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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 (Date of earliest event reported): JUNE 24, 1996
ENERGY VENTURES, INC.
(Exact name of registrant as specified in charter)
DELAWARE 0-7265 04-2515019
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
5 POST OAK PARK, SUITE 1760,
HOUSTON, TEXAS 77027-3415
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 297-8400
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Exhibit Index Appears on Page 26
<PAGE> 2
ITEM 5. OTHER EVENTS.
TCA ACQUISITION
On June 21, 1996, Energy Ventures, Inc., a Delaware corporation (the
"Company"), entered into an Agreement and Plan of Merger (the "TCA Merger
Agreement") with Tubular Corporation of America, a Delaware corporation
("TCA"), providing for the acquisition by the Company of TCA in exchange for
the issuance of 500,000 shares of the Company's common stock, $1.00 par value
(the "Common Stock"), $15 million cash and assumed debt of approximately $15
million. Under the terms of the TCA Merger Agreement, the stockholders of TCA
may elect to receive up to $5 million of the cash consideration in the form of
a note due in January 1997. The Company also entered into agreements with
the holders in excess of 95% of the outstanding stock of TCA purchased to
which such holders agreed to the terms of the acquisition.
TCA is a manufacturer of premium casing used in oil and gas
exploration and development. The Company intends to integrate the operations
of TCA with those of its tubular products division and to offer TCA's line of
premium casing products in conjunction with the Company's own line of
engineered connections and premium tubulars. The Company expects to benefit
from the TCA acquisition through product line synergies, manufacturing cost
savings and a consolidation of overhead.
The acquisition of TCA is subject to various conditions, including the
receipt of all required regulatory approvals and the expiration of all waiting
periods. Although there can be no assurance that the TCA transaction will
close, the Company currently anticipates that the acquisition will be
consummated shortly after the receipt of such regulatory approvals.
NOBLE RIG ACQUISITION; CHEVRON CONTRACT
On June 21, 1996, the Company entered into an Asset Purchase Agreement
(the "Noble Acquisition") by and between the Company and Mallard Bay Drilling,
Inc., a Louisiana corporation and wholly owned subsidiary of the Company
("Mallard"), and Noble Drilling (West Africa) Inc., a Delaware corporation
("Noble Nigeria"), and Noble Drilling Corporation, a Delaware corporation
("Noble"), providing for the purchase by the Company of Noble's two barge
drilling rigs that are currently operating in Nigeria. The two rigs to be
acquired were substantially upgraded by Noble for international drilling
operations in 1990 and 1991 at a cost in excess of $50 million and have been
working under contract since 1991. The rigs are designed to drill wells to
depths of up to 30,000 feet in transition zones, typically shallow inland,
coastal and offshore waters. The consideration for the two rigs will be $32
million, consisting of $24.5 million in cash and a $7.5 million drill pipe
credit.
The Company also is currently negotiating long-term drilling contracts
with The Shell Petroleum Development Company of Nigeria Ltd. ("Shell Nigeria")
for the operation of the rigs after closing of the Noble Acquisition. In
addition, the Company
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has also entered into a letter of intent with Chevron Nigeria Limited
("Chevron") for the retrofit and redeployment of one of the Company's rigs in
the United States (Rig No. 60) to Nigeria to operate for Chevron under a three
year contract. The cost to retrofit the Company's rig for international
operations is expected to be approximately $9 million.
The acquisition of the Noble rigs is being pursued to increase the
Company's international barge drilling rig fleet at what the Company believes
are attractive prices and terms. The Chevron contract similarly provides the
Company with the opportunity to retrofit one of its currently stacked Gulf
Coast barge rigs for international drilling operations with the costs being
financed through the payments received from a long-term contract with Chevron.
Under both circumstances, the Company's objectives are to expand and enhance
its international fleet to take advantage of anticipated improvements in
international demand for barge drilling rigs as reserves in the transition
zones of the world's oil and gas producing countries are developed.
The acquisition of the Noble rigs is subject to various conditions,
including the Company's receipt of satisfactory drilling contracts with Shell
Nigeria and the absence of any material adverse changes affecting the rigs or
the ability of the Company to operate the rigs in Nigeria. The new contract
with Chevron for an additional rig in Nigeria is also subject to various
conditions, including local governmental approval of the contract. Although
there can be no assurance that either the Noble or Chevron transaction will
close, the Company currently anticipates that the Noble Acquisition will be
consummated in July 1996 and that the Chevron contract will begin in the fourth
quarter of 1996. The Company intends to finance the Noble acquisition with its
existing working capital.
