such disposition would reduce
the fair value of the Parent Common Stock (evaluated as of the
EnviroSystems Agreement and Plan of Merger/Page 44
<PAGE> 53
Effective Date) retained by such Shareholder to an amount less than
50% of the fair value of the Company Common Stock held by the
Shareholder immediately prior to the Merger, unless the Shareholder
obtains an opinion of counsel or of an accounting firm of national
standing, which counsel or firm is reasonably satisfactory to Parent,
that such transfer will not violate the continuity of shareholder
interest requirement set forth in Treasury Regulation Section 1.368-1.
3.11 SATISFACTION OF CONDITIONS BY THE COMPANY AND SHAREHOLDERS.
The Company and the Shareholders shall (i) use their reasonable efforts to
obtain, as soon as possible, all governmental approvals required to be obtained
by the Company and make, as soon as possible, all filings with any governmental
authority required on the part of the Company to consummate the transactions
contemplated hereby, (ii) use their reasonable efforts to obtain, as soon as
possible, all other consents to and approvals required to be obtained by the
Company to consummate the transactions contemplated hereby, and (iii) otherwise
use their reasonable efforts to satisfy the conditions set forth in Article 4
of this Agreement to the extent that such satisfaction is within their control;
provided, however, that this Section 3.11 shall not be construed to limit the
rights of Shareholders to terminate this Agreement as provided in Article 5 of
this Agreement.
3.12 SATISFACTION OF CONDITIONS BY PARENT. Parent shall (i) use
its reasonable efforts to obtain, as soon as possible, all governmental
approvals required to be obtained by the Parent and make, as soon as possible,
all filings with any governmental authority required on the part of the Parent
to consummate the transactions contemplated hereby, (ii) use its reasonable
efforts to obtain, as soon as possible, all of the consents to and approvals
required to be obtained by the Parent to consummate the transactions
contemplated hereby, and (iii) otherwise use its reasonable efforts to satisfy
the conditions set forth in Article 4 of this Agreement to the extent that such
satisfaction is within its control; provided, however, that this Section 3.11
shall not be construed to limit the rights of Parent to terminate this
Agreement as provided in Article 5 of this Agreement.
3.13 AMENDMENT OF OTHER ACQUISITION AGREEMENTS. Parent will not
enter into any amendment to any Other Acquisition Agreement unless the
Shareholders have previously consented thereto in writing, which consent may
not be unreasonably withheld or delayed unless (i) the Shareholders are not
given, simultaneously with the execution of any such amendment, all of the
benefits accorded thereby to the Other Company and its shareholders, or (ii)
the amendment is materially unfavorable to Parent and/or Merger Sub in the
reasonable belief of the Shareholders.
3.14 DELIVERIES. Parent will promptly deliver, as soon as they are
available to Parent, all exhibits and schedules (including the disclosure
schedules) to each Other Acquisition Agreement and all amendments and
supplements to those exhibits and schedules.
3.15 PERIODIC REPORTS. Parent will, following the effective date
of the Registration Statement, timely file all periodic reports required to be
filed by it pursuant to the Securities Act or the Securities Exchange Act of
1934, and take all such other action as may be required of it, to the extent
the failure to timely file such reports or the failure to take such other
action would adversely affect the availability to the Shareholders of the
exemption from registration contained in Rules 144 or 145 under the Securities
Act with respect to resales of Parent Common Stock.
EnviroSystems Agreement and Plan of Merger/Page 45
<PAGE> 54
3.16 CORPORATE INDEMNIFICATION. From and after the Effective Time,
Merger Sub (as then successor to the Company) will, to the maximum extent
permitted by the Louisiana Business Corporation Law, indemnify (including,
without limitation, advancement of expenses) each of the Shareholders and the
persons identified in Exhibit 3.16 who was or is or becomes a party or is or
becomes threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative, or investigative, including any action
by or in the right of the corporation, by reason of the fact that he or she is
or was a director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
of another business, foreign or non-profit corporation, partnership, joint
venture, or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement in connection therewith.
3.17 RELEASE OF SHAREHOLDERS AND OTHERS. Effective at the Final
Closing (with respect to the Company) and at the Effective Time (with respect
to Parent and Merger Sub), each of the Company, Parent and Merger Sub (acting
as the then-successor of the Company) hereby releases, acquits and forever
discharges the Shareholders and the persons listed on Exhibit 3.17 from (i) any
and all liabilities, obligations, indebtedness, claims, demands, actions or
causes of action arising from or relating to any event, occurrence, act,
omission or condition occurring or existing on or prior to the Final Closing,
or (ii) any claim for indemnity or contribution from the Shareholders in
connection with any liability of the Company under this Agreement; provided
that Shareholders shall not be released by this Section 3.17 from (a) any
liability or claims arising from any action taken or omitted by the
Shareholders as officers, directors, employees or agents of the Company
involving willful misconduct or (b) claims pursuant to Article 6 of this
Agreement. THE FOREGOING PROVISION IS SPECIFICALLY INTENDED TO RELEASE THE
RELEASED PERSONS FROM LIABILITY FOR (AMONG OTHER THINGS) THEIR OWN NEGLIGENCE
OR GROSS NEGLIGENCE.
3.18 RELEASE AND INDEMNIFICATION FROM GUARANTIES. Parent will use
its best efforts to have the Shareholders released, at the earliest possible
time, from all guaranties (including any pledges of assets) by any of them of
debts or obligations of the Company, including by repayment of such debt or
obligation if necessary to effect such release. From and after the Final
Closing, Parent and Merger Sub will defend, indemnify and hold each Shareholder
harmless of and from any claims made or threatened to be made, or loss
incurred, in connection with any such guarantee.
3.19 BENEFIT PLANS. Neither Parent nor Merger Sub shall terminate
any health or medical insurance, life insurance, 401(k) plan or other benefit
plan in effect with respect to the Company until such time as Parent replaces
such plan with a plan that is applicable to Parent and all of its then
subsidiaries. Any such replacement plan shall give the former officers and
employees of the Company full credit for the period of time each was employed
by the Company prior to the Effective Time and for the period of time each is
employed by the Surviving Corporation after the Effective Time. Each such
former officer and employee shall become fully vested under each such plan in
effect with respect to the Company that is terminated after the Effective Time
in accordance with this Section, including (without limitation) those former
officers and employees who may have been terminated after the Effective Time
but before termination of such plan. Any new health insurance plan shall
provide for coverage for pre-existing conditions. Parent and Merger Sub will
provide
EnviroSystems Agreement and Plan of Merger/Page 46
<PAGE> 55
officers and employees of the Company with benefits that, in the aggregate, are
not less favorable than those provided to any of the Other Companies.
3.20 NATURE OF OBLIGATIONS. All obligations of Parent in this
Agreement are guaranteed jointly and severally by Merger Sub, and vice-versa.
Where both Parent and Merger Sub are bound with respect to the same obligation,
the obligation is joint and several.
3.21 INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY.
(a) From and after the Final Closing Date, Parent and the
Surviving Corporation agree to indemnify, defend and hold harmless the
former directors and officers of the Company and the persons listed on
Exhibit 3.21 (as used in this Section, each an "Indemnified Person")
from and against all losses, claims, damages, liabilities and
judgments (and related expenses including, but not limited to,
attorney's fees and amounts paid in settlement), and any action or
other proceeding in respect thereof, to which any Indemnified Person
becomes subject, based upon or arising out of actions or omissions or
alleged actions or omissions of such persons occurring (or alleged to
have occurred) at or prior to the Final Closing Date, to the fullest
extent (including the advancement of expenses) permitted under (1) the
Delaware General Corporation Law or the Louisiana Business Corporation
Law, as applicable, or (2) the certificate of incorporation, bylaws or
other governing documents of the Company as in effect on the date of
this Agreement, whichever of (1) or (2) is greater.
(b) From and after the Final Closing Date, Parent shall
not amend, alter or repeal those provisions of the certificate of
incorporation, bylaws or other governing documents of the Company
relating to liability or indemnification of directors and officers,
except as required by law, if the effect of such amendment, alteration
or repeal would be to increase the potential liability of a director
or officer of the Company to the Company or to its stockholders for
monetary damages for breach of fiduciary duty, or to lessen or
otherwise adversely affect the indemnification rights of directors and
officers of the Company as provided in such certificate of
incorporation, bylaws or other governing documents as in effect on the
date of this Agreement.
(c) The rights granted to the Indemnified Persons hereby
shall be contractual rights inuring to the benefit of all Indemnified
Persons and shall survive this Agreement and the Final Closing. They
are in addition to the indemnification provided pursuant to Section
3.16.
3.22 PARENT'S IPO. Parent shall use its best efforts to cause the
Registration Statement to become effective, and to complete its IPO, as soon as
practicable. To the extent permitted by applicable law, Parent shall keep the
Company informed regarding the status of Parent's IPO.
3.23 LISTING. Parent shall use its best efforts to cause the
Parent Common Stock to be listed on a national securities exchange or a
national computerized quotation and trading system after the IPO.
EnviroSystems Agreement and Plan of Merger/Page 47
<PAGE> 56
3.24 PRINCIPAL OFFICE. Parent agrees that it will maintain the
principal office of the Surviving Corporation (or other entity or division
operating the Company's assets) at 183 South Beadle Road, Lafayette, Louisiana
for a period of 12 months after the Final Closing Date, and represents and
warrants to the Shareholders that it has no present plans or intentions to move
such principal office after such time.
3.25 DISTRIBUTIONS. The Company will, not later than immediately
before the Final Closing (except as otherwise provided by Section 8.2(b)), make
the distributions contemplated by Sections 2.2(h)(13) and 3.1(m).
3.26 CERTAIN ACTIONS. Parent will not (a) declare or pay,
following the Preliminary Closing and prior to the Final Closing, any stock
dividend, subdivision, reclassification, recapitalization, split-up,
combination, or exchange of shares or the like; and (b) take any action to
terminate the effectiveness of the Merger following the Final Closing and prior
to the Effective Time.
ARTICLE 4
CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARENT. The
obligations of the Parent to consummate the Preliminary Closing under this
Agreement are subject to the satisfaction in all material respects of each of
the following conditions, unless waived by the Parent:
(a) Accuracy of Representations and Warranties. Except
for such changes as are permitted pursuant to Section 3.4 of this
Agreement, the representations and warranties of the Shareholders and
the Company contained in this Agreement, in the Shareholders
Disclosure Schedule, the Company Disclosure Schedule and in each
closing certificate and document delivered to Parent by the Company or
the Shareholders pursuant hereto shall be correct in all material
respects at and as of the Preliminary Closing Date as though made at
and as of the Preliminary Closing Date, other than such
representations and warranties as are specifically made as of another
date which shall be correct at and as of such other date; and the
Shareholders and the Company shall each have delivered to Parent a
certificate to the effect set forth in this Section.
(b) Performance of Covenants. The Shareholders and the
Company shall have performed and complied with all covenants of this
Agreement to be performed or complied with by them at or prior to the
Preliminary Closing Date (except where the failure to so perform or
comply would not have an adverse effect on Parent or prevent the
Shareholders or Parent from consummating the transactions contemplated
hereby), and the Shareholders and the Company shall each have
delivered to Parent a certificate to that effect.
(c) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted after the date hereof against
the Shareholders or the Company, or against Parent, arising by reason
of the acquisition of the Company pursuant to this Agreement, which is
EnviroSystems Agreement and Plan of Merger/Page 48
<PAGE> 57
reasonably likely (1) to restrain, prohibit or invalidate the
consummation of the transactions contemplated by this Agreement, (2)
to have a material adverse effect on the Company or (3) to have a
material adverse effect on the results of operations or financial
condition of Parent and its subsidiaries, taken as a whole, after
giving effect to the consummation of the transactions contemplated by
this Agreement and the Other Acquisition Agreements.
(d) Approvals. The Company and the Shareholders shall
have procured all of the consents, approvals and waivers specified in
Sections 2.1(b) and 2.2(e), and the Shareholders and the Company shall
each have delivered the same to Parent.
(e) [Intentionally left blank]
(f) Policies of Title Insurance. The Shareholders shall
have delivered Policies of Title Insurance insuring the Company's
ownership or leasehold interest in the Title Insurance Property.
(g) Employment Agreements. Each of the individuals
specified on Exhibit 4.1(g)(1) shall have executed and delivered an
Employment Agreement with the Company substantially in the form
attached as Exhibit 4.1(g)(2) hereto.
(h) The Registration Rights Agreements and Shareholders
Lock-up Agreements. The Shareholders shall have executed and
delivered the Registration Rights Agreements and any lock-up agreement
reasonably requested by the managing underwriter of Parent's IPO which
restricts the sale or other disposition of Parent Common Stock for a
reasonable and customary period not exceeding 365 days following the
effectiveness of the Registration Statement.
(i) Parent's IPO. Parent and the underwriters shall have
executed and delivered the Underwriting Agreement.
(j) Lender Approval. Parent shall have secured a
commitment for approximately $25,000,000 in senior indebtedness.
(k) Audit of the Company. Parent shall have received the
results of an audit of the Company's financial statements by the
certified public accounting firm regularly engaged by Parent or such
other independent public accountant as agreed by the parties.
(l) Opinion of Counsel for the Company and the
Shareholders. Parent and the Merger Sub shall have received the
favorable opinion of Correro Fishman Haygood Phelps Weiss Walmsley &
Casteix, L.L.P., counsel for the Company and the Shareholders, dated
the Preliminary Closing Date, substantially in the form and to the
effect set forth in Exhibit 4.1(l) hereto.
(m) The Shareholders Release of the Company; Corporate
Records. The Shareholders shall have delivered to the Exchange Agent
(i) a release that effectuates
EnviroSystems Agreement and Plan of Merger/Page 49
<PAGE> 58
Section 3.7 of this Agreement, and (ii) the corporate records and
books of Company, including the minute book, the stock transfer books,
and the corporate seal of the Company (of any of which the
Shareholders may retain copies for any proper purpose).
(n) All Proceedings to be Satisfactory. All necessary
director and shareholder resolutions, waivers and consents and all
other actions to be taken by the Shareholders and the Company in
connection with the consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby
shall be satisfactory in form and substance to Parent and the Merger
Sub and their counsel.
4.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SHAREHOLDERS
AND THE COMPANY. The obligations of the Shareholders and the Company to
consummate the Preliminary Closing under this Agreement are subject to the
satisfaction in all material respects or waiver by the Shareholders of each of
the following conditions:
(a) Accuracy of Representations and Warranties. Except
for such changes as are permitted pursuant to Section 3.4 of this
Agreement, the representations and warranties of Parent and the Merger
Sub contained in this Agreement, in the Parent Disclosure Schedule and
in each closing certificate and document delivered by the Parent or
the Merger Sub to the Shareholders or the Company pursuant hereto
shall be correct in all material respects at and as of the Preliminary
Closing Date, as though made at and as of the Preliminary Closing
Date, other than such representations and warranties as are
specifically made as of another date which shall be correct at and as
of such other date; and Parent and the Merger Sub shall have delivered
to the Shareholders and the Company a certificate to the effect set
forth in this Section.
(b) Performance of Covenants. Parent and the Merger Sub
shall have performed and complied with all covenants of this Agreement
to be performed or complied with by them at or prior to the
Preliminary Closing Date (except where the failure to so perform or
comply would not have a material adverse effect on the Shareholders or
the Company or prevent Parent, Merger Sub or the Shareholders from
consummating the transactions contemplated hereby), and Parent and the
Merger Sub shall each have delivered to the Shareholders and the
Company a certificate to such effect.
(c) Approvals. Parent shall have procured all of the
consents, approvals and waivers specified in Section 2.3(f), and
Parent shall deliver the same to the Shareholders and the Company.
(d) Delivery of PPM. Parent shall have delivered the PPM
to the Shareholders.
(e) [Intentionally left blank]
EnviroSystems Agreement and Plan of Merger/Page 50
<PAGE> 59
(f) Employment Agreements. The Company shall have
executed and delivered to the Exchange Agent an Employment Agreement
with each of the individuals specified on Exhibit 4.1(g)(1) in the
form attached as Exhibit 4.1(g)(2) hereto.
(g) Registration Rights Agreement. Parent and each of
the Shareholders shall have executed and delivered to the Exchange
Agent a Registration Rights Agreement in the form attached as Exhibit
1.8 hereto.
(h) All Proceedings to be Satisfactory. The Shareholders
and their counsel shall have received Parent's PPM describing Parent
and the Parent Common Stock to be delivered as a part of the Merger
Consideration together with all such counterpart originals or
certified or other copies of all documents relating to Parent incident
to the transactions contemplated hereby as the Shareholders or such
counsel may reasonably request; and the PPM, the Registration
Statement (each as amended or supplemented) and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby shall be satisfactory in form and
substance to Shareholders, the Company and their counsel.
(i) Opinion of Counsel for The Parent and the Merger Sub.
The Shareholders and the Company shall have received the favorable
opinion of Chamberlain, Hrdlicka, White, Williams & Martin, counsel
for Parent and the Merger Sub, dated the Preliminary Closing Date,
substantially in the form and to the effect set forth in Exhibit
4.2(i) hereto.
(j) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted after the date hereof against
the Parent, or against the Shareholders or the Company, arising by
reason of the acquisition of the Company pursuant to this Agreement,
which is reasonably likely (1) to restrain, prohibit or invalidate the
consummation of the transactions contemplated by this Agreement, (2)
to have a material adverse effect on the Company or (3) to have a
material adverse effect on the results of operations or financial
condition of Parent and its subsidiaries, taken as a whole, after
giving effect to the consummation of the transactions contemplated by
this Agreement and the Other Acquisition Agreements.
(k) IPO. The Registration Statement shall have been
declared effective by the SEC and shall relate to the public offering
for cash of at least $45,000,000 from the sale of shares of Parent
Common Stock that do not exceed approximately 50% of the total number
of shares to be outstanding immediately following the closing of the
IPO and the Other Acquisition Agreements (in each case excluding any
shares sold under an over-allotment option and the proceeds therefrom)
and shall not be subject to any stop order or similar proceeding; and
the Underwriting Agreement shall have been executed and delivered by
the parties thereto.
(l) Release. The Company, Parent and Merger Sub shall
have delivered to the Exchange Agent a release that effectuates
Section 3.17 of this Agreement.
EnviroSystems Agreement and Plan of Merger/Page 51
<PAGE> 60
(m) Simultaneous Closings. The "preliminary closings"
under the Other Acquisition Agreements shall occur simultaneously with
or prior to the Preliminary Closing under this Agreement.
(n) No Material Adverse Change. There shall have been no
material adverse change in the business, financial condition or
prospects of Parent combined with the Other Companies on a proforma
basis.
(o) Shareholder Agreement. The Shareholders, the Parent
Insiders and their affiliates and Parent shall have entered into a
shareholder agreement with respect to, among other things, (i) mutual
"tag along" rights for the Shareholders and the Parent Insiders
applicable to sales of more than 75,000 shares of Parent Common Stock
(to be adjusted for stock splits and dividends occurring after the
date hereof) in private placement transactions, or in the alternative
an additional demand registration for the Shareholders under the
Registration Rights Agreement, (ii) restrictions on Parent Insiders
and their affiliates selling shares of Parent Common Stock for 2 years
following the Final Closing, and (iii) permitted sales of Parent
Common Stock in private sales by the Parent Insiders after one year
from the Final Closing in amounts not to exceed the lesser of the
90-day Rule 144 limits on affiliates of companies, or 10% of the
personal holding of each such Parent Insider, in any 6-month period;
which agreement shall be reasonably acceptable to the Shareholders,
the Parent Insiders and Parent.
(p) Listing of Parent Common Stock. The Parent Common
Stock shall have been accepted for listing, subject only to issuance,
on a national securities exchange or the NASDAQ Stock Market (national
market system).
(q) Reliance Letters. The Shareholders shall have
received letters addressed to them by Arthur Andersen LLP and
Chamberlain, Hrdlicka, White, Williams & Martin, permitting the
shareholders to rely on the comfort or opinion letters to be delivered
by those firms to the underwriters at the closing of the IPO, to the
extent such letters bear upon tax matters relating to the Merger, and
the accuracy or completeness of the Registration Statement or its
compliance with the Securities Act and other applicable law.
(r) Tax Opinion. The Shareholders shall have received a
favorable tax opinion from KPMG Peat Marwick LLP to the effect that
the Merger qualifies as a reorganization under Section 368(a)(2)(D) of
the Code.
EnviroSystems Agreement and Plan of Merger/Page 52
<PAGE> 61
ARTICLE 5
TERMINATION
5.1 TERMINATION OF AGREEMENT. The Parties may terminate this
Agreement as provided below:
(a) Prior to the Preliminary Closing. The Parties may
terminate this Agreement at any time prior to the Preliminary Closing
as provided below:
(1) Mutual Consent. The Parent and the
Shareholders may terminate this Agreement by mutual written
consent of Parent and Required Shareholders at any time prior
to the Preliminary Closing;
(2) Termination by Parent. The Parent may
terminate this Agreement by giving written notice to the
Shareholders at any time prior to the consummation of the
Preliminary Closing (1) in the event the Shareholders or the
Company has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect,
the Parent has notified the Shareholders of the breach, and
the breach has continued without cure until the earlier of (A)
20 days after the notice of such breach or (B) the Preliminary
Closing Date or (C) the date set forth below in this Section,
whichever is earlier, or (2) if the Preliminary Closing shall
not have occurred on or before December 31, 1997, by reason of
the failure of any condition precedent under Section 4.1
hereof (unless the failure results primarily from the Parent
itself breaching an obligation to proceed with the Preliminary
Closing hereunder); and
(3) Termination by the Shareholders. The
Required Shareholders may terminate this Agreement by giving
written notice to the Parent at any time prior to the
consummation of the Preliminary Closing (1) in the event the
Parent or the Merger Sub has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, the Shareholders have
notified the Parent of the breach, and the breach has
continued without cure until the earlier of (A) 20 days after
the notice of such breach or (B) the Preliminary Closing Date
or (C) the date set forth below in this Section, whichever is
earlier, or (2) after execution of this Agreement, within
three business days after each date following the date of this
Agreement on which the Shareholders receive the PPM or any
amendment or supplement thereto, or any Other Acquisition
Agreement or exhibit or schedule thereto or any amendment to
any thereof, if any such document constitutes or reflects,
individually or in the aggregate, a material adverse change to
the business, assets or prospects of Parent and its
subsidiaries in the aggregate, including the Other Companies,
or materially changes, in a manner that is adverse to the
Shareholders, the content of the PPM, the Registration
Statement or the Prospectus or requires such a material change
(all of the matters set forth in clause (2) as determined in
good faith by the Required Shareholders), or (3) if the
Preliminary Closing shall not have
EnviroSystems Agreement and Plan of Merger/Page 53
<PAGE> 62
occurred on or before December 31, 1997 (or such earlier
comparable date as may be set forth in any Other Acquisition
Agreement), or (4) if any of the Other Acquisition Agreements
are terminated.
(b) After the Preliminary Closing Date. This Agreement
may be terminated after the Preliminary Closing only as provided in
Section 1.2(d) or 3.4.
5.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 5.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto, except
that (1) Section 3.5, Section 9.1, Section 9.6, Section 9.7, Section 9.8,
Section 9.10 and Section 9.11 hereof shall survive such termination and (2)
nothing herein shall relieve any party from liability for (A) any willful and
intentional breach in bad faith that preceded such termination and continued
prior to such termination despite reasonable notice, except that this clause
(A) will not apply to a termination under Section 5.1(a)(1); or (B) any willful
breach of any such surviving Section hereof.
ARTICLE 6
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Subject to the
limitations of Section 6.6, the respective representations and warranties of
the parties contained in this Agreement shall survive the Preliminary Closing
Date and the Final Closing Date, regardless of any investigation made by or on
behalf of any party.
6.2 INDEMNIFICATION BY THE SHAREHOLDERS. Subject to the
limitations of Section 6.6, the Shareholders hereby agree to indemnify and hold
harmless the Surviving Corporation and Parent in respect of any losses, claims,
damages, liabilities or related expenses (including, but not limited to, all
litigation costs but net of all available proceeds of insurance) (collectively,
"Losses") which the Surviving Corporation or Parent (but without duplication)
incurs as a result of the breach of: (A) any of the representations or
warranties made by the Shareholders in or pursuant to this Agreement, except
that the Shareholders shall have no obligation to indemnify and hold harmless
with respect to (i) a breach of the representations or warranties set forth in
Section 2.2(p) ("Environmental Laws") to the extent that the Company has
insurance to adequately cover potential liabilities for environmental matters,
or (ii) any representation or warranty that any property is in good condition
or repair or otherwise fit for the purposes for which the property is intended;
or (B) any of the covenants made by the Shareholders in this Agreement which
are to be performed at or after the Final Closing; or (C) any of the covenants
made by the Shareholders in this Agreement which are to be performed at or
after the Preliminary Closing and prior to the Final Closing but only if the
breach thereof is willful and intentional and involves self-dealing or bad
faith. The indemnification obligations of the Shareholders under this Section
6.2 shall survive the Preliminary Closing and the Final Closing and will
terminate at the time specified in Section 6.6.
6.3 INDEMNIFICATION BY PARENT AND SURVIVING CORPORATION. Parent
and Surviving Corporation, jointly and severally, agree to indemnify and hold
harmless the Shareholders in respect
EnviroSystems Agreement and Plan of Merger/Page 54
<PAGE> 63
of any losses, claims, damages, liabilities or related expenses (including, but
not limited to, all litigation costs) which the Shareholders incur as a result
of the breach of any of the representations or warranties made by Parent in or
pursuant to this Agreement or any of the covenants made by Parent or the
Surviving Corporation in this or any related Agreement which are to be
performed at or after the Preliminary Closing or the Final Closing. The
indemnification obligations of Parent and Surviving Corporation under this
Section 6.3 shall survive the Preliminary Closing and the Final Closing.
6.4 NOTICE. Promptly after any party hereto (in Article 6, the
"Indemnified Party") has received notice or has knowledge of the occurrence of
any event which the Indemnified Party asserts is an indemnifiable event or
after the threat or commencement of any action, claim or proceeding commenced
against the Indemnified Party by a third party that might result in any claim
for indemnity pursuant to this Agreement (a "Third Party Claim"), the
Indemnified Party shall provide the party obligated to provide indemnification
hereunder (in Article 6, the "Indemnifying Party") written notice of such claim
or the threat of commencement of such action or proceeding. Promptly after
receipt by an Indemnifying Party of any such notice, the Indemnifying Party
shall, within ten business days of receipt of such notice, either: (i)
acknowledge the debt, liability or obligation for which indemnity is sought as
a valid claim and forthwith pay (except as payment is deferred pursuant to
Section 6.5) the Indemnified Party an amount sufficient to discharge such debt,
liability or obligation; (ii) in the event of a Third Party Claim which is not
acknowledged by the Indemnifying Party to be owing, notify the Indemnified
Party whether the Indemnifying Party elects to undertake the defense thereof
and, if so, thereupon promptly assume and diligently contest such Third Party
Claim with counsel reasonably satisfactory to the Indemnified Party; or (iii)
in the event of a claim by the Indemnified Party for indemnity hereunder which
is challenged by the Indemnifying Party, notify the Indemnified Party of such
challenge. Failure to respond within the appropriate time period following the
receipt of a notice hereunder shall be deemed to constitute a challenge by the
Indemnifying Party of the claims to indemnification by the Indemnified Party.
In the event of such a challenge, the Indemnified Party shall, if the claim is
a Third Party Claim, defend against such claim subject to such Party's right to
be indemnified for all litigation costs to the extent it is ultimately
determined that the Indemnifying Party was obligated (after applying the
limitations of Section 6.6) to provide indemnification with respect to such
Third Party Claim. The Indemnified Party shall not compromise a Third Party
Claim without the prior written consent of the Indemnifying Party (which
consent may not be unreasonably withheld or delayed if the Indemnifying Party
has challenged the claim to indemnification by the Indemnified Party). The
Indemnifying Party shall not compromise a Third Party Claim unless the
compromise includes a complete release of the Indemnified Party and does not
create any obligations of the Indemnified Party.
6.5 TIME OF PAYMENT. The Shareholders may defer any payment due
under Article 6 to the Indemnified Parties, in an amount up to 50% of the
aggregate amount of indemnification (including such deferred payment) which
Shareholders are at the time obligated to pay or have paid, until the date that
is two years after the Final Closing Date, on which date any such deferred
payments shall become due without interest.
EnviroSystems Agreement and Plan of Merger/Page 55
<PAGE> 64
6.6 LIMITATIONS ON INDEMNIFICATION.
(a) No Indemnified Party shall be entitled to
indemnification from a Shareholder pursuant to Article 6 unless and
until the aggregate of all Losses for which indemnification would (but
for the limitation of this sentence) be required to be paid under
Article 6 exceeds $15,000 (the "Loss Threshold"), provided that if the
aggregate Losses for which indemnification is required to be paid
shall exceed such sum then only those Losses in excess thereof shall
be payable (subject to the further limitations set forth below). If
an Indemnifying Party pays indemnification (including without
limitation, the cost of defending a Third Party Claim) that was not
required to be paid due to any limitation set forth in this Section
6.6, then the Indemnified Party shall, promptly after demand by the
Indemnifying Party, reimburse the latter for such payments without
interest. Losses for which indemnification is required to be paid
under Article 6 by reason of any breach of the representations and
warranties of Section 2.1 ("Section 2.1 Losses") shall not be subject
to the Loss Threshold, but the amount of Section 2.1 Losses shall not
be counted toward meeting that threshold with respect to other
indemnification claims. If an Indemnified Party's right to
indemnification arises by reason of the breach of any representation
or warranty set forth in Section 2.2 of this Agreement, then each
Shareholder will be liable solely for his or her proportionate share
of such indemnification based on the proportion that the Merger
Consideration received by such Shareholder bears to the total Merger
Consideration received by all Shareholders. If an Indemnified Party's
right to indemnification arises by reason of the breach of any
representation or warranty of a Shareholder other than those set forth
in Section 2.2 or by reason of the breach of a covenant of a
Shareholder, then (i) the Shareholder who breached such representation
or warranty shall be solely liable for indemnification for Losses
attributable to such breach, and (ii) the Shareholder who breached
such covenant shall be solely liable for indemnification for Losses
attributable to such breach, except that if more than one Shareholder
participated in such breach of a representation, warranty or covenant
then the participating Shareholders, jointly in the proportion that
the Merger Consideration received by each of them bears to the total
Merger Consideration received by all of such participating
Shareholders, shall be liable for indemnification for Losses
attributable to such breach of a representation, warranty or covenant.
The maximum liability of any Shareholder pursuant to Article 6 of this
Agreement shall not exceed $50,000 in the aggregate (the "Individual
Limitation"). In addition, the maximum aggregate liability of the
Shareholders under Article 6 of this Agreement shall not exceed
$100,000 in the aggregate (the "Aggregate Limitation"). A Shareholder
shall have no further obligations under Article 6 of this Agreement at
the earlier of (i) the time when such Shareholder has paid and/or is
obligated to pay indemnification under Article 6 of this Agreement
(including, without limitation, payments in respect of defending
against Third Party Claims and payments that are deferred to a future
date under Section 6.5) equal to the Individual Limitation, or (ii)
the time when all Shareholders have paid and/or are obligated to pay
indemnification under Article 6 of this Agreement (including, without
limitation, payments in respect of defending against Third Party
Claims and payments that are deferred to a future date under Section
6.5) equal in the aggregate to the Aggregate Limitation. Upon
reaching either limitation, a Shareholder who is then defending
against a Third Party Claim shall turn the defense thereof over to any
other Shareholder who then remains liable for indemnification with
respect thereto or, if there is no such other Shareholder, to the
Indemnified Parties, which shall thereafter undertake such defense at
their sole expense.
EnviroSystems Agreement and Plan of Merger/Page 56
<PAGE> 65
(b) An Indemnified Party shall not be entitled to make
any claim for indemnification against a Shareholder under this Article
6 unless notice of such claim describing such claim with particularity
is given prior to the date that is 18 months after the Final Closing
Date, or, with respect to the warranties and representations in
Section 2.2(v) ("Tax Matters"), the date that is not later than the
expiration of the applicable statute of limitations for a claim by a
taxing authority for any taxes, penalties or interest.
(c) In no event will an Indemnified Party be entitled to
make a claim under Article 6 against a Shareholder for the breach of
any representation, warranty, or covenant if, at or prior to the Final
Closing, such Indemnified Party had knowledge of facts constituting
such breach and failed to notify the Shareholders thereof prior to the
Final Closing.
6.7 EFFECTIVE DATE; EXCLUSIVE REMEDY. The obligations of the
parties under Article 6 shall only become effective from and after the Final
Closing. Upon becoming effective, the right to indemnification set forth in
this Article 6 shall be the sole and exclusive remedy of the parties for breach
of any representation, warranty, covenant or agreement set forth in or made
pursuant to this Agreement, and each party covenants and agrees not to seek or
assert any other remedy following the Final Closing, except that any party may
seek such injunctive relief as may be available. Parent and Merger Sub
acknowledge that, except as expressly set forth in this Agreement, there are no
other representations or warranties of the Shareholders or the Company in
connection with the transactions contemplated hereby, all such other
representations and warranties being expressly disclaimed.
ARTICLE 7
STOCK TRANSFER RESTRICTIONS
7.1 COMPLIANCE WITH SECURITIES LAWS. The Shareholders acknowledge
and agree with Parent that the shares of Parent Common Stock issued pursuant to
this Agreement (the "Restricted Shares") to the Shareholders shall not be
transferable except upon the conditions specified in this Article 7, which
conditions are intended, among other things, to ensure compliance with the
provisions of the Securities Act and any applicable state securities laws in
respect of the transfer of such Restricted Shares. The Shareholders
acknowledge and agree that the certificates representing the Restricted Shares
will contain a restrictive legend to the effect that transfer of such shares is
prohibited unless the shares are registered under the Securities Act and
applicable state securities laws, or in the event that such transfer is, in the
opinion of counsel to Parent or counsel to the Shareholders which is reasonably
satisfactory to the Parent, exempt from the registration provisions of the
Securities Act and applicable state securities laws.
7.2 RESTRICTIONS ON TRANSFER. Prior to any transfer or attempted
transfer of Restricted Shares other than the sale of such shares pursuant to
registration under the Securities Act, the Shareholders agree to give written
notice to Parent of its intention to effect such transfer. The notice shall
describe the manner and circumstances of the proposed transfer in detail and
shall contain an undertaking to furnish such other information as may be
required to enable Parent's counsel to render the opinions referred to below,
and shall give the identity and address of the Shareholders' counsel.
EnviroSystems Agreement and Plan of Merger/Page 57
<PAGE> 66
Parent shall promptly submit a copy of the notice to its counsel, and the
following provisions shall apply:
(a) If, in the opinion of the Parent's counsel or counsel
to the Shareholders which is reasonably satisfactory to the Parent,
the proposed transfer may be effected without registration of the
Restricted Shares under the Securities Act, Parent shall, as promptly
as practicable, so notify the Shareholders who will then be entitled
to transfer the Parent Common Stock in accordance with the terms of
the notice delivered by the Shareholders to Parent.
(b) If, in the opinion of the Parent's counsel or counsel
to the Shareholders which is reasonably satisfactory to the Parent,
the proposed transfer of the Parent Common Stock may not be effected
without registration under the Securities Act, Parent shall, as
promptly as practicable, so notify the Shareholders, and the
Shareholders shall not be allowed to effect the proposed transfer
except pursuant to an offering registered under the Securities Act.
(c) The Shareholders understand and agree that except as
set forth in the Registration Rights Agreement or any similar
agreement or this Agreement, Parent is not obligated to furnish a
registration statement under the Act or any state securities laws
covering the Restricted Shares nor is Parent under any obligation to
aid the Shareholders in obtaining any exemption from any such
registration requirements. Each Shareholder also acknowledges that
they shall be responsible for compliance with all conditions of
transfer of the Restricted Shares imposed by any administrator of any
state and for the fees of their counsel. Parent shall be responsible
for the fees and expenses incurred by Parent for legal or accounting
services in connection with reviewing such proposed transfer and
issuing opinions in connection therewith.
(d) The Shareholders understand and agree that transfer
of the Restricted Shares may be effected only on the books of Parent,
and that stop transfer instructions will be issued to the transfer
agent of Parent Common Stock in accordance with the legend on any
certificate representing the Restricted Shares. The transfer agent
will not remove the legend from any certificate representing the
Restricted Shares without either registration of the Restricted Shares
under the Securities Act and applicable state securities laws or an
opinion of the Parent's counsel or counsel to the Shareholders which
is reasonably satisfactory to the Parent stating that the transfer of
the Restricted Shares is exempt from such registration requirements by
reason of Rule 144(k) under the Securities Act or other exemption.
(e) The foregoing restrictions on transfer of Restricted
Shares shall terminate as to any Shareholder as soon as the provisions
of Rule 144(k) under the Securities Act (or any successor rule) become
available to such Shareholder and Parent shall at that time, upon
request of any Shareholder, cause Parent's transfer agent to reissue
certificates to such Shareholder not containing any legend relating to
resales of unregistered securities.
EnviroSystems Agreement and Plan of Merger/Page 58
<PAGE> 67
ARTICLE 8
FURTHER ASSURANCES
8.1 FURTHER ASSURANCES. At any time and from time to time on and
after the Final Closing Date (a) at the request and expense of Parent or the
Surviving Corporation, the Shareholders shall deliver to Parent (but may retain
copies for any proper purpose) any records, documents and data possessed by the
Shareholders and not previously delivered to Parent or the Surviving
Corporation to which Parent or the Surviving Corporation is entitled and
execute and deliver or cause to be executed and delivered all such deeds,
assignments, consents, documents and further instruments of transfer and
conveyance, and take or cause to be taken all such other actions, as Parent or
the Surviving Corporation may reasonably deem necessary or desirable in order
to fully and effectively vest in Parent or the Surviving Corporation, or to
confirm its title to and possession of, the Company Common Stock or to assist
Parent in exercising rights with respect thereto which Parent or the Surviving
Corporation is entitled to exercise pursuant to the terms of this Agreement;
and (b) Parent or the Surviving Corporation shall execute and deliver or cause
to be executed and delivered such further instruments and take or cause to be
taken such further actions as the Shareholders may reasonably deem necessary or
desirable to carry out the terms and provisions of this Agreement.
8.2 BOOKS AND RECORDS.
(a) Parent agrees that it shall preserve and keep all
books and records relating to the Company in Parent's possession until
the later of December 31, 2003, or six months following the expiration
of the statute of limitations (including extensions thereof)
applicable to the tax returns filed by or with respect to the Company
for taxable periods ending prior to or on the Final Closing Date to
which such books or records are relevant. After such time, before
Parent shall dispose of any of such books and records, at least 90
calendar days' prior written notice to such effect shall be given by
Parent to the Shareholders, and the Shareholders shall be given an
opportunity, at Parent's cost and expense, to remove all or any part
of such books and records as the Shareholders may select, and the
Shareholders may retain copies thereof. Duly authorized
representatives of the Shareholders shall, upon reasonable notice,
have access at any time to such books and records during normal
business hours to examine, inspect and copy such books and records.
(b) In any instance in which any Shareholder or Parent,
as the case may be, is required to prepare or file (or cause to be
filed) tax returns which cover a period that includes the Final
Closing Date or to respond to an audit by the Internal Revenue Service
or other governmental agency with respect to a period prior to the
Final Closing Date, each Shareholder or Parent, as the case may be,
will furnish all information and records reasonably available to it
and reasonably requested of him, her or it and necessary or
appropriate for use in preparing such returns or responding to such
audit. The Shareholders shall at Parent's expense prepare and file,
subject to giving Parent a reasonable opportunity to comment on, tax
returns covering periods ending on the Final Closing Date. The amount
of any dividends permitted by Section 3.25 hereof but not taken by the
Final Closing shall be paid by the
EnviroSystems Agreement and Plan of Merger/Page 59
<PAGE> 68
Surviving Corporation to the Shareholders in proportion to their
ownership of Company Common Stock as soon thereafter as the unpaid
amount thereof is made known to it by the Shareholders.
(c) Parent, Merger Sub and the Shareholders shall
cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the filing of tax returns and any
audit, litigation or other proceeding with respect to taxes. Such
cooperation shall include the provision of records and information
which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any
material provided hereunder.
ARTICLE 9
MISCELLANEOUS
9.1 EXPENSES, ETC. Whether or not the transactions contemplated
by this Agreement are consummated, none of the parties hereto shall have any
obligation to pay any of the fees and expenses of the other parties incident to
the negotiation, preparation and execution of this Agreement, including the
fees and expenses of counsel, accountants and other experts. The Company shall
pay its own fees and expenses. The Shareholders, the Company, Parent, and the
Surviving Corporation will indemnify the other parties, and hold them harmless
from and against any claims for finders' fees or brokerage commissions in
relation to or in connection with such transactions as a result of any
agreement or understanding between such indemnifying party and any third party.
The Shareholders shall pay and be responsible for any stock transfer Taxes with
respect to the Company Common Stock incident to the Merger. Parent shall pay
and be responsible for any stock transfer Taxes arising from the issuance and
sale of shares of Parent Common Stock hereunder.
9.2 EXECUTION IN COUNTERPARTS. For the convenience of the
parties, this Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
9.3 NOTICES. All notices which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given in writing and delivered or mailed by
registered or certified mail postage prepaid, or sent by telex, telecopier,
facsimile transmission or telegraph as follows:
EnviroSystems Agreement and Plan of Merger/Page 60
<PAGE> 69
If to the Shareholders or, prior With a copy to:
to the Final Closing, to the Company:
Linda C. Woodson Louis Y. Fishman
122 Shannon Rd. Correro Fishman Haygood
Lafayette, LA 70503 Phelps Weiss Walmsley & Casteix, L.L.P.
201 St. Charles Avenue, 47th Floor
Cheryl L. Woodson New Orleans, Louisiana 70170
102 Shannon Rd. Facsimile: (504) 586-5250
Lafayette, LA 70503
Paula K. Woodson
501 Woodvale
Lafayette, LA 70503
If to Parent or the Surviving With a copy to:
Corporation, to:
TransCoastal Marine Services, Inc. James J. Spring, III
505 Lorie Avenue, Suite I Chamberlain, Hrdlicka, White,
Lafayette, Louisiana 70507 Williams & Martin
Attention: President 1200 Smith Street, Suite 1400
Facsimile No. (318) 896-0034 Houston, Texas 77002-4310
Facsimile No. (713) 658-2553
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto. Any notice or other
communication pursuant to this Agreement shall be deemed to have been duly
given or made and to have become effective upon the earliest of (a) when
delivered in hand to the party to which directed, or (b) if sent by first-class
mail postage prepaid, certified mail, return receipt requested, or by telex,
telecopier, facsimile transmission or telegraph and properly addressed as set
forth above, at the time when received by the addressee or (c) with respect to
delivery by certified mail, return receipt requested, when delivery thereof,
properly addressed as set forth above, is made by the U.S. Postal Service.
9.4 WAIVERS. Any party hereto (as to itself, but not as to other
parties without their consent) may, by written notice to the other parties
hereto, (a) extend the time for the performance of any of the obligations or
other actions of the other parties under this Agreement; (b) waive any
inaccuracies in the representations or warranties of another party contained in
this Agreement or in any document delivered pursuant to this Agreement; (c)
waive compliance with any of the conditions or covenants of another party
contained in this Agreement; or (d) waive performance of any of the obligations
of another party under this Agreement. Except as otherwise provided in the
preceding sentence, no action taken pursuant to this Agreement, including
without limitation any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance
with any representation, warranty, covenant or agreement contained in this
EnviroSystems Agreement and Plan of Merger/Page 61
<PAGE> 70
Agreement. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed a waiver of any subsequent breach.
9.5 AMENDMENTS, SUPPLEMENTS, ETC. At any time this Agreement may
be amended or supplemented by such additional agreements, articles or
certificates, as may be determined by the parties hereto to be necessary,
desirable or expedient to further the purposes of the Agreement, or to clarify
the intention of the parties hereto, or to add to or modify the covenants,
terms or conditions hereof or to effect or facilitate any governmental approval
or acceptance of this Agreement or to effect or facilitate the filing or
recording of this Agreement or the consummation of any of the transactions
contemplated hereby. Any such instrument must be in writing and signed by all
parties.
9.6 ENTIRE AGREEMENT. This Agreement, its Exhibits and Disclosure
Schedules and the documents executed on the Preliminary Closing Date and the
Final Closing Date in connection herewith, constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral and written, between
the parties hereto with respect to the subject matter hereof. No
representation, warranty, promise, inducement or statement of intention has
been made by any party hereto which is not embodied in this Agreement or such
other documents, and no party hereto shall be bound by, or be liable for, any
alleged representation, warranty, promise, inducement or statement of intention
not embodied herein or therein.
9.7 CHOICE OF FORUM; CONSENT TO JURISDICTION. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Texas. Any suit, action or proceeding arising with respect to the validity,
construction, enforcement or interpretation of this Agreement, and all issues
relating in any matter hereto, shall be brought in the United States District
Court for the Western District of Louisiana, or in the event that federal
jurisdiction does not pertain, in the state courts of the State of Louisiana in
Lafayette Parish. Each of the parties hereto hereby submits and consents to
the jurisdiction of such courts for the purpose of any such suit, action or
proceeding and hereby irrevocably waives (a) any objection which any of them
may now or hereafter have to the laying of venue in such courts, and (b) any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
9.8 BINDING EFFECT, BENEFITS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors, assigns, heirs and legatees. Nothing in this Agreement, expressed
or implied, is intended to confer on any person other than the parties hereto
or their respective successors and assigns, and third parties who are expressly
given rights hereunder, any rights, remedies, obligations or liabilities under
or by reason of this Agreement. In particular, but without limitation, no
representation, warranty or covenant of the Company or Shareholders herein or
in any related document shall confer on any present or future shareholder of
Parent or any of the Other Companies any rights or remedies except as is
expressly granted to Relatives.
9.9 ASSIGNABILITY. Neither this Agreement nor any of the parties'
rights hereunder shall be assignable by any party hereto without the prior
written consent of the other parties hereto.
EnviroSystems Agreement and Plan of Merger/Page 62
<PAGE> 71
9.10 INVALID PROVISIONS. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future law,
rule or regulation, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof. The remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance herefrom.
Furthermore, in lieu of such illegal, invalid or unenforceable provision, there
shall be added automatically as a part of this Agreement a legal, valid and
enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.
9.11 KNOWLEDGE. As used in this Agreement and the Disclosure
Schedules, the phrase "to the knowledge" of the Company and the Shareholders
means to the actual knowledge of the Shareholders or other representatives of
the Company listed on Exhibit 9.11.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed effective as of the date first above written.
PARENT:
TRANSCOASTAL MARINE SERVICES, INC.,
A DELAWARE CORPORATION
By: /s/ G. DARCY KLUG
----------------------------------------
Name: G. Darcy Klug
-----------------------------------
Title: Vice President
----------------------------------
SHAREHOLDERS:
/s/ LINDA C. WOODSON
-------------------------------------------
Linda C. Woodson
/s/ CHERYL L. WOODSON
-------------------------------------------
Cheryl L. Woodson
/s/ PAULA K. WOODSON
-------------------------------------------
Paula K. Woodson
THE COMPANY:
ENVIROSYSTEMS, INC., A LOUISIANA CORPORATION
By: /s/ CHERYL L. WOODSON
----------------------------------------
Cheryl L. Woodson, President
EnviroSystems Agreement and Plan of Merger/Page 63
<PAGE> 1
EXHIBIT 10.17
PURCHASE AND SALE AGREEMENT
BY AND AMONG
TRANSCOASTAL MARINE SERVICES, INC.
AND
C.S.I. HYDROSTATIC TESTERS, INC.
HARGETT MOORING AND MARINE, INC.
HARGETT INVESTMENTS, L.L.C.
AND
DANIEL N. HARGETT, SR.
YVETTE HARGETT
RICHARD L. HARGETT
August 28, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE 1
PURCHASE AND SALE OF CSI SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Basic Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 CSI Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Registration Rights Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 The Escrow Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2
CONSIDERATION ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Adjustments to Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Determination of Earn-Out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Certain Definitions Related to the Earn-Out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Review of Earn-Out Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(d) Reduction for Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(e) Increase for Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Payment of Earn-Out. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 3
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 Representations and Warranties by Sellers; Exhibit 3.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(d) Ownership of Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(e) Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Representations and Warranties of Sellers and CSI; Exhibit 3.2 . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Representations and Warranties of Sellers and Hargett; Exhibit 3.3 . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 Representations and Warranties of Sellers and Investments; Exhibit 3.4 . . . . . . . . . . . . . . . . . . . . . 9
3.5 Representations and Warranties by the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) Organization and Qualification, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(c) Subsidiaries, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(d) Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(e) Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(f) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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(g) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(h) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(i) Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(j) Buyer Offering Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 4
ADDITIONAL COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Access to Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.3 Amendment to Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(a) Confidential Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.5 Principal Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.6 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.7 Release of Sellers' Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.8 Sellers' Release of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.9 Real Estate Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(a) Title Insurance Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(b) Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(c) Title Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(d) Phase I Environmental Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(e) Title and Environmental Objections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(f) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.10 Confidential Information Memorandum; Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . . . 22
(a) Companies to Provide Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(c) Further Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(d) Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.11 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.12 Satisfaction of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.13 Buyer's IPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.14 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.15 Indemnification of Directors and Officers of the Companies . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.16 Availability of Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 5
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.1 Conditions Precedent to the Obligations of the Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(a)Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(b) Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(c) Legal Actions or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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(d) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(e) CSI Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(f) Policies of Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(g) Executive Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(h) Shareholder Lock-up Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(i) Completion of Buyer's IPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(j) Lender Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(k) Opinion of Counsel for the Companies and Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(l) Resignations of Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(m) All Proceedings to be Satisfactory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.2 Conditions Precedent to the Obligations of Sellers and the Companies. . . . . . . . . . . . . . . . . . . . . . 28
(a) Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(b) Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(c) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(d) Release from Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(e) Executive Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(f) Registration Rights Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(g) Lender Approval; Performance Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(h) Receipt of Memorandum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(i) Opinion of Counsel for the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(j) Legal Actions or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(k) All Proceedings to be Satisfactory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 6
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.1 Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Mutual Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(b) Termination by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(c) Termination by Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(d) After the Escrow Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 7
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.2 Indemnification by Sellers. Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.3 Indemnification by Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.4 Indemnification Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 8
STOCK TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.1 Compliance with Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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8.2 Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 9
FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.1 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.2 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 10
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1 Expenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.2 Execution in Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.4 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.5 Amendments, Supplements, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.6 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.7 Choice of Forum; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.8 Binding Effect, Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.9 Assignability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.10 Invalid Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.11 Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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Exhibits:
EXHIBIT 1.2 - ALLOCATION OF PURCHASE PRICE
EXHIBIT 1.3 - LIST OF VESSELS
EXHIBIT 1.4 - EMPLOYMENT AGREEMENT
EXHIBIT 1.5 - REGISTRATION RIGHTS AGREEMENT
EXHIBIT 1.8 - EXCLUDED ASSETS
EXHIBIT 3.1 - REPRESENTATIONS AND WARRANTIES OF SELLERS
EXHIBIT 3.2 - REPRESENTATIONS AND WARRANTIES OF SELLERS AND CSI
EXHIBIT 3.3 - REPRESENTATIONS AND WARRANTIES OF SELLERS AND HARGETT
EXHIBIT 3.4 - REPRESENTATIONS AND WARRANTIES OF SELLERS AND INVESTMENTS
EXHIBIT 3.5 - REPRESENTATIONS AND WARRANTIES OF BUYER
EXHIBIT 5.1 - OPINION OF COUNSEL FOR COMPANIES AND SELLERS
EXHIBIT 5.2 - OPINION OF COUNSEL FOR THE BUYER
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PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT (this "Agreement") made effective as of
August 28, 1997, by and among Transcoastal Marine Services, Inc., a Delaware
corporation ("Buyer"), C.S.I. Hydrostatic Testers, Inc., a Delaware corporation
("CSI"), Hargett Mooring and Marine, Inc., a Louisiana corporation ("Hargett")
Hargett Investments, L.L.C., a Louisiana limited liability company
("Investments") (CSI, Hargett and Investments are sometimes referred to
individually as a "Company" and collectively as the "Companies"), and Daniel N.
Hargett, Sr., Yvette Hargett, and Richard L. Hargett ("Sellers").
WHEREAS, the Sellers in the aggregate own all of the outstanding capital
stock or membership interests, as the case may be, of the Companies;
WHEREAS, the Sellers are willing to cause the Companies to reorganize their
corporate structure in order to complete the transactions contemplated by this
Agreement such that CSI will acquire all of the outstanding capital stock of
Hargett; and
WHEREAS, this Agreement contemplates a series of transactions in which the
Buyer will purchase from the Sellers, and the Sellers will sell to the Buyer,
all of the outstanding capital stock of CSI and all of the membership interests
of Investments in return for cash and shares of the Buyer's common stock, par
value $.001 per share ("TMS Common Stock");
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
ARTICLE 1
PURCHASE AND SALE OF CSI SHARES
1.1 Basic Transaction. On and subject to the terms and conditions of
this Agreement, the Buyer agrees to purchase from each of the Sellers, and
each of the Sellers agrees to sell and convey to the Buyer, at the Closing (as
defined below), all of the outstanding capital stock of CSI (the "CSI Shares")
and all of the outstanding membership interests of Investments (the
"Investments Interests") for the consideration specified below in this Article
1. For purposes of this Agreement, the term "Sellers" shall include (i) the
children of Daniel N. Hargett, Sr. and (ii) Horace Harrington, in the event
that Daniel N. Hargett, Sr. transfers any CSI shares to such individuals and
such individuals execute an agreement, satisfactory to Buyer, providing that
they will be deemed to be parties to this Agreement for all purposes.
1.2 Purchase Price. Subject to the adjustments contained in Article
2 hereof, Buyer agrees to pay and deliver to the Sellers at the Closing an
aggregate of $48,000,000 (the "Purchase Price") and
CSI Purchase and Sale Agreement/Page 1
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pay and deliver to the Sellers at Closing the Tax Adjustment (as defined
below), in consideration for delivery of the CSI Shares, for delivery of the
Investments Interests and for the other covenants and agreements contained
herein and the other documents to be delivered pursuant hereto. The Purchase
Price shall be allocated $47,000,000 in payment for the CSI Shares and
$1,000,000 in payment for the Investments Interests. The Purchase Price shall
be paid to the Sellers by delivery of $40,000,000 in cash payable to the
Sellers by wire transfer or delivery of immediately available funds and (ii)
$8,000,000 in TMS Common Stock. The Tax Adjustment shall be paid to Sellers in
cash by wire transfer or delivery of immediately available funds. For purposes
of this Section 1.2, the TMS Common Stock deliverable to the Sellers at the
Closing shall have a value (the "Closing Share Price") equal to the price per
share paid by the public (the "IPO Price") in the initial public offering of
TMS Common Stock (the "IPO"). The Purchase Price and the Tax Adjustment shall
be allocated among the Sellers as set forth in Exhibit 1.2 hereto. The
Purchase Price shall be increased after the Closing by the amount of the
Earn-Out (defined below), if any, payable pursuant to Article 2 of this
Agreement and shall be allocated as set forth in Exhibit 1.2 hereto.
1.3 CSI Reorganization. Immediately prior to the Escrow Closing
(defined below), the Sellers shall consummate a transaction pursuant to which
CSI shall acquire all of the outstanding capital stock of Hargett resulting in
Hargett becoming a wholly-owned subsidiary of CSI (such transaction is
sometimes referred to herein as the "CSI Reorganization"). At the Closing,
record title to the marine vessels listed in Exhibit 1.3 attached hereto (the
"Vessels") that are currently used by the Companies in their respective
business operations shall be held by CSI or Hargett, respectively.
1.4 Employment Agreements. At the Escrow Closing, CSI and certain
individuals listed in Schedule 1.4 hereto shall each execute an Executive
Employment Agreement in substantially the forms attached as Exhibits 1.4A and
1.4B (the "Executive Employment Agreements"), providing for the employment of
each of such employees by CSI for an initial term of two years. The Executive
Employment Agreements shall be delivered to the Escrow Agent (defined below) at
the Escrow Closing and shall be delivered by the Escrow Agent at the Closing as
provided below.
1.5 Registration Rights Agreements. Buyer and each of the Sellers
shall execute and deliver a Registration Rights Agreement substantially in the
form attached as Exhibit 1.5 (the "Registration Rights Agreement"). The
Registration Rights Agreement shall be delivered to the Escrow Agent at the
Escrow Closing and shall be delivered by the Escrow Agent at the Closing as
provided below.
1.6 The Escrow Closing. Not earlier than four business days prior to
the Closing (such date is the "Escrow Closing Date"), certain deliveries will
be made into escrow (the "Escrow Closing") with an escrow agent to be
designated by Sellers (the "Escrow Agent"). The escrow shall be governed by a
document escrow agreement to be mutually acceptable to the parties hereto (the
"Escrow Agreement"), provided that the Escrow Agreement shall provide that
unless (i) Buyer's IPO shall have occurred not later than four business days
after the deliveries into escrow, and (ii) the Closing shall have occurred
pursuant to which the Buyer
CSI Purchase and Sale Agreement/Page 2
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shall have delivered the entirety of the cash portion of the Purchase Price and
the Tax Adjustment to Sellers, the Escrow Agent shall immediately, ipso facto,
and without any further actions on the part of any of the parties (A) deliver
to Sellers any and all certificates, instruments, and documents delivered by
Sellers to the Escrow Agent at the Escrow Closing, including, without
limitation, the certificates representing the CSI Shares and the assignments of
the Investments Interests, (B) deliver to Buyer any and all certificates,
instruments and documents delivered by Buyer to the Escrow Agent at the Escrow
Closing, including, without limitation, the certificates representing the TMS
Common Stock, and (C) mark the Executive Employment Agreements as "CANCELLED."
The Escrow Closing will take place at the offices of Chamberlain, Hrdlicka,
White, Williams & Martin in Houston, Texas commencing at 9:00 a.m. central
standard time. The items to be delivered to the Escrow Agent at the Escrow
Closing are as follows: (i) Sellers will deliver the various certificates,
instruments, and documents referred to in Section 5.1 below ; (ii) Buyer will
deliver the various certificates, instruments, and documents referred to in
Section 5.2 below ; (iii) each of the Sellers will deliver certificates, duly
endorsed in blank or accompanied by stock powers duly endorsed to Buyer, and in
the form for transfer to Buyer, representing all of the CSI Shares and will
deliver assignments of all of the Investments Interests owned by such Seller;
(iv) Buyer will deliver certificates for TMS Common Stock in the amount set
forth in Section 1.2 above, such certificate(s) to be in the form for issuance
to Sellers; and (v) CSI and the individuals listed in Schedule 1.4 shall each
deliver an Executive Employment Agreement between CSI and the respective
individual.
1.7 The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Chamberlain,
Hrdlicka, White, Williams & Martin in Houston, Texas commencing at 9:00 a.m.
central standard time following the satisfaction or waiver of all conditions to
the obligations of the parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective parties
will take at the Closing itself) (the date of Closing is the "Closing Date"),
provided that the Closing shall take place not later than the fourth business
day following the Escrow
CSI Purchase and Sale Agreement/Page 3
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Closing. At the Closing (i) Buyer will deliver to Sellers the cash portion of
the Purchase Price and the Tax Adjustment as provided in Section 1.2 above;
(ii) the various certificates, instruments and documents held in escrow which
are to be delivered to Buyer pursuant to this Agreement (including the CSI
Shares and the assignments of the Investments Interests) shall be released and
delivered to Buyer; (iii) the various certificates, instruments and documents
held in escrow to be delivered to Sellers pursuant to this Agreement (including
the certificates for TMS Common Stock and the Registration Rights Agreement)
shall be released and delivered to Sellers; (iv) the Executive Employment
Agreements shall be released and delivered to CSI and the respective
individuals who are parties to such agreements; and (v) any other certificates,
instruments and documents not held in escrow which are to be delivered to Buyer
and/or Sellers, respectively, shall be delivered to Buyer and/or Sellers,
respectively.
