UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: June 6, 1997
TYREX OIL COMPANY
------------------
(Exact name of registrant as specified in its charter)
Wyoming 09358 83-0245581
- ---------------------- -------------------- -----------------
(State of (Commission I.R.S. Employer
Organization) File Number) Identification No.)
777 No. Overland Trail
Suite 101, Post Office Box 2459
Casper, Wyoming
----------------
(Address of principal executive offices
including Zip Code)
Registrant's telephone number, including area code: (307) 234-4260
<PAGE>
Item 2. Acquisition of Assets
- ------------------------------
On May 28, 1997, the Registrant entered into an Agreement and Plan of
Reorganization and Transition Agreement whereby it acquired Kimbrough Computer
Sales, Inc. d/b/a 3Si Incorporated ("3Si") in a triangular merger. A transitory
corporation formed for the purpose and wholly owned by the Registrant was merged
with and into 3Si and 3Si was the surviving corporation which is now a wholly
owned subsidiary of the Registrant.
The Registrant issued 28,333,333 shares of its common stock to three
individuals who were not affiliated with the Registrant prior to the
transaction. The three individuals, the former owners of 3Si, were Frank
Backes, Frederick Slack and Felipe Larry Valdez. Messrs. Backes, Slack and
Valdez were elected to the Board of Directors of the Registrant and now comprise
three of its eight members.
3Si is engaged in computer and Internet sales and service, primarily as a
systems integrator, focusing on Internet security services. The Company
distributes and resells computer hardware and software and also provides
maintenance service on computers, as well as consulting and training.
The consideration issued in connection with the transaction was established
through negotiation between the Registrant and the 3Si shareholders. Moreover,
the Registrant received a fairness opinion as to the financial terms of the
transaction from an independent private investment consulting firm.
As previously reported, the Registrant has contracted to sell its oil and
gas assets for approximately $1,800,000 subject to adjustment for revenues and
expenses since the effective date of January 1, 1997. The Board of Directors
resolved on May 20, 1997 to instruct its officers to initiate steps to enable
the Registrant to conduct a self tender offer for a portion of its outstanding
shares (exclusive of those issued in the acquisition). It is presently
anticipated that offer will be for approximately 6,000,000 shares of the
Registrant's common stock at approximately $0.30 per share to shareholders of
record on May 20, 1997. The proposed offer may be withdrawn, modified or
ultimately not made, in the Board of Director's sole discretion. However, it is
presently anticipated that the Registrant will file requisite information with
the Securities and Exchange Commission under Section 13(e)(4) adopted under the
Securities Exchange Act of 1934 within the next 60 days.
2
<PAGE>
Item 7. Financial Statements and Exhibits.
- ------------------------------------------
(a)(b) Financial Statements of Businesses Acquired Included Herewith:
Independent Auditors' Report
Balance Sheets
At December 31, 1996 and 1995
Statements of Income
Years Ended December 31, 1996, 1995 and 1994
Statements of Changes in Retained Earnings
Years Ended December 31, 1996, 1995 and 1994
Statements of Cash Flows
Years Ended December 31, 1996, 1995 and 1994
Notes to Financial Statements
Pro Forma Financial Statements and pro forma financial
information will be filed within 60 days from the date hereof.
(c) Exhibits:
No.
----------
97.10.1 Agreement and Plan of Reorganization
97.10.2 Transition Agreement
97.10.3 Consent of John M. Hanson & Company
3
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned duly
authorized.
TYREX OIL COMPANY
By: /s/ Tom N. Richardson
----------------------
Tom N. Richardson, President
Date: June 6, 1997
4
<PAGE>
ITEM 7.
FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS' REPORT
KIMBROUGH COMPUTER SALES, INC.
D/B/A
3SI - Solution, System & Service Integration
December 31, 1996
1
<PAGE>
CONTENTS
--------
PAGE
----
INDEPENDENT AUDITORS' REPORT 3
FINANCIAL STATEMENTS
BALANCE SHEETS 4-5
STATEMENTS OF OPERATIONS 6
STATEMENTS OF CHANGES IN RETAINED EARNINGS 7
STATEMENTS OF CASH FLOWS 8
NOTES TO FINANCIAL STATEMENTS 9-11
2
<PAGE>
JOHN M. HANSON & COMPANY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Kimbrough Computer Sales, Inc.
d/b/a 3SI
Solution, System & Service Integration
Independent Auditors' Report
----------------------------
We have audited the accompanying balance sheets of 3SI as of December 31,
1996 and 1995, and the statements of operations, changes in retained earnings,
and cash flows for the years ended December 31, 1996, 1995 and 1994. 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 audits 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
presentations. 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 3SI as of December 31, 1996
and 1995, and the results of its operations and its cash flows for the years
ended December 31, 1996, 1995 and 1994, in conformity with generally accepted
accounting principles.
/S/ John M. Hanson & Company, P.C.
Denver, Colorado
April 11, 1997, except for Note C as to which
the date is April 30, 1997
3
<PAGE>
3SI
Solution, System & Service Integration
Balance Sheets (Page 1 of 2)
December 31, 1996 and 1995
ASSETS
December 31,
1996 1995
---- ----
CURRENT ASSETS (NOTE C)
Cash and cash equivalents (Note A) $ 47,166 $ 238,138
Accounts receivable - trade (Note B) 4,537,908 4,111,696
Inventory at the lower of cost
(weighted average method) or market 286,210 425,191
Other current assets 91,053 80,231
--------- ---------
Total current assets 4,962,337 4,855,256
PROPERTY AND EQUIPMENT - AT COST (NOTE C)
Computer systems 323,437 372,362
Furniture and fixtures (Note D) 165,882 202,096
Equipment 2,352 161,029
Leasehold improvements 63,063 23,770
--------- ---------
Total property and equipment 554,734 759,257
Less accumulated depreciation and
amortization (Note A) (187,885) (427,110)
--------- --------
Net property and equipment 366,849 332,147
OTHER ASSETS
Deposits 20,400 34,320
-------- --------
Total assets $5,349,586 $5,221,723
======== ========
The accompanying notes are an integral part of these statements
4
<PAGE>
3SI
Solution, System & Service Integration
Balance Sheets (Page 2 of 2)
December 31, 1996 and 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
1996 1995
---- ----
CURRENT LIABILITIES
Revolving line of credit (Note C) $1,175,000 $1,350,000
Current portion of capital lease (Note D) 21,729 19,319
Accounts payable - trade 3,684,793 2,961,766
Customer deposits 103,863 119,913
Accrued liabilities 145,175 237,336
--------- ---------
Total current liabilities 5,130,560 4,688,334
LONG-TERM DEBT (NOTE D) 76,060 99,496
COMMITMENTS (NOTE D) - -
STOCKHOLDERS' EQUITY
Common stock - authorized 50,000
shares of no par value; issued and
outstanding 300 shares 30,000 30,000
Retained earnings (Note D) 112,966 403,893
--------- ---------
Total stockholders' equity 142,966 433,893
--------- ---------
Total liabilities and stockholders' equity $5,349,586 $5,221,723
========= =========
The accompanying notes are an integral part of these statements
5
<PAGE>
3SI
Solution, System & Service Integration
Statements of Operations
Year Ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Net sales $19,007,245 $21,774,221 $17,503,876
Cost of goods sold 13,844,356 17,670,049 14,483,346
Royalty expense 286,106 326,727 261,502
---------- ---------- ----------
Total cost of goods sold 14,130,462 17,996,776 14,744,848
---------- ---------- ----------
Gross profit 4,876,783 3,777,445 2,759,028
Selling and administrative expenses 4,873,193 3,886,922 2,409,706
---------- ---------- ----------
Earnings (loss) from operations 3,590 (109,477) 349,322
Other income (expense)
Interest income 16,584 3,686 3,012
Miscellaneous income 2,616 18,942 24,969
Interest expense (170,413) (91,128) (10,457)
Offering costs (45,071) - -
Loss on disposition of assets (2,621) - -
---------- ---------- ----------
Total other income (expense) (198,505) (68,500) 17,524
--------- ---------- ----------
Net (loss) earnings $ (195,315) $ (177,977) $ 366,846
========= ========== ========
The accompanying notes are an integral part of these statements
6
<PAGE>
3SI
Solution, System & Service Integration
Statements of Changes in Retained Earnings
Year Ended December 31, 1996, 1995, and 1994
1996 1995 1994
---- ---- ----
Balance, beginning of year $ 403,893 $ 796,425 $ 566,904
Net (loss) earnings (195,315) (177,977) 366,846
Dividends declared (Note D) (95,612) (214,555) (137,325)
------- ------- -------
Balance, end of year $ 112,966 $ 403,893 $ 796,425
======= ======= =======
The accompanying notes are an integral part of these statements
7
<PAGE>
3SI
Solution, System & Service Integration
Statements of Cash Flows
Year Ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Reconciliation of net (loss) earnings
to net cash provided by (used for)
operating activities:
Net (loss) earnings $(195,315) $ (177,977) $ 366,846
Reconciling adjustments:
Depreciation and amortization 91,765 50,931 42,547
Loss on disposition of assets 2,621 - -
Changes in operating assets and
liabilities:
Accounts receivable (426,212) (1,336,096) (684,051)
Inventory 138,981 (238,367) 320,250
Other assets (50,389) (19,128) (7,300)
Accounts payable 723,027 1,218,541 (581,424)
Other liabilities (108,211) 103,188 90,932
-------- ---------- ----------
Total adjustments 371,582 (220,931) (819,046)
-------- ---------- ---------
Net cash provided by (used for)
operating activities 176,267 (398,908) (452,200)
Investing activities:
Deposits on equipment purchases - 3,250 (3,250)
Purchases of equipment (129,088) (173,415) (89,652)
-------- -------- ---------
Net cash used for investing
activities (129,088) (170,165) (92,902)
Financing activities:
Payments on long-term debt (21,026) (1,517) -
Revolving line of credit, net (175,000) 1,050,000 300,000
Advances to owners 53,487 (80,231) -
Dividends paid (95,612) (214,555) (137,325)
-------- -------- ---------
Net cash (used for) provided by
financing activities (238,151) 753,697 162,675
Net change in cash and cash
equivalents (190,972) 184,624 (382,427)
Cash and cash equivalents at
beginning of year 238,138 53,514 435,941
-------- -------- ---------
Cash and cash equivalents at end
of year $ 47,166 $ 238,138 $ 53,514
======== ======= =========
See Note D for capital lease
disclosures.
Interest paid $ 176,774 $ 81,531 $ 9,270
======== ======== ========
The accompanying notes are an integral part of these statements
8
<PAGE>
3SI
Solution, System & Service Integration
Notes to Financial Statements
Note A - Summary of Significant Accounting Policies
Organization
The Company was incorporated in Colorado in 1979 and is primarily engaged as a
systems integrator, focusing on internet security services. The Company
distributes and resells computer hardware and software, and also provides
maintenance service on computers, as well as consulting and training.
The principal markets for its services are large corporations located in metro
Denver and Colorado Springs, Colorado. The corporate offices are located in
Englewood, Colorado. The Company also maintains offices in Albuquerque, New
Mexico; Raleigh, North Carolina; and Colorado Springs, Colorado. The Company
obtains substantial hardware from two vendors, but this hardware can be readily
obtained from other sources.
In April 1996, 3SI entered into an sub-contract agreement to provide information
systems support to the U.S. Postal Service. Revenues for the nine months that
the Company operated under the agreement in 1996 were approximately $1.8
million. The Company estimates continuing revenue from the subcontract
agreement to be approximately $3 million per year for the next four years ending
March 31, 2001, (which includes anticipated renewals).
Use of Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in these financial statements
and accompanying notes. Actual results could differ from those estimates.
Depreciation and Amortization
Depreciation and amortization have been provided in amounts sufficient to relate
the cost of depreciable assets to operations over their estimated useful lives
using straight-line and accelerated methods. Equipment acquired under capital
leases is amortized on a straight-line basis over the lease period.
Income Taxes
The Company has elected S Corporation status. All earnings are passed through
to the stockholders and taxed on their individual income tax returns.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments with an original maturity of three months or less to be
cash equivalents.
Financial Instruments
The carrying amounts reported in the balance sheets for all financial
instruments approximates fair value.
9
<PAGE>
3SI
Solution, System & Service Integration
Notes to Financial Statements
Note B - Accounts Receivable
1996 1995
---- ----
Trade receivables $4,552,908 $4,159,696
Allowance for doubtful accounts (15,000) (48,000)
----------- -----------
Net $4,537,908 $4,111,696
========= =========
Due to the nature of the business, significant accounts receivables are owed by
a small number of customers. Generally, the Company does not require collateral
or other security to support customer receivables.
Note C - Revolving Line of Credit
Bank revolving line of credit with interest at 2.5% over prime up to $1,175,000
(subject to certain collateral limitations) which expired April 7, 1997.
Subsequent to its expiration, the Company converted the revolving line of credit
to a note with the bank requiring monthly payments of $80,000 plus interest at
2.5% over prime through September 2, 1997. The Company anticipates refinancing
this new note prior to its maturity. The bank facility is collateralized by
substantially all assets of the Company and personal guarantees of three of its
officers, and contains restrictions relating to incurring additional debt and
maintaining certain financial ratios. The balance of the note at December 31,
1996 and 1995 is $1,175,000 and $1,350,000, respectively.
Note D - Commitments
Leases
The Company currently has operating leases for office space in Englewood and
Colorado Springs, Colorado and Albuquerque, New Mexico. The Company leased
office space in Wheat Ridge, Colorado from former stockholders under an
operating lease until September, 1995. The rent expense is net of a sublease in
the Englewood office of $27,000 for the year ended December 31, 1996.
1996 1995 1994
---- ---- ----
Rent Expense $124,440 $136,055 $119,284
====== ====== ======
During December, 1995, the Company acquired $120,332 of furniture and fixtures
under a capital lease. Accumulated amortization at December 31, 1996 and 1995
is $26,072 and $2,006 respectively.
10
<PAGE>
3SI
Solution, System & Service Integration
Notes to Financial Statements
Note D - Commitments (continued)
Capital Capital Operating
Lease Lease Leases
Minimum Debt Minimum
Payment Maturity Payment
-------- -------- --------
1997 $ 31,324 $ 21,729 $141,580
1998 31,324 24,200 138,879
1999 31,324 26,976 123,072
2000 26,104 24,884 123,072
2001 - - 92,304
------ ------ -------
$120,076 $ 97,789 $618,907
====== ====== =======
Royalties
The Company executed a License and Royalty Agreement effective August 1, 1993
with former stockholders of the Company. Under the terms of the agreement, the
Company is obligated to pay 1.5% of gross revenues as a royalty expense to the
former stockholders through July, 1999. As a condition of the agreement with
the former stockholders, dividends payable to the new stockholders may be
limited.
Note E - Profit Sharing Plan
The Company established a 401(k) profit-sharing plan covering substantially all
employees during the year ended December 31, 1995. Company contributions are at
the discretion of the Board of Directors. For the years ended December 31,
1996, 1995 and 1994, the Company made no contributions to the plan.