OTHER
A copy of the press releases announcing the signing of the TCA Merger
Agreement and the Noble Agreement are filed as Exhibits 99.1 and 99.2,
respectively, and are hereby incorporated herein by reference.
The audited consolidated financial statements of TCA and subsidiary
(i) for the years ended December 31, 1995, and 1994, and (ii) the quarters
ended March 31, 1996, and 1995, are set forth below:
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
TUBULAR CORPORATION OF AMERICA AND SUBSIDIARY
Report of Independent Public Accountants ................................ 5
Consolidated Balance Sheets -- December 31, 1995 and 1994 ............. 6
Consolidated Statements of Income, for each of two years in the
period ended December 31, 1995 ...................................... 7
Consolidated Statements of Stockholders' Investment, for each of the
two years in the period ended December 31, 1995 ..................... 8
Consolidated Statements of Cash Flows, for each of the two years
in the period ended December 31, 1995 ............................... 9
Notes to Consolidated Financial Statements ............................ 10
Unaudited Consolidated Balance Sheet -- March 31, 1996 .................. 19
Unaudited Consolidated Statements of Income for the three
month periods ended March 31, 1996 and 1995 ........................... 20
Unaudited Consolidated Statements of Cash Flows for the three
month periods ended March 31, 1996 and 1995 ........................... 21
Notes to Unaudited Consolidated Financial Statements .................... 22
</TABLE>
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Tubular Corporation of America:
We have audited the accompanying consolidated balance sheets of Tubular
Corporation of America (a Delaware corporation) and subsidiary as of December
31, 1995 and 1994 and the related consolidated statements of operations,
shareholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tubular Corporation of America
and subsidiary as of December 31, 1995 and 1994 and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Tulsa, Oklahoma
April 18, 1996
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TUBULAR CORPORATION OF AMERICA AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents (Note 2) $ 41,004 $ 639,785
Investment securities (Note 2) 63,797 54,281
Accounts receivable, less allowance of $85,000
and $75,000 in 1995 and 1994,
respectively (Note 4) 6,372,975 4,458,625
Inventories (Notes 2 and 4) 4,785,420 4,170,116
Warehouse supplies 690,153 560,833
Prepaid expenses and deposits 351,828 327,240
-------------- --------------
Total current assets 12,305,177 10,210,880
-------------- --------------
PROPERTY, PLANT AND EQUIPMENT (Notes 2 and 3) 28,890,659 27,075,316
Less-accumulated depreciation 10,689,380 9,035,220
-------------- --------------
Net property, plant and equipment 18,201,279 18,040,096
-------------- --------------
OTHER ASSETS 135,799 147,576
-------------- --------------
Total assets $ 30,642,255 $ 28,398,552
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 3) $ 3,443,412 $ 2,655,068
Short-term borrowings (Note 4) 1,284,383 229,043
Accounts payable 6,561,279 6,078,183
Accrued liabilities 1,819,142 1,692,722
Advance payments on contracts (Note 2) 30,911 750,000
-------------- --------------
Total current liabilities 13,139,127 11,405,016
-------------- --------------
LONG-TERM DEBT, less current maturities above (Note 3) 8,987,148 11,018,736
------------- --------------
COMMITMENTS AND CONTINGENCIES (Notes 6 and 8)
SHAREHOLDERS' EQUITY (Note 5):
Common stock, $1 par value, 100,000 authorized
shares; 62,694 shares issued and outstanding
in 1995 and 1994 62,694 62,694
Additional paid-in capital 8,973,749 8,973,749
Accumulated deficit (520,463) (3,061,643)
-------------- --------------
Total shareholders' equity 8,515,980 5,974,800
-------------- --------------
Total liabilities and shareholders' equity $ 30,642,255 $ 28,398,552
============== ==============
</TABLE>
The accompanying notes are an integral part
of these consolidated balance sheets.