1.8 Excluded Assets. Buyer and Sellers agree that, prior to the
Closing Date, Seller shall cause those assets of CSI identified on Exhibit 1.8
attached hereto (the "Excluded Assets") and related liabilities to be
transferred to one or more of the Sellers or to a corporation or other entity
controlled by one or more of the Sellers
ARTICLE 2
CONSIDERATION ADJUSTMENTS
2.1 Adjustments to Purchase Price. The Purchase Price payable to
Seller under this Agreement is subject to the adjustments described in this
Section 2.1:
(a) Determination of Earn-Out. Sellers shall select an
accounting firm, reasonably acceptable to Buyer, and cause such firm to prepare
and deliver to Buyer, at Sellers' expense, not more than 30 days after the
Closing Date, a statement (the "Earn-Out Statement") based on the financial
statements of CSI for the nine months ended September 30, 1997, prepared in
accordance with GAAP, and showing (a) the aggregate amount of CSI's current
assets and current liabilities as of the Closing Date and the amount of the
Working Capital Adjustment (defined below), if any, (b) the calculation of the
amount of the Adjusted 1997 EBITDA (defined below) of CSI, and (c) the amount,
if any, by which the product of 4.5 multiplied by such Adjusted 1997 EBITDA
exceeds the sum of $5,700,000 plus Long-Term Debt (defined below) as of the
Closing Date. The amount of such excess (if any) reduced by the Working
Capital Adjustment (if any) is the "Earn-Out". For purposes of calculating the
Earn-Out, the financial statements of Hargett and Investments shall not be
taken into account.
(b) Certain Definitions Related to the Earn-Out.
(1) "GAAP" means U.S. generally accepted accounting
principles consistently applied.
CSI Purchase and Sale Agreement/Page 4
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(2) "Working Capital Adjustment" means the extent, if any,
to which 1.2 times current liabilities exceeds current assets,
based on current assets and current liabilities of CSI determined
as of the Closing Date in accordance with GAAP; provided however,
that (i) prepaid expenses shall be excluded from current assets
of CSI, (ii) current maturities of Long Term Debt shall be
excluded from current liabilities of CSI for purposes of
determining the Working Capital Adjustment, and (iii) CSI's claim
for "extra work" under its subcontract with HBH, Inc. dated April
__, 1997 (the "Extra Work Claim") shall be included as a current
asset.
(3) "Long-Term Debt" means the aggregate of all long-term
liabilities (including current maturities) of CSI owed to persons
other than Sellers and their affiliates as of the Closing Date,
including deferred taxes and capitalized lease obligations,
determined in accordance with GAAP.
(4) "Adjusted 1997 EBITDA" means the sum of (i) Net
After-Tax Income (as defined below), plus (ii) the amount of
income and franchise taxes deducted in the calculation of Net
After-Tax Income, plus (iii) the amount of depreciation and
amortization deducted in the calculation of Net After-Tax Income,
plus (iv) the amount of interest expense deducted in the
calculation of Net After-Tax Income (with amounts in clauses (i)
through (iv) above determined in accordance with GAAP),
determined with respect to the period from January 1, 1997
through September 30, 1997, and "annualized" by dividing such
amount by 9 and multiplying such amount by 12.
(5) "Net After-Tax Income" means, with respect to any
period, the aggregate net income (or loss) of CSI after deduction
for income, franchise and other taxes and without giving effect
to non-recurring gains and losses, interest income or investment
income, determined for such period in accordance with GAAP. Net
After Tax Income shall also be adjusted to exclude from the
calculation (a) any rents in excess of $7,000 per month paid or
accrued by CSI to Investments, (b) any life insurance premiums
paid by CSI on the life of Daniel N. Hargett, Sr., (c) expenses
paid by CSI relating to the Companies' entertainment facilities,
(d) one-half of any amounts (excluding salary and life insurance)
paid by CSI with respect to Daniel N. Hargett, Sr.'s travel and
entertainment on behalf of the Companies, (e) the book value of
the Excluded Assets and (f) the amount of any bonus paid to
Horace Harrington by the Companies after June 30, 1997 and prior
to the Closing Date.
(c) Review of Earn-Out Statement Buyer shall have the right to
review the Earn-Out Statement (and supporting work papers) and provide written
notice to Sellers of Buyer's objections with respect to any error, omission or
other discrepancy in the Earn-Out Statement (the "Discrepancy Notice") until 20
days following Buyer's receipt of the Earn-Out Statement. Buyer and Seller
shall work together in good faith to resolve any such dispute and agree on the
final Earn-Out Statement. In the event that Buyer and Seller cannot agree on
the final Earn-Out Statement within 10 days after delivery of Buyer's
Discrepancy Notice, Buyer and Seller shall refer the disputed issue
CSI Purchase and Sale Agreement/Page 5
<PAGE> 12
or issues to a national independent public accounting firm (other than the
regular accountants for any party or the accountants who prepared the Earn-Out
Statement which is reasonably acceptable to each party (the "Arbitrating
Accountants") within 15 days following delivery of Buyer's Discrepancy Notice.
The Arbitrating Accountants shall be instructed to render a decision, which
shall be binding upon both parties, within 20 days. Each party shall be
entitled to present any information or analysis concerning the matter in good
faith to the Arbitrating Accountants with a copy provided to the other party.
Buyer and Sellers shall each bear their own fees and expenses, and the fees and
expenses of the Arbitrating Accountants shall be shared equally by Buyer and
Sellers.
(d) Reduction for Long-Term Debt The cash portion of the
Purchase Price shall be reduced by an amount equal to the amount by which the
aggregate amount of the Companies' long-term debt as of the Closing Date
exceeds $5,500,000, unless the Buyer consents to any increase in such long-term
debt. For the purpose of this Section 2.1(d), the Companies' long-term debt
shall mean indebtedness of any Company to Transamerica Business Credit
Corporation or Bank of Sunset and Trust Company.
(e) Increase for Taxes. The cash portion of the Purchase Price
allocated to the purchase of the Investments Interests shall be increased by an
amount equal to the difference between (i) the taxes payable by the Sellers who
are the owners of the Investments Interests as a result of the purchase of the
Investments Interests pursuant hereto and (ii) the taxes which would have been
payable by such Sellers in the event that, on the Closing Date, Investments had
been a wholly-owned subsidiary of CSI which amount shall be grossed-up to
account for federal and state and local income taxes payable by Sellers with
respect to such additional amount (such grossed-up amount is the "Tax
Adjustment"). For purposes of determining the Sellers' tax liabilities
hereunder, such liabilities shall be computed based upon the Internal Revenue
Code of 1986, as amended, as in effect on the Closing Date and applicable state
and local income tax provisions, as in effect on the Closing Date.
2.2 Payment of Earn-Out. Within two days after the Buyer and Sellers
agree on the content of the Earn-Out Statement (but in no event later than
January 31, 1997), Buyer shall deliver payment of the Earn-Out to Sellers (if
the Earn-Out is greater than zero), allocated among the Sellers as set forth in
Schedule 1.2, by delivery of cash and TMS Common Stock in the same ratio as the
Purchase Price is paid pursuant to Section 1.2. For purposes of this Section
2.2, the TMS Shares delivered as payment of the Earn-Out shall have a value
equal to the lesser of: (1) the IPO Price, or (2) the average of the daily
closing prices (or if no closing price is reported, the average of the daily
closing bid and asked prices) of TMS Common Stock for the ten consecutive
trading days ending on and including the date that is three trading days prior
to the payment date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties by Sellers; Exhibit 3.1. Each
Seller represents and warrants to Buyer that the statements with respect to
such Seller contained in this Section 3.1
CSI Purchase and Sale Agreement/Page 6
<PAGE> 13
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date and the Escrow Closing Date (as though
made then and as though such dates were substituted for the date of this
Agreement throughout this Section 3.1) except as set forth in the disclosure
schedule contained in Exhibit 3.1 attached hereto, delivered by the Sellers to
the Buyer on the date hereof and initialed by the parties hereto (the "Sellers
Disclosure Schedule"). The representations and warranties of each Seller are
made severally and are not made as to any other Seller. The Sellers Disclosure
Schedule will be arranged in sections and paragraphs corresponding to the
lettered and numbered sections and paragraphs contained in this Section 3.1.
The Sellers Disclosure Schedule constitutes an exception to each warranty or
representation set forth in this Section 3.1, whether or not such warranty or
representation specifically refers to the Sellers Disclosure Schedule,
accordingly each warranty or representation set forth in this Section 3.1 is
deemed to be preceded by the clause: "Except as set forth in the Sellers
Disclosure Schedule..."
(a) Qualification. Each Seller has the power and authority to own
his or her properties and assets and carry on his or her business and
affairs as currently conducted.
(b) Authority Relative to Agreement. Each Seller has the power and
authority to execute and deliver this Agreement. Each Seller has power and
authority to perform this Agreement and to consummate the transactions
contemplated on the part of such Seller hereby. To each Seller's
knowledge, no proceeding on the part of such Seller, and, except for those
approvals described in Exhibit 3.1(b) to this Agreement, no notice,
consent, authorization, order or approval of, filing or registration with,
any governmental commission, board or other regulatory body or any bank,
bonding company, lender, surety, customer, supplier, or any other person
whatsoever is required for or in connection with the execution and delivery
of this Agreement by such Seller. To each Seller's knowledge, no
proceeding on the part of such Seller, and no notice, consent,
authorization, order or approval of, filing or registration with, any
governmental commission, board or other regulatory body or any bank,
bonding company, lender, surety, customer, supplier, or any other person
whatsoever is required for or in connection with the performance of this
Agreement by such Seller and the consummation by such Seller of the
transactions contemplated hereby. This Agreement has been duly executed
and delivered by each Seller and is a valid and binding Agreement of such
Seller, enforceable against such Seller in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws relating to
creditors' rights generally or general principles of equity (whether
considered in a proceeding in equity or at law) or by public policy
applicable to securities laws.
(c) Non-Contravention. To each Seller's knowledge, except as
provided in Exhibit 3.1(c) to this Agreement, the execution, delivery and
performance of this Agreement by such Seller does not, and the consummation
by such Seller of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation, or acceleration of any obligation or to the loss of a
material benefit under, or
CSI Purchase and Sale Agreement/Page 7
<PAGE> 14
result in the creation or imposition of any material lien, charge, pledge,
security interest or other encumbrance upon any of the property or assets
of any of the Companies pursuant to any provision of, any mortgage, lien,
lease, agreement, license, instrument, law, ordinance, regulation, order,
arbitration award, judgment or decree to which any of the Companies is a
party or by which any of the Companies' respective assets are bound. To
each Seller's knowledge, except as provided in Exhibit 3.1(c) to this
Agreement, the execution, delivery and performance of this Agreement by
each Seller does not and the consummation by such Seller of the
transactions contemplated hereby will not violate or conflict with any
other restriction of any kind or character to which any Company is subject
or by which the Companies' respective assets may be bound.
(d) Ownership of Company Common Stock. Each Seller is, and on the
Closing Date and the Escrow Closing Date will be, the record and
beneficial owner of the number of CSI Shares or Investment Interests, as
the case may be, set forth opposite such Seller's name on Exhibit 3.1(d) to
this Agreement. Each Seller is the record and beneficial owner of his or
her shares of such capital stock or membership interests, as the case may
be, free and clear of all liens, claims, encumbrances and rights of others
of any nature whatsoever, with full power to vote all such shares on any
matter that may properly come before shareholders or members, as the case
may be, of the Companies, and the Seller may exercise such voting power on
any matter without violation of the rights of any person. There are no
rights, warrants or options outstanding with respect to the capital stock
or membership interests, as the case may be, owned by such Seller and
Seller has no obligation to deliver capital stock or membership interests,
as the case may be, of the Companies or any of their respective
Subsidiaries to any person as of the date hereof, at any time on or prior
to the Escrow Closing Date, thereafter or as a result thereof or in
connection therewith except as provided in this Agreement.
(e) Restricted Securities.
(1) Each Seller acknowledges that the shares of TMS Common Stock
which Seller may acquire pursuant to this Agreement have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), and, if acquired pursuant to this Agreement, are
being acquired for each Seller's own account. If acquired pursuant to
this Agreement, the TMS Common Stock will be subject to Article 8
below.
(2) Each Seller has the knowledge and experience in financial
and business matters to enable him or her to evaluate the merits and
risks of approving this Agreement and the transactions contemplated
herein, and, if applicable, acquiring shares of TMS Common Stock.
(3) Each Seller is able to bear the economic risks of his or her
investment in the TMS Common Stock, if any, including the risk of a
complete loss of the value of TMS Common Stock.
CSI Purchase and Sale Agreement/Page 8
<PAGE> 15
(4) Each Seller has been represented by legal counsel in this
transaction and such Seller and his or her representatives, including
such counsel, have been given the opportunity to ask questions of, and
receive answers from, the officers of the Buyer concerning the terms
of the transactions contemplated by this Agreement and the affairs and
the business and financial condition of the Buyer.
(5) Each Seller has received a confidential private placement
memorandum concerning the Buyer and an investment in shares of TMS
Common Stock, and each Seller and his or her representatives have been
given such access to all documents, books and additional information
concerning Buyer which they have requested regarding Buyer.
(6) Each Seller has conducted such investigations by himself or
herself and through his or her representatives in making a decision to
enter into this Agreement and the transactions contemplated in Article
1 herein as such Seller has deemed necessary and advisable.
(7) Each Seller acknowledges and agrees that the TMS Common
Stock issued to such Seller, if any, may not be disposed of except in
accordance with the provisions of Article 8 hereof and the applicable
Registration Rights Agreement.
(8) None of the representations made by the Sellers in this
Section 3.1(e) shall affect any of Seller's rights under any other
section of this Agreement.
3.2 REPRESENTATIONS AND WARRANTIES OF SELLERS AND CSI; EXHIBIT 3.2.
Daniel N. Hargett, Sr. and CSI, jointly and severally, represent and warrant
to Buyer that the statements contained in Exhibit 3.2 attached hereto are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date and the Escrow Closing Date (as though made
then and as though such dates were substituted for the date of this Agreement
throughout Exhibit 3.2) except as otherwise set forth in the disclosure
schedule delivered by Daniel N. Hargett, Sr. and CSI to Buyer on the date
hereof and initialed by the parties hereto (the "CSI Disclosure Schedule").
The CSI Disclosure Schedule will be arranged in sections and paragraphs
corresponding to the lettered and numbered sections and paragraphs contained in
Exhibit 3.2. The CSI Disclosure Schedule constitutes an exception to each
warranty or representation set forth in Exhibit 3.2, whether or not such
warranty or representation specifically refers to the CSI Disclosure Schedule,
accordingly each warranty or representation set forth in Exhibit 3.2 is deemed
to be preceded by the clause: "Except as set forth in the CSI Disclosure
Schedule..."
3.3 REPRESENTATIONS AND WARRANTIES OF SELLERS AND HARGETT; EXHIBIT 3.3.
Daniel N. Hargett, Sr. and Hargett, jointly and severally, and Richard L.
Hargett and Hargett, jointly and severally, represent and warrant to Buyer that
the statements contained in Exhibit 3.3 attached hereto are correct and
complete as of the date of this Agreement and will be correct and complete as
of the Closing Date and the Escrow Closing Date (as though made then and as
though such dates were substituted for the date of this Agreement throughout
Exhibit 3.3), except as otherwise
CSI Purchase and Sale Agreement/Page 9
<PAGE> 16
set forth in the disclosure schedule delivered by Daniel N. Hargett, Sr.,
Richard L. Hargett and Hargett to Buyer on the date hereof and initialed by the
parties hereto (the "Hargett Disclosure Schedule"). The representations of
Daniel N. Hargett, Sr. and Richard L. Hargett are made severally and each of
them is not making any representation or warranty regarding any other Seller.
The Hargett Disclosure Schedule will be arranged in sections and paragraphs
corresponding to the lettered and numbered sections and paragraphs contained in
Exhibit 3.3. The Hargett Disclosure Schedule constitutes an exception to each
warranty or representation set forth in Exhibit 3.3, whether or not such
warranty or representation specifically refers to the Hargett Disclosure
Schedule, accordingly each warranty or representation set forth in Exhibit 3.3
is deemed to be preceded by the clause: "Except as set forth in the Hargett
Disclosure Schedule..."
3.4 REPRESENTATIONS AND WARRANTIES OF SELLERS AND INVESTMENTS; EXHIBIT
3.4. Daniel N. Hargett, Sr. and Investments, jointly and severally, and Yvette
Hargett and Investments, jointly and severally, represent and warrant to Buyer
that the statements contained in Exhibit 3.4 attached hereto are correct and
complete as of the date of this Agreement and will be correct and complete as
of the Closing Date and the Escrow Closing Date (as though made then and as
though such dates were substituted for the date of this Agreement throughout
Exhibit 3.4), except as otherwise set forth in the disclosure schedule
delivered by Daniel N. Hargett, Sr., Yvette Hargett and Investments to Buyer on
the date hereof and initialed by the parties hereto (the "Investments
Disclosure Schedule"). The Investments Disclosure Schedule will be arranged in
sections and paragraphs corresponding to the lettered and numbered sections and
paragraphs contained in Exhibit 3.4. The representations of Daniel N. Hargett,
Sr. and Yvette Hargett are made severally and each of them is not making any
representation or warranty regarding any other Seller. The Investments
Disclosure Schedule constitutes an exception to each warranty or representation
set forth in Exhibit 3.4, whether or not such warranty or representation
specifically refers to the Investments Disclosure Schedule, accordingly each
warranty or representation set forth in Exhibit 3.4 is deemed to be preceded by
the clause: "Except as set forth in the Investments Disclosure Schedule..."
3.5 REPRESENTATIONS AND WARRANTIES BY THE BUYER. The Buyer represents and
warrants to the Sellers and the Companies that the statements contained in this
Section 3.5 are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date and the Escrow Closing Date (as
though made then and as though such dates were substituted for the date of this
Agreement throughout this Section 3.5), except as set forth in the disclosure
schedule delivered by the Buyer to the Sellers and Investments on the date
hereof and initialed by the parties hereto (the "Buyer Disclosure Schedule").
The Buyer Disclosure Schedule will be arranged in sections and paragraphs
corresponding to the lettered and numbered sections and paragraphs contained in
this Section 3.5.
(a) Organization and Qualification, etc. The Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, has corporate power and authority and, to the knowledge
of Buyer, all licenses, permits, titles and authorizations necessary, to
own all of its properties and assets and to carry on its business as it is
now being conducted and is duly qualified to do business and is in good
standing in
CSI Purchase and Sale Agreement/Page 10
<PAGE> 17
each jurisdiction as set forth in Schedule 3.5(a) of the Buyer Disclosure
Schedule where, to the reasonable belief of Buyer, such qualification is
appropriate. The copies of the Buyer's Certificate of Incorporation and
Bylaws, as amended to date, which have been delivered to Sellers are
complete and correct, and such instruments, as so amended, are in full
force and effect at the date hereof.
(b) Capital Stock. The entire authorized capital of Buyer consists
of 25,000,000 shares of capital stock which is divided into (1) 3,000,000
shares of restricted common stock having a par value of $.001 per share,
(ii) 20,000,000 shares of common stock having a par value of $.001 per
share (i.e., TMS Common Stock), and (3) 2,000,000 shares of preferred stock
having a par value of $.001 per share. As of the date hereof, 1,256,000
shares of TMS Common Stock are validly issued and outstanding, fully paid
and non-assessable. No shares of the capital stock of Buyer have been
issued in violation of the preemptive rights of any past or present
shareholder. Except as set forth in Schedule 3.5(b) of the Buyer
Disclosure Schedule, there are no outstanding subscriptions, shares of
capital stock, calls, warrants, options, contracts, commitments, or demands
relating to the capital stock of Buyer or other agreements of any character
under which Buyer would be obligated to issue or purchase shares of its
capital stock. There is no voting agreement, voting trust, proxy or other
agreement or understanding with respect to the voting of the capital stock
of Buyer. Buyer has no commitments to issue or sell any securities or
obligations convertible into or exchangeable for, or giving any person any
right to subscribe for or acquire from Buyer, any shares of its capital
stock and no securities or obligations evidencing any such rights are
outstanding, except as set forth in Schedule 3.5(b).
(c) Subsidiaries, etc. Buyer does not own of record or beneficially,
directly or indirectly, (1) any shares of outstanding capital stock or
securities convertible into capital stock of any other corporation or (2)
any participating interest in any partnership, joint venture or other
non-corporate business enterprise. Except as described on Schedule 3.5(c)
of the Buyer Disclosure Schedule, neither Buyer nor any subsidiary of Buyer
owns or has any right or obligation to acquire any class of securities
(including, without limitation, debt securities) issued by any person or
company, and neither Buyer nor any subsidiary of Buyer is a party to or
bound by any partnership, joint venture, or voluntary association with any
person for the conduct of any business.
(d) Authority Relative to Agreement. Buyer has the corporate power
and authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated on the part of Buyer hereby. The
execution and delivery by Buyer of this Agreement and the consummation by
Buyer of the transactions contemplated on its part hereby have been duly
authorized by its Board of Directors. No other corporate proceedings on
the part of Buyer are necessary to authorize the execution and delivery of
this Agreement by Buyer. Except for corporate action related to the IPO,
no other corporate proceedings on the part of Buyer are necessary to
authorize the performance of this Agreement by Buyer or the consummation by
Buyer of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Buyer and is enforceable against Buyer in
accordance
CSI Purchase and Sale Agreement/Page 11
<PAGE> 18
with its terms, except as enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws
relating to creditors' rights generally or general principles of equity
(whether considered in a proceeding in equity or at law) or by public
policy applicable to securities laws.
(e) Non-Contravention. The execution, delivery and performance of
this Agreement by Buyer do not and the consummation by Buyer of the
transactions contemplated hereby will not (1) violate any statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other restriction of any government, government agency, or court to which
Buyer or any of its assets is subject or (2) violate any provision of the
Certificate of Incorporation or Bylaws of Buyer, or (3) violate or result
in, with the giving of notice or the lapse of time or both, the violation
of any provision of, or result in the acceleration of or entitle any party
to terminate or accelerate (whether after the giving of notice or lapse of
time or both) any obligation under, or result in the creation or imposition
of any lien, charge, pledge, security interest or other encumbrance upon
any of the property of Buyer pursuant to any provision of any mortgage,
lien, lease, agreement, contract, license, or instrument to which Buyer is
a party or by which any of its assets is bound.
(f) Approvals. Except for the declaration of effectiveness of the
registration statement ("Registration Statement") filed in connection with
Buyer's IPO by the U.S. Securities and Exchange Commission ("SEC") pursuant
to the Securities Act, and the consents and approvals required pursuant to
state securities laws with respect to the IPO, and except as set forth in
Schedule 3.5(f) of the Buyer Disclosure Schedule, no notice, consent,
authorization, order or approval of, or filing or registration with, any
governmental commission, board or other regulatory body or any other person
is required for or in connection with the execution, delivery and
performance of this Agreement and the consummation by Buyer of the
transactions contemplated hereby.
(g) Litigation. There are no actions, claims, proceedings,
arbitrations or governmental investigations pending against, relating to or
affecting Buyer or any of its assets or properties at law or in equity,
before or by any federal, state, or municipal court, agency or other
governmental entity, or by any other person nor, to Buyer's knowledge, are
any such matters threatened.
(h) Brokers. Other than McFarland Grossman & Company, Inc., all
negotiations relative to this Agreement and the transactions contemplated
hereby have been carried out by Buyer directly with Sellers and the
Companies, without the intervention of any person on behalf of Buyer in
such manner as to give rise to any valid claim by any person against Buyer
for a finder's fee, brokerage commission, or similar payment.
(i) Investment Intent.
CSI Purchase and Sale Agreement/Page 12
<PAGE> 19
(a) Buyer is acquiring the CSI Shares and the Investments
Interests solely for the purpose of investment, for its own account
and not with a view to or for sale in connection with any distribution
thereof within the meaning of Section 2(11) of the Securities Act.
Buyer acknowledges that the CSI Shares and the Investments Interests
are being sold to Buyer by each of the Sellers in reliance upon one or
more exemptions from registration contained in the Securities Act and
applicable state securities laws. The reliance by Sellers upon such
exemptions is based in part upon the representations set forth in this
Section 3.5(i).
(b) Buyer understands that the CSI Shares and the Investments
Interests have not been registered under the Securities Act, that it
has no right to demand the registration of the CSI Shares or the
Investments Interests under the Securities Act to permit them to be
resold, that there is no assurance that CSI or Investments will file
any such registration in the future, that there is no established
market for the CSI Shares or the Investments Interests and that there
is no likelihood one will develop. Buyer understands and agrees that
the CSI Shares and the Investments Interests must be held indefinitely
and cannot be transferred unless they are subsequently registered
under the Securities Act or an exemption from such registration is
available with respect to such transfer.
(c) Buyer has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks
of an investment in the CSI Shares and the Investments Interests and
of making an informed investment decision.
(d) Buyer is able to bear the economic risk of its investment in
the CSI Shares and the Investments Interests, to hold the CSI Shares
and the Investments Interests for an indefinite period of time and to
afford a complete loss of its investment in the CSI Shares and the
Investments Interests.
(e) Buyer and its representatives have been given access to all
documents, books and additional information concerning CSI, Hargett
and Investments which they have requested.
(f) Buyer has been represented by legal counsel in this
transaction and Buyer and its representatives, including such counsel,
have been given the opportunity to ask questions of, and receive
answers from, the officers of CSI concerning the terms of the
transactions contemplated by this Agreement and the affairs and the
business and financial condition of CSI, Hargett and Investments.
CSI Purchase and Sale Agreement/Page 13
<PAGE> 20
(g) Buyer has conducted such investigations in making a decision
to enter into this Agreement and the transactions contemplated in
Article I herein as Buyer has deemed necessary and advisable.
(h) None of the representations made by Buyer in this Section
3.5(i) shall affect any of Buyer's rights under any other section of
this Agreement.
(i) Buyer Offering Documents. Buyer has delivered to each of
the Sellers a confidential private placement memorandum, and will
deliver to each of the Sellers prior to the Closing Date a copy of any
registration statement prepared by it, in the form (including exhibits
and any amendments thereto) filed with the SEC (collectively, the
"Buyer Offering Documents"). As of their respective dates, the Buyer
Offering Documents (i) were prepared in all material respects in
accordance with the applicable requirements of the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations thereunder, and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made,
not misleading.
ARTICLE 4
ADDITIONAL COVENANTS AND AGREEMENTS
4.1 CONDUCT OF BUSINESS. During the period from the date hereof to the
Closing Date, except as otherwise contemplated by this Agreement, Sellers shall
use reasonable efforts to cause each of the Companies to, and each of the
Companies shall use reasonable efforts to, conduct its operations according to
its ordinary and usual course of business, subject to the foregoing, to
preserve substantially intact its business organization, keep available the
services of its officers and employees, and maintain its present relationships
with licensors, suppliers, distributors, customers and others having
significant business relationships with it. Representatives of the Companies
will confer with representatives of Buyer to keep it informed with respect to
the general status of the on-going operations of the business of such Company.
Without limiting the generality of the foregoing, Sellers will use reasonable
efforts to cause each of the Companies to:
(a) carry on its business in substantially the same manner as
heretofore carried on and not introduce any material new method of
management, operation or accounting, nor provide discounted services
outside the ordinary course of business;
(b) maintain its properties, facilities, equipment and other
assets, including those held under leases, in good working order,
condition and repair, ordinary wear and tear excepted;
(c) perform all of its obligations under all debt and lease
instruments and other agreements relating to or affecting its
business, assets, properties, equipment and rights, and
CSI Purchase and Sale Agreement/Page 14
<PAGE> 21
pay all vendors, suppliers, and other third parties (including
mechanics and materialmen) as and when their bills are payable in the
ordinary course of business and pay in full all payroll obligations
when due;
(d) maintain its present debt and lease instruments (unless same
are otherwise mature) and refrain from entering into new or amended
debt or lease instruments (other than expansion of CSI's existing line
of credit with Iberia Savings Bank ("ISB") which CSI is currently
negotiating) without prior written consent of Buyer;
(e) not incur any indebtedness other than ordinary trade
accounts payable in the ordinary course of business and other than
borrowings under the ISB line of credit;
(f) keep in full force and effect its present insurance policies
or other comparable insurance coverage;
(g) use reasonable efforts to maintain and preserve its business
organization intact, retain its present employees and maintain its
relationship with suppliers, customers and others having business
relations with such Company;
(h) refrain from effecting any change in the certificate of
incorporation, certificate of organization , bylaws, regulations (or
other organizational document) or capital structure of the Company and
refrain from entering into or agreeing to enter into any merger or
consolidation by the Company with or into, and refrain from acquiring
all or substantially all of the assets, capital stock or business of,
any person, corporation, partnership, association or other business
organization or division of any thereof, provided that nothing herein
shall prohibit the contemplated acquisition by CSI of the capital
stock of Hargett;
(i) refrain from incurring any expenditures outside the normal
course of business, including any capital expenditures (or series of
related expenditures) in excess of $50,000, without prior written
notification to Buyer, except capital expenditures related to the
installation of two Bingham pump packages below deck and a moon pool
on M/V Discovery;
(j) refrain from starting or acquiring any new businesses which
might reasonably be expected to have a material adverse effect on the
value of any Company, without prior written notification to Buyer;
(k) other than in the normal course of business, refrain from
increasing its present salaries and commission levels for all
officers, directors, managers, employees or agents, refrain from
entering into an employment agreement except in the ordinary course of
business, and refrain from entering into any collective bargaining
agreement; and
(l) refrain from declaring or paying any fees, commissions or
loans outside the ordinary course of business, and refrain from
declaring or paying any bonuses except (i) bonuses under any Company's
existing contractual commitments to Gerald F. Palliser, Sr.
CSI Purchase and Sale Agreement/Page 15
<PAGE> 22
and (ii) discretionary bonuses to officers and employees to the extent
that the aggregate amount of all such discretionary bonuses paid or
declared during 1997 do not exceed, in the aggregate, 10% of the
Company's pre- tax net income during 1997 through the date of the
latest such payment; and
(m) refrain from declaring or paying any dividends or
distributions to any shareholders or members, as the case may be
(including Sellers), directors, managers, sales agents, employees or
other personnel, except for (i) any open account debt from any Seller
in favor of any Company, (ii) the Excluded Assets, and (iii) any other
dividends and distributions to shareholders paid or declared after
June 30, 1997 which in the aggregate do not exceed 42% of the
Company's pre-tax net income during 1997 through the date of the
latest such distribution.
(n) promptly notify Buyer of the receipt by them or the Company
of any notice or claim, written or oral, of (a) default or breach by
the Company under, or of any termination (other than at the end of the
stated term thereof) or cancellation, or threat of termination (other
than at end of the stated term thereof) or cancellation, of any
contract, lease, permit or license (or series of related agreements,
contracts, leases, permits and licenses ) involving more than $50,000
to which the Company or its subsidiaries as set forth on the
Disclosure Schedules hereto is a party or by which any of them is
bound, (b) any loss of, damage to or disposition of, any of the
properties, assets or the products of the Company of a value of
$50,000 or more, singly or in the aggregate (other than the sale or
use in the ordinary course of business), (c) any claim or litigation
threatened or instituted, or any other adverse event or occurrence
involving or affecting the Company or its assets, properties,
operations, businesses or employees, and (d) any proposal made by any
third party received by the Company or of which any Seller obtains
knowledge in respect of any sale or other disposition, direct or
indirect, of the assets (other than the sale or use of inventories in
the ordinary course of business), businesses or outstanding capital
stock or other ownership or voting interests of the Company;
(o) comply with and cause to be complied with all applicable
laws, rules, regulations and orders of all federal, state and local
governments or governmental agencies affecting or relating to the
Company or its assets, properties, operations, businesses or employees
except where the failure to comply will not have a material adverse
effect on the Company;
(p) except as provided in Section 4.1(m) hereof, refrain from
any sale, disposition, distribution or encumbrance of any of its
properties or assets (except the Excluded Assets) and refrain from
entering into any agreement or commitment with respect to any such
sale, disposition, distribution or encumbrance (other than sales in
the ordinary course of business);
(q) refrain from any purchase or redemption of any capital stock
or other voting interest of the Company and refrain from issuing any
capital stock or other voting interest,
CSI Purchase and Sale Agreement/Page 16
<PAGE> 23
provided that nothing herein shall prohibit the contemplated
acquisition by CSI of the capital stock of Hargett;
(r) refrain from making any change in any accounting principle,
classification, policy or practice;
(s) manage working capital in the ordinary course consistent
with past practice and except as consistent with past practice,
refrain from providing any discounted services or products,
discounting any receivables or taking any action to accelerate payment
of any receivable prior to its due date; and
(t) without notice to Buyer, refrain from entering into any
contract, lease, undertaking, commitment, mortgage, indenture, note,
security agreement, license or other agreement outside the ordinary
course of business (a) involving the receipt or expenditure of more
than $50,000 over the term thereof, (b) containing provisions calling
for the sale or purchase of products or services at prices that vary
from the Company's customary prices of such products or services, (c)
which include "meet or release", "most favored nations" or similar
pricing or delivery arrangements, (d) with any officer, director,
shareholder or affiliate of the Company, (e) requiring the Company to
indemnify or hold harmless any other person or entity, (f) evidencing
any warranty obligation of the Company with respect to services or
products sold or leased by it (other than warranties given in the
normal course of business containing substantially the same terms as
those presently in effect), or (g) imposing on the Company any
confidentiality, non-disclosure or non-compete obligation.
4.2 ACCESS TO INFORMATION. Until the Closing Date or termination of
this Agreement, Sellers will furnish to Buyer unaudited monthly financial
statements of CSI and Hargett in a form consistent with the past practices of
such Company for each month following May 1997 promptly as available, but in no
event more than 20 days following the end of such month. Buyer may prior to
the Closing have access to the business and properties of the Companies and
information concerning their financial and legal condition as Buyer deems
necessary or advisable in connection with the consummation of the transactions
contemplated hereby, provided that such access shall not interfere with normal
operations of the Companies. Sellers and the Companies agree to permit Buyer
and its authorized representatives, or cause them to be permitted to have,
after the date hereof and until the Closing Date, full access to the premises,
books and records of the Companies during normal business hours, and the
officers of the Companies will furnish Buyer with such financial and operating
data and other information with respect to the business and properties of the
Companies as Buyer shall from time to time reasonably request; provided Buyer
shall promptly notify the Sellers in the event that information comes to the
attention of Buyer which would indicate that any of the representations and
warranties of Sellers and the Companies are incorrect.
(b) From the date hereof through the Closing Date, Buyer will provide
the Companies and Sellers with prompt written notice of any material adverse
change in the financial condition, results of operations, business or prospects
of Buyer. From the date hereof through the Closing Date,
CSI Purchase and Sale Agreement/Page 17
<PAGE> 24
the Companies will provide Buyer with prompt written notice of any material
adverse change in the financial condition, results of operations, business or
prospects of any of the Companies.
4.3 AMENDMENT TO DISCLOSURE SCHEDULES. Each party hereto agrees that,
with respect to the representations and warranties of such party contained in
this Agreement, such party shall have the continuing obligation until Closing
to supplement or amend promptly each of the CSI Disclosure Schedule, the
Hargett Disclosure Schedule , the Investments Disclosure Schedule, the Sellers
Disclosure Schedule and the Buyer Disclosure Schedule (individually a
"Disclosure Schedule" and collectively, the "Disclosure Schedules") with
respect to any matter that would have been or would be required to be set forth
or described in the Disclosure Schedules in order to not materially breach any
representation, warranty or covenant of such party contained herein. For all
purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Section 5.1 and Section 5.2
have been fulfilled, the Disclosure Schedules hereto shall be deemed to be the
Disclosure Schedules as amended or supplemented pursuant to this Section. In
the event that Buyer, any Company or Sellers seeks to amend or supplement a
Disclosure Schedule pursuant to this Section 4.3 and, if such amendment or
supplement to a Disclosure Schedule proposed by Buyer constitutes or reflects,
in the reasonable judgment of Sellers, individually or in the aggregate, a
materially adverse change to the business or assets of the Buyer, or an
amendment or supplement to a Disclosure Schedule proposed by any of the
Companies or Sellers constitutes or reflects, in the reasonable judgment of
Buyer, individually or in the aggregate, a material adverse change to the
business or assets of the Companies, the Sellers or the Buyers, respectively,
may elect to terminate this Agreement, in which case this Agreement shall be
deemed terminated by mutual written consent as set forth in Section 6.1(a)
hereof.
4.4 CONFIDENTIALITY. The provisions of this Section 4.4 shall supersede
and replace all prior agreements and understandings of the parties with respect
to the subject matter hereof.
(a) Confidential Information. Until the closing of the transactions
contemplated herein, all Confidential Information, as hereinafter defined,
acquired by Buyer with respect to Sellers or the Companies, or by Sellers
or the Companies with respect to Buyer, shall be (i) maintained in strict
confidence, (ii) used only for the purpose of and in connection with
evaluating the transactions contemplated herein, and (iii) disclosed only
to employees and duly authorized agents and representatives who have been
informed of the obligations of the parties under this Agreement with
respect to such Confidential Information, who have a need to know the
information in connection with consummating the transactions contemplated
herein, and who agree to keep such information confidential. Buyer,
Sellers and the Companies shall be responsible for any breach of this
Section by any of their respective representatives and each agrees to take
all reasonable measures to restrain its representatives from prohibited or
unauthorized disclosure of the Confidential Information. For the purpose
of this Agreement, the term "Confidential Information" shall mean all
information acquired by any party from another party hereto or its
representatives pursuant to Section 4.2 hereof or otherwise with respect to
the business or operations of such other party, other than (A) information
generally available to the public which has not become available as a
result of disclosure in violation of this Section and (B) information which
becomes available on a
CSI Purchase and Sale Agreement/Page 18
<PAGE> 25
nonconfidential basis from a source other than a party to this Agreement or
its representatives, provided that such source is not known by the party to
this Agreement receiving such information to be bound by a confidentiality
agreement or other obligation of secrecy to another party to this Agreement
or its representatives. If the transactions contemplated herein are not
consummated, all Confidential Information in written or printed or other
tangible form (whether copies or originals) shall be returned to the party
of origin, and all documents, memoranda, notes and other writings
whatsoever prepared by any party or its representatives based on
Confidential Information shall be destroyed.
(B) PUBLIC ANNOUNCEMENTS. No press release, public announcement,
confirmation or other information regarding this Agreement or the contents
hereof shall be made by Buyer, Sellers or the Companies without the prior
consultation of the Buyer and the Companies, except as may be necessary in
the opinion of counsel to any party to meet the requirements of any
applicable law or regulations, the determination of any court, or the
requirements of any stock exchange on which the securities of such party
may be listed. Notwithstanding the foregoing, each Company may make
appropriate disclosures of the general nature of the transaction
contemplated hereby to its employees, vendors and customers to protect such
Company's goodwill and to facilitate the consummation of the transactions
contemplated hereby, and Buyer may disclose pertinent information regarding
the transaction contemplated hereby to its existing and prospective
investors, lenders or investment bankers or financial advisors for the
purposes of obtaining financing (including the contemplated IPO). Buyer
may also make appropriate disclosures of the general nature of the
transaction contemplated hereby and the identity, nature and scope of the
Companies' operations to prospective acquisition candidates in its efforts
to attract additional acquisitions for Buyer. Buyer may also make
appropriate disclosure as required in connection with any registration
statement or confidential information memorandum prepared by Buyer. Buyer
and the Companies shall jointly approve the contents of any press releases,
written employee presentations, or other materials of potentially wide
distribution that disclose or refer to the transaction contemplated hereby,
except for such press releases or other communications required by law.
4.5 PRINCIPAL OFFICE. Buyer agrees that it will maintain the principal
office of CSI (or Buyer's division operating CSI's assets) at 2205 West
Pinhook, Lafayette, Louisiana for a period of 12 months after the Closing Date,
and represents and warrants to the Sellers that it has no present plans or
intentions to move such principal office after such time.
4.6 EXCLUSIVITY. After the signing of this Agreement, until December 31,
1997 or the earlier termination of the Agreement, Sellers shall not (i)
solicit, initiate, or encourage the submission of any proposal of offer from
any person or entity relating to the acquisition of any capital stock or other
voting securities, or any substantial portion of the assets of the Companies
(including any acquisition structured as a merger, consolidation, or share
exchange) or (ii) participate in any negotiations or discussions regarding,
furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any person or entity in
favor of such acquisition structured as a stock purchase, sale of assets,
merger, consolidation, or share
CSI Purchase and Sale Agreement/Page 19
<PAGE> 26
exchange. Sellers will (and shall cause the Companies to) notify Buyer if any
person or entity makes any proposal, offer, inquiry, or contact with respect to
any of the foregoing.
4.7 RELEASE OF SELLERS' GUARANTEES. At or prior to the Closing Date,
Buyer will use its best efforts to obtain the release of Sellers and their
respective affiliates, heirs, successors and assigns from any and all personal
guarantees previously given by Sellers to secure the long-term debt obligations
(as defined in Section 2.1(d) hereof) of any Company, the obligations of any
Company to Iberia Savings Bank or the performance bonds of any Company. In the
event that Buyer is unable to obtain such releases from any of the Companies'
lenders, at the Closing Buyer shall cause such Company to pay off or otherwise
retire all of such Company's indebtedness up to a maximum of $5,500,000.
4.8 SELLERS' RELEASE OF CLAIMS. Effective as of the Closing Date, except
as provided herein, the Sellers do hereby (i) release, acquit and forever
discharge each of the Companies and each of their respective subsidiaries that
are listed on the Disclosure Schedules (all of such subsidiaries of the
Companies being referred to collectively as the "Company Subsidiaries") from
any and all liabilities, obligations, indebtedness, claims, demands, actions or
causes of action arising from or relating to any event, occurrence, act,
omission or condition occurring or existing on or prior to Closing, including,
without limitation, any claim for indemnity or contribution from the Companies
or the Company Subsidiaries in connection with the obligations or liabilities
of the Sellers hereunder, except for indemnification to which a Seller may be
entitled as an officer, director, employee or agent of a Company, and salary
and benefits payable to a Seller as an employee in the ordinary course of
business; (ii) waive all breaches, defaults or violations of each agreement to
which such Seller is a party, if any, applicable to the CSI Shares or any of
the Companies, and agree that any and all such agreements are terminated as of
Closing, and (iii) waive any and all preemptive or other rights to acquire any
shares of capital stock of (or other equity interest in) any of the Companies
and release any and all claims arising in connection with any prior default,
violation or failure to comply with or satisfy any such preemptive or other
rights.
4.9 REAL ESTATE MATTERS.
(a) Title Insurance Commitments. Buyer, in its sole discretion, may
elect to obtain title insurance with respect to any or all real estate that
any of the Companies owns or leases as listed on the Disclosure Schedules
delivered in connection with this Agreement (the "Title Insurance
Property"). If Buyer elects to obtain such title insurance, it shall
notify Sellers in writing on or before August 29, 1997, and Sellers will
cause the Companies to obtain and deliver to Buyer (at Buyer's expense), as
soon as practicable, and in any event on or before September 15, 1997,
commitments for title insurance ("Title Commitments") issued by title
insurance company(ies) reasonably acceptable to Buyer with respect to the
Title Insurance Property, Surveys (defined below) of the Title Insurance
Property prepared by surveyors reasonably acceptable to the Buyer and one
set of legible copies of title exception documents with respect to any
exceptions set forth in the commitments. The Title Commitments shall set
forth the status of title to the Title Insurance Property together with all
exceptions or conditions to such title, including, but not limited to, all
easements,
CSI Purchase and Sale Agreement/Page 20
<PAGE> 27
restrictions, rights-of-way, covenants, reservations and all other
encumbrances affecting the Title Insurance Property which would appear in
an Owner's Policy of Title Insurance (as defined below), if issued (such
matters, "Title Commitments Exceptions"). The Title Commitments shall
contain the express commitment of the title underwriter to issue the
Owner's Policies of Title Insurance to the Companies with the standard
printed exceptions endorsed or deleted in accordance with this Section 4.9.
(b) Surveys. With respect to each Title Insurance Property, Sellers
will cause the Companies, at Buyer's expense, to procure in preparation for
the Closing a current survey of such real property, prepared by a licensed
surveyor and conforming to current ALTA Minimum Detail Requirements for
Land Title Surveys, disclosing the location of all improvements, easements,
party walls, sidewalks, roadways, utility lines, and other matters shown
customarily on such surveys, and showing access affirmatively to public
streets and roads (the "Surveys"). The Surveys shall disclose any survey
defect or encroachment from or onto the real property.
(c) Title Insurance Policies. On the Closing Date, if Buyer has
elected to obtain title insurance as set forth in Section 4.9(a), the
Companies shall deliver to Buyer, at Buyer's expense, title insurance
policies ("Policies of Title Insurance") with respect to the Title
Insurance Property, in an amount reasonably acceptable to Buyer, but in no
event greater than the values of the real property to be insured, issued by
the title insurance company(ies) that issued the Title Commitments, subject
to the Title Commitments Exceptions. The Policies of Title Insurance may
be subject to the Title Commitments Exceptions but shall contain no
additional exceptions other than the standard preprinted exceptions
provided that (i) the standard preprinted survey exception, if any, shall
be revised to read "shortages in area" only, (ii) there shall be no
exception as to easements, or claims of easements, not shown by the public
records, nor any exception as to parties in possession, and (iii) the
exception as to the lien for taxes will be limited to the year in which the
Closing occurs. The Policies of Title Insurance delivered under this
Section 4.9 shall insure title to the real property and all recorded
easements benefitting such real property.
(d) Phase I Environmental Assessment. The Sellers will cause the
Companies to obtain and deliver to Buyer, as soon as practicable, and in
any event on or before September 22, 1997, a Phase I environmental
assessment prepared by environmental engineers reasonably acceptable to
Buyer with respect to all of the real estate owned or leased by the
Companies listed on the Disclosure Schedules delivered by the Companies
(the "Environmental Assessment Property"). Buyer shall be responsible for
one-half of the cost and expenses incurred by Sellers in obtaining such
Phase I environmental assessments. Also during the period prior to
Closing, Sellers and the Companies shall afford Buyer and its
representatives the continuing right to inspect, during the Company's
normal business hours, the Environmental Assessment Property and all books,
records, contracts, documents and other data pertaining to the use,
ownership, operation, or maintenance of the Environmental Assessment
Property (collectively with the phase I assessment, the "Studies").
CSI Purchase and Sale Agreement/Page 21
<PAGE> 28
(e) Title and Environmental Objections. If for any reason Buyer, in
its sole and absolute discretion, is not satisfied with any matter
contained in the Studies, the Surveys, or the Title Commitments or is
otherwise not satisfied with the real property owned or leased by the
Companies for any reason whatsoever, then Buyer may notify the Companies
and Sellers in writing of its objection (the "Objections") no later than
September 30, 1997 ("Objection Date"), describing with specificity the
subject real property and the Objections thereto, and, at the sole
discretion of Buyer, the Buyer may either (i) terminate this Agreement in
accordance with Section 6.1(b) hereof, (ii) proceed to Closing, the Buyer
being deemed to have approved and to have agreed to all matters contained
in the Studies, the Surveys and the Title Commitments and all other matters
affecting the real property owned or leased by the Companies, or (iii)
enter into negotiations with the Sellers to lease any real property which
is the subject of the Objections. Buyer's failure to notify Sellers and
Companies of Objections by the Objection Date shall constitute a waiver of
Buyer's right to terminate this Agreement because of the Objections or any
matters contained in the Studies, the Surveys, the Titles Commitments and
the Policies of Title Insurance or any other matter affecting the real
property owned or leased by the Companies.
(f) Expenses. Any and all expenses and other costs associated with
the Title Commitments, Surveys and Policies of Title Insurance referred to
in Sections 4.9(a), 4.9(b) and 4.9(c), respectively, and one-half of the
costs and expenses associated with the Phase I environmental assessments
referred to in Section 4.9(d) shall be the obligation of Buyer, and,
notwithstanding any provision to the contrary contained in Sections 4.9(a),
4.9(b), 4.9(c) and 4.9(d), neither Sellers nor the Companies will have any
obligation to proceed with ordering or processing any such items unless and
until Buyer shall have deposited with the Companies a sufficient amount of
funds to fully pay any and all such items requested by Buyer.
4.10 CONFIDENTIAL INFORMATION MEMORANDUM; REGISTRATION STATEMENT.
(a) Companies to Provide Information. Sellers and the Companies
shall cooperate with Buyer to promptly provide such information as
reasonably requested by Buyer to (i) prepare a confidential information
memorandum (the "Memorandum"), pursuant to Rule 506 of Regulation D
promulgated by the SEC under the Securities Act, for dissemination to
Buyer's acquisition candidates and their shareholders, and (ii) prepare and
file with the SEC the registration statement on Form S-1 (or other
appropriate Form) to be filed by Buyer under the Securities Act in
connection with its IPO (including the prospectus constituting a part
thereof, the "Registration Statement"). Buyer shall obtain all necessary
state securities law or "Blue Sky" permits and approvals required to carry
out the transactions contemplated by this Agreement, the Memorandum and the
Registration Statement.
(b) Accuracy of Information. Buyer represents and warrants that the
Memorandum or the Registration Statement, by exhibit or otherwise, will
not, at the time that such party has authorized dissemination of the
Memorandum, and at the time the Registration Statement and each amendment
and supplement thereto, if any, become effective under the Securities Act,
contain any untrue statement of a material fact or omit to
CSI Purchase and Sale Agreement/Page 22
<PAGE> 29
state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. Sellers and the Companies, respectively, shall
agree with Buyer as to the information and documents supplied by them for
inclusion in the Registration Statement and each shall indicate such
information and documents in a letter (the "Information Letter") to be
jointly prepared by Buyer, the Sellers and the Companies and delivered (i)
within fifteen days after the filing of the Registration Statement with the
SEC and (ii) prior to filing any amendment to the Registration Statement
with the SEC (other than any prospectus filed with the SEC pursuant to Rule
424(b)).
(c) Further Information. Sellers and the Companies, respectively,
shall promptly upon request, furnish Buyer with all information concerning
itself and such other matters as may be reasonably requested by Buyer in
connection with the preparation of the Memorandum, the Registration
Statement and each amendment or supplement thereto, or any other statement,
filing, notice or application made by or on behalf of each such party to
any governmental entity in connection with the transactions contemplated by
this Agreement.
(d) Indemnification. Buyer will indemnify and hold harmless Sellers,
each of the Companies, and each of their respective directors, officers and
other persons, if any, who control any of the Companies within the meaning
of the Securities Act from and against any losses, claims, damages,
liabilities or judgments, joint or several, to which they or any of them
may become subject, under the Securities Act or any state securities or
blue sky laws or otherwise, insofar as such losses, claims, damages,
liabilities, or judgments (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a
material fact contained in the Memorandum or Registration Statement, or in
any amendment or supplement thereto, or in any state application for
qualification, permit, exemption or registration as a broker/dealer, or in
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, and will reimburse each such person for any legal expenses
reasonably incurred by such person in connection with investigating or
defending any such action or claim; provided, however, that Buyer shall not
be liable, in any such case, to the extent that any such loss, claim,
damage, liability, or judgment (or action in respect thereof) arises out of
or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in the Memorandum or Registration
Statement, or any such amendment or supplement thereto, or in any such
state application, or in any amendment or supplement thereto, in reliance
upon and in conformity with information furnished in writing to Buyer by or
on behalf of the Companies or the Sellers for use therein.
4.11 CERTAIN TAX MATTERS.
(a) Tax Periods Ending on or Before the Closing Date. Buyer shall
prepare or cause to be prepared and file or cause to be filed all returns,
declarations, reports, claims for refund, or information returns or
statements relating to Taxes, including any schedule,
CSI Purchase and Sale Agreement/Page 23
<PAGE> 30
attachment, or amendment thereto ("Tax Returns") for each Company and each
of the Company Subsidiaries for all periods ending on or prior to the
Closing Date which are filed after the Closing Date. Buyer shall permit
Sellers to review and comment on each such Tax Return described in the
preceding sentence prior to filing and shall make such revisions to such
Tax Returns as are reasonably requested by Sellers.
(b) Cooperation on Tax Matters.
(i) Buyer, Company (and its Company Subsidiaries) and Sellers
shall cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the filing of Tax Returns pursuant to this
Section and any audit, litigation or other proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the other
party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and
making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
Company (and its Subsidiaries) and Sellers agree: (A) to retain all books
and records with respect to Tax matters pertinent to Company (and its
Subsidiaries) relating to any taxable period beginning before the Closing
Date until the expiration of the statute of limitations (and, to the extent
notified by Buyer or Sellers, any extensions thereof) of the respective
taxable periods, and to abide by all record retention agreements entered
into with any taxing authority; and (B) to give the other party reasonable
written notice prior to transferring, destroying or discarding any such
books and records and, if the other party so requests, Company (and its
Subsidiaries) or Sellers, as the case may be, shall allow the other party
to take possession of such books and records.
(ii) Buyer and Sellers further agree, upon request, to use their
best efforts to obtain any certificate or other document from any
governmental authority or any other person as may be necessary to mitigate,
reduce or eliminate any Taxes that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
(c) Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving each Company (and each of the
Company Subsidiaries) shall be terminated as of the Closing Date and,
after the Closing Date, none of the Companies (nor any of the Company
Subsidiaries) shall be bound thereby or have any liability thereunder.
4.12 Satisfaction of Conditions.
(a) The Companies and the Sellers, respectively, shall (i) use their
reasonable efforts to obtain, as soon as possible, all governmental approvals
required to be obtained by the Companies and make, as soon as possible, all
filings with any governmental authority required on the part of the Companies
to consummate the transactions contemplated hereby, (ii) use their reasonable
efforts to obtain, as soon as possible, all other consents to and approvals
required to be obtained by the Companies to consummate the transactions
contemplated hereby, and (iii) otherwise use their
CSI Purchase and Sale Agreement/Page 24
<PAGE> 31
reasonable efforts to satisfy the conditions set forth in Article 5 of the
Agreement to the extent that such satisfaction is within their control;
provided, however, that this Section 4.12 shall not be construed to limit the
rights of Sellers to terminate this Agreement as provided in Article 6 of the
Agreement.
(b) The Buyer shall (i) use its reasonable efforts to obtain, as soon
as possible, all governmental approvals required to be obtained by the Buyer
and make, as soon as possible, all filings with any governmental authority
required on the part of the Buyer to consummate the transactions contemplated
hereby, (ii) use its best reasonable efforts to obtain, as soon as possible,
all other consents to and approvals required to be obtained by the Buyer to
consummate the transactions contemplated hereby, and (iii) otherwise use its
reasonable efforts to satisfy the conditions set forth in Article 5 of the
Agreement to the extent that such satisfaction is within its control; provided,
however, that this Section 4.12 shall not be construed to limit the rights of
Buyer to terminate this Agreement as provided in Article 6 of this Agreement.
4.13 Buyer's IPO. Buyer shall use its best efforts to cause the
Registration Statement to become effective, and to complete its IPO, as soon as
practicable. To the extent permitted by applicable law, Buyer shall keep the
Companies informed regarding the status of Buyer's IPO.
4.14 Financing. Buyer shall use its best efforts to obtain a commitment
from a lender for approximately $25,000,000 in senior indebtedness. Buyer
shall keep the Companies informed regarding Buyer's efforts to obtain such
financing.
4.15 Indemnification of Directors and Officers of the Companies.
(a) From and after the Closing Date, Buyer agrees to indemnify, defend
and hold harmless the former directors and officers of each of the Companies
(an "Indemnified Person") from and against all losses, claims, damages,
liabilities and judgments (and related expenses including, but not limited to,
attorney's fees and amounts paid in settlement), and any action or other
proceeding in respect thereof, to which any Indemnified Person becomes subject,
based upon or arising out of actions or omissions or alleged actions or
omissions of such persons occurring (or alleged to have occurred) at or prior
to the Closing Date, to the fullest extent permitted under the Delaware
General Corporation Law or the Louisiana Business Corporation Law, as
applicable, or the certificate of incorporation, bylaws or other governing
documents of such Company as in effect on the date of this Agreement, whichever
is greater.
(b) From and after the Closing Date, Buyer shall not amend, alter or
repeal those provisions of the certificate of incorporation, bylaws or other
governing documents of any of the Companies relating to liability or
indemnification of directors and officers, except as required by law, if the
effect of such amendment, alteration or repeal would be to increase the
potential liability of a director or officer of a Company to such Company or to
its stockholders for monetary damages for breach of fiduciary duty, or to
lessen or otherwise adversely affect the indemnification rights of directors
and officers of such Company as provided in such certificate of incorporation,
bylaws or other governing documents as in effect on the date of this Agreement.
CSI Purchase and Sale Agreement/Page 25
<PAGE> 32
(c) The rights granted to the Indemnified Persons hereby shall be
contractual rights inuring to the benefit of all Indemnified Persons and shall
survive this Agreement and the Closing.
4.16 Availability of Rule 144. With a view to making available to Sellers
the benefit of Rule 144 promulgated under the Securities Act, or any successor
or other rule or regulation of the SEC which may at any time permit Sellers to
resell shares of TMS Common Stock to the public exempt from registration, Buyer
agrees (i) if TMS Common Stock has been registered under Section 12 of the
Exchange Act, and such registration is not then withdrawn or suspended, or TMS
Common Stock has been registered under the Securities Act and Buyer is subject
to the periodic reporting requirements of the Exchange Act pursuant to Section
15(d) thereof, to use its best efforts to file with the SEC in a timely manner
all reports and other documents required to be filed by an issuer of securities
registered under the Exchange Act, so as to maintain the availability of Rule
144 to Sellers; (ii) at its sole expense, upon any Seller's request, to deliver
to such Seller a certificate, signed by one of Buyer's principal officers,
stating (A) the number of shares of TMS Common Stock outstanding as shown by
the most recent report or statement published by Buyer, (B) whether Buyer has
filed the reports required to be filed under the Exchange Act for a period of
at least ninety (90) days prior to the date of such certificate and in addition
has filed the most recent annual report required to be filed thereunder, and
(C) such other or additional information as shall be reasonably necessary to
make available to such Seller the ability to offer and sell the maximum number
of shares under Rule 144; and (iii) when Rule 144 is being complied with or the
holding period applicable to any Seller under Rule 144 shall have expired, to
reissue promptly upon such Seller's request certificates evidencing shares of
TMS Common Stock held by such Seller not bearing any legend restricting
transfer of such securities (to the extent then permitted by rules, or
interpretations of the staff, of the SEC).
ARTICLE 5
CONDITIONS PRECEDENT
5.1 Conditions Precedent to the Obligations of the Buyer. The obligations
of the Buyer under this Agreement are subject to the satisfaction in all
material respects of each of the following conditions, unless waived by the
Buyer:
(a) Accuracy of Representations and Warranties. Except for such
changes as are permitted pursuant to Section 4.3 of this Agreement, the
representations and warranties of Sellers and the Companies contained in
this Agreement, in Disclosure Schedules of this Agreement by each of the
Companies or in any closing certificate or document delivered to Buyer
pursuant hereto shall be correct and complete in all material respects at
and as of the Closing Date and the Escrow Closing Date as though made at
and as of such dates, other than such representations and warranties as are
specifically made as of another date, and Sellers and the Companies shall
each have delivered to Buyer a certificate to that effect.
(b) Performance of Covenants. Sellers and the Companies shall each
have performed and complied with all covenants of this Agreement to be
performed or complied with by them at or prior to the Closing Date and the
Escrow Closing Date (except where
CSI Purchase and Sale Agreement/Page 26
<PAGE> 33
the failure to so perform or comply would not have a material adverse
effect on Buyer or prevent the Companies, Sellers or Buyer from
consummating the transactions contemplated hereby), and Sellers and the
Companies shall each have delivered to Buyer a certificate to that effect.
(c) Legal Actions or Proceedings. No legal action or proceeding
shall have been instituted after the date hereof against Sellers or any of
the Companies, or against Buyer arising by reason of the acquisition of the
Companies pursuant to this Agreement, which is reasonably likely (1) to
restrain, prohibit or invalidate the consummation of the transactions
contemplated by this Agreement, (2) to have a material adverse effect on
the Companies or (3) to have a material adverse effect on the results of
operations or financial condition of Buyer and its subsidiaries, taken as a
whole, after giving effect to the consummation of the transactions
contemplated by this Agreement; and Sellers and the Companies shall each
have delivered to Buyer a certificate to their knowledge to that effect.