11
<PAGE>
Exhibit No. 97.10-1
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") entered into as
of the 28th day of May, 1997, by and among:
TYREX OIL COMPANY, a Wyoming corporation (herein called "TYREX"), with its
principal office located in Casper, Wyoming.
TYREX TRANSITORY CORP., a corporation to be organized by TYREX under the
laws of Colorado as a wholly-owned subsidiary of TYREX (herein called the
"TYREX Subsidiary");
KIMBROUGH COMPUTER SALES, INC. dba 3SI, INC., a Colorado corporation
(herein called "3SI"), with its principal office located at 6886 South
Yosemite Street, Englewood, Colorado 80112; and
FRANK BACKES, FREDERICK SLACK and FELIPE LARRY VALDEZ (herein called the
"3SI SHAREHOLDERS").
R E C I T A L S:
WHEREAS, 3SI is engaged in the marketing of systems, interaction/internet
solutions and the sale of computer hardware and software products, integrated
computer solutions commonly termed a systems integrator (the "3SI Business");
and
WHEREAS, the 3SI Shareholders own all of the issued and capital stock in
3SI; and
WHEREAS, TYREX is a publicly-held corporation listed on NASDAQ;
WHEREAS, the parties desire to provide for an agreement and plan of
reorganization within the meaning of Section 368(a)(1)(A) and related provisions
of the Internal Revenue Code of 1986, as amended, for the statutory merger into
a wholly-owned subsidiary of TYREX with and into 3SI in which the shareholders
of 3SI will receive shares of TYREX common stock in the statutory merger, all on
the terms and subject to the conditions set forth in this Agreement;
NOW, therefore, in consideration of the premises, the parties agree as
follows:
SECTION 1. CERTAIN DEFINITIONS
The following terms not defined elsewhere in this Agreement shall be defined to
mean as follows:
"Affiliate" means any member of the immediate family of a named party, or any
corporation, partnership, trust or other entity in which any of the foregoing
individuals is a director, officer, partner or trustee or has an equity interest
in excess of 5%. The term "Affiliate" shall also include any entity which
controls, or is controlled by, or is under common control with, the named party
or any of the individuals or entities described in the preceding sentence.
"3SI Common Stock" means the common stock of 3SI, as the same is presently
constituted.
1
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"3SI Audited Financial Statements" means 3SI's audited financial statements as
of December 31, 1996 and the three year period then ended, attached hereto as
Schedule A.
"3SI Interim Financial Statements" shall mean 3SI's unaudited balance sheet as
of March 31, 1997 and its unaudited statements of operations and cash flows for
the three month period then ended, attached hereto as Schedule 1AA.
"TYREX Common Stock" means the 28,333,333 shares of issued and outstanding TYREX
no par value common stock of TYREX, to be issued in the Merger, as the same is
presently constituted.
"TYREX Audited Financial Statements" means TYREX's audited financial statements
as of June 30, 1996 and the three year period then ended, attached hereto as
Schedule 1B.
"TYREX Interim Financial Statements" shall mean TYREX's unaudited balance sheet
as of March 31, 1997 and its unaudited statements of operations, cash flows and
changes in shareholders' equity for the nine month period then ended, attached
hereto as Schedule 1BB.
"Code" means the Internal Revenue Code of 1986, as amended, and applicable rules
and regulations promulgated thereunder.
"Colorado Business Corporation Act" means Title 7 of the Colorado Revised
Statutes 1993, as amended to date.
"GAAP" means generally accepted accounting principles consistently applied with
prior periods.
"Oil and Gas Purchase and Sale Agreement" means that agreement whereby Tyrex
intends to sell certain of its oil and gas properties.
"Previous Owners of 3SI" means Jerrie Fuller-Hughes, Frederick Hughes, and Bill
Gunn.
"Royalty to Previous Owners" means that certain 1.5% royalty on gross revenues
of 3SI, which 3SI has contracted to purchase from the Previous Owners of 3SI for
a purchase price of $625,000.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and all rules and
regulations promulgated thereunder.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as amended,
and all rules and regulations promulgated thereunder.
"Security Interest" means any mortgage, pledge, security interest, encumbrance,
charge or other lien of any kind or character, direct or indirect, whether
accrued, absolute, contingent or otherwise, other than (a) liens for taxes not
yet due and payable, (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation, and (c) liens
securing rental payments under equipment lease arrangements.
2
<PAGE>
"Transition Agreement" means that certain agreement of even date herewith which
shall govern among other things the self tender offer described therein and the
control of Tyrex until termination of the Transition Period as defined therein.
SECTION 2. CLOSING
Subject to the terms and conditions of this Agreement, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of ONE CAPITAL CORPORATION, in Denver, Colorado, commencing at 10:00
A.M. local time on May 28, 1997 (the "Closing Date"), or such earlier or later
date and time as may be mutually agreed hereafter in writing by 3SI and TYREX,
subject to the satisfaction of all conditions precedent to the obligations of
the parties to consummate the transactions contemplated by this Agreement.
SECTION 3. THE MERGER
3.1. The Merger. On and subject to the terms and conditions of this
Agreement, at or immediately prior to the Closing Date, TYREX Subsidiary will
merge with and into 3SI (the "Merger") in accordance with the provisions of S7-
111-101 et seq. of the Business Corporation Act. The effective time and date of
the Merger shall occur when articles of merger conforming to the requirements of
the Business Corporation Act (the "Articles of Merger") are executed in
duplicate on behalf of the TYREX Subsidiary, 3SI and TYREX in the manner
provided by S7-111-105 of the Business Corporation Act and filed by the
Secretary of State of Colorado (the "Effective Date" or Effective Time"). 3SI
shall be the surviving corporation in the Merger (the "Surviving Corporation")
and the separate existence of the TYREX Subsidiary shall cease from and after
the Effective Time. The Surviving Corporation may, at any time after the
Effective Time, take any action (including executing and delivering any
document) in the name and on behalf of either the TYREX Subsidiary or 3SI in
order to carry out and effectuate the transactions contemplated by this
Agreement.
3.2. Material Terms and Effect of the Merger.
3.2.1. Conversion of Securities. By virtue of the Merger and without
any other action on the part of the holders of any of the following securities:
(a) all of the 300 issued and outstanding shares of 3SI Common Stock
immediately prior to the Effective Time shall cease to be issued and
outstanding, and each such share of 3SI Common Stock shall become, and be
converted into 28,333,333 shares of TYREX no par value common stock (the
"Merger Consideration").
(b) each holder of record of 3SI Common Stock immediately prior to the
Effective Time shall receive at Closing that number of full shares of TYREX
Common Stock, representing his one-third (1/3) pro rata share of the total
Merger Consideration (i.e. 9,444,444 shares each); provided, however, these
amounts may be reduced to accommodate shares which may be issued to MOE
and/or Tom Chenault; and provided further that no fractional shares of
TYREX Common Stock shall be issued in distribution of the Merger
Consideration and, in lieu of fractions, each such fractional share (after
taking into account all shares to which the holder thereof is entitled)
shall be rounded up to a full share of TYREX Common Stock in lieu of such
fractional interest.
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(c) each of the 1000 issued and outstanding shares of common stock in the TYREX
Subsidiary held of record and beneficially by TYREX immediately prior to
the Effective Time shall be surrendered by TYREX in exchange for one (1)
share of common stock in the Surviving Corporation.
3.2.2. Articles of Incorporation. The articles of incorporation of the
Surviving Corporation shall be the articles of incorporation of 3SI as in effect
immediately prior to the Effective Time, until amended in accordance with
applicable law.
3.2.3. Bylaws. The bylaws of the Surviving Corporation shall be the
bylaws of 3SI as in effect immediately prior to the Effective Time, until
amended in accordance with applicable law.
3.2.4. Directors and Officers.
(a) The directors and officers of the Surviving Corporation as of the Effective
Time and the Closing Date shall be as follows:
Executive Officers:
Chief Executive Officer Fred Slack
President Frank Backes
Chairman of the Board and COO Larry Valdez
Directors
---------
Frank Backes
Frederick Slack
Larry Valdez
Tom N. Richardson
Doris K. Backus
(b) The directors and officers of TYREX shall be as set forth in the Transition
Agreement.
3.2.5. Procedure for Conversion. At least ten (10) business days prior
to Closing, 3SI shall provide the TYREX Subsidiary with a true, correct and
complete list of the holders of record of 3SI Common Stock, the number of shares
held by each and their addresses. At the Closing, TYREX shall have reserved and
made available to the transfer agent for the TYREX Common Stock, i.e., American
Securities Transfer & Trust, Inc., Denver, Colorado, that number of shares of
TYREX Common Stock necessary for the Surviving Corporation to effect the
conversion of 3SI Common Stock in exchange for TYREX Common Stock to be
distributed on the Closing Date to former holders of record of 3SI Common Stock
as the same existed immediately prior to the Effective Time in accordance with
the Merger.
3.2.6. Closing of 3SI Transfer Records. At the Effective Time, the
stock transfer books of 3SI shall be closed and no further transfers of 3SI
Common Stock shall be made on such stock transfer books.
3.2.7 Equitable Adjustment. If, after the date of this Agreement and
prior to the Closing, there shall be any stock split, reverse stock split, stock
dividend or similar reorganization, recapitalization, reclassification or other
transaction affecting generally the capital stock of 3SI or TYREX, or any
extraordinary stock dividend paid on or with respect to the TYREX Common Stock,
4
<PAGE>
then appropriate and equitable adjustments shall be made hereunder with respect
to the Merger Consideration so that the aggregate relative rights and
obligations of the parties hereto shall not be adversely affected by any such
action. TYREX agrees that it will take no such action prior to the Closing
hereunder without first obtaining the prior written consent of 3SI and the 3SI
Shareholders.
3.2.8. Necessary Further Action. Subject to the full satisfaction and
performance of all conditions to Closing having occurred hereunder, TYREX, the
TYREX Subsidiary, 3SI and the 3SI Shareholders each shall use all reasonable
efforts to take all actions as may be necessary or appropriate in order to
effectuate the Merger in accordance with the terms hereof. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
immunities and franchises of 3SI, then the officers and directors of the
Surviving Corporation are fully authorized in the name of 3SI to take all such
actions.
SECTION 4. COVENANTS AND AGREEMENTS PRIOR TO OR AT CLOSING
4.1. Sale of Properties; Satisfaction of TYREX Liabilities. Prior to the
Closing, TYREX shall have (i) paid or made adequate provision for the payment
and settlement of all of TYREX's known debts and liabilities, and (ii) sold, or
entered into binding legal contracts to sell, all of TYREX's assets other than
cash assets, such that after giving effect to such transactions and as of the
Closing Date:
(a) all of TYREX's known debts and liabilities, shall have been fully paid,
settled in full, or fully reserved as set forth in Schedule 4.1(a) hereto;
(b) after giving effect to the payment, settlement and reserve for TYREX's
debts and liabilities, as aforesaid, and payment of its expenses involved
in the Merger, $400,000 in cash shall be loaned or otherwise made
available by TYREX to 3SI to be used in accordance with the of proceeds
schedule attached hereto as Schedule 4.1(b); and
(c) at Closing, TYREX shall purchase from the Previous Owners of 3SI the
$625,000 Royalty, and shall receive from them an assignment of such Royalty
and a signed release of all further liabilities from 3SI to the 3SI
Previous Owners and a release of all liens or encumbrances by the 3SI
Previous Owners against 3SI's assets or capital stock.
4.2. Authorization by 3SI of the Merger. Prior to the Closing, 3SI shall
have obtained all required authorizations for approval on behalf of 3SI of the
Merger. Such actions will require: (i) adoption of resolutions by 3SI's board
of directors authorizing the Merger and recommending that such proposals be
submitted to 3SI shareholders; and (ii) the unanimous written consent of all 3SI
shareholders to approve the Merger.
Each of the 3SI Shareholders hereby covenants and agrees to vote all
shares of 3SI Common Stock which he is entitled to vote in favor of the Merger
contemplated by this Agreement. Notwithstanding such approval, 3SI may refuse
to proceed with the Merger if conditions precedent to its obligations hereunder
have not been fully satisfied prior to the Effective Time.
4.3. Certain Due Diligence and Reporting Matters
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(a) Investigation by 3SI. From and after the execution of this Agreement and
during the full term hereof, TYREX shall permit 3SI and its duly authorized
representatives to be provided by TYREX with full access to the properties,
books, records and business operations of TYREX and the TYREX Subsidiary,
which shall include without limitation copies of all contracts and
agreements to which TYREX and the TYREX Subsidiary are a party, information
as to their financial condition and results of operations, and other
records and information which 3SI and its representatives reasonably deem
of significance in an investigation of the business, assets, rights,
liabilities, obligations and prospects of TYREX. This right of access
shall include physical inspection of properties and assets as well as the
review of all pertinent books, records and corporate documents. 3SI and
its representatives, however, shall not contact or communicate with any
vendor to, or customer or creditor of, TYREX without the prior consent of
TYREX's Chief Executive Officer. TYREX will cause TYREX's officers and
employees to cooperate fully in said examination and to cause TYREX's
independent public accountants and outside legal counsel to cooperate fully
and to make a full and complete disclosure to 3SI and its representatives
of all material facts regarding the corporate documents, financial records,
assets, obligations, contracts and business operations of TYREX.
(b) Investigation by TYREX. From and after the execution of this Agreement
and during the full term hereof, 3SI and the 3SI Shareholders shall cause
3SI to permit TYREX and its duly authorized representatives to be provided
by 3SI with full access to the properties, books, records and business
operations of 3SI, which shall include without limitation copies of all
contracts and agreements to which 3SI is a party, information as to its
financial condition and results of operations, and other records and
information which TYREX and its representatives reasonably deem of
significance in an investigation of the business, assets, rights,
liabilities, obligations and prospects of 3SI. This right of access shall
include physical inspection of properties and assets as well as the review
of all pertinent books, records and corporate documents. TYREX and its
representatives, however, shall not contact or communicate with any vendor
to, or customer or creditor of, TYREX without the prior consent of 3SI's
Chief Executive Officer. 3SI and the 3SI Shareholders will cause 3SI's
officers and employees to cooperate fully in said examination and to cause
3SI's independent public accountants and outside legal counsel to cooperate
fully and to make a full and complete disclosure to TYREX and its
representatives of all material facts regarding the corporate documents,
financial records, assets, obligations, contracts and business operations
of 3SI.
(c) Confidentiality. In connection with the foregoing matters, each party
hereto has or will be furnishing to the other from time to time with oral
and written information as to its proprietary products, marketing strategy
and business plans, significant portions of which each of TYREX and 3SI
considers to be proprietary and confidential information (herein called the
"Confidential Information"). Each party acknowledges that "Confidential
Information", as used herein, does not include any information which (i)
was or becomes generally available to the public other than as a result of
an improper disclosure by the other party hereto; (ii) was or becomes
information available to the other party on a non-confidential basis from a
third party source that is not bound by a confidentiality obligation to
either of the parties hereto; (iii) is required to be disclosed by law as
the result of the securities of TYREX being registered under S12(g) of the
Securities Exchange Act.