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TUBULAR CORPORATION OF AMERICA AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
NET SALES (Note 2) $ 49,232,570 $ 37,759,782
OPERATING COSTS AND EXPENSES:
Cost of goods sold 41,910,427 32,732,642
Administrative and selling expenses 1,815,886 1,473,959
Depreciation and amortization 1,763,233 1,805,098
-------------- --------------
Total operating costs and expenses 45,489,546 36,011,699
-------------- --------------
OPERATING INCOME 3,743,024 1,748,083
-------------- --------------
OTHER EXPENSE (INCOME):
Interest and fees paid 1,175,236 1,427,784
Interest income (3,392) (43,710)
-------------- --------------
1,171,844 1,384,074
-------------- --------------
INCOME BEFORE INCOME TAX PROVISION 2,571,180 364,009
INCOME TAX PROVISION (Note 7) 30,000 --
-------------- --------------
NET INCOME $ 2,541,180 $ 364,009
============== ==============
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE $ 38.03 $ 5.45
======= =======
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
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TUBULAR CORPORATION OF AMERICA AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Common Stock Additional
------------------------ Paid-In Accumulated
Shares Amount Capital Deficit
--------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 62,694 $ 62,694 $ 8,973,749 $ (3,425,652)
Net Income -- -- -- 364,009
------ -------- ----------- ------------
Balance at December 31, 1994 62,694 $ 62,694 $ 8,973,749 $ (3,061,643)
Net Income -- -- -- 2,541,180
------ -------- ----------- ------------
Balance at December 31, 1995 62,694 $ 62,694 $ 8,973,749 $ (520,463)
====== ======== =========== ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
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TUBULAR CORPORATION OF AMERICA AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION> 1995 1994
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,541,180 $ 364,009
Adjustments to reconcile net income to net cash
used in operating activities-
Depreciation and amortization 1,763,233 1,805,098
Changes in assets and liabilities-
Increase in accounts receivable, net (1,914,350) (291,417)
Increase in inventories and supplies (744,624) (370,596)
(Increase) decrease in prepaid expenses and
deposits (24,588) 103,776
Increase in accounts payable 483,096 872,166
Increase in accrued liabilities 126,420 133,195
(Decrease) increase in advance payments
on contracts (719,089) 708,061
-------------- --------------
Net cash provided by operating activities 1,511,278 3,324,292
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (504,879) (240,930)
Proceeds from sale of assets 3,085 --
Investments in marketable securities (9,516) (54,281)
-------------- --------------
Net cash used in investing activities (511,310) (295,211)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances on long-term debt -- --
Payments on long-term debt (2,593,244) (1,359,404)
Deferred financing charges (60,845) --
Proceeds from short-term borrowings 50,114,772 37,905,251
Payments on short-term borrowings (49,059,432) (41,494,458)
-------------- --------------
Net cash used in financing activities (1,598,749) (4,948,611)
-------------- --------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (598,781) (1,919,530)
CASH AND CASH EQUIVALENTS:
Beginning of year 639,785 2,559,315
-------------- --------------
End of year $ 41,004 $ 639,785
============== ==============
NONCASH INVESTING AND FINANCING ACTIVITY
Equipment lease $ 1,350,000 $ --
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for interest $ 1,485,193 $ 1,820,956
Cash paid during the year for income taxes $ 18,500 $ --
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
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TUBULAR CORPORATION OF AMERICA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. ORGANIZATION AND BUSINESS:
Tubular Corporation of America (the Company) was incorporated in Delaware in
July 1989. The Company is a processor of high-strength, high-quality, tubular
goods used in oil and gas exploration and development and a provider of tubular
inspection services. Using the "quench and temper" process, the Company
converts purchased semi-finished steel pipe "green tubes" into specialized
seamless casing through heat treating, re-sizing, straightening, nondestructive
testing and threading processes.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, Muskogee Inspection Company (MICO). All material
intercompany transactions and accounts have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Substantially all cash is temporarily invested in highly liquid instruments
with maturities of three months or less.
INVESTMENT SECURITIES
All of the Company's investment securities are classified as trading securities
and are accounted for in accordance with the provisions of Statement of
Financial Accounting Standards No. 115.