(d) Approvals. The Companies and Sellers shall have procured all of
the consents, approvals and waivers specified in Section 3.1(b) of this
Agreement, Sections 3.2(e) of Exhibit 3.2, Section 3.3(e) of Exhibit 3.3,
and Section 3.4(e) of Exhibit 3.4, and Sellers and the Companies shall each
have delivered to Buyer a certificate, to their knowledge, to that effect.
(e) CSI Reorganization. Sellers and the Companies shall have
consummated the CSI Reorganization to the reasonable satisfaction of Buyer,
and the Sellers shall provide Buyer with such documents or information as
Buyer may reasonably request to evidence the consummation of the CSI
Reorganization.
(f) Policies of Title Insurance. If Title Insurance Policies have
been requested by Buyer pursuant to Section 4.9(c) hereof, and it has
complied with the requirements of Section 4.9(f) hereof, Sellers shall
deliver Policies of Title Insurance insuring the ownership or leasehold
interest of the Companies in the Title Insurance Property.
(g) Executive Employment Agreements. The individuals designated in
Schedule 1.4 hereto shall each execute and deliver an Executive Employment
Agreement in substantially the form attached as Exhibit 1.4 hereto.
(h) Shareholder Lock-up Agreements. Sellers each shall have executed
and delivered any lock-up agreement reasonably requested by the managing
underwriter of Buyer's IPO which restricts the sale or other disposition of
TMS Common Stock (to the extent any such shares are being delivered
pursuant to this Agreement) for a reasonable and customary period (no
longer than 365 days) following the effectiveness of the Registration
Statement.
(i) Completion of Buyer's IPO. Buyer's initial public offering of
TMS Common Stock, as described in the Registration Statement, shall have
closed.
CSI Purchase and Sale Agreement/Page 27
<PAGE> 34
(j) Lender Approval. Buyer shall have secured a commitment for
approximately $25,000,000 in senior indebtedness.
(k) Opinion of Counsel for the Companies and Sellers. Buyer shall
have received the opinion of McGlinchey Stafford dated the Closing Date,
substantially in the form and to the effect set forth in Exhibit 5.1
hereto.
(l) Resignations of Directors and Officers. Sellers will deliver to
Buyer (i) the resignations, effective as of the Closing Date, of all the
Sellers who are officers and directors of the Company; (ii) a complete and
general release of all claims by the Sellers against the Companies except
as otherwise provided in Sections 4.8 and 4.15 hereof; (iii) on or before
the Closing Date evidence of the resignation from or final removal from
office, effective on the Closing Date, of all officers and directors of the
Companies; and (iv) to the extent then available, the corporate records and
books of each of the Companies, including the minute books, the stock
transfer books, and the corporate seal of each Company.
(m) All Proceedings to be Satisfactory. All actions to be taken by
Sellers and the Companies in connection with the consummation of the
transactions contemplated in Article 1 hereof and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby shall be reasonably satisfactory in form
and substance to Buyer and its counsel.
5.2 Conditions Precedent to the Obligations of Sellers and the Companies.
The obligations of Sellers and the Companies under this Agreement are subject
to the satisfaction in all material respects or waiver by Sellers prior to or
on the Closing Date of each of the following conditions:
(a) Accuracy of Representations and Warranties. Except for such
changes as are permitted pursuant to Section 4.3 of this Agreement, the
representations and warranties of Buyer contained in this Agreement or in
any closing certificate or document delivered to Sellers or the Companies
pursuant hereto shall be correct and complete in all material respects on
and as of the Closing Date and the Escrow Closing Date as though made at
and as of such dates other than such representations and warranties as are
specifically made as of another date, and Buyer shall have delivered to
Sellers and each of the Companies a certificate to that effect.
(b) Performance of Covenants. Buyer shall have performed and
complied with all covenants of this Agreement to be performed or complied
with by it at the Closing Date and the Escrow Closing Date (except where
the failure to so perform or comply would not have a material adverse
effect on Sellers or the Companies or prevent any of the Companies, Sellers
or Buyer from consummating the transactions contemplated hereby), and Buyer
shall have delivered to Sellers and the Companies a certificate to such
effect.
CSI Purchase and Sale Agreement/Page 28
<PAGE> 35
(c) Approvals. Buyer shall have procured all of the consents,
approvals and waivers specified in Section 3.5(f), and Buyer shall deliver
to Sellers and the Companies a certificate to that effect.
(d) Release from Guarantees. Buyer shall have caused the release of
Sellers from any and all personal guarantees of each Company's
indebtedness and performance bonds in accordance with Section 4.7 above
effective as of the Closing Date.
(e) Executive Employment Agreements. CSI or such other appropriate
Company shall execute and deliver an Executive Employment Agreement with
the individuals listed in Schedule 1.4 hereto and each such Executive
Employment Agreement shall be in substantially the form attached as Exhibit
1.4.
(f) Registration Rights Agreements. Buyer shall have executed and
delivered a Registration Rights Agreement, substantially in the form of
Exhibit 1.5, to the Sellers receiving TMS Common Stock pursuant to this
Agreement.
(g) Lender Approval; Performance Bonds. Sellers and Buyer shall have
obtained the consent of each Company's lenders with respect to the
assumption or prepayment of approximately $5,500,000 of indebtedness by
Buyer, and the release of Sellers and their respective affiliates, heirs,
successors and assigns with respect to such indebtedness and with respect
to each Company's performance bonds effective as of the Closing Date.
(h) Receipt of Memorandum. Sellers and their counsel shall have
received the Memorandum describing Buyer and the TMS Common Stock, if any,
to be delivered as a part of the Purchase Price together with all such
counterpart originals or certified or other copies of all documents
relating to Buyer or incident to the transactions contemplated hereby as
Sellers or such counsel may reasonably request.
(i) Opinion of Counsel for the Buyer. Sellers and the Companies
shall have received the opinion of Chamberlain, Hrdlicka, White, Williams &
Martin, counsel for Buyer, dated the Closing Date, substantially in the
form and to the effect set forth in Exhibit 5.2 hereto.
(j) Legal Actions or Proceedings. No legal action or proceeding
shall have been instituted that is reasonably likely to restrain, prohibit,
violate or otherwise affect the consummation of the transactions
contemplated hereby.
(k) All Proceedings to be Satisfactory. All actions to be taken by
Buyer in connection with the consummation of the transactions contemplated
in Article 1 hereof and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to Sellers and their counsel.
CSI Purchase and Sale Agreement/Page 29
<PAGE> 36
ARTICLE 6
TERMINATION
6.1 Termination of Agreement. The Parties may terminate this Agreement as
provided below:
(a) Mutual Consent. The Buyer and the Sellers may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(b) Termination by Buyer. The Buyer may terminate this Agreement by
giving written notice to the Sellers at any time prior to the Closing (1)
in the event any of the Sellers has breached any material representation,
warranty, or covenant contained in this Agreement in any material respect,
the Buyer has notified the Sellers of the breach, and the breach has
continued without cure until the earlier of 20 days after the notice of
such breach or the Closing Date, whichever is earlier, or (2) if the
Closing Date shall not have occurred on or before the earlier of 75 days
after receipt by Buyer of comments from the SEC with respect to Buyer's
initial filing of its Registration Statement or December 31, 1997, by
reason of the failure of any condition precedent under Section 5.1 hereof
(unless the failure results primarily from the Buyer itself breaching any
representation, warranty, or covenant contained in this Agreement); and
(c) Termination by Sellers. Sellers may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing (1) in
the event the Buyer has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, any of the
Sellers has notified the Buyer of the breach, and the breach has continued
without cure until the earlier of 20 days after the notice of such breach
or the Closing Date, whichever is earlier, or (2) if the Closing Date
shall not have occurred on or before the earlier of 75 days after receipt
by Buyer of comments from the SEC with respect to Buyer's Registration
Statement or December 31, 1997, by reason of the failure of any condition
precedent under Section 5.2 hereof (unless the failure results primarily
from any of the Sellers themselves breaching any representation, warranty,
or covenant contained in this Agreement). Buyer shall promptly provide
written notice to Sellers and the Companies at such time as Buyer has
reason to know that it cannot purchase the CSI Shares in accordance with
the terms of this Agreement, including, without limitation, the inability
of Buyer to complete an IPO or obtain financing for the contemplated
transactions by the earlier of 75 days after receipt by Buyer of comments
from the SEC with respect to Buyer's Registration Statement or December 31,
1997.
(d) After the Escrow Closing Date. This Agreement shall terminate
after the Escrow Closing only as follows:
CSI Purchase and Sale Agreement/Page 30
<PAGE> 37
(1) Termination of Underwriting Agreement. If, prior to the
successful completion of the IPO, there shall occur a
termination of the agreement between Buyer and certain investment
banking firms (the "Underwriting Agreement") under which such
firms agree to purchase shares of TMS Common Stock from Buyer on
a firm commitment basis for resale to the public initially at the
IPO Price, this Agreement shall terminate automatically and
without action on the part of any party;
(2) Automatic Termination. This Agreement shall terminate
automatically and without action on the part of any party hereto
if both the Buyer's IPO and the Closing shall not have been
consummated within four (4) business days after the Escrow
Closing; or
(3) Section 4.3. If this Agreement is terminated pursuant to
Section 4.3.
6.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 6.1, this Agreement shall forthwith become void and
there shall be no liability on the part of any party hereto, except that (1)
Section 4.4, Section 10.1, Section 10.6, Section 10.7, Section 10.8 and Section
10.10 hereof shall survive such termination and (2) nothing herein shall
relieve any party from liability for any willful breach of any other provision
hereof.
ARTICLE 7
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
7.1 Survival of Representations and Warranties. Except as provided
hereafter, the respective representations and warranties of the parties
contained in this Agreement (except for Sections 3.2(m), (o) and (u) of Exhibit
3.2, Sections 3.3(m), (o) and (u) of Exhibit 3.3 and Sections 3.4(m), (o) and
(u) of Exhibit 3.4) shall survive the Closing Date and shall expire and
terminate on the last day of the 18th month after the Closing Date. The
representations and warranties contained in Section 3.2(u) of Exhibit 3.2,
Section 3.3(u) of Exhibit 3.3 and Section 3.4(u) of Exhibit 3.4 hereof shall
not terminate until the expiration of the applicable statute of limitations
(including any extension thereof) for any claim by a taxing authority for any
taxes, penalties or interest. With respect to Section 3.2(m) of Exhibit 3.2,
Section 3.3(m) of Exhibit 3.3 and Section 3.4(m) of Exhibit 3.4, no
representation or warranty that any property is in good condition or repair or
otherwise fit for the purposes for which the property is intended shall survive
the Closing Date. The representations and warranties contained in Section
3.2(o) of Exhibit 3.2, Section 3.3(o) of Exhibit 3.3 and Section 3.4(o) of
Exhibit 3.4 shall not survive the Closing Date.
7.2 Indemnification by Sellers. Sellers hereby agree to indemnify and
hold harmless the Companies and Buyer in respect of any losses, claims,
damages, liabilities or related expenses
CSI Purchase and Sale Agreement/Page 31
<PAGE> 38
(including, but not limited to, reasonable attorney's fees and expenses, which
the Companies or the Buyer incurs in excess of $500,000 in the aggregate as a
result of the breach of any of the representations, warranties and covenants
made by Sellers in or pursuant to this Agreement; provided that Sellers'
indemnification obligations under this Agreement shall not exceed $5,000,000
(the "Indemnification Cap"). The indemnification obligations of Sellers under
this Section 7.2 shall survive the Closing and will terminate at the time
specified in Section 7.1, except with respect to any indemnity claim or claims
pending on the date of such termination.
7.3 Indemnification by Buyer. Buyer agrees to indemnify and hold harmless
Sellers in respect of any losses, claims, damages, liabilities or related
expenses (including, but not limited to, reasonable attorney's fees and
expenses) which Sellers incur in excess of $500,000 in the aggregate as a
result of the breach of any of the representations, warranties and covenants
made by Buyer in or pursuant to this Agreement; provided that Buyer's
indemnification obligations under this Agreement shall not exceed the
Indemnification Cap. The indemnification obligations of Buyer under this
Section 7.3 shall survive the Closing and will terminate at the time specified
in Section 7.1, except with respect to any indemnity claim or claims pending on
the date of such termination.
7.4 Indemnification Procedure.
(a) Promptly after any party hereto (the "Indemnified Party") has received
notice or has knowledge of the occurrence of any event which the Indemnified
Party asserts is an indemnifiable event or after the commencement of any
action, claim or proceeding commenced against the Indemnified Party by a third
party that might result in any claim for indemnity pursuant to this Agreement
(a "Third Party Claim"), the Indemnified Party shall, subject to the
Indemnification Cap, provide the party obligated to provide indemnification
hereunder (the "Indemnifying Party") written notice (the "Indemnification
Notice") of such claim, which notice shall identify the nature of such event,
claim, action or proceeding and the basis for the indemnification claim. If an
Indemnified Party shall fail to give prompt notice hereunder, and the
Indemnifying Party shall have been prejudiced in any material respect by such
failure so to notify the Indemnifying Party, the Indemnifying Party shall have
the right, but not the obligation, to set-off against any amounts payable or
that become payable by the Indemnifying Party under this Agreement the amount
by which the Indemnifying Party has been damaged as a result of the failure so
to notify the Indemnifying Party. The Indemnifying Party shall, within ten
business days of receipt of an Indemnification Notice, either: (i) acknowledge
the debt, liability or obligation for which indemnity is sought as a valid
claim and, subject to the Indemnification Cap, (x) forthwith pay the
Indemnified Party an amount sufficient to discharge such debt, liability or
obligation, or (y) assume the defense of, or permit the Indemnified Party to
defend, such Third Party Claim in accordance with Section 7.4(b) below; (ii) in
the event of a Third Party Claim which is not acknowledged by the Indemnifying
Party to be owing or with respect to which the Indemnifying Party disputes that
indemnification is owed to the Indemnified Party, notify the Indemnified Party
of its position with respect to such claim; or (iii) with respect to a claim
other than a Third Party Claim, in the event of a claim by the Indemnified
Party for indemnity hereunder which is challenged by the Indemnifying Party,
notify the Indemnified Party of such challenge.
CSI Purchase and Sale Agreement/Page 32
<PAGE> 39
(b) At any time after the Indemnified Party gives notice to the
Indemnifying Party of a Third Party Claim being made against the Indemnified
Party for which a demand for indemnity is being asserted, to the extent that
such Third Party Claim is not being defended by any third party under the terms
of any applicable insurance policy or policies, the Indemnified Party shall
permit the Indemnifying Party, at the option and expense of the Indemnifying
Party, to assume the complete defense of such Third Party Claim with full
authority to conduct such defense and to settle or otherwise dispose of the
same (except as hereinafter provided). In order to assume such defense, the
Indemnifying Party must notify the Indemnified Party in writing of its election
to do so within ten (10) days following receipt of notice of the Third Party
Claim from the Indemnified Party; in the event that the Indemnifying Party does
not so notify the Indemnified Party within such ten (10) day period, the
Indemnifying Party shall be deemed to have elected not to assume such defense.
The Indemnifying Party will not, in defense of any such Third Party Claim,
except with the consent of the Indemnified Party, consent to the entry of any
judgment or enter into any settlement that does not include, as an
unconditional term thereof, the release by claimant or plaintiff of the
Indemnified Party from all claims and/or liability in respect thereof. After
notice to the Indemnified Party of the Indemnifying Party's election to assume
the defense of such Third Party Claim as provided above, the Indemnifying Party
shall be liable to the Indemnified Party for such legal or other expenses
subsequently incurred at the request of the Indemnifying Party by the
Indemnified Party in connection with the defense thereof. As to those Third
Party Claims with respect to which the Indemnifying Party does not elect to
assume control of the defense, (i) the Indemnified Party will afford the
Indemnifying Party an opportunity to participate in such defense, at the
Indemnifying Party's own cost and expense; and (ii) the Indemnified Party will
not settle or otherwise dispose of any such Third Party Claim without the
consent of the Indemnifying Party, which consent will not be unreasonably
withheld.
(c) Notwithstanding anything to the contrary contained herein, any amounts
owing from an Indemnifying Party to an Indemnified Party under the provisions
of this Agreement shall be reduced to the extent to which the Indemnified Party
or any other claimant actually receives any proceeds of any insurance policy
that are paid with respect to the event, action, claim, or proceeding that gave
rise to such indemnification.
(d) Notwithstanding the provisions of Section 7.2 and 7.3 hereof, the
Indemnifying Party shall not be liable for indemnification pursuant thereto to
the extent that any loss, claim, damage, liability or expense is found by a
court or arbitration panel of competent jurisdiction, after full hearing on the
merits, to have resulted from the dishonest, fraudulent, grossly negligent, bad
faith or criminal act or omission of the Indemnified Party or its officers,
directors, employees, agents or affiliates.
(e) Regardless of whether the defense of any Third Party Claim is being
undertaken by the Indemnified Party and the Indemnifying Party jointly or by
either of them alone as provided in Section 7.4(b) above, the Indemnified Party
and the Indemnifying Party each agree with the other to aid in the conduct of
such defense to any reasonable extent, including furnishing each other with
records or documents related to the Third Party Claim, permitting employees
connected with the Third Party Claim to testify at depositions or in court, and
complying with any other reasonable request made by the other party in the
furtherance of the defense of the Third Party Claim.
CSI Purchase and Sale Agreement/Page 33
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(f) The indemnification obligations of Sellers and Buyer under this
Article 7 shall constitute the sole and exclusive remedy of Buyer and Sellers,
respectively, for the recovery of money damages with respect to the matters
described in Sections 7.2 and 7.3, respectively.
(g) Failure to respond within the appropriate time period following the
receipt of an Indemnification Notice hereunder shall be deemed acknowledgment
of the right to be indemnified and give rise to the immediate right in the
Indemnified Party to payment in full of the amount claimed, except in each case
as any such claim shall be limited by the Indemnification Cap.
ARTICLE 8
STOCK TRANSFER RESTRICTIONS
8.1 Compliance with Securities Laws. Sellers acknowledge and agree with
Buyer that the shares of TMS Common Stock issued pursuant to this Agreement
(the "Restricted Shares") to Sellers shall not be transferable except upon the
conditions specified in this Article 8, which conditions are intended, among
other things, to ensure compliance with the provisions of the Securities Act
and any applicable state securities laws in respect of the transfer of such
Restricted Shares. Sellers acknowledge and agree that the certificates
representing the Restricted Shares will contain a restrictive legend to the
effect that transfer of such shares is prohibited unless the shares are
registered under the Securities Act and applicable state securities laws, or in
the event that such transfer is, in the opinion of counsel to Buyer, exempt
from the registration provisions of the Securities Act and applicable state
securities laws.
8.2 Restrictions on Transfer.
(a) Each Seller understands and agrees that none of the Restricted
Shares may be transferred by such Seller unless (i) (A) such disposition is
pursuant to an effective registration statement under the Securities Act, (B)
the Seller shall have delivered to Buyer an opinion of counsel, which opinion
and counsel shall be reasonably satisfactory, to the effect that such
disposition is exempt from the provisions of Section 5 of the Securities Act,
or (C) a no-action letter from the SEC, reasonably satisfactory to counsel for
the Company, shall have been obtained with respect to such disposition, and
(ii) such disposition is pursuant to registration or qualification under any
applicable state securities laws or an exemption therefrom.
(b) Each Seller understands and agrees that except as provided in the
Registration Rights Agreement, Buyer is not obligated to furnish a registration
statement under the Act or any state securities laws covering the Restricted
Shares nor is Buyer under any obligation to aid Sellers in obtaining any
exemption from any such registration requirements. Each Seller also
acknowledges that except as provided in the Registration Rights Agreement, he
shall be responsible for compliance with all conditions of transfer of the
Restricted Shares imposed by any administrator of any state.
CSI Purchase and Sale Agreement/Page 34
<PAGE> 41
(c) Each Seller understands and agrees that transfer of the
Restricted Shares may be effected only on the books of Buyer, and that stop
transfer instructions will be issued to the transfer agent of TMS Common Stock
in accordance with the legend on any certificate representing the Restricted
Shares. The transfer agent will not remove the legend from any certificate
representing the Restricted Shares without either registration of the
Restricted Shares under the Securities Act and applicable state securities laws
or an opinion of counsel reasonably acceptable to Buyer stating that the
transfer of the Restricted Shares is exempt from such registration requirements
and authorizing removal of the stop transfer instructions.
ARTICLE 9
FURTHER ASSURANCES
9.1 Further Assurances. At any time and from time to time on and after
the Closing Date (a) at the request of Buyer, Sellers shall deliver to Buyer
any records, documents and data possessed by Sellers and not previously
delivered to Buyer to which Buyer is entitled and execute and deliver or cause
to be executed and delivered all such deeds, assignments, consents, documents
and further instruments of transfer and conveyance, and take or cause to be
taken all such other actions, (provided that such actions shall be without cost
or expense to Sellers) as Buyer may reasonably deem necessary or desirable in
order to fully and effectively vest in Buyer, or to confirm its title to and
possession of, the CSI Shares or to assist Buyer in exercising rights with
respect thereto which Buyer is entitled to exercise pursuant to the terms of
this Agreement; and (b) at the request of Sellers, Buyer shall execute and
deliver or cause to be executed and delivered such further instruments and take
or cause to be taken such further actions (provided that such actions shall not
be without cost or expense to Buyer) as Sellers may reasonably deem necessary
or desirable to carry out the terms and provisions of this Agreement.
9.2 Books and Records.
(a) Buyer agrees that it shall preserve and keep all books and
records relating to the Companies in Buyer's possession until six months
following the expiration of the statute of limitations (including
extensions thereof) applicable to the tax returns filed by or with respect
to the Companies for taxable periods ending prior to or on the Closing Date
to which such books or records are relevant. After such time, before Buyer
shall dispose of any of such books and records, at least 90 calendar days'
prior written notice to such effect shall be given by Buyer to Sellers, and
Sellers shall be given an opportunity, at their sole cost and expense, to
remove all or any part of such books and records as Sellers may select.
Duly authorized representatives of Sellers shall, upon reasonable notice,
have access to such books and records during normal business hours to
examine, inspect and copy such books and records.
(b) In any instance in which any Seller or Buyer, as the case may be,
is required to prepare or file (or cause to be filed) tax returns which
cover a period that includes the Closing Date or to respond to an audit by
the Internal Revenue Service or other governmental
CSI Purchase and Sale Agreement/Page 35
<PAGE> 42
agency with respect to a period prior to the Closing Date, each Seller or
Buyer, as the case may be, will furnish all information and records
reasonably available to it and reasonably requested of him, her or it and
necessary or appropriate for use in preparing such returns or responding to
such audit.
ARTICLE 10
MISCELLANEOUS
10.1 Expenses, etc. Whether or not the transactions contemplated by this
Agreement are consummated, none of the parties hereto shall have any obligation
to pay any of the fees and expenses of the other parties incident to the
negotiation, preparation and execution of this Agreement, including the fees
and expenses of counsel, accountants and other experts. Each of the Sellers,
the Companies and Buyer will indemnify the other parties, and hold them
harmless from and against any claims for finders' fees or brokerage commissions
in relation to or in connection with such transactions as a result of any
agreement or understanding between such indemnifying party and any third party.
Sellers shall pay and be responsible for any stock transfer Taxes arising from
the sale of CSI Shares and the Investments Interests hereunder. Buyers shall
pay and be responsible for any stock transfer taxes arising from the sale of
shares of TMS Common Stock hereunder.
10.2 Execution in Counterparts. For the convenience of the parties, this
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
10.3 Notices. All notices which are required or may be given pursuant to
the terms of this Agreement shall be in writing and shall be sufficient in all
respects if given in writing and delivered or mailed by registered or certified
mail postage prepaid, or sent by telex, telecopier, facsimile transmission or
telegraph as follows:
If to Sellers or any Company: With a copy to:
Mr. Daniel N. Hargett, Sr. If to Daniel N. Hargett, Sr., Yvette
Ms. Yvette Hargett Hargett or any Company:
Mr. Richard L. Hargett Steven I. Klein
2205 West Pinhook McGlinchey Stafford, a Professional
Lafayette, Louisiana 70508 Limited Liability Company
Facsimile: (318) 237-2281 643 Magazine Street
New Orleans, Louisiana 70130
Facsimile: (504) 596-2800
If to Richard L. Hargett or any
Company:
William B. Gibbens, III
Gelpi, Sullivan, Carroll & Gibbens
400 Poydras Street,
Suite 2525 New Orleans,
Louisiana 70130 Facsimile:
(504) 524-9653
CSI Purchase and Sale Agreement/Page 36
<PAGE> 43
If to Buyer, to: With a copy to:
Transcoastal Marine Services, Inc. James J. Spring, III
3535 Briarpark, Suite 210 Chamberlain, Hrdlicka, White, Williams
Houston, Texas 77042 & Martin
Attention: Chief Executive Officer 1200 Smith Street, Suite 1400
Facsimile: (713) 781-6364 Houston, Texas 77002-4310
Facsimile: (713) 658-2553
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto. Any notice or other
communication pursuant to this Agreement shall be deemed to have been duly
given or made and to have become effective upon the earliest of (a) when
delivered in hand to the party to which directed, or (b) if sent by first-class
mail postage prepaid, certified mail, return receipt requested, or by telex,
telecopier, facsimile transmission or telegraph and properly addressed as set
forth above, at the time when received by the addressee or (c) with respect to
delivery by certified mail, return receipt requested, when delivery thereof,
properly addressed as set forth above, is attempted by the U.S. Postal Service.
10.4 Waivers. Any party hereto (as to itself, but not as to other
parties without their consent) may, by written notice to the other parties
hereto, (a) extend the time for the performance of any of the obligations or
other actions of the other parties under this Agreement; (b) waive any
inaccuracies in the representations or warranties of another party contained in
this Agreement or in any document delivered pursuant to this Agreement; (c)
waive compliance with any of the conditions or covenants of another party
contained in this Agreement; or (d) waive performance of any of the obligations
of another party under this Agreement. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed a
waiver of any subsequent breach.
10.5 Amendments, Supplements, etc. At any time this Agreement may
be amended or supplemented by such additional agreements, articles or
certificates, as may be determined by the parties hereto to be necessary,
desirable or expedient to further the purposes of the Agreement, or to clarify
the intention of the parties hereto, or to add to or modify the covenants,
terms or conditions hereof or to effect or facilitate any governmental approval
or acceptance of this Agreement or to effect or facilitate the filing or
recording of this Agreement or the consummation of any of the transactions
contemplated hereby. Any such instrument must be in writing and signed by all
parties.
10.6 Entire Agreement. This Agreement, its Exhibits and Disclosure
Schedules and the documents executed on the Closing Date in connection
herewith, constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral and written, between the parties hereto with respect to
the subject matter hereof. No representation, warranty, promise, inducement or
statement of intention
CSI Purchase and Sale Agreement/Page 37
<PAGE> 44
has been made by any party hereto which is not embodied in this Agreement or
such other documents, and no party hereto shall be bound by, or be liable for,
any alleged representation, warranty, promise, inducement or statement of
intention not embodied herein or therein.
10.7 Choice of Forum; Consent to Jurisdiction. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Texas. Any suit, action or proceeding arising with respect to the validity,
construction, enforcement or interpretation of this Agreement, and all issues
relating in any matter hereto, shall be brought in the United States District
Court for the Western District of Louisiana, or in the event that federal
jurisdiction does not pertain, in the state courts of the State of Louisiana in
Lafayette Parish. Each of the parties hereto hereby submits and consents to
the jurisdiction of such courts for the purpose of any such suit, action or
proceeding and hereby irrevocably waives (a) any objection which any of them
may now or hereafter have to the laying of venue in such courts, and (b) any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
10.8 Binding Effect, Benefits. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. Notwithstanding anything contained in this Agreement
to the contrary, except with respect to Section 4.15 hereof, nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto or their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
10.9 Assignability. Neither this Agreement nor any of the parties'
rights hereunder shall be assignable by any party hereto without the prior
written consent of the other parties hereto.
10.10 Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future law,
rule or regulation, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof. The remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance herefrom.
Furthermore, in lieu of such illegal, invalid or unenforceable provision, there
shall be added automatically as a part of this Agreement a legal, valid and
enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.
10.11 Knowledge. As used in this Agreement and the Disclosure
Schedules, the phrase "to the knowledge" of the Company, CSI, Hargett or
Investments means to the actual knowledge of Daniel N. Hargett, Sr., Daniel N.
Hargett, Jr., Lloyd G. Hargett, Gerald F. Palliser, Sr., Richard L. Hargett,
Horace Harrington or R. Todd Soltow, and the phrase "to the knowledge" of a
Seller means to the actual knowledge of such Seller.
CSI Purchase and Sale Agreement/Page 38
<PAGE> 45
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed effective as of the date first above written.
BUYER:
TRANSCOASTAL MARINE SERVICES, INC.
By: /s/ G. DARCY KLUG
------------------------------------
G. Darcy Klug
Vice President
SELLERS:
/s/ DANIEL N. HARGETT, SR.
----------------------------------------
Daniel N. Hargett, Sr.
/s/ YVETTE HARGETT
----------------------------------------
Yvette Hargett
/s/ RICHARD L. HARGETT
----------------------------------------
Richard L. Hargett
THE COMPANIES:
C.S.I. HYDROSTATIC TESTERS, INC.,
a Delaware corporation
By: /s/ DANIEL N. HARGETT, SR.
-------------------------------------
Name: Daniel N. Hargett, Sr.
-----------------------------------
Title: Chief Executive Officer
----------------------------------
HARGETT MOORING AND MARINE, INC.,
a Louisiana corporation
By:/s/ DANIEL N. HARGETT, SR.
-------------------------------------
Name: Daniel N. Hargett, Sr.
-----------------------------------
Title: Chief Executive Office
----------------------------------
HARGETT INVESTMENTS, L.L.C.,
a Louisiana limited liability company
By:/s/ DANIEL N. HARGETT, SR.
-------------------------------------
Name: Daniel N. Hargett, Sr.
-----------------------------------
Title: Managing Member
----------------------------------
CSI Purchase and Sale Agreement/Page 39
<PAGE> 1
EXHIBIT 10.18
PURCHASE AND SALE AGREEMENT
BY AND AMONG
TRANSCOASTAL MARINE SERVICES, INC.,
HBH, INC.,
AND
THE SUCCESSION
OF
HERBERT D. HUGHES
EFFECTIVE AS OF AUGUST 20, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE 1
PURCHASE AND SALE OF COMPANY SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Basic Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Stock Purchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Real Estate Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Deliveries at the Closing and the IPO Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Registration Rights Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2
CONSIDERATION ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Adjustments to Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Long-Term Debt Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 3
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Representations and Warranties by Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(d) Ownership of Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(e) Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Representations and Warranties of Sellers and the Company . . . . . . . . . . . . . . . . . . . . . . 6
(a) Organization and Qualification, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(d) Qualification of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(e) Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(f) Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(g) Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(h) Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(i) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(j) Permits and Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(k) Title to Properties; Absence of Liens and Encumbrances, etc. . . . . . . . . . . . . . . . 13
(l) Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(m) Patent, Trademark, etc. Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(n) List of Properties, Contracts and Other Data . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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(o) Use of Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(p) Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(q) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(r) Labor and Employment Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(s) Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(t) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(u) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(v) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(w) Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(x) Powers of Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(y) Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.3 Representations and Warranties by the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(a) Organization and Qualification, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(c) Subsidiaries, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(d) Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(e) Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(f) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(g) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(h) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 4
ADDITIONAL COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.2 Access to Information by Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.3 Amendment to Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Confidential Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(b) Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.5 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.6 Release of Sellers' Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.7 Sellers' Release of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.8 Confidential Information Memorandum; Registration Statement. . . . . . . . . . . . . . . . . . . . . 31
(a) Company to Provide Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(b) Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(c) Further Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.9 Satisfaction of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.10 Certain Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(a) Mutual Consent for Section 338(h)(10) Election. . . . . . . . . . . . . . . . . . . . . . 32
(b) S Corporation Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(c) Tax Periods Ending on or before the Closing Date. . . . . . . . . . . . . . . . . . . . . 32
(d) Cooperation on Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(e) Tax Sharing Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
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<TABLE>
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4.11 Conrad Matter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.12 Change of Financial Institutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 5
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.1 Conditions Precedent to the Obligations of the Buyer. . . . . . . . . . . . . . . . . . . . . . . . 34
(a) Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 34
(b) Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(c) Legal Actions or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(d) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(e) Executive Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(f) Shareholder Lock-up Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(g) Completion of Buyer's IPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(h) Lender Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(i) Audit of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(j) Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(k) Opinion of Counsel for the Company and Sellers . . . . . . . . . . . . . . . . . . . . . . 35
(l) Resignations of Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(m) All Proceedings to be Satisfactory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(n) Delivery of Certificates Representing Company Common Stock . . . . . . . . . . . . . . . . 36
5.2 Conditions Precedent to the Obligations of Sellers and the Company. . . . . . . . . . . . . . . . . 36
(a) Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 36
(b) Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(c) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(d) Release from Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(e) Executive Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(f) Lender Approval; Performance Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(g) All Proceedings to be Satisfactory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(h) Opinion of Counsel for The Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(i) Legal Actions or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(j) Payment of the Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 6
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.1 Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(a) Mutual Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(b) Termination by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(c) Termination by Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
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ARTICLE 7
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.2 Indemnification by Sellers. Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.3 Indemnification by Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.4 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 8
STOCK TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.1 Compliance with Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.2 Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 9
FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.1 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.2 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 10
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.1 Expenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.2 Execution in Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.4 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.5 Amendments, Supplements, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.6 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.7 Choice of Forum; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.8 Binding Effect, Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.9 Assignability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.10 Invalid Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
-iv-
<PAGE> 6
EXHIBITS:
EXHIBIT 1.3 - REAL ESTATE PURCHASE AGREEMENT
EXHIBIT 1.4 - EMPLOYMENT AGREEMENT
EXHIBIT 1.7 - REGISTRATION RIGHTS AGREEMENT
EXHIBIT 1.8 - EXCLUDED ASSETS
EXHIBIT 5.1 - OPINION OF COUNSEL FOR THE COMPANY AND SELLERS
EXHIBIT 5.2 - OPINION OF COUNSEL FOR THE BUYER
SCHEDULES:
Schedule 1.1 - Description of Real Estate and Option Real Estate
SELLERS DISCLOSURE SCHEDULE
Schedule 3.1(b) - Approvals
Schedule 3.1(c) - Conflicts
Schedule 3.1(d) - Holders of Company Common Stock
COMPANY DISCLOSURE SCHEDULE
Schedule 3.2(a) - Jurisdictions Where Qualified
Schedule 3.2(c) - Subsidiaries
Schedule 3.2(e) - Approvals
Schedule 3.2(f) - Conflicts
Schedule 3.2(g) - Company Financial Statements
Schedule 3.2(h) - Changes and Events since December 31, 1996
Schedule 3.2(h-1) - Permitted Exceptions
Schedule 3.2(j) - Permits and Legal Compliance
-v-
<PAGE> 7
Schedule 3.2(m) - Intellectual Property
Schedule 3.2(n)(2) - Real Estate Leased by the Company
Schedule 3.2(n)(3) - Other Contracts and Commitments of the Company
Schedule 3.2(q) - Litigation, Actions and Proceedings
Schedule 3.2(r) - Employment Agreements, Benefit Plans, and Compensation
Schedule 3.2(s) - Pledged Accounts Receivable
Schedule 3.2(t) - Insurance Coverage; Self Insurance
Schedule 3.2(u) - Company Benefit Plan
Schedule 3.2(v) - Tax Audits; Basis in Assets; NOLs; Qualified S Subsidiary
BUYER DISCLOSURE SCHEDULE
Schedule 3.3(a) - Jurisdictions Where Qualified
Schedule 3.3(f) - Approvals
-vi-
<PAGE> 8
EXHIBIT 10-18
PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT (this "Agreement") made effective as
of August 20, 1997, by and among TRANSCOASTAL MARINE SERVICES, INC., a Delaware
corporation ("Buyer"), HBH, INC., a Louisiana corporation (the "Company"), and
the SUCCESSION OF HERBERT D. HUGHES, sole shareholder of the Company
("Sellers").
WHEREAS, the Sellers in the aggregate own all of the outstanding
capital stock of the Company (the "Company Shares") and Sellers own certain
real property necessary or desirable for operation of the Company; and
WHEREAS, this Agreement contemplates a transaction in which the Buyer
will purchase from the Sellers, and the Sellers will sell to the Buyer, all of
the outstanding capital stock of the Company in return for cash and shares of
the Buyer's common stock, par value $.001 per share ("TCMS Common Stock"); and
WHEREAS, in connection with Buyer's acquisition of the Company Shares,
Sellers desire to sell to Buyer, and Buyer desires to purchase, and Sellers
desire to sell, certain of Sellers' real estate under certain terms and
conditions.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
ARTICLE 1
PURCHASE AND SALE OF COMPANY SHARES
1.1 BASIC TRANSACTION. On and subject to the terms and conditions
of this Agreement, the Buyer agrees to purchase from each of the Sellers, and
each of the Sellers agrees to sell and convey to the Buyer, at the Closing (as
defined below), (a) all of the Company Shares for the consideration specified
below in this Article 1, and (b) certain real property located in Jefferson
Parish, Louisiana, described in Schedule 1.1, together with all improvements
located thereon and all rights and appurtenances thereto (the "Real Estate").
1.2 STOCK PURCHASE. On the date of closing of Buyer's "IPO"
(defined below) (the "IPO Closing Date"), in consideration for delivery of the
Company Shares and for the other covenants and agreements contained herein and
the other documents to be delivered pursuant hereto (other than pursuant to the
Real Estate Purchase Agreement), Buyer agrees to pay and deliver to the Sellers
the following consideration totaling $32 million (collectively, the "Purchase
Price") payable as follows: (i) $23 million in cash; plus (ii) the number of
validly issued, fully paid and nonassessable shares of TCMS Common Stock
resulting from dividing $9.0 million by the IPO Price (as defined below) and
rounding down to the nearest whole number (the "TCMS Shares"). The IPO Closing
Date shall occur not later than the earlier to occur of 75 days after the
receipt by Buyer of comments from the U.S. Securities and Exchange Commission
("SEC") with respect to Buyer's initial filing of its
HBH, Inc. Purchase and Sale Agreement/Page 1
<PAGE> 9
registration statement on Form S-1 or December 31, 1997. The Purchase Price
shall be adjusted after the IPO Closing Date pursuant to Article 2 of this
Agreement. The term "IPO" means the Buyer's first underwritten public offering
of the Buyer's common stock other than any offering pursuant to any
registration statement (i) relating to any capital stock of the Buyer or
options, warrants or other rights to acquire any such capital stock issued or
to be issued primarily to directors, officers or employees of the Buyer, or any
of its subsidiaries (ii) relating to any employee benefit plan or interest
therein, (iii) relating principally to any preferred stock or debt securities
of the Buyer, or (iv) filed pursuant to Rule 145 under the Securities Act of
1933, as amended, or any successor or similar provisions.
1.3 REAL ESTATE PURCHASE. On the IPO Closing Date, the Buyer
agrees to pay and deliver to the Sellers $1,350,000 in cash (the "Real Estate
Purchase Price") in consideration for (i) purchase and sale of the Real Estate
and (ii) an option to acquire, for an exercise price of $1,200,000 in cash,
certain other real property located in Jefferson Parish, Louisiana described on
Schedule 1.1 (the "Option Real Estate"). Buyer's acquisition of the Real Estate
and Buyer's purchase option with respect to the Option Real Estate shall be
subject to all terms and conditions of that certain Real Estate Purchase
Agreement between Sellers and Buyer in the form attached as Exhibit 1.3 (the
"Real Estate Purchase Agreement") to be executed concurrently herewith.
1.4 EMPLOYMENT AGREEMENT. At the Closing, the Company and H.
Daniel Hughes II shall execute and deliver an Executive Employment Agreement in
the form attached as Exhibit 1.4 (the "Executive Employment Agreement"),
providing for the employment of Mr. Hughes as an executive of the Company for
an initial term of three years.
1.5 THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Chamberlain,
Hrdlicka, White, Williams & Martin, in Houston, Texas, commencing at 9:00 a.m.
local time not later than the fourth business day prior to the IPO Closing Date
or such other date as the Buyer and the Sellers may mutually determine (the
"Closing Date"). The actions taken at the Closing will not include payment of
the Purchase Price, the delivery to Buyer of certificates representing the
Company Shares, or the delivery to Sellers of certificates representing the
TCMS Shares. Instead, the share certificates, duly endorsed for transfer, shall
be delivered into escrow with a mutually agreeable escrow agent (the "Document
Escrow") to be released and delivered pursuant to this Agreement on the IPO
Closing Date. During the period from the Closing until the IPO Closing Date,
this Agreement may be terminated by the parties only pursuant to Section
6.1(b).
1.6 DELIVERIES AT THE CLOSING AND ON THE IPO CLOSING DATE. At the
Closing, (i) Sellers will deliver the various certificates, instruments, and
documents referred to in Section 5.1 below into the Document Escrow, (ii) Buyer
will deliver the various certificates, instruments, and documents referred to
in Section 5.2 below into the Document Escrow (other than the Purchase Price)
(iii) each of the Sellers will deliver into the Document Escrow a certificate
or certificates, duly endorsed in blank or accompanied by stock powers duly
endorsed to Buyer, and in the form for transfer to Buyer, and, if required by
Buyer, with signatures guaranteed by an eligible guarantor institution pursuant
to any medallion signature guarantee program, representing all of the Company
Shares owned by such Seller free and clear of any pledge, lien, claim,
encumbrance, or interest of any third party,
HBH, Inc. Purchase and Sale Agreement/Page 2
<PAGE> 10
(iv) if required by the Real Estate Purchase Agreement, Sellers shall execute
and deliver into the Document Escrow an act of sale effecting transfer of
immovable property and the other certificates, instruments and documents
provided for in the Real Estate Purchase Agreement, as required to convey or
lease the Real Estate to Buyer pursuant to terms of the Real Estate Purchase
Agreement, and (v) at the Closing or on the next business day, Buyer will
deliver into the Document Escrow a certificate representing the TCMS Shares. On
the IPO Closing Date, (A) Buyer will deliver the cash portion of the Purchase
Price to Sellers pursuant to Section 1.2 above, (B) the various certificates,
instruments and documents held in the Document Escrow which are to be delivered
to Buyer pursuant to this Agreement including the Company Shares, shall be
released and delivered to Buyer, and (C) the various certificates, instruments
and documents held in the Document Escrow to be delivered to Sellers pursuant
to this Agreement, including the TCMS Shares, shall be released and delivered
to Sellers, and (D) if required by the Real Estate Purchase Agreement, the Real
Estate Purchase Price to Sellers as specified in Section 1.2 above.
1.7 REGISTRATION RIGHTS AGREEMENT. Sellers shall execute and
deliver a Registration Rights Agreement in the form attached as Exhibit 1.7
hereto. Provisions of the Registration Rights Agreement shall be no less
favorable to the Sellers than provisions of any other agreement of the Buyer
providing registration rights to the owners of any other corporation or
business entity to be acquired by Buyer prior to or in connection with the IPO.
Buyer shall not grant to any other person registration rights that are senior
to the registration rights granted to Sellers.
1.8 EXCLUDED ASSETS. Buyer and Seller agree that prior to the
Closing Date, Sellers and the Company shall cause ownership and/or possession
of those assets identified on Exhibit 1.8 attached hereto (the "Excluded
Assets") to be transferred to Sellers or others. These distributions shall be
in addition to any other distributions permitted pursuant to this Agreement.
ARTICLE 2
CONSIDERATION ADJUSTMENTS
2.1 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price payable to
Seller under this Agreement is subject to the adjustments described in this
Section 2.1:
(a) Long-Term Debt Adjustment. The Purchase Price shall
be reduced by the amount, if any, of Long- Term Debt of the Company on the IPO
Closing Date that is in excess of (i) $6.0 million, if the IPO Closing Date
occurs on or before September 30, 1997, or (ii) $6.5 million, if the IPO
Closing Date occurs after September 30, 1997. "Long- Term Debt" means all
long-term liabilities (including current maturities of such Long-Term Debt and
prepayment penalties as of the IPO Closing Date) of the Company owed to persons
other than Sellers and their affiliates as of the IPO Closing Date, including
deferred taxes and capitalized lease obligations, determined in accordance with
GAAP; provided that amounts outstanding pursuant to the Company's line of
credit with Banc One, N.A., and the Company's line of credit with Diversified
Group, Inc. shall be deemed current liabilities and not Long-Term Debt.
HBH, Inc. Purchase and Sale Agreement/Page 3
<PAGE> 11
(b) Capital Expenditure Adjustment. The Purchase Price
shall be reduced by the amount, if any, by which the aggregate amount of the
Company's capital expenditures during the period from January 1, 1997 through
the IPO Closing Date, together with all of the Company's commitments for
capital expenditures on the IPO Closing Date, determined as of such date in
accordance with GAAP, exceeds (i) $870,000, if the IPO Closing Date occurs on
or before September 30, 1997, and (ii) $1,370,000, if the IPO Closing Date
occurs after September 30, 1997. "GAAP" means U.S. generally accepted
accounting principles consistently applied.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES BY SELLERS. Sellers each
represent and warrant to Buyer that the statements contained in this Section
3.1 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date and the IPO Closing Date (as though
made then and as though such dates were substituted for the date of this
Agreement throughout this Section 3.1) except as set forth in the disclosure
schedule delivered by the Sellers to the Buyer on the date hereof and initialed
by the parties hereto (the "Sellers Disclosure Schedule"). The Sellers
Disclosure Schedule will be arranged in sections and paragraphs corresponding
to the lettered and numbered sections and paragraphs contained in this Section
3.1.
(a) Qualification. Each Seller has the legal power and
authority to own its properties and assets and carry on its business
and affairs as currently conducted.
(b) Authority Relative to Agreement. Each Seller has the
full right, power, and legal authority to execute and deliver this
Agreement. Provided that court approval is received in the succession
of Herbert D. Hughes with respect to the transactions contemplated by
this Agreement prior to Closing (the "Hughes Court Approval"), each
Seller has the full right, power, and legal authority to perform this
Agreement and to consummate the transactions contemplated on the part
of the Company hereby. No proceeding on the part of any Seller, and,
except for those approvals described in Schedule 3.1(b), no notice,
consent, authorization, order or approval of, filing or registration
with, any governmental commission, board or other regulatory body or
any bank, bonding company, lender, surety, customer, supplier, or any
other person whatsoever is required for or in connection with the
execution and delivery of this Agreement. No proceeding on the part of
any Seller, and, except for those approvals described in Schedule
3.1(b) and Hughes Court Approval, no notice, consent, authorization,
order or approval of, filing or registration with, any governmental
commission, board or other regulatory body or any bank, bonding
company, lender, surety, customer, supplier, or any other person
whatsoever is required for or in connection with the performance of
this Agreement and the consummation by Sellers of the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by each Seller and is a valid and binding agreement of such
Seller, enforceable against such Seller in accordance with its terms.
HBH, Inc. Purchase and Sale Agreement/Page 4
<PAGE> 12
(c) Non-Contravention. Except as provided on Schedule
3.1(c), the execution, delivery and performance of this Agreement by
Sellers do not, and the consummation by Sellers of the transactions
contemplated hereby will not (provided that the Hughes Court Approval
is received prior to Closing), conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation, or
acceleration of any obligation or to the loss of a material benefit
under, or result in the creation or imposition of any material lien,
charge, pledge, security interest or other encumbrance upon any of the
property or assets of Sellers or the Company pursuant to any provision
of, any mortgage, lien, lease, agreement, license, instrument, law,
ordinance, regulation, order, arbitration award, judgment or decree to
which any Seller or the Company is a party or by which any of their
respective assets are bound. Except as provided on Schedule 3.1(c),
the execution, delivery and (assuming Hughes Court Approval prior to
Closing) performance of this Agreement by Sellers do not and the
consummation by Sellers of the transactions contemplated hereby will
not violate or conflict with any other restriction of any kind or
character to which any Seller or the Company is subject or by which
any of their respective assets may be bound.
(d) Ownership of Company Common Stock. Each Seller holds
of record and owns beneficially the number of Company Shares set forth
next to his name in Schedule 3.1(d) of the Sellers Disclosure
Schedule. Collectively, the Sellers are, and as of the Closing Date
and the IPO Closing Date will be, the sole and exclusive lawful owners
of all of the outstanding shares of Company Common Stock free and
clear of all liens, claims, encumbrances and rights of others of any
nature whatsoever, with full power to vote all such shares on any
matter that may properly come before shareholders of the Company, and
each Seller may exercise such voting power on any matter without
violation of the rights of any person. There are no rights, warrants
or options outstanding with respect to such capital stock, and Sellers
have no obligation to deliver capital stock of the Company or any of
its Subsidiaries to any person as of the date hereof, at any time on
or prior to the IPO Closing Date, thereafter or as a result thereof or
in connection therewith except as provided in this Agreement.
(e) Restricted Securities.
(1) Sellers acknowledge that the shares of TCMS
Common Stock which Sellers will acquire pursuant to this
Agreement have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), and are being
acquired for each Seller's own account for investment and not
with a view to the distribution thereof. The TCMS Common Stock
acquired pursuant to this Agreement will be subject to the
stock transfer restrictions described in Article 8 below.
(2) Each Seller has the knowledge and experience
in financial and business matters to enable it to evaluate the
merits and risks of approving this Agreement and the
transactions contemplated herein and acquiring shares of TCMS
Common Stock.
HBH, Inc. Purchase and Sale Agreement/Page 5
<PAGE> 13
(3) Each Seller is able to bear the economic
risks of its investment in the TCMS Common Stock, including
the risk of a complete loss of the value of TCMS Common Stock.
(4) Each Seller has been represented by legal
counsel in this transaction and such Seller and its
representatives, including such counsel, have been given the
opportunity to ask questions of, and receive answers from, the
officers of the Buyer concerning the terms of the transactions
contemplated by this Agreement and the affairs and the
business and financial condition of the Buyer.
(5) Each Seller has received a confidential
private placement memorandum concerning the Buyer and an
investment in shares of TCMS Common Stock, and each Seller and
its representatives have been given such access to all
documents, books and additional information concerning Buyer
which they have requested regarding Buyer.
(6) Each Seller has conducted such investigations
by itself and through its representatives in making a decision
to approve this Agreement and the transactions contemplated
herein as it has deemed necessary and advisable.
(7) Each Seller acknowledges and agrees that the
TCMS Common Stock issued to such Seller may not be disposed of
except in accordance with the requirements of the Securities
Act and any applicable state securities laws.
3.2 REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY.
Sellers and the Company, jointly and severally, represent and warrant to Buyer
that the statements contained in this Section 3.2 are correct and complete as
of the date of this Agreement and will be correct and complete as of the
Closing Date and the IPO Closing Date (as though made then and as though the
such dates were substituted for the date of this Agreement throughout this
Section 3.2), except as otherwise set forth in the disclosure schedule
delivered by the Sellers and the Company to Buyer on the date hereof and
initialed by the parties hereto (the "Company Disclosure Schedule"). The
Company Disclosure Schedule will be arranged in sections and paragraphs
corresponding to the lettered and numbered sections and paragraphs contained in
this Section 3.2.
(a) Organization and Qualification, etc. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Louisiana, has the full right, power
and legal authority and all licenses, permits, titles and
authorizations necessary to own all of its properties and assets and
to carry on its business as it is now being conducted, and is duly
qualified to do business and is in good standing in each jurisdiction
as set forth in Schedule 3.2(a) of the Company Disclosure Schedule
where, to the reasonable belief of Sellers and the Company, such
qualification is appropriate. The copies of the Company's Articles of
Incorporation and Bylaws, as amended to date, which have been
delivered to Buyer are complete and correct, and such instruments, as
so amended, are in full force and effect at the date hereof. The
Company is qualified to transact business as a foreign corporation and
is in good standing in all jurisdictions in which it is engaged in
HBH, Inc. Purchase and Sale Agreement/Page 6
<PAGE> 14
business and in which its properties or assets are located, which
foreign jurisdictions are listed in Schedule 3.2(a).
(b) Capital Stock. The entire authorized capital stock of
the Company consists of 3,000 shares of Company Common Stock, no par
value, of which as of the date hereof 882 shares of Company Common
Stock are validly issued and outstanding, fully paid and
nonassessable, all of which are held of record and beneficially by
Seller. No shares of the capital stock of the Company have been issued
in violation of the preemptive rights of any past or present
shareholder. No shares of the capital stock of the Company are in the
treasury of the Company. There are no outstanding subscriptions,
shares of capital stock, calls, warrants, options, contracts,
commitments, or demands relating to the capital stock of the Company
or other agreements of any character under which the Company or Buyer
would be obligated to issue or purchase shares of its capital stock.
There is no voting agreement, voting trust, proxy, or other agreement
or understanding with respect to the voting of the capital stock of
the Company. The Company has no commitments to issue or sell any
securities or obligations convertible into or exchangeable for, or
giving any person any right to subscribe for or acquire from the
Company, any shares of its capital stock and no securities or
obligations evidencing any such rights are outstanding.
(c) Subsidiaries. With respect to each corporation, firm,
partnership or other business entity in which the Company holds an
interest, Schedule 3.2(c) of the Company Disclosure Schedule sets
forth the name, the interest of the Company, and the capitalization of
such entity (each such entity in which the Company owns or controls
more than 50% of the voting securities, directly or indirectly, or in
which the Company acts as manager or general partner is hereinafter a
"Subsidiary"). Except as described on Schedule 3.2(c) of the Company
Disclosure Schedule neither the Company nor any Subsidiary owns or has
any right or obligation to acquire any class of securities (including,
without limitation, debt securities) issued by any person or company
and neither the Company nor any Subsidiary is a party to or bound to
any partnership, joint venture or similar arrangement with any person
for the conduct of any business.
(d) Qualification of Subsidiaries. Each Subsidiary is
duly organized, validly existing and in good standing under the laws
of its state of organization, with the corporate or organizational
power to own its property and carry on its business as it is now being
conducted. All of the issued and outstanding shares of capital stock
of each Subsidiary have been duly authorized and are validly issued,
fully paid, and nonassessable, and were not issued in violation of the
preemptive rights of any past or present shareholder. The Company and
its Subsidiaries hold of record and own beneficially all of the
outstanding shares or other interests in each Subsidiary of the
Company held by them 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 any of the Company and its Subsidiaries to sell,
transfer, or otherwise dispose of any capital stock of any of its
Subsidiaries or that could require any Subsidiary to issue, sell, or
HBH, Inc. Purchase and Sale Agreement/Page 7
<PAGE> 15
otherwise cause to become outstanding any of its own capital stock.
There are no outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to any Subsidiary. There
are no voting trusts, proxies, or other agreements or understandings
with respect to the voting of any capital stock of any Subsidiary.
None of the Company and its Subsidiaries controls directly or
indirectly or has any direct or indirect equity participation in any
corporation, partnership, trust, or other business association which
is not a Subsidiary of the Company.
(e) Authority Relative to Agreement. The Company has the
full right, power, and legal authority to execute and deliver this
Agreement. Provided that Hughes Court Approval is received prior to
Closing, the Company has the full right, power, and legal authority to
perform this Agreement and to consummate the transactions contemplated
on the part of the Company hereby. The execution and delivery by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated on its part hereby have been duly authorized
by its Board of Directors and the Sellers in their capacity as all
holders of the capital stock of the Company. No proceeding on the part
of the Company, and, except for those approvals described in Schedule
3.2(e), no notice, consent, authorization, order or approval of,
filing or registration with, any governmental commission, board or
other regulatory body, or any bank, bonding company, lender, surety,
customer, supplier, or any other person whatsoever is required for or
in connection with the execution and delivery of this Agreement. No
proceeding on the part of the Company, and, except for those approvals
described in Schedule 3.2(e) and Hughes Court Approval, no notice,
consent, authorization, order or approval of, filing or registration
with, any governmental commission, board or other regulatory body or
any bank, bonding company, lender, surety, customer, supplier, or any
other person whatsoever is required for or in connection with the
performance of this Agreement and the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by the Company and is a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms.
(f) Non-Contravention. Except as provided on Schedule
3.2(f), the execution, delivery, and performance of this Agreement by
the Company do not and the consummation by the Company of the
transactions contemplated hereby will not (provided that the Hughes
Court Approval is received prior to Closing), (1) violate any
constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government,
government agency, or court to which the Company or any of its assets
is subject or (2) violate any provision of the Articles of
Incorporation or Bylaws of the Company or any Subsidiary, or (3)
violate or result in, with the giving of notice or the lapse of time
or both, the violation of any provision of, or result in the
acceleration of or entitle any party to accelerate (whether after the
giving of notice or lapse of time or both) any obligation under, or
result in the creation or imposition of any lien, charge, pledge,
security interest or other encumbrance upon any of the property of the
Company or any Subsidiary pursuant to any provision of any mortgage,
lien, lease, contract, agreement, license, or instrument to which the
Company or any Subsidiary is a party or by which any of their
respective assets are bound. Except as provided on Schedule 3.2(f),
the execution, delivery and (assuming Hughes Court Approval prior to
Closing) performance of this Agreement by the Company
HBH, Inc. Purchase and Sale Agreement/Page 8
<PAGE> 16
do not and will not violate or conflict with any other restriction of
any kind or character to which the Company or any Subsidiary is
subject or by which any of their respective assets may be bound, and
the same do not and will not constitute an event permitting
termination of any such mortgage, lien, lease, agreement, license or
instrument to which the Company or any Subsidiary is a party or by
which any of their respective assets are bound, except as such
enforcement is subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting
creditors' rights.
(g) Financial Information. Sellers have previously
furnished Buyer with true and complete copies of the audited balance
sheets of the Company and its Subsidiaries as of December 31, 1996 and
December 31, 1995, and the related audited statements of income,
retained earnings and cash flows for each of the three years ended
December 31, 1996 audited by Deloitte & Touche, the independent
accountants of the Company, together with the unqualified audit report
of such accountants with respect to such financial statements. Such
financial statements have been prepared in conformity with GAAP
consistently applied and present fairly, in all material respects, and
accurately, in all material respects, the financial position and
results of operations of the Company and its consolidated Subsidiaries
as of and for the respective periods then ended. Sellers have also
previously furnished the Buyer with a correct and complete copy of the
unaudited balance sheets of the Company as of the last day of the
fiscal quarters ended March 31, 1997 and June 30, 1997, and the
related quarterly unaudited statements of cash flows and retained
earnings of the Company with respect to each of the fiscal quarters
ended March 31, 1997 and June 30, 1997, certified by the chief
executive officer and the chief accounting officer of the Company
(including such certificates, the "Unaudited Quarterly Financial
Statements"). To the best knowledge of Management of the Company, such
financial statements have been prepared in conformity with GAAP, in
all material respects, consistently applied (except for the absence of
footnote disclosure) and to the best knowledge of the Company present
fairly, in all material respects, and accurately, in all material
respects, the financial position and results of operations of the
Company as of and for the subject periods. Sellers have also
previously furnished the Buyer with a correct and complete copy of the
unaudited monthly balance sheets of the Company as of the last day of
each month from January through June 1997, and the related monthly
unaudited statement of income and retained earnings of the Company
with respect to each month from January through June 1997 certified by
the chief executive officer and the chief accounting officer of the
Company (including such certificates, the "Unaudited Monthly Financial
Statements"). To the best knowledge of management of the Company, such
financial statements have been prepared in conformity with GAAP, in
all material respects, consistently applied (except for (i) the
classified balance sheets, (ii) the absence of footnote disclosure,
(iii) absence of the statement of cash flows and the statement of
retained earnings and (iv) the reclassification of interest expense on
the income statement) and to the best knowledge of the Company present
fairly, in all material respects, and accurately, in all material
respects, the financial position and results of operations of the
Company as of and for the subject periods, except for normal recurring
year-end adjustments. The Company and its Subsidiaries do not have any
material liabilities or obligations of a type which should be included
in or reflected as such in financial statements prepared in accordance
with GAAP, whether related to tax or non-tax matters, accrued or
contingent, due or not yet due,
HBH, Inc. Purchase and Sale Agreement/Page 9
<PAGE> 17
liquidated, or unliquidated, or otherwise, except as and to the extent
disclosed or reflected in such financial statements or in Schedule
3.2(i). Collectively, the financial statements described in this
Section 3.2(g) are the "Company Financial Statements."