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Each party agrees that Confidential Information will be used solely for the
purpose of evaluating the Merger contemplated by this Agreement,
investigating market information and potential markets, and for the parties
to pursue due diligence and legal disclosure requirements in connection
with the Merger, and will not be used in the business or operations of the
party to which such information has been disclosed or used in any other
way, directly or indirectly, that may detrimental to the interests of the
party that owns such Confidential Information. Confidential Information
may be disclosed to representatives of the party receiving the same who
need to know such Confidential Material for the purposes described above,
it being understood that such representatives shall be informed of the
confidential nature of the Confidential Information and shall be directed
to treat the Confidential Information confidentially and as proprietary
information of the party that owns the same. Each party shall notify the
other as to the identity of such representatives. If either party
receives a request, including a subpoena or similar legal inquiry, to
disclose any of the Confidential Material, it shall provide the party that
owns such Confidential Information with prompt notice so that the owner may
seek appropriate protective relief.
If the Closing shall fail to occur for any reason, each party shall
promptly deliver and return all copies of Confidential Information to the
party which owns the same, and without retaining any copy, notes or
extracts thereof.
(d) TYREX Current Financials and Cold-Comfort Letter. At or prior to the
Closing, 3SI shall have received from TYREX's independent public
accountants a so-called "cold-comfort" letter, in form and substance
satisfactory to 3SI, to the effect that based upon a review of the TYREX
Interim Financial Statements and their limited procedures set forth in such
letter, nothing has come to their attention which causes them to believe
that the such TYREX Interim Financial Statements do not comply in all
material respects, or are not presented in conformity, with GAAP.
(e) 3SI Financials, TYREX Form 8-K Report and Cold-Comfort Letter. As promptly
as possible after the execution of this Agreement, and in any event prior
to the expiration of thirty (30) days from the Closing Date, 3SI shall
provide TYREX with current financial statements of 3SI in form and
substance adequate for TYREX to comply with the instructions to Item 7 of
Form 8-K required to be filed by TYREX under the Securities Exchange Act
(the "3SI Financials") and applicable provisions of SEC Regulation S-X.
Prior to Closing, 3SI shall provide TYREX with a copy of the 3SI Interim
Financial Statements. Within fifteen (15) days from the Closing Date, 3SI
shall have made available to TYREX all information reasonably requested by
it to comply with Item 2 of From 8-K. At or prior to the Closing, TYREX
shall have received from 3SI's independent public accountants a so-called
"cold-comfort" letter, in form and substance satisfactory to TYREX, to the
effect that based upon a review of the 3SI Interim Financial Statements and
their limited procedures set forth in such letter, nothing has come to
their attention which causes them to believe that the such 3SI Interim
Financial Statements do not comply in all material respects, or are not
presented in conformity, with GAAP.
4.4. Employment Agreements. At Closing, the Surviving Corporation shall
enter into written employment agreements with each of the three 3SI Shareholders
on mutually satisfactory terms providing, among other things, for the terms and
provisions set forth in Schedule 4.4 attached to this Agreement.
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4.5. Ordinary Course. Until the Closing occurs or this Agreement is
otherwise terminated, TYREX and 3SI each shall use their best efforts to
preserve, protect and maintain their respective business operations and to
operate the same in the ordinary course of business. Without limiting the
generality of the foregoing, except with the consent of the other such party
hereto, each of TYREX, the TYREX Subsidiary and 3SI shall:
(a) maintain their separate corporate existence and not commingle their assets
with the assets of any third party;
(b) maintain their properties and assets in good repair, order and condition,
reasonable wear and tear excepted;
(c) maintain and keep in full force and effect all insurance on their assets
and property and all liability and other casualty insurance presently
carried;
(d) preserve intact its reputation and keep available the services of present
executives, employees and agents and preserve the good will of its
suppliers, customers and others with whom it has business relationships;
(e) maintain its books, accounts and records in accordance with good business
practices;
(f) not solicit, induce or otherwise engage in discussions or negotiations
relating to or proposed to lead to the acquisition, merger or sale of
substantially all of its assets or shares of capital stock except as
contemplated by this Agreement;
(g) not sell or dispose of any material assets or properties, except in the
ordinary course of business and as contemplated with the Oil and Gas
Purchase and Sale Agreement;
(h) not declare, set aside or pay any dividend or make any other distribution
with respect to its capital stock, nor issue any stock options, warrants or
other stock rights which would dilute its stock;
(i) not authorize for issuance, issue, sell or deliver any additional shares of
its capital stock of any class (except as contemplated by this Agreement)
or any securities or obligations convertible into shares of its capital
stock of any class, or issue or grant any option, warrant or other right to
purchase any shares of capital stock of any class;
(j) not incur any material obligations or commitments other than in the
ordinary course of business;
(k) not incur or become subject to, nor agree to incur or become subject to,
any debt, obligation or liability, contingent or otherwise, except current
liabilities in the ordinary course of business and obligations incurred in
connection with capital asset acquisitions consistent in amounts in prior
periods;
(l) not impose or permit any Security Interest to be imposed upon any of its
assets;
(m) not make any capital investment in, make any loan to, or acquire the
securities or assets of any other person, except that the 3SI Shareholders
have disclosed to, and received approval of TYREX, to continue the Stock
Pledge Agreement with the Previous Owners by releasing the existing 3SI
Stock at Closing, and repledging newly issued TYREX Stock at Closing;
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(n) not grant any salary increases (other than as required by existing
contracts or consistent with past practice), unscheduled promotions or
enter into any new employment or benefit contracts.
4.6. Support of the Merger. Subject to the performance and satisfaction of
conditions precedent to the Closing, TYREX and 3SI agree to propose, advocate,
support and vote for the Merger contemplated by Section 3 of this Agreement, and
to act in good faith with a view to completing the transactions contemplated
herein to the best of their ability.
4.7. Notice of Developments. Each party to this Agreement shall give
prompt written notice to the others of any material development affecting the
ability of the parties to consummate the transactions contemplated by this
Agreement.
4.8. Notices and Consents. In the event either TYREX or 3SI is required to
give any notices to third parties and/or to obtain any third-party consents to
complete the Merger, all such notices shall have been required and such consents
obtained prior to the Effective Time and the Closing.
4.9. Investment Representation by 3SI Shareholders. Each of 3SI and the
3SI Shareholders understands that the TYREX Common Stock constituting the Merger
Consideration has not been registered under the Securities Act and each of the
3SI Shareholders represents and warrants that he is acquiring such securities at
the Closing hereunder for his own account for investment and not with a view to
the resale or other distribution thereof. Each of the 3SI Shareholders
acknowledges that such securities may not be resold or transferred unless they
have been effectively registered under the Securities Act or the issuer has
received an opinion of counsel reasonable satisfactory to it to the effect that
any such proposed resale or transfer is exempt from the registration
requirements of the Securities Act. Each of the 3SI Shareholders acknowledges
that he is familiar with the provisions applicable to the resale of "restricted
securities" within the meaning and the limitations of Rule 144 promulgated by
the SEC under the Securities Act.
4.10. Other Documents and Conditions to Exchange Closing. At the
Closing, 3SI and TYREX shall deliver to each other all certificates, instruments
and documents referred to in this Agreement or reasonably requested by their
respective counsel as conditions to Closing. All conditions precedent to the
Closing set forth in Sections 3 and 4 of this Agreement shall have been fully
performed and satisfied, or waived in writing by the parties hereto, at or prior
to the Closing Date.
5. REPRESENTATIONS AND WARRANTIES OF TYREX
TYREX represents and warrants to 3SI and the 3SI Shareholders as of the
date hereof, and as of the Closing Date, as follows:
5.1. Authority. TYREX has, and upon its formation the TYREX Subsidiary
will have, all requisite power and authority, without the consent of any other
person, to execute and deliver this Agreement and the agreements and instruments
to be delivered upon the Closing Date and to carry out the transactions
contemplated hereby. This Agreement, the Merger and the transactions
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contemplated hereby and thereby have been duly authorized by the board of
directors and Shareholders of TYREX and, upon its formation, will be duly
authorized by the board of directors of the TYREX Subsidiary and by TYREX as the
sole shareholder of the TYREX Subsidiary.
5.2. Validity. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in the
creation of any Security Interest or other lien, charge or encumbrance of any
kind or the acceleration of any indebtedness or other obligation of TYREX and
the TYREX Subsidiary, and are not prohibited by, do not violate or conflict with
any provision of, and do not constitute a default under or a breach of: (a) the
charter or by-laws of TYREX and the TYREX Subsidiary; (b) any note, bond,
indenture, contract, agreement, permit, license or other instrument to which
TYREX or the TYREX Subsidiary is a party or by which any of its or their assets
are bound; and (c) any order, writ, injunction, decree or judgment of any court
or government agency; or (d) any law, rule or regulation applicable to TYREX.
5.3. Due Organization. TYREX is a corporation duly organized, validly
existing and in good standing under the laws of the State of Wyoming and has
full power and authority and all requisite rights, licenses, permits and
franchises to own, lease and operate its assets and to carry out the business in
which it is engaged. TYREX is not required by its ownership of assets or
conduct of its business to be licensed or qualified to do business as a foreign
corporation in any other jurisdiction where it is not so qualified. Upon its
formation, the TYREX Subsidiary will be a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado and will
have full power and authority and all requisite rights, licenses, permits and
franchises to own, lease and operate its assets and to carry out the business in
which it is and intends to be engaged (including the 3SI Business). The TYREX
Subsidiary will not be required by its ownership of assets or conduct of its
business to be licensed or qualified to do business as a foreign corporation in
any other jurisdiction.
5.4. No Other Subsidiaries. Except for the TYREX Subsidiary, TYREX does
not own stock or have any equity investment or other interest in, does not have
the right to acquire any such interest, and does not control, directly or
indirectly, any corporation, association, partnership, joint venture or other
entity, and has not had such an ownership or control relationship with any other
entity during the three years preceding this Agreement.
5.5. Capitalization. The authorized capital stock of TYREX consists of
50,000,000 no par value shares of TYREX Common Stock and no shares of preferred
stock. As of the date hereof, there are 10,960,091 shares of TYREX Common
Stock, together with stock options and warrants outstanding as set forth on
Schedule 5.5. All of the issued and outstanding shares of TYREX Common Stock,
are duly authorized, validly issued, fully paid and nonassessable, were not
issued in violation of any preemptive, subscription or other right of any person
to acquire securities of TYREX and constitute in the aggregate all of the issued
and outstanding capital stock of all classes of TYREX. Except for this
Agreement and as disclosed in SCHEDULE 5.5 (the One Capital Corporation warrants
and Employee Stock Options) attached hereto, there is no outstanding
subscription, option, convertible or exchangeable security, preemptive right,
warrants, call, agreement, arrangement or other right relating to the capital
stock of TYREX or other obligation or commitment of TYREX to issue or transfer
any shares of capital stock. Except as set forth in SCHEDULE 5.5 attached
hereto, there are no voting trusts or other agreements, arrangements or
understandings applicable to the exercise of voting or any other rights with
respect to the capital stock TYREX. There are no outstanding or authorized
stock appreciation, phantom stock or similar rights with respect to TYREX or its
capital stock.
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The authorized capital stock of the TYREX Subsidiary upon its
formation will consist of 1,000 shares of common stock. As of the Closing,
there will be 1,000 shares of such common stock issued and outstanding, all of
which shall be owned of record and beneficially by TYREX and, as part of the
Merger and Closing shall be converted into one share of 3SI pursuant to Section
3.2.1.(b) above. Prior to Closing, all such outstanding shares of TYREX
Subsidiary common stock shall be duly authorized, validly issued, fully paid and
nonassessable, shall not be subject to any preemptive, subscription or other
right of any person to acquire securities of the TYREX Subsidiary and shall
constitute in the aggregate all of the issued and outstanding capital stock of
all classes of the TYREX Subsidiary. Except for this Agreement and as set forth
in Schedule 5.5, there is no outstanding subscription, option, convertible or
exchangeable security, preemptive right, warrants, call, agreement, arrangement
or other right relating to the capital stock of the TYREX Subsidiary or other
obligation or commitment of the TYREX Subsidiary to issue or transfer any shares
of capital stock. Except for the Transition Agreement, there are no voting
trusts or other agreements, arrangements or understandings applicable to the
exercise of voting or any other rights with respect to the capital stock of the
TYREX Subsidiary and there shall be no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the TYREX
Subsidiary or its capital stock.
5.6. Transactions with Affiliates. Since December 31, 1996, there has not
been any dividend declared or paid or other distribution of assets by TYREX or
the TYREX Subsidiary to its shareholders. None of the officers or directors of
TYREX or the TYREX Subsidiary or any of their Affiliates, directly or
indirectly:
(a) owns any debt, equity or other interest or investment in any corporation,
association or other entity which is a competitor, lessor, lessee, customer
or supplier of TYREX;
(b) has any cause of action or other claim whatsoever against or owes any
amount to, or is owed any amount by, TYREX, except for (i) reimbursement of
business expenses incurred in the ordinary course of business; (ii) current
payroll, accrued vacation pay and other rights as an employee of TYREX; and
(iii) severance payment rights as set forth in Schedule 5.10(B) attached
hereto;
(c) has any interest in or owns any property or right used in the conduct of
the business of TYREX; and
(d) is a party to any contract, lease, agreement, arrangement or commitment
entered into with TYREX or in connection with the TYREX Business except as
set forth in Schedule 5.6 hereto or as set forth in Schedule 5.6 hereto or
as contemplated by this Agreement or by the Oil and Gas Purchase and Sale
Agreement.
5.7. Financial Statements and Related Matters.
(a) SEC Reports. TYREX has made all filings with the SEC that it has been
required to make under the Securities Act and the Securities Exchange Act
(all of such filings by TYREX with the SEC are collectively called the
"Public Reports"). Each of the Public Reports at the time the same was
filed with the SEC has complied with the Securities Act and the Securities
Exchange Act in all material respects. None of the Public Reports, as of
their respective dates, contained any untrue statement of a material fact
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or omitted to state a material fact necessary in order to make the
statements made therein, in light of the circumstances under which they
were made, not misleading. TYREX has delivered to 3SI a correct and
complete copy of each of the Public Reports filed by TYREX with the SEC
since January 1, 1995 (together with all material exhibits thereto and as
amended to date).
(b) SEC Actions, Investigations, Insider Trading. There are no pending or
threatened SEC actions or investigations, and TYREX and its officers,
directors, and major shareholders and affiliates have not, to their
knowledge, violated any federal or state securities laws, or SEC
regulations, including but not limited to SEC reporting requirements,
disclosure rules, and insider trading rules.