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INVENTORIES
Inventories are valued at the lower of cost or market using a weighted average
method and are comprised of the following components:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Raw materials $ 1,929,973 $ 1,088,273
Work-in-process 1,559,908 2,097,607
Finished goods 1,295,539 984,236
------------- -------------
$ 4,785,420 $ 4,170,116
============= =============
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
The Company capitalizes additions or betterments to its property, plant and
equipment accounts at cost. Depreciation is computed using the straight-line
method for financial reporting purposes. The components of property, plant and
equipment and estimated useful lives are as follows:
<TABLE>
<CAPTION>
Life in
Years 1995 1994
------ ---------- ----------
<S> <C> <C> <C>
Buildings and improvements 5-25 $ 4,484,358 $ 4,482,808
Machinery and equipment 3-20 24,259,863 22,440,485
Furniture and fixtures 3-5 15,061 12,754
Construction in progress -- 131,377 139,269
------------- ------------
$ 28,890,659 $ 27,075,316
============= ============
</TABLE>
FAIR VALUE
The carrying amounts of accounts receivable and accounts payable approximate
their fair value. Based on the estimated borrowing rates currently available
to the Company for the long-term loans with similar terms and average
maturities, the aggregate fair value at December 31, 1995 of the Company's
long-term debt approximates the aggregate carrying amount, excluding the impact
of the accrued charges (see Note 3).
REVENUE RECOGNITION
Revenue is recognized upon passage of title to the customer which coincides
with either shipment or acceptance. The Company processes casing for certain
customers under sales contracts which require advance payments. Recognition of
income on these sales contracts is deferred until either shipment or
acceptance.
CUSTOMER CONCENTRATION
The Company enters the market through a distribution channel of oil country,
tubular-goods distributors and selected end users. During 1995 and 1994, three
and two customers,
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respectively, individually accounted for more than 10% of the Company's
consolidated net sales. In total, sales to these customers comprised 64% and
33%, respectively, of the Company's sales. Credit risk arising from customer
concentration is directly impacted by changes in the price and demand for
oilfield equipment, however, management considers such credit risk to be
limited.
EARNINGS PER COMMON SHARE
Earnings per common and common equivalent share are computed by dividing net
income by the weighted average number of common and common equivalent shares,
when dilutive, outstanding during the year. The weighted average number of
common and common equivalent shares outstanding was 66,829 in 1995 and 1994.
3. LONG-TERM DEBT:
Long-term debt consisted of the following at December 31, 1995:
<TABLE>
<S> <C>
Term Loan, payable to a bank, secured by fixed assets pari passu to the Convertible Term
Notes, interest at 1-1/2% above either the Toronto Dominion New York prime or LIBOR (7.2% at
December 31, 1995), with maximum quarterly payments of $285,750 plus an annual sweep payment,
which are dependent on cash flow as defined in the credit agreement, and a final balloon
payment on January 1, 1997. $ 5,557,111
Convertible term notes, payable to shareholders, secured by fixed assets pari passu to the
Term Loan, interest at the higher of 12% or 1-1/2% above either the Toronto Dominion New York
prime or LIBOR (12% at December 31, 1995), with maximum quarterly payments of $225,000 plus
an annual sweep payment, which are dependent on cash flow as defined in the credit agreement,
and a final balloon payment on January 1, 1997. 3,070,492
Capitalized equipment lease, interest at 8%, with monthly payments of $16,134 through May
2005. 1,289,687
Subordinated building and equipment loans, interest at rates ranging from 4.8% to 6% payable
to a government organization, with annual payments of $120,000 through December 2002. 917,075
10% subordinated building loan, payable to a government organization, with fixed monthly
principal and interest payments of $11,076 through November 1997 and a balloon payment in
December 1997. 808,823
8% note, payable to a corporation, secured by a second lien on certain equipment, with
variable monthly payments based on production levels. 360,000
</TABLE>
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<TABLE>
<S> <C>
Accrued charges on Term Loan and 10% subordinated building loan recorded in accordance with
Statement of Financial Accounting Standards No. 15, Accounting by Debtors and Creditors for
Troubled Debt Restructurings (SFAS 15).
286,535
Other 140,837
-------------
12,430,560
Less - current maturities 3,443,412
-------------
Total long-term debt, including accrued charges $ 8,987,148
=============
</TABLE>
Long-term debt will mature as follows:
<TABLE>
<S> <C>
1996 $ 3,410,487
1997 6,769,152
1998 300,129
1999 309,262
Thereafter 1,641,530
--------------
$ 12,430,560
==============
</TABLE>
The accrued charges recorded in accordance with SFAS 15 above are being
amortized by reducing interest expense over the life of the respective loans
which resulted in an effective interest rate of 3.4% and 4.6% for the Term Loan
and the 10% Subordinated Building Loan, respectively, during 1995.