(h) Absence of Certain Changes or Events. Since December
31, 1996, and except to the extent described in Schedule 3.2(h) of the
Company Disclosure Schedule:
(1) none of the Company and its Subsidiaries 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;
(2) none of the Company and its Subsidiaries has
entered into any agreement, contract, lease, permit or license
(or series of related agreements, contracts, leases, permits
and licenses) involving more than $100,000 outside the
ordinary course of business;
(3) no party (including any of the Company and its
Subsidiaries) has breached, accelerated, terminated, modified,
or canceled any agreement, contract, lease, permit or license
(or series of related agreements, contracts, leases, permits
and licenses) involving more than $50,000 to which any of the
Company and its Subsidiaries is a party or by which any of
them is bound ("Company Contracts");
(4) none of the Company and its Subsidiaries has
imposed any lien, encumbrance or security interest upon any of
its assets, tangible or intangible (other than the Permitted
Exceptions, as defined below);
(5) none of the Company and its Subsidiaries has made
any capital expenditure (or series of related capital
expenditures) either involving more than $50,000 or outside
the ordinary course of business;
(6) none of the Company and its Subsidiaries has made
any capital investment in, any loan to, or any acquisition of
the securities of any other corporation, partnership, limited
liability company or other person (or series of related
capital investments, loans, and acquisitions) either involving
more than $50,000 or outside the ordinary course of business;
(7) none of the Company and its Subsidiaries 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 $50,000 singly or $100,000 in the aggregate;
(8) none of the Company and its Subsidiaries has
delayed or postponed the payment of accounts payable and other
liabilities outside the ordinary course of business;
HBH, Inc. Purchase and Sale Agreement/Page 10
<PAGE> 18
(9) none of the Company and its Subsidiaries has
canceled, compromised, satisfied, settled, waived, or released
any right or claim (or series of related rights and claims)
outside the ordinary course of business;
(10) none of the Company and its Subsidiaries has
granted any license or sublicense of any rights under or with
respect to any Intellectual Property (as hereinafter defined);
(11) there has been no change made or authorized in
the Articles of Incorporation or bylaws of any of the Company
and its Subsidiaries except as required to adopt the usual and
customary corporate indemnities for certain directors and
officers of the Company consistent with corporate governance
provisions of similar corporations;
(12) none of the Company and its Subsidiaries 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;
(13) none of the Company and its Subsidiaries 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 except for dividends and
distributions to shareholders which in the aggregate do not
exceed 42% of the Company's pre-tax net income during 1997
through the earlier of December 31, 1997 or the IPO Closing
Date;
(14) none of the Company and its Subsidiaries has
experienced any damage, destruction, or loss to its property
in excess of $50,000 which is not covered by insurance;
(15) none of the Company and its Subsidiaries 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;
(16) none of the Company and its Subsidiaries has
entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(17) none of the Company and its Subsidiaries has
granted any increase in compensation to any of its employees
in excess of prevailing market rates, or to any of its
directors, officers, consultants or agents in excess of five
percent of such person's base compensation or any
discretionary bonuses to officers and employees in the
aggregate amount of $50,000 plus up to 10% of the pre-tax net
income of the Company during 1997 through, at Seller's option,
September 30, 1997, October 31, 1997 or the IPO Closing Date;
HBH, Inc. Purchase and Sale Agreement/Page 11
<PAGE> 19
(18) none of the Company and its Subsidiaries 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 other employee benefit plan);
(19) except for the indemnification of certain
officers and directors pursuant to provisions of the Company's
Articles of Incorporation and Bylaws as permitted under
Louisiana law pursuant to amendment of same, none of the
Company and its Subsidiaries has made any other change in
employment terms for any of its directors, officers, and
employees outside the ordinary course of business;
(20) none of the Company and its Subsidiaries has
made or pledged to make any charitable or other capital
contribution outside the ordinary course of business;
(21) outside of the ordinary course of business
involving the Company or any of its Subsidiaries, there has
not been any other material: (i) occurrence; (ii) event; (iii)
incident; (iv) action; (v) failure to act; or (vi)
transaction;
(22) there has not been any material adverse change
in the business, financial condition, operation, results of
operation, or future prospects of the Company and its
Subsidiaries;
(23) there has not been any work interruptions, labor
grievances or claims filed, proposed law or regulation (the
existence of which is known, or under the normal course of
business should be known, to the Company) or any event or
condition of any character materially adversely affecting the
business of future prospects of the Company or its
Subsidiaries which do not affect the industry of the Company
as a whole; and
(24) there has not been any merger or consolidation
or agreement to merge or consolidate with or into any other
corporations (except the transactions contemplated by this
Agreement).
"Permitted Exceptions" shall mean (i) Inchoate Liens,
mechanic's, materialman's, warehouseman's and carrier's liens and
purchase money security interests arising in the ordinary course of
business, a correct and complete list of which is set forth on
Schedule 3.2(h-1) of the Company Disclosure Schedule; (ii) liens for
taxes and assessments not yet payable; (iii) liens for taxes,
assessments and charges and other claims, the validity of which the
Company or Sellers are contesting in good faith, a correct and
complete list of which is set forth on Schedule 3.2(h-1); and (iv)
imperfections of title, liens, security interests, claims and other
charges and encumbrances the existence of which does not adversely
affect the operation, value, use or enjoyment of such asset or
property. For purposes of this Agreement, "Inchoate Liens" means liens
arising under contracts customary in industry of the Company and liens
with respect to vessels which, in each case, relate to obligations of
the Company (or obligations of the vessel) which are not yet due or
which will be paid or
HBH, Inc. Purchase and Sale Agreement/Page 12
<PAGE> 20
performed, as applicable, in the ordinary course of business, and
which are not currently in default.
(i) Undisclosed Liabilities. To the best knowledge of
Sellers and the Company, the Company and its Subsidiaries have no
material liabilities (and there is no basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against the Company or its Subsidiaries giving rise
to any such liability), except for (i) liabilities set forth on the
face of the Company Financial Statements (rather than in any notes
thereto), (ii) liabilities set forth and described on Schedule 3.2(i),
and (iii) liabilities which have arisen after June 30, 1997 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).
(j) Permits and Legal Compliance. The Company and its
Subsidiaries have all permits, licenses, orders, qualifications, and
approvals of all governmental and regulatory authorities material to
the conduct of their business, a correct and complete list of which is
set forth in Schedule 3.2(j) of the Company Disclosure Schedule. All
such permits, licenses, orders and approvals are in full force and
effect, and no suspension or cancellation of any of them is pending or
threatened. None of such permits, licenses, orders or approvals, and
no application for any of such permits, licenses, orders or approvals,
will be adversely affected by the consummation of the transactions
contemplated by this Agreement. To the best knowledge of Sellers and
the Company, the Company and its Subsidiaries have 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, to the best knowledge of Sellers and the
Company, no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced
against the Company or its Subsidiaries alleging any failure so to
comply.
(k) Title to Properties; Absence of Liens and
Encumbrances, etc. The Company and its Subsidiaries have good and
marketable title to all of the real, tangible personal and mixed
properties and assets owned by it and used in its business (other than
any intangible properties and assets described in Sections 3.2(l),
3.2(m) and 3.2(n), which sections contain the Company's and Sellers'
representations and warranties with respect to such intangible
properties and assets), free and clear of any liens, charges, pledges,
mortgages, conditional sales contracts, security interests or other
encumbrances (other than Permitted Exceptions), except as reflected in
the Company Financial Statements or disclosed on Schedule 3.2(h-1). A
correct and complete list of all material properties and assets of the
Company and its Subsidiaries (other than properties and assets
described in Sections 3.2(l), 3.2(m) and 3.2(n), and other than
properties with a zero basis) as of April 30, 1997 is set forth on the
Company's fixed asset list attached as Schedule 3.2(k).
(l) Software. The Company and each of its Subsidiaries
own all operating and applications computer programs and data bases
("Software") or have the right to use such Software under valid leases
or license agreements therefor, or such Software has been made
HBH, Inc. Purchase and Sale Agreement/Page 13
<PAGE> 21
available to the Company by an affiliate of the Company that has the
right to use such Software under valid leases or license agreements.
Such Software constitutes all the Software which is necessary to
operate the business of the Company and its Subsidiaries as currently
conducted. None of the Software used by or available to the Company or
its Subsidiaries, and no use thereof, infringes upon or violates any
patent, copyright, trade secret or other proprietary right of anyone
else, and no claim with respect to any such infringement or violation
is threatened. Sellers, the Company and certain affiliates will enter
into a transition agreement with the Buyer at Closing regarding the
Company's ownership and/or use at Closing of certain Software used by
the Company and the continued use by the Company, for a period of not
less than six months following Closing, of certain Software currently
used by the Company which has been made available to the Company by
its affiliates.
(m) Patent, Trademark, etc. Claims. The Company or its
Subsidiaries is the owner or licensee of all patents, patent licenses,
trademarks/servicemarks/trade names, trademark/servicemark/trade name
registrations, copyrights, and copyright registrations or any other
intellectual property ("Intellectual Property") used by or necessary
to the operation of the Company's business as presently conducted and
listed in Schedule 3.2(m) of the Company Disclosure Schedule. Each
item of Intellectual Property owned or used by the Company or its
Subsidiaries immediately prior to the Closing will be owned or
available for use by the Company or its Subsidiaries on the same terms
and conditions immediately after the IPO Closing Date. Each of the
Company and its Subsidiaries owns or has the right to use all such
Intellectual Property and has taken all necessary action to maintain
and protect each item of Intellectual Property that it owns or uses.
Each of the Company and its Subsidiaries has not infringed, and is not
now infringing, on any trade name, trademark, service mark, or
copyright belonging to any other person, firm or corporation and has
not received any notice of such infringement. Neither the Company nor
any Subsidiary is a party to any license, sublicense, agreement or
arrangement, pursuant to which the Company or its Subsidiaries uses
Intellectual Property except as shown in Schedule 3.2(m). With respect
to each such license, sublicense, agreement or arrangement disclosed:
(1) the license, sublicense, agreement or
arrangement covering the item is legal, valid, binding,
enforceable, and in full force and effect;
(2) the license, sublicense, agreement or
arrangement will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms
following the Closing;
(3) no party to such license, sublicense,
agreement or arrangement 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; and
(4) no party to the license, sublicense,
agreement or arrangement has repudiated any provision thereof.
HBH, Inc. Purchase and Sale Agreement/Page 14
<PAGE> 22
Each of the Company and its Subsidiaries owns, or holds adequate
licenses or other rights to use its trade names in the business as now
conducted by it, and that does not, and will not, conflict with,
infringe on, or otherwise violate any rights of others. Sellers have
delivered to Buyer correct and complete copies of all such licenses,
sublicenses agreements and arrangements (as amended to date) disclosed
on Schedule 3.2(m).
(n) List of Properties, Contracts and Other Data. The
Company and its Subsidiaries own, lease or subcontract for all
property and tangible assets necessary for the conduct of their
business as presently conducted. To the best knowledge of Sellers and
the Company, except as reflected in such Schedule 3.2(n) of the
Company Disclosure Schedule, all of the material property of the
Company and its Subsidiaries is in existence and is in operable
condition and in conformity in all material respects with all
building, zoning, OSHA, Coast Guard, safety, or other applicable
ordinances, regulations, or laws (except for immaterial
non-conformities to such provisions). Except as to the representation
regarding operability above, Sellers and the Company make no warranty
whatsoever whether expressed or implied as to the condition of the
Company's material property, and with respect to such properties Buyer
expressly waives all implied warranties of seaworthiness, where
applicable, or fitness for intended purposes, whether arising under
contract, tort or under the law of redhibition. Schedule 3.2(n) of the
Company Disclosure Schedule contains a list setting forth with respect
to the Company and its Subsidiaries as of the date hereof the
following:
(1) The Company does not own any real or
immovable property.
(2) Schedule 3.2(n)(2) of the Company Disclosure
Schedule lists and describes briefly all real property leased
or subleased by or to the Company or any of its Subsidiaries
(whether as lessor or as lessee). The Sellers have delivered
to the Buyer correct and complete copies of the leases and
subleases listed in Schedule 3.2(n)(2) (as amended to date).
With respect to each lease and sublease listed in Schedule
3.2(n)(2):
(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) except as described on Schedule 3.2(n)(2), there
are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
HBH, Inc. Purchase and Sale Agreement/Page 15
<PAGE> 23
(vi) with respect to each sublease, the
representations and warranties set forth in
subsections (i) through (v) above are correct and
complete with respect to the underlying lease;
(vii) none of the Company and its Subsidiaries has
assigned, transferred, conveyed, mortgaged, deeded in
trust, or encumbered any interest in the leasehold or
subleasehold;
(viii) to the best knowledge of Sellers and the
Company, 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;
(ix) all facilities leased or subleased thereunder
are supplied with utilities and other services
necessary for the operation of said facilities; and
(3) Schedule 3.2(n)(3) of the Company Disclosure
Schedule lists and describes briefly all contracts and
commitments (including, without limitation, mortgages,
indentures and loan agreements) to which the Company or any
Subsidiary is a party, or to which it or any of its assets or
properties are subject and which are not specifically referred
to elsewhere in Section 3.2, provided that there need not be
listed in the Company Disclosure Schedule (unless required
pursuant to the preceding subsections of this Section 3.2(n))
any contract or commitment incurred in the ordinary course of
business which requires payments to or by the Company and its
Subsidiaries during its remaining life of less than $250,000
or which is terminable by the Company or any Subsidiary within
thirty days without payment of a premium or penalty; and
Correct and complete copies of all documents and descriptions
complete in all material respects of all oral agreements or
commitments (if any) referred to in this Section 3.2(n) have been
provided to, or made available to, Buyer or its counsel. None of the
Company, the Sellers and the Subsidiaries has been notified of any
claim that any contract listed in Schedule 3.2(n)(3) of the Company
Disclosure Schedule is not valid and enforceable in accordance with
its terms for the periods stated therein, or that there is under any
such contract any existing material default or event of default or
event which with notice or lapse of time or both would constitute such
a default.
(o) Use of Real Property. None of the Sellers, the
Company and the Subsidiaries has received notice of violation of any
applicable zoning or building regulation, ordinance or other law,
order, regulation or requirement relating to the operations of the
Company or its Subsidiaries, or any notice of default under any
material lease, contract, commitment, license or permit, relating to
the use and operation of the owned or leased real property listed in
the Company Disclosure Schedules and there is no such violation or
default. None of the Sellers, the Company and the Subsidiaries has
received notice that any plant, facility or other
HBH, Inc. Purchase and Sale Agreement/Page 16
<PAGE> 24
building which is owned or covered by a lease set forth in the Company
Disclosure Schedule does not substantially conform in all material
respects with all applicable ordinances, codes, regulations and
requirements, and none of the Sellers, the Company and the
Subsidiaries has received notice that any law or regulation presently
in effect or condition precludes or restricts continuation of the
present use of such properties.
(p) Environmental Laws. To the best knowledge of Sellers
and the Company, the Company and its Subsidiaries, including, without
limitation, their businesses, facilities, property, vessels, and
equipment of the Company and its Subsidiaries have been and are
currently in compliance, in all material respects, with all applicable
federal, state, and local laws, rules, and regulations of all
authorities, including without limitation, applicable Environmental
Laws (as hereinafter defined), and, to the best knowledge of Sellers
and the Company, the Company and its Subsidiaries have all permits,
certificates, and licenses required to operate their businesses,
facilities, property, vessels, and equipment, including, without
limitation, any relating to the generation, processing, treatment,
discharge, storage, transport, disposal, or other management of
chemicals and other hazardous materials, of waste materials of any
kind, and those relating to the protection of environmentally
sensitive areas. To the best knowledge of Sellers and the Company,
there is no material adverse effect on any of the facilities,
properties, vessels or equipment of the Companies, or with respect to
function, use, or value of any such assets, resulting from any
hazardous or toxic substance, or any pollutant or contaminant, or as a
result of exposure to petroleum or any by-product thereof.
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, and the Occupational Safety and Health Act of
1970, each as amended, together with all other 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) concerning pollution or
protection of the environment, public 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 in ambient air, 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.
(q) Litigation. Except as provided on Schedule 3.2(q) of
the Company Disclosure Schedule, there are no actions, suits, audits,
investigations, unfair labor practices charges, complaints, claims,
grievances or proceedings with respect to the Company or any
Subsidiary pending against the Company or any Subsidiary at law or in
equity, or before or by any federal, state, municipal, foreign or
other governmental department, commission, board, bureau, agency or
instrumentality, nor are there any such actions, suits, audits,
investigations, unfair labor practices charges, complaints, claims,
grievances or proceedings with respect to the Company (or any
Subsidiary) or threatened against the Company or any Subsidiary.
HBH, Inc. Purchase and Sale Agreement/Page 17
<PAGE> 25
(r) Labor and Employment Matters.
(1) Schedule 3.2(r) of the Company Disclosure
Schedule sets forth all collective bargaining agreements,
employment and consulting agreements (other than consulting
agreements terminable by the Company or any Subsidiary within
60 days without payment of a premium or a penalty), executive
compensation plans, bonus plans, deferred compensation
agreements, employee pension plans or retirement plans,
employee profit sharing plans, employee stock purchase and
stock option plans, group life insurance, hospitalization
insurance or other plans or arrangements providing for
benefits to employees of the Company or any Subsidiary;
(2) To the best knowledge of the Sellers and the
Company, there are no controversies between the Company (or
any Subsidiary) and any employees or any unresolved labor
union grievances or unfair labor practice or labor arbitration
proceedings pending or threatened, related to the Company (or
any Subsidiary) and there are not any organizational efforts
presently being made or threatened in an organized fashion
involving any of the employees of the Company or any
Subsidiary, except as disclosed on Schedule 3.2(r).
(3) None of the Sellers, the Company and the
Subsidiaries has received notice of any claim that it has not
complied with any laws relating to the employment of labor,
including any provisions thereof relating to wages, hours,
collective bargaining, the payment of social security and
similar taxes, equal employment opportunity, employment
discrimination and employment safety, or that it is liable for
any arrears of wages or any taxes or penalties for failure to
comply with any of the foregoing in any case which is
unresolved as of the date hereof, except as disclosed on
Schedule 3.2(r).
(4) Schedule 3.2(r) of the Company Disclosure
Schedule sets forth the current pay rates of all employees of
the Company and its Subsidiaries (by position or by
department) as of a recent date.
(s) Accounts Receivable. The accounts receivable
reflected on the balance sheet of the Company as of December 31, 1996,
and all accounts receivable arising between December 31, 1996 and the
date hereof, arose from bona fide transactions in the ordinary course
of business; the services involved have been provided to the account
obligor and other than any accounts receivable which are the subject
of disputes and for which there are reasonably adequate reserves on
the Company's Financial Statements, no further services are required
to be provided in order to complete the sales and to entitle the
Company or its assignees to collect the accounts receivable in full.
No such account has been assigned or pledged to any other person, firm
or corporation except as set forth on Schedule 3.2(s).
(t) Insurance. Schedule 3.2(t) of the Company 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
HBH, Inc. Purchase and Sale Agreement/Page 18
<PAGE> 26
surety arrangements) to which the Company and its Subsidiaries have
been a party, a named insured, or otherwise the beneficiary of
coverage at any time within the past five years (except as to
insurance policies owned by third party vendors, contractors and
clients of the Company which have contractually named the Company or
its Subsidiaries as insured or provided other benefits of coverage as
a result of contractual liability coverage, which policies need not be
listed on Schedule 3.2(t) but shall be made available for inspection
by Buyer's representatives):
(1) the name, address, and telephone number of
the agent;
(2) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(3) the policy number and the period of coverage;
(4) 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
(5) a description of any retroactive or "swing"
premium adjustments or other loss-sharing arrangements.
To the best knowledge of Sellers and the Company, with respect to each
such insurance policy owned by the Company or any of its Subsidiaries:
(A) to the best knowledge of Sellers and the Company, the policy is
legal, valid, binding, enforceable, and in full force and effect with
respect to the periods and risks which such policy purports to insure;
(B) the policy will continue to be legal, valid, binding, enforceable,
and in full force and effect in accordance with its terms on the same
terms following the consummation of the transactions contemplated
hereby; (C) neither the Company nor any of its Subsidiaries 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 the
Company has received no notice of default, and no termination,
modification, or acceleration has occurred, under the policy; and (D)
no party to the policy has repudiated any provision thereof. The
Company and each of its Subsidiaries has been covered during the past
five years by insurance in scope and amount customary and reasonable
for the businesses in which it has engaged during the aforementioned
period. Schedule 3.2(t) of the Company Disclosure Schedule describes
any self-insurance arrangements affecting the Company and its
Subsidiaries. "Self insurance arrangements" means any arrangement by
which the Company or its Subsidiaries has assumed risks in scope and
amount customarily insured by businesses in the Company's industry and
geographic region.
(u) Employee Benefits.
HBH, Inc. Purchase and Sale Agreement/Page 19
<PAGE> 27
(1) The Company and its Subsidiaries have complied
and currently is in compliance, both as to form and operation,
in all material respects with the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Internal Revenue Codes of 1954 and/or 1986,
as amended, respectively (for purposes of this Section 3.2(u)
only, the "Code"), with respect to each "employee benefit
plan" as defined under Section 3(3) of ERISA. Each employee
benefit plan of the Company and its Subsidiaries ("Plan") is
described in Schedule 3.2(u) of the Company Disclosure
Schedule, and a copy of each Plan is attached thereto.
(2) Except as described on Schedule 3.2(u), the
Company and its Subsidiaries have never maintained, adopted or
established, contributed or been required to contribute to, or
otherwise participated or been required to participate in, a
"multiemployer plan" (as defined in Section 3(37) of ERISA).
No amount is due as owing from the Company or any Subsidiary
on account of a "multiemployer plan" (as defined in Section
3(37) of ERISA) or on account of any withdrawal therefrom.
(3) The Company and its Subsidiaries have not
incurred any liability with respect to a Plan including,
without limitation, under ERISA (including, without
limitation, Title I or Title IV of ERISA, other than liability
for premiums due to the Pension Benefit Guaranty Corporation
("PBGC")), the Code or other applicable law, which has not
been satisfied in full, and no event has occurred, and there
exists no condition or set of circumstances which could result
in the imposition of any liability with respect to a Plan,
including, without limitation, under ERISA (including, without
limitation, Title I or Title IV of ERISA), the Code or other
applicable law with respect to the Plan.
(4) The Company and its Subsidiaries have no
outstanding commitments to provide or to cause to be provided
any severance or other post-employment benefit, salary
continuation, termination, disability, death, retirement,
health or medical benefit or similar benefit to any person
(including, without limitation, any former or current
employee) that has not been reflected in the Company Financial
Statements or is not included in any Plan or required by
ERISA, COBRA or other labor law, disclosed in Schedule 3.2(u)
of the Company Disclosure Schedule to this Agreement.
(v) Tax Matters.
(1) All federal, state, local and foreign tax returns
required to be filed by the Company and its Subsidiaries prior
to the date hereof have been filed on a timely basis with the
appropriate governmental authorities in all jurisdictions in
which such tax returns are required to be filed, and all such
returns are correct and complete. Sellers have delivered to
Buyer correct and complete copies of all federal income tax
returns, examination reports, and statements of deficiencies
asserted against or agreed to by the Company or any Subsidiary
since January 1, 1992. Neither the Company nor its
Subsidiaries are currently the subject of any audit,
examination or any similar
HBH, Inc. Purchase and Sale Agreement/Page 20
<PAGE> 28
investigation by any governmental authority. Schedule 3.2(v)
of the Company Disclosure Schedule sets forth all audits,
examinations or similar investigations of the Company and its
Subsidiaries by any governmental authority since January 1,
1992.
(2) All federal, state, local and foreign income,
franchise, sales, use, property, and all other taxes, fees,
assessments, or other governmental charges (including
withholding taxes), and all interest and penalties thereon
(all of the foregoing collectively, "Taxes") due from or
properly accruable by the Company and its Subsidiaries have
been fully and timely paid or, in the cases of Taxes for which
payment is not yet required, properly and fully accrued for on
the Company Financial Statements or in Schedule 3.2(v) of the
Company Disclosure Schedule with respect to all taxable
periods ending on or prior to the date hereof and interim
periods through the date hereof.
(3) Neither the Company nor its Subsidiaries has
filed a consent under Section 341(f) of the Code concerning
collapsible corporations. Neither the Company nor any of its
Subsidiaries is a party to any agreement, contract or
arrangement that would, by reason of the consummation of any
of the transactions contemplated by this Agreement,
individually or in the aggregate, result in the payment of any
"excess parachute payment" within the meaning of Section 280G
of the Code. None of the assets of the Company or any
Subsidiary is required to be treated as being owned by any
other person pursuant to the "safe harbor" leasing provisions
of Section 168 of the Internal Revenue Code of 1954, as in
effect prior to the repeal of said leasing provisions.
(4) None of the Company and its Subsidiaries is a
party to any Tax allocation or sharing agreement. None of the
Company and its Subsidiaries (A) has been a member of an
affiliated group filing a consolidated federal income tax
return (other than a group the common parent of which was the
Company) or (B) has any liability for the taxes of any person
(other than any of the Company and its Subsidiaries) under
Treas. Reg. Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor,
by contract, or otherwise.
(5) Schedule 3.2(v) of the Company Disclosure
Schedule sets forth the following information with respect to
each of the Company and its Subsidiaries (or, in the case of
clause (B) below, with respect to each of the Subsidiaries) as
of the most recent practicable date: (A) the tax basis of the
Company or Subsidiary in its assets as shown on the tax return
of the Company; (B) the amount of any net operating loss, net
capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to
the Company or Subsidiary; and (C) the amount of any deferred
gain or loss allocable to the Company or Subsidiary arising
out of any Deferred Intercompany Transaction (as defined in
Treas. Reg. Section 1.1502-13).
HBH, Inc. Purchase and Sale Agreement/Page 21
<PAGE> 29
(6) The Company has not waived any statute of
limitations, or agreed to any extension of time with respect
to an assessment or deficiency, with respect to any Taxes.
(7) The Company has been a validly electing S
corporation within the meaning of Sections 1361 and 1362 of
the Internal Revenue Code of 1986, as amended (the "Code"), at
all times since November 1, 1984.
(w) Fees. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by Sellers
and the Company directly with the Buyer, without the intervention of
any other person on behalf of Sellers or the Company in such manner as
to give rise to any valid claim by any other person against Sellers or
the Company for a finder's fee, brokerage commissions, or similar
payment; provided, however, Sellers shall pay consulting and financial
advisory fees to certain employees of the Company and its affiliates
with respect to the consummation of the transaction for which fees and
expenses Sellers will be solely liable.
(x) Powers of Attorney. There are no outstanding powers
of attorney executed on behalf of the Company.
(y) Investment Company. Each of the Company or its
Subsidiaries is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "holding company, a subsidiary
company" of a "holding company" or an "affiliate" of a "holding
company" or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
3.3 REPRESENTATIONS AND WARRANTIES BY THE BUYER. The Buyer
represents and warrants to the Sellers and the Company that the statements
contained in this Section 3.3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date and the IPO
Closing Date (as though made then and as though such dates were substituted for
the date of this Agreement throughout this Section 3.3), except as set forth in
the disclosure schedule delivered by the Buyer to the Sellers and the Company
on the date hereof and initialed by the parties hereto (the "Buyer Disclosure
Schedule"). The Buyer Disclosure Schedule will be arranged in sections and
paragraphs corresponding to the lettered and numbered sections and paragraphs
contained in this Section 3.3.
(a) Organization and Qualification, etc. The Buyer is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, has corporate power and
authority to own all of its properties and assets and to carry on its
business as it is now being conducted, and is duly qualified to do
business and is in good standing in each jurisdiction as set forth in
Schedule 3.3(a) of the Buyer Disclosure Schedule where, to the
reasonable belief of Buyer, such qualification is appropriate. The
copies of the Buyer's Articles of Incorporation and Bylaws, as amended
to date, which have been delivered
HBH, Inc. Purchase and Sale Agreement/Page 22
<PAGE> 30
to Sellers are complete and correct, and such instruments, as so
amended, are in full force and effect at the date hereof.
(b) Capital Stock. The entire authorized capital stock of
Buyer consists of 25,000,000 shares of capital which is divided into
(1) 3,000,000 shares of restricted common stock having a par value of
$.001 per share, (2) 20,000,000 shares of common stock having a par
value of $.001 per share (i.e., TCMS Common Stock), and (3) 2,000,000
shares of preferred stock having a par value of $.001 per share.
(c) Subsidiaries, etc. Buyer does not own of record or
beneficially, directly or indirectly, (1) any shares of outstanding
capital stock or securities convertible into capital stock of any
other corporation or (2) any participating interest in any
partnership, joint venture or other non-corporate business enterprise.
(d) Authority Relative to Agreement. Buyer has the
corporate power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated on the part
of Buyer hereby. The execution and delivery by Buyer of this
Agreement and the consummation by Buyer of the transactions
contemplated on its part hereby have been duly authorized by its Board
of Directors. No other corporate proceedings on the part of Buyer are
necessary to authorize the execution and delivery of this Agreement by
Buyer. Except for corporate action related to the IPO, no other
corporate proceedings on the part of Buyer are necessary to authorize
the performance of this Agreement by Buyer or the consummation by
Buyer of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Buyer and is enforceable against Buyer
in accordance with its terms.
(e) Non-Contravention. The execution, delivery and
performance of this Agreement by Buyer do not and the consummation by
Buyer of the transactions contemplated hereby will not (1) violate any
constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling change, or other restriction of any government,
government agency, or court to which Buyer is subject to, or (2)
violate any provision of the Articles of Incorporation or Bylaws of
Buyer, or (3) violate or result in, with the giving of notice or the
lapse of time or both, the violation of any provision of, or result in
the acceleration of or entitle any party to accelerate (whether after
the giving of notice or lapse of time or both) any obligation under,
or result in the creation or imposition of any lien, charge, pledge,
security interest or other encumbrance upon any of the property of
Buyer pursuant to any provision of any mortgage, lien, lease,
agreement, contract, license, or instrument to which Buyer is a party
or by which any of its assets is bound. The execution, delivery and
performance of this Agreement by Buyer do not and will not violate or
conflict with any other restriction of any kind or character to which
Buyer is subject or by which any of its assets may be bound, and the
same does not and will not constitute an event permitting termination
of any such mortgage, lien, lease, agreement, license or instrument to
which Buyer is a party or by which any of its assets is bound, except
as such enforcement is subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws relating to or
affecting creditors' rights.
HBH, Inc. Purchase and Sale Agreement/Page 23
<PAGE> 31
(f) Approvals. Except for the declaration of
effectiveness of the registration statement filed in connection with
Buyer's IPO by the SEC pursuant to the Securities Act, and the
consents and approvals required pursuant to state securities laws with
respect to the IPO, and except as set forth in Schedule 3.3(f) of the
Buyer Disclosure Schedule, no consent, authorization, order or
approval of, or filing or registration with, any governmental
commission, board or other regulatory body or any other person is
required for the execution and delivery of this Agreement and the
consummation by Buyer of the transactions contemplated hereby.
(g) Litigation. There are no actions, claims, proceedings
or governmental investigations pending against Buyer or any of its
assets or properties at law or in equity, before or by any federal,
state, or municipal court, agency or other governmental entity, or by
any other person, which, individually or in the aggregate, could
reasonably be expected (1) to have a material adverse effect on the
financial condition or results of operations of Buyer or (2) to
prevent the consummation of the transactions contemplated hereby.
(h) Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by
Buyer directly with Sellers and the Company, without the intervention
of any person on behalf of Buyer in such manner as to give rise to any
valid claim by any person against Buyer for a finder's fee, brokerage
commission, or similar payment.
(i) Disclosure. The confidential private placement
memorandum including amendments and supplements thereto ("Memorandum")
previously delivered to Sellers contains no misstatement of material
fact, nor omits to state any material fact required to make statements
contained therein not misleading. As disclosed in the Memorandum, and
as of the execution date of this Agreement, certain contracts and
agreements required in connection with the IPO are in negotiation or
remain to be negotiated, and approval of the SEC and certain other
government agencies is required to consummate the proposed
transactions. Aside from such contingencies, Buyer knows of no reason
why the transactions described in the Memorandum will not go forward.
ARTICLE 4
ADDITIONAL COVENANTS AND AGREEMENTS
4.1 CONDUCT OF BUSINESS. During the period from the date hereof to
the IPO Closing Date, except as otherwise contemplated by this Agreement,
Sellers shall cause the Company to, and the Company shall use its reasonable
efforts to conduct its operations according to its ordinary and usual course of
business, subject to the foregoing, to preserve substantially intact its
business organization, keep available the services of its officers and
employees, and maintain its present relationships with licensors, suppliers,
distributors, customers and others having significant business relationships
with it. Representatives of the Company will confer with representatives of
Buyer to
HBH, Inc. Purchase and Sale Agreement/Page 24
<PAGE> 32
keep it informed with respect to the general status of the on-going operations
of the business of the Company. Without limiting the generality of the
foregoing, Sellers will cause the Company to:
(a) carry on the business in substantially the same manner as
heretofore carried on and not introduce any material new method of
management, operation or accounting, nor provide discounted services
outside the ordinary course of business;
(b) in the ordinary course of business, maintain its material
properties, facilities, equipment and other assets, including those
held under leases, in good working order, condition and repair,
ordinary wear and tear excepted;
(c) perform all of its obligations under all debt and lease
instruments and other agreements relating to or affecting its
business, assets, properties, equipment and rights, and pay all
vendors, suppliers, and other third parties (including mechanics and
materialmen) in the ordinary course of business, except those
contested in good faith, and pay in full all payroll obligations when
due;
(d) maintain its present debt and lease instruments (unless
same are otherwise mature) and refrain from entering into new or
amended debt or lease instruments other than short term and operating
leases with respect to equipment entered into in the ordinary course
of business, except as provided in paragraph (e) below without prior
written consent of Buyer;
(e) not incur any indebtedness or any encumbrance of any of
its properties or assets, other than indebtedness with respect to (1)
ordinary trade accounts payable, (2) indebtedness under existing lines
of credit with Banc One, N.A., (3) indebtedness under existing lines
of credit from Diversified Group, Inc., a Louisiana corporation, and
(4) Long-Term Debt permitted under Section 5.1(j), and encumbrances
related to indebtedness described in clauses (2), (3) and (4) above
and purchase money security interests incurred in the ordinary course
of business; provided that such indebtedness does not incur interest
in excess of market rates and such indebtedness contains no prepayment
penalty in excess of the three percent of the outstanding principal
amount.
(f) keep in full force and effect its present insurance
policies or other comparable insurance coverage;
(g) use its best efforts to maintain and preserve its business
organization intact, retain its present employees and maintain its
relationship with suppliers, customers and others having business
relations with the Company;
(h) except as otherwise permitted by this Agreement, refrain
from effecting any change in the certificate of incorporation, bylaws
or capital structure of the Company and refrain from entering into or
agreeing to enter into any merger or consolidation by the Company with
or into, and refrain from acquiring all or substantially all of the
assets, capital
HBH, Inc. Purchase and Sale Agreement/Page 25
<PAGE> 33
stock or business of, any person, corporation, partnership,
association or other business organization or division of any thereof;
(i) refrain from incurring any expenditures outside the
normal course of business, except with prior written notification to
Buyer, and refrain from incurring capital expenditures, including
commitments for capital expenditures as of such date, in the aggregate
in excess of (i) $870,000 if the IPO Closing Date occurs on or before
September 30, 1997, and (ii) $1,370,000, if the IPO Closing Date
occurs after September 30, 1997;
(j) refrain from starting or acquiring any new businesses
without the prior written consent of Buyer;
(k) except as required by market conditions, maintain its
present salaries and commission levels for all officers, directors,
employees or agents, refrain from entering into an employment
agreement except in the ordinary course of business, and refrain from
entering into any collective bargaining agreement; and
(l) refrain from declaring or paying any fees, commissions or
loans outside the ordinary course of business, and refrain from
declaring or paying any bonuses except discretionary bonuses to
officers and employees to the extent that the aggregate amount of all
such discretionary bonuses paid or declared during 1997 do not exceed,
in the aggregate, the sum of 10% of the Company's pre-tax net income
during 1997 through, at Seller's option, September 30, 1997, October
31, 1997 or the IPO Closing Date, plus $50,000; and
(m) refrain from declaring or paying any dividends or
Subchapter "S" distributions to any shareholders (including Sellers),
directors, management, sales agents, employees or other personnel,
except for dividends and distributions to shareholders paid or
declared in 1997 which in the aggregate do not exceed 42% of the
Company's pre-tax net income during 1997 through the earlier of
December 31, 1997 or the IPO Closing Date.
(n) promptly notify Buyer of the receipt by it or the
Company of any notice or claim, written or oral, of (a) default or
breach by the Company under, or of any termination (other than at the
end of the stated term thereof) or cancellation, or threat of
termination (other than at end of the stated term thereof) of
cancellation, of any Company Contract, (b) any loss of, damage to or
disposition of, any of the properties, assets or the products of the
Company of a value of $50,000 or more, singly or in the aggregate
(other than the sale or use of inventories or equipment in the
ordinary course of business), (c) any claim or litigation threatened
or instituted, or any other material adverse event or occurrence
involving or affecting the Company or any of its assets, properties,
operations, businesses or employees, and (d) any proposal made by any
third party received by the Company or of which any Seller obtains
knowledge in respect of any sale or other disposition, direct or
indirect, of the assets (other than the sale or use of inventories in
the ordinary course of business), businesses or outstanding capital
stock or other ownership or voting interests of the Company;
HBH, Inc. Purchase and Sale Agreement/Page 26
<PAGE> 34
(o) comply with and cause to be complied with all
applicable laws, rules, regulations and orders of all federal, state
and local governments or governmental agencies affecting or relating
to the Company or its assets, properties, operations, businesses or
employees except where the failure to comply will not have a material
adverse effect on the Company;
(p) except in the ordinary course of business or as
otherwise permitted by this Agreement, refrain from any sale,
disposition or distribution of any of its properties or assets and
refrain from entering into any agreement or commitment with respect to
any such sale, disposition or distribution (other than the sale or
disposition of inventories or equipment in the ordinary course of
business);
(q) refrain from any purchase or redemption of any
capital stock or other voting interest of the Company and refrain from
issuing any capital stock or other voting interest;
(r) refrain from making any change in any accounting
principle, classification, policy or practice;
(s) manage working capital in the ordinary course
consistent with past practice and refrain from introducing any new
method of management or operation, and except for any action in the
ordinary course of business consistent with past practices, refrain
from providing any discounted services or products, discounting any
receivables or taking any action to accelerate payment of any
receivable prior to its due date;
(t) except as otherwise permitted by this Agreement,
refrain from entering into any contract, lease, undertaking,
commitment, mortgage, indenture, note, security agreement, license or
other agreement:
(i) containing provisions calling for
the sale or purchase of raw materials, product or
service at prices that vary from the market prices of
such raw materials, products or services generally
prevailing in customary third-party markets;
(ii) which include "take or pay", "meet
or release", "most favored nations" (without Buyer's
consent, not to be unreasonably withheld) or similar
pricing or delivery arrangements;
(iii) with any officer, director,
shareholder or affiliate of the Company, other than
usual and customary indemnities consistent with
corporate governance practices of similar companies;
(iv) requiring the Company to indemnify
or hold harmless any other person or entity, except
in the ordinary course of business;
HBH, Inc. Purchase and Sale Agreement/Page 27
<PAGE> 35
(v) evidencing any warranty obligation
of the Company with respect to goods, services or
products sold or leased by it (other than warranties
given in the normal course of business containing
substantially the same terms as those presently in
effect); or
(vi) imposing on the Company any
confidentiality, non-disclosure or non-compete
obligation, except in the ordinary course of
business.
4.2 ACCESS TO INFORMATION BY BUYER. Until the IPO Closing Date or
termination of this Agreement, Sellers will furnish to Buyer, with the
Unaudited Monthly Financial Statements for each month following June 1997
promptly as available, but in no event more than 25 days following the end of
such month. Buyer may prior to the Closing have access to the business and
properties of the Company and information concerning its financial and legal
condition as Buyer deems necessary or advisable in connection with the
consummation of the transactions contemplated hereby, provided that such access
shall not interfere with normal operations of the Company. Sellers and the
Company agree to permit Buyer and its authorized representatives, or cause them
to be permitted to have, after the date hereof and until the Closing Date, full
access to the premises, books and records of the Company during normal business
hours, and the officers of the Company will furnish Buyer with such financial
and operating data and other information with respect to the Business and
properties of the Company as Buyer shall from time to time reasonably request.
No investigation by Buyer heretofore or hereafter made shall affect the
representations and warranties of Sellers and the Company, and each such
representation and warranty shall survive any such investigation.
4.3 AMENDMENT TO SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until Closing to
supplement or amend promptly the Disclosure Schedules with respect to any
matter that would have been or would be required to be set forth or described
in the Disclosure Schedules in order to not materially breach any
representation or warranty of such party contained herein; provided that no
amendment or supplement to a Disclosure Schedule that constitutes or reflects
(either alone or together with all other such changes to the Disclosure
Schedule), in the aggregate, a material and adverse change to the net assets,
business, properties, financial condition, results of operations, cash flow,
business or prospects of the Company as compared with the condition of the
Company as of December 31, 1996 (a "Company Material Adverse Change") may be
made unless Buyer consents to such amendment or supplement, and no amendment or
supplement to a Disclosure Schedule that constitutes or reflects (together with
all other changes of such party to the Disclosure Schedule) in the aggregate, a
material and adverse change to Buyer's net assets, business, properties,
financial condition, results of operations, cash flow, business or prospects as
compared with the condition of Buyer as of the date hereof (a "Buyer Material
Adverse Change") may be made unless the Company consents to such amendment or
supplement. For all purposes of this Agreement, including without limitation
for purposes of determining whether the conditions set forth in Section 5.1 and
Section 5.2 have been fulfilled, the Disclosure Schedules hereto shall be
deemed to be the Disclosure Schedules as amended or supplemented pursuant to
this Section. In the event that the Company or Sellers seek to amend or
supplement a Disclosure Schedule pursuant to this Section 4.3 and the consent
of Buyer is required pursuant to this Section and Buyer does not consent to
such amendment or supplement, or in the
HBH, Inc. Purchase and Sale Agreement/Page 28
<PAGE> 36
event that Buyer seeks to amend or supplement a Disclosure Schedule pursuant to
this Section 4.3 and the Consent of the Company is required pursuant to this
Section and the Company does not consent, the party whose consent would be
required may elect to terminate this Agreement, in which case this Agreement
shall be deemed terminated by mutual written consent as set forth in Section
6.1 hereof. In the event that Buyer must amend its representations contained
herein to state reasons known to Buyer which could reasonably be expected to
prevent the transactions described in the Memorandum from going forward (other
than such reasons caused by Sellers or the Company), such amendment shall be
deemed a Buyer Material Adverse Change.
4.4 CONFIDENTIALITY. The provisions of this Section 4.4 shall
supersede and replace all prior agreements and understandings of the parties
with respect to the subject matter hereof.
(a) Confidential Information. Until the closing of the
transactions contemplated herein, all Confidential Information, as
hereinafter defined, acquired by Buyer with respect to Sellers or the
Company, or by Sellers or the Company with respect to Buyer, shall be
(i) maintained in strict confidence, (ii) used only for the purpose of
and in connection with evaluating the transactions contemplated
herein, and (iii) disclosed only to employees and duly authorized
agents and representatives who have been informed of the obligations
of the parties under this Agreement with respect to such Confidential
Information, who have a need to know the information in connection
with consummating the transactions contemplated herein, and who agree
to keep such information confidential. Buyer, Sellers and the Company
shall be responsible for any breach of this Section by any of their
respective representatives and each agrees to take all reasonable
measures to restrain its representatives from prohibited or
unauthorized disclosure of the Confidential Information. For the
purpose of this Agreement, the term "Confidential Information" shall
mean all information acquired by any party from another party hereto
or its representatives pursuant to Section 4.2 hereof or otherwise
with respect to the business or operations of such other party, other
than (A) information generally available to the public which has not
become available as a result of disclosure in violation of this
Section and (B) information which becomes available on a
nonconfidential basis from a source other than a party to this
Agreement or its representatives, provided that such source is not
known by the party to this Agreement receiving such information to be
bound by a confidentiality agreement or other obligation of secrecy to
another party to this Agreement or its representatives. If the
transactions contemplated herein are not consummated, all Confidential
Information in written or printed or other tangible form (whether
copies or originals) shall be returned to the party of origin, all
documents, memoranda, notes and other writings whatsoever prepared by
any party or its representatives based on Confidential Information
shall be destroyed, and Buyer, Seller, the Company and the respective
officers and representatives of each of them will not disclose or
utilize the Confidential Information for a period of two years
following the effective date of this Agreement.
(b) Public Announcements. No press release, public
announcement, confirmation or other information regarding this
Agreement or the contents hereof shall be made by Buyer, Sellers or
the Company without the prior consultation of the Buyer, Sellers and
the Company, except as may be necessary in the opinion of counsel to
any party to meet the
HBH, Inc. Purchase and Sale Agreement/Page 29
<PAGE> 37
requirements of any applicable law or regulations, the determination
of any court, or the requirements of any stock exchange on which the
securities of such party may be listed. Notwithstanding the foregoing,
the Company may make appropriate disclosures of the general nature of
the transaction contemplated hereby to its employees, vendors and
customers to protect the Company's goodwill and to facilitate the
consummation of the transactions contemplated hereby, and Buyer may
disclose pertinent information regarding the transaction contemplated
hereby to its existing and prospective investors, lenders or
investment bankers or financial advisors for the purposes of obtaining
financing (including the contemplated IPO). Buyer may also make
appropriate disclosures of the general nature of the transaction
contemplated hereby and the identity, nature and scope of the
Company's operations to prospective acquisition candidates in its
efforts to attract additional acquisitions for Buyer. Subject to
prior review, revision and approval by the Company of disclosure with
respect to matters relating to the Company, Buyer may also make
appropriate disclosure as required in connection with any registration
statement or confidential information memorandum prepared by Buyer.
Buyer and the Company shall jointly approve the contents of any press
releases, written employee presentations, or other materials of
potentially wide distribution that disclose or refer to the
transaction contemplated hereby, provided Buyer shall not unreasonably
withhold such consent.
4.5 EXCLUSIVITY. After the signing of this Agreement until
December 31, 1997, Sellers shall not (i) solicit, initiate, or encourage the
submission of any proposal of offer from any person or entity relating to the
acquisition of any capital stock or other voting securities, or any substantial
portion of the assets of the Company (including any acquisition structured as a
merger, consolidation, or share exchange) or (ii) participate in any
negotiations or discussions regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any person or entity in favor of such acquisition structured as a
merger, consolidation, or share exchange. Sellers will (and shall cause the
Company to) notify Buyer if any person or entity make any proposal, offer,
inquiry, or contact with respect to any of the foregoing.
4.6 RELEASE OF SELLERS' GUARANTEES. At or prior to the IPO Closing
Date, Buyer will use its best efforts to obtain the release of Sellers and
their respective affiliates, heirs, successors and assigns from any and all
personal guarantees previously given by Sellers to secure the Company's
Long-Term Debt obligations and performance bonds. In the event that Buyer is
unable to obtain such releases from the Company's lenders, Buyer shall cause
the Company to pay off or otherwise retire all of the Company's Long-Term Debt
secured by the personal guarantee of Sellers, up to a maximum of (i) $6.5
million, if the IPO Closing Date occurs on or before September 30, 1997, and
(ii) $7.0 million if the IPO Closing Date occurs after September 30, 1997.
Buyer shall obtain the release of the guaranties of Diversified Group, Inc. and
Herbert D. Hughes (and the Succession of Herbert D. Hughes) with respect to the
Company's line of credit with Banc One, N.A.
4.7 SELLERS' RELEASE OF CLAIMS. Effective as of the IPO Closing
Date, the Sellers do hereby (i) release, acquit and forever discharge each of
the Companies and each of their respective subsidiaries that are listed on the
Disclosure Schedules (all of such subsidiaries of the Companies being referred
to collectively as the "Company Subsidiaries") from any and all liabilities,
obligations, indebtedness, claims, demands, actions or causes of action arising
from or relating to any event,
HBH, Inc. Purchase and Sale Agreement/Page 30
<PAGE> 38
occurrence, act, omission or condition occurring or existing on or prior to
Closing, including, without limitation, any claim for indemnity or contribution
from the Companies or the Company Subsidiaries in connection with the
obligations or liabilities of the Sellers hereunder, except for indemnification
to which a Seller may be entitled as an officer, director, employee or agent of
a Company, and salary and benefits payable to a Seller as an employee in the
ordinary course of business; (ii) waive all breaches, defaults or violations of
each agreement, if any, applicable to the Company Shares or the Real Estate and
agree that any and all such agreements are terminated as of the Closing Date
and (iii) waive any and all preemptive or other rights to acquire any shares of
capital stock of the Company and release any and all claims arising in
connection with any prior default, violation or failure to comply with or
satisfy any such preemptive or other rights.
4.8 CONFIDENTIAL INFORMATION MEMORANDUM; REGISTRATION STATEMENT.
(a) Company to Provide Information. Sellers and the
Company shall cooperate with Buyer to promptly provide such
information as reasonably requested by Buyer to (i) prepare a
confidential information memorandum (the "CIM"), pursuant to Rule 506
of Regulation D promulgated by the SEC under the Securities Act, for
dissemination to Buyer's acquisition candidates and their
shareholders, and (ii) prepare and file with the SEC the registration
statement on Form S-1 (or other appropriate Form) to be filed by Buyer
under the Securities Act in connection with its IPO (including the
prospectus constituting a part thereof, the "Registration Statement").
Buyer shall obtain all necessary state securities law or "Blue Sky"
permits and approvals required to carry out the transactions
contemplated by this Agreement, the CIM and the Registration
Statement, and Sellers and the Company shall furnish all information
concerning themselves as may be reasonably requested in connection
with any such action.
(b) Accuracy of Information. Buyer, Sellers and the
Company each represent and warrant that none of the information or
documents supplied or to be supplied by it specifically for inclusion
in the CIM or the Registration Statement, by exhibit or otherwise,
will, at the time that such party has authorized dissemination of the
CIM, and at the time the Registration Statement and each amendment and
supplement thereto, if any, become effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. Sellers and the Company, respectively,
shall agree with Buyer as to the information and documents supplied by
them for inclusion in the Registration Statement and each shall
indicate such information and documents in a letter (the "Information
Letter") to be delivered (i) prior to the filing of the Registration
Statement with the SEC, and (ii) prior to filing any amendment to the
Registration Statement with the SEC (other than any prospectus filed
with the SEC pursuant to Rule 424(b)). Sellers and the Company shall
be entitled to review the CIM, the Registration Statement and each
amendment thereto, if any, prior to delivery of the Information
Letter. Sellers and the Company shall immediately notify Buyer in the
event of any development or occurrence that would cause matters
referenced in the Information Letter to be inaccurate, incomplete or
misleading in any material respect.
HBH, Inc. Purchase and Sale Agreement/Page 31
<PAGE> 39
(c) Further Information. Sellers and the Company,
respectively, shall use their best efforts to promptly upon request,
furnish Buyer with all information concerning itself and such other
matters as may be reasonably requested by Buyer in connection with the
preparation of the CIM, the Registration Statement and each amendment
or supplement thereto, or any other statement, filing, notice or
application made by or on behalf of each such party to any
governmental entity in connection with the transactions contemplated
by this Agreement.
4.9 SATISFACTION OF CONDITIONS. The Company and the Sellers shall
(i) use their reasonable efforts to obtain, as soon as possible, all
governmental approvals required to be obtained by the Company and make, as soon
as possible, all filings with any governmental authority required on the part
of the Company to consummate the transactions contemplated hereby, (ii) use
their reasonable efforts to obtain, as soon as possible, all other consents to
and approvals required to be obtained by the Company to consummate the
transactions contemplated hereby, and (iii) otherwise use their reasonable
efforts to satisfy the conditions set forth in Article 5 of the Agreement to
the extent that such satisfaction is within their control; provided, however,
that this Section 4.9 shall not be construed to limit the rights of Sellers to
terminate this Agreement as provided in Article 6 of the Agreement. Buyer
agrees that, if any event or circumstances develops such that the CIM
previously delivered to Sellers no longer contains no misstatement of material
fact, nor omits to state any material fact required to make statements
contained therein not misleading, Buyer shall promptly notify Sellers and the
Company of such event or circumstance and, as soon as practicable, Buyer shall
supplement the CIM as required to remedy such deficiency. Buyer shall provide
its reasonable efforts to obtain all governmental approvals and to satisfy all
contingencies required to consummate the IPO and all of the transactions
anticipated hereby. In the event that Buyer shall become aware of any event or
circumstance which, in Buyer's reasonable judgment, renders consummation of the
IPO and all of the transactions anticipated hereby unlikely, Buyer shall
promptly notify Sellers and the Company of such event or circumstance.
4.10 CERTAIN TAX MATTERS.
(a) Mutual Consent for Section 338(h)(10) Election. The
Buyer and Sellers shall cooperate fully and work together towards
determining whether an election will be made under Section 338(h)(10)
of the Code (and any corresponding election under state, local, and
foreign tax law) with respect to the purchase and sale of the stock of
the Company pursuant to this Agreement. Any such election (a "Section
338(h)(10) Election") shall be made only pursuant to the mutual
consent of the Buyer and Sellers. In the event of said mutual consent
regarding the election of Section 338(h)(10), the Buyer and Sellers
shall cooperate fully to ensure that all returns, documents,
statements, and other forms that are required to be submitted to any
federal, state, county or other local taxing authority in connection
with a Section 338(h)(10) Election are submitted in compliance with
applicable filing deadlines.
(b) S Corporation Status. Through the Closing Date,
Company and Sellers will not revoke Company's election to be taxed as
an S corporation within the meaning of Sections 1361 and 1362 of the
Code. Company and Sellers will not take or allow any action, other
than the sale of Company's stock pursuant to this Agreement, that
would result in the
HBH, Inc. Purchase and Sale Agreement/Page 32
<PAGE> 40
termination of Company's status as a validly electing S corporation
within the meaning of Sections 1361 and 1362 of the Code.
(c) Tax Periods Ending on or before the Closing Date.
Buyer shall prepare or cause to be prepared and file or cause to be
filed all returns, declarations, reports, claims for refund, or
information returns or statements related to Taxes, including any
schedules, attachments, or amendments thereto ("Tax Returns") for the
Company for all periods ending on or prior to the IPO Closing Date
which are filed after the IPO Closing Date. Buyer shall permit Sellers
to review and comment on each such Tax Return described in the
preceding sentence prior to filing and shall make such revisions to
such Tax Returns as are reasonably requested by Sellers. To the extent
permitted by applicable law, Sellers shall include any income, gain,
loss, deduction or other tax items for such periods on their Tax
Returns in a manner consistent with the Schedule K-1s furnished by
Company to the Sellers for such periods using the interim closing of
the books method. Sellers shall reimburse Buyer for any Taxes of the
Company with respect to such periods within fifteen (15) days after
payment by Buyer or the Company and its Subsidiaries of such Taxes to
the extent such Taxes are not reflected in the reserve for Taxes
(other than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) shown on the face of
the Company Financial Statements.
(d) Cooperation on Tax Matters.
(i) Buyer, Company and Sellers shall cooperate
fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns pursuant to this Section
and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other
party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding
and making employees available on a mutually convenient basis to
provide additional information and explanation of any material
provided hereunder. Company and Sellers agree: (A) to retain all books
and records with respect to Tax matters pertinent to Company relating
to any taxable period beginning before the IPO Closing Date until the
expiration of the statute of limitations (and, to the extent notified
by Buyer or Sellers, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into
with any taxing authority; and (B) to give the other party reasonable
written notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests, Company or
Sellers, as the case may be, shall allow the other party to take
possession of such books and records.
(ii) Buyer and Sellers further agree, upon
request, to use their best efforts to obtain any certificate or other
document from any governmental authority or any other person as may be
necessary to mitigate, reduce or eliminate any Taxes that could be
imposed (including, but not limited to, with respect to the
transactions contemplated hereby).
(e) Tax Sharing Agreements. All tax sharing agreements or
similar agreements with respect to or involving Company, if any, shall
be terminated as of the IPO Closing Date
HBH, Inc. Purchase and Sale Agreement/Page 33
<PAGE> 41
and, after the IPO Closing Date, Company shall not be bound thereby or
have any liability thereunder.
4.11 CONRAD MATTER. Buyer agrees with Sellers and the Company that
Buyer will not challenge the Company's accounting treatment of the Company's
dispute and settlement with Conrad Industries, Inc. ("Conrad") v. HBH, Inc.
on the docket of the 24th Judicial District Court for the Parish of Jefferson,
State of Louisiana, regarding a contract dispute with Conrad over delivery of
the BH 400 pipeline barge, and that Buyer will not assert a breach of
representation or warranty against Sellers or the Company based on such
accounting treatment.
4.12 CHANGE OF FINANCIAL INSTITUTIONS. Sellers at their discretion
shall be permitted to change the Company's banking relationships so long as all
terms and conditions of all debt instruments and security agreements of the
Company with any new financial institution shall be on an equal or more
favorable basis to the Company than the debt instruments of the Company being
replaced. The name of such new financial institution shall be deemed
substituted and replaced for "Banc One, N.A." throughout this Agreement.
ARTICLE 5
CONDITIONS PRECEDENT
5.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER. The
obligations of the Buyer under this Agreement are subject to the satisfaction
in all material respects of each of the following conditions, unless waived by
the Buyer:
(a) Accuracy of Representations and Warranties. Except
for such changes as are permitted pursuant to Section 4.3 of this
Agreement, the representations and warranties of Sellers and the
Company contained in this Agreement, in the Company Disclosure
Schedule of this Agreement or in any closing certificate or document
delivered to Buyer pursuant hereto shall be correct and complete at
and as of the Closing Date and the IPO Closing Date as though made at
and as of such dates, other than such representations and warranties
as are specifically made as of another date, and Sellers and the
Company shall each have delivered to Buyer a certificate to that
effect.
(b) Performance of Covenants. Sellers and the Company
shall have performed and complied with all covenants of this Agreement
to be performed or complied with by them at or prior to the Closing
Date and the IPO Closing Date (except where the failure to so perform
or comply would not have a material adverse effect on Buyer or prevent
Sellers or Buyer from consummating the transactions contemplated
hereby), and Sellers and the Company shall each have delivered to
Buyer a certificate to that effect.
(c) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted after the date hereof against
Sellers or the Company, or against Buyer arising by reason of the
acquisition of the Company pursuant to this Agreement, which is not
adequately covered by insurance or which is reasonably likely (1) to
restrain, prohibit or
HBH, Inc. Purchase and Sale Agreement/Page 34
<PAGE> 42
invalidate the consummation of the transactions contemplated by this
Agreement, (2) to have a Company Material Adverse Change on the
Company or (3) to have a Company Material Adverse Change on the
results of operations or financial condition of Buyer and its
subsidiaries, taken as a whole, after giving effect to the
consummation of the transactions contemplated by this Agreement; and
Sellers and the Company shall each have delivered to Buyer a
certificate to that effect.
(d) Approvals. The Company and Sellers shall have
procured all of the consents, approvals and waivers specified in
Sections 3.1(b) and 3.2(e), and Sellers and the Company shall each
have delivered to Buyer a certificate to that effect.
(e) Executive Employment Agreement. H. Daniel Hughes II
shall execute and deliver the Executive Employment Agreement with the
Company substantially in the form attached as Exhibit 1.4 hereto.
(f) Shareholder Lock-up Agreements. Sellers, H. Daniel
Hughes II and Elizabeth H. DePass each shall have executed and
delivered any lock-up agreement reasonably requested by the managing
underwriter of Buyer's IPO which restricts the sale or other
disposition of TCMS Common Stock for a reasonable and customary period
following the effectiveness of the Registration Statement; provided
that the terms and conditions of such agreement are no more onerous
than those required of any of the shareholders of the other acquired
companies at time of the IPO.