(c) Financial Statements and Liabilities. The audited financial statements of
TYREX for the years ended June 30, 1995 and 1996 contained in the Public
Reports (the "TYREX Audited Financial Statements") and the TYREX Interim
Financial Statements are and will be: (i) accurate, correct and complete
in all material respects; (ii) in accordance with the books of account and
records of TYREX; (c) fair presentations of the financial condition and
results of operations of TYREX as of the dates and for the periods
indicated therein; and (d) prepared in accordance with GAAP. Except to the
extent reflected on the balance sheet included in the TYREX Interim
Financial Statements, or as otherwise contemplated herein, TYREX does not
have any indebtedness, liabilities or obligations of any nature, whether
absolute, accrued, contingent or otherwise as of the date of this Agreement
and the Closing. The TYREX Subsidiary will not own any assets or have any
liabilities of any nature, whether absolute, accrued, contingent or
otherwise as of the Closing.
(d) Books and Records{tc "Books and Records" \l 2}. The books of account,
stock records and other records (financial and otherwise) of TYREX are in
all material respects complete and correct and are maintained in accordance
with good business practices.
(e) Interim Change. Since the date of TYREX's Interim Financial Statements,
there has not been (a) any material adverse change in the financial
condition, assets, liabilities, personnel or business of TYREX or in its
relationships with suppliers, customers, distributors, lenders, lessors or
others; (b) any damage, destruction or loss, whether or not covered by
insurance, materially adversely affecting TYREX; (c) any event or condition
or series of events or conditions which could, individually or in the
aggregate, reasonably be expected to have a material adverse effect on
TYREX; or (d) any development which could or will have a material adverse
effect on TYREX.
5.8. Accounts Receivable. All outstanding accounts receivable reflected
on the TYREX Interim Financial Statements and incurred in the ordinary course of
business since the date of such Interim Financial Statements, and as of the
Closing Date, will be, due and valid claims against account debtors for goods or
services delivered or rendered, collectible in full within 120 days of delivery
and subject to no defenses, offsets or counterclaims, except as reserved against
in the TYREX Interim Financial Statements in accordance with GAAP. All
receivables arose in the ordinary course of business, and no receivables are
subject to prior assignment, adverse claims, liens or security interests except
for claims of secured debt reflected on the TYREX Interim Financial Statements.
TYREX has provided sufficient reserves in the TYREX Interim Financial Statements
to cover any liabilities to customers for discounts, returns, promotional
allowances or otherwise. TYREX has provided sufficient reserves in the TYREX
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Interim Financial Statements to cover any refunds, allowances or returns in
respect of products manufactured, processed, distributed, shipped or sold by or
for the account of TYREX on or prior to the Closing Date.
5.9. Title to Assets. TYREX is the legal and equitable owner of all
right, title and interest in and has good and marketable title to all of the
assets which it purports to own and which are reflected on the balance sheet
included in the TYREX Interim Financial Statements and acquired in the ordinary
course of business subsequent thereto. Except as disclosed in SCHEDULE 5.9,
none of the assets which TYREX purports to own are subject to (a) any material
title defect or objection; (b) any contract of lease, license or sale, other
than the Oil and Gas Purchase and Sale Agreement; (c) any Security Interest; (d)
any royalty (except as to its oil and gas properties) or commission arrangement;
or (e) any materially adverse claim, covenant or restriction. The TYREX assets
are in good operating condition and repair, taken as a whole (reasonable wear
and tear excepted), are suitable for the purposes for which they are presently
being used, and are adequate to meet all present requirements of the business of
TYREX as currently conducted.
5.10. Employees.
(a) Employment Contracts. Except as set forth in Schedule 5.10(A), there are
no agreements, arrangements or understandings, written or oral, with
officers, directors and employees of TYREX regarding services to be
rendered, terms and conditions of employment, or compensation which are not
terminable at will by TYREX;
(b) No Extraordinary Benefits. Except as set forth in Schedule 5.10(B) no
employee of TYREX is entitled to receive supplementary retirement benefits
or allowances, whether pursuant to a contractual obligation or otherwise.
TYREX has not (i) paid, or made any accrual or arrangement for the payment
of, bonuses or special compensation of any kind including any severance or
termination pay, to any present or former officer or employee, (ii) made
wage or salary increases except in the ordinary course of business
consistent with prior practice, or (iii) increased or altered any other
benefits or insurance provided to any employee;
(c) Disputes. There are no controversies pending or, to the knowledge of
TYREX, threatened involving any group of employees. TYREX has not suffered
or sustained any work stoppage and no such work stoppage is threatened. No
union organizing or election activities involving any employees of TYREX
are in progress or threatened;
(d) Compliance. TYREX has complied with all laws, rules and regulations
relating to the employment of labor by TYREX, including provisions relating
to wages, hours, equal opportunity, persons with disabilities, occupational
health and safety, severance, collective bargaining and the payment of
social security and other taxes; and
(e) Employee Benefit Plans. TYREX is not a party to or obligated under any
"welfare benefit plans" as defined in S3(2) of the Employee Retirement
Income Security Act of 1974 ("ERISA"), as amended, or any employee pension
benefit plans, bonus, profit sharing, deferred compensation, incentive or
other compensation plans or arrangements, or other employee fringe benefit
plans, whether funded or unfunded, qualified or unqualified, whether
maintained or contributed to by TYREX or any other organization which is a
member of a controlled group of organizations for the benefit of any of its
officers, employees or other persons.
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5.11. Material Contracts. SCHEDULE 5.11 sets forth an accurate,
correct and complete list of all significant instruments, commitments,
agreements, arrangements and understandings to which TYREX is a party or by
which any of its assets are subject or bound, or pursuant to which TYREX is a
beneficiary (the "TYREX Material Contracts"). SCHEDULE 5.11 includes, without
limitation, a list of all (a) real estate leases; (b) personal property leases
involving payments of more than $10,000 per year; (c) agreements or licenses
relating to intellectual property; (d) commitments for capital expenditures or
for the purchase of goods or services in excess of $25,000 except those incurred
in the ordinary course of business; (e) any purchase order or commitment
obligating TYREX to sell or deliver any product or service at a price which does
not cover the cost (including labor, materials and production overhead); (f)
any instrument evidencing indebtedness, liability for borrowed money,
obligations for the deferred purchase price of property in excess of $25,000
(excluding normal trade payables), and any instrument guaranteeing any
indebtedness, obligation or liability; (g) any joint venture, partnership or
other agreement involving a sharing of profits; (h) any deed, lease, easement,
agreement or other instrument affecting real property; (i) any contract with any
government agency; (j) any contract with respect to the discharge, storage or
removal of effluent, waste or pollutants; (k) any license or royalty agreement;
(l) any contract to indemnify any party or to share tax liability of any party;
(m) any contract for the purchase or sale of foreign currency or derivative
securities; (n) any contract containing covenants not to compete in any line of
business or with any person in any geographical area; and (n) any other
commitment which provides for payment or performance having an aggregate value
of $5,000 or more that is not terminable without payment or penalty.
Accurate, correct and complete copies of all TYREX's Material
Contracts have been delivered by TYREX to 3SI. TYREX has complied with all
material commitments and obligations on its part to be performed or observed
under each TYREX Material Contract, and no event has occurred which is or, after
the giving of notice or passage of time, or both, would constitute a default
under or a breach of any TYREX Material Contract.
5.12. Insurance. TYREX maintains insurance issued under valid and
enforceable policies or binders for the benefit of TYREX, and all such policies
or binders are in full force and effect and are in amounts and for risks,
casualties and contingencies customarily insured against by enterprises in
operations similar to the business operated by TYREX. There are no pending or
asserted claims against any insurance of TYREX as to which any insurer has
denied liability, and there are no claims under any such insurance that have
been disallowed. No notice of cancellation or nonrenewal with respect to any
insurance has been received by TYREX.
5.13. Environmental Matters. Except as set forth on Schedule 5.13, the
use and operation by TYREX of each facility used in the TYREX business has been,
and on the Closing Date will be, in compliance with all Federal, state and local
environmental and anti-pollution laws and regulations, including the Resource
Conservation and Recovery Act, as amended ("RCRA"), and all laws and regulations
concerning particulate emissions, hazard communication, surface water pollution,
groundwater pollution, air pollution, solid wastes, hazardous wastes, storage,
handling, treatment, transportation, spills or other releases, and disposal of
any substance, material or waste, and exposure to or notification regarding any
substance, material or waste. There has not been, and is not occurring, at any
facility operated or previously owned or operated by TYREX any improper release
or threatened release of any hazardous substances or petroleum products. TYREX
has not applied or disposed of any hazardous substance in any manner which may
require removal, remedial action or expense at any facility, site, location or
body of water, surface or subsurface. No environmental audits or assessments or
occupational health studies have been undertaken by TYREX or any government
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agency with respect to the TYREX business, facilities or properties. To the
best knowledge to TYREX, there has not been located on or disposed of on any
facility owned or operated by TYREX during any period of such ownership or
operations, or, at any other time: (a) any asbestos; any material, equipment or
structure constructed of or containing any asbestos; or any product or item made
in whole or in part of asbestos, or (b) any polychlorinated biphenyl; any
compound or material containing any polychlorinated biphenyl; or any equipment,
article or item using, containing, or made up in whole or in part of any
polychlorinated biphenyl.
5.14. Compliance with Law. TYREX and its TYREX Business and assets
conform in all material respects to all applicable statutes, codes, ordinances,
licensing requirements, laws, rules and regulations. No notice from any
governmental body or other person of any violation of any statute, code,
ordinance, law, rule or regulation or requiring or calling attention to the
necessity of any repairs, installation or alteration in connection with the
TYREX Business or assets of TYREX has been served, and TYREX does not know of
any meritorious basis therefor.
5.15. Taxes.
(a) Filings. TYREX has filed all returns, declarations and reports and all
information returns and statements (collectively, "TYREX Returns") required
to be filed or sent with respect to all federal, state, county, local and
other taxes of every kind and however measured, including income, gross
receipts, excise, franchise, property, value added, import duties,
employment, payroll, sales and use taxes and any additions to tax and any
interest or penalties thereon (collectively, "TYREX Taxes") for any period
ending on or before the Closing Date. As of the time of filing, the TYREX
Returns correctly reflected the income, business, assets, operations,
activities and status of TYREX and any other information required to be
shown thereon. TYREX has paid or made provision for all TYREX Taxes shown
as due and payable on its TYREX Returns required to be filed or sent prior
to the Closing Date. All required TYREX Tax estimates, deposits,
prepayments and similar reports or payments for current and prior periods
have been properly made; and
(b) Compliance. TYREX has withheld amounts from employees and others working
in the TYREX Business, as required under applicable law, and has filed all
TYREX Returns with respect to employee income tax withholding and social
security and unemployment taxes and paid such TYREX Taxes in compliance
with the tax withholding provisions of the Code and other applicable laws.
5.16. Legal Proceedings. TYREX is not engaged in or a party to or
threatened with any action, suit, proceeding, complaint, charge, investigation
or arbitration or other method of settling disputes or disagreements, and does
not anticipate or have notice of any reasonable basis for any such action.
TYREX has not received notice of any investigation threatened or contemplated by
any government or regulatory authority, including those involving the safety of
products, the working conditions of employees, employment practices or policies,
or compliance with environmental regulations. TYREX is not subject to any
judgment, order, writ, injunction or decree of any court or any government
agency or any arbitrator.
5.17. No Brokers. Except for the warrant agreement and $150,000 cash
payment to ONE CAPITAL CORPORATION in connection with the Merger Advisory
Agreement and Warrants to be issued under the Warrant Agreement, as set forth in
Schedule 5.17 hereto, neither TYREX nor any of its Affiliates has retained any
broker, finder or agent or incurred any liability or obligation for any
brokerage fees, commissions or finders' fees with respect to this Agreement or
the transactions contemplated hereby for which 3SI or the Surviving Corporation
will be responsible.
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5.18. Disclosure. The representations and warranties of TYREX contained
in this Agreement and each Schedule, certificate or other written statements
delivered pursuant to this Agreement are each accurate, correct and complete in
all material respects, and do not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
and information contained herein or therein not misleading.
6. REPRESENTATIONS AND WARRANTIES OF 3SI AND THE 3SI SHAREHOLDERS.
3SI and the 3SI Shareholders, jointly and individually, represent and
warrant to TYREX, its shareholders, and the Surviving Corporation as of the date
hereof, and as of the Closing Date, as follows:
6.1. Authority. 3SI has all requisite power and authority, without the
consent of any other person, to execute and deliver this Agreement and the
agreements and instruments to be delivered upon the Closing Date and to carry
out the transactions contemplated hereby. This Agreement, the Merger and the
transactions contemplated hereby and thereby have been duly authorized by the
board of directors of 3SI.
6.2. Validity. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in the
creation of any Security Interest or other lien, charge or encumbrance of any
kind or the acceleration of any indebtedness or other obligation of 3SI and are
not prohibited by, do not violate or conflict with any provision of, and do not
constitute a default under or a breach of (a) the charter or by-laws of 3SI, (b)
any note, bond, indenture, contract, agreement, permit, license or other
instrument to which 3SI is a party or by which any of its assets are bound, (c)
any order, writ, injunction, decree or judgment of any court or government
agency, or (d) any law, rule or regulation applicable to 3SI.
6.3. Due Organization. 3SI is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado and has
full power and authority and all requisite rights, licenses, permits and
franchises to own, lease and operate its assets and to carry out the business in
which it is engaged. 3SI is licensed or qualified to do business as a foreign
corporation in any other jurisdiction in which its ownership of assets or
conduct of the 3SI Business requires such qualification.
6.4. No Subsidiaries. 3SI does not own stock or have any equity investment
or other interest in, does not have the right to acquire any such interest, and
does not control, directly or indirectly, any corporation, association,
partnership, joint venture or other entity and has not had such an ownership or
control relationship with any other entity during the three years preceding this
Agreement.
6.5. Capitalization. The authorized capital stock of 3SI consists of
50,000 shares of 3SI Common Stock. As of the date hereof, there are 300 shares
of 3SI Common Stock issued and outstanding. All of the issued and outstanding
shares of 3SI Common Stock are duly authorized, validly issued, fully paid and
nonassessable, were not issued in violation of any preemptive, subscription or
other right of any person to acquire securities of 3SI and constitute in the
aggregate all of the issued and outstanding capital stock of all classes of 3SI.
Except for this Agreement, there is no outstanding subscription, option,
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convertible or exchangeable security, preemptive right, warrant, call,
agreement, arrangement or other right relating to the capital stock of 3SI or
other obligation or commitment of 3SI or the 3SI Shareholders individually to
issue or transfer any shares of capital stock. There are no voting trusts or
other agreements, arrangements or understandings applicable to the exercise of
voting or any other rights with respect to the capital stock 3SI, except the
Shareholders Agreement among Messrs. Backes, Slack and Valdez, which will be
terminated upon Closing. There are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to 3SI or its capital
stock.
The 3SI Shareholders are the sole record and beneficial owners all of
the issued and outstanding capital stock of 3SI and have good, marketable and
indefeasible title thereto, free and clear of all claims, Security Interests,
liens, pledges, charges, escrows, options, proxies, rights of first refusal,
encumbrance or restriction of any kind, except the pledge of 3SI stock to the
Previous Owners of 3SI, pursuant to the Pledge Agreement as set forth in
Schedule 6.5 hereto, which pledge of stock will be released at Closing pursuant
to TYREX's payment of the Royalty to Previous Owners, pursuant to Section 4.1(c)
hereof. The 3SI Shareholders will not sell, assign or otherwise encumber any
interest in such shares prior to the Closing hereunder.