Certain shareholders have provided personal guarantees totaling $4,227,000 as
further security for the Term Loan and Subordinated Building Loan.
The Term Loan and Convertible Term Note agreements contain certain financial
covenants which require, among other things, (1) a ratio of at least 1 to 1
between current assets and current liabilities excluding current maturities of
long-term debt; (2) a ratio of no less than 1.4 to 1 between earnings before
interest, taxes and depreciation and net interest expense; (3) maximum spending
limits for administrative and selling expenses and (4) a minimum net worth of
$6,000,000 in 1996 and $7,000,000 in 1997.
The Convertible Term Notes are owned by shareholders and are convertible into
common stock for a limited period of time, at a per share price of one half of
the book value of the Company's common stock, if the Company's quarterly
principal payment made is less than the $225,000 maximum as outlined in the
Term Note agreement.
Substantially all assets of the Company are pledged as collateral on the above
debt.
Subsequent to December 31, 1995, the Company entered into negotiations with a
financial institution to refinance the Term Loan, Convertible Term Notes and
the 10% Subordinated Building Loan. The financial institution has issued a
commitment letter, which is subject to satisfactory appraisals, which provides
for an $8,000,000 five year term loan, a revolving line of credit and a line
exclusively for the issuance of standby letters of credit all with prime or
LIBOR based interest rates.
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4. SHORT-TERM BORROWINGS:
The Company has a credit line facility with a financial institution which
provides for borrowings and the issuance of standby letters of credit up to
$7,000,000 with interest at 2.5% above Philadelphia National Bank prime (11.0%
at December 31, 1995) on borrowings and 4% on the letters of credit. At
December 31, 1995, $1,048,113 of borrowings were outstanding and $3,000,000 of
the credit line facility was utilized for a standby letter of credit. The
maximum additional borrowings available, which is based on a percentage of
eligible accounts receivable and inventory, was $2,200,181 at December 31,
1995. The credit line is secured by the accounts receivable and inventory used
in computing the maximum borrowing amount and expires on July 11, 1996.
Short-term borrowings also include a $236,270 note with interest at 8.85%
payable to a financial institution at December 31, 1995. Such note financed
the Company's insurance premiums and is secured by the related return premiums.
The weighted average interest rate on short-term borrowings for the year ended
December 31, 1995 was 10.79%.
Three of the Company's shareholders owned junior participations in the credit
line facility totaling to $650,000 until February 8, 1995 and were paid
supplemental fees of $11,842 and $65,236, in 1995 and 1994, respectively. In
1994 the Company paid $47,871 of fees to a shareholder for a supplemental
credit support agreement which provided a $1,000,000 standby letter of credit
to support raw material purchases.
5. SHAREHOLDERS' EQUITY:
The Company's authorized common stock consists of 100,000 shares with a par
value of $1 per share. The Company's authorized preferred stock consists of
20,000 shares, with a par value of $1 per share of which none is outstanding.
The Company has a Stock Option Plan which provides for the issuance of options
for 5,078 shares of common stock to employees of which 4,135 stock options are
outstanding. Such options have an exercise price of $95.29 per share and
expire in 1996.
The Company has Stockholder Agreements with all of its shareholders which
specify the procedures governing certain voting and the sale or transfer of all
currently issued and outstanding common stock. The Stockholder Agreements,
among other things, specify that the shareholders must provide the Company and
certain shareholders with the opportunity to match a bona fide third party
offer for the sale of their stock. In addition, the circumstances under which
employee shareholders are required to offer to sell their stock to the Company
or a shareholder designated by the Company (generally when employment is
terminated) at fair market value are defined together with the procedures to
determine the fair market value of the stock. All common stock currently owned
or subsequently issued in a non public stock sale is subject to these
agreements.