(g) Completion of Buyer's IPO. Buyer's initial public
offering of common stock, as described in the Registration Statement,
shall have successfully closed.
(h) Lender Approval. (i) Sellers and Buyer shall have
obtained the consent or approval of Sellers' lending institution with
respect to the assumption or prepayment of up to $6,500,000 of the
Company's Long-Term Debt by Buyer (provided that this amount shall be
$7,000,000 if the IPO Closing Date should occur subsequent to
September 30, 1997), and the release of Sellers, concurrently with the
IPO Closing Date, and (ii) Buyer shall have secured a commitment for
approximately $25 million in senior indebtedness.
(i) Audit of the Company. Buyer shall have received the
results of an audit of the Company's financial statements for the
three years ended December 31, 1996 by the certified public accounting
firm regularly engaged by Buyer or such other independent public
accountant as agreed by the parties.
(j) Long-Term Debt. The Company's Long-Term Debt
(including current maturities of said Long-Term Debt and prepayment
penalties as of the IPO Closing Date) as of the IPO Closing Date shall
not exceed (i) $6,500,000, if the IPO Closing Date occurs on or before
September 30, 1997, or (ii) $7,000,000, if the IPO Closing Date occurs
after September 30, 1997. The Company shall have been released from
all of its obligations as a surety or guarantor with respect to the
indebtedness of third parties, including without limitation, all
guaranties and other obligations of the Company with respect to the
HBH, Inc. Purchase and Sale Agreement/Page 35
<PAGE> 43
indebtedness of Herbert D. Hughes (and the Succession of Herbert D.
Hughes) and the indebtedness of Diversified Group, Inc. The Company
shall pay the indebtedness owed to the Succession of Herbert D. Hughes
at or prior to Closing.
(k) Opinion of Counsel for the Company and Sellers. Buyer
shall have received the favorable opinion of Lugenbuhl, Burke,
Wheaton, Peck, Rankin & Hubbard dated the Closing Date, substantially
in the form and to the effect set forth in Exhibit 5.1 hereto.
(l) Resignations of Directors and Officers. Sellers will
deliver to Buyer (i) the resignations of all the Sellers who are
officers and directors of the Company; (ii) a complete and general
release of all claims by the Sellers against the Company except for
claims by Sellers as provided under Section 4.7; (iii) on or before
the IPO Closing Date evidence of the resignation from or final removal
from office of all officers and directors of the Company; and (iv) the
corporate records and books of Company, including the minute book, the
stock transfer books, and the corporate seal of the Company.
(m) All Proceedings to be Satisfactory. All actions to be
taken by Sellers and the Company in connection with the consummation
of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby shall be satisfactory in form and
substance to Buyer and its counsel.
(n) Delivery of Certificates Representing Company Common
Stock. Sellers shall deliver Certificates representing all of the
Company Common Stock, with signatures guaranteed by an eligible
guarantor institution, if requested by Buyer, against payment of the
Purchase Price.
5.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS AND THE
COMPANY. The obligations of Sellers and the Company under this Agreement are
subject to the satisfaction in all material respects of each of the following
conditions, unless waived by Sellers:
(a) Accuracy of Representations and Warranties. Except
for such changes as are permitted pursuant to Section 4.3 of this
Agreement, the representations and warranties of Buyer contained in
this Agreement or in any closing certificate or document delivered to
Sellers or the Company pursuant hereto shall be correct and complete
on and as of the Closing Date and the IPO Closing Date as though made
at and as of that date other than such representations and warranties
as are specifically made as of such dates, and Buyer shall have
delivered to Sellers and the Company a certificate to that effect.
(b) Performance of Covenants. Buyer shall have performed
and complied with all covenants of this Agreement to be performed or
complied with by it at the Closing Date and the IPO Closing Date
(except where the failure to so perform or comply would not have a
material adverse effect on Sellers and the Company or prevent it from
consummating the transactions contemplated hereby), and Buyer shall
have delivered to Sellers and the Company a certificate to such
effect.
HBH, Inc. Purchase and Sale Agreement/Page 36
<PAGE> 44
(c) Approvals. Buyer shall have procured all of the
consents, approvals and waivers specified in Section 3.3(f), and Buyer
shall deliver to Sellers and the Company a certificate to that effect.
(d) Release from Guarantee. Buyer shall have caused the
release of Sellers and Diversified Group, Inc. from any and all
personal guarantees of the Company's indebtedness and performance
bonds in accordance with Section 4.6 above effective as of the IPO
Closing Date.
(e) Executive Employment Agreement. The Company shall
execute and deliver the Executive Employment Agreement with H. Daniel
Hughes II in the form attached as Exhibit 1.4.
(f) Lender Approval; Performance Bonds. Buyer shall have
obtained the consent of Company's lenders with respect to the
assumption or prepayment of up to $6,500,000 of the Company's
Long-Term Debt by Buyer (provided that this amount shall be $7,000,000
if the IPO Closing Date should occur subsequent to September 30,
1997), and the release of Sellers and their respective affiliates,
heirs, successors and assigns with respect to such indebtedness and
with respect to the Company's performance bonds concurrently with the
IPO Closing Date. Buyer shall have obtained the release of the
guaranties of Diversified Group or Herbert D. Hughes (and the
Succession of Herbert D. Hughes) of the Company's line of credit with
Banc One, N.A.
(g) All Proceedings to be Satisfactory. Sellers and their
counsel shall have received Buyer's Memorandum describing Buyer and
the TCMS Common Stock to be delivered as a part of the Purchase Price
together with all such counterpart originals or certified or other
copies of all documents relating to Buyer incident to the transactions
contemplated hereby as Sellers or said counsel may reasonably request.
(h) Opinion of Counsel for The Buyer. Sellers and the
Company shall have received the favorable opinion of Chamberlain,
Hrdlicka, White, Williams & Martin, counsel for Buyer, dated the
Closing Date, substantially in the form and to the effect set forth in
Exhibit 5.2 hereto.
(i) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted that is reasonably likely to
restrain, prohibit, violate or otherwise affect the consummation of
the transactions contemplated hereby.
(j) Payment of the Purchase Price. Buyer shall deliver
payment of the Purchase Price to Seller, including the shares of TCMS
Common Stock provided for herein, against delivery of the share
certificates representing all of the Company Common Stock.
HBH, Inc. Purchase and Sale Agreement/Page 37
<PAGE> 45
ARTICLE 6
TERMINATION
6.1 TERMINATION OF AGREEMENT. The parties may terminate this
Agreement only as provided below.
(a) Prior to Closing. The parties may terminate this
Agreement at any time prior to the Closing only as provided
below:
(1) Mutual Consent. Buyer and Sellers may
terminate this Agreement by mutual written consent at any time
prior to the Closing;
(2) Termination by Buyer. Buyer may terminate
this Agreement by giving written notice to the Sellers at any
time prior to the Closing (i) in the event Sellers or the
Company has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect,
the Buyer has notified Sellers of the breach, and the breach
has continued without cure until the earlier of 20 days after
the notice of such breach or the Closing Date, whichever is
earlier, or (ii) if the IPO Closing Date shall not have
occurred on or before the earlier of 75 days after receipt by
Buyer of comments from the SEC with respect to Buyer's initial
filing of its registration statement on Form S-1 or December
31, 1997, by reason of the failure of any condition precedent
under Section 5.1 hereof (unless the failure results primarily
from the Buyer itself breaching any representation, warranty,
or covenant contained in this Agreement); and
(3) Termination by Sellers. Sellers may terminate
this Agreement by giving written notice to the Buyer at any
time prior to the Closing: (i) in the event the Buyer has
breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, Sellers
have notified the Buyer of the breach, and the breach has
continued without cure until the earlier of 20 days after the
notice of such breach or the Closing Date, whichever is
earlier; or (ii) if the IPO Closing Date shall not have
occurred on or before the earlier of 75 days after receipt by
Buyer of comments from the SEC with respect to Buyer's initial
filing of its registration statement on Form S-1 or December
31, 1997, by reason of the failure of any condition precedent
under Section 5.2 hereof (unless the failure results primarily
from Sellers breaching any representation, warranty, or
covenant contained in this Agreement); or (iii) in the event
that the acquisition agreements between Buyer and any of
Woodson Construction Company, Laine Construction Company, Kori
Corporation, EnviroSystems, Inc., CSI Hydrostatic Testers,
Inc., Hargett Mooring & Marine, Inc., or the Red Fox Companies
of New Iberia, Inc. (the "Founding Companies") terminates
prior to the IPO Closing Date.
HBH, Inc. Purchase and Sale Agreement/Page 38
<PAGE> 46
(b) After the Closing Date. This agreement may be
terminated after the Closing only as follows:
(1) Termination of Underwriting Agreement. Prior
to the successful completion of the IPO, upon termination of
the agreement between Buyer and certain investment banking
firms (the "Underwriting Agreement") under which such firms
agree to purchase shares of TCMS Common Stock from Buyer on a
firm commitment basis for resale to the public initially at
the IPO Price, Buyer or Sellers may each terminate this
Agreement by providing written notice to the other.
(2) Automatic Termination. This Agreement shall
terminate automatically and without action on the part of any
party hereto if the IPO is not consummated within 10 business
days after the Closing.
6.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 6.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto, except
that (1) Section 4.4, Section 10.1, Section 10.6, Section 10.7, Section 10.8
and Section 10.10 hereof shall survive such termination and (2) nothing herein
shall relieve any party from liability for any willful breach of any other
provision hereof.
ARTICLE 7
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of the parties contained in this Agreement
(except for Section 3.2(v)) shall survive the IPO Closing Date, regardless of
any investigation made by or on behalf of any party, and shall expire and
terminate on the last day of the 18th month after the IPO Closing Date. The
representations and warranties contained in Section 3.2(v) hereof shall not
terminate until the expiration of the applicable statute of limitations
(including any extension thereof) for any claim by a taxing authority for any
taxes, penalties or interest. The representations and warranties contained in
Section 3.2(p) shall not survive the IPO Closing Date.
7.2 INDEMNIFICATION BY SELLERS. Sellers hereby agree to indemnify
and hold harmless the Company and Buyer in respect of any losses, claims,
damages, liabilities or related expenses (including, but not limited to, all
reasonable attorneys' fees) which the Company or the Buyer incurs in excess of
$500,000 in the aggregate as a result of the breach of any of the
representations, warranties and covenants made by Sellers in or pursuant to
this Agreement; provided that Sellers' indemnification obligations under this
Agreement shall not exceed $5,000,000 (the "Indemnification Cap"). Except as
provided above, the indemnification obligations of Sellers under this Section
7.2 shall survive the IPO Closing Date and will terminate at the time specified
in Section 7.1, except with respect to any indemnity claim or claims pending on
the date of such termination. The indemnification obligations of Sellers under
this Section 7.2 shall survive the IPO Closing Date and will terminate at the
time specified in Section 7.1, except with respect to any indemnity claim or
claims pending on the date of such termination.
HBH, Inc. Purchase and Sale Agreement/Page 39
<PAGE> 47
7.3 INDEMNIFICATION BY BUYER. Buyer agrees to indemnify and hold
harmless Sellers in respect of any losses, claims, damages, liabilities or
related expenses (including, but not limited to all reasonable attorneys' fees)
which Sellers incur in excess of $500,000 in the aggregate as a result of the
breach of any of the representations, warranties and covenants made by Buyer in
or pursuant to this Agreement; provided that Buyer's indemnification
obligations under this Agreement shall not exceed the Indemnification Cap. The
indemnification obligations of Buyer under this Section 7.3 shall survive the
IPO Closing Date and will terminate at the time specified in Section 7.1,
except with respect to any indemnity claim or claims pending on the date of
such termination.
7.4 NOTICE. Promptly after any party hereto (the "Indemnified
Party") has received notice or has knowledge of the occurrence of any event
which the Indemnified Party asserts is an indemnifiable event or after the
commencement of any action, claim or proceeding commenced against the
Indemnified Party by a third party that might result in any claim for indemnity
pursuant to this Agreement (a "Third Party Claim"), the Indemnified Party shall
notify the party obligated to provide indemnification hereunder (the
"Indemnifying Party") written notice of such claim or the commencement of such
action or proceeding. Promptly after receipt by an Indemnifying Party of any
such notice, the Indemnifying Party shall, within twenty days of receipt of
such notice, either: (i) acknowledge the debt, liability or obligation for
which indemnity is sought as a valid claim and forthwith pay the Indemnified
Party an amount sufficient to discharged such debt, liability or obligation;
(ii) in the event of a Third Party Claim which is not acknowledged by the
Indemnifying Party to be owing, notify the Indemnified Party of the defense
thereto and thereupon promptly assume and diligently contest such Third Party
Claim with counsel satisfactory to the Indemnified Party; or (iii) with respect
to a claim other than a Third Party Claim, in the event of a claim by the
Indemnified Party for indemnity hereunder which is challenged by the
Indemnifying Party, notify the Indemnified Party of such challenge.
ARTICLE 8
STOCK TRANSFER RESTRICTIONS
8.1 COMPLIANCE WITH SECURITIES LAWS. Sellers acknowledge and agree
with Buyer that the shares of TCMS Common Stock issued pursuant to this
Agreement (the "Restricted Shares") to Sellers shall not be transferable except
upon the conditions specified in this Article 8, which conditions are intended,
among other things, to ensure compliance with the provisions of the Securities
Act and any applicable state securities laws in respect of the transfer of such
Restricted Shares. Sellers acknowledge and agree that the certificates
representing the Restricted Shares will contain a restrictive legend to the
effect that transfer of such shares is prohibited unless the shares are
registered under the Securities Act and applicable state securities laws, or in
the event the event that such transfer is, in the opinion of counsel to Buyer,
exempt from the registration provisions of the Securities Act and applicable
state securities laws.
8.2 RESTRICTIONS ON TRANSFER. Prior to any transfer or attempted
transfer of Restricted Shares other than the sale of such shares pursuant to
registration under the Securities Act, Sellers agree to give written notice to
Buyer of its intention to effect such transfer. The notice shall describe the
manner and circumstances of the proposed transfer in detail and shall contain
an undertaking to
HBH, Inc. Purchase and Sale Agreement/Page 40
<PAGE> 48
furnish such other information as may be required to enable Buyer's counsel to
render the opinions referred to below, and shall give the identity and address
of the Seller's counsel. Buyer shall submit a copy of the notice to its
counsel, and the following provisions shall apply:
(a) If, in the opinion of the Buyer's counsel, the
proposed transfer may be effected without registration of the Restricted Shares
under the Securities Act, Buyer shall, as promptly as practicable, so notify
Sellers who will then be entitled to transfer the TCMS Common Stock in
accordance with the terms of the notice delivered by Sellers to Buyer.
(b) If, in the opinion of the Buyer's counsel, the
proposed transfer of the TCMS Common Stock may not be effected without
registration under the Securities Act, Buyer shall, as promptly as practicable,
so notify Sellers, and Sellers shall not be allowed to effect the proposed
transfer except pursuant to an offering registered under the Securities Act.
(c) Each Seller understands and agrees that except as
provided in the Registration Rights Agreement, Buyer is not obligated to
furnish a registration statement under the Act or any state securities laws
covering the Restricted Shares nor is Buyer under any obligation to aid Sellers
in obtaining any exemption from any such registration requirements. Each Seller
also acknowledges that except as provided in the Registration Rights Agreement,
he shall be responsible for compliance with all conditions of transfer of the
Restricted Shares imposed by any administrator of any state and for reasonable
expenses incurred by Buyer for legal or accounting services in connection with
reviewing such proposed transfer and issuing opinions in connection therewith.
(d) Each Seller understands and agrees that transfer of
the Restricted Shares may be effected only on the books of Buyer, and that stop
transfer instructions will be issued to the transfer agent of TCMS Common Stock
in accordance with the legend on any certificate representing the Restricted
Shares. The transfer agent will not remove the legend from any certificate
representing the Restricted Shares without either registration of the
Restricted Shares under the Securities Act and applicable state securities laws
or an opinion of the Buyer's counsel (i) stating that the transfer of the
Restricted Shares is exempt from such registration requirements and authorizing
removal of the stop transfer instructions or (ii) authorizing removal of the
restrictive legend.
ARTICLE 9
FURTHER ASSURANCES
9.1 FURTHER ASSURANCES. At any time and from time to time on and
after the Closing Date (a) at the request of Buyer, Sellers shall deliver to
Buyer any records, documents and data possessed by Sellers and not previously
delivered to Buyer to which Buyer is entitled and execute and deliver or cause
to be executed and delivered all such deeds, assignments, consents, documents
and further instruments of transfer and conveyance, and take or cause to be
taken all such other actions, as Buyer may reasonably deem necessary or
desirable in order to fully and effectively vest in Buyer, or to confirm its
title to and possession of, the Company Shares or to assist Buyer in exercising
rights with respect thereto which Buyer is entitled to exercise pursuant to the
terms of this Agreement; and (b) Buyer shall execute and deliver or cause to be
executed and delivered such
HBH, Inc. Purchase and Sale Agreement/Page 41
<PAGE> 49
further instruments and take or cause to be taken such further actions as
Sellers may reasonably deem necessary or desirable to carry out the terms and
provisions of this Agreement.
9.2 BOOKS AND RECORDS.
(a) Buyer agrees that it shall preserve and keep all
books and records relating to the Company in Buyer's possession until
six months following the expiration of the statute of limitations
(including extensions thereof) applicable to the tax returns filed by
or with respect to the Company for taxable periods ending prior to or
on the IPO Closing Date to which such books or records are relevant.
After such time, before Buyer shall dispose of any of such books and
records, at least 90 calendar days' prior written notice to such
effect shall be given by Buyer to Sellers, and Sellers shall be given
an opportunity, at its sole cost and expense, to remove all or any
part of such books and records as Sellers may select, and Sellers may
retain copies thereof. Duly authorized representatives of Sellers
shall, upon reasonable notice, have access to such books and records
during normal business hours to examine, inspect and copy such books
and records, and Buyer and its representatives will provide reasonable
assistance and cooperation to Sellers with respect to inspection of
such books and records.
(b) In any instance in which any Seller or Buyer, as the
case may be, is required to prepare or file (or cause to be filed) tax
returns which cover a period that includes the IPO Closing Date or to
respond to an audit by the Internal Revenue Service or other
governmental agency with respect to a period prior to the IPO Closing
Date, each Seller or Buyer, as the case may be, will furnish all
information and records reasonably available to it and reasonably
requested of him, her or it and necessary or appropriate for use in
preparing such returns or responding to such audit.
ARTICLE 10
MISCELLANEOUS
10.1 EXPENSES, ETC. Except as may otherwise be agreed in writing by
the parties, whether or not the transactions contemplated by this Agreement are
consummated, none of the parties hereto shall have any obligation to pay any of
the fees and expenses of the other parties incident to the negotiation,
preparation and execution of this Agreement, including the fees and expenses of
counsel, accountants and other experts. Each of the Sellers, the Company and
Buyer will indemnify the other parties, and hold them harmless from and against
any claims for finders' fees or brokerage commissions in relation to or in
connection with such transactions as a result of any agreement or understanding
between such indemnifying party and any third party. Sellers shall pay and be
responsible for any stock transfer Taxes arising from the sale of the Company
Shares hereunder. Buyers shall pay and be responsible for any stock transfer
taxes arising from the sale of shares of TCMS Common Stock hereunder.
HBH, Inc. Purchase and Sale Agreement/Page 42
<PAGE> 50
10.2 EXECUTION IN COUNTERPARTS. For the convenience of the parties,
this Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
10.3 NOTICES. All notices which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given in writing and delivered or mailed by
registered or certified mail postage prepaid, or sent by telex, telecopier,
facsimile transmission or telegraph as follows:
<TABLE>
<CAPTION>
If to Sellers, to: With a copy to:
<S> <C>
Mr. Tom Budde Mr. Stewart F. Peck
Ms. Elizabeth H. DePass Lugenbuhl, Burke, Wheaton, Peck,
c/o The Diversified Group, Inc. Rankin & Hubbard
5801 Citrus Blvd. 601 Poydras Street, 27th Floor
Harahan, Louisiana 70123 New Orleans, Louisiana 70130-6017
Facsimile: (504) 733-2884 Facsimile: (504) 529-7418
If to the Company, to:
Mr. Danny Hughes
c/o The Diversified Group, Inc.
5801 Citrus Blvd.
Harahan, Louisiana 70123
Facsimile: (504) 733-2884
If to Buyer, to: With a copy to:
TransCoastal Marine Services, Inc. Robert J. Viguet, Jr.
3535 Briarpark, Suite 210 Chamberlain, Hrdlicka, White, Williams
Houston, Texas 77042 & Martin
Attention: Mr. G. Darcy Klug 1200 Smith Street, Suite 1400
Facsimile No. (713) 781-6364 Houston, Texas 77002-4310
Facsimile No. (713) 658-2553
</TABLE>
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto. Any notice or other
communication pursuant to this Agreement shall be deemed to have been duly
given or made and to have become effective upon the earliest of (a) when
delivered in hand to the party to which directed, or (b) if sent by first-class
mail postage prepaid, certified mail, return receipt requested, or by telex,
telecopier, facsimile transmission or telegraph and properly addressed as set
forth above, at the time when received by the addressee or (c) with respect to
delivery by certified mail, return receipt requested, when delivery thereof,
properly addressed as set forth above, is attempted by the U.S. Postal Service.
HBH, Inc. Purchase and Sale Agreement/Page 43
<PAGE> 51
10.4 WAIVERS. Any party hereto (as to itself, but not as to other
parties without their consent) may, by written notice to the other parties
hereto, (a) extend the time for the performance of any of the obligations or
other actions of the other parties under this Agreement; (b) waive any
inaccuracies in the representations or warranties of another party contained in
this Agreement or in any document delivered pursuant to this Agreement; (c)
waive compliance with any of the conditions or covenants of another party
contained in this Agreement; or (d) waive performance of any of the obligations
of another party under this Agreement. Except as otherwise provided in the
preceding sentence, no action taken pursuant to this Agreement, including
without limitation any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance
with any representation, warranty, covenant or agreement contained in this
Agreement. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed a waiver of any subsequent breach.
10.5 AMENDMENTS, SUPPLEMENTS, ETC. At any time this Agreement may
be amended or supplemented by such additional agreements, articles or
certificates, as may be determined by the parties hereto to be necessary,
desirable or expedient to further the purposes of the Agreement, or to clarify
the intention of the parties hereto, or to add to or modify the covenants,
terms or conditions hereof or to effect or facilitate any governmental approval
or acceptance of this Agreement or to effect or facilitate the filing or
recording of this Agreement or the consummation of any of the transactions
contemplated hereby. Any such instrument must be in writing and signed by all
parties.
10.6 ENTIRE AGREEMENT. This Agreement, its Exhibits and Disclosure
Schedules and the documents executed on the Closing Date and the IPO Closing
Date in connection herewith, constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and supersede all
prior agreements and understandings, oral and written, between the parties
hereto with respect to the subject matter hereof. No representation, warranty,
promise, inducement or statement of intention has been made by any party hereto
which is not embodied in this Agreement or such other documents, and no party
hereto shall be bound by, or be liable for, any alleged representation,
warranty, promise, inducement or statement of intention not embodied herein or
therein.
10.7 CHOICE OF FORUM; CONSENT TO JURISDICTION. This Agreement shall
be governed by and construed in accordance with the laws of the State of Texas.
Any suit, action or proceeding arising with respect to the validity,
construction, enforcement or interpretation of this Agreement, and all issues
relating in any matter hereto, shall be brought in the United States District
Court for the Eastern District of Louisiana, or in the event that federal
jurisdiction does not pertain, in the state courts of the State of Louisiana in
Jefferson Parish. Each of the parties hereto hereby submits and consents to the
jurisdiction of such courts for the purpose of any such suit, action or
proceeding and hereby irrevocably waives (a) any objection which any of them
may now or hereafter have to the laying of venue in such courts, and (b) any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
10.8 BINDING EFFECT, BENEFITS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. Notwithstanding anything contained in this Agreement to
the contrary, nothing in this Agreement, expressed or
HBH, Inc. Purchase and Sale Agreement/Page 44
<PAGE> 52
implied, is intended to confer on any person other than the parties hereto or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
10.9 ASSIGNABILITY. Neither this Agreement nor any of the parties'
rights hereunder shall be assignable by any party hereto without the prior
written consent of the other parties hereto.
10.10 INVALID PROVISIONS. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future law, rule
or regulation, such provision shall be fully severable and this Agreement shall
be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof. The remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance herefrom.
Furthermore, in lieu of such illegal, invalid or unenforceable provision, there
shall be added automatically as a part of this Agreement a legal, valid and
enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed effective as of the date first above written.
BUYER:
TRANSCOASTAL MARINE SERVICES, INC.
BY: /s/ BILL E. STALLWORTH
------------------------------------
BILL E. STALLWORTH,
CHIEF EXECUTIVE OFFICER
SELLERS:
THE SUCCESSION OF HERBERT D. HUGHES
/s/ ELIZABETH H. DEPASS
----------------------------------------
ELIZABETH H. DEPASS, THE DULY AUTHORIZED
EXECUTRIX IN THE SUCCESSION OF HERBERT
D. HUGHES
THE COMPANY:
HBH, INC., A LOUISIANA CORPORATION
By: /s/ DAN HUGHES
-------------------------------------
Name: Dan Hughes
-----------------------------------
Title: President
----------------------------------
HBH, Inc. Purchase and Sale Agreement/Page 45
<PAGE> 1
EXHIBIT 10.19
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TRANSCOASTAL MARINE SERVICES, INC.,
RNI ACQUISITION CORP.,
AND
THE RED FOX COMPANIES OF NEW IBERIA, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1
BASIC TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Basic Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Real Estate Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(c) Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effective Time of the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Conversion of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Merger Sub Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Cancellation of the Company Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Final Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(d) IPO Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Delivery of Company Common Stock and Closing Merger Consideration . . . . . . . . . . . . . . 4
(b) Payment of Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Indemnification of Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(d) No Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(e) Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(f) Payment in Full Satisfaction of All Rights . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.7 Deliveries at the Closing and on the IPO Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 2
CONSIDERATION ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Post-Closing Adjustments to Merger Consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Determination of Earn-Out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Certain Definitions Related to the Earn-Out . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Review of Earn-Out Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Payment of Earn-Out. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Protection of Tax-Free Reorganization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 3
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Representations and Warranties by Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(b) Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
(d) Ownership of Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(e) Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Representations and Warranties of Shareholder and the Company . . . . . . . . . . . . . . . . . . . 11
(a) Organization and Qualification, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(c) Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(d) Qualification of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(e) Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(f) Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(g) Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(h) Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(i) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(j) Permits and Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(k) Title to Properties; Absence of Liens and Encumbrances, etc. . . . . . . . . . . . . . . . 18
(l) Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(m) Patent, Trademark, etc. Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(n) List of Properties, Contracts and Other Data . . . . . . . . . . . . . . . . . . . . . . . 19
(o) Use of Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(p) Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(q) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(r) Labor and Employment Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(s) Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(t) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(u) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(v) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(w) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(x) Powers of Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(y) Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(z) Tax-Free Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.3 Representations and Warranties by the Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(a) Organization and Qualification, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(b) Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(c) Subsidiaries, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(d) Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(e) Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(f) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(g) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(h) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(i) Tax-Free Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.4 Representations and Warranties Concerning the Merger Sub. . . . . . . . . . . . . . . . . . . . . . 33
(a) Organization and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(b) Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(c) Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
ii
<PAGE> 4
<TABLE>
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ARTICLE 4
ADDITIONAL COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.2 Access to Information by Parent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.3 Amendment to Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(a) Confidential Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(b) Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.5 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.6 Release of Shareholder's Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.7 Shareholder's Release of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.8 Real Estate Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(a) Title Insurance Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(b) Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(c) Title Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(d) Phase I Environmental Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(e) Title and Environmental Objections . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.9 Confidential Information Memorandum; Registration Statement. . . . . . . . . . . . . . . . . . . . . 41
(a) Company to Provide Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(b) Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(c) Further Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.10 Tax-Free Reorganization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(a) No Acts Jeopardizing Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(b) Two-Year Holding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(a) Tax Periods Ending on or Before the IPO Closing Date. . . . . . . . . . . . . . . . . . . 42
(b) Cooperation on Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(c) Tax Sharing Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(d) Certain Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.12 Satisfaction of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 5
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.1 Conditions Precedent to the Obligations of the Parent. . . . . . . . . . . . . . . . . . . . . . . . 44
(a) Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 44
(b) Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(c) Legal Actions or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(d) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(e) Leasehold Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(f) Executive Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(g) Shareholder Lock-up Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(h) Completion of Parent's IPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(i) Lender Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
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(j) Audit of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(k) Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(l) Opinion of Counsel for the Company and Shareholder . . . . . . . . . . . . . . . . . . . . 45
(m) Shareholder Release of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(n) All Proceedings to be Satisfactory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.2 Conditions Precedent to the Obligations of Shareholder and the Company . . . . . . . . . . . . . . . 46
(a) Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 46
(b) Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(c) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(d) Leasehold Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(e) Executive Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(f) All Proceedings to be Satisfactory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(g) Opinion of Counsel for The Parent and the Merger Sub . . . . . . . . . . . . . . . . . . . 47
(h) Legal Actions or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 6
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.1 Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(a) Prior to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(b) After the Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 7
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.2 Indemnification by Shareholder. Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.3 Indemnification by Parent and Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . 49
7.4 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 8
STOCK TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.1 Compliance with Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.2 Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 9
FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.1 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.2 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
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ARTICLE 10
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.1 Expenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.2 Execution in Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.4 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.5 Amendments, Supplements, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.6 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.7 Choice of Forum; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.8 Binding Effect, Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.9 Assignability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.10 Invalid Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
EXHIBITS:
EXHIBIT 1.1(b) - Leasehold Purchase Agreement
EXHIBIT 1.1(c)-1 - Beldon E. Fox, Jr. Executive Employment Agreement
EXHIBIT 1.1(c)-2 - Form of Key Employee Employment Agreement
EXHIBIT 1.5(c) - Secured Promissory Note
EXHIBIT 1.5(c-1) - Security Agreement
EXHIBIT 1.6 - Letter of Transmittal
EXHIBIT 5.1 - Opinion of Counsel for the Company and Shareholder
EXHIBIT 5.2 - Opinion of Counsel for the Parent and the Merger Sub
SCHEDULES:
Schedule 1.1 - Description of Real Estate
Schedule 1.1(c) - Certain Key Employees
SHAREHOLDER DISCLOSURE SCHEDULE
Schedule 3.1(b) - Approvals
Schedule 3.1(d) - Holders of Company Common Stock
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COMPANY DISCLOSURE SCHEDULE
Schedule 3.2(a) - Jurisdictions Where Qualified
Schedule 3.2(c) - Subsidiaries of the Company
Schedule 3.2(e) - Approvals
Schedule 3.2(g) - Company Financial Statements
Schedule 3.2(h) - Changes and Events since December 31, 1996
Schedule 3.2(h-1) - Permitted Exceptions
Schedule 3.2(j) - Permits and Legal Compliance
Schedule 3.2(k) - Properties and Assets of the Company
Schedule 3.2(l) - Software
Schedule 3.2(m) - Intellectual Property
Schedule 3.2(n)(1) - Real Estate Owned by the Company
Schedule 3.2(n)(2) - Real Estate Leased by the Company
Schedule 3.2(n)(3) - Contracts and Commitments of the Company
Schedule 3.2(q) - Litigation, Actions and Proceedings
Schedule 3.2(r) - Employment Agreements, Benefit Plans, and Compensation
Schedule 3.2(s) - Accounts Receivable of the Company
Schedule 3.2(t) - Insurance Coverage; Self Insurance
Schedule 3.2(u) - Company Benefit Plan
Schedule 3.2(v) - Tax Audits; Basis in Assets; NOLs
BUYER DISCLOSURE SCHEDULE
Schedule 3.3(a) - Jurisdictions Where Qualified
Schedule 3.3(c) - Subsidiaries of Parent
Schedule 3.3(f) - Approvals
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") made effective as
of August 27, 1997, by and among TRANSCOASTAL MARINE SERVICES, INC., a
Delaware corporation (the "Parent"), RNI ACQUISITION CORP., a Louisiana
corporation (the "Merger Sub"), THE RED FOX COMPANIES OF NEW IBERIA, INC., a
Louisiana corporation (the "Company"), and the BELDON E. FOX, SR.
GRANDCHILDREN'S TRUST NO. 1 (Allyson B. Fox, Trustee), SOLE SHAREHOLDER OF THE
COMPANY (the "Shareholder").
WHEREAS, the respective Boards of Directors of the Parent, Merger Sub
and the Company have each approved the merger of the Company with and into
Merger Sub (the "Merger") pursuant to this Agreement and the applicable
statutes of the State of Louisiana whereby each issued and outstanding share of
Common Stock, no par value per share, of the Company ("Company Common Stock")
will be converted into the right to receive certain shares of common stock,
$.001 par value per share, of the Parent ("Parent Common Stock"), and certain
other consideration, all as provided herein;
WHEREAS, the Merger has been approved, as required by applicable law,
by the Parent, acting as sole shareholder of Merger Sub, and by the
Shareholder, as the holder of all of the outstanding capital stock of the
Company;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization pursuant to Section 368(a)(2)(D) of
the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, the Shareholder desires to sell to the Parent, and the Parent
desires to purchase, certain real estate interests used in connection with the
Company's business operations under certain terms and conditions.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
ARTICLE 1
BASIC TRANSACTION
1.1 BASIC TRANSACTION. Subject to the terms and conditions of this
Agreement:
(a) Merger. In accordance with the Louisiana Business
Corporation Law ("Applicable Corporate Law") upon the Effective Time (as
defined in Section 1.3), the Company
Red Fox of New Iberia Merger Agreement/Page 1
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shall be merged with and into the Merger Sub. Merger Sub, as the surviving
entity following the Merger, is sometimes referred to in this Agreement as the
"Surviving Corporation."
(b) Real Estate Purchase. The Parent agrees to purchase
from the Shareholder, or to cause its designee to purchase from the
Shareholder, and the Shareholder agrees to sell and convey to the Surviving
Corporation or its designee certain immovable property and leasehold interests
located in Iberia Parish, Louisiana, described in Schedule 1.1(b) hereto,
together with all improvements located thereon and all rights and appurtenances
thereto (collectively, the "Real Estate Interests"). On the date of closing of
the Parent's initial public offering of Common Stock (the "IPO Closing Date"),
the Parent or its designee will pay and deliver to the Shareholder $1,500,000
in cash (the "Real Estate Purchase Price") in consideration for the purchase
and sale of the Real Estate Interests. The acquisition of the Real Estate
Interests shall be subject to all terms and conditions of that certain
Leasehold Purchase Agreement between Shareholder and Parent in the form
attached as Exhibit 1.1(b) (the "Leasehold Purchase Agreement") to be executed
concurrently herewith.
(c) Employment Agreement. At the Closing, (i) Merger Sub
(the Surviving Corporation) and Beldon E. Fox, Jr. shall execute and deliver
an Executive Employment Agreement in the form attached as Exhibit 1.1(c)-1 (the
"Executive Employment Agreement"), providing for the employment of Mr. Beldon
E. Fox, Jr. as an executive of the Surviving Corporation for an initial term of
three years, and (ii) Merger Sub (the Surviving Corporation) and certain
individuals named on Schedule 1.1(c) will each execute an employment agreement
in the form attached as Exhibit 1.1(c)-2 (the "Key Employee Employment
Agreements"), providing for employment of such individuals by Merger Sub for a
period of two years.
1.2 THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Chamberlain,
Hrdlicka, White, Williams & Martin, in Houston, Texas, commencing at 9:00 a.m.
local time following the satisfaction or waiver of all conditions to the
obligations of the parties to consummate the transactions contemplated hereby
(other than the closing of the IPO (as defined below) and conditions with
respect to actions the respective parties will take at the Closing itself) not
later than the fourth business day prior to the IPO Closing Date (the "Closing
Date"); provided, however, that the Closing Date shall be no later than
December 31, 1997. The actions taken at the Closing will not include the
completion of the Merger, delivery of the Closing Merger Consideration pursuant
to Section 1.6, or delivery of the Real Estate Purchase Price pursuant to
Section 1.1(b). Instead, on the IPO Closing Date the Certificate of Merger
will become effective as provided in this Section and all transactions pursuant
to this Agreement to be closed or completed on or before the IPO Closing Date,
including delivery of the Closing Merger Consideration and delivery of the Real
Estate Purchase Price, will be closed or completed. During the period from the
Closing until the IPO Closing Date, this Agreement may be terminated by the
parties only pursuant to Section 6.1(b).
1.3 EFFECTIVE TIME OF THE MERGER. In accordance with the
requirements of the Applicable Corporate Law, an appropriate Certificate of
Merger of shall be prepared, executed, certified, acknowledged and submitted
for filing with the Secretary of State of the State of Louisiana. The effective
time of the Merger ("Effective Time") will be the time on the IPO Closing Date
which
Red Fox of New Iberia Merger Agreement/Page 2
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the Certificate of Merger specifies, or if the Certificate of Merger does not
specify another time, 12:00 noon central daylight time on the IPO Closing Date.
1.4 EFFECTS OF THE MERGER.
(a) At the Effective Time, (i) the Company shall merge
with and into the Merger Sub and as a result thereof, the separate existence of
the Company shall cease; (ii) the Articles of Incorporation of the Merger Sub,
as in effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation, except that the Articles of
Incorporation of the Merger Sub shall be amended to provide that the name of
the Surviving Corporation shall be changed to "The Red Fox Companies of New
Iberia, Inc.," (iii) the Bylaws of the Merger Sub as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation,
and (iv) the directors and officers of the Merger Sub immediately prior to the
Effective Time shall become the directors and officers of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected or appointed, as the case may be.
(b) At and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, immunities and
franchises, of a public as well as of a private nature previously belonging to
the Company and Merger Sub; and all property (real, personal and mixed), and
all debts due on whatever account, including subscriptions to shares, and all
other choses in action, and all and every other interest of or belonging to or
due to each of the Company and Merger Sub shall be transferred to, and vested
in, the Surviving Corporation without further act or deed; and all such
property, rights and privileges, powers and franchises and all and every other
interest shall be thereafter the property of the Surviving Corporation as they
were of the Company and Merger Sub; and the title to any immovable property, or
interest therein, whether by deed or otherwise, shall not revert or be in any
way impaired by reason of the Merger. The Surviving Corporation shall be
responsible and liable for all the liabilities and obligations of the Company
and Merger Sub and any claim existing, or action or proceeding pending, by or
against the Company or Merger Sub may be prosecuted against the Surviving
Corporation. Neither the rights of creditors nor any liens upon the property of
the Company or Merger Sub shall be impaired by the Merger, and all debts,
liabilities and duties of each of the Company and Merger Sub shall attach to
the Surviving Corporation, and may be enforced against it to the same extent as
if such debts, liabilities and duties had been incurred or contracted by it,
all in accordance with provisions of the Applicable Corporate Law and the terms
of this Agreement.
1.5 CONVERSION OF STOCK. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Company Common Stock or capital stock of the Merger Sub:
(a) Merger Sub Capital Stock. Each share of capital stock
of the Merger Sub issued and outstanding at the Effective Time, shall remain
outstanding and shall be unchanged after
Red Fox of New Iberia Merger Agreement/Page 3
<PAGE> 11
the Merger and shall thereafter constitute all of the issued and outstanding
capital stock of the Surviving Corporation.
(b) Cancellation of the Company Treasury Stock. All
shares of Company Common Stock that are owned by the Company as treasury stock
shall be canceled and retired and shall cease to exist and no stock of the
Parent or other consideration shall be delivered in exchange therefor.
(c) Final Merger Consideration. All of the outstanding
shares of Company Common Stock, in the aggregate (other than shares to be
canceled in accordance with Section 1.5(b)), shall be converted into the right
to receive: (i) a secured promissory note given by Parent with an original
principal amount of $3,000,000 in substantially the form attached hereto on
Exhibit 1.5(c) (the "Purchase Note"); (ii) the number of validly issued, fully
paid and nonassessable shares of Parent Common Stock resulting from dividing
$3,000,000 by the IPO Price (as defined below) and rounding down to the nearest
whole number; and (iii) the Earn Out, as defined in Section 2.1 below
(collectively, the "Final Merger Consideration"); provided, however, that the
Shareholder shall also be entitled to cash in lieu of a fractional share
pursuant to Section 1.6(d) below with regard to the fraction of a share
eliminated as a result of rounding pursuant to clause (ii) of this Section
1.5(c); and provided further that if between the date of this Agreement and the
Effective Time, the outstanding shares of Parent Common Stock shall have been
changed into a different number of shares or a different class, by reason of
any stock dividend, subdivision, reclassification, recapitalization, split-up,
combination, or exchange of shares or the like, the conversion formula in this
Section 1.5(c) shall be correspondingly revised to provide for the
proportionate amount of Parent Common Stock or any other interests into which
the Parent Common Stock may have changed.
(d) IPO Statement. At the Closing, Parent shall cause to
be prepared and delivered to Shareholder a statement (the "IPO Statement")
reporting the price per share paid by the public for shares of Parent Common
Stock (the "IPO Price") in the initial public offering of Parent Common Stock
("IPO"). The IPO Statement shall report the IPO Price and the quotient
resulting from dividing $3,000,000 by the IPO Price. Such quotient, rounded
down to the nearest whole number, shall represent the number of shares of
Parent Common Stock included in the Closing Merger Consideration (as defined
below).
1.6 EXCHANGE OF CERTIFICATES.
(a) Delivery of Company Common Stock and Closing Merger
Consideration. Prior to the Closing, the Parent will deliver to Shareholder a
letter of transmittal, in substantially the form attached hereto as Exhibit
1.6, to be used for the purpose of surrendering to the Parent all certificates
representing Company Common Stock in exchange for the right to receive the
Final Merger Consideration. On the IPO Closing Date, (i) Parent shall deposit
the aggregate amount of Final Merger Consideration other than the Earn-Out (the
"Closing Merger Consideration") with the exchange agent selected by Parent and
reasonably acceptable to Shareholder (the "Exchange Agent"), and (ii)
Shareholder shall surrender each and every outstanding certificate which prior
Red Fox of New Iberia Merger Agreement/Page 4
<PAGE> 12
thereto represented shares of Company Common Stock, together with a properly
completed and executed letter of transmittal (with such signature guaranteed by
an eligible guarantor institution pursuant to any medallion signature guarantee
program), to the Exchange Agent. Upon such surrender of Company Common Stock to
the Exchange Agent, Shareholder shall be entitled receive in exchange therefor
the Closing Merger Consideration and, in accordance with Section 2.2 below,
Shareholder shall be entitled to payment of the Earn-Out. Adoption of this
Agreement by Shareholder and the Parent shall constitute ratification of the
appointment of such Exchange Agent. After the Effective Time and until the
outstanding certificates formerly representing shares of the Company Common
Stock are so surrendered, each outstanding certificate which, prior to the
Effective Time, represented the Company Common Stock shall be deemed for all
corporate purposes (except the payment of dividends) to evidence ownership of
the Final Merger Consideration into which the shares of the Company Common
Stock represented thereby prior to such Effective Time shall have been
converted.
(b) Payment of Dividends. Until certificates representing
shares of Company Common Stock have been surrendered, no dividend payable to
holders of record of the Parent Common Stock shall be paid to the holders of
such outstanding stock certificates of the Company in respect thereof. Upon
surrender of such outstanding certificates, however, there shall be paid to the
holders of the certificate for the Parent Common Stock issued in exchange
therefor the amount of dividends, if any, which theretofore became payable with
respect to such full shares of the Parent Common Stock, but which have not
theretofore been paid on such stock. No interest shall be payable with respect
to the payment of any dividends.
(c) Indemnification of Exchange Agent . Notwithstanding
any of the foregoing, the parties agree that Exchange Agent shall not be
individually responsible or liable in any manner whatsoever for anything which
he may do or refrain from doing in connection herewith, and that in the event
Exchange Agent becomes involved in any litigation, claim a controversy in
connection with his actions under this Agreement, Shareholder agrees to
indemnify, defend and save Exchange Agent from all losses, costs, damages,
expenses and attorneys' fees suffered or incurred by Exchange Agent as a result
thereof.
(d) No Fractional Shares. Fractional shares of the Parent
Common Stock will not be issued in exchange for the Company Common Stock. Upon
delivery of all certificates representing shares of Company Common Stock,
together with a duly and properly completed and executed letter of transmittal
to the Exchange Agent on or after the Effective Time, Exchange Agent will
deliver the Closing Merger Consideration and, in accordance with Section 2.2
below, the Earn-Out, if any, provided that in lieu of any fractional share,
Exchange Agent shall deliver a cash amount equivalent to the amount obtained by
multiplying such fraction by the IPO Price. No interest shall be payable with
respect to payment of such cash distribution.
(e) Assignments. No assignment, transfer or other
disposition of record or beneficial ownership of any shares of Company Common
Stock may be made on or after the date hereof.
Red Fox of New Iberia Merger Agreement/Page 5
<PAGE> 13
(f) Payment in Full Satisfaction of All Rights. The
delivery of the Closing Merger Consideration to Shareholder with respect to the
Company Common Stock shall be deemed to be payment in full satisfaction of all
rights pertaining to the outstanding Company Common Stock, except for the right
to receive additional shares of Parent Common Stock pursuant to the Earn-Out as
described in Article 2 hereof.
1.7 DELIVERIES AT THE CLOSING AND ON THE IPO CLOSING DATE. At the
Closing, (i) the Shareholder will deliver to Exchange Agent the various
certificates, instruments, and documents referred to in Section 5.1 below
(other than conveyance of the Real Estate Interests), and (ii) the Parent will
deliver to Exchange Agent the various certificates, instruments, and documents
referred to in Section 5.2 below (other than payment of the Leasehold Purchase
Price). At the IPO Closing, (A) Shareholder will deliver to Exchange Agent a
completed and executed letter of transmittal in the form of Exhibit 1.6
attached hereto, representing all of the Company Common Stock owned by the
Shareholder, free and clear of any pledge, lien, claim, encumbrance, or
interest of any third party, (B) Exchange Agent will release the various
certificates, instruments and documents to be delivered to Parent pursuant to
Section 5.1 and the various certificates, instruments and documents to be
delivered to Shareholder pursuant to Section 5.2, (C) Shareholder shall execute
and deliver to Parent or its designee a Transfer of Immovable Property and the
other certificates, instruments and documents provided for in the Leasehold
Purchase Agreement, as required to convey the Real Estate Interests to Parent
or its designee pursuant to terms of the Leasehold Purchase Agreement, and (D)
Parent will deliver the Closing Merger Consideration and the Leasehold Purchase
Price to Shareholder as specified above.
ARTICLE 2
CONSIDERATION ADJUSTMENTS
2.1 POST-CLOSING ADJUSTMENTS TO MERGER CONSIDERATION. The Final
Merger Consideration into which the Company Common Stock shall be converted is
subject to the adjustments described in this Section 2.1:
(a) Determination of Earn-Out. Shareholder shall prepare
and deliver to the Parent, on or before February 28, 1998, a statement (the
"Earn-Out Statement") based on the financial statements of the Company for the
period from January 1, 1997 to December 31, 1997, prepared in accordance with
GAAP, and showing (a) the calculation of the amount of the Company's current
assets and current liabilities as of the IPO Closing Date and the amount of the
Working Capital Adjustment (defined below), if any, (b) the calculation of the
amount of the Company's Adjusted 1997 EBITDA (defined below), and (c) the
amount, if any, by which the product of 4.5 multiplied by such Adjusted 1997
EBITDA exceeds the sum of $6,000,000 plus Long-Term Debt (defined below) as of
the IPO Closing Date. The amount of such excess (if any) reduced by the Working
Capital Adjustment (if any) is the "Earn-Out."
Red Fox of New Iberia Merger Agreement/Page 6
<PAGE> 14
(b) Certain Definitions Related to the Earn-Out.
(1) "GAAP" means U.S. generally accepted accounting
principles consistently applied.
(2) "Working Capital Adjustment" means the extent, if
any, to which 1.2 times current liabilities exceeds current
assets, based on current assets and current liabilities of the
Company determined as of the IPO Closing Date in accordance
with GAAP; provided however, that for purposes of determining
the Working Capital Adjustment, current maturities of Long
Term Debt shall be excluded from current liabilities of the
Company and prepaid expenses shall be excluded from current
assets of the Company.
(3) "Long Term Debt" means all long-term liabilities
(including current maturities) of the Company owed to persons
other than Shareholder and its affiliates as of the IPO
Closing Date, including deferred taxes and capitalized lease
obligations, determined in accordance with GAAP.
(4) "Adjusted 1997 EBITDA" means the sum of (i) Net
After-Tax Income (as defined below), plus (ii) the amount of
income and franchise taxes deducted in the calculation of Net
After-Tax Income, plus (iii) the amount of depreciation and
amortization deducted in the calculation of Net After-Tax
Income, plus (iv) the amount of interest expense deducted in
the calculation of Net After-Tax Income (with amounts in
clauses (i) through (iv) above determined in accordance with
GAAP), determined with respect to the period from January 1,
1997 through December 31, 1997.
(5) "Net After-Tax Income" means, with respect to any
period, the consolidated net income (or loss) of the Company
after deduction for income, franchise and other taxes and
without giving effect to non-recurring gains and losses,
interest income or investment income, determined for such
period in accordance with GAAP.
(c) Review of Earn-Out Statement. Parent shall have the
right to review the Earn-Out Statement (and supporting work papers) and provide
written notice to the Shareholder of Parent's objections with respect to any
error, omission or other discrepancy in the Earn-Out Statement (the
"Discrepancy Notice") until the later of March 20, 1998 or 20 days following
Parent's receipt of the Earn-Out Statement. Parent and Shareholder shall work
together in good faith to resolve any such dispute and agree on the final
Earn-Out Statement. In the event that Parent and Shareholder cannot agree on
the final Earn-Out Statement within 10 days after delivery of Parent' s
Discrepancy Notice, Parent and Shareholder shall refer the disputed issue or
issues to a national independent public accounting firm (other than the regular
accountants for any party or the accountants who prepared the Earn-Out
Statement) which is reasonably acceptable to each party (the
Red Fox of New Iberia Merger Agreement/Page 7
<PAGE> 15
"Arbitrating Accountants") within 15 days following delivery of Parent's
Discrepancy Notice. The Arbitrating Accountants shall be instructed to render a
decision, which shall be binding upon both parties, within 20 days. Each party
shall be entitled to present any information or analysis concerning the matter
in good faith to the Arbitrating Accountants with a copy provided to the other
party. Parent and Shareholder shall each bear their own fees and expenses, and
the fees and expenses of the Arbitrating Accountants shall be shared equally by
Parent and Shareholder.
2.2 PAYMENT OF EARN-OUT. Within thirty days following delivery of
the Earn-Out Statement, Parent shall deliver payment of the Earn-Out to
Shareholder (if the Earn-Out is greater than zero) by delivery Parent Common
Stock (the "Adjustment Shares") such that 100% of the aggregate amount of the
Earn-Out is received by Shareholder in the form of shares of Parent Common
Stock. For purposes of this Section 2.2, the Adjustment Shares shall have a
value (the "Earn- Out Price") equal to the lesser of: (i) the IPO Price or (ii)
the average of the daily closing prices (or if no closing price is reported,
the average of the daily closing bid and asked prices) of the Parent Common
Stock for the ten consecutive trading days ending on and including the date
that is three trading days prior to the payment date.
2.3 PROTECTION OF TAX-FREE REORGANIZATION. Notwithstanding
anything in this Article 2 to the contrary, in the event that any of the
adjustments required in this Article 2 would jeopardize the qualification of
the Merger as a reorganization pursuant to Section 368(a)(2)(D) of the Code,
the parties agree to reallocate the Aggregate Merger Consideration payable to
Shareholder such that the portion allocated to Parent Common Stock satisfies
the requirements for a tax-deferred reorganization pursuant to such Code
section, and the parties agree to amend the provisions of this Article 2 as
necessary to cause the Merger to comply with the provisions of Section
368(a)(2)(D).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES BY SHAREHOLDER. Shareholder
represents and warrants to the Parent and the Merger Sub that the statements
contained in this Section 3.1 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date and as of the
IPO Closing Date (as though made then and as though such dates were substituted
for the date of this Agreement throughout this Section 3.1) except as set forth
in the disclosure schedule delivered by the Shareholder to the Parent and the
Merger Sub on the date hereof and initialed by the parties hereto (the
"Shareholder Disclosure Schedule"). Nothing in the Shareholder Disclosure
Schedule shall be deemed adequate to disclose an exception to a representation
or warranty made herein, however, unless the Shareholder Disclosure Schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other
item shall not be deemed adequate to disclose an exception to a representation
or warranty made herein (unless the representation or warranty has to do with
the existence of the document or other item itself). The Shareholder Disclosure
Schedule will be arranged in sections
Red Fox of New Iberia Merger Agreement/Page 8
<PAGE> 16
and paragraphs corresponding to the lettered and numbered sections and
paragraphs contained in this Section 3.1.
(a) Qualification. Shareholder has the legal power and
authority to own its properties and assets and carry on its business
and affairs as currently conducted.
(b) Authority Relative to Agreement. Shareholder has the
full right, power, and legal authority to execute and deliver this
Agreement. Shareholder has the full right, power, and legal authority
to perform this Agreement and to consummate the transactions
contemplated on the part of the Company hereby. No proceeding on the
part of Shareholder, and, except for those approvals described in
Schedule 3.1(b), no notice, consent, authorization, order or approval
of, filing or registration with, any governmental commission, board or
other regulatory body or any bank, bonding company, lender, surety,
customer, supplier, or any other person whatsoever is required for or
in connection with the execution and delivery of this Agreement. No
proceeding on the part of Shareholder, and, except for those approvals
described in Schedule 3.1(b), no notice, consent, authorization, order
or approval of, filing or registration with, any governmental
commission, board or other regulatory body or any bank, bonding
company, lender, surety, customer, supplier, or any other person
whatsoever is required for or in connection with the performance of
this Agreement and the consummation by Shareholder of the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by Shareholder and is a valid and binding agreement of
Shareholder, enforceable against Shareholder in accordance with its
terms.
(c) Non-Contravention. The execution, delivery and
performance of this Agreement by Shareholder do not, and the
consummation by Shareholder of the transactions contemplated hereby
will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation, or acceleration of any
obligation or to the loss of a material benefit under, or result in
the creation or imposition of any material lien, charge, pledge,
security interest or other encumbrance upon any of the property or
assets of Shareholder or the Company pursuant to any provision of, any
mortgage, lien, lease, agreement, license, instrument, law, ordinance,
regulation, order, arbitration award, judgment or decree to which
Shareholder or the Company is a party or by which any of their
respective assets are bound. The execution, delivery and performance
of this Agreement by Shareholder do not and the consummation by
Shareholder of the transactions contemplated hereby will not violate
or conflict with any other restriction of any kind or character to
which Shareholder or the Company is subject or by which any of their
respective assets may be bound.
(d) Ownership of Company Common Stock. Shareholder holds
of record and owns beneficially the number of shares of Company Common
Stock set forth next to its name in Schedule 3.1(d) of the
Shareholder's Disclosure Schedule. The Shareholder is, and as of the
IPO Closing Date will be, the sole and exclusive lawful owner of all
of the
Red Fox of New Iberia Merger Agreement/Page 9
<PAGE> 17
outstanding shares of Company Common Stock free and clear of all
liens, claims, encumbrances and rights of others of any nature
whatsoever, with full power to vote all such shares on any matter that
may properly come before shareholders of the Company, and Shareholder
may exercise such voting power on any matter without violation of the
rights of any person. There are no rights, warrants or options
outstanding with respect to such capital stock, and Shareholder has no
obligation to deliver capital stock of the Company or any of its
Subsidiaries (as defined below) to any person as of the date hereof,
at any time on or prior to the IPO Closing Date, thereafter or as a
result thereof or in connection therewith except as provided in this
Agreement.
(e) Restricted Securities.
(1) Shareholder acknowledges that the shares of
Parent Common Stock which Shareholder shall acquire pursuant
to the Merger and this Agreement have not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), and are being acquired for Shareholder's own account
for investment and not with a view to the distribution
thereof. The Parent Common Stock will be subject to the stock
transfer restrictions described in Article 8 below.
(2) Shareholder has the knowledge and experience
in financial and business matters to enable it to evaluate the
merits and risks of approving this Agreement and the
transactions contemplated herein and acquiring shares of
Parent Common Stock.
(3) Shareholder is able to bear the economic
risks of its investment in the Parent Common Stock, including
the risk of a complete loss of the value of Parent Common
Stock.
(4) Shareholder has been represented by legal
counsel in this transaction and Shareholder and its
representatives, including such counsel, have been given the
opportunity to ask questions of, and receive answers from, the
officers of the Parent concerning the terms of the
transactions contemplated by this Agreement and the affairs
and the business and financial condition of the Parent.
(5) Shareholder has received a confidential
private placement memorandum concerning the Parent and an
investment in shares of Parent Common Stock, and Shareholder
and its representatives have been given access to all
documents, books and additional information concerning Parent
which they have requested regarding Parent.
(6) Shareholder has conducted such investigations
by itself and through its representatives in making a decision
to approve this Agreement and the transactions contemplated
herein as it has deemed necessary and advisable.
Red Fox of New Iberia Merger Agreement/Page 10
<PAGE> 18
(7) Shareholder acknowledges and agrees that the
Parent Common Stock issued to Shareholder may not be disposed
of except in accordance with the requirements of the
Securities Act and any applicable state securities laws.
3.2 REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER AND THE COMPANY.
Shareholder and the Company, jointly and severally, represent and warrant to
the Parent and the Merger Sub that the statements contained in this Section 3.2
are correct and complete as of the date of this Agreement and will be correct
and complete as of the IPO Closing Date (as though made then and as though the
IPO Closing Date were substituted for the date of this Agreement throughout
this Section 3.2), except as otherwise set forth in the disclosure schedule
delivered by the Shareholder and the Company to the Parent and the Merger Sub
on the date hereof and initialed by the parties hereto (the "Company Disclosure
Schedule"). Nothing in the Company Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein, however,
unless the Company Disclosure Schedule identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or
other item itself). The Company Disclosure Schedule will be arranged in
sections and paragraphs corresponding to the lettered and numbered sections and
paragraphs contained in this Section 3.2.
(a) Organization and Qualification, etc. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Louisiana, has the full right, power
and legal authority and all licenses, permits, titles and
authorizations necessary to own all of its properties and assets and
to carry on its business as it is now being conducted, and is duly
qualified to do business and is in good standing in each jurisdiction
as set forth in Schedule 3.2(a) of the Company Disclosure Schedule
where, to the reasonable belief of Shareholder and the Company, such
qualification is appropriate. The copies of the Company's Articles of
Incorporation and Bylaws, as amended to date, which have been
delivered to Parent are complete and correct, and such instruments, as
so amended, are in full force and effect at the date hereof. The
Company is qualified to transact business as a foreign corporation and
is in good standing in all jurisdictions in which it is engaged in
business and in which its properties or assets are located, which
foreign jurisdictions are listed in Schedule 3.2(a).
(b) Capital Stock. The entire authorized capital stock of
the Company consists of 10,000 shares of Company Common Stock of which
as of the date hereof 100 shares of Company Common Stock are validly
issued and outstanding, fully paid and nonassessable, all of which are
held of record and beneficially by Shareholder. No shares of the
capital stock of the Company have been issued in violation of the
preemptive rights of any past or present shareholder. No shares of the
capital stock of the Company are in the treasury of the Company. There
are no outstanding subscriptions, shares of capital stock, calls,
warrants, options, contracts, commitments, or demands relating to the
capital stock of the Company
Red Fox of New Iberia Merger Agreement/Page 11
<PAGE> 19
or other agreements of any character under which the Company or Parent
would be obligated to issue or purchase shares of its capital stock.
There is no voting agreement, voting trust, proxy, or other agreement
or understanding with respect to the voting of the capital stock of
the Company. The Company has no commitments to issue or sell any
securities or obligations convertible into or exchangeable for, or
giving any person any right to subscribe for or acquire from the
Company, any shares of its capital stock and no securities or
obligations evidencing any such rights are outstanding.