6.6. Transactions with Affiliates. Since the date of 3SI's Audited
Financial Statements as of December 31, 1996, there has not been any dividend
declared or paid or other distribution of assets by 3SI to its shareholders,
except distributions made to the 3SI Shareholders for payment to the Previous
Owners on the Promissory Note owed to the Previous Owners. None of the officers
or directors of 3SI or any of their Affiliates, directly or indirectly:
(a) owns any debt, equity or other interest or investment in any corporation,
association or other entity which is a competitor, lessor, lessee, customer
or supplier of 3SI;
(b) has any cause of action or other claim whatsoever against or owes any
amount to, or is owed any amount by, 3SI, except for (i) reimbursement of
business expenses incurred in the ordinary course of business, and (ii)
current payroll, accrued vacation pay and other rights as an employee of
3SI;
(c) has any interest in or owns any property or right used in the conduct of
the business of 3SI; or
(d) is a party to any contract, lease, agreement, arrangement or commitment
entered into with 3SI or in connection with the 3SI Business, except as
contemplated by this Agreement.
6.7. Financial Statements and Related Matters.
(a) Financial Statements and Liabilities. The current financial statements of
3SI for the years ended December 31, 1996 and 1995 to be furnished by 3SI
to TYREX prior to the Closing Date (the "3SI Financials") and the 3SI
Interim Financial Statements are and will be: (i) accurate, correct and
complete in all material respects; (ii) in accordance with the books of
account and records of 3SI; (iii) fair presentations of the financial
condition and results of operations of 3SI as of the dates and for the
periods indicated therein; and (iv) prepared in accordance with GAAP.
Except to the extent reflected on the balance sheet included in the 3SI
Interim Financial Statements, obligations for trade payables and accrued
liabilities incurred since March 31, 1997 in the ordinary course of
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business, and leases for office equipment and facilities, 3SI does not have
any indebtedness, liabilities or obligations of any nature, whether
absolute, accrued, contingent or otherwise;
(b) Books and Records. The books of account, stock records and other records
(financial and otherwise) of 3SI are in all material respects complete and
correct and are maintained in accordance with good business practices; and
(c) Interim Change. Since the date of 3SI's Interim Financials, there has not
been (i) any material adverse change in the financial condition, assets,
liabilities, personnel or business of 3SI or in its relationships with
suppliers, customers, distributors, lenders, lessors or others; (ii) any
damage, destruction or loss, whether or not covered by insurance,
materially adversely affecting 3SI; (iii) any event or condition or series
of events or conditions which could, individually or in the aggregate,
reasonably be expected to have a material adverse effect on 3SI; or (iv)
any development which could or will have a material adverse effect on 3SI.
6.8. Accounts Receivable. All outstanding accounts and notes receivable
reflected on the 3SI Interim Financial Statements and incurred in the ordinary
course of business since the date of 3SI's Interim Financials are, and as of the
Closing Date, will be, due and valid claims against account debtors for goods or
services delivered or rendered, collectible in full within 120 days of delivery
and subject to no defenses, offsets or counterclaims, except as reserved against
in the 3SI Interim Financial Statements in accordance with GAAP. All
receivables arose in the ordinary course of business, and no receivables are
subject to prior assignment, adverse claims, liens or security interests, except
for the existing line of credit from Bank One, N.A., in the initial approximate
amount of $1,175,000. 3SI has provided sufficient reserves in the 3SI Interim
Financial Statements to cover any liabilities to customers for discounts,
returns, promotional allowances or otherwise. 3SI has provided sufficient
reserves in the 3SI Interim Financial Statements to cover any refunds,
allowances or returns in respect of products manufactured, processed,
distributed, shipped or sold by or for the account of 3SI.
6.9. Inventory. All inventories reflected on the 3SI Interim Financial
Statements and acquired thereafter are (a) properly valued at the lower of cost
or market value on a first-in, first-out basis in accordance with GAAP; (b) of
good and merchantable quality and contain no material amounts that are not
salable and usable in the ordinary course of business and meet the current
standards and specifications of its business; (c) in conformity with warranties
customarily given to purchasers of like products; and (d) at levels adequate and
not excessive in relation to the circumstances of its business and in accordance
with past inventory stocking practices. All inventories disposed of subsequent
hereto will be disposed of only in the ordinary course of business and at prices
and under terms that are consistent with the past practices of 3SI customary in
its industry.
6.10. Title to Assets. 3SI is the legal and equitable owner of all right,
title and interest in and has good and marketable title to all of the assets
which it purports to own and which are reflected on the balance sheet included
in the 3SI Interim Financial Statements and acquired in the ordinary course of
business subsequent thereto. Except as disclosed in SCHEDULE 6.10, none of the
assets which 3SI purports to own are subject to (a) any material title defect or
objection; (b) any contract of lease, license or sale, except the sale of
inventory in the ordinary course of business; (c) any Security Interest; (d) any
royalty or commission arrangement (except the Royalty to Previous Owners defined
in Section 1 and set forth in Schedule 6.10); or (e) any materially adverse
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claim, covenant or restriction. The 3SI assets are in good operating condition
and repair, taken as a whole (reasonable wear and tear excepted), are suitable
for the purposes for which they are presently being used, and are adequate to
meet all present requirements of the business of 3SI as currently conducted.
3SI does not own any real property.
6.11. Intellectual Property and Trade Secrets; No Infringement.
(a) SCHEDULE 6.11 sets forth an accurate, correct and complete list and summary
description of all patents, trademarks, trademark rights, trade names,
trade styles, trade dress, product designations, service marks, copyrights
and applications for any of the foregoing utilized in the business of 3SI
(the "3SI Intellectual Property"). Except as set forth in SCHEDULE 6.11,
(i) 3SI owns or has the exclusive right to use the 3SI Intellectual
Property; (ii) no action, suit, proceeding or investigation is pending or,
to the best knowledge of 3SI is threatened, which alleges that the 3SI
Intellectual Property or its sale of products and services interferes with,
infringes upon, conflicts with or otherwise violates the rights of others,
and none is subject to any outstanding order, decree, judgment, stipulation
or other adverse charge; and (iii) there are no royalty, commission or
similar arrangements, and no licenses, sublicenses or agreements,
pertaining to any of the 3SI Intellectual Property;
(b) All information in the nature of know-how, trade secrets or proprietary
information which provides 3SI with an advantage over competitors is
collectively called the "3SI Technical Information". All 3SI Technical
Information (i) is owned solely and exclusively by 3SI; (ii) is adequately
documented and in condition for use by the Surviving Corporation upon
consummation of the Merger; and (iii) has been continuously maintained in
confidence by taking reasonable precautions to protect the secrecy of all
3SI Technical Information and to prevent disclosure to unauthorized
parties; and
(c) The 3SI Shareholders do not own or possess any intellectual property rights
or technical information useful to the 3SI Business which have not been
assigned and transferred to 3SI and all of the same currently are included
in the 3SI Intellectual Property and the 3SI Technical Information. All
rights to inventions and technical information developed by the 3SI
Shareholders in the course of their employment by 3SI or otherwise relating
to the 3SI Business as of the Closing Date are and shall be included in the
3SI Intellectual Property and the 3SI Technical Information.
6.12. Employees.
(a) Employment Contracts. Except as set forth in Schedule 6.12 with respect to
the 3SI Shareholders, there are no agreements, arrangements or
understandings, written or oral, with officers, directors and employees of
3SI regarding services to be rendered, terms and conditions of employment,
or compensation which are not terminable at will by 3SI;
(b) No Extraordinary Benefits. Except as set forth in Schedule 6.12 with
respect to the 3SI Shareholders, no employee of 3SI is entitled to receive
supplementary retirement benefits or allowances, whether pursuant to a
contractual obligation or otherwise, and 3SI has not (i) paid, or made any
accrual or arrangement for the payment of, bonuses or special compensation
of any kind including any severance or termination pay, to any present or
former officer or employee, (ii) made wage or salary increases except in
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the ordinary course of business consistent with prior practice, or (iii)
increased or altered any other benefits or insurance provided to any
employee;
(c) Disputes. There are no controversies pending or, to the knowledge of 3SI,
threatened involving any group of employees. 3SI has not suffered or
sustained any work stoppage and no such work stoppage is threatened. No
union organizing or election activities involving any employees of 3SI are
in progress or threatened;
(d) Compliance. 3SI has complied with all laws, rules and regulations relating
to the employment of labor by 3SI, including provisions relating to wages,
hours, equal opportunity, persons with disabilities, occupational health
and safety, severance, collective bargaining and the payment of social
security and other taxes; and
(e) Employee Benefit Plans. Except as set forth in Schedule 6.12 with respect
to the 3SI Shareholders, 3SI is not a party to or obligated under any
"welfare benefit plans" as defined in S3(2) of the Employee Retirement
Income Security Act of 1974 ("ERISA"), as amended, or any employee pension
benefit plans, bonus, profit sharing, deferred compensation, incentive or
other compensation plans or arrangements, or other employee fringe benefit
plans, whether funded or unfunded, qualified or unqualified, whether
maintained or contributed to by 3SI or any other organization which is a
member of a controlled group of organizations for the benefit of any of its
officers, employees or other persons.
6.13. Material Contracts. SCHEDULE 6.13 sets forth an accurate,
correct and complete list of all significant instruments, commitments,
agreements, arrangements and understandings to which 3SI is a party or by which
any of its assets are subject or bound, or pursuant to which 3SI is a
beneficiary (the "3SI Material Contracts"). SCHEDULE 6.13 includes, without
limitation, a list of all (a) real estate leases; (b) personal property leases
involving payments of more than $10,000 per year; (c) distribution and
manufacturers' representation agreements; (c) agreements or licenses relating
to intellectual property; (d) commitments for capital expenditures or for the
purchase of goods or services in excess of $25,000 except those incurred in the
ordinary course of business; (e) any purchase order or commitment obligating
3SI to sell or deliver any product or service at a price which does not cover
the cost (including labor, materials and production overhead); (f) any
instrument evidencing indebtedness, liability for borrowed money, obligations
for the deferred purchase price of property in excess of $25,000 (excluding
normal trade payables), and any instrument guaranteeing any indebtedness,
obligation or liability; (g) any joint venture, partnership or other agreement
involving a sharing of profits; (h) any deed, lease, easement, agreement or
other instrument affecting real property; (i) any contract with any government
agency; (j) any contract with respect to the discharge, storage or removal of
effluent, waste or pollutants; (k) any license or royalty agreement; (l) any
contract to indemnify any party or to share tax liability of any party; (m) any
contract for the purchase or sale of foreign currency or derivative securities;
(n) any contract containing covenants not to compete in any line of business or
with any person in any geographical area; and (n) any other commitment which
provides for payment or performance having an aggregate value of $5,000 or more
that is not terminable without payment or penalty.
Accurate, correct and complete copies of all 3SI Material Contracts
have been delivered by 3SI to TYREX. 3SI has complied with all material
commitments and obligations on its part to be performed or observed under each
3SI Material Contract, and no event has occurred which is or, after the giving
of notice or passage of time, or both, would constitute a default under or a
breach of any 3SI Material Contract.
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6.14. Software and Information Systems. 3SI owns all necessary right,
title and interest to all electronic data processing systems, information
systems, computer software programs, program specifications, procedures, input
data, routines, data bases, report layouts and formats, record file layouts,
diagrams, functional specifications and other related material used in the 3SI
Business (collectively the "3SI Software"), except for 3SI Software which is
validly licensed to 3SI. All 3SI Software documentation is current, accurate
and sufficient in detail and content to identify and explain the nature thereof,
and to allow its full and proper use by the Surviving Corporation without
reliance on the special knowledge or memory of third parties.
6.15. Customers, Subcontractors and Suppliers. All contracts and
orders with customers, subcontractors and suppliers were entered into by or on
behalf of 3SI in the ordinary course of business and will be fully performed
within the period contracted for. There has been no cancellation of backlogged
orders in excess of cancellations previously experienced in the ordinary course
of business. Schedule 6.15 sets forth the backlog of 3SI at March 31, 1997.
3SI has no reason to believe that any customer, subcontractor or supplier will
cease to do business with the Surviving Corporation after, or as a result of,
the Merger contemplated hereby, or that any customer or supplier of 3SI is
threatened with bankruptcy or insolvency. 3SI knows of no fact, condition or
event which would adversely affect the relationship of 3SI with any existing
customer or supplier.
6.16. Licenses and Permits. All material licenses, permits,
accreditations or authorizations required by 3SI for the conduct of the 3SI
Business are valid and in full force and effect and there are no pending or
threatened proceedings which could result in the termination, revocation,
limitation or impairment of any of the same.
6.17. Product Warranty and Product Liability. All products
manufactured, processed, distributed, shipped or sold by 3SI and any services
rendered by 3SI have been in conformity in all material respects with all
applicable contractual commitments and all expressed or implied warranties.
There are no existing claims, liabilities or obligations arising from or alleged
to arise from any injury to person or property as a result the conduct of the
business of 3SI or use of any product manufactured, processed, distributed,
shipped or sold by 3SI prior to the Closing Date.
6.18. Insurance. 3SI maintains insurance issued under valid and
enforceable policies or binders for the benefit of 3SI, and all such policies or
binders are in full force and effect and are in amounts and for risks,
casualties and contingencies customarily insured against by enterprises in
operations similar to the business operated by 3SI. There are no pending or
asserted claims against any insurance of 3SI as to which any insurer has denied
liability, and there are no claims under any such insurance that have been
disallowed. No notice of cancellation or nonrenewal with respect to any
insurance has been received by 3SI.
6.19. Environmental Matters. The use and operation by 3SI of each
facility used in the 3SI Business has been, and on the Closing Date will be, in
compliance with all Federal, state and local environmental and anti-pollution
laws and regulations, including the Resource Conservation and Recovery Act, as
amended ("RCRA"), and all laws and regulations concerning particulate emissions,
hazard communication, surface water pollution, groundwater pollution, air
pollution, solid wastes, hazardous wastes, storage, handling, treatment,
transportation, spills or other releases, and disposal of any substance,
material or waste, and exposure to or notification regarding any substance,
material or waste. There has not been, and is not occurring, at any facility
operated or previously owned or operated 3SI any improper release or threatened
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release of any hazardous substances or petroleum products. 3SI has not applied
or disposed of any hazardous substance in any manner which may require removal,
remedial action or expense at any facility, site, location or body of water,
surface or subsurface. No environmental audits or assessments or occupational
health studies have been undertaken by 3SI or any government agency with respect
to the 3SI Business, facilities or properties. To the best knowledge to 3SI,
there has not been located on or disposed of on any facility owned or operated
by 3SI during any period of such ownership or operations, or, at any other time:
(a) any asbestos; any material, equipment or structure constructed of or
containing any asbestos; or any product or item made in whole or in part of
asbestos, or (b) any polychlorinated biphenyl; any compound or material
containing any polychlorinated biphenyl; or any equipment, article or item
using, containing, or made up in whole or in part of any polychlorinated
biphenyl.