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6. COMMITMENTS:
LAND LEASES
The Company has operating land leases which require payments totaling $107,975
annually through 2006. The Company has an option to renew the leases for an
additional 25 years with quarterly payments no greater than $46,000. The
Company's total commitments for these agreements are as follows:
<TABLE>
<S> <C>
1996 $ 107,975
1997 107,975
1998 107,975
1999 107,975
Thereafter 741,744
-------------
$ 1,173,644
=============
</TABLE>
SUPPLY CONTRACT
The Company has a long-term steel supply agreement with a major integrated
steel producer which provides for the supply of seamless semi-finished steel
pipe "green tube" casing and has established a $3,000,000 standby letter of
credit to guarantee its payments. The volumes provided for under this
contract, which does not require minimum purchases, are sufficient to supply
the Company's current requirements.
LONG-TERM PROCESSING CONTRACT
In 1990, the Company entered into a long-term processing contract with USS/Kobe
Steel Company, a partnership between Kobe Steel Ltd. of Japan and United States
Steel Division (USS) of USX Corporation, to provide heat treating, sizing and
straightening on all of USS/Kobe's domestic production of 10 3/4" through 14
3/8" high-strength, seamless casing.
EBDIT SHARING PLAN
The Company has established the Tubular Corporation of America EBDIT (Earnings
Before Depreciation, Interest and Taxes) Sharing Plan (EBDIT Plan). All
full-time employees who have completed six months of employment are eligible to
participate in the EBDIT Plan. Amounts awarded under the EBDIT Plan are
calculated as a percentage of the EBDIT pool, as defined, which is determined
by the Compensation Committee of the Board of Directors. Earnings by employees
under the EBDIT Plan were $619,000 and $274,000 in 1995 and 1994, respectively.
LONG TERM SECURITY 401(k) PLAN
The Company has established the Tubular Corporation of America Long Term
Security Plan for all eligible employees of the Company and its subsidiary.
The plan is a qualified defined contribution plan under section 401(k) of the
Internal Revenue Code. Contribution levels are determined by the Company's
Board of Directors annually. The Company contributed 2% of each eligible
employee's base compensation plus a matching contribution of 33 1/3 cents for
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each dollar of employee contributions on up to 6% of their base compensation
(maximum cost to the Company is 4% of base compensation) in 1995. Total
expense recorded was $117,706 and $74,169 in 1995 and 1994, respectively.
7. INCOME TAXES:
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, which requires an
asset and liability approach to financial accounting and reporting. The
difference between the financial statement and tax bases of assets and
liabilities is determined annually. Deferred income tax assets and liabilities
are computed for those differences that have future tax consequences using
currently enacted tax laws and rates that apply to the periods in which they
are expected to affect taxable income.
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1995 1994
------ -------
<S> <C> <C>
Current:
Federal $30,000 $ --
State -- --
------- --------
30,000 --
------- --------
Deferred:
Federal -- --
State -- --
------- --------
-- --
------- --------
$30,000 $ --
======= ========
</TABLE>
The reconciliation of income tax computed at the federal statutory rate to the
effective rate is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1995 1994
------ ------
<S> <C> <C>
Statutory rate 34.0% 34.0%
Alternative minimum tax 1.2 -
Recognition of previously reserved deferred tax assets (36.1) (45.5)
Nondeductible expenses 2.1 11.5
------ ------
Effective rate 1.2% 0.0%
====== ======
</TABLE>
The significant components of the Company's deferred tax assets (liabilities)
are as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Deferred tax assets:
Tax Benefit Transfer Leases $ 5,457,895 $ 5,995,491
Net operating loss carryforward (NOLCF) 2,877,321 3,257,784
Tax credit carryforward 828,976 852,295
Accruals and reserves not currently deductible 300,271 356,375
Accrued SFAS 15 charges not currently deductible 106,878 207,796
Difference in basis of assets acquired from predecessor company 87,495 534,096
Other 5,814 5,029
------------- --------------
Total gross deferred tax assets 9,664,650 11,208,866
</TABLE>
Page 16
<PAGE> 17
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Deferred tax liabilities:
Accelerated depreciation on property, plant and equipment $ (4,335,015) $ (4,668,927)
------------- --------------
Net deferred tax asset 5,329,635 6,539,939
Less - valuation allowance (5,329,635) (6,539,939)
------------- --------------
Net deferred tax assets $ -- $ --
============= ============
</TABLE>
The current income tax provision differs from the amount computed using the
statutory federal income tax rate due to alternative minimum taxes and
utilization of a portion of the NOLCF.