(c) Subsidiaries. With respect to each corporation, firm,
partnership or other business entity in which the Company holds an
interest, Schedule 3.2(c) of the Company Disclosure Schedule sets
forth the name, the interest of the Company, and the capitalization of
such entity (each such entity in which the Company owns or controls
more than 50% of the voting securities, directly or indirectly, or in
which the Company acts as manager or general partner is hereinafter a
"Subsidiary"). Except as described on Schedule 3.2(c) of the Company
Disclosure Schedule neither the Company nor any Subsidiary owns or has
any right or obligation to acquire any class of securities (including,
without limitation, debt securities) issued by any person or company
and neither the Company nor any Subsidiary is a party to or bound to
any partnership, joint venture, voluntary association, or other
agreement with any person for the conduct of any business.
(d) Qualification of Subsidiaries. Each Subsidiary is
duly organized, validly existing and in good standing under the laws
of its state of organization, with the corporate or organizational
power to own its property and carry on its business as it is now being
conducted. All of the issued and outstanding shares of capital stock
of each Subsidiary have been duly authorized and are validly issued,
fully paid, and nonassessable, and were not issued in violation of the
preemptive rights of any past or present shareholder. The Company and
its Subsidiaries hold of record and own beneficially all of the
outstanding shares or other interests in each Subsidiary of the
Company held by them 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 any of the Company and its Subsidiaries to sell,
transfer, or otherwise dispose of any capital stock of any of its
Subsidiaries or that could require any Subsidiary to issue, sell, or
otherwise cause to become outstanding any of its own capital stock.
There are no outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to any Subsidiary. There
are no voting trusts, proxies, or other agreements or understandings
with respect to the voting of any capital stock of any Subsidiary.
None of the Company and its Subsidiaries controls directly or
indirectly or has any direct or indirect equity participation in any
corporation, partnership, trust, or other business association which
is not a Subsidiary of the Company.
Red Fox of New Iberia Merger Agreement/Page 12
<PAGE> 20
(e) Authority Relative to Agreement. The Company has the
full right, power, and legal authority to execute and deliver this
Agreement. The Company has the full right, power, and legal authority
to perform this Agreement and to consummate the transactions
contemplated on the part of the Company hereby. The execution and
delivery by the Company of this Agreement and the consummation by the
Company of the transactions contemplated on its part hereby have been
duly authorized by its Board of Directors and the Shareholder in its
capacity as the holder of all of the capital stock of the Company. No
proceeding on the part of the Company, and, except for those approvals
described in Schedule 3.2(e), no notice, consent, authorization, order
or approval of, filing or registration with, any governmental
commission, board or other regulatory body, or any bank, bonding
company, lender, surety, customer, supplier, or any other person
whatsoever is required for or in connection with the execution and
delivery of this Agreement. No proceeding on the part of the Company,
and, except for those approvals described in Schedule 3.2(e), no
notice, consent, authorization, order or approval of, filing or
registration with, any governmental commission, board or other
regulatory body or any bank, bonding company, lender, surety,
customer, supplier, or any other person whatsoever is required for or
in connection with the performance of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement
has been duly executed and delivered by the Company and is a valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms.
(f) Non-Contravention. The execution, delivery, and
performance of this Agreement by the Company do not and the
consummation by the Company of the transactions contemplated hereby
will not (1) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, government agency, or court to which
the Company or any of its assets is subject or (2) violate any
provision of the Articles of Incorporation or Bylaws of the Company or
any Subsidiary, or (3) violate or result in, with the giving of notice
or the lapse of time or both, the violation of any provision of, or
result in the acceleration of or entitle any party to accelerate
(whether after the giving of notice or lapse of time or both) any
obligation under, or result in the creation or imposition of any lien,
charge, pledge, security interest or other encumbrance upon any of the
property of the Company or any Subsidiary pursuant to any provision of
any mortgage, lien, lease, contract, agreement, license, or instrument
to which the Company or any Subsidiary is a party or by which any of
their respective assets are bound. The execution, delivery and
performance of this Agreement by the Company do not and will not
violate or conflict with any other restriction of any kind or
character to which the Company or any Subsidiary is subject or by
which any of their respective assets may be bound, and the same do not
and will not constitute an event permitting termination of any such
mortgage, lien, lease, agreement, license or instrument to which the
Company or any Subsidiary is a party or by which any of their
respective assets are bound, except as such enforcement is subject to
the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws relating to or affecting creditors' rights.
Red Fox of New Iberia Merger Agreement/Page 13
<PAGE> 21
(g) Financial Information. Shareholder has previously
furnished Parent with true and complete copies of the audited balance
sheets of the Company and its Subsidiaries as of December 31, 1996 and
December 31, 1995, and the related audited statements of income,
retained earnings and cash flows for each of the three years in the
period ended December 31, 1996 audited by Dannall, Sikes & Fredrick,
the independent accountants of the Company, together with the
unqualified audit report of such accountants with respect to such
financial statements. Such financial statements have been prepared in
conformity with GAAP consistently applied and present fairly and
accurately the financial position and results of operations of the
Company and its consolidated Subsidiaries as of and for the respective
periods then ended. Shareholder has also previously furnished the
Parent with a correct and complete copy of the unaudited monthly
balance sheets of the Company as of the last day of each month from
January through June 1997, and the related monthly unaudited statement
of income, retained earnings and cash flows of the Company with
respect to each month from January through June 1997 certified by the
chief executive officer and the chief accounting officer of the
Company (including such certificates, the "Unaudited Monthly Financial
Statements"). Such financial statements have been prepared in
conformity with GAAP consistently applied and present fairly and
accurately the financial position and results of operations of the
Company and its consolidated Subsidiaries as of and for the subject
periods, except for normal recurring year-end adjustments. The Company
and its Subsidiaries do not have any liabilities or obligations of a
type which should be included in or reflected as such in financial
statements prepared in accordance with GAAP, whether related to tax or
non-tax matters, accrued or contingent, due or not yet due,
liquidated, or unliquidated, or otherwise, except as and to the extent
disclosed or reflected in such financial statements. Collectively, the
financial statements described in this Section 3.2(g) are the "Company
Financial Statements."
(h) Absence of Certain Changes or Events. Since December
31, 1996, and except to the extent described in Schedule 3.2(h) of the
Company Disclosure Schedule:
(1) none of the Company and its Subsidiaries 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;
(2) none of the Company and its Subsidiaries has
entered into any agreement, contract, lease, permit or license
(or series of related agreements, contracts, leases, permits
and licenses) either involving more than $20,000 outside the
ordinary course of business;
(3) no party (including any of the Company and its
Subsidiaries) has breached, accelerated, terminated, modified,
or canceled any agreement, contract, lease, permit or license
(or series of related agreements, contracts, leases, permits
and licenses) involving more than $20,000 to which any of the
Company and its Subsidiaries is a party or by which any of
them is bound ("Company Contracts");
Red Fox of New Iberia Merger Agreement/Page 14
<PAGE> 22
(4) none of the Company and its Subsidiaries has
imposed or suffered to exist any lien, encumbrance or security
interest upon any of its assets, tangible or intangible (other
than the Permitted Exceptions, as defined below);
(5) none of the Company and its Subsidiaries has made
any capital expenditure (or series of related capital
expenditures) either involving more than $20,000 or outside
the ordinary course of business;
(6) none of the Company and its Subsidiaries has made
any capital investment in, any loan to, or any acquisition of
the securities or assets of, any other corporation,
partnership, limited liability company or other person (or
series of related capital investments, loans, and
acquisitions) either involving more than $20,000 or outside
the ordinary course of business;
(7) none of the Company and its Subsidiaries 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 $20,000 singly or $50,000 in the aggregate;
(8) none of the Company and its Subsidiaries has
delayed or postponed the payment of accounts payable and other
liabilities outside the ordinary course of business;
(9) none of the Company and its Subsidiaries has
canceled, compromised, satisfied, settled, waived, or released
any right or claim (or series of related rights and claims)
either involving more than $20,000 or outside the ordinary
course of business;
(10) none of the Company and its Subsidiaries has
granted any license or sublicense of any rights under or with
respect to any Intellectual Property (as hereinafter defined);
(11) there has been no change made or authorized in
the Articles of Incorporation or bylaws of any of the Company
and its Subsidiaries;
(12) none of the Company and its Subsidiaries 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;
(13) none of the Company and its Subsidiaries 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
Red Fox of New Iberia Merger Agreement/Page 15
<PAGE> 23
stock except for dividends and distributions to shareholders
which in the aggregate do not exceed 10% of the Company's
pre-tax net income during 1997 through the date of the latest
such distribution;
(14) none of the Company and its Subsidiaries has
experienced any damage, destruction, or loss to its property
in excess of $20,000 which is not covered by insurance;
(15) none of the Company and its Subsidiaries 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;
(16) none of the Company and its Subsidiaries has
entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(17) none of the Company and its Subsidiaries has
granted any increase in compensation to any of its directors,
officers, employees, consultants or agents in excess of five
percent of such person's base compensation and discretionary
bonuses to officers and employees in the aggregate amount of
up to 10% of the pre-tax net income of the Company during 1997
up to the date of the latest such payment;
(18) none of the Company and its Subsidiaries 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 other employee benefit plan);
(19) none of the Company and its Subsidiaries has
made any other change in employment terms for any of its
directors, officers, and employees outside the ordinary course
of business;
(20) none of the Company and its Subsidiaries has
made or pledged to make any charitable or other capital
contribution outside the ordinary course of business;
(21) 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 Company or its Subsidiaries;
(22) there has not been any adverse change in the
business, financial condition, operation, results of
operation, or future prospects of the Company and its
Subsidiaries;
Red Fox of New Iberia Merger Agreement/Page 16
<PAGE> 24
(23) there has not been any work interruptions, labor
grievances or claims filed, proposed law or regulation (the
existence of which is known, or under the normal course of
business should be known, to the Company) or any event or
condition of any character materially adversely affecting the
business of future prospects of the Company or its
Subsidiaries;
(24) there has not been any merger or consolidation
or agreement to merge or consolidate with or into any other
corporations (except the transactions contemplated by this
Agreement); and
(25) none of the Company and its Subsidiaries has
committed to any of the foregoing.
"Permitted Exceptions" shall mean (i) mechanic's,
materialman's, warehouseman's and carrier's liens and purchase money
security interests arising in the ordinary course of business, a
correct and complete list of which is set forth on Schedule 3.2(h-1)
of the Company Disclosure Schedule; (ii) liens for taxes and
assessments not yet payable; (iii) liens for taxes, assessments and
charges and other claims, the validity of which the Company or
Shareholder are contesting in good faith, a correct and complete list
of which is set forth on Schedule 3.2(h-1); and (iv) imperfections of
title, liens, security interests, claims and other charges and
encumbrances the existence of which does not adversely affect the
operation, value, use or enjoyment of such asset or property.
(i) Undisclosed Liabilities. The Company and its
Subsidiaries have no liabilities (and there is no basis for any
present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against the Company or its
Subsidiaries giving rise to any liability), except for (i) liabilities
set forth on the face of the Company Financial Statements (rather than
in any notes thereto) and (ii) liabilities which have arisen after
June 30, 1997 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).
(j) Permits and Legal Compliance. The Company and its
Subsidiaries have all permits, licenses, orders, qualifications, and
approvals of all governmental and regulatory authorities material to
the conduct of their business, a correct and complete list of which is
set forth in Schedule 3.2(j) of the Company Disclosure Schedule. All
such permits, licenses, orders and approvals are in full force and
effect, and no suspension or cancellation of any of them is pending or
threatened. None of such permits, licenses, orders or approvals, and
no application for any of such permits, licenses, orders or approvals,
will be adversely affected by the consummation of the transactions
contemplated by this Agreement. The Company and its Subsidiaries have
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,
Red Fox of New Iberia Merger Agreement/Page 17
<PAGE> 25
proceeding, hearing, investigation, charge, complaint, claim, demand,
or notice has been filed or commenced against the Company or its
Subsidiaries alleging any failure so to comply.
(k) Title to Properties; Absence of Liens and
Encumbrances, etc. The Company and its Subsidiaries have good and
marketable title to all of the real, tangible personal and mixed
properties and assets owned by it and used in its business, free and
clear of any liens, charges, pledges, mortgages, conditional sales
contracts, security interests or other encumbrances (other than
Permitted Exceptions), except as reflected in the Company Financial
Statements. A correct and complete list of all such properties and
assets (other than properties and assets described in Sections 3.2(l),
3.2(m) and 3.2(n)) with a historical cost in excess of $1,000 is set
forth on Schedule 3.2(k). The properties and assets of the Company and
its Subsidiaries (other than the properties and assets described in
Sections 3.2(l), 3.2(m) and 3.2(n), which sections contain the
Company's and Shareholder's representations and warranties with
respect to such intangible properties and assets) are free and clear
of any liens, charges, pledges, mortgages, conditional sales
contracts, security interests or other encumbrances (other than
Permitted Exceptions), except as reflected in the Company Financial
Statements.
(l) Software. Schedule 3.2(l) of the Company Disclosure
Schedule contains a list or description by type of all operating and
applications computer programs and data bases ("Software") which the
Company or any Subsidiary uses or has available for use and plans to
use, and such Software constitutes all the Software which is necessary
to operate the business of the Company and its Subsidiaries as
currently conducted. All such Software is owned outright by the
Company or its Subsidiaries except as indicated on Schedule 3.2(l). As
to any Software which Schedule 3.2(l) indicates is not owned by the
Company or its Subsidiaries, the owner of such Software is identified
on Schedule 3.2(l) and the Company and its Subsidiaries have the right
to use the same pursuant to valid leases or licenses therefor. None of
the Software used by or available to the Company or its Subsidiaries,
and no use thereof, infringes upon or violates any patent, copyright,
trade secret or other proprietary right of anyone else and no claim
with respect to any such infringement or violation is threatened.
(m) Patent, Trademark, etc. Claims. The Company or its
Subsidiaries is the owner or licensee of all patents, patent licenses,
trademarks/servicemarks/trade names, trademark/servicemark/trade name
registrations, copyrights, and copyright registrations or any other
intellectual property ("Intellectual Property") used by or necessary
to the operation of the Company's business as presently conducted and
a correct and complete list of such Intellectual Property is set forth
in Schedule 3.2(m) of the Company Disclosure Schedule. Each item of
Intellectual Property owned or used by the Company or its Subsidiaries
immediately prior to the Closing will be owned or available for use by
the Company or its Subsidiaries on the same terms and conditions
immediately after the Closing. Each of the Company and its
Subsidiaries owns or has the right to use all such Intellectual
Property and has taken all necessary action to maintain and protect
each item of Intellectual Property that
Red Fox of New Iberia Merger Agreement/Page 18
<PAGE> 26
it owns or uses. Each of the Company and its Subsidiaries has not
infringed, and is not now infringing, on any trade name, trademark,
service mark, or copyright belonging to any other person, firm or
corporation and has not received any notice of such infringement.
Neither the Company nor any Subsidiary is a party to any license,
sublicense, agreement or arrangement, pursuant to which the Company or
its Subsidiaries uses Intellectual Property except as shown in
Schedule 3.2(m). With respect to each such license, sublicense,
agreement or arrangement disclosed:
(1) the license, sublicense, agreement or
arrangement covering the item is legal, valid, binding,
enforceable, and in full force and effect;
(2) the license, sublicense, agreement or
arrangement will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms
following the Closing;
(3) no party to such license, sublicense,
agreement or arrangement 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; and
(4) no party to the license, sublicense,
agreement or arrangement has repudiated any provision thereof.
Each of the Company and its Subsidiaries owns, or holds adequate
licenses or other rights to use its trade names in the business as now
conducted by it, and that does not, and will not, conflict with,
infringe on, or otherwise violate any rights of others. Shareholder
has delivered to Parent correct and complete copies of all such
licenses, sublicenses agreements and arrangements (as amended to date)
disclosed on Schedule 3.2(m).
(n) List of Properties, Contracts and Other Data. The
Company and its Subsidiaries own or lease all property and tangible
assets necessary for the conduct of their business as presently
conducted. Except as reflected in such Schedule 3.2(n) of the Company
Disclosure Schedule, all of the property of the Company and its
Subsidiaries is in existence and is in good condition and repair,
except for reasonable wear and tear, and in conformity in all material
respects with all building, zoning, OSHA, Coast Guard, safety, or
other applicable ordinances, regulations, or laws. Schedule 3.2(n) of
the Company Disclosure Schedule contains a list setting forth with
respect to the Company and its Subsidiaries as of the date hereof the
following:
(1) Schedule 3.2(n)(1) of the Company Disclosure
Schedule lists and describes briefly all real property which
the Company and each Subsidiary owns. With respect to each
such parcel of owned real property (collectively, the
"Property"):
Red Fox of New Iberia Merger Agreement/Page 19
<PAGE> 27
(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 and except as set forth on Schedule 3.2(n)(1)
of the Company Disclosure Schedule;
(ii) there are no pending or, to the knowledge of
Shareholder and the directors and officers (and
employees with responsibility for real estate
matters) of the Company and its Subsidiaries,
threatened condemnation proceedings, lawsuits, or
administrative actions or other matters relating to
the Property which could reasonably be expected to
adversely affect the current ownership, maintenance,
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 is 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, except
as described on Schedule 3.2(n)(1), 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 such approvals and
applicable laws, rules, and regulations;
(v) except as described on Schedule 3.2(n)(2) 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 Company
and its Subsidiaries) in possession of the parcel of
real property, other than tenants in possession of
Red Fox of New Iberia Merger Agreement/Page 20
<PAGE> 28
property leased or subleased by the Company or any of
its Subsidiaries under any leases or subleases
disclosed on Schedule 3.2(n)(2) which tenants are in
possession of space to which they are entitled;
(viii) Except as described on Schedule 3.2(n)(1), to
the extent necessary or desirable for the use or
operation of facilities located on real property
owned by the Company or any Subsidiary, such
facilities are supplied with utilities and other
services, including gas, electricity, water,
telephone, sanitary sewer, and storm sewer, all of
which services are adequate in accordance with all
applicable laws, ordinances, rules, and regulations;
(ix) Except as described on Schedule 3.2(n)(1), 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;
(x) Except as described on Schedule 3.2(n)(1), the
Property is not located within an area that has been
designated by the Federal Insurance Administration,
the Army Corps of Engineers or any other governmental
agency or body as being subject to special flooding
hazards; and
(xi) Except as described on Schedule 3.2(n)(1), the
improvements on the Property (A) have been
constructed in a good and workmanlike manner, free
from defects in workmanship and material and, to the
best of Shareholder's and Company's knowledge, do not
require any repair or replacement other than minor,
routine maintenance; and (B) have been constructed
and are being occupied, maintained, and operated in
compliance with all applicable laws, regulations,
insurance requirements, contracts, leases, permits,
licenses, ordinances, restrictions, building setback
lines, covenants, reservations, and easements, and
Shareholder and Company have received no notice,
written or oral, claiming any violation of any of the
same or requesting or requiring the performance of
any repairs, alterations, or other work in order to
so comply.
(2) Schedule 3.2(n)(2) of the Company Disclosure
Schedule lists and describes briefly all real property leased
or subleased by or to the Company or any of its Subsidiaries
(whether as lessor or as lessee). Schedule 3.2(n)(2) also
identifies the properties leased or subleased to the Company
or any of its Subsidiaries for which title insurance policies
are to be procured as provided in Section 4.8 below. The
Shareholder has delivered to the Parent correct and complete
copies of the leases and subleases listed in Schedule
3.2(n)(2) (as amended to date). With respect to each lease and
sublease listed in Schedule 3.2(n)(2):
Red Fox of New Iberia Merger Agreement/Page 21
<PAGE> 29
(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) Except as described on Schedule 3.2(n)(2), 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 correct and
complete with respect to the underlying lease;
(vii) none of the Company and its Subsidiaries 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;
(ix) all facilities leased or subleased thereunder
are supplied with utilities and other services
necessary for the operation of said facilities; and
(3) Schedule 3.2(n)(3) of the Company Disclosure
Schedule lists and describes briefly all contracts and
commitments (including, without limitation, mortgages,
indentures and loan agreements) to which the Company or any
Subsidiary is a party, or to which it or any of its assets or
properties are subject and which are not specifically referred
to elsewhere in Section 3.2, provided that there need not be
listed in the Company Disclosure Schedule (unless required
pursuant to the preceding subsections of this Section 3.2(n))
any contract or commitment incurred in the ordinary course of
business which requires payments to or by the Company and its
Subsidiaries during its remaining life aggregating less than
$20,000 or which is terminable by the Company or any
Subsidiary within thirty days without payment of a premium or
penalty; and
Red Fox of New Iberia Merger Agreement/Page 22
<PAGE> 30
Correct and complete copies of all documents and descriptions
complete in all material respects of all oral agreements or
commitments (if any) referred to in this Section 3.2(n) have been
provided to Parent or its counsel. None of the Company, the
Shareholder and the Subsidiaries has been notified of any claim that
any contract listed in Schedule 3.2(n)(3) of the Company Disclosure
Schedule is not valid and enforceable in accordance with its terms for
the periods stated therein, or that there is under any such contract
any existing material default or event of default or event which with
notice or lapse of time or both would constitute such a default.
(o) Use of Real Property. None of the Shareholder, the
Company and the Subsidiaries has received notice of violation of any
applicable zoning or building regulation, ordinance or other law,
order, regulation or requirement relating to the operations of the
Company or its Subsidiaries, or any notice of default under any
material lease, contract, commitment, license or permit, relating to
the use and operation of the owned or leased real property listed in
the Company Disclosure Schedules and there is no such violation or
default. None of the Shareholder, the Company and the Subsidiaries has
received notice that any plant, facility or other building which is
owned or covered by a lease set forth in the Company Disclosure
Schedule does not substantially conform in all material respects with
all applicable ordinances, codes, regulations and requirements, and
none of the Shareholder, the Company and the Subsidiaries has received
notice that any law or regulation presently in effect or condition
precludes or restricts continuation of the present use of such
properties.
(p) Environmental Laws. The Company and its Subsidiaries,
including, without limitation, their businesses, facilities, property,
vessels, and equipment of the Company and its Subsidiaries have been
and are currently in compliance, in all material respects, with all
applicable federal, state, and local laws, rules, and regulations of
all authorities, including without limitation, applicable
Environmental Laws (as hereinafter defined), and the Company and its
Subsidiaries have all permits, certificates, and licenses required to
operate their businesses, facilities, property, vessels, and
equipment, including, without limitation, any relating to the
generation, processing, treatment, discharge, storage, transport,
disposal, or other management of chemicals and other hazardous
materials, of waste materials of any kind, and those relating to the
protection of environmentally sensitive areas. There is no adverse
effect on any of the facilities, properties, vessels or equipment of
the Companies, or with respect to function, use, or value of any such
assets, resulting from any hazardous or toxic substance, or any
pollutant or contaminant, or as a result of exposure to petroleum or
any by-product thereof. "Environmental Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the
Resource Conservation and Recovery Act of 1976, and the Occupational
Safety and Health Act of 1970, each as amended, together with all
other 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) concerning pollution or protection of the environment, public
health and safety including laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants, or
chemical, industrial,
Red Fox of New Iberia Merger Agreement/Page 23
<PAGE> 31
hazardous, or toxic materials or wastes in ambient air, 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.
(q) Litigation. Except as provided on Schedule 3.2(q) of
the Company Disclosure Schedule, there are no actions, suits, audits,
investigations, unfair labor practices charges, complaints, claims,
grievances or proceedings with respect to the Company or any
Subsidiary pending against the Company or any Subsidiary at law or in
equity, or before or by any federal, state, municipal, foreign or
other governmental department, commission, board, bureau, agency or
instrumentality, nor are there any such actions, suits, audits,
investigations, unfair labor practices charges, complaints, claims,
grievances or proceedings with respect to the Company (or any
Subsidiary) or threatened against the Company or any Subsidiary.
(r) Labor and Employment Matters.
(1) Schedule 3.2(r) of the Company Disclosure
Schedule sets forth all collective bargaining agreements,
employment and consulting agreements (other than consulting
agreements terminable by the Company or any Subsidiary within
60 days without payment of a premium or a penalty), executive
compensation plans, bonus plans, deferred compensation
agreements, employee pension plans or retirement plans,
employee profit sharing plans, employee stock purchase and
stock option plans, group life insurance, hospitalization
insurance or other plans or arrangements providing for
benefits to employees of the Company or any Subsidiary;
(2) There are no controversies between the Company
(or any Subsidiary) and any employees or any unresolved labor
union grievances or unfair labor practice or labor arbitration
proceedings pending or threatened, related to the Company (or
any Subsidiary) and there are not any organizational efforts
presently being made or threatened in an organized fashion
involving any of the employees of the Company or any
Subsidiary.
(3) None of the Shareholder, the Company and the
Subsidiaries has received notice of any claim that it has not
complied with any laws relating to the employment of labor,
including any provisions thereof relating to wages, hours,
collective bargaining, the payment of social security and
similar taxes, equal employment opportunity, employment
discrimination and employment safety, or that it is liable for
any arrears of wages or any taxes or penalties for failure to
comply with any of the foregoing.
(4) Schedule 3.2(r) of the Company Disclosure
Schedule sets forth the current annual compensation of all
employees of the Company and its Subsidiaries (by position or
by department) as of a recent date.
Red Fox of New Iberia Merger Agreement/Page 24
<PAGE> 32
(s) Accounts Receivable. The accounts receivable
reflected on the balance sheet of the Company as of December 31, 1996,
and all accounts receivable arising between December 31, 1996 and the
date hereof, arose from bona fide transactions in the ordinary course
of business; the services involved have been provided to the account
obligor and no further services are required to be provided in order
to complete the sales and to entitle the Company or its assignees to
collect the accounts receivable in full. No such account has been
assigned or pledged to any other person, firm or corporation. Unless
paid prior to the IPO Closing Date, the accounts receivable are or
will be as of the IPO Closing Date current and collectible net of the
respective reserves, if any, shown on the Company Financial Statements
(which reserves are adequate and calculated consistent with past
practices). Subject to such reserves, each of the accounts receivable
either has been or will be collected in full, without any set-off,
within 90 days after the day on which it first became due and payable.
There is no contest, claim or right of set-off, other than in the
ordinary course of business, under any of the Company Contracts with
any obligor of an account receivable relating to the amount or
validity of such account receivable. Schedule 3.2(s) sets forth a
complete and accurate list of all accounts receivable as of July 31,
1997, which list indicates the aging of such accounts receivable.
(t) Insurance. Schedule 3.2(t) of the Company 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 the Company and its Subsidiaries have been a
party, a named insured, or otherwise the beneficiary of coverage at
any time within the past five years (except as to insurance policies
owned by third party vendors, contractors and clients of the Company
which have contractually named the Company or its Subsidiaries as
insured or provided other benefits of coverage as a result of
contractual liability coverage, which policies need not be listed on
Schedule 3.2(t) but shall be made available for inspection by Parent's
representatives):
(1) the name, address, and telephone number of
the agent;
(2) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(3) the policy number and the period of coverage;
(4) 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
(5) a description of any retroactive or "swing"
premium adjustments or other loss-sharing arrangements.
Red Fox of New Iberia Merger Agreement/Page 25
<PAGE> 33
With respect to each such insurance policy owned by the Company or any
of its Subsidiaries: (A) the policy is legal, valid, binding,
enforceable, and in full force and effect with respect to the periods
and risks which such policy purports to insure; (B) the policy will
continue to be legal, valid, binding, enforceable, and in full force
and effect in accordance with its terms on the same terms following
the consummation of the transactions contemplated hereby; (C) neither
the Company nor any of its Subsidiaries 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 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 (D) no party to the policy has
repudiated any provision thereof. The Company and each of its
Subsidiaries has been covered during the past five years by insurance
in scope and amount customary and reasonable for the businesses in
which it has engaged during the aforementioned period. Schedule 3.2(t)
of the Company Disclosure Schedule describes any self- insurance
arrangements affecting the Company and its Subsidiaries. "Self
insurance arrangements" means any arrangement by which the Company or
its Subsidiaries has assumed risks in scope and amount customarily
insured by businesses in the Company's industry and geographic region.
(u) Employee Benefits.
(1) The Company and its Subsidiaries have complied
and currently is in compliance, both as to form and operation,
in all material respects with the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Internal Revenue Codes of 1954 and/or 1986,
as amended, respectively (for purposes of this Section 3.2(u)
only, the "Code"), with respect to each "employee benefit
plan" as defined under Section 3(3) of ERISA. Each employee
benefit plan of the Company and its Subsidiaries ("Plan") is
described in Schedule 3.2(u) of the Company Disclosure
Schedule, and a copy of each Plan is attached thereto.
(2) The Company and its Subsidiaries have never
maintained, adopted or established, contributed or been
required to contribute to, or otherwise participated or been
required to participate in, a "multiemployer plan" (as defined
in Section 3(37) of ERISA). No amount is due as owing from the
Company or any Subsidiary on account of a "multiemployer plan"
(as defined in Section 3(37) of ERISA) or on account of any
withdrawal therefrom.
(3) The Company and its Subsidiaries have not
incurred any liability with respect to a Plan including,
without limitation, under ERISA (including, without
limitation, Title I or Title IV of ERISA, other than liability
for premiums due to the Pension Benefit Guaranty Corporation
("PBGC")), the Code or other applicable law, which has not
been satisfied in full, and no event has occurred, and there
exists no
Red Fox of New Iberia Merger Agreement/Page 26
<PAGE> 34
condition or set of circumstances which could result in the
imposition of any liability with respect to a Plan, including,
without limitation, under ERISA (including, without
limitation, Title I or Title IV of ERISA), the Code or other
applicable law with respect to the Plan.
(4) The Company and its Subsidiaries have no
outstanding commitments to provide or to cause to be provided
any severance or other post-employment benefit, salary
continuation, termination, disability, death, retirement,
health or medical benefit or similar benefit to any person
(including, without limitation, any former or current
employee) that has not been reflected in the Company Financial
Statements or is not included in any Plan disclosed in
Schedule 3.2(u) of the Company Disclosure Schedule to this
Agreement.
(v) Tax Matters.
(1) All federal, state, local and foreign tax returns
required to be filed by the Company and its Subsidiaries prior
to the date hereof have been filed on a timely basis with the
appropriate governmental authorities in all jurisdictions in
which such tax returns are required to be filed, and all such
returns are correct and complete. Shareholder has delivered to
Parent correct and complete copies of all federal income tax
returns, examination reports, and statements of deficiencies
asserted against or agreed to by the Company or any Subsidiary
since January 1, 1992. Neither the Company nor its
Subsidiaries are currently the subject of any audit,
examination or any similar investigation by any governmental
authority. Schedule 3.2(v) of the Company Disclosure Schedule
sets forth all audits, examinations or similar investigations
of the Company and its Subsidiaries by any governmental
authority since January 1, 1992.
(2) All federal, state, local and foreign income,
franchise, sales, use, property, and all other taxes, fees,
assessments, or other governmental charges (including
withholding taxes), and all interest and penalties thereon
(all of the foregoing collectively, "Taxes") due from or
properly accruable by the Company and its Subsidiaries have
been fully and timely paid or, in the cases of Taxes for which
payment is not yet required, properly and fully accrued for on
the Company Financial Statements or in Schedule 3.2(v) of the
Company Disclosure Schedule with respect to all taxable
periods ending on or prior to the date hereof and interim
periods through the date hereof.
(3) None of the Company and its Subsidiaries has
filed a consent under Section 341(f) of the Code concerning
collapsible corporations. None of the Shareholder, the Company
or any Subsidiary is a party to any agreement, contract or
arrangement that would, by reason of the consummation of any
of the transactions contemplated by this Agreement,
individually or in the aggregate, result in the
Red Fox of New Iberia Merger Agreement/Page 27
<PAGE> 35
payment of any "excess parachute payment" within the meaning
of Section 280G of the Code. None of the assets of the Company
or any Subsidiary is required to be treated as being owned by
any other person pursuant to the "safe harbor" leasing
provisions of Section 168 of the Internal Revenue Code of
1954, as in effect prior to the repeal of said leasing
provisions.
(4) None of the Company and its Subsidiaries is a
party to any Tax allocation or sharing agreement. None of the
Company and its Subsidiaries (A) has been a member of an
affiliated group filing a consolidated federal income tax
return (other than a group the common parent of which was the
Company) or (B) has any liability for the taxes of any person
(other than any of the Company and its Subsidiaries) under
Treas. Reg. Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor,
by contract, or otherwise.
(5) Schedule 3.2(v) of the Company Disclosure
Schedule sets forth the following information with respect to
each of the Company and its Subsidiaries (or, in the case of
clause (B) below, with respect to each of the Subsidiaries) as
of the most recent practicable date: (A) the basis of the
Company or Subsidiary in its assets; (B) the basis of the
stockholder(s) of the Subsidiary in its stock (or the amount
of any excess loss account); (C) the amount of any net
operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution
allocable to the Company or Subsidiary; and (D) the amount of
any deferred gain or loss allocable to the Company or
Subsidiary arising out of any Deferred Intercompany
Transaction (as defined in Treas. Reg. Section 1.1502-13).
(6) The Company has not waived any statute of
limitations, or agreed to any extension of time with respect
to an assessment or deficiency, with respect to any Taxes.
(7) The amount of Company's liability for unpaid
Taxes for all periods ending on or before the date of this
Agreement do not, in the aggregate, exceed the amount of the
current liability accruals for Taxes (other than any reserve
for deferred Taxes established to reflect timing differences
between book and Tax income) solely with respect to Company as
of the date of this Agreement, and the amount of Company's
liability for unpaid Taxes for all periods ending on or before
the IPO Closing Date shall not, in the aggregate, exceed the
amount of the current liability accruals for Taxes (other than
any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) as such accruals are
reflected on the face of the Company Financial Statements.
(w) Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by
Shareholder and the Company directly with the Parent, without the
intervention of any other person on behalf of Shareholder or the
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<PAGE> 36
Company in such manner as to give rise to any valid claim by any other
person against Shareholder or the Company for a finder's fee,
brokerage commissions, or similar payment.
(x) Powers of Attorney. There are no outstanding powers
of attorney executed on behalf of the Company.
(y) Investment Company. Each of the Company or its
Subsidiaries is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "holding company, a subsidiary
company" of a "holding company" or an "affiliate" of a "holding
company" or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(z) Tax-Free Reorganization. With respect to the
qualification of the Merger as a reorganization pursuant to Section
368(a)(2)(D) of the Code:
(1) There is no plan or intention on the part of
Shareholder to sell, exchange or otherwise dispose of a number
of shares of Parent Common Stock received in the Merger which
would reduce the Shareholders' aggregate ownership of such
Parent Common Stock to a number of shares having a value, as
of the Effective Time, of less than fifty percent of the value
of all of the formerly outstanding capital stock of the
Company as of the same date.
(2) Immediately following the Merger, the
Surviving Corporation will hold at least 90 percent of the
fair market value of the Company's net assets and at least 70%
of the fair market value of the Company's gross assets.
(3) The liabilities of the Company assumed by the
Surviving Corporation and the liabilities to which the assets
of the Company are subject were incurred in the Company's
ordinary course of business.
(4) If the Merger is effected, the Company and
the Shareholders will each pay their respective expenses, if
any, incurred in connection with the Merger, and neither the
Company nor the Shareholders will pay any Parent or Merger Sub
expenses incurred in connection with the Merger.
(5) At the Effective Time, the Company will not
have any outstanding warrants, options, convertible
securities, or any other right pursuant to which any person
could acquire stock in the Company that, if exercised or
converted, would affect the Parent's retention of control of
the Surviving Corporation.
(6) The Company is not an investment company
within the meaning of Section 368(a)(2)(F) of the Code.
Red Fox of New Iberia Merger Agreement/Page 29
<PAGE> 37
(7) At the Effective Time, the fair market value
of the assets of the Company will exceed the sum of its
liabilities, plus the amount of liabilities, if any, to which
its assets are subject.
(8) The Company is not under the jurisdiction of
a court in a case under Title 11 of the United States Code, or
a receivership, foreclosure, or similar proceeding in a
federal or state court.
3.3 REPRESENTATIONS AND WARRANTIES BY THE PARENT. The Parent
represents and warrants to the Shareholder and the Company that the statements
contained in this Section 3.3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the IPO Closing Date (as
though made then and as though the IPO Closing Date were substituted for the
date of this Agreement throughout this Section 3.3), except as set forth in the
disclosure schedule delivered by the Parent to the Shareholder and the Company
on the date hereof and initialed by the parties hereto (the "Parent Disclosure
Schedule"). The Parent Disclosure Schedule will be arranged in sections and
paragraphs corresponding to the lettered and numbered sections and paragraphs
contained in this Section 3.3.
(a) Organization and Qualification, etc. The Parent is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, has corporate power and
authority to own all of its properties and assets and to carry on its
business as it is now being conducted, and is duly qualified to do
business and is in good standing in each jurisdiction as set forth in
Schedule 3.3(a) of the Parent Disclosure Schedule where, to the
reasonable belief of Parent, such qualification is appropriate. The
copies of the Parent's Certificate of Incorporation and Bylaws, as
amended to date, which have been delivered to Shareholder are complete
and correct, and such instruments, as so amended, are in full force
and effect at the date hereof.
(b) Capital Stock. The entire authorized capital stock of
Parent consists of 25,000,000 shares of capital which is divided into
(1) 3,000,000 shares of restricted common stock having a par value of
$.001 per share, (2) 20,000,000 shares of common stock having a par
value of $.001 per share (i.e., Parent Common Stock), and (3)
2,000,000 shares of preferred stock having a par value of $.001 per
share.
(c) Subsidiaries, etc. Other than the Merger Sub, and
except as set forth in Schedule 3.3(c) of the Parent Disclosure
Schedule, the Parent does not own of record or beneficially, directly
or indirectly, (1) any shares of outstanding capital stock or
securities convertible into capital stock of any other corporation or
(2) any participating interest in any partnership, joint venture or
other non-corporate business enterprise.
(d) Authority Relative to Agreement. Parent has the
corporate power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated on the part
of Parent hereby. The execution and delivery by Parent of this
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<PAGE> 38
Agreement and the consummation by Parent of the transactions
contemplated on its part hereby have been duly authorized by its Board
of Directors. No other corporate proceedings on the part of Parent are
necessary to authorize the execution and delivery of this Agreement by
Parent. Except for corporate action related to the IPO, no other
corporate proceedings on the part of Parent are necessary to authorize
the performance of this Agreement by Parent or the consummation by
Parent of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Parent and is enforceable against
Parent in accordance with its terms.
(e) Non-Contravention. The execution, delivery and
performance of this Agreement by Parent do not and the consummation by
Parent of the transactions contemplated hereby will not (1) violate
any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling change, or other restriction of any government,
government agency, or court to which Parent is subject to, or (2)
violate any provision of the Articles of Incorporation or Bylaws of
Parent, or (3) violate or result in, with the giving of notice or the
lapse of time or both, the violation of any provision of, or result in
the acceleration of or entitle any party to accelerate (whether after
the giving of notice or lapse of time or both) any obligation under,
or result in the creation or imposition of any lien, charge, pledge,
security interest or other encumbrance upon any of the property of
Parent pursuant to any provision of any mortgage, lien, lease,
agreement, contract, license, or instrument to which Parent is a party
or by which any of its assets is bound. The execution, delivery and
performance of this Agreement by Parent do not and will not violate or
conflict with any other restriction of any kind or character to which
Parent is subject or by which any of its assets may be bound, and the
same does not and will not constitute an event permitting termination
of any such mortgage, lien, lease, agreement, license or instrument to
which Parent is a party or by which any of its assets is bound, except
as such enforcement is subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws relating to or
affecting creditors' rights.
(f) Approvals. Except for the declaration of
effectiveness of the registration statement filed in connection with
Parent's IPO by the U.S. Securities and Exchange Commission ("SEC")
pursuant to the Securities Act, and the consents and approvals
required pursuant to state securities laws with respect to the IPO,
and except as set forth in Schedule 3.3(f) of the Parent Disclosure
Schedule, no consent, authorization, order or approval of, or filing
or registration with, any governmental commission, board or other
regulatory body or any other person is required for the execution and
delivery of this Agreement and the consummation by Parent of the
transactions contemplated hereby.
(g) Litigation. There are no actions, claims, proceedings
or governmental investigations pending against Parent or any of its
assets or properties at law or in equity, before or by any federal,
state, or municipal court, agency or other governmental entity, or by
any other person, which, individually or in the aggregate, could
reasonably be expected
Red Fox of New Iberia Merger Agreement/Page 31
<PAGE> 39
(1) to have a material adverse effect on the financial condition or
results of operations of Parent or (2) to prevent the consummation of
the transactions contemplated hereby.
(h) Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by
Parent directly with Shareholder and the Company, without the
intervention of any person on behalf of Parent in such manner as to
give rise to any valid claim by any person against Parent for a
finder's fee, brokerage commission, or similar payment.
(i) Tax-Free Reorganization. With respect to the
qualification of the Merger as a reorganization pursuant to Section
368(a)(2)(D) of the Code:
(1) The Parent has no plan or intention to sell,
exchange or otherwise dispose or liquidate the Surviving
Corporation, to merge the Surviving Corporation with or into
any other corporation, to sell or otherwise dispose of any
capital stock of the Surviving Corporation except for
transfers of such capital stock to corporations of which the
Parent has control (within the meaning of Section 368(a) of
the Code) at the time of such transfer, or to cause the
Surviving Corporation to sell or otherwise dispose of any of
its assets or of any assets acquired in the Merger, except for
dispositions made in the ordinary course of business or
transfers of assets to a corporation of which the Surviving
Corporation has control (within the meaning of Section 368(a)
of the Code) at the time of such transfer.
(2) The Parent has no plan or intention to cause the
Surviving Corporation, after the Merger, to issue additional
shares of its stock that would result in the Parent losing
control of the Surviving Corporation within the meaning of
Section 368(c) of the Code.
(3) Following the Merger, the Surviving Corporation
will continue the Company's historic business or use a
significant portion of his historic business assets in a
business.
(4) If the Merger is effected, the Parent and the
Merger Sub will each pay their respective expenses, if any,
incurred in connection with the Merger.
(5) The Parent Common Stock that will be exchanged in
the Merger is voting stock within the meaning of Section
368(c) of the Code.
(6) At the time of the Merger, neither the Parent nor
Merger Sub will have any outstanding warrants, options,
convertible securities, or any other right pursuant to which
any person could acquire stock in the Parent or Merger Sub
Red Fox of New Iberia Merger Agreement/Page 32
<PAGE> 40
which, if exercised or converted, would affect Parent's
acquisition or retention of control of the Surviving
Corporation.
(7) The Parent and the Merger Sub are not investment
companies as defined in Section 368(a)(2)(F) of the Code.
(8) None of the Parent Common Stock received by
Shareholder as a part of the Merger Consideration will be
separate consideration for, or allocable to, any employment
agreement.
(9) Neither the Parent nor the Merger Sub is under
the jurisdiction of a court in a case under Title 11 of the
United States Code, or a receivership, foreclosure, or similar
proceeding in a federal or state court.
3.4 REPRESENTATIONS AND WARRANTIES CONCERNING THE MERGER SUB. The
Parent and Merger Sub, jointly and severally, hereby represent and warrant to
the Shareholder and the Company as follows:
(a) Organization and Standing. Merger Sub is a
corporation duly incorporated, validly existing and in good standing
under the laws of the State of Louisiana.
(b) Capital Structure. The authorized capital stock of
Merger Sub consists of 5,000 shares of common stock, par value $.01
per share, 1,000 of which are validly issued and outstanding, fully
paid and nonassessable and are owned by the Parent free and clear of
all liens, encumbrances and adverse claims.
(c) Authority. Merger Sub has the corporate power and
authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement, the performance by Merger Sub of its
obligations hereunder and the consummation of the transactions
contemplated hereby have been duly authorized by its Board of
Directors and the Parent as its sole shareholder, and, except for the
corporate filings required by state law, no other corporate
proceedings on the part of Merger Sub are necessary to authorize this
Agreement and the transaction contemplated hereby. This Agreement has
been duly and validly executed and delivered by Merger Sub and
(assuming the due authorization, execution and delivery hereof by the
Company) constitutes a valid and binding obligation of Merger Sub
enforceable against Merger Sub in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles
of equity (whether applied in a proceeding at law or in equity).
Red Fox of New Iberia Merger Agreement/Page 33
<PAGE> 41
ARTICLE 4
ADDITIONAL COVENANTS AND AGREEMENTS
4.1 CONDUCT OF BUSINESS. During the period from the date hereof to
the IPO Closing Date, except as otherwise contemplated by this Agreement,
Shareholder shall cause the Company to, and the Company shall, conduct its
operations according to its ordinary and usual course of business, subject to
the foregoing, to preserve substantially intact its business organization, keep
available the services of its officers and employees, and maintain its present
relationships with licensors, suppliers, distributors, customers and others
having significant business relationships with it. Representatives of the
Company will confer with representatives of Parent to keep it informed with
respect to the general status of the on-going operations of the business of the
Company. Without limiting the generality of the foregoing, Shareholder will
cause the Company to:
(a) carry on the business in substantially the same manner as
heretofore carried on and not introduce any material new method of
management, operation or accounting, nor provide discounted services
outside the ordinary course of business;
(b) maintain its properties, facilities, equipment and other
assets, including those held under leases, in good working order,
condition and repair, ordinary wear and tear excepted;
(c) perform all of its obligations under all debt and lease
instruments and other agreements relating to or affecting its
business, assets, properties, equipment and rights, and pay all
vendors, suppliers, and other third parties (including mechanics and
materialmen) as and when their bills are due and pay in full all
payroll obligations when due;
(d) maintain its present debt and lease instruments (unless
same are otherwise mature) and refrain from entering into new or
amended debt or lease instruments without prior written consent of
Parent;
(e) not incur any indebtedness other than ordinary trade
accounts payable at market rates with no prepayment penalty which are
used to fund operations in the ordinary course of business;
(f) keep in full force and effect its present insurance
policies or other comparable insurance coverage;
(g) use its best efforts to maintain and preserve its business
organization intact, retain its present employees and maintain its
relationship with suppliers, customers and others having business
relations with the Company;
Red Fox of New Iberia Merger Agreement/Page 34
<PAGE> 42
(h) refrain from effecting any change in the articles of
incorporation, bylaws or capital structure of the Company and refrain
from entering into or agreeing to enter into any merger or
consolidation by the Company with or into, and refrain from acquiring
all or substantially all of the assets, capital stock or business of,
any person, corporation, partnership, association or other business
organization or division of any thereof;
(i) refrain from incurring any expenditures outside the normal
course of business, including any capital expenditures (or series of
related expenditures) in excess of $20,000, without prior written
notification to Parent;
(j) refrain from starting or acquiring any new businesses
without the prior written consent of Parent;
(k) maintain its present salaries and commission levels for
all officers, directors, employees or agents, refrain from entering
into an employment agreement except in the ordinary course of
business, and refrain from entering into any collective bargaining
agreement; and
(l) refrain from declaring or paying any fees, commissions or
loans outside the ordinary course of business, and refrain from
declaring or paying any bonuses except discretionary bonuses to
officers and employees to the extent that the aggregate amount of all
such discretionary bonuses paid or declared during 1997 do not exceed,
in the aggregate, 10% of the Company's pre-tax net income during 1997
through the date of the latest such payment; and
(m) refrain from declaring or paying any dividends or
distributions to Shareholder, directors, management, sales agents,
employees or other personnel, except for dividends and distributions
to shareholders paid or declared in 1997 which in the aggregate do not
exceed 10% of the Company's pre-tax net income during 1997 through the
date of the latest such distribution; and
(n) promptly notify Parent of the receipt by it or the
Company of any notice or claim, written or oral, of (a) default or
breach by the Company under, or of any termination (other than at the
end of the stated term thereof) or cancellation, or threat of
termination (other than at end of the stated term thereof) of
cancellation, of any Company Contract, (b) any loss of, damage to or
disposition of, any of the properties, assets or the products of the
Company of a value of $20,000 or more, singly or in the aggregate
(other than the sale or use of inventories in the ordinary course of
business), (c) any claim or litigation threatened or instituted, or
any other adverse event or occurrence involving or affecting the
Company or any of its assets, properties, operations, businesses or
employees, and (d) any proposal made by any third party received by
the Company or of which Shareholder obtains knowledge in respect of
any sale or other disposition, direct or indirect, of the assets
(other than the sale
Red Fox of New Iberia Merger Agreement/Page 35
<PAGE> 43
or use of inventories in the ordinary course of business), businesses
or outstanding capital stock or other ownership or voting interests of
the Company;
(o) comply with and cause to be complied with all
applicable laws, rules, regulations and orders of all federal, state
and local governments or governmental agencies affecting or relating
to the Company or its assets, properties, operations, businesses or
employees except where the failure to comply will not have a material
adverse effect on the Company;
(p) refrain from any sale, disposition, distribution or
encumbrance of any of its properties or assets and refrain from
entering into any agreement or commitment with respect to any such
sale, disposition, distribution or encumbrance (other than the sale or
use of inventories in the ordinary course of business);
(q) refrain from any purchase or redemption of any
capital stock or other voting interest of the Company and refrain from
issuing any capital stock or other voting interest;
(r) refrain from making any change in any accounting
principle, classification, policy or practice;
(s) manage working capital in the ordinary course
consistent with past practice and refrain from introducing any new
method of management or operation, providing any discounted services
or products, discounting any receivables or taking any action to
accelerate payment of any receivable prior to its due date; and
(t) refrain from entering into any contract, lease,
undertaking, commitment, mortgage, indenture, note, security
agreement, license or other agreement (a) involving the receipt or
expenditure of more than $20,000 over the term thereof, (b) containing
provisions calling for the sale or purchase of raw materials, product
or service at prices that vary from the market prices of such raw
materials, products or services generally prevailing in customary
third-party markets, (c) which include "take or pay", "meet or
release", "most favored nations" or similar pricing or delivery
arrangements, (d) with any officer, director, shareholder or affiliate
of the Company, (e) requiring the Company to indemnify or hold
harmless any other person or entity, (f) evidencing any warranty
obligation of the Company with respect to goods, services or products
sold or leased by it (other than warranties given in the normal course
of business containing substantially the same terms as those presently
in effect), or (g) imposing on the Company any confidentiality,
non-disclosure or non- compete obligation.
4.2 ACCESS TO INFORMATION BY PARENT. Until the IPO Closing Date or
termination of this Agreement, Shareholder will furnish Parent with the
Unaudited Monthly Financial Statements for each month following June 1997
promptly as available, but in no event more than 20 days following the end of
such month. Parent may prior to the Closing have access to the business and
properties
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<PAGE> 44
of the Company and information concerning its financial and legal condition as
Parent deems necessary or advisable in connection with the consummation of the
transactions contemplated hereby, provided that such access shall not interfere
with normal operations of the Company. Shareholder and the Company agree to
permit Parent and its authorized representatives, or cause them to be permitted
to have, after the date hereof and until the IPO Closing Date, full access to
the premises, books and records of the Company during normal business hours,
and the officers of the Company will furnish Parent with such financial and
operating data and other information with respect to the Business and
properties of the Company as Parent shall from time to time reasonably request.
No investigation by Parent heretofore or hereafter made shall affect the
representations and warranties of Shareholder and the Company, and each such
representation and warranty shall survive any such investigation.
4.3 AMENDMENT TO SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until Closing to
supplement or amend promptly the Disclosure Schedules with respect to any
matter that would have been or would be required to be set forth or described
in the Disclosure Schedules in order to not materially breach any
representation, warranty or covenant of such party contained herein; provided
that no amendment or supplement to a Disclosure Schedule that constitutes or
reflects, individually or in the aggregate, a material adverse change (as
determined by Parent) to the business or assets of Shareholder or the Company
may be made unless Parent consents to such amendment or supplement, and no
amendment or supplement to a Disclosure Schedule that constitutes or reflects a
material adverse change (as determined by the Company) to Parent's assets or
business may be made unless the Company consents to such amendment or
supplement. For all purposes of this Agreement, including without limitation
for purposes of determining whether the conditions set forth in Section 5.1 and
Section 5.2 have been fulfilled, the Disclosure Schedules hereto shall be
deemed to be the Disclosure Schedules as amended or supplemented pursuant to
this Section. In the event that the Company or Shareholder seeks to amend or
supplement a Disclosure Schedule pursuant to this Section 4.3 and the consent
of Parent is required pursuant to this Section and Parent does not consent to
such amendment or supplement, or in the event that Parent seeks to amend or
supplement a Disclosure Schedule pursuant to this Section 4.3 and the consent
of the Company is required pursuant to this Section and the Company does not
consent, the party whose consent would be required (the "Non- Amending Party")
may elect to (i) terminate this Agreement, in which case this Agreement shall
be deemed terminated by mutual written consent as set forth in Section 6.1
hereof, or (ii) close the transactions contemplated by this Agreement without
such amendment to the Disclosure Schedule and preserve its remedies under
Article 7 hereof for the breach of such representation, warranty or covenant;
provided, however, that the Non-Amending Party shall not be entitled to
terminate this Agreement after the Closing Date for any reason except a
provided in Section 6.1(b).
4.4 CONFIDENTIALITY. The provisions of this Section 4.4 shall
supersede and replace all prior agreements and understandings of the parties
with respect to the subject matter hereof.
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<PAGE> 45
(a) Confidential Information. Until the closing of the
transactions contemplated herein, all Confidential Information, as
hereinafter defined, acquired by Parent with respect to Shareholder or
the Company, or by Shareholder or the Company with respect to Parent,
shall be (i) maintained in strict confidence, (ii) used only for the
purpose of and in connection with evaluating the transactions
contemplated herein, and (iii) disclosed only to employees and duly
authorized agents and representatives who have been informed of the
obligations of the parties under this Agreement with respect to such
Confidential Information, who have a need to know the information in
connection with consummating the transactions contemplated herein, and
who agree to keep such information confidential. Parent, Shareholder
and the Company shall be responsible for any breach of this Section by
any of their respective representatives and each agrees to take all
reasonable measures to restrain its representatives from prohibited or
unauthorized disclosure of the Confidential Information. For the
purpose of this Agreement, the term "Confidential Information" shall
mean all information acquired by any party from another party hereto
or its representatives pursuant to Section 4.2 hereof or otherwise
with respect to the business or operations of such other party, other
than (A) information generally available to the public which has not
become available as a result of disclosure in violation of this
Section and (B) information which becomes available on a
nonconfidential basis from a source other than a party to this
Agreement or its representatives, provided that such source is not
known by the party to this Agreement receiving such information to be
bound by a confidentiality agreement or other obligation of secrecy to
another party to this Agreement or its representatives. If the
transactions contemplated herein are not consummated, all Confidential
Information in written or printed or other tangible form (whether
copies or originals) shall be returned to the party of origin, and all
documents, memoranda, notes and other writings whatsoever prepared by
any party or its representatives based on Confidential Information
shall be destroyed.
(b) Public Announcements. No press release, public
announcement, confirmation or other information regarding this
Agreement or the contents hereof shall be made by Parent, Shareholder
or the Company without the prior consultation of the Parent and the
Company, except as may be necessary in the opinion of counsel to any
party to meet the requirements of any applicable law or regulations,
the determination of any court, or the requirements of any stock
exchange on which the securities of such party may be listed.
Notwithstanding the foregoing, the Company may make appropriate
disclosures of the general nature of the transaction contemplated
hereby to its employees, vendors and customers to protect the
Company's goodwill and to facilitate the consummation of the
transactions contemplated hereby, and Parent may disclose pertinent
information regarding the transaction contemplated hereby to its
existing and prospective investors, lenders or investment bankers or
financial advisors for the purposes of obtaining financing (including
the contemplated IPO). Parent may also make appropriate disclosures of
the general nature of the transaction contemplated hereby and the
identity, nature and scope of the Company's operations to prospective
acquisition candidates in its efforts to attract additional
acquisitions for Parent. Subject to prior review, revision and
approval by the Company of disclosure with respect to matters relating
to the Company, Parent may also make appropriate disclosure as
Red Fox of New Iberia Merger Agreement/Page 38
<PAGE> 46
required in connection with any registration statement or confidential
information memorandum prepared by Parent. Parent and the Company
shall jointly approve the contents of any press releases, written
employee presentations, or other materials of potentially wide
distribution that disclose or refer to the transaction contemplated
hereby, except for such press releases or other communications
required by law.
4.5 EXCLUSIVITY. After the signing of this Agreement until
September 30, 1997, Shareholder shall not (i) solicit, initiate, or encourage
the submission of any proposal of offer from any person or entity relating to
the acquisition of any capital stock or other voting securities, or any
substantial portion of the assets of the Company (including any acquisition
structured as a merger, consolidation, or share exchange) or (ii) participate
in any negotiations or discussions regarding, furnish any information with
respect to, assist or participate in, or facilitate in any other manner any
effort or attempt by any person or entity in favor of such acquisition
(including any acquisition structured as a merger, consolidation, or share
exchange). Shareholder will (and shall cause the Company to) notify Parent if
any person or entity make any proposal, offer, inquiry, or contact with respect
to any of the foregoing.
4.6 RELEASE OF SHAREHOLDER'S GUARANTEES. At or prior to the IPO
Closing Date, Parent will use its best efforts to obtain the release of
Shareholder and their respective affiliates, heirs, successors and assigns from
any and all personal guarantees previously given by Shareholder to secure the
Company's Long-Term Debt obligations and performance bonds. In the event that
Parent is unable to obtain such releases from the Company's lenders, Parent
shall cause the Company to pay off or otherwise retire all of the Company's
indebtedness secured by the personal guarantee of Shareholder, up to a maximum
of $0.0.
4.7 SHAREHOLDER'S RELEASE OF CLAIMS. Effective as of Closing, the
Shareholder hereby (i) releases, acquits and forever discharges the Company and
its Subsidiaries from any and all liabilities, obligations, indebtedness,
claims, demands, actions or causes of action arising from or relating to any
event, occurrence, act, omission or condition occurring or existing on or prior
to Closing, including, without limitation, any claim for indemnity or
contribution from the Company or any of its Subsidiaries in connection with the
obligations or liabilities of the Shareholder hereunder, except for salary and
benefits payable to Shareholder as an employee in the ordinary course of
business; (ii) waives all breaches, defaults or violations of each agreement,
if any, applicable to the Company Common Stock or the Real Property and agrees
that any and all such agreements are terminated as of Closing, and (iii) waives
any and all preemptive or other rights to acquire any shares of capital stock
of the Company and releases any and all claims arising in connection with any
prior default, violation or failure to comply with or satisfy any such
preemptive or other rights.
Red Fox of New Iberia Merger Agreement/Page 39
<PAGE> 47
4.8 REAL ESTATE MATTERS.
(a) Title Insurance Commitments. Parent, in its sole
discretion, may elect to obtain title insurance with respect to any or
all real estate that the Company owns or leases listed on Schedule
3.2(n)(1) or Schedule 3.2(n)(2) of the Company Disclosure Schedule
(the "Title Insurance Property"). The Company will obtain and deliver
to Parent, as soon as practicable, and in any event on or before
fifteen (15) days following the date of this Agreement, commitments
for title insurance ("Title Commitments") issued by title insurance
company(ies) reasonably acceptable to Parent with respect to the Title
Insurance Property, Surveys (defined below) of the Title Insurance
Property reasonably acceptable to the Parent and one set of legible
copies of title exception documents with respect to any exceptions set
forth in the commitments. The Title Commitments shall set forth the
status of title to the Title Insurance Property together with all
exceptions or conditions to such title, including, but not limited to,
all easements, restrictions, rights-of-way, covenants, reservations
and all other encumbrances affecting the Title Insurance Property
which would appear in an Owner's Policy of Title Insurance (as defined
below), if issued. The Title Commitments shall contain the express
commitment of the title underwriter to issue the Owner's Policies of
Title Insurance to the Parent and the Company with the standard
printed exceptions endorsed or deleted in accordance with this Section
4.8.
(b) Surveys. With respect to each Title Insurance
Property, Shareholder will cause the Company to procure in preparation
for the Closing a current survey of such real property, prepared by a
licensed surveyor and conforming to current ALTA Minimum Detail
Requirements for Land Title Surveys, disclosing the location of all
improvements, easements, party walls, sidewalks, roadways, utility
lines, and other matters shown customarily on such surveys, and
showing access affirmatively to public streets and roads (the
"Survey"). The Survey shall disclose any survey defect or encroachment
from or onto the real property.