6.20. Compliance with Law. 3SI and its 3SI Business and assets conform
in all material respects to all applicable statutes, codes, ordinances,
licensing requirements, laws, rules and regulations. No notice from any
governmental body or other person of any violation of any statute, code,
ordinance, law, rule or regulation or requiring or calling attention to the
necessity of any repairs, installation or alteration in connection with the 3SI
Business or assets of 3SI has been served, and 3SI does not know of any
meritorious basis therefor.
6.21. Taxes.
(a) Filings. 3SI has filed all returns, declarations and reports and all
information returns and statements (collectively, "3SI Returns") required
to be filed or sent with respect to all federal, state, county, local and
other taxes of every kind and however measured, including income, gross
receipts, excise, franchise, property, value added, import duties,
employment, payroll, sales and use taxes and any additions to tax and any
interest or penalties thereon (collectively, "3SI Taxes") for any period
ending on or before the Closing Date. As of the time of filing, the 3SI
Returns correctly reflected the income, business, assets, operations,
activities and status of 3SI and any other information required to be shown
thereon. 3SI has paid or made provision for all 3SI Taxes shown as due and
payable on its 3SI Returns required to be filed or sent prior to the
Closing Date. All required 3SI Tax estimates, deposits, prepayments and
similar reports or payments for current and prior periods have been
properly made; and
(b) Compliance. 3SI has withheld amounts from employees and others working in
the 3SI Business, as required under applicable law, and has filed all 3SI
Returns with respect to employee income tax withholding and social security
and unemployment taxes and paid such 3SI Taxes in compliance with the tax
withholding provisions of the Code and other applicable laws.
6.22. Legal Proceedings. 3SI is not engaged in or a party to or
threatened with any action, suit, proceeding, complaint, charge, investigation
or arbitration or other method of settling disputes or disagreements, and
neither 3SI nor the 3SI Shareholders knows, anticipates or has notice of any
reasonable basis for any such action. 3SI has not received notice of any
investigation threatened or contemplated by any government or regulatory
authority, including those involving the safety of products, the working
conditions of employees, employment practices or policies, or compliance with
environmental regulations. 3SI is not subject to any judgment, order, writ,
injunction or decree of any court or any government agency or any arbitrator.
6.23. No Brokers. Except as set forth in Schedule 5.17 (the agreement
with ONE CAPITAL CORPORATION, and the finder's agreement with TOM V. CHENAULT)
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and in Schedule 6.23, neither 3SI nor any of its Affiliates has retained any
broker, finder or agent or incurred any liability or obligation for any
brokerage fees, commissions or finders' fees with respect to this Agreement or
the transactions contemplated hereby for which the Surviving Corporation will be
responsible.
6.24. Disclosure. The representations and warranties of 3SI contained in
this Agreement and each Schedule, certificate or other written statements
delivered pursuant to this Agreement are each accurate, correct and complete in
all material respects, and do not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
and information contained herein or therein not misleading.
6.25. Previous Negotiations. 3SI and the 3SI Shareholders have
provided all written documentation in its (their) possession which in any way
relates to any offer to sell, sale or other proposed disposition of shares of
3SI, whether by 3SI or by the 3SI Shareholders individually, including without
limitation all reports, letters, correspondence, valuations and agreements
(whether terminated or not) related thereto. Such persons have also provided
written summaries of any substantive oral offers in the foregoing regard.
SECTION 7. CONDITIONS PRECEDENT TO CLOSING
The obligations of each the parties to consummate the transactions to be
performed by it at Closing are subject to satisfaction of the following
conditions precedent:
7.1. Prior to the Closing, TYREX shall have furnished sufficient
documentation and bank statements to 3SI to demonstrate that TYREX has complied
with the provisions of Section 4.1 of this Agreement and that, after giving
effect to the payment and settlement of TYREX's known debts and liabilities, as
provided therein, TYREX has sufficient cash (at least $400,000) on deposit to
satisfy the requirements of Section 4.1 of this Agreement.
7.2. Prior to the Closing, 3SI and TYREX shall each have completed, to its
sole satisfaction, its due diligence investigation of the other party pursuant
to Section 4.3 of this Agreement; and shall not have given written notice to the
other party of its desire to terminate the transaction.
7.3. The Articles of Merger shall have been prepared, signed and ready for
filing with the Secretary of State of Colorado.
7.4. The representations and warranties of TYREX set forth in Section 5 of
this Agreement and the Schedules relating thereto, and the representations and
warranties of 3SI set forth in Section 6 of this Agreement and the Schedules
related thereto, shall be true and correct in all respects at and as of the
Closing Date.
7.5. At the Closing Date, each of the parties shall have performed and
complied with all of its covenants and agreements hereunder to be performed at
or prior to the Closing Date including, without limitation, all covenants and
agreements set forth in Sections 3 and 4 of this Agreement, and including, but
not limited to execution of satisfactory Employment Agreements with the 3SI
Shareholders, pursuant to Section 4.4 of this Agreement and Exhibit A attached
hereto.
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7.6. At the Closing Date, no action, suit or proceeding shall be in effect,
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state or local jurisdiction wherein an unfavorable
judgment, order, decree, stipulation, injunction or charge would (i) prevent
consummation of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, or (iii) affect adversely the right of the Surviving
Corporation to operate or control business and assets of TYREX and 3SI.
7.7. At the Closing, the cold comfort letters referred to in Section 4.3(d)
and (e) shall have been delivered; and TYREX and 3SI shall have each received
from counsel to the respective parties an opinion with respect to appropriate
matters addressed to TYREX and 3SI respectively and dated as of such date.
7.8. At the Closing Date, all actions to be taken by TYREX and 3SI in
connection with the Merger and the consummation of the transactions contemplated
by this Agreement, and all certificates, opinions, instruments and other
documents required to effect the transactions contemplated by this Agreement,
shall be satisfactory in form and substance to counsel for TYREX and counsel for
3SI.
7.9 At the Closing Date, 3SI shall have provided evidence to TYREX that it
has in place Bank One interim financing through September 1,1 997 in the amount
of $1,100,000.
7.10 At the Closing, TYREX, 3SI and the 3SI Shareholders individually shall
have executed the "Transition Agreement" defined herein.
7.11 Fairness Opinion. At Closing, TYREX shall have received a fairness
opinion from One Capital Corporation, satisfactory in form and substance to
TYREX and 3SI.
7.12 Chenault. The finders fee letter of March 5, 1997 between 3SI and Tom
Chenault shall have been terminated and a general release and waiver from Mr.
Chenault and/or MOE shall have been delivered to TYREX.
7.13 Previous Owners of 3SI. 3SI and the Previous Owners of 3SI have
entered into agreement satisfactory to TYREX which replace the existing Stock
Purchase and Pledge Agreements pursuant to which the 3SI Shareholders purchased
300 shares of 3SI common stock.
SECTION 8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES,
COVENANTS AND INDEMNIFICATION PROVISIONS
8.1. Reliance. All representations, warranties, covenants and agreements
contained in this Agreement or in any document, agreement or instrument
delivered pursuant hereto or thereto shall be deemed to be material and to have
been relied upon by the parties hereto, and the accuracy thereof shall be a
condition precedent to the obligation of the other parties hereto to consummate
the transactions contemplated by this Agreement.
8.2. Survival of Representations and Warranties After Closing.
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(a) The representations and warranties of TYREX set forth in Section 5 of this
Agreement shall survive the Closing hereunder.
(b) The Representations of 3SI set forth in Section 6 of this Agreement shall
survive the Closing hereunder.
8.3. Indemnification to 3SI Shareholders from TYREX.
(a) The 3SI Shareholders shall be indemnified, held harmless and reimbursed by
TYREX from and after the Closing Date, but only if the Closing shall occur,
for any and all losses, liabilities, damages, costs and expenses including,
without limitation, all reasonable attorneys' fees incurred in enforcing
the provisions of this Section 8.3, actually suffered or incurred by the
3SI Shareholders as a result, (collectively, the "TYREX Indemnified
Obligations"), any and all liabilities, losses, damages, claims, costs and
expenses resulting from (a) misrepresentations or breaches of any
warranties on the part of TYREX contained in Section 5 of this Agreement;
(b) Environmental violations, or EEOC violations occurring prior to the
Closing Date, but asserted after Closing; (c) Violation of any applicable
bulk sales law in Wyoming; and (d) any ERISA liabilities arising prior to
Closing, but asserted after Closing. Such TYREX Indemnified Obligations
shall include, without limitation, any and all liabilities, losses,
damages, costs and expenses of the Surviving Corporation and TYREX arising
as a result of liabilities and obligations of TYREX attributable to any act
or omission prior to the Closing Date, except for liabilities and losses
disclosed in the TYREX Audited Financial Statements, the TYREX Interim
Financial Statements, the Schedules attached to this Agreement or
liabilities incurred by TYREX in the ordinary course of business of TYREX
prior to the Closing Date.
8.4. Indemnification to TYREX from 3SI.
(a) TYREX and its officers, directors, employees and agents shall be
indemnified, held harmless and reimbursed by 3SI, from and after the
Closing Date, but only if the Closing shall occur, for all of any and all
losses, liabilities, damages, costs and expenses including, without
limitation, all reasonable attorneys' fees incurred in enforcing the
provisions of this Section 8.4, actually suffered or incurred by TYREX as a
result, (collectively, the "3SI Indemnified Obligations"), any and all
liabilities, losses, damages, claims, costs and expenses resulting from
misrepresentations or breaches of any warranties on the part of 3SI
contained in Section 6 of this Agreement or the Special Covenant set forth
in Section 8.5 below. Such 3SI Indemnified Obligations shall include,
without limitation, any and all liabilities, losses, damages, costs and
expenses of TYREX arising as a result of liabilities and obligations of 3SI
attributable to any act or omission prior to the Closing Date, except for
liabilities and losses disclosed in the 3SI Financial Statements, the 3SI
Interim Financial Statements, the Schedules attached to this Agreement or
liabilities incurred by 3SI in the ordinary course of business of 3SI prior
to the Closing Date.
8.5 Special Covenant. 3SI and the 3SI Shareholders represent, warrant and
covenant that neither it, nor they, have represented to Bank One or any other
creditor that TYREX will assume, guarantee or otherwise become obligated with
respect to any amounts owed to such persons, or that TYREX assets are or will be
available in satisfaction of any such debts or obligations.
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SECTION 9. TERMINATION
Termination of Agreement. The parties may terminate this Agreement as
provided below:
9.1. The parties may mutually agree to terminate this Agreement by
written consent of 3SI and TYREX at any time prior to the Closing.
9.2. TYREX may terminate this Agreement at any time prior to the
Closing Date by giving written notice to 3SI and each of the 3SI Shareholders at
any time prior to the Closing Date in the event 3SI is in material breach of any
representation, warranty or covenant on its part contained in this Agreement,
has failed to perform any material covenant or agreement on 3SI's part to be
performed hereunder, or by reason of the failure of any of the conditions
precedent under Sections 3, 4 and 7 hereof.
9.3. 3SI may terminate this Agreement at any time prior to the Closing
Date by giving written notice to TYREX at any time prior to the Closing Date in
the event TYREX is in material breach of any representation, warranty or
covenant on its part contained in this Agreement, has failed or is unable to
perform any material covenant or agreement on TYREX's part to be performed
hereunder, or by reason of the failure of any of the conditions precedent under
Sections 3, 4 and 7 hereof.
9.4. The termination of this Agreement prior to the Closing Date shall
be without cost or liability to any of the parties hereto, each of which shall
bear its own expenses incurred in connection with the execution and performance
of this Agreement prior to the Closing hereunder.
SECTION 10. MISCELLANEOUS
10.1. Amendments and Waiver. No amendment, waiver or consent with
respect to any provision of this Agreement shall in any event be effective,
unless the same shall be in writing and signed by the parties hereto, and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
10.2. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered in person or sent by
registered or certified mail, postage prepaid and return receipt requested,
commercial overnight courier (such as Express Mail, Federal Express, etc.) with
written verification of receipt or by facsimile telecopy. A notice shall be
deemed given: (a) when delivered by personal delivery (as evidenced by the
receipt); (b) ten (10) days after deposit in the mail if sent by registered or
certified mail; (c) one (1) business day after having been sent by commercial
overnight courier as evidenced by the written verification of receipt; or
(d) one business day after the date of confirmation if telecopied, in each event
addressed as set forth below:
If to TYREX: Tom N. Richardson, President
Tyrex Oil Company
777 North Overland Trail
Suite 101
Casper, Wyoming 82601
26
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With copy to: Samuel E. Wing
Jones & Keller, P.C.
1625 Broadway, Suite 1600
Denver, Colorado 80202
Telephone: (303) 573-1600
Facsimile: (303) 893-6506
IF TO 3SI
or the 3SI Shareholders: Frank Backes, Frederick Slack and Larry Valdez
KSI;3SI Inc.
6886 South Yosemite Street
Englewood, Colorado 80112
Facsimile No.: (303) 741-9801
With copy to: Daniel P. Edwards, Esq.
128 S. Tejon, Suite 310
Colorado Springs, Colorado 80903
Telephone: (719) 634-3142
Facsimile: (719) 634-3142
Any party may change its address for receiving notice given by written notice
given to the others named above.
10.3. Expenses. Each party to this Agreement shall pay its own costs
and expenses in connection with the transactions contemplated by the Agreement.
10.4. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts each of which shall be deemed an original, but all of
which together constitute one and the same instrument.
10.5. Successors and Assigns. This Agreement shall bind and inure to
the benefit of the parties named herein and their respective successors and
assigns. No party to this Agreement shall be entitled to assign its rights and
duties under this Agreement without the consent of the other parties.
10.6. Entire Transaction. This Agreement and the documents referred to
herein contain the entire understanding among the parties with respect to the
actions contemplated hereby and supersedes all other agreements, understandings
and undertakings among the parties on the subject matter hereof.
10.7. Other Rules of Construction. Words in the singular include the
plural and in the plural include the singular. The section and other headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
10.8 Announcements. Upon the execution of this Agreement, TYREX and 3SI
shall promptly confer to release an appropriate public announcement of the
proposed Merger contemplated hereby; provided, that no such announcement shall
be released except in the form of a written statement mutually agreed to by both
parties.
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10.9. No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the parties, the Surviving
Corporation and their respective shareholders, successors and permitted assigns.
10.10. Interpretation. This Agreement shall be interpreted according to
its fair meaning and not for or against either party who may have drafted
provisions hereof.
10.11. Choice of Law. This Agreement shall be deemed to have been made
and executed, and all performance shall be deemed to take place, within the
State of Colorado. All aspects of this Agreement shall be governed by and
interpreted by the laws of the State of Colorado.