The deferred tax asset for the Tax Benefit Transfer Leases (the Leases) is
related to transactions in 1982 by the Company's predecessor company that
increased taxable income to the Company over the initial years of the Leases
and are now decreasing taxable income and the related taxes payable. The
Company has Federal NOLCF's totaling approximately $7,700,000 at December 31,
1995 which begin to expire in 2006 and include approximately $2,500,000 that is
subject to statutory limitations (resulting from a change in ownership that
occurred in 1991) which limit the amount that can be used each year. In
addition, the Company has an investment tax credit eligible for carryforward
for state tax reporting purposes of approximately $829,000 which begins to
expire in 2003.
The Company has established a valuation allowance of $5,329,635 at December 31,
1995, which has been applied against the net deferred tax asset. At such time
when the Company has experienced a longer trend of consistent earnings which
are reasonably expected to continue, it will establish all or part of the net
deferred tax asset and will record the related income tax benefit.
8. CONTINGENCIES:
CLAIMS
The Company is aware of certain potential claims arising out of operations in
the normal course of business. In the opinion of management, the ultimate
outcome of the claims should not have a material adverse effect on the
consolidated financial position or results of operations of the Company.
The Company did not have any pending or threatened product liability claims
open at December 31, 1995, but carries insurance to cover significant claims
should they arise.
TAX BENEFIT TRANSFER LEASES
The Company assumed responsibility for the continuation of certain irrevocable
letters of credit that were obtained by its predecessor company in connection
with the sale of tax benefits on certain leases in 1982. Any disbursements
from these letters of credit, of which $1,436,500 was outstanding at December
31, 1995, to the purchasers of the tax benefits would be in accordance with
established escrow agreements and could result if the related assets are
improperly sold or removed from service.
Page 17
<PAGE> 18
CHANGE IN CONTROL AGREEMENTS
The Company has agreements with several officers whereby the Company will
provide the officers with salary continuation in the event they are terminated
without cause during the 18-month period following a change in control of the
Company. The total contingency is approximately $720,000.
Page 18
<PAGE> 19
TUBULAR CORPORATION OF AMERICA AND SUBSIDIARY
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996
The unaudited consolidated financial statements included herein have been
prepared by Tubular Corporation of America and Subsidiary (the "Company")
pursuant to the rules and regulations of the Securities and Exchange Commission.
<PAGE> 20
TUBULAR CORPORATION OF AMERICA AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 163,496
Investment securities 66,590
Accounts receivable less allowance of $89,910 6,428,014
Inventories 8,239,706
Warehouse supplies 746,270
Prepaid expenses and deposits 211,144
-----------
Total current assets 15,855,220
-----------
PROPERTY, PLANT AND EQUIPMENT, AT COST,
NET OF ACCUMULATED DEPRECIATION 17,921,839
OTHER ASSETS 116,601
-----------
Total assets $33,893,660
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 7,705,523
Short-term borrowings 4,154,423
Accounts payable 7,943,580
Accrued liabilities 1,443,452
Advance payments on contracts 79,578
-----------
Total current liabilities 21,326,556
-----------
LONG-TERM DEBT, less current maturities 3,189,025
-----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $1 par value, 100,000 authorized shares;
62,694 shares issued and outstanding at
March 31, 1996 62,694
Additional paid-in capital 8,973,749
Retained earnings 341,636
-----------
Total shareholders' equity 9,378,079
-----------
Total liabilities and shareholders' equity $33,893,660
===========
The accompanying notes are an integral part
of this unaudited consolidated balance sheet.
Page 19
<PAGE> 21
TUBULAR CORPORATION OF AMERICA AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
MARCH 31, MARCH 31,
1996 1995
----------- -----------
NET SALES $12,462,779 $10,357,507
OPERATING COSTS AND EXPENSES:
Cost of goods sold 10,330,669 8,663,662
Administrative and selling expenses 487,176 436,072
Depreciation and amortization 467,297 421,640
----------- -----------
Total operating costs and expenses 11,285,142 9,521,374
----------- -----------
OPERATING INCOME 1,177,637 836,133
----------- -----------
OTHER EXPENSE (INCOME):
Interest expense 300,953 294,099
Interest income (415) (2,915)
----------- -----------
300,538 291,184
----------- -----------
INCOME BEFORE INCOME TAX PROVISION 877,099 544,949
INCOME TAX PROVISION (Note 7) 15,000 7,500
----------- -----------
NET INCOME $ 862,099 $ 537,449
=========== ===========
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE $12.90 $8.04
====== =====
WEIGHTED AVERAGE SHARES OUTSTANDING 66,829 66,829
====== ======
The accompanying notes are an integral part
of these unaudited consolidated financial statements.