(c) Title Insurance Policies. At the Closing, the Company
shall deliver to Parent title insurance policies ("Policies of Title
Insurance") with respect to the Title Insurance Property, in an amount
reasonably acceptable to Parent, issued by such title insurance
company(ies), subject to those easements, reservations, restrictions,
covenants, conditions and other matters therein specified to the
extent that the same do not, in the reasonable judgment of Parent,
render title unmarketable or adversely affect the operation, value,
use or enjoyment of the Title Insurance Property affected thereby
("Real Property Title Exceptions"). The Policies of Title Insurance
may be subject to the Real Property Title Exceptions but shall contain
no additional exceptions other than the standard preprinted exceptions
reasonably acceptable to Parent; provided that (i) the standard
preprinted exception, if any, for restrictive covenants shall be
deleted, except for Real Property Title Exceptions, (ii) the standard
preprinted survey exception, if any, shall be revised to read
"Shortages in area" only, (iii) there shall be no exception as to
easements, or claims of easements, not shown by the public records,
nor any exception as to parties in possession,
Red Fox of New Iberia Merger Agreement/Page 40
<PAGE> 48
and (iv) the exception as to the lien for taxes will be limited to the
year in which the Closing occurs. The Policies of Title Insurance
delivered under this Section 4.8 shall insure title to the real
property and all recorded easements benefitting such real property.
(d) Phase I Environmental Assessment. The Company will
obtain and deliver to Parent, as soon as practicable, and in any event
on or before September 1, 1997, a phase I environmental assessment
prepared by environmental engineers reasonably acceptable to Parent
with respect to all of the real estate owned or leased by the Company
listed on Schedule 3.2(n)(1) or Schedule 3.2(n)(2) of the Company
Disclosure Schedule (the "Environmental Assessment Property"). Also
during the period prior to Closing, Shareholder and the Company shall
afford Parent and its representatives the continuing right to inspect,
during the Company's normal business hours, the Environmental
Assessment Property and all books, records, contacts, documents and
other data pertaining to the use, ownership, operation, or maintenance
of the Environmental Assessment Property (collectively with the phase
I assessment, the "Studies").
(e) Title and Environmental Objections. If for any reason
Parent, in its sole and absolute discretion, is not satisfied with any
matter contained in the Studies, the Survey, or the Real Property
Title Exceptions, or is otherwise not satisfied with the real property
owned or leased by the Company for any reason whatsoever, then Parent
may notify the Company and Shareholder in writing of its objection
(the "Objections"), describing with specificity the subject real
property and the Objections thereto, and, at the sole discretion of
Parent, either (i) the measures required of the Company to cure such
Objections, or (ii) directing that the Company divest itself of the
subject real property prior to or concurrently with the Closing. If
Parent shall request that the Company cure such Objections and the
Company or Shareholder has not cured such Objections to Parent's
satisfaction by the IPO Closing Date, Parent shall have the right to
terminate this Agreement in accordance with Section 6.1(a)(2) hereof.
4.9 CONFIDENTIAL INFORMATION MEMORANDUM; REGISTRATION STATEMENT.
(a) Company to Provide Information. Shareholder and the
Company shall cooperate with Parent to promptly provide such
information as reasonably requested by Parent to (i) prepare a
confidential information memorandum (the "Memorandum"), pursuant to
Rule 506 of Regulation D promulgated by the SEC under the Securities
Act, for dissemination to Parent's acquisition candidates and their
shareholders, and (ii) prepare and file with the SEC the registration
statement on Form S-1 (or other appropriate Form) to be filed by
Parent under the Securities Act in connection with its IPO (including
the prospectus constituting a part thereof, the "Registration
Statement"). Parent shall obtain all necessary state securities law or
"Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement, the Memorandum and the
Registration Statement, and Shareholder and the Company shall furnish
all information concerning them as may be reasonably requested in
connection with any such action.
Red Fox of New Iberia Merger Agreement/Page 41
<PAGE> 49
(b) Accuracy of Information. Parent, Shareholder and the
Company each represent and warrant that none of the information or
documents supplied or to be supplied by it specifically for inclusion
in the Memorandum or the Registration Statement, by exhibit or
otherwise, will, at the time that such party has authorized
dissemination of the Memorandum, and at the time the Registration
Statement and each amendment and supplement thereto, if any, become
effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
Shareholder and the Company, respectively, shall agree with Parent as
to the information and documents supplied by them for inclusion in the
Registration Statement and each shall indicate such information and
documents in a letter (the "Information Letter") to be delivered (i)
within two business days following dissemination of the Memorandum,
(ii) prior to the filing of the Registration Statement with the SEC,
and (iii) prior to filing any amendment to the Registration Statement
with the SEC (other than any prospectus filed with the SEC pursuant to
Rule 424(b)). Shareholder and the Company shall be entitled to review
the Memorandum, the Registration Statement and each amendment thereto,
if any, prior to delivery of the Information Letter. Shareholder and
the Company shall immediately notify Parent in the event of any
development or occurrence that would cause matters referenced in the
Information Letter to be inaccurate, incomplete or misleading in any
material respect.
(c) Further Information. Shareholder and the Company,
respectively, shall promptly upon request, furnish Parent with all
information concerning itself and such other matters as may be
reasonably requested by Parent in connection with the preparation of
the Memorandum, the Registration Statement and each amendment or
supplement thereto, or any other statement, filing, notice or
application made by or on behalf of each such party to any
governmental entity in connection with the transactions contemplated
by this Agreement.
4.10 TAX-FREE REORGANIZATION.
(a) No Acts Jeopardizing Merger. Unless the other parties
shall otherwise agree in writing, none of the Shareholders, the
Parent, the Merger Sub, the Company or the Surviving Corporation shall
knowingly take or fail to take any action, which action or failure to
act would jeopardize the qualification of the Merger as a
reorganization pursuant to Section 368(a)(2)(D) of the Code.
(b) Two-Year Holding Period. Shareholder will not dispose
of any of the Parent Common Stock received in the Merger within two
years following the Effective Date if such disposition would reduce
the fair value of the Parent Common Stock (evaluated as of the
Effective Date) retained by Shareholder to an amount less than 50% of
the fair value of the Company Common Stock held by Shareholder
immediately prior to the Merger, unless Shareholder obtains an opinion
of counsel reasonably satisfactory to Parent that such transfer will
not violate the continuity of shareholder interest requirement set
forth in Treasury
Red Fox of New Iberia Merger Agreement/Page 42
<PAGE> 50
Regulation Section 1.368-1. In the event that Shareholder wishes to
dispose of any shares of Parent Common Stock received in the Merger,
Shareholder shall provide written notice to Parent not less than ten
days prior to the date of the intended disposition specifying the
number of shares of which the Shareholder proposes to dispose.
4.11 CERTAIN TAX MATTERS.
(a) Tax Periods Ending on or Before the IPO Closing Date.
Buyer shall prepare or cause to be prepared and file or cause to be
filed all returns, declarations, reports, claims for refund, or
information returns or statements relating to Taxes, including any
schedule, attachment, or amendment thereto ("Tax Returns") for the
Company and its Subsidiaries for all periods ending on or prior to the
IPO Closing Date which are filed after the IPO Closing Date. Buyer
shall permit Sellers to review and comment on each such Tax Return
described in the preceding sentence prior to filing and shall make
such revisions to such Tax Returns as are reasonably requested by
Sellers. Sellers shall reimburse Buyer for Taxes of the Company and
its Subsidiaries with respect to such periods within fifteen (15) days
after payment by Buyer or the Company and its Subsidiaries of such
Taxes to the extent such Taxes are not reflected in the reserve for
Tax Liability (other than any reserve for deferred Taxes established
to reflect timing differences between book and Tax income) shown on
the face of the Company Financial Statements.
(b) Cooperation on Tax Matters.
(i) Buyer, Company (and its Subsidiaries) and
Sellers shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax
Returns pursuant to this Section and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Company (and its
Subsidiaries) and Sellers agree: (A) to retain all books and records
with respect to Tax matters pertinent to Company (and its
Subsidiaries) relating to any taxable period beginning before the IPO
Closing Date until the expiration of the statute of limitations (and,
to the extent notified by Buyer or Sellers, any extensions thereof) of
the respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority; and (B) to give the
other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other
party so requests, Company (and its Subsidiaries) or Sellers, as the
case may be, shall allow the other party to take possession of such
books and records.
Red Fox of New Iberia Merger Agreement/Page 43
<PAGE> 51
(ii) Buyer and Sellers further agree, upon
request, to use their best efforts to obtain any certificate or other
document from any governmental authority or any other person as may be
necessary to mitigate, reduce or eliminate any Taxes that could be
imposed (including, but not limited to, with respect to the
transactions contemplated hereby).
(c) Tax Sharing Agreements. All tax sharing agreements or
similar agreements with respect to or involving Company (and its
Subsidiaries) shall be terminated as of the IPO Closing Date and,
after the IPO Closing Date, Company (and its Subsidiaries) shall not
be bound thereby or have any liability thereunder.
(d) Certain Taxes. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any
penalties and interest) incurred in connection with this Agreement
(including any corporate-level gains tax triggered by the sale of
Company stock, New York City Transfer Tax and any similar tax imposed
in other states or subdivisions), shall be paid by Sellers when due,
and the Sellers will, at their own expense, file all necessary Tax
Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees,
and, if required by applicable law, Buyer will, and will cause its
affiliates to, join in the execution of any such Tax Returns and other
documentation.
4.12 SATISFACTION OF CONDITIONS. The Company and the Shareholder
shall (i) use their reasonable efforts to obtain, as soon as possible, all
governmental approvals required to be obtained by the Company and make, as soon
as possible, all filings with any governmental authority required on the part
of the Company to consummate the transactions contemplated hereby, (ii) use
their reasonable efforts to obtain, as soon as possible, all other consents to
and approvals required to be obtained by the Company to consummate the
transactions contemplated hereby, and (iii) otherwise use their reasonable
efforts to satisfy the conditions set forth in Article 5 of the Agreement to
the extent that such satisfaction is within their control; provided, however,
that this Section 4.12 shall not be construed to limit the rights of
Shareholder to terminate this Agreement as provided in Article 6 of the
Agreement.
ARTICLE 5
CONDITIONS PRECEDENT
5.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARENT. The
obligations of the Parent under this Agreement are subject to the satisfaction
in all material respects of each of the following conditions, unless waived by
the Parent:
(a) Accuracy of Representations and Warranties. Except
for such changes as are permitted pursuant to Section 4.3 of this
Agreement, the representations and warranties of Shareholder and the
Company contained in this Agreement, in the Shareholder Disclosure
Red Fox of New Iberia Merger Agreement/Page 44
<PAGE> 52
Schedule, the Company Disclosure Schedule and in each closing
certificate and document delivered to Parent pursuant hereto shall be
correct and complete at and as of the Closing Date as though made at
and as of that time, other than such representations and warranties as
are specifically made as of another date, and Shareholder and the
Company shall each have delivered to Parent a certificate to that
effect.
(b) Performance of Covenants. Shareholder and the Company
shall have performed and complied with all covenants of this Agreement
to be performed or complied with by them at or prior to the Closing
Date (except where the failure to so perform or comply would not have
an adverse effect on Parent or prevent Shareholder or Parent from
consummating the transactions contemplated hereby), and Shareholder
and the Company shall each have delivered to Parent a certificate to
that effect.
(c) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted after the date hereof against
Shareholder or the Company, or against Parent arising by reason of the
acquisition of the Company pursuant to this Agreement, which is
reasonably likely (1) to restrain, prohibit or invalidate the
consummation of the transactions contemplated by this Agreement, (2)
to have a material adverse effect on the Company or (3) to have a
material adverse effect on the results of operations or financial
condition of Parent and its subsidiaries, taken as a whole, after
giving effect to the consummation of the transactions contemplated by
this Agreement; and Shareholder and the Company shall each have
delivered to Parent a certificate to that effect.
(d) Approvals. The Company and Shareholder shall have
procured all of the consents, approvals and waivers specified in
Sections 3.1(b) and 3.2(e), and Shareholder and the Company shall each
have delivered to Parent a certificate to that effect.
(e) Leasehold Purchase Agreement. Shareholder shall have
executed and delivered to Parent and the Merger Sub the Leasehold
Purchase Agreement, and Shareholder shall execute and deliver a
Transfer of Immovable Property (or other appropriate instrument)
conveying title in the Real Estate Interests to Parent, the Merger Sub
or such other entity designated by them, together with the other
certificates, instruments and documents provided for in the Leasehold
Purchase Agreement, against payment of the Leasehold Purchase Price on
the IPO Closing Date.
(f) Executive Employment Agreement. At the Closing,
Beldon E. Fox, Jr. shall execute and deliver the Executive Employment
Agreement with the Company substantially in the form attached as
Exhibit 1.1(c) hereto.
(g) Shareholder Lock-up Agreements. At the Closing,
Shareholder shall have executed and delivered any lock-up agreement
reasonably requested by the managing underwriter of Parent's IPO which
restricts the sale or other disposition of Parent Common Stock for a
reasonable and customary period following the effectiveness of the
Registration Statement.
Red Fox of New Iberia Merger Agreement/Page 45
<PAGE> 53
(h) Completion of Parent's IPO. On the IPO Closing Date,
Parent's initial public offering of common stock, as described in the
Registration Statement, shall have successfully closed.
(i) Lender Approval. On or before the Closing Date,
Parent shall have secured a commitment for approximately $25 million
in senior indebtedness.
(j) Audit of the Company. On or before the Closing Date,
Parent shall have received the results of an audit of the Company's
financial statements by the certified public accounting firm regularly
engaged by Parent or such other independent public accountant as
agreed by the parties.
(k) Long-Term Debt. The Company's Long-Term Debt
(including current maturities) as of the Closing Date shall not exceed
$0.0.
(l) Opinion of Counsel for the Company and Shareholder.
On or before the Closing Date, Parent and the Merger Sub shall have
received the favorable opinion of Floyd LeBleu substantially in the
form and to the effect set forth in Exhibit 5.1 hereto.
(m) Shareholder Release of the Company. On or before the
Closing Date, Shareholder will deliver to Parent and the Merger Sub
(i) a complete and general release of all claims by the Shareholder
against the Company except otherwise agreed by the Parent in writing,
and (ii) the corporate records and books of Company, including the
minute book, the stock transfer books, and the corporate seal of the
Company.
(n) All Proceedings to be Satisfactory. At Closing, all
actions to be taken by Shareholder and the Company in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby shall be satisfactory in
form and substance to Parent and the Merger Sub and its counsel.
5.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SHAREHOLDER AND THE
COMPANY. The obligations of Shareholder and the Company under this Agreement
are subject to the satisfaction in all material respects or waiver by
Shareholder of each of the following conditions:
(a) Accuracy of Representations and Warranties. Except
for such changes as are permitted pursuant to Section 4.3 of this
Agreement, the representations and warranties of Parent and the Merger
Sub contained in this Agreement and in each closing certificate and
document delivered to Shareholder or the Company pursuant hereto shall
be correct and complete on and as of the Closing Date as though made
at and as of that date other than such
Red Fox of New Iberia Merger Agreement/Page 46
<PAGE> 54
representations and warranties as are specifically made as of another
date, and Parent and the Merger Sub shall have delivered to
Shareholder and the Company a certificate to that effect.
(b) Performance of Covenants. Parent and the Merger Sub
shall have performed and complied with all covenants of this Agreement
to be performed or complied with by it at the Closing Date (except
where the failure to so perform or comply would not have a material
adverse effect on Shareholder and the Company or prevent it from
consummating the transactions contemplated hereby), and Parent and the
Merger Sub shall have delivered to Shareholder and the Company a
certificate to such effect.
(c) Approvals. On or before the Closing Date, Parent
shall have procured all of the consents, approvals and waivers
specified in Section 3.3(f), and Parent shall deliver to Shareholder
and the Company a certificate to that effect.
(d) Leasehold Purchase Agreement. On the IPO Closing
Date, Parent shall cause delivery of the Leasehold Purchase Price to
Shareholder against Shareholder's delivery of the Transfer of
Immovable Property and other certificates, instruments and documents
provided for in the Leasehold Purchase Agreement to effect conveyance
of the Real Estate Interests to Parent, the Merger Sub or any other
entity designated by them.
(e) Executive Employment Agreement. On or before the
Closing Date, the Merger Sub shall execute and deliver the Executive
Employment Agreement with Beldon E. Fox, Jr. in the form attached as
Exhibit 1.1(c)-1, and the Key Employee Employment Agreement with the
individuals named on Schedule 1.1(c) in the form attached as Exhibit
1.1(c)-2.
(f) All Proceedings to be Satisfactory. On or before the
Closing Date, Shareholder and its counsel shall have received Parent's
Memorandum describing Parent and the Parent Common Stock to be
delivered as a part of the Purchase Price together with all such
counterpart originals or certified or other copies of all documents
relating to Parent incident to the transactions contemplated hereby as
Shareholder or such counsel may reasonably request.
(g) Opinion of Counsel for The Parent and the Merger Sub.
On or before the Closing Date, Shareholder and the Company shall have
received the favorable opinion of Chamberlain, Hrdlicka, White,
Williams & Martin, counsel for Parent and the Merger Sub substantially
in the form and to the effect set forth in Exhibit 5.2 hereto.
(h) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted that is reasonably likely to
restrain, prohibit, violate or otherwise affect the consummation of
the transactions contemplated hereby.
Red Fox of New Iberia Merger Agreement/Page 47
<PAGE> 55
ARTICLE 6
TERMINATION
6.1 TERMINATION OF AGREEMENT. The parties may terminate this
Agreement only as provided below.
(a) Prior to Closing. The parties may terminate this
Agreement at any time prior to the Closing only as provided below:
(1) Mutual Consent. The Parent and the
Shareholder may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(2) Termination by Parent. The Parent may
terminate this Agreement by giving written notice to the
Shareholder at any time prior to the Closing (1) in the event
Shareholder or the Company has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, the Parent has notified
Shareholder of the breach, and the breach has continued
without cure until the earlier of 20 days after the notice of
such breach or the Closing Date, whichever is earlier, or (2)
if the Closing shall not have occurred on or before December
31, 1997, by reason of the failure of any condition precedent
under Section 5.1 hereof (unless the failure results primarily
from the Parent itself breaching any representation, warranty,
or covenant contained in this Agreement); and
(3) Termination by Shareholder. Shareholder may
terminate this Agreement by giving written notice to the
Parent at any time prior to the Closing (1) in the event the
Parent or the Merger Sub has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, Shareholder has notified
the Parent of the breach, and the breach has continued without
cure until the earlier of 20 days after the notice of such
breach or the Closing Date, whichever is earlier, or (2) if
the Closing shall not have occurred on or before December 31,
1997, by reason of the failure of any condition precedent
under Section 5.2 hereof (unless the failure results primarily
from Shareholder breaching any representation, warranty, or
covenant contained in this Agreement).
(b) After the Closing Date. This agreement may be
terminated after the Closing only as follows:
(1) Mutual Consent. Parent or Shareholder may
each terminate this Agreement by providing written notice to
the other upon termination, prior to the successful completion
of the IPO, of the agreement between Parent and certain
investment banking firms (the "Underwriting Agreement") under
which such firms
Red Fox of New Iberia Merger Agreement/Page 48
<PAGE> 56
agree to purchase shares of Parent Common Stock from Parent on
a firm commitment basis for resale to the public initially at
the IPO Price.
(2) Automatic Termination. This Agreement shall
terminate automatically and without action on the part of any
party hereto if the IPO is not consummated within 15 business
days after the Closing.
6.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 6.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto, except
that (1) Section 4.4, Section 10.1, Section 10.6, Section 10.7, Section 10.8
and Section 10.10 hereof shall survive such termination and (2) nothing herein
shall relieve any party from liability for any willful breach of any other
provision hereof.
ARTICLE 7
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of the parties contained in this Agreement
(except for Section 3.2(v)) shall survive the Closing Date and the IPO Closing
Date, regardless of any investigation made by or on behalf of any party, and
shall expire and terminate on the last day of the 18th month after the IPO
Closing Date. The representations and warranties contained in Section 3.2(v)
hereof shall not terminate until the expiration of the applicable statute of
limitations (including any extension thereof) for any claim by a taxing
authority for any taxes, penalties or interest.
7.2 INDEMNIFICATION BY SHAREHOLDER. Shareholder hereby agrees to
indemnify and hold harmless the Surviving Corporation and Parent in respect of
any losses, claims, damages, liabilities or related expenses (including, but
not limited to, all litigation costs, as defined hereafter) which the Company
or the Parent incurs in excess of $50,000 in the aggregate as a result of the
breach of any of the representations, warranties and covenants made by
Shareholder in or pursuant to this Agreement. The indemnification obligations
of Shareholder under this Section 7.2 shall survive the Closing and will
terminate at the time specified in Section 7.1, except with respect to any
indemnity claim or claims pending on the date of such termination.
7.3 INDEMNIFICATION BY PARENT AND SURVIVING CORPORATION. Parent
and Surviving Corporation, jointly and severally, agree to indemnify and hold
harmless Shareholder in respect of any losses, claims, damages, liabilities or
related expenses (including, but not limited to, all litigation costs, as
defined hereafter) which Shareholder incurs in excess of $50,000 in the
aggregate as a result of the breach of any of the representations, warranties
and covenants made by Parent in or pursuant to this Agreement. The
indemnification obligations of Parent and Surviving Corporation under this
Section 7.3 shall survive the Closing and will terminate at the time specified
in Section 7.1, except with respect to any indemnity claim or claims pending on
the date of such termination.
Red Fox of New Iberia Merger Agreement/Page 49
<PAGE> 57
7.4 NOTICE. Promptly after any party hereto (the "Indemnified
Party") has received notice or has knowledge of the occurrence of any event
which the Indemnified Party asserts is an indemnifiable event or after the
commencement of any action, claim or proceeding commenced against the
Indemnified Party by a third party that might result in any claim for indemnity
pursuant to this Agreement (a "Third Party Claim"), the Indemnified Party shall
notify the party obligated to provide indemnification hereunder (the
"Indemnifying Party") written notice of such claim or the commencement of such
action or proceeding. Promptly after receipt by an Indemnifying Party of any
such notice, the Indemnifying Party shall, within ten business days of receipt
of such notice, either: (i) acknowledge the debt, liability or obligation for
which indemnity is sought as a valid claim and forthwith pay the Indemnified
Party an amount sufficient to discharged such debt, liability or obligation;
(ii) in the event of a Third Party Claim which is not acknowledged by the
Indemnifying Party to be owing, notify the Indemnified Party of the defense
thereto and thereupon promptly assume and diligently contest such Third Party
Claim with counsel satisfactory to the Indemnified Party; or (iii) with respect
to a claim other than a Third Party Claim, in the event of a claim by the
Indemnified Party for indemnity hereunder which is challenged by the
Indemnifying Party, notify the Indemnified Party of such challenge. Failure to
respond within the appropriate time period following the receipt of a notice
hereunder shall be deemed acknowledgment of the right to be indemnified and
give rise to the immediate right in the Indemnified Party to payment in full of
the amount claimed.
ARTICLE 8
STOCK TRANSFER RESTRICTIONS
8.1 COMPLIANCE WITH SECURITIES LAWS. Shareholder acknowledges and
agrees with Parent that the shares of Parent Common Stock issued pursuant to
this Agreement (the "Restricted Shares") to Shareholder shall not be
transferable except upon the conditions specified in this Article 8, which
conditions are intended, among other things, to ensure compliance with the
provisions of the Securities Act and any applicable state securities laws in
respect of the transfer of such Restricted Shares. Shareholder acknowledges and
agrees that the certificates representing the Restricted Shares will contain a
restrictive legend to the effect that transfer of such shares is prohibited
unless the shares are registered under the Securities Act and applicable state
securities laws, or in the event the event that such transfer is, in the
opinion of counsel to Parent, exempt from the registration provisions of the
Securities Act and applicable state securities laws.
8.2 RESTRICTIONS ON TRANSFER. Prior to any transfer or attempted
transfer of Restricted Shares other than the sale of such shares pursuant to
registration under the Securities Act, Shareholder agrees to give written
notice to Parent of its intention to effect such transfer. The notice shall
describe the manner and circumstances of the proposed transfer in detail and
shall contain an undertaking to furnish such other information as may be
required to enable Parent's counsel to render the opinions referred to below,
and shall give the identity and address of the Shareholder's counsel. Parent
shall submit a copy of the notice to its counsel, and the following provisions
shall apply:
Red Fox of New Iberia Merger Agreement/Page 50
<PAGE> 58
(a) If, in the opinion of the Parent's counsel, the
proposed transfer may be effected without registration of the Restricted Shares
under the Securities Act, Parent shall, as promptly as practicable, so notify
Shareholder who will then be entitled to transfer the Parent Common Stock in
accordance with the terms of the notice delivered by Shareholder to Parent.
(b) If, in the opinion of the Parent's counsel, the
proposed transfer of the Parent Common Stock may not be effected without
registration under the Securities Act, Parent shall, as promptly as
practicable, so notify Shareholder, and Shareholder shall not be allowed to
effect the proposed transfer except pursuant to an offering registered under
the Securities Act.
(c) Shareholder understands and agrees that Parent is not
obligated to furnish a registration statement under the Act or any state
securities laws covering the Restricted Shares nor is Parent under any
obligation to aid Shareholder in obtaining any exemption from any such
registration requirements. Shareholder also acknowledges that he shall be
responsible for compliance with all conditions of transfer of the Restricted
Shares imposed by any administrator of any state and for any expenses incurred
by Parent for legal or accounting services in connection with reviewing such
proposed transfer and issuing opinions in connection therewith.
(d) Shareholder understands and agrees that transfer of
the Restricted Shares may be effected only on the books of Parent, and that
stop transfer instructions will be issued to the transfer agent of Parent
Common Stock in accordance with the legend on any certificate representing the
Restricted Shares. The transfer agent will not remove the legend from any
certificate representing the Restricted Shares without either registration of
the Restricted Shares under the Securities Act and applicable state securities
laws or an opinion of the Parent's counsel stating that the transfer of the
Restricted Shares is exempt from such registration requirements and authorizing
removal of the stop transfer instructions.
ARTICLE 9
FURTHER ASSURANCES
9.1 FURTHER ASSURANCES. At any time and from time to time on and
after the Closing Date (a) at the request of Parent or the Surviving
Corporation, Shareholder shall deliver to Parent any records, documents and
data possessed by Shareholder and not previously delivered to Parent or the
Surviving Corporation to which Parent or the Surviving Corporation is entitled
and execute and deliver or cause to be executed and delivered all such deeds,
assignments, consents, documents and further instruments of transfer and
conveyance, and take or cause to be taken all such other actions, as Parent or
the Surviving Corporation may reasonably deem necessary or desirable in order
to fully and effectively vest in Parent or the Surviving Corporation, or to
confirm its title to and possession of, the Company Common Stock or to assist
Parent in exercising rights with respect thereto which Parent or the Surviving
Corporation is entitled to exercise pursuant to the terms of this Agreement;
and (b) Parent or the Surviving Corporation shall execute and deliver or cause
to be executed and delivered such further instruments and take or cause to be
taken such further actions as Shareholder may reasonably deem necessary or
desirable to carry out the terms and provisions of this Agreement.
Red Fox of New Iberia Merger Agreement/Page 51
<PAGE> 59
9.2 BOOKS AND RECORDS.
(a) Parent agrees that it shall preserve and keep all
books and records relating to the Company in Parent's possession until
six months following the expiration of the statute of limitations
(including extensions thereof) applicable to the tax returns filed by
or with respect to the Company for taxable periods ending prior to or
on the IPO Closing Date to which such books or records are relevant.
After such time, before Parent shall dispose of any of such books and
records, at least 90 calendar days' prior written notice to such
effect shall be given by Parent to Shareholder, and Shareholder shall
be given an opportunity, at its sole cost and expense, to remove all
or any part of such books and records as Shareholder may select, and
Shareholder may retain copies thereof. Duly authorized representatives
of Shareholder shall, upon reasonable notice, have access to such
books and records during normal business hours to examine, inspect and
copy such books and records.
(b) In any instance in which Shareholder or Parent, as
the case may be, is required to prepare or file (or cause to be filed)
tax returns which cover a period that includes the IPO Closing Date or
to respond to an audit by the Internal Revenue Service or other
governmental agency with respect to a period prior to the IPO Closing
Date, Shareholder or Parent, as the case may be, will furnish all
information and records reasonably available to it and reasonably
requested of him, her or it and necessary or appropriate for use in
preparing such returns or responding to such audit.
ARTICLE 10
MISCELLANEOUS
10.1 EXPENSES, ETC. Whether or not the transactions contemplated by
this Agreement are consummated, none of the parties hereto shall have any
obligation to pay any of the fees and expenses of the other parties incident to
the negotiation, preparation and execution of this Agreement, including the
fees and expenses of counsel, accountants and other experts. The Shareholder,
the Company, Parent, and the Surviving Corporation will indemnify the other
parties, and hold them harmless from and against any claims for finders' fees
or brokerage commissions in relation to or in connection with such transactions
as a result of any agreement or understanding between such indemnifying party
and any third party. Shareholder shall pay and be responsible for any stock
transfer Taxes with respect to the Company Common Stock incident to the Merger.
Parent shall pay and be responsible for any stock transfer Taxes arising from
the sale of shares of Parent Common Stock hereunder.
Red Fox of New Iberia Merger Agreement/Page 52
<PAGE> 60
10.2 EXECUTION IN COUNTERPARTS. For the convenience of the parties,
this Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
10.3 NOTICES. All notices which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given in writing and delivered or mailed by
registered or certified mail postage prepaid, or sent by telex, telecopier,
facsimile transmission or telegraph as follows:
<TABLE>
<CAPTION>
If to Shareholder, to: With a copy to:
<S> <C>
The Beldon E. Fox, Sr. Grandchildrens Trust No. 1 Floyd LeBleu
c/o Allyson B. Fox, Trustee 965 Belleveu Plantation Rd.
2425 West Loop South, Suite 200 Lafayette, Louisiana 70503
Houston, Texas 77017 Facsimile: (318) 981-6476
Facsimile: (713) 297-9149
If to Parent or the Surviving Corporation, to: With a copy to:
TransCoastal Marine Services, Inc. Robert J. Viguet, Jr.
3535 Briarpark, Suite 210 Chamberlain, Hrdlicka, White,
Houston, Texas 77042 Williams & Martin
Attention: Chief Executive Officer 1200 Smith Street, Suite 1400
Facsimile No. (713) 781-6364 Houston, Texas 77002-4310
Facsimile No. (713) 658-2553
</TABLE>
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto. Any notice or other
communication pursuant to this Agreement shall be deemed to have been duly
given or made and to have become effective upon the earliest of (a) when
delivered in hand to the party to which directed, or (b) if sent by first-class
mail postage prepaid, certified mail, return receipt requested, or by telex,
telecopier, facsimile transmission or telegraph and properly addressed as set
forth above, at the time when received by the addressee or (c) with respect to
delivery by certified mail, return receipt requested, when delivery thereof,
properly addressed as set forth above, is attempted by the U.S. Postal Service.
10.4 WAIVERS. Any party hereto (as to itself, but not as to other
parties without their consent) may, by written notice to the other parties
hereto, (a) extend the time for the performance of any of the obligations or
other actions of the other parties under this Agreement; (b) waive any
inaccuracies in the representations or warranties of another party contained in
this Agreement or in any document delivered pursuant to this Agreement; (c)
waive compliance with any of the conditions or covenants of another party
contained in this Agreement; or (d) waive performance of any of the obligations
of another party under this Agreement. Except as otherwise provided in the
preceding sentence, no action taken pursuant to this Agreement, including
without limitation any investigation
Red Fox of New Iberia Merger Agreement/Page 53
<PAGE> 61
by or on behalf of any party, shall be deemed to constitute a waiver by the
party taking such action of compliance with any representation, warranty,
covenant or agreement contained in this Agreement. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed a waiver of any subsequent breach.
10.5 AMENDMENTS, SUPPLEMENTS, ETC. At any time this Agreement may
be amended or supplemented by such additional agreements, articles or
certificates, as may be determined by the parties hereto to be necessary,
desirable or expedient to further the purposes of the Agreement, or to clarify
the intention of the parties hereto, or to add to or modify the covenants,
terms or conditions hereof or to effect or facilitate any governmental approval
or acceptance of this Agreement or to effect or facilitate the filing or
recording of this Agreement or the consummation of any of the transactions
contemplated hereby. Any such instrument must be in writing and signed by all
parties.
10.6 ENTIRE AGREEMENT. This Agreement, its Exhibits and Disclosure
Schedules and the documents executed on the Closing Date and the IPO Closing
Date in connection herewith, constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and supersede all
prior agreements and understandings, oral and written, between the parties
hereto with respect to the subject matter hereof. No representation, warranty,
promise, inducement or statement of intention has been made by any party hereto
which is not embodied in this Agreement or such other documents, and no party
hereto shall be bound by, or be liable for, any alleged representation,
warranty, promise, inducement or statement of intention not embodied herein or
therein.
10.7 CHOICE OF FORUM; CONSENT TO JURISDICTION. This Agreement shall
be governed by and construed in accordance with the laws of the State of Texas.
Any suit, action or proceeding arising with respect to the validity,
construction, enforcement or interpretation of this Agreement, and all issues
relating in any matter hereto, shall be brought in the United States District
Court for the Southern District of Texas, or in the event that federal
jurisdiction does not pertain, in the state courts of the State of Texas in
Harris County. Each of the parties hereto hereby submits and consents to the
jurisdiction of such courts for the purpose of any such suit, action or
proceeding and hereby irrevocably waives (a) any objection which any of them
may now or hereafter have to the laying of venue in such courts, and (b) any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
10.8 BINDING EFFECT, BENEFITS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. Notwithstanding anything contained in this Agreement to
the contrary, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
10.9 ASSIGNABILITY. Neither this Agreement nor any of the parties'
rights hereunder shall be assignable by any party hereto without the prior
written consent of the other parties hereto.
Red Fox of New Iberia Merger Agreement/Page 54
<PAGE> 62
10.10 INVALID PROVISIONS. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future law, rule
or regulation, such provision shall be fully severable and this Agreement shall
be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof. The remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance herefrom.
Furthermore, in lieu of such illegal, invalid or unenforceable provision, there
shall be added automatically as a part of this Agreement a legal, valid and
enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.
Red Fox of New Iberia Merger Agreement/Page 55
<PAGE> 63
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed effective as of the date first above written.
PARENT:
TRANSCOASTAL MARINE SERVICES, INC.
BY: /s/ G. DARCY KLUG
---------------------------------------
G. DARCY KLUG, VICE PRESIDENT
SHAREHOLDER:
THE BELDON E. FOX, SR.
GRANDCHILDRENS TRUST NO. 1
/s/ ALLYSON B. FOX
------------------------------------------
ALLYSON B. FOX, TRUSTEE
THE COMPANY:
THE RED FOX COMPANIES OF NEW IBERIA, INC.,
A LOUISIANA CORPORATION
By: /s/ ALLYSON B. FOX
---------------------------------------
Name: Allyson B. Fox
-------------------------------------
Title: President
------------------------------------
Red Fox of New Iberia Merger Agreement/Page 56
<PAGE> 1
EXHIBIT 10.20
AGREEMENT TO PURCHASE AND SELL
TRANSCOASTAL MARINE SERVICES, INC., a ____________ corporation,
appearing herein through G. Darcy Klug, its Vice President, duly authorized by
resolution of its Board of Directors, a certified copy of which is attached
hereto ("Purchaser"), offers to purchase from LINDA WOODSON, CHERYL WOODSON,
and PAULA WOODSON ("Seller"), certain property located in Lafayette, Lafayette
Parish, Louisiana, and comprised of approximately 14.95 acres, as more
particularly described on Exhibit "A" attached hereto, together with all
improvements and component parts located thereon, (the "Improvements");
provided, however, SELLER reserves unto herself, her heirs and assigns, all of
the oil, gas and other minerals lying under the above described property with a
non-surface use clause prohibiting SELLER, her lessees or assigns from
utilizing the surface of the said property in any manner, it being expressly
understood that all exploration or production of minerals shall be by
directional drilling from property other than the said property which is the
subject of this Act of Cash Sale, or by means of pooling or unitization. The
above listed items being collectively called the "Property."
1. PURCHASE PRICE. At Closing, Purchaser shall pay to Seller the sum
of TWO MILLION AND NO/100 DOLLARS ($2,000,000) for the purchase of the Property
(the "Purchase
Price").
2. DEPOSIT. Purchaser shall not be required to post or to deliver a
deposit, this Agreement being concluded in consideration of the mutual
obligations assumed by the parties pursuant to that certain Agreement and Plan
of Merger effective as of August 12, 1997, and executed by and among Purchaser,
Seller, Woodson Acquisition Corp. and Woodson Construction Company, Inc. (the
"Company") regarding the acquisition of the Company by Purchaser by way of
merger (the "Master Agreement"); Purchaser and Seller agree and stipulate that
the right accorded the Purchaser pursuant to this Agreement is predicated upon
the conclusion of the Purchaser's merger in accordance with the terms and
conditions of the Master Agreement and any title matters objected to by
Purchaser are hereinafter referred to as ("Title Defects").
3. TITLE. Seller shall procure and deliver to Purchaser as soon as
practicable, and in any event, on or before August 30, 1997, at Purchaser's
expense, a title report or title commitment issued by title insurance companies
reasonably acceptable to Purchaser, along with legible copies of all documents
referred to in such commitment. The title commitment shall set forth the status
of title to the Property, together with all exceptions or conditions to such
title, including, but not limited to, all easements, restrictions,
rights-of-way, covenants, reservations, and all other encumbrances, affecting
the Property. Purchaser may object to any items identified on the title
commitment on or before ____________,1997, and Seller shall have until the
Closing Date to cure or remove the Title Defects. If Seller, acting with due
diligence and best efforts, fails to cure or remove the Title Defects within
said period, Purchaser shall have the right, in its sole and exclusive
discretion, upon notice to Seller (a) to terminate this Agreement, or (b) to
waive its objections to the Title Defects and proceed to Closing in accordance
with the terms hereof.
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<PAGE> 2
Purchaser shall have the right but not the obligation to take whatever action
it deems appropriate to cure or remove the Title Defects. It is a condition of
Purchaser's obligation to close hereunder that an extended coverage ALTA
owner's policy of title insurance (Form B, 1970 or other form acceptable to
Purchaser) be issued by a title company acceptable to Purchaser and in the
amount of the Purchase Price, showing an insurable, good and marketable title
in Purchaser subject only to the Title Defects approved by Purchaser ("Title
Policy").
4. SURVEY, PROPERTY INFORMATION, TESTING AND CONTIGUITY.
(a) Survey. Seller, at Purchaser's request, will have the Property
surveyed, at Purchaser's expense, which Survey shall be acceptable for the
issuance of the Title Policy without taking general exception to matters shown
on the Survey, which Survey shall be a current survey of the Property, prepared
by a licensed surveyor and conforming to current ALTA Minimum Detail
Requirements for Land Title Surveys, disclosing the location of all
improvements, easements, party walls, sidewalks, roadways, utility lines, and
other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Survey"). The Survey shall
disclose any survey defect or encroachment from or onto the Property. The
Survey description shall be used in the Deed, as defined below. Approval by
Purchaser of the Survey and of matters or issues apparent on the Survey shall
be a condition precedent to the Purchaser's obligations to close under this
Agreement.
(b) Title Policy. At the Closing, the Seller shall deliver to
Purchaser the title policy ("Title Policy"), acceptable to Purchaser, issued by
such title insurance company(ies), subject to those easements, reservations,
covenants, conditions and other matters therein specified to the extent that
the same do not, in the reasonable judgment of the Purchaser, render title
unmarketable or adversely affect the operation, value, use or enjoyment of the
Property affected thereby ("Property Title Exceptions"). The Title Policy may
be subject to Property Title Exceptions but shall contain no additional
exceptions other than the standard preprinted exceptions reasonably acceptable
to Purchaser; provided that (i) the standard preprinted exception, if any, for
restrictive covenants shall be deleted, except for Property Title Exceptions,
(ii) the standard preprinted survey exception, if any, shall be revised to read
"shortages in area" only, (iii) there shall be no exception as to easements, or
claims of easements, not shown by the public records, nor any exception as to
parties in possession, and (iv) the exception as to the lien for taxes will be
limited to the year in which the Closing occurs and taxes not yet due and
payable.
(c) Phase I Environmental Assessment. The Seller will obtain and
deliver to Purchaser, as soon as practicable, and in any event on or before
September 1, 1997, a Phase I environmental assessment prepared by environmental
engineers reasonably acceptable to Purchaser with respect to the Property.
Purchaser shall pay the expenses incurred by the Seller in obtaining such
assessments. Upon receipt of the Phase I environmental assessment, Purchaser
shall immediately deliver same to Seller. Seller shall have thirty (30) days to
satisfy all valid objections, and, if Seller acting with due diligence and best
efforts, fails to cure or remove the objections,
2
<PAGE> 3
Purchaser shall have the right, in its sole and exclusive discretion upon
notice to Seller (a) to terminate this Agreement, or (b) to waive its objection
and proceed to Closing in accordance with the terms hereof. Also during the
period prior to Closing, the Seller and the Company shall afford Purchaser and
its representatives the continuing right to inspect, during the Company's
normal business hours, the Property and all books, records, contracts,
documents and other data pertaining to the use, ownership, operation, or
maintenance of the Property (collectively with the Phase I assessment, the
"Study").
(d) Title and Environmental Objections. If for any reason Purchaser,
in its sole and absolute discretion, is not satisfied with any matter contained
in the Studies, the Survey, or the Property Title Exceptions, or is otherwise
not satisfied with the Property, then Purchaser shall notify the Seller in
writing of its objection (the "Objections") on or before ____________,1997,
describing with specificity the Objections thereto, failing which Purchaser
shall be deemed to have waived all such Objections and all remedies therefor
pursuant to this Agreement. If Purchaser shall request that the Seller cure
such Objections and the Seller has not cured such Objections to Purchaser's
satisfaction by the Closing Date, Purchaser shall have the right to terminate
this Agreement.
5. CONVEYANCE. At Closing, Seller shall convey to Purchaser good and
marketable title to the Property in fee simple by general warranty deed (the
"Deed"), and bill of sale (the "Bill of Sale"), warranting title thereto to be
free and clear of all contracts, liens, defects, encumbrances, encroachments,
leases, tenancies and occupancies, (except for the existing lease to the
Company) and those matters approved by Purchaser in accordance with Section 3
hereof, and current real estate taxes and assessments, both general and
special, not then due and payable. Seller shall deliver possession of the
Property to Purchaser at Closing in the same condition and state of repair as
on the date of Seller's execution of this Agreement, subject only to normal
wear, tear, and use since that date. Prior to Closing, Seller shall not take or
fail to take any action which would adversely affect the title, condition, or
value of the Property, or Purchaser's intended use thereof. Seller shall not
enter into any agreements prior to Closing which would materially adversely
affect Purchaser's intended use of the Property without Purchaser's prior
written consent, which consent may be withheld in Purchaser's sole and
exclusive discretion.
6. TAXES, RENTS, UTILITY CHARGES. Seller shall pay all taxes and
assessments on the Property, general and special, levied or assessed for any
year prior to that in which the Closing occurs, whether or not such taxes and
assessments are then past due or are payable thereafter. All real estate taxes
and assessments, and all property taxes on personal property acquired
hereunder, if any, for the current year in which the Closing occurs be prorated
between the parties as of the Closing Date using the valuation and rate shown
on the last available real estate tax bill; provided, however, that any
installments of reassessed or other special assessments, whether then due or to
become due, together with interest and penalties thereon, if any, shall be paid
in full by Seller; and provided further, that the proration of real estate
taxes and assessments shall be adjusted after Closing in the event the
valuation and/or rate is increased in the tax year up to and
3
<PAGE> 4
including the Closing Date, as indicated by the next available real estate tax
bill. Rents are to be prorated between the parties as of the Closing Date.
7. CLOSING. The Act of Sale or Closing ("Closing") of the sale of the
Property shall occur before Purchaser's notary public on or before
____________, 1997 ("Closing Date"), subject to extension by mutual consent of
the parties in order that the Closing Date coincide with the closing of the
transactions anticipated by and referenced in the Master Agreement. At Closing,
the costs of conveyance, mortgage, and tax research certificates shall be paid
by Purchaser. All other costs shall be for the account of Purchaser.
8. DEFAULT. If this Agreement is terminated for any reason permitted
herein, the parties shall have no further liability and/or obligations
hereunder except as expressly provided herein. If Seller breaches or defaults
in its performance under this Agreement, Purchaser's sole remedy shall be to
seek specific performance. Likewise, if Purchaser breaches or defaults in its
performance under this Agreement, Seller's sole remedy shall be to seek
specific performance.
9. REPRESENTATIONS. Seller represents and warrants to Purchaser,
subject, however to the schedule of exceptions attached hereto as Exhibit "B",
at the time of Seller's acceptance of this Agreement, and continuing to
Closing, that:
(a) Seller has good and marketable title in fee simple to the
Property, free and clear of any security interest, easements, covenants, or
other restrictions, except for installments of specific assessments not yet
delinquent and easements, covenants, and other restrictions which do not impair
the current use, occupancy or value, or the marketability of title of the
Property; has authority to execute, deliver and perform this Agreement and each
instrument and agreement to be executed and delivered by Seller pursuant
hereto, and the taking by Seller of the actions contemplated hereby;
(b) To the best of Seller's knowledge, there is no threatened or
pending proceeding to which Seller is a party or of which it has been given
notice or is otherwise aware concerning zoning, condemnation, impairment of
access, tax adjustment or similar proceeding, assessment or plan by any
governmental entity which could affect the Property;
(c) There are no pending, or to the best of Seller's knowledge,
threatened actions, lawsuits, investigations, condemnation proceedings or
administrative actions to be brought in any court or before a governmental
entity relating to the Property or which does or could have an effect on the
ability of Purchaser to own and operate the Property for Purchaser's use,
encumber or burden the Property, prevent the execution, delivery or performance
of this Agreement by Purchaser or Seller, or delay or prohibit Closing; neither
are there any unsatisfied judgments or consent decrees which could have any
such effect;
4
<PAGE> 5
(d) To the best of Seller's knowledge, with respect to the use,
operation or maintenance of the Property, Seller and the Company are in
compliance with all statutes, ordinances, orders, writs, injunctions or
decrees, including but not limited to zoning ordinances, building codes or
laws;
(e) Other than the Company, there are no tenants, under written or
oral leases, parties in possession, adverse possessors or other occupants on
the Property, and Seller has not accepted or granted any other agreements,
rights of first refusal, offers or options to purchase or lease the Property;
(f) Seller has not made an assignment for the benefit of creditors and
is not insolvent or bankrupt;
(g) The legal description for the Property attached hereto describes
such Property 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 is 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 Property does not serve any adjoining property for any purpose
inconsistent with the use of the Property, 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;
(h) 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 such approvals and applicable laws, rules, and regulations;
(i) 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;
(j) To the extent necessary or desirable for the use or operation of
facilities located on the Property, such facilities are supplied with utilities
and other services, including gas, electricity, water, telephone, sanitary
sewer, and storm sewer, all of which services are adequate in accordance with
all applicable laws, ordinances, rules, and regulations;
(k) The 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;
5
<PAGE> 6
(l) The Property is not located within an area that has been
designated by the Federal Insurance Administration, the Army Corps of Engineers
or any other governmental agency or body as being subject to special flooding
hazards;
(m) The Seller has received no notice of violation of any applicable
zoning or building regulation, ordinance or other law, order, regulation or
requirement relating to the operations of the Company, or any notice of default
under any material lease, contract, commitment, license or permit, relating to
the use and operation of the Property. The Seller has received no notice that
any law or regulation presently in effect or condition precludes or restricts
continuation of the present use of the Property;
(n) The Seller, the Company and the Property, including, without
limitation, its businesses, facilities, property, vessels, and equipment have
been and are currently in compliance, in all material respects, with all
applicable federal, state, and local laws, rules, and regulations of all
authorities, including without limitation, applicable Environmental Laws (as
hereinafter defined), and the Company, the Seller and the Property have all
permits, certificates, and licenses required to operate their businesses,
facilities, property, vessels, and equipment, including, without limitation,
any relating to the generation, processing, treatment, discharge, storage,
transport, disposal, or other management of chemicals and other hazardous
materials, of waste materials of any kind, and those relating to the protection
of environmentally sensitive areas. There is no adverse effect on the Property
or any of the facilities, properties, vessels or equipment of the Seller, or
with respect to function, use, or value of any such assets, resulting from any
hazardous or toxic substance, or any pollutant or contaminant, or as a result
of exposure to petroleum or any by-product thereof. "Environmental Laws" means
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Resource Conservation and Recovery Act of 1976, and the Occupational
Safety and Health Act of 1970, each as amended, together with all other 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) concerning pollution or protection of
the environment, public 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 in ambient air,
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;
(o) There are no actions, suits, audits, investigations, unfair labor
practices charges, complaints, claims, grievances or proceedings with respect
to the Seller or the Property, or before or by any federal, state, municipal,
foreign or other governmental department, commission, board, bureau, agency or
instrumentality, nor are there any such actions, suits, audits, investigations,
unfair labor practices charges, complaints, claims, grievances or proceedings
that are known to be threatened against the Seller or the Property; and
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<PAGE> 7
(p) The improvements on the Property (i) have been constructed in a
good and workmanlike manner, free from defects in workmanship and material and,
to the best of Seller's knowledge, do not require any repair or replacement
other than minor, routine maintenance; and (ii) have been constructed and are
being occupied, maintained, and operated in compliance with all applicable
laws, regulations, insurance requirements, contracts, leases, permits,
licenses, ordinances, restrictions, building setback lines, covenants,
reservations, and easements, and the Sellers has received no notice, written or
oral, claiming any violation of any of the same or requesting or requiring the
performance of any repairs, alterations, or other work in order to so comply.
10. MISCELLANEOUS.
(a) Expropriation or Casualty. If, prior to Closing, the Property or
any part thereof shall be, or becomes known to Purchaser or Seller (who shall
notify Purchaser promptly) to be, or threatened to be condemned or otherwise
acquired for public purposes, or if access to the Property shall be, or become
known to Purchaser or Seller to be, or threatened to be restricted or denied
through eminent domain, or the exercise of police power, all of the
above-described events collectively referred to as "Expropriation"), or if any
portion of the Property shall be destroyed or damaged by fire or other
casualty, as determined by Purchaser, then in any such case, Purchaser, upon
notice to Seller, may elect (i) to terminate this Agreement, or (ii) to receive
from the proceeds of any insurance payable to Seller upon such damage or
destruction, or from any award paid or payable to Seller as a result of the
Expropriation, as the case may be, an appropriate credit against the balance of
the Purchase Price to be paid by Purchaser.
(b) Transfer Taxes - Commissions. Seller shall defend, indemnify and
hold harmless Purchaser, its successors, assigns, directors, officers,
employees and agents from and against any liability, including court costs and
attorneys' fees, for any commissions by any real estate agent or broker
utilized by Seller in this transaction.
(c) Notices. Any and all notices provided under this Agreement must be
in writing and shall be deemed given when delivered in person, or when
deposited with Federal Express or other similar overnight service, return
receipt requested, or when deposited in the United States mails, postage
prepaid for certified mail, return receipt requested, or upon actual receipt of
a facsimile or other similar transmission (provided that a copy of the
facsimile is delivered or deposited within twenty-four [24] hours in the manner
specified above), properly addressed to the parties. For purposes of notice,
the addresses of the parties shall be as follows:
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<PAGE> 8
If to SELLER to:
With a copy to:
If to PURCHASER to: ________________________
505 Lorie Avenue, Suite I
Lafayette, Louisiana 70507
Attention: Mr. G. Darcy Klug
With a copy to: Robert J. Viquet, Jr.
Chamberlain, Hrdlicka, White, Williams ~ Martin
1200 Smith Street, Suite 1400
Houston, Texas 70002-4310
Either party may designate a different address for receiving notices
hereunder by giving at least ten (10) days written notice thereof to the other
parry.
(d) Waiver. Except as otherwise specifically provided in this
Agreement, no failure or delay on the part of either party in exercising any of
their respective rights hereunder upon any failure by the other party to
perform or observe any condition, covenant or provision herein contained shall
operate as a waiver thereof, nor shall any single or partial exercise of any of
such rights preclude any other or further exercise thereof or the exercise of
any other right hereunder. No waiver or release of any of the terms, conditions
or provisions of this Agreement shall be valid or asserted or relied upon by
either Party hereto or offered in any judicial proceeding or otherwise, unless
the same is in writing and duly executed by the party against whom such waiver
or release is being asserted.
(e) Construction. This Agreement shall be governed and performed in
accordance with the laws of the State of Louisiana.
(f) Severability. This Agreement is intended to be performed in
accordance with and only to the extent permitted by all applicable laws,
ordinances, rules and regulations. If any provision of this Agreement or the
application thereof to any person, entity, or circumstance, shall for any
reason and to any extent be held to be invalid or unenforceable, the remainder
of this Agreement and the application of such provision to the other person or
circumstance shall not be affected thereby, but rather shall be enforced to the
greatest extent permitted by law.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, which together shall constitute the understanding of the parties
hereto.
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<PAGE> 9
(h) Dates. If any deadline set forth herein falls on a Saturday,
Sunday or holiday, the deadline shall be extended to the next business day.
(i) Captions. The captions in this Agreement and in any addenda or
exhibits attached hereto are used for reference purposes only and they in no
way define, limit or prescribe the scope or intent of this Agreement or any
provisions hereof.
(j) Survival. The terms of this Agreement shall not survive Closing.
(k) Further Assurances. The parties agree to execute such other
documents as may be required from time to time to give effect to the terms
contained herein and the intent hereof.
(l) Counsel. The parties acknowledge that they have had an opportunity
to consult with legal counsel and to study and negotiate the terms and
provisions of this Agreement. The draftsmanship or authorship of this
Agreement, any addenda hereto and any interlineation hereof shall not be
construed in favor of or against either party, it having been negotiated and
adopted fully and freely by both parties.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
undersigned this ____ day of ______________ 1997, having first read and
understood the terms contained herein and the purpose, intent and effects
hereof.
WITNESS: PURCHASER:
By: TRANSCOASTAL MARINE SERVICES, INC.
-------------------------
Print:
----------------------
By: By:
------------------------- ----------------------------------
Print: G. Darcy Klug, Vice President
----------------------
SELLER:
By:
------------------------- ----------------------------------
Print: LINDA WOODSON
----------------------
By:
-------------------------
Print:
----------------------
9
<PAGE> 10
By:
------------------------- ----------------------------------
Print: CHERYL WOODSON
----------------------
By:
-------------------------
Print:
----------------------
By:
------------------------- ----------------------------------
Print: PAULA WOODSON
----------------------
By:
-------------------------
Print:
----------------------
ACKNOWLEDGMENT (SELLER)
STATE OF LOUISIANA
PARISH OF ___________
BEFORE ME, A Notary Public in and for said Parish and State,
personally appeared the above-named _____________________, who is personally
known to me and acknowledged that he did sign the foregoing instrument and that
the same is his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
______________________, this ____ day of __________________ 1997.
-----------------------------
-----------------------------
Notary Public
My Commission Expires:
10
<PAGE> 11
ACKNOWLEDGMENT (PURCHASER)
STATE OF LOUISIANA
PARISH OF ____________
BEFORE ME, a Notary Public in and for said Parish and State,
personally appeared the above-named Linda Woodson, who is personally known to
me and acknowledged that he did sign the foregoing instrument and that the same
is his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
_________________________, this ______ day of 1997.
-----------------------------
-----------------------------
Notary Public
My Commission Expires:
STATE OF LOUISIANA
PARISH OF ____________
BEFORE ME, a Notary Public in and for said Parish and State,
personally appeared the above-named Cheryl Woodson, who is personally known to
me and acknowledged that he did sign the foregoing instrument and that the same
is his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
_________________________, this ______ day of 1997.
-----------------------------
-----------------------------
Notary Public
My Commission Expires:
11
<PAGE> 12
STATE OF LOUISIANA
PARISH OF ____________
BEFORE ME, a Notary Public in and for said Parish and State,
personally appeared the above-named Paula Woodson, who is personally known to
me and acknowledged that he did sign the foregoing instrument and that the same
is his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
_________________________, this ______ day of 1997.
-----------------------------
-----------------------------
Notary Public
My Commission Expires:
12
<PAGE> 13
EXHIBIT "A"
PROPERTY DESCRIPTION
That certain tract of land containing (14.95) acres, more or less, together
with all buildings and improvements thereon and all rights, ways, privileges
and servitude thereunto appertaining, situated in Sections 55 and 51, Township
10 South, Range 4 East, being more particularly described on that certain plat
of survey prepared by Domingue, Szabo and Associates, Inc., C.E., dated March
14, 1975 and recorded under entry number 642029 of the records of the Clerk of
Court of Lafayette Parish, Louisiana, incorporated herein by reference thereto.
Said tract being bounded now or formerly as follows: North by Willis Comeaux;
East by Allen and Eugene Begnaud; South by Beadle Road and/or P. Alex
Langlinais; and on the West by Sidney Guidry. Being the same tract of land
acquired by Seller from Louis Woodson by Act of Sale dated December 20, 1979
and recorded under entry number 79-32625 of the records of the Clerk of Court
of Lafayette Parish, Louisiana.
SELLER reserves unto herself, her heirs and assigns, all of the oil, gas and
other minerals lying under the above described property with a non-surface use
clause prohibiting SELLER, her lessees or assigns from utilizing the surface of
the said property in any manner, it being expressly understood that all
exploration or production of minerals shall be by directional drilling from
property other than the said property which is the subject of this Act of Cash
Sale, or by means of pooling or unitization.
<PAGE> 14
EXHIBIT "B"
SCHEDULE OF EXCEPTIONS
Section 9(a): Easements or Servitudes:
An apparent electrical servitude or easement runs diagonally across
the property with visible poles and transmission lines.
The property may also be subject to non-apparent servitudes or
easements of record in the office of the Clerk of Court of Lafayette
Parish, Louisiana.
Section 9(e)(i): Property is subject to the following written and oral leases
Written Lease Agreement dated , entered into by and between Seller,
as Lessor, and John A. Hendry, D.D.S. This lease shall be for a
period of fifteen (15) years, commencing July 1, 1997 and expiring on
June 30, 2012. However, LESSEE may cancel this Lease Agreement upon
giving LESSOR at least ninety (90) days written notice, so long as
LESSEE is not in default of any terms and conditions hereof. LESSEE
agrees to pay as rental for the Leased Premises the sum of TWO
THOUSAND ($2,000.00) DOLLARS per month, for each and every month of
the lease from July 1, 1997 through June 30, 2012. Each monthly
rental payment shall be due by the first day of the month to which
the payment relates.
This property is subject to an oral, month to month lease, with Lige
Frank Dunaway, III, D.D.S., Lessee. The current rental is $1,000.00
per month.
This property is subject to an oral, month to month lease, with Welch
& Malloy, Ltd., a professional dental corporation, Lessee. The
current rental is $2,500.00 per month.
This property is subject to an oral month to month lease, with
Winston B. Diel, D.D.S., Lessee. The current rental is $1,000.00 per
month.
Section 9 (g): Permitted Non-Conforming Use:
The Kori fabrication shop is a "permitted non-conforming use". The
shop was operating when City of Lafayette annexed the property. The
shop is classified as industrial, while the zoning classification is
business. Thus, the Kori fabrication shop has been grandfathered in
and is a permitted non-conforming use.