10.12. Mediation; Arbitration.
10.12.1 Negotiation Between Senior Executives
(a) The parties shall attempt in good faith to resolve any controversy, claim
or dispute of whatever nature arising between the parties, including but
not limited to those arising out of or relating to this Agreement or the
construction, interpretation, performance, breach, termination,
enforceability or validity thereof, or the commercial, economic or other
relationship of the parties hereto, whether such claim is based on rights,
privileges or interest recognized by or based upon statute, contract, tort,
common law or otherwise and whether such claim existed prior to or arises
on or after the date of this Agreement (a "Dispute"), promptly by
negotiation between Tom Richardson for TYREX and Frank Backes for 3SI
("Senior Party Representatives").
(b) Either party may give the other party written notice (a "Dispute Notice")
of any Dispute which has not been resolved in the normal course of
business. Within three (3) days after delivery of the Dispute Notice, the
receiving party shall submit to the other a written response (the
"Response"). The Dispute Notice and the Response shall include (i) a
statement setting forth the position of the party giving such notice and a
summary of arguments supporting such position. Within three (3) days after
delivery of the Response, the Senior Party Representatives of both parties
shall meet a mutually acceptable time and place, and thereafter as often as
they reasonably deem necessary, to attempt to resolve the Dispute. All
reasonable requests for information made by one party to the other will be
honored.
(c) If the Dispute has not been resolved within ten (10) days after delivery of
the Dispute Notice, or if the parties fail to meet within ten (10) days
after delivery of the Dispute Notice, as hereinabove provided, either party
may initiate mediation of the Dispute as hereinafter provided.
(d) All negotiations pursuant to this Section 10.12.1 shall be treated as
compromise and settlement negotiations. Nothing said or disclosed, nor any
document produced, in the course of such negotiations which is not
otherwise independently discoverable shall be offered or received as
evidence or used for impeachment or for any other purpose in any current of
future arbitration or litigation.
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10.12.2 Mediation
(a) If the Dispute has not been resolved by negotiation as hereinabove
provided, the parties shall make a good faith attempt to settle the Dispute
by mediation pursuant to the provisions of this Section 10.12.2 before
resorting to arbitration, litigation or any other dispute resolution
procedure.
(b) Unless the parties agree otherwise, the mediation shall be conducted in
accordance with the Commercial Mediation Rules of the American Arbitration
Association (the "AAA") then in effect by a mediator who (i) has the
qualifications and experience set forth in paragraph (c) of this Section
10.12.2 and (ii) is selected as provided in paragraph (d) of this Section
10.12.2.
(c) Unless the parties agree otherwise, the mediator shall be a neutral and
impartial lawyer with excellent academic and professional credentials (i)
who is or has been practicing law for at least fifteen (15) years,
specializing in either general commercial litigation or general corporate
and commercial matters with some familiarity as to securities regulation,
and (ii) who has had both training and experience as a mediator and who has
mediated at least ten cases.
(d) Either party (the "Initiating Party") may initiate mediation of the Dispute
by giving the other party (the "Recipient Party") written notice (a
"Mediation Notice") setting forth a list of the names and resumes of
qualifications and experience of three impartial persons who the Initiating
Party believes would be qualified as a mediator pursuant to the provisions
of paragraph (c) hereof. Within three (3) days after the delivery of the
Mediation Notice, the Recipient Party shall give a counter-notice (the
"Counter-Notice") to the Initiating Party in which the Recipient Party may
designate a person to serve as the mediator from among the three persons
listed by the Initiating Party in the Mediation Notice in which event such
designated person shall be the mediator. If none of the persons listed in
the Mediation Notice is designated by the Recipient Party to serve as the
mediator, the Counter-Notice should set forth a list of the names and
resumes of three impartial persons who the Recipient Party believes would
be qualified as a mediator pursuant to the provisions of paragraph (c)
hereof. Within three (3) days after the delivery of the Counter-Notice,
the Initiating Party may designate a person to serve as the mediator from
among the three person listed by the Recipient Party in the Counter-Notice
in which event such designated person shall be the mediator. If the
parties cannot agree on a mediator from the three impartial nominees
submitted by each party, each party shall strike two names from the other
party's list, and the mediator shall be selected by lot between the two
remaining persons on both lists and the two remaining persons on both lists
will jointly select as the mediator any person who has the qualifications
and experience set forth in paragraph (c) hereof. If they are unable to
agree, immediate arbitration may be instituted by either party.
(e) Within ten (10) days after the mediator has been selected as provided
above, both parties and their respective attorneys shall meet with the
mediator for one mediation session of at least four hours, it being agreed
that each party representative attending such mediation session shall be a
Senior Party Representative with authority to settle the Dispute. If the
Dispute cannot be settled at such mediation session or at any mutually
agreed continuation thereof, either party may give the other and the
mediator a written notice declaring the mediation process at an end, in
which event then the Dispute shall be resolved by arbitration as
hereinafter provided.
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(f) All conferences and discussions which occur in connection with the
mediation conducted pursuant to this Agreement shall be deemed settlement
discussions, and nothing said or disclosed, nor any document produced,
which is not otherwise independently discoverable shall be offered or
received as evidence or used for impeachment or for any other purpose in
any current or future arbitration or litigation.
(g) The costs of the mediation shall be shared equally between the parties.
10.12.3 Arbitration
(a) If the Dispute has not been resolved by negotiation as provided in Section
10.12.1 or mediation as provided in Section 10.12.2, then, except as
otherwise provided in this Section 10.12.3, the Dispute shall be determined
by arbitration in Denver, Colorado in accordance with the Commercial
Arbitration rules of the American Arbitration Association ("AAA")[and its
Supplementary Procedures of Large, Complex Disputes then in effect by one
arbitrator who (i) has the qualifications and experience set forth in
paragraph (b) of this Section 10.12.3 and (ii) is selected as provided in
paragraph (c) of this Section 10.12.3. The arbitrator(s) shall base their
award on the terms of this Agreement, and they shall endeavor to follow the
law and judicial precedents which a United States District Judge sitting in
the Federal District Court of Wyoming would apply in the event the Dispute
were litigated in such court. The parties expressly agree that this
Agreement shall confer no power or authority upon the arbitrator(s) to
render any judgment or award that is erroneous in its application of
substantive law and expressly agree that no such erroneous judgment or
award shall be eligible for confirmation. The arbitrator(s) shall render
their award in writing and, unless both parties agree otherwise, shall
include an explanation of the reasons for their award, which explanation
may be limited to the extent necessary to support the award and need not
attempt to cover all issues raised by the parties. The arbitration shall
be governed by the substantive laws of the State of Wyoming applicable to
contracts made and to be performed therein, without regard to conflicts of
law rules, and by the arbitration law of the Federal Arbitration Act (Title
9, U.S. Code), and judgment upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof.
(b) Every person named on all lists of potential arbitrators shall be a neutral
and impartial lawyer with excellent academic and professional credentials
(i) who is or has been practicing law for at least fifteen (15) years,
specializing in either general commercial litigation or general corporate
and commercial matters with some familiarity as to securities regulations;
and (ii) who has had both training and experience as an arbitrator and is
generally available to serve as an arbitrator.
(c) The arbitrator shall be selected as provided in this Section 10.12.3 and
otherwise in accordance with the AAA's Commercial Arbitration Rules then in
effect, except that each party shall be entitled to strike on a peremptory
basis, for any reason or no reason, any or all of the names of potential
arbitrators on any list submitted to the parties by the AAA and any person
selected by the AAA to serve as an arbitrator by administrative
appointment. In the event the parties cannot agree on a mutually
acceptable arbitrator form the one or more lists submitted by the AAA
within ten (10) days after the AAA transmits to the parties its first list
of potential arbitrators, the President of the Colorado Bar Association
shall designate three persons who, in his or her opinion, meet the criteria
set forth in paragraph (b) hereof, which designees may include persons
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named on any list submitted by the AAA. Each party shall be entitled to
strike one of such three designees on a peremptory basis within 10 days
after its receipt of such list of designees, indicating its order of
preference with respect to the remaining designees. If two of such
designees have been stricken by the parties, the unstricken designee shall
be the arbitrator. Otherwise, the selection of the arbitrator shall be
made by the AAA from the remaining designees in accordance with their
mutual order of preference, or by random selection in the absence of a
mutual order of preference.
10.13. Choice of Venue. Any mediation or arbitration shall take place
in Denver, Colorado. Any litigation, including litigation arising out of or
concerning such arbitration, shall be conducted exclusively in the Federal
District Court, Denver, Colorado, if applicable, and if not, in the District
Court, Denver County, Colorado. All parties hereby consent to the jurisdiction
of such court for all litigation.
SECTION 11. Piggyback Registration Rights.
11.1. Definitions. For purposes of this Section 11:
(1) The "Company" means the Surviving Corporation.
(2) The term "register," "registered," and "registration" refer
to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration
statement or document;
(3) The term "Securities with Piggyback Rights" means securities
of the Company which are entitled upon request to be included in
a registration effected by the Company (including a registration
statement effected by the Company for shareholders).
11.2. Company Registration. If (but without any obligation to do so)
the Company proposes to register (including for this purpose a registration
effected by the Company on Form S-8 except for that required to be filed for One
Capital Corporation) any of its stock or securities under the Act, the Company
shall, at such time, promptly give each of the 3SI Shareholders and each of the
present officers and directors of TYREX ("Holders"), written notice of such
registration. Upon the written request of each such Holder given within twenty
(20) days after mailing of such notice by the Company in accordance with the
notice requirements hereof, the Company shall, subject to the provisions hereof,
cause to be registered under the Act all of the Piggyback Securities.
11.3. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section that the
selling Holders shall furnish to the Company such information regarding
themselves, the Piggyback Securities held by them, and the intended method of
disposition of such securities shall be required to effect the registration of
their Piggyback Securities.
11.4. Expenses of Piggyback Registration. All expenses incurred in
connection with registrations pursuant hereto, including (without limitation)
all registration, filing and qualification fees, printers' and accounting fees,
audit fees, if required, fees and disbursements of counsel for the Company, and
the reasonable fees and disbursements of counsel for the selling Holders shall
be borne by the Company.
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11.5 Underwriting Requirements. In connection with any offering involving
an underwriting of shares, the Company shall not be required to include any of
the Holders' securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it, and then only in such quantity as will not, in the opinion of the
underwriters, jeopardize the success of the offering by the Company.
11.6 Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 12.
11.7 Indemnification. In the event any Piggyback Securities are included
in a
registration statement under this Section 12:
(1) To the extent permitted by law, the Company and the Holders of
the Piggyback Securities will each indemnify and hold harmless each
other and the officers, directors and controlling shareholders of the
Company and any underwriter (as defined in the Act) , against any
losses, claims, damages, or liabilities joint of several) to which
they may become subject under the Act, the 1934 Act or other federal
or state law, insofar as such losses, claims, damages or liabilities
(or action's in respect thereof arise out of or are based upon any of
the following statements, omissions or violations (collectively a
"Violation"): (a) any untrue statement or alleged untrue statement of
a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (b) the omission or alleged
omission to state there a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (c) any
violation or alleged violation by the Company of the Act, the 1934
Act, any state securities law or any rule or regulation promulgated
under the Act, the 1934 Act or any state securities law; and the
indemnifying party will reimburse the party indemnified for any legal
or other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, damage, liability, or
action. The Company shall not be liable under any of the foregoing
circumstances for any such loss, claim, damage, liability, or action
to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by
any such Holder of the Piggyback Securities.
(2) Promptly after receipt by an indemnified party, under this
Section of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under
this Section, notify the indemnifying party in writing of the
commencement thereof and the indemnifying party shall have the right
to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to
the parties; provided however, that an indemnified party shall have
the right to retain its own counsel, with the fees and expenses to be
paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between
such indemnified party and any other represented by such counsel in
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such proceeding. The failure to notify an indemnifying party within a
reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying
party of any liability to the indemnified party under this Section,
but the omission so to notify the indemnifying party will not relieve
it of any liability that it may have to any indemnified party
otherwise than under this Section.
11.8 Assignment of Registration Rights. The rights to cause the Company
to register Piggyback Securities pursuant to this Section may not be assigned by
a Holder of such Piggyback Securities, without the prior written consent of the
Company.
IN WITNESS WHEREOF, each of the parties hereto has executed or caused this
Agreement to be executed all as of the date first written above.
TYREX OIL COMPANY
By: /s/ Tom N. Richardson
---------------------------------
Tom N. Richardson, President
KIMBROUGH COMPUTER SALES, INC. dba 3SI
By: /s/ Larry Valdez
---------------------------------
Larry Valdez, President
By: /s/ Frank Backes
---------------------------------
Frank Backes, Vice President
By: /s/ Fred Slack
---------------------------------------
Fred Slack, Chief Executive Officer
3SI SHAREHOLDERS:
/s/ Frank Backes
------------------------------
Frank Backes, an individual
/s/ Federick Slack
------------------------------------
Frederick Slack, an individual
/s/ Larry Valdez
------------------------------
Larry Valdez, an individual
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Exhibit 97.10.2
TRANSITION AGREEMENT
This Transition Agreement ("Agreement") is made and entered into this 28th
day of May, 1997 between and among Tyrex Oil Company ("Tyrex"), Kimbrough
Computer Sales, Inc., d/b/a 3Si, Inc. ("3Si") and Fred Slack, Frank Backes and
Larry Valdez (collectively, the "3Si Shareholders") but bound separately hereto
as individuals and as shareholders of 3Si, and Tom N. Richardson ("Richardson"),
individually. All of the other parties to this Agreement are hereinafter
referred to as the "Parties."
WHEREAS, the Parties have entered into an Agreement and Plan of
Reorganization dated May 28, 1997 (the "Reorganization Agreement"), pursuant to
which a wholly owned subsidiary of Tyrex will merge with and into 3Si, and
thereafter 3Si will be a wholly owned subsidiary of Tyrex and the 3Si
Shareholders will become shareholders of Tyrex, and
WHEREAS, Tyrex has heretofore entered into a Purchase and Sale Agreement
relating to the sale of certain of its oil and gas assets for approximately
$1,800,000 of gross proceeds subject to adjustment, which sale is contemplated
to be closed on or before July 1, 1997 (the "Property Sale"), and
WHEREAS, the Parties wish to provide for a mechanism whereby Tyrex can be
assured of the ability to make a tender offer to its shareholders for certain of
its shares.
It is and has been, in consideration for the mutual promises and covenants
contained herein and in the Agreement and Plan of Reorganization, agreed as
follows:
1 . Transition Period. There shall be a Transition Period (defined below)
-----------------
during which control of Tyrex will not be changed for purposes of Section 14(f)
of the Securities Exchange Act of 1934 ("'34 Act"). The Transition Period is
hereby defined by the Parties as that period of time between: (i) the Closing
Date as defined in the Reorganization Agreement; and (ii) the earliest of (x)
completion of the Self Tender Offer (defined below), (y) upon written agreement
of the persons constituting the Boards of Directors of Tyrex and 3Si, or (z)
December 31, 1997, unless extended in writing by the mutual agreement of all
Parties hereto to a date not later than March 31, 1998. It is understood that
when the Transition Period is terminated, any funds not used in the Self Tender
Offer will become unrestricted funds of Tyrex.