<PAGE> 1
EXHIBIT 10.21
AGREEMENT TO PURCHASE AND SELL
TRANSCOASTAL MARINE SERVICES, INC., a Delaware corporation, appearing
herein through G. Darcy Klug, its President, duly authorized by resolution of
its Board of Directors, a certified copy of which is attached hereto
("Purchaser"), offers to purchase from THE SUCCESSION OF HERBERT D. HUGHES,
appearing herein through its Executrix, Elizabeth H. DePass ("Seller"), the
immovable property bearing the municipal number 2701 Engineers Road, Belle
Chasse, Plaquemines Parish, Louisiana, and comprised of approximately 14 acres,
together with all improvements and component parts located thereon, which
property is more particularly described in Exhibit "A" attached hereto and made
a part hereof (the "Property").
1. PURCHASE PRICE. At closing, Purchaser shall pay to Seller the
sum of ONE MILLION THREE HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS
($1,350,000.00) for the purchase of the Property (the "Purchase Price").
2. DEPOSIT. Purchaser shall not be required to post or to
deliver a deposit, this Agreement being concluded in consideration of the
mutual obligations assumed by the parties pursuant to that certain PURCHASE AND
SALE AGREEMENT effective as of August __, 1997, and executed by and among
Purchaser, Seller, and HBH, Inc. (the "Company") regarding the sale of all of
the outstanding capital stock of the Company as well as the Property (the
"Master Agreement"); Purchaser and Seller agree and stipulate that the right
accorded the Purchaser pursuant to this Agreement is predicated upon the
conclusion of the Purchaser's acquisition of the outstanding capital stock of
the Company in accordance with the terms and conditions of the Master
Agreement.
3. TITLE. Within thirty (30) days after the execution of this
Agreement, Purchaser shall procure, at Purchaser's expense, a survey and a
title report or title commitment on the condition of Seller's title to the
Property and shall notify Seller of any exceptions to title disclosed therein
or to survey ("Title Defects"). If such survey is made, the survey description
shall be used in the Deed, as defined below. Seller shall have thirty (30)
days from the date of notification by Purchaser to cure or remove the Title
Defects. If Seller, acting with due diligence and best efforts, fails to cure
or remove the Title Defects within said period, Purchaser shall have the right,
in its sole and exclusive discretion, upon notice to Seller (a) to terminate
this Agreement, or (b) to waive its objections to the Title Defects and proceed
to Closing in accordance with the terms hereof. Purchaser shall have the right
but not the obligation to take whatever action it deems appropriate to cure or
remove the Title Defects. It is a condition of Purchaser's obligation to close
hereunder that an extended coverage ALTA owner's policy of title insurance
(Form B, 1970 or other form acceptable to Purchaser) be issued by a title
company acceptable to Purchaser and in the amount of the Purchase Price,
showing an insurable, good and marketable title in Purchaser subject only to
the Title Defects and any servitudes, rights-of-way, alienations, encroachments
apparent by survey and accepted by Purchaser, and containing a zoning
endorsement acceptable to Purchaser ("Title Policy").
<PAGE> 2
4. PROPERTY INFORMATION, TESTING AND CONTIGUITY.
(a) Property Information. Seller shall provide to Purchaser
within thirty (30) days after Seller's execution of this Agreement, and
thereafter until Closing as Seller may come into possession or control of same,
correct and complete copies of any documents, correspondence and information in
Seller's possession or control relating to the Property.
(b) Testing. Purchaser shall be accorded a period of sixty (60)
days from the date of the execution hereof by both parties in which to conduct
any and all investigations, inspections and tests with respect to the
environmental condition of the Property. Purchaser and Purchaser's agents
shall have the right to enter and to conduct or cause to be conducted any
investigations, inspections and tests of the Property (the "Tests"), including
but not limited to investigations, inspections and tests regarding the
condition of the soil, surface water and groundwater of the Property to
determine the environmental condition of the Property and to test for the
presence of any Hazardous Materials, including a "Phase I" environmental
assessment and, if the Purchaser in its sole discretion deems it necessary, a
"Phase II" environmental assessment. For purposes hereof, "Hazardous
Materials" shall mean any and all flammable explosives, hydrocarbons and/or
petroleum products or fractions thereof, radioactive materials, hazardous or
toxic wastes, substances or materials, including but not limited to those
materials and substances defined as "hazardous substances," "extremely
hazardous substances," "hazardous materials," "hazardous wastes" or "toxic
substances" in the Laws. For purposes hereof, the "Laws" shall include but not
be limited to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as amended; the Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq.; and any other federal, state and local statutes
and ordinances, including all amendments thereto, replacements thereof, any
rules, regulations and orders adopted and issued pursuant thereto, and any
judicial and administrative interpretations thereof. The cost of the "Phase I"
environmental assessment shall be split 50/50 by Seller and Purchaser.
Purchaser shall pay all other costs of any such Tests. If this Agreement is
terminated for any reason permitted herein, Purchaser shall repair any damage
caused to the Property by the Tests. Purchaser shall and does hereby indemnify
and hold harmless Seller from any and all claims and causes of action arising
out of such Tests, provided Seller is not negligent or at fault, and further
provided that Purchaser shall not be responsible for any costs, claims,
damages, or liabilities caused by or arising from any Hazardous Materials
discovered on the Property by such Tests. If the Tests reveal that the
Property is, in the Purchaser's sole and exclusive discretion, unsuitable to
Purchaser's use or contaminated, then Purchaser may terminate this Agreement by
giving written notice to Seller at any time within sixty (60) days of the
execution of this Agreement by both Purchaser and Seller. If no such notice is
given, then the predication provided in this paragraph shall be deemed
satisfied.
5. CONVEYANCE.
(a) Title. At Closing, Seller shall convey to Purchaser good and
marketable title to the Property in fee simple by general warranty deed
warranting title thereto to be free and clear of all contracts, liens, defects,
encumbrances, encroachments, leases, tenancies and occupancies, (except for the
existing lease to the Company) and those matters approved by Purchaser in
accordance with Section 3 hereof, and current real estate taxes and
assessments, both general and special, not then
2
<PAGE> 3
due and payable (the "Deed"). Seller shall deliver possession of the Property
to Purchaser at Closing in the same condition and state of repair as on the
date of Seller's execution of this Agreement, subject only to normal wear,
tear, and use since that date. Prior to Closing, Seller shall not take or fail
to take any action in which would adversely affect the title, condition, or
value of the Property, or Purchaser's intended use thereof. Seller shall not
enter into any agreements prior to Closing which would materially adversely
affect Purchaser's intended use of the property without Purchaser's prior
written consent, which consent may be withheld in Purchaser's sole and
exclusive discretion.
(b) Limitation of Warranty. The Deed shall contain the following
provisions:
1. Except for warranty of title as provided herein,
Seller hereby conveys to Purchaser all right, title
and interest of Seller in and to the Property,
without any warranty or recourse whatsoever as to the
condition of the Property and the improvements
thereon, including, without limitation, any warranty
of fitness of the Property or the improvements
thereon for a particular purpose, even for the return
or reduction of the purchase price, but with full
substitution and subrogation in and to all of the
rights and actions of warranty which Seller has or
may have against all preceding owners or sellers; it
being understood that Purchaser takes the Property
and the improvements "AS IS" and "WHERE IS,"
Purchaser hereby acknowledging reliance solely on
Purchaser's own inspection of the Property and
improvements, and not on any warranties or
representations from Seller. In addition, Purchaser
acknowledges that Seller has made no representations
or warranties with respect to the Property and
improvements (including, without limitation, the
income to be derived therefrom or expenses to be
incurred with respect thereto), or with respect to
information or documents previously furnished to
Purchaser. All implied warranties with respect to
the Property and improvements, including those
related to merchantability or fitness for a
particular purpose, are hereby disclaimed by Seller
and expressly waived by Purchaser. Purchaser shall
have no right and/or causes of action against Seller
to assert in any controversy, claim, demand, or
litigation arising from or in connection with the
Property or improvements, and Purchaser hereby waives
any such right or cause of action, including, but
without limitation: (a) those arising under LSA -
C.C. Article 2315.3, Statewide Order 29-B by Office
of Conservation, Department of Natural Resources,
State of Louisiana, the Louisiana Environmental
Quality Act, the Louisiana Abandoned Oilfield Waste
Site Law, the Comprehensive Environmental Response,
Compensation and Liability Act, The Resource
Conservation and Recovery Act, the Superfund
Amendments and Reauthorization Act of 1986, the Toxic
Substance Control Act and/or any other federal, state
or local law, ordinance, rule, regulation, order,
decree, penalty or requirement concerning, affecting,
regulating or involving hazardous, toxic or harmful
substances or the environment. Without limiting the
generality of the foregoing, Seller does not warrant
that the Property and improvements are free from
redhibitory or
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<PAGE> 4
latent defects or vices. Purchaser hereby expressly
waives all rights in redhibition and reduction of
purchase price pursuant to Louisiana Civil Code
Articles 2520, et seq. Purchaser hereby releases
Seller from any liability for redhibitory or latent
defects or vices under Louisiana Civil Code Articles
2520 (1870) through 2548 (1870). Seller and
Purchaser acknowledge and stipulate that the sale
price was negotiated and agreed upon after
consideration of the waives of warranty herein set
forth. Purchaser further declares and acknowledges
that Purchaser has read these waiver provisions and
that the foregoing waivers have been brought to the
attention of Purchaser and explained in detail to
Purchaser and that Purchaser has voluntarily and
knowingly consented to the foregoing waivers.
2. This sale is made by Seller, and accepted by
Purchaser, subject to all servitudes, rights-of- way,
alienations and encroachments, whether of record, or
as shown on a survey to be obtained pursuant to
paragraph 4(a).
3. This sale is made by Seller, and accepted by
Purchaser, subject to the reservation by Seller, its
successors and assigns, of all oil, gas and other
materials in or under the Property; provided,
however, that Seller shall not disturb the surface of
the Property in the exercise of this mineral
servitude and reservation.
6. TAXES, RENTS, UTILITY CHARGES. Seller shall pay all taxes and
assessments on the Property, general and special, levied or assessed for any
year prior to that in which the Closing occurs, whether or not such taxes and
assessments are then past due or are payable thereafter. All real estate taxes
and assessments, and all property taxes on personal property acquired
hereunder, if any, for the current year in which the Closing occurs shall be
prorated between the parties as of the Closing Date using the valuation and
rate shown on the last available real estate tax bill; provided, however, that
any installments of reassessed or other special assessments, whether then due
or to become due, together with interest and penalties thereon, if any, shall
be paid in full by Seller; and provided further, that the proration of real
estate taxes and assessments shall be adjusted after Closing in the event the
valuation and/or rate is increased in the tax year up to and including the
Closing Date, as indicated by the next available real estate tax bill. Rents
are to be prorated between the parties as of the Closing Date.
7. CLOSING. The Act of Sale or Closing ("Closing") of the sale
of the Property shall occur before Purchaser's notary public on the "Closing
Date" as that term is defined in the Master Agreement. At Closing, the costs
of conveyance, mortgage, and tax research certificates shall be paid by Seller.
All other closing costs shall be for the account of Purchaser.
8. DEFAULT. If this Agreement is terminated for any reason
permitted herein, the parties shall have no further liability and/or
obligations hereunder except as expressly provided herein. If Seller breaches
or defaults in its performance under this Agreement, Purchaser's sole
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<PAGE> 5
remedy shall be to seek specific performance. Likewise, if Purchaser breaches
or defaults in its performance under this Agreement, Seller's sole remedy shall
be to seek specific performance.
9. REPRESENTATIONS. Seller represents and warrants to Purchaser
at the time of Seller's acceptance of this Agreement, and continuing through
Closing, that:
(a) Seller has good and marketable title or fee simple to the
Property, has authority to execute, deliver and perform this Agreement and each
instrument and agreement to be executed and delivered by Seller pursuant
hereto, and the taking by Seller of the actions contemplated hereby;
(b) To the best of Seller's knowledge, information, and belief,
the Property is properly zoned for the Company's use, and there is no
threatened or pending proceeding to which Seller is a party or of which it has
been given notice or is otherwise aware concerning zoning, condemnation,
impairment of access, tax adjustment or similar proceeding, assessment or plan
by the Government which could affect the Property;
(c) To the best of Seller's knowledge, information, and belief
there are no actions, investigations or proceedings pending or threatened to be
brought in any court or before the Government which does or could have an
effect on the ability of Purchaser to improve and operate the Property for
Purchaser's use, encumber or burden the Property, prevent the execution,
delivery or performance of this Agreement by Purchaser or Seller, delay or
prohibit Closing; neither are there any unsatisfied judgments or consent
decrees which could have any such effect;
(d) To the best of Seller's knowledge, information, and belief,
with respect to the use, operation or maintenance of the Property, Seller and
the Company are in compliance with all statutes, ordinances, orders, writs,
injunctions or decrees, including but not limited to zoning ordinances,
building codes or the Laws;
(e) Seller has provided or will provide to Purchaser true, correct
and complete copies of any documents in Seller's possession as specified in
Section 4(b) of this Agreement;
(f) Other than the Company, there are no tenants, parties in
possession, adverse possessors or other occupants on the Property, and Seller
has not accepted or granted any other agreements, offers or options to purchase
or lease the Property;
(g) To the best of Seller's knowledge, information, and belief,
the Property has never been used or operated for the storage, manufacture,
treatment, transportation, sale or disposal of Hazardous Materials, except as
required in the ordinary course of the business of the Company;
(h) Seller has not made an assignment for the benefit of creditors
and is not insolvent or bankrupt.
5
<PAGE> 6
10. OPTION TO PURCHASE. In consideration of the execution of the
Master Agreement, and of the obligations of the parties as therein specified,
Seller hereby grants to Purchaser an option to purchase (the "Option") the
immovable property bearing the municipal number 2617 Engineers Road, Belle
Chasse, Plaquemines Parish, Louisiana, measuring approximately 300 feet front
on Engineers Road by a depth of approximately 665 feet more or less, between
equal and parallel lines, and comprised of approximately 4.5 acres, together
with all improvements and component parts located thereon, and subject to a
lease in favor of Pool Co., Gulf Offshore Operations, dated June 21, 1995,
expiring December 31, 1998, which property is more particularly described on
Exhibit "B" attached hereto and made a part hereof (the "Option Property").
(a) The Price for which Seller shall sell the Option Property
shall be ONE MILLION TWO HUNDRED THOUSAND and NO/100 Dollars ($1,200,000) in
cash (the "Option Price").
(b) The Purchaser's right to exercise the Option shall commence as
of the Closing, and shall be irrevocable for a period of thirty (30) days from
the Closing date (the "Option Period").
(c) The Purchaser may exercise its Option at any time during the
Option Period by the giving of notice to Seller of its exercise of the Option.
The sale of the Option Property shall then be concluded within sixty (60) days
of such notice. The Act Of Sale of the Option Property shall contain terms and
conditions substantially identical to, the terms and provisions contained in
and required by this Agreement, taking into account such changes and additions
as shall be mutually acceptable to the parties.
11. EXTENSION OF AGREEMENT AND LEASE. In the event the survey
described in Section 3, the Tests, described in Section 4(b), the status of
title to the Property, described in Section 3, are not acceptable to Purchaser
or have not been obtained, as applicable, in Purchaser's sole discretion, as of
the expiration of the applicable due diligence periods as provided herein, or
if Court Approval as described in Section 12(m) has not been obtained as of the
Closing Date, Purchaser, at Purchaser's option, may, in addition to the
termination rights set forth in this Agreement, extend the Closing Date with
respect to the purchase of the Property for a three year period, in which case,
concurrent with the closing of the transactions contemplated by the Master
Agreement, Purchaser shall lease the Property on the same terms and conditions
set forth in that certain Lease of Commercial Property, which commenced July 1,
1984, between HBH, Inc., as Tenant, and H. D. Hughes, as Lessor, a copy of
which is attached hereto as Exhibit "C", except that the rent stipulated
therein shall be adjusted annually on each anniversary date of the execution
thereof in accordance with the CPI-U, U.S. City Average. Seller will obtain
all required approvals of any court or other party and pay any fee or expense
required to obtain such approval. Such lease may be terminated by Purchaser
only in the event that it elects to close the purchase of the Property pursuant
to the terms of the Agreement.
6
<PAGE> 7
12. MISCELLANEOUS
(a) Expropriation or Casualty. If, prior to Closing, the Property
or any part thereof shall be, or becomes known to Purchaser or Seller (who
shall notify Purchaser promptly) to be, or threatened to be condemned or
otherwise acquired for public purposes, or if access to the Property shall be,
or become known to Purchaser or Seller to be, or threatened to be restricted or
denied through eminent domain, or the exercise of police power, all of the
above- described events collectively referred to as "Expropriation"), or if any
portion of the Property shall be destroyed or damaged by fire or other
casualty, as determined by Purchaser, then in any such case, Purchaser, upon
notice to Seller, may elect (i) to terminate this Agreement, or (ii) to receive
from the proceeds of any insurance payable to Seller upon such damage or
destruction, or from any award paid or payable to Seller as a result of the
Expropriation, as the case may be, an appropriate credit against the balance of
the Purchase price to be paid by Purchaser.
(b) Transfer Taxes - Commissions. Seller shall defend, indemnify
and hold harmless Purchaser, its successors, assigns, directors, officers,
employees and agents from and against any liability, including court costs and
attorneys' fees, for any commissions by any real estate agent or broker
utilized by Seller in this transaction.
(c) Notices. Any and all notices provided under this Agreement
must be in writing and shall be deemed given when delivered in person, or when
deposited with Federal Express or other similar overnight service, return
receipt requested, or when deposited in the United States mails, postage
prepaid for certified mail, return receipt requested, or upon actual receipt of
a facsimile or other similar transmission (provided that a copy of the
facsimile is delivered or deposited within twenty-four [24] hours in the manner
specified above), properly addressed to the parties. For purposes of notice,
the addresses of the parties shall be as follows:
If to SELLER to: Elizabeth H. DePass, Executrix
Succession of Herbert D. Hughes
5801 Citrus Boulevard
Harahan, Louisiana 70123
With a copy to: Stewart F. Peck
Lugenbuhl, Burke, Wheaton, Peck,
Rankin and Hubbard
Pan-American Life Center
601 Poydras Street, Suite 2775
New Orleans, Louisiana 70130
If to PURCHASER to: TransCoastal Marine Services, Inc.
505 Lorie Avenue, Suite 1
Lafayette, Louisiana 70507
Attention: Mr. G. Darcy Klug
7
<PAGE> 8
With a copy to: Robert J. Viguet, Jr.
Chamberlain, Hrdlicka, White,
Williams & Martin
1200 Smith Street, Suite 1400
Houston, Texas 77002-4310
Either party may designate a different address for receiving notices
hereunder by giving at least ten (10) days written notice thereof to the other
party.
(d) Waiver. Except as otherwise specifically provided in this
Agreement, no failure or delay on the part of either party in exercising any of
their respective rights hereunder upon any failure by the other party to
perform or observe any condition, covenant or provision herein contained shall
operate as a waiver thereof, nor shall any single or partial exercise of any of
such rights preclude any other or further exercise thereof or the exercise of
any other right hereunder. No waiver or release of any of the terms,
conditions or provisions of this Agreement shall be valid or asserted or relied
upon by either Party hereto or offered in any judicial proceeding or otherwise,
unless the same is in writing and duly executed by the party against whom such
waiver or release is being asserted.
(e) Construction. This Agreement shall be governed and performed
in accordance with the laws of the State of Louisiana.
(f) Severability. This Agreement is intended to be performed in
accordance with and only to the extent permitted by all applicable laws,
ordinances, rules and regulations. If any provision of this Agreement of the
application thereof to any person, entity, or circumstance, shall for any
reason and to any extent be held to be invalid or unenforceable, the remainder
of this Agreement and the application of such provision to the other person or
circumstance shall not be affected thereby, but rather shall be enforced to the
greatest extent permitted by law.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, which together shall constitute the understanding of the parties
hereto.
(h) Dates. If any deadline set forth herein falls on a Saturday,
Sunday or holiday, the deadline shall be extended to the next business day.
(i) Captions. The captions in this Agreement and in any addenda
or exhibits attached hereto are used for reference purposes only and they in no
way define, limit or prescribe the scope or intent of this Agreement or any
provisions hereof.
(j) Survival. The terms of this Agreement shall survive Closing.
(k) Further Assurances. The parties agree to execute such other
documents as may be required from time to time to give effect to the terms
contained herein and the intent hereof.
8
<PAGE> 9
(l) Counsel. The parties acknowledge that they have had an
opportunity to consult with legal counsel and to study and negotiate the terms
and provisions of this Agreement. The draftsmanship or authorship of this
Agreement, any addenda hereto and any interlineations hereof shall not be
construed in favor of or against either party, it having been negotiated and
adopted fully and freely by both parties.
(m) COURT APPROVAL. THIS AGREEMENT, AND THE SALE OF THE PROPERTY,
AND OF THE OPTION PROPERTY, BY SELLER, IS SUBJECT TO THE APPROVAL OF THE 24TH
JUDICIAL DISTRICT COURT FOR THE PARISH OF JEFFERSON, STATE OF LOUISIANA, IN
PROCEEDING NO. 502898, DIVISION "A", STYLED "SUCCESSION OF HERBERT D. HUGHES.
IF COURT APPROVAL IS NOT OBTAINED BY THE CLOSING DATE, PURCHASER SHALL HAVE THE
RIGHT TO TERMINATE THIS AGREEMENT.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
undersigned this 20th day of August, 1997, having first read and understood
the terms contained herein and the purpose, intent and effects hereof.
WITNESSES: PURCHASER:
By: /s/ SUSAN POE TRANSCOASTAL MARINE SERVICES, INC.
-----------------------------
Print: Susan Poe
---------------------------
By: /s/ WILMA BURDEN By: /s/ BILL E. STALLWORTH
----------------------------- ------------------------------------
Bill E. Stallworth
Chief Executive Officer
SELLER:
By: /s/ THOMAS P. BUDDE SUCCESSION OF HERBERT D. HUGHES
------------------------------
Print: Thomas P. Budde
--------------------------
By: /s/ DAN HUGHES By: /s/ ELIZABETH H. DEPASS
------------------------------ ----------------------------------
Elizabeth H. DePass, Executrix
Print: Dan Hughes
--------------------------
9
<PAGE> 10
THE STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
BEFORE ME, the undersigned authority, on this day personally appeared
Bill E. Stallworth, Chief Executive Officer of TransCoastal Marine Services,
Inc., known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that he executed the same for the purposes
and consideration therein stated, and in the capacity therein set forth.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 22nd day of August,
1997.
[SEAL] /s/ MARY ANN SOTO
---------------------------------
Notary Public in and for the
State of Texas
Mary Ann Soto
---------------------------------
Printed Name of Notary
My Commission Expires:
5-10-2000
---------------------------------
THE STATE OF LOUISIANA Section
Section
PARISH OF ORLEANS Section
BEFORE ME, the undersigned authority, on this day personally appeared
Elizabeth H. DePass, Executrix of Succession of Herbert D. Hughes, known to me
to be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that (s)he executed the same for the purposes and
consideration therein stated, and in the capacity therein set forth.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 20th day of August,
1997.
[SEAL] /s/ STEWART F. PECK
---------------------------------
Notary Public in and for the
State of Louisiana
Stewart F. Peck
---------------------------------
Printed Name of Notary
My Commission Expires:
at death
---------------------------------
10
<PAGE> 11
EXHIBIT "A"
LEGAL DESCRIPTION
A certain tract of land, containing 14.217 acres, situated in and
being a part of Section 91, Township 14 South, Range 24 East, West of the
Mississippi River, Plaquemines Parish, Louisiana, and being more fully
described as follows, to-wit:
Commence at the intersection of the northwesterly right of way line of
the Gulf Intracoastal Waterway-Alternate Route with northeasterly line of Lots
1, 3, 5, 7, etc. of Concord Canal Subdivision - Bayou Barataria Section and run
N.53o 44' 04" E., along the said northwesterly right of way line of the Gulf
Intracoastal Waterway-Alternate Route, for a distance of 307.12 feet, to the
point of beginning of the tract herein described located 270 feet northeasterly
from and perpendicular to the said northeasterly line of Lots 1, 3, 5, 7, etc.
of Concord Canal Subdivision - Bayou Barataria Section;
Run thence N.64 degrees 43' 40"W., for a distance of 182.00 feet, to a
point;
Run thence S.53 degrees 44' 04"W., for a distance of 216.12 feet, to a
point;
Run thence N.54 degrees 43' 40"W., for a distance of 469.06 feet, to
a point located N.25 degrees 25'20"E., at a distance of 80.00 feet, from a
Grate Bar having coordinate values of X =2,407,918.45 and Y=428,147.52, which
Grate Bar marks the most northerly corner of Lot 1 of said Concord Canal
Subdivision - Bayou Barataria Section;
Run thence N.64 degrees 25' 40"W., for a distance of 20.00 feet, to a
point;
Run thence N.53 degrees 44' 04"E., for a distance of 835.85 feet, to a
point;
Run thence S.36 degrees 15' 56"E., for a distance of 590.00 feet, to a
point;
Run thence N.53 degrees 44' 04"E., for a distance of 300.00 feet, to a
point;
Run thence S.36 degrees 15' 56"E., for a distance of 425.00 feet, to
a point in the center-line of the Gulf Intracoastal Waterway-Alternate Route;
Run thence S.53 degrees 44' 04"W., along the center-line of the Gulf
Intracoastal Waterway-Alternate Route, for a distance of 600.00 feet, to a
point;
Run thence N.36 degrees 15' 66"W., for a distance of 425.00 feet, to
the point of beginning.
Exhibit "A" Page 1
<PAGE> 12
The tract hereinabove described is bounded northwesterly by the right
of way for Engineers Road, northeasterly by property owned by Power
Enterprises, Inc. or assigns and by property owned by Hero Lands Company or
assigns, southeasterly by property owned by Hero Lands Company or assigns and
southwesterly by the right of way for Concord Road and by property owned by
Hero Lands Company or assigns and is subject to a 60-foot wide road and rail
servitude in favor of Hero Lands Company which lies southeasterly from and
contiguous to the said right of way for Engineers Road and is subject to a
425-foot wide servitude in favor of the United States of America for the Gulf
Intracoastal Waterway- Alternate Route which lies northwesterly from and
contiguous to the southeasterly boundary as hereinabove described. All as more
fully shown on the attached map of survey by Hugh B. McCurdy, Jr. dated July
23, 1981, as amended on March 24, 1982, whereon the hereinabove described tract
is the area encompassed by connecting the letters H-J-K-A-B-C-D-E-F-G- H.
Survey, data refers to the State Plane Coordinate System.
LESS AND EXCEPT THE FOLLOWING-DESCRIBED PROPERTY:
A certain tract of land situated in and being a part of Section 91,
Township 14 South, Range 24 East, West of the Mississippi River, Plaquemines
Parish, Louisiana, and being more fully described as follows, to-wit:
Commence at the intersection of the north-westerly right of way line
of the Gulf Intracoastal Waterway- Alternative Route with northeasterly line of
Lots 1, 3, 5, 7, etc. of Concord Canal Subdivision - Bayou Barataria Section
and run North 53 degrees 44 minutes 04 seconds East, along Intracoastal
Waterway-Alternate Route, for a distance of 607.12 feet to the Point of
Beginning of the tract herein described:
Run thence North 53 degrees 44 minutes 04 seconds East, for a distance
of 300.00 feet to a point;
Run thence South 36 degrees 15 minutes 56 seconds East, for a distance
of 71.30 feet, to a point;
Run thence South 52 degrees 11 minutes 41 seconds West, for a distance
of 304.82 feet to a point;
Run thence North 35 degrees 45 minutes 40 seconds West, for a distance
of 79.50 feet, to a point;
Run thence North 35 degrees 27 minutes 33 seconds West, for a distance
of 82.21 feet, to a point;
Run thence North 53 degrees 44 minutes 40 seconds East, for a distance
of 2.85 feet to a point;
Exhibit "A" Page 2
<PAGE> 13
Run thence South 36 degrees 15 minutes 56 seconds East, for a distance
of 82.20 feet, to a Point of Beginning.
The tract hereinabove described is bounded northwesterly by property
owned by Power Enterprises, Inc., northeasterly by property owned by Power
Enterprises, Inc., and by property owned by Hero Lands Company or assigns,
southeasterly by property formerly owned by Hughes Lands, Inc., and
southwesterly by property formerly owned by Hughes Lands, Inc. All as more
fully shown on the map of survey by Hugh B. McCurdy, Jr., dated on May 22,
1986. Survey data refers to the State Plan Coordinate system (the "Property").
Exhibit "A" Page 3
<PAGE> 14
EXHIBIT "B"
OPTION PROPERTY
LEGAL DESCRIPTION
A CERTAIN PIECE OR PORTION OF GROUND, together with all the buildings and
improvements thereon and all of the rights, ways, privileges, prescriptions,
servitudes, advantages and appurtenances thereunto belonging or in anywise
appertaining, containing 4.063 acres, situated in and being a part of Section
91, Township 14 South, Range 24 East, Plaquemines Parish, Louisiana, and being
more fully described as follows, to wit: Commence at the point of intersection
of the northwesterly right of way of the Gulf Intracoastal Waterway-Alternate
Route with the northeasterly line of Concord Canal Subdivision-Bayou Barataria
Section and run N 53 degrees 44' 04" E., along said northwesterly right of way
line of the Gulf Intracoastal Waterway-Alternate Route, for a distance of
607.12 feet, to the pont of beginning of the tract herein described; run thence
N 36 degrees 14' 56" W., for a distance of 590.00 feet, to a point in the
southeasterly right of way line of Engineers Road; run thence N53 degrees 44'
04" E., along the southeasterly right of way line of Engineers Road, for a
distance of 300.00 feet, to a point; run thence S 36 degrees 15' 56" E., for a
distance of 590.00 feet, to a point in the northwesterly right of way line of
the Gulf Intracoastal Waterway-Alternate Route; run thence S 53 degrees 44' 04"
W., along the northwesterly right of way line of the Gulf Intracoastal
Waterway- Alternate Route, for a distance of 300.00 feet, to the point of
beginning. Subject to a 60 foot wide road and rail servitude lying
southeasterly from and contiguous to the said southeasterly right of way line
of Engineers Road.
TOGETHER WITH THE FOLLOWING-DESCRIBED PROPERTY:
A certain tract of land situated in and being a part of Section 91, Township 14
South, Range 24 East, West of the Mississippi River, Plaquemines Parish,
Louisiana, and being more fully described as follows, to-wit:
Commence at the intersection of the north-westerly right of way line of the
Gulf Intracoastal Waterway-Alternative Route with northeasterly line of Lots 1,
3, 5, 7, etc. of Concord Canal Subdivision - Bayou Barataria Section and run
North 53 degrees 44 minutes 04 seconds East, along Intracoastal
Waterway-Alternate Route, for a distance of 607.12 feet to the Point of
Beginning of the tract herein described:
Run thence North 53 degrees 44 minutes 04 seconds East, for a distance of
300.00 feet to a point;
Exhibit "B" Page 1
<PAGE> 15
Run thence South 36 degrees 15 minutes 56 seconds East, for a distance of 71.30
feet, to a point;
Run thence South 52 degrees 11 minutes 41 seconds West, for a distance of
304.82 feet to a point;
Run thence North 35 degrees 45 minutes 40 seconds West, for a distance of 79.50
feet, to a point;
Run thence North 35 degrees 27 minutes 33 seconds West, for a distance of 82.21
feet, to a point;
Run thence North 53 degrees 44 minutes 40 seconds East, for a distance of 2.85
feet to a point;
Run thence South 36 degrees 15 minutes 56 seconds East, for a distance of 82.20
feet, to the Point of Beginning.
The tract hereinabove described is bounded northwesterly by property owned by
Power Enterprises, Inc., northeasterly by property owned by Power Enterprises,
Inc., and by property owned by Hero Lands Company or assigns, southeasterly by
property formerly owned by Hughes Lands, Inc., and southwesterly by property
formerly owned by Hughes Lands, Inc. All as more fully shown on the map of
survey by Hugh B. McCurdy Jr., dated on May 22, 1986. Survey data refers to
the State Plan Coordinate System (the "Property").
Exhibit "B" Page 2
<PAGE> 1
EXHIBIT 10.22
LEASEHOLD PURCHASE AGREEMENT
TransCoastal Marine Services, Inc., a Delaware Corporation, appearing
herein through G. Darcy Klug, its Vice President, duly authorized by resolution
of its Board of Directors, a certified copy of which is attached hereto
("Purchaser"), offers to purchase and receive from BELDON E. FOX, SR.
GRANDCHILDRENS TRUST NO. 1 ("Seller"), that certain leasehold interest (the
"Leasehold") established by that certain lease agreement (the "Ground Lease"),
dated July 21, 1987, between Beldon E. Fox, Sr. and Clementine Ruth Clements,
as original lessee (and assigned by original lessee to Seller) and Port of
Iberia District, a port harbor and terminal district, as lessor (the "Ground
Lessor"), recorded under Entry No. 87-7302 of the records of Iberia Parish,
Louisiana, covering the immovable property in Iberia Parish, Louisiana, which
property is more particularly described in Exhibit "A" attached hereto and made
a part hereof (the "Land"), together with all improvements and component parts
located thereon, (the "Improvements"). The Leasehold and Seller's right and
title in the Improvements collectively called the "Property."
1. PURCHASE PRICE. At closing, Purchaser shall pay to Seller the sum
of ONE MILLION FIVE HUNDRED THOUSAND and NO/100 DOLLARS ($1,500,000.00) for the
assignment of the Property (the "Purchase Price").
2. DEPOSIT. Purchaser shall not be required to post or to deliver a
deposit, this Agreement being concluded in consideration of the mutual
obligations assumed by the parties pursuant to that certain AGREEMENT and PLAN
OF MERGER effective as of August 27, 1997, and executed by and among Purchaser,
RNI Acquisition Corp. and Red Fox Companies of New Iberia, Inc. (the "Company")
regarding the sale of all of the outstanding capital stock of the Company as
well as the Property (the "Master Agreement"); Purchaser and Seller agree and
stipulate that the right accorded the Purchaser pursuant to this Agreement is
predicated upon the conclusion of the Purchaser's acquisition of the
outstanding capital stock of the Company in accordance with the terms and
conditions of the Master Agreement.
3. TITLE. Purchaser may procure, at Purchaser's expense, a title
report or title commitment on the condition of Seller's title to the Property
and shall notify Seller of any exceptions to title disclosed therein ("Title
Defects"). Seller shall have thirty (30) days from the date of notification by
Purchaser to cure or remove the Title Defects. If Seller, acting with due
diligence and best efforts, fails to cure or remove the Title Defects within
said period, Purchaser shall have the right, in its sole and exclusive
discretion, upon notice to Seller (a) to terminate this Agreement, or (b) to
waive its objections to the Title Defects and proceed to Closing in accordance
with the terms hereof. Purchaser shall have the right but not the obligation
to take whatever action it deems appropriate to cure or remove the Title
Defects. It is a condition of Purchaser's obligation to close hereunder that
an extended coverage ALTA owner's policy of title insurance (Form B, 1970 or
other form acceptable to Purchaser) be issued by a title company acceptable to
Purchaser and in the amount of the Purchase Price, showing an insurable, good
and marketable title in Purchaser subject only to the Title Defects approved by
Purchaser ("Title Policy").
<PAGE> 2
4. SURVEY, PROPERTY INFORMATION, TESTING AND CONTIGUITY.
(a) Survey. Purchaser may have the Land and Improvements surveyed, at
Purchaser's expense, which survey shall be acceptable for the issuance of the
Title Policy without taking general exception to matters of survey. If such
survey is made, the survey description shall be used in the Assignment of
Lease, as defined below. Approval by Purchaser of the survey and of matters or
issues apparent on the survey shall be a condition precedent to the Purchaser's
obligations under this Agreement.
(b) Consent. Purchaser shall request the consent of the Ground Lessor
to the assignment of the Ground Lease. Seller agrees to cooperate with
Purchaser in securing the Ground Lessor's consent. If Ground Lessor does not
consent to such conveyance and assignment by the end of the sixty (60) day
period set forth below in Section 4(d), Purchaser may terminate this Agreement.
(c) Proper Information. Seller shall provide to Purchaser within
thirty (30) days after Seller's execution of this Agreement, and thereafter
until Closing, as Seller may come into possession or control of same, correct
and complete copies of any documents, correspondence and information in
Seller's possession or control relating to the Land and the Property.
(d) Testing. Purchaser shall be accorded a period of sixty (60) days
from the date of the execution hereof by both parties in which to conduct any
and all investigations, inspections and tests with respect to the environmental
condition of the Land and the Property. Purchaser and Purchasers' agents
shall have the right to enter and to conduct or cause to be conducted any
investigations, inspections and tests of the Land and the Property (the
"Tests"), including but not limited to investigations, inspections and tests
regarding the condition of the soil, surface water and groundwater of the Land
and the Property to determine the environmental condition of the Land and the
Property and to test for the presence of any Hazardous Materials, including a
"Phase I" environmental assessment and, if Purchaser in its sole discretion
deems it necessary, a "Phase II" environmental assessment. For purposes
hereof, "Hazardous Materials" shall mean any and all flammable explosives,
hydrocarbons and/or petroleum products or fractions thereof, radioactive
materials, hazardous or toxic wastes, substances or materials, including but
not limited to those materials and substances defined as hazardous substances",
"extremely hazardous substances", "hazardous materials", "hazardous wastes" or
"toxic substances" in the Laws. For purposes hereof, the "Laws" shall include
but not be limited to the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as amended; the
Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901 et seq.; and any other federal, state and local
statutes and ordinances, including all amendments thereto, replacements
thereof, any rules, regulations and orders adopted and issued pursuant thereto,
and any judicial and administrative interpretations thereof. The cost of the
"Phase I" environmental assessment shall be split 50/50 by Seller and
Purchaser. Purchaser shall pay all other costs for such Tests. If this
Agreement is terminated for any reason permitted herein, Purchaser shall repair
any damage caused to the Land and the Property by the Tests. Purchaser shall
and does hereby indemnify and hold harmless Seller from any and all claims and
causes of action arising out of such Tests, provided Seller is not negligent or
at fault, and further provided that Purchaser shall not be responsible for any
costs, claims, damages, or liabilities
2
<PAGE> 3
caused by or arising from any Hazardous Materials discovered on the Land and
the Property by such Tests. If the Tests reveal that the Land and the Property
is, in the Purchaser's sole and exclusive discretion, unsuitable to Purchaser's
use or contaminated, then Purchaser may terminate this Agreement by giving
written notice to Seller at any time within sixty (60) days of the execution of
this Agreement by both Purchaser and Seller. If no such notice is given, then
the predication provided in this paragraph shall be deemed satisfied.
5. CONVEYANCE. At Closing, Seller shall assign to Purchaser good and
marketable title to the Ground Lease and Improvements by assignment of lease
(the "Assignment of Lease"), warranting title thereto to be free and clear of
all contracts, liens, defects, encumbrances, encroachments, leases, tenancies
and occupancies, (except for the existing lease to the Company) and those
matters approved by Purchaser in accordance with Section 3 hereof, and current
real estate taxes and assessments, both general and special, not then due and
payable. Seller shall deliver possession of the Land and Property to Purchaser
at Closing in the same condition and state of repair as on the date of Seller's
execution of this Agreement, subject only to normal wear, tear, and use since
that date. Prior to Closing, Seller shall not take or fail to take any "action
in which would adversely affect the title, condition, or value of the Land and
Property, or Purchaser's intended use thereof. Seller shall not enter into
any agreements prior to Closing, including, without limitation, amending or
modifying the Ground Lease, which would materially adversely affect Purchaser's
intended use of the Land and Property without Purchaser's prior written
consent, which consent may be withheld in Purchaser's sole and exclusive
discretion.
6. TAXES, RENTS, UTILITY CHARGES. Seller shall pay all taxes and
assessments on the Property, general and special, levied or assessed for any
year prior to that in which the Closing occurs, whether or not such taxes and
assessments are then past due or are payable thereafter. All real estate
taxes and assessments, and all property taxes on personal property acquired
hereunder, if any, for the current year in which the Closing occurs be prorated
between the parties as of the Closing Date using the valuation and rate shown
on the last available real estate tax bill; provided, however, that any
installments of reassessed or other special assessments, whether then due or to
become due, together with interest and penalties thereon, if any, shall be paid
in full by Seller; and provided further, that the proration of real estate
taxes and assessments shall be adjusted after Closing in the event the
valuation and/or rate is increased in the tax year up to and including the
Closing Date, as indicated by the next available real estate tax bill. Rents
are to be prorated between the parties as of the Closing Date.
7. CLOSING. The Assignment or Closing ("Closing") of the assignment
of the Property shall occur before Purchaser's notary public on or before
ninety (90) days of the execution of the Agreement ("Closing Date"), subject to
extension by mutual consent of the parties in order that the Closing Date
coincide with the closing of the transactions anticipated by and referenced in
the Master Agreement. At Closing, the costs of conveyance, mortgage, and tax
research certificates shall be paid by Seller. All other costs shall be for
the account of Purchaser.
8. DEFAULT. If this Agreement is terminated for any reason permitted
herein, the parties shall have no further liability and/or obligations
hereunder except as expressly provided herein. If Seller breaches or defaults
in its performance under this Agreement, Purchaser's sole remedy
3
<PAGE> 4
shall be to seek specific performance. Likewise, if Purchaser breaches or
defaults in its performance under this Agreement, Seller's sole remedy shall be
to seek specific performance.
9. REPRESENTATIONS. Seller represents and warrants to Purchaser at
the time of Seller's acceptance of this Agreement, and continuing through
Closing, that:
(a) Seller has and owns 100% good and marketable title to the
leasehold interest of the Ground Lease and the Improvements, has authority to
execute, deliver and perform this Agreement and each instrument and agreement
to be executed and delivered by Seller pursuant hereto, and the taking by
Seller of the actions contemplated hereby;
(b) To the best of Seller's knowledge, information, and belief, the
Property is properly zoned for the Company's use, and there is no threatened or
pending proceeding to which Seller is a party or of which it has been given
notice or is otherwise aware concerning zoning, condemnation, impairment of
access, tax adjustment or similar proceeding, assessment or plan by the
Government which could affect the Property;
(c) To the best of Seller's knowledge, information, and belief there
are no actions, investigations or proceedings pending or threatened to be
brought in any court or before the Government which does or could have an
effect on the ability of Purchaser to improve and operate the Property for
Purchaser's use, encumber or burden the Property, prevent the execution,
delivery or performance of this Agreement by Purchaser or Seller, delay or
prohibit Closing; neither are there any unsatisfied judgments or consent
decrees which could have any such effect;
(d) To the best of Seller's knowledge, information, and belief, with
respect to the use, operation or maintenance of the Property, Seller and the
Company are in compliance with all statutes, ordinances, orders, writs,
injunctions or decrees, including but not limited to zoning ordinances,
building codes or the Laws;
(e) Seller has provided or will provide to Purchaser true, correct and
complete copies of any documents in Seller's possession as specified in Section
4 (b) of this Agreement;
(f) Other than the Company, there are no tenants, parties in
possession, adverse possessors or other occupants on the Property, and Seller
has not accepted or granted any other agreements, offers or options to purchase
or lease the Property;
(g) To the best of Seller's knowledge, information, and belief, the
Property has never been used or operated for the storage, manufacture,
treatment, transportation, sale or disposal of Hazardous Materials, except as
required in the ordinary course of the business of the Company and Seller has
no notice from any government authority or other report or study, that
indicates that Hazardous Materials are or have been located on the Property;
(h) Seller has not made an assignment for the benefit of creditors and
is not insolvent or bankrupt.
4
<PAGE> 5
10. MISCELLANEOUS.
(a) Expropriation or Casualty. If, prior to Closing, the Property or
any part thereof shall be, or becomes known to Purchaser or Seller (who shall
notify Purchaser promptly) to be, or threatened to be condemned or otherwise
acquired for public purposes, or if access to the Property shall be, or become
known to Purchaser or Seller to be, or threatened to be restricted or denied
through eminent domain, or the exercise of police power, all of the
above-described events collectively referred to as "Expropriation"), or if any
portion of the Property shall be destroyed or damaged by fire or other
casualty, as determined by Purchaser, then in any such case, Purchaser, upon
notice to Seller, may elect (i) to terminate this Agreement, or (ii) to receive
from the proceeds of any insurance payable to Seller upon such damage or
destruction, or from any award paid or payable to Seller as a result of the
Expropriation, as the case may be, an appropriate credit against the balance of
the Purchase Price to be paid by Purchaser.
(b) Transfer Taxes - Commissions. Seller shall defend, indemnify and
hold harmless Purchaser, its successors, assigns, directors, officers,
employees and agents from and against any liability, including court costs and
attorneys' fees, for any commissions by any real estate agent or broker
utilized by Seller in this transaction.
(c) Notices. Any and all notices provided under this Agreement must
be in writing and shall be deemed given when delivered in person, or when
deposited with Federal Express or other similar overnight service, return
receipt requested, or when deposited in the United States mails, postage
prepaid for certified mail, return receipt requested, or upon actual receipt of
a facsimile or other similar transmission (provided that a copy of the
facsimile is delivered or deposited within twenty-four [24] hours in the manner
specified above), properly addressed to the parties. For purposes of notice,
the addresses of the parties shall be as follows:
If to SELLER to: The Beldon E. Fox, Sr. Grandchildren's
Trust No. 1
2425 W. Loop South, Suite 200
Houston, TX 77027
Attention: Allyson B. Fox
If to PURCHASER to: TransCoastal Marine Services, Inc.
505 Lorie Avenue, Suite I
Lafayette, Louisiana 70507
Attention: Mr. G. Darcy Klug
With a copy to: Robert J. Viguet, Jr.
Chamberlain, Hrdlicka, White,
Williams ~ Martin
1200 Smith Street, Suite 1400
Houston, Texas 70002-4310
Either party may designate a different address for receiving notices
hereunder by giving at least ten (10) days written notice thereof to the other
parry.
5
<PAGE> 6
(d) Waiver. Except as otherwise specifically provided in this
Agreement, no failure or delay on the part of either party in exercising any of
their respective rights hereunder upon any failure by the other party to
perform or observe any condition, covenant or provision herein contained shall
operate as a waiver thereof, nor shall any single or partial exercise of any of
such rights preclude any other or further exercise thereof or the exercise of
any other right hereunder. No waiver or release of any of the terms,
conditions or provisions of this Agreement shall be valid or asserted or relied
upon by either Party hereto or offered in any judicial proceeding or otherwise,
unless the same is in writing and duly executed by the party against whom such
waiver or release is being asserted.
(e) Construction. This Agreement shall be governed and performed in
accordance with the laws of the State of Louisiana.
(f) Severability. This Agreement is intended to be performed in
accordance with and only to the extent permitted by all applicable laws,
ordinances, rules and regulations. If any provision of this Agreement or the
application thereof to any person, entity, or circumstance, shall for any
reason and to any extent be held to be invalid or unenforceable, the remainder
of this Agreement and the application of such provision to the other person or
circumstance shall not be affected thereby, but rather shall be enforced to the
greatest extent permitted by law.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, which together shall constitute the understanding of the parties
hereto.
(h) Dates. If any deadline set forth herein falls on a Saturday,
Sunday or holiday, the deadline shall be extended to the next business day.
(i) Captions. The captions in this Agreement and in any addenda or
exhibits attached hereto are used for reference purposes only and they in no
way define, limit or prescribe the scope or intent of this Agreement or any
provisions hereof.
(j) Survival. The terms of this Agreement shall survive Closing.
(k) Further Assurances. The parties agree to execute such other
documents as may be required from time to time to give effect to the terms
contained herein and the intent hereof.
(l) Counsel. The parties acknowledge that they have had an
opportunity to consult with legal counsel and to study and negotiate the terms
and provisions of this Agreement. The draftsmanship or authorship of this
Agreement, any addenda hereto and any interlineations hereof shall not be
construed in favor of or against either party, it having been negotiated and
adopted fully and freely by both parties.
6
<PAGE> 7
IN WITNESS WHEREOF, this Agreement has been duly executed by the
undersigned this 11th day of August 1997, having first read and
understood the terms contained herein and the purpose, intent and effects
hereof.
WITNESS: PURCHASER:
By: /s/ JEAN SAVOY TRANSCOASTAL MARINE SERVICES, INC.
-------------------------------
Print: Jean Savoy
----------------------------
By: /s/ MARY ANN SOTO By: /s/ G. DARCY KLUG
------------------------------- --------------------------------
Print: Mary Ann Soto G. Darcy Klug, Vice President
----------------------------
SELLER:
By: /s/ JEAN SAVOY BELDON E. FOX, SR.
------------------------------- GRANDCHILDRENS TRUST NO. 1
Print: Jean Savoy
----------------------------
By: /s/ MARY ANN SOTO By: /s/ ALLYSON B. FOX
------------------------------- --------------------------------
Print: Mary Ann Soto Allyson B. Fox, Trustee
---------------------------- --------------------------------
7
<PAGE> 8
THE STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
BEFORE ME, the undersigned authority, on this day personally appeared
Allyson B. Fox, Trustee of Beldon E. Fox, Sr. Grandchildrens Trust
No. 1, known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that (s)he executed the same for the
purposes and consideration therein stated, and in the capacity therein set
forth.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 11th day of August,
1997.
[SEAL] /s/ MARY ANN SOTO
-----------------------------
Notary Public in and for the
State of Texas
Mary Ann Soto
-----------------------------
Printed Name of Notary
My Commission Expires:
5-10-2000
-----------------------------
THE STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
BEFORE ME, the undersigned authority, on this day personally appeared
G. Darcy Klug, President of TransCoastal Marine Services, Inc., known to me to
be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he executed the same for the purposes and consideration
therein stated, and in the capacity therein set forth.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 11th day of August,
1997.
[SEAL] /s/ MARY ANN SOTO
-----------------------------
Notary Public in and for the
State of Texas
Mary Ann Soto
-----------------------------
Printed Name of Notary
My Commission Expires:
5-10-2000
-----------------------------
8
<PAGE> 9
EXHIBIT A
(a) Part of Lot 10 at the Port of Iberia located in Section 3, Township 13
South, Range 6 East, Iberia Parish, Louisiana, containing 10.754
acres, together with any improvements thereon, containing and
measuring 469.1 feet on the west side of Lewis Street (Parish Road No.
605), being irregular in shape and being bounded on the north by Lot 9
and part of Lot 10, on the south by Lot 11, on the east by Lewis
Street (Parish Road No. 605) and on the west by Commercial Canal,
being part of Lot 10 as shown in part on plat of R. B. Marie, Land
Surveyor, dated October 12, 1978, a copy of which is attached to that
certain Lease dated July 21, 1987, and is recorded under Entry No.
87-7302 of the records of the Clerk of Court's Office for the Parish
of Iberia, Louisiana.
Subject to that certain five foot utilities easement running along the
entire eastern boundary of the subject property parallel and adjacent
to Lewis Street (Parish Road No. 605) as more particularly shown on
plat of R. B. Marie, Land Surveyor, dated October 12, 1978.
(b) Part of Lot 10 at the Port of Iberia located in Section 3, Township 13
South, Range 6 East, Iberia Parish, Louisiana, containing 0.569 acres,
together with any improvements thereon, being bounded on the north by
Lot 8, south by the remainder of Lot 10, east by Lot 9 and west by
Commercial Canal as shown on plat of R. B. Marie, Land Surveyor, dated
January 30, 1979, a copy of which is attached to that certain Lease
dated July 21, 1987 and is recorded under Entry No. 87-7302 of the
records of the Clerk of Court's Office for the Parish of Iberia,
Louisiana.
9
<PAGE> 1
EXHIBIT 10.23
AMENDED AND RESTATED CONSULTING AND FINANCIAL
ADVISORY SERVICES AGREEMENT
This AMENDED AND RESTATED CONSULTING AND FINANCIAL ADVISORY SERVICES
AGREEMENT (the "Agreement") is made and entered into this 24th day of
September, 1997 (the "Execution Date"), by and between TransCoastal Marine
Services, Inc., a Delaware corporation (the "Company") and J&D Capital
Investments, L.C., a Nevada limited liability company (the "Consultant"), in
order to amend and restate that certain Consulting and Financial Advisory
Services Agreement entered into by and between Red Fox International, Inc., a
Louisiana company and predecessor to the Company, and J&D Capital Investments, a
general partnership and predecessor to Consultant.
RECITALS
The Company desires to acquire certain target companies engaged in
providing offshore and marine construction, fabricating and related services to
the oil and gas industry;
The Company desires to engage Consultant to advise the Company with
respect to identification of target companies, assistance in negotiating
agreements for the acquisition of certain target companies, advice and analysis
regarding the structure and financing of such acquisitions, and assistance in
arranging such financing.
AGREEMENT
In consideration of the promises and covenants herein contained, and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties to this Agreement agree as follows:
1. Services to be Provided. Upon request by the Company, and in
consultation with its executive officers, Consultant agrees to provide the
following services:
(i) Assist the Company in identifying target companies engaged in
the business of pipeline construction, pipeline testing,
pipeline construction and burial services, and fabrication
and installation of offshore structures for the offshore oil
and gas industry, provide the Company with advice and analysis
regarding the structure of the acquisitions and provide advice
and assistance regarding the acquisition of such companies,
(ii) Provide financial advisory services to the Company with
respect to mergers and acquisitions of target companies,
including advice and analysis concerning the financial
structure of the Company and assistance in identifying
potential institutional financing sources, assistance in
connection with the presentation of the Company to
1
<PAGE> 2
such sources and assistance in negotiating terms and
conditions of such financing; and
(iii) Provide briefings, reports and presentations to the Company's
management concerning its recommendations and the results of
its assessments.
2. Performance of Services. The parties agree that Consultant is
acting only in the capacity of an advisor and consultant to the Company, and
nothing herein shall be construed or deemed to create an employer-employee,
joint venture, partnership or similar business relationship between the Company
and Consultant. In each instance, Consultant will perform the consultation and
advisory services described above at the specific request of the Company.
Except as expressly provided by terms of this Agreement, any decision to
proceed with any proposal or to act on any recommendation, any commitment to
enter into any contract or obligation, and any election to hire or otherwise
engage any person or firm in connection with this engagement, shall be at the
sole discretion of the Company.
3. Authorization of Consultant. Consultant covenants and agrees
that:
(a) it currently possesses and will maintain power and authority
as required to conduct its business and provide the services
contemplated herein, as well as all licenses, permits and
other authorizations required to provide the services
contemplated in this Agreement;
(b) its execution and delivery of this Agreement and the
performance of its obligations hereunder will not violate the
provisions of any law or regulation applicable to Consultant,
or the provisions of the order or decree of any court or other
governmental entity with jurisdiction over Consultant or the
subject activities;
(c) its performance of all terms of this Agreement does not and
will not breach any fiduciary duty or other obligation of
Consultant with respect to any client or other person, whether
arising under any law or regulation applicable to Consultant
or pursuant to any agreement to which Consultant or any of its
affiliates may be a party; and
(d) it will observe and comply with all applicable laws and
regulations in the performance of its services hereunder.
4. Confidentiality. During the term of this Agreement and for
five (5) years after its termination, all non-public information which the
Company provides to Consultant as confidential information regarding the
Company, its business operations, management, financial condition, business
development strategy or objectives, shall be maintained by Consultant in strict
confidence and shall be disclosed only as required by law.
2
<PAGE> 3
5. Compensation for Services. In consideration of the
consultation and advisory services to be provided hereunder:
(a) During the first year of this Agreement, the Company shall pay
to Consultant an aggregate amount equal to $23,500 per month
payable monthly (the "Consulting Fee"). In each subsequent
year of this Agreement, the Company shall pay to Consultant an
aggregate amount equal to the greater of (i) the Consulting
Fee for the immediately preceding year or (ii) a Consulting
Fee determined by the Board of Directors following an annual
performance review.
(b) Effective upon the successful completion of the initial public
offering (the "IPO") of the common stock of the Company, par
value $.001 ("Common Stock"), Consultant shall be granted an
option to purchase a number of shares of Common Stock equal to
$660,000 divided by the initial offering price per share of
Common Stock at the IPO. The grant of such option shall be
pursuant to the Non-Qualified Stock Option Agreement attached
as Exhibit A hereto.
(c) Consultant shall receive an annual cash performance bonus for
the calendar year during the term of this Agreement to be
determined according to the following procedure. The Board of
Directors of the Company, or the Compensation Committee of the
Board of Directors, if so authorized, shall establish specific
annual performance goals for the Company and for Consultant
with respect to each calendar year during the term of this
Agreement commencing on January 1, 1998. Such goals shall be
communicated to Consultant not later than the end of the first
quarter of the applicable calendar year. At the end of each
calendar year during the term of this Agreement, or within a
reasonable time thereafter, the Board of Directors of the
Company, or the Compensation Committee of the Board of
Directors, if so authorized, shall review the actual
performance of the Company and Consultant, giving due
consideration to market and other developments outside of the
control or influence of Consultant and the Company, and based
upon the extent to which the applicable annual performance
goals have been achieved, shall determine in its sole and
absolute discretion, the amount of performance bonus payable
to Consultant with respect to such year.
6. Expenses. During the term hereof, the Company shall reimburse
Consultant for all reasonable and necessary travel and other expenses incurred
by Consultant in rendering services required under the terms of this Agreement.
7. Term. This Agreement shall terminate on the date that is
three (3) years from the Execution Date.
3
<PAGE> 4
8. Termination.
(a) This Agreement may be terminated by the Company upon:
(i) the willful, continued and unreasonable breach of
this Agreement by Consultant after reasonable written
notice and opportunity to cure such breach;
(ii) the conviction of Consultant, or a member thereof, of
a crime involving moral turpitude by a court of
competent jurisdiction as to which no further appeal
can be taken;
(iii) the proven commission by Consultant of an act of
fraud upon the Company;
(iv) the willful and proven misappropriation of any funds
or property of the Company by Consultant; or
(v) the dissolution of Consultant.
Such termination shall be effective upon delivery of written notice to
Consultant of the Company's election to terminate this Agreement under this
Section 8.
(b) This Agreement may be terminated by Consultant upon thirty
(30) days written notice to the Company.
(c) Upon the termination of this agreement as provided in this
Section 8, the Company's obligation to pay the Consulting Fee
shall cease, provided, however, no such termination shall
relieve the Company of the obligation to pay Consultant all
amounts due for services rendered hereunder by Consultant
prior to such termination.
9. Binding Agreement. This Agreement shall be binding upon and
inure to the benefit of the parties hereto, their representatives, officers,
successors-in-interest and assigns; provided, however, that the rights and
duties of Consultant under this Agreement shall not be assigned without the
prior approval of the Company.
10. Entire Agreement; Amendment. This Agreement constitutes the
full and complete agreement of the parties hereto with respect to the subject
matter hereof and may be changed, modified or amended only by an instrument in
writing executed by each of the parties hereto.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement effective as of the date first above written.
TRANSCOASTAL MARINE SERVICES, INC.,
a Delaware corporation
By: /s/ BILL E. STALLWORTH
---------------------------------------------
Bill E. Stallworth, Chief Executive Officer
J&D CAPITAL INVESTMENTS, L.C.
a Nevada limited liability company
By: /s/ G. DARCY KLUG
---------------------------------------------
G. Darcy Klug, President
5
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF THE COMPANY
Woodson Construction Company, Inc.
Laine Construction Company, Inc.
Kori Corporation
EnviroSystems, Inc.
CSI Hydrostatic Testers, Inc.
Hargett Investments, L.L.C.
The Red Fox Companies of New lberia, Inc.
Red Fox International, Inc.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-34603 of TransCoastal Marine Services, Inc. on Form S-1 of our report dated
March 27, 1997 (May 7, 1997 as to Note 6), appearing in the Prospectus, which is
part of this Registration Statement. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
October 6, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
registration statement.
Darnall, Sikes & Frederick
(A Corporation of Certified Public
Accountants)
Lafayette, Louisiana
October 6, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Houston, Texas
October 6, 1997
<PAGE> 1
EXHIBIT 23.7
CONSENT OF PERSON NAMED TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended (the
"Act"), I hereby consent to the use of my name and any references to me as a
person nominated to become a director of TransCoastal Marine Services Inc.
("TCMS") in the Prospectus constituting a part TCMS' Registration Statement on
Form S-1 to be filed with the Securities and Exchange Commission pursuant to the
Act, and any amendments thereto.
Dated: October 6, 1997
/s/ NATHAN AVERY
--------------------------------------
Nathan Avery
2
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