2. Board of Directors. During the Transition Period, the Board of
------------------
Directors of Tyrex shall be comprised of eight members, five of whom shall be
designated by Tom N. Richardson and John D. Traut, or their successors or
nominees and three of whom shall be designated by the 3Si Shareholders. To
effectuate and perpetuate this portion of this Transition Agreement, the Parties
agree further as follows.
(i) from and after the Closing Date (as defined in the
Reorganization Agreement) and until the occurrence of the earliest of the
conditions described in Paragraph 1 above, each of Messrs. Valdez, Backes,
Slack and Richardson (if he continues to be a shareholder of Tyrex after
the Closing Date) shall vote all of his shares of Tyrex Common Stock and
any other voting securities of Tyrex over which such shareholder has voting
control and shall take all other necessary or desirable actions within his
control (whether in his capacity as a stockholder, director, member of a
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board committee or officer of Tyrex or otherwise, and including, without
limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings),
and Tyrex shall take all reasonable, necessary or desirable actions within
its control (including, without limitation, calling special board and
shareholder meetings), to ensure that the size of the Board remains eight
to ensure the election of, and affirmative vote for, five nominees
designated by the current Board of Directors of Tyrex and three nominees
designated by the current Board of 3Si; to insure that Tyrex's Board of
Directors will support 3Si management and will not take any action which
will adversely affect 3Si's ability to implement its business plan after
the merger, which the Tyrex Board understands may include but not be
limited to arranging of new or increased credit lines; entering into
strategic alliances or ventures with NETCOM, INACOM, SECURE COMPUTING or
others (of which 3SI and the 3SI Shareholders hereby represent there are
presently no agreements, plans, arrangements or understandings, except as
set forth in the Reorganization Agreement); selling a portion (less than
7%) of the 3Si Shareholders' stock (after completion or termination of the
self tender offer); paying off or refinancing the approximate $200,000 Note
to the Previous Owners of 3Si to obtain the Previous Owners' release of
their collateral in Tyrex stock; and performing such further acts as may be
deemed by 3Si management to be in the best interests of Tyrex and its
shareholders in pursuing the business plan; provided however 3SI may not
issue, or agree to issue any of its securities or derivatives thereof, or
take, or attempt to take, any other action during the Transition Period
which would cause 3Si to be other than a wholly owned subsidiary of Tyrex.
During the period covered by this Transition Agreement, 3Si will function
under the control of its Board of Directors with general oversight by the
Board of Directors of Tyrex necessary to meet their fiduciary duties;
(ii) in the event that any representative designated by Tyrex or 3Si
ceases to serve as a member of the Board during his term of office, the
resulting vacancy on the Board shall be filled by a representative
designated by Tyrex if such person was a Tyrex nominee, or by 3Si if such
person was a 3Si nominee;
(iii) Messrs. Valdez', Backes', Slack's and Richardson's obligation to
vote their shares as described in this Transition Agreement constitutes a
voting Agreement created under the Wyoming Business Corporation Act;
(iv) in order to secure each of Messrs. Valdez', Backes', Slack's and
Richardson's obligation to vote his shareholder shares and other voting
securities of Tyrex in accordance with the provisions of this Transition
Agreement, each of Messrs. Valdez, Backes, Slack and Richardson hereby
appoints Tom N. Richardson as his true and lawful proxy and attorney-in-
fact, with full power of substitution, to vote all of his shares and other
voting securities of Tyrex for the election of directors as expressly
provided for in this Transition Agreement for the modifications described
in Paragraph 4(vii) below, if any, and for any affirmation or ratification
set forth in Paragraph 4(viii) below, Tom N. Richardson may exercise the
irrevocable proxy granted to him hereunder at any time Messrs. Valdez,
Backes or Slack fail to comply with the provisions of this Transition
Agreement. The proxies and powers granted by Messrs. Valdez, Backes and
Slack pursuant to this paragraph 2 are coupled with an interest and are
given to secure the performance of their respective obligations to Tyrex
under this Transition Agreement. Such proxies and powers shall be
irrevocable for the Transition Period and shall survive the death,
incompetency, disability or bankruptcy of Messrs. Valdez, Backes or Slack
or either of them and the subsequent holders of their shares;
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(v) Messrs. Valdez, Backes, Slack and Richardson shall not grant any
proxy or become party to any voting trust or other Agreement which is
inconsistent with, conflicts with, or violates any provision of this
Agreement nor shall Messrs. Valdez, Backes and Slack assign, sell or
transfer any Tyrex shares under circumstances where such assignee,
purchaser or transferee is not bound hereby; and
(vi) Messrs. Traut, Gruman and Massey will sign letters of resignation
as members of the Board of Directors of Tyrex which letters shall be held
in trust by Tom N. Richardson who shall date such letters and deliver them
to Tyrex upon the earliest event to cause termination of the Transition
Period as described in Paragraph 1(x), (y) and (z) above.
3. '34 Act Information and Filings. The Parties acknowledge that Tyrex
------------------------------
is obligated to file certain information regarding the Reorganization Agreement,
the Self Tender Offer and other matters under various provisions of the '34 Act,
as are the 3Si Shareholders, individually and/or as a group. 3Si and the 3Si
Shareholders and Richardson agree specifically that:
(i) information in form and substance necessary to enable Tyrex to
comply with Form 8-K, including among other things, Items 2 and 7, therein
will be made available to Tyrex within 15 days and 30 days, respectively,
from the date hereof; and
(ii) information in form and substance necessary to enable Tyrex to file
the Self Tender Offer will be made available to Tyrex within 30 days from
the date hereof.
The Parties further acknowledge that the proposed Self Tender Offer is an
integral part of the overall reorganization of Tyrex and therefore that each
will do whatever is reasonably requested to effectuate the Self Tender Offer as
expeditiously as possible, and to that end 3Si will cause Larry Valdez and Paul
Kaufhold to devote whatever time is reasonably requested to work with Tyrex and
its agents in completing the Self Tender Offer.
More specifically, Mr. Kaufhold will use his best efforts to deliver
within thirty (30) days after the Closing Date a draft in proper and customary
form suitable in the opinion of Jones & Keller, P.C., or any independent
successor counsel to Tyrex, for inclusion in the Self Tender Offer document.
Such document and the related financial statements will fully comply in form and
content with applicable provisions of:
(i) Rule 13e-4 and Schedule 13E-4;
(ii) Regulation S-K;
(iii) Regulation S-X.
Within ten (10) days after receipt of any comment letter(s) from the Securities
and Exchange Commission with respect to such filing, Mr. Kaufhold will use his
best efforts to provide full and adequate documentation to enable Tyrex to amend
such filing(s) in accordance with such comments.
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4. Self Tender Offer. The Parties hereto acknowledge that the Self
-----------------
Tender Offer is an integral part of the Reorganization Agreement and the Board
of Directors, of Tyrex approved such Agreement based upon the representations,
warranties and covenants of Richardson and of 3Si and the 3Si Shareholders as to
its and their ability to provide the information necessary to meet the filing
requirements described in paragraph 3 above. Therefore, the Parties agree that:
(i) all will use their respective best efforts to conclude the
Property Sale and if such is not concluded, each will use their respective
best efforts to conclude a sale of the properties included in the present
Agreement to another party as soon as is reasonably practicable:
(ii) proceeds from the Property Sale, after payment of certain
liabilities contemplated in the Reorganization Agreement, will be
segregated and deposited in a trust escrow account with trust escrow
account shall be Tom N. Richardson, John D. Traut and William P. Gruman and
that a majority vote of the three trustees will be necessary for the trust
to take any action to fulfill its purposes;
(iii) the proceeds from the Property Sale, as deposited in the
trust escrow account, along with funds from the Tyrex general account shall
equal $1,800,000 plus an additional amount estimated to be sufficient to
cover the legal, accounting, printing, mailing and other reasonable costs
associated with the Self Tender Offer and will be held in trust for the
benefit of existing Tyrex shareholders and shall not be subject to claims
of creditors of 3Si nor shall it be subject to satisfying any actions or
claims against 3Si;
(iv) 3Si and the 3Si Shareholders, individually, for and in
consideration of the sum of $10.00 each, the receipt of which is hereby
acknowledged, hereby waive and reject any right to Participate in the Self
Tender Offer described herein and in the Reorganization Agreement;
(v) the Parties hereto acknowledge that the Self Tender Offer will
consist of offers to all Tyrex shareholders as of a record date after the
Closing Date set forth in the Reorganization Agreement (excluding the three
current 3Si shareholders) and in general terms, such tender offer shall be
for approximately 6,000,000 shares of Tyrex Common Stock at approximately
$.30 per share or a total of approximately $1,800,000, It is understood
that the number of shares and price per share may be adjusted to reflect
market or other conditions as determined in the sole discretion of the
Tyrex Board of Directors. It is further contemplated that shareholders
will be allowed to tender none, a portion, or all of their shares (subject
to proration);
(vi) if, for any reason, regulatory requirements or Securities
and Exchange Commission rules and regulations require, the Parties hereto
agree to modify this Agreement, to whatever extent is necessary to carry
out the full intent and purpose of the Self Tender Offer;
(vii) in the event that, for any reason, a shareholder vote shall
be required to effect modifications contemplated in (vi) above, Richardson
and the 3Si Shareholders agree to vote their shares in favor thereof; and
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(viii) should shareholder approval or ratification be necessary or
advisable with respect to the Property Sale (or any similar successor
transaction) Richardson and the 3Si Shareholders agree to vote their shares
in favor thereof.
5. Indemnification.
---------------
A. Indemnification to 3Si Shareholders from Tyrex. The 3Si Shareholders
shall be indemnified, held harmless and reimbursed by Tyrex, for any reasonable
losses, liabilities, damages, costs and expenses including, without limitation,
all reasonable attorneys' fees incurred in enforcing the provisions of this
Agreement, actually suffered or incurred by the 3Si Shareholders as a result,
(collectively, the "Tyrex Indemnified Obligations"), and any and all
liabilities, losses, damages, claims, costs and expenses resulting from
misrepresentations or omissions to state material facts on the part of Tyrex
contained in the Self Tender Offering documents required to effectuate Section 4
above (except to the extent any such misrepresentation or omission is the fault
of 3Si or the 3Si Shareholders or was based on information furnished in writing
by 3Si or the 3Si Shareholders).
B. Indemnification to Tyrex from 3Si and the 3Si Shareholders.
Richardson, Tyrex and its officers, directors, employees and agents shall be
indemnified, held harmless and reimbursed by 3Si and the 3Si Shareholders for
any reasonable losses, liabilities, damages, costs and expenses including,
without limitation, all reasonable attorneys' fees incurred in enforcing the
provisions of this Agreement, actually suffered or incurred by Tyrex as a
result, (collectively, the "3Si Indemnified Obligations"), and any and all
liabilities, losses, damages, claims, costs and expenses resulting form
misrepresentations or omissions to state material facts on the part of 3Si
contained in the Self Tender Offering documents required to effectuate Section 4
above (except to the extent any such misrepresentation or omission is the fault
of Richardson or Tyrex or was based on information furnished in writing by
Richardson or Tyrex).
6. No Assumptions; Guarantees. During the Transition Period, except as
--------------------------
expressly provided in the Agreement and Plan of Reorganization Tyrex either
directly or indirectly through the actions of 3Si or its Board of Directors or
executive officers shall not directly or indirectly assume, agree to pay or
guarantee any debt or obligation of 3Si or allow any cash, assets or properties
of Tyrex to become subject to any lien or security interest arising from or
relating to any debt or obligation of 3Si; provided, that the existing line of
credit from Bank One to 3Si in the approximate amount of $1,175,000 will be
continued, and may be increased by action of the Board of Directors of Tyrex
during the Transition Period.
7. Governing Law. This Transition Agreement shall be governed and
-------------
construed in accordance with the laws of the State of Wyoming.
8. Successors and Assigns. Except as otherwise provided herein, this
----------------------
Transition Agreement shall bind and inure to the benefit of and be enforceable
by the Parties hereto and may not be assigned. 3Si and the 3Si shareholders
agree that they will not offer, sell, transfer, assign or otherwise convey any
3Si shares of common stock owned by them, or any shares of Tyrex common stock
acquired by them under the Agreement and Plan of Reorganization for a period of
six months from the Closing Date set forth therein, unless approved by the Board
of Directors of Tyrex, which approval will not be unreasonably withheld.
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9. Counterparts. This Transition Agreement may be executed in multiple
------------
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
10. Remedies. Tyrex, Richardson and 3Si and the 3Si Shareholders
--------
individually shall be entitled to enforce their rights under this Transition
Agreement specifically to recover damages by reason of any breach of any
provision of this Transition Agreement and to exercise all other rights existing
in their favor. The Parties hereto agree and acknowledge that money damages may
not be an adequate remedy for any breach of the provisions of this Transition
Agreement and the aggrieved Party may in its discretion apply to any court of
law or equity of competent jurisdiction for specific performance and/or
injunctive relief (without posting a bond or other security) in order to enforce
or prevent any violations of the provisions of this Transition Agreement.
11. Amendment and Waiver. Except as other provided herein, no
--------------------
modification, amendment or waiver' of any provision of this Transition Agreement
shall be effective against any party unless such modification, amendment or
waiver is approved in writing by the parties hereto. The failure of any party
to enforce any of the provisions of this Transition Agreement shall in no way be
construed as a waiver of such provisions and shall not affect the right of such
party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
12. Severability. Whenever possible, each provision of this Transition
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any response under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Transition Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this Transition
Agreement shall be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision had never been contained
herein.
13. Entire Agreement. Except as otherwise expressly -set forth herein,
----------------
this Agreement embodies the complete agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
The Parties hereto have executed this Agreement as of the date set forth
above.
TYREX OIL COMPANY
By: /s/ Tom N. Richardson
----------------------
Its: President
---------------------
/s/ Tom N. Richardson
-------------------------
Tom N. Richardson, individually
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KIMBROUGH COMPUTER SALES, INC.
d/b/a 3Si
By:/s/ Larry Valdez
---------------------------
Larry Valdez, President
By:/s/ Frank Backes
---------------------------
Frank Backes, Vice President
By:/s/ Fred Slack
---------------------------
Fred Slack, Chief Executive Officer
APPROVED AND ACCEPTED
BY THE TRUSTEES: INDIVIDUALLY:
/s/ Tom N. Richardson By: /s/ Larry Valdez
- ----------------------------------- -------------------------------------
Tom N. Richardson Larry Valdez
/s/ John D. Traut By: /s/ Frank Backes
- ----------------------------------- -------------------------------------
John D. Traut Frank Backes
/s/ William P. Gruman By: /s/ Fred Slack
- ----------------------------------- --------------------------------
William P. Gruman Fred Slack
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Exhibit 97.10.3
JOHN M HANSON & COMPANY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Consent
----------------------------
We consent to the use in the Current Report of Tyrex Oil Company on form 8-K
dated June 6, 1997, of our report dated April 11, 1997 related to the financial
statements of Kimbrough Computer Sales, Inc. d/b/a 3SI as of December 31, 1996
and 1995 and for the years ended December 31, 1996, 1995 and 1994.
/s/ John M. Hanson & Company, P.C.
Denver, Colorado
June 6, 1997
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