Page 20
<PAGE> 22
TUBULAR CORPORATION OF AMERICA AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, March 31,
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 862,099 $ 537,449
Adjustments to reconcile net income to net cash
provided by (used in) operating activities -
Depreciation and amortization 467,297 421,640
Changes in assets and liabilities -
(Increase) decrease in accounts receivable, net (55,039) 472,629
Increase in inventories and supplies (3,510,403) (1,527,541)
Decrease in prepaid expenses and deposits 140,684 93,922
Increase in accounts payable 1,382,301 255,450
Decrease in accrued liabilities (375,690) (78,423)
Increase in advance payments on contracts 48,667 431,290
----------- -----------
Net cash provided by (used in) operating activities (1,040,084) 606,416
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (168,659) (156,904)
Investments in investment securities (2,793) (2,002)
----------- -----------
Net cash used in investing activities (171,452) (158,906)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (1,468,791) (614,384)
Deferred financing charge (67,221) (67,884)
Proceeds from short-term borrowings 14,960,814 12,126,980
Payments on short-term borrowings (12,090,774) (12,137,845)
----------- -----------
Net cash provided by (used in) financing activities 1,334,028 (693,133)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 122,492 (245,623)
CASH AND CASH EQUIVALENTS:
Beginning of period 41,004 639,785
----------- -----------
End of period $ 163,496 $ 394,162
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest $ 301,738 $ 274,750
Cash paid during the period for income taxes $ 9,000 $ --
</TABLE>
The accompanying notes are an integral part
of these unaudited consolidated financial statements.
Page 21
<PAGE> 23
TUBULAR CORPORATION OF AMERICA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL:
The unaudited consolidated financial statements included herein have
been prepared by Tubular Corporation of America and Subsidiary (the "Company")
pursuant to the rules and regulations of the Securities and Exchange Commission.
These financial statements reflect all adjustments, consisting only of normal
recurring adjustments, which the Company considers necessary for the fair
presentation of such financial statements for the interim periods presented.
Although the Company believes that the disclosures in these financial statements
are adequate to make the interim information presented not misleading, certain
information relating to the Company's origination and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles has been condensed or omitted in the Form 8-K
pursuant to such rules and regulations. These financial statements should be
read in conjunction with the audited financial statements and notes thereto
included elsewhere herein. The results of operations for the three months ended
March 31, 1996 are not necessarily indicative of the results expected for the
full year.
2. INVENTORIES:
Major components of inventories at March 31, 1996 include:
Raw materials .................. $3,821,634
Work-in-process ................ 2,734,457
Finished goods ................. 1,683,615
----------
$8,239,706
==========
3. CONTINGENCIES:
Claims
The Company is aware of certain potential claims arising out of
operations in the normal course of business. In the opinion of management, the
ultimate outcome of the claims should not have a material adverse effect on the
consolidated financial position or results of operations of the Company.
The Company did not have any pending or threatened product liability
claims open at March 31, 1996, but carries insurance to cover significant
claims should they arise.
4. SUBSEQUENT EVENT:
On May 29, 1996, the Company signed a credit agreement with a financial
institution to refinance substantially all of its outstanding debt. The credit
agreement provides for a $5,000,000 revolving credit note and an $8,000,000
term note. In addition, the financial institution will provide a $3,000,000
standby letter of credit facility. All of the facilities have prime or LIBOR
based interest rates.
Page 22
<PAGE> 24
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated April 18, 1996 on our audits of the consolidated
Financial Statements of Tubular Corporation of America and Subsidiary included
in the Energy Ventures, Inc. (the "Company") Form 8-K dated June 24, 1996, into
the Company's previously filed Registration File Nos. 333-03407, 33-31662,
33-56384, 33-56386, 33-65790, 33-77960 and 33-64349. It should be noted that we
have not audited any financial statements of Tubular Corporation of America and
Subsidiary subsequent to December 31, 1995 or performed any audit procedures
subsequent to the date of our report.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
June 24, 1996
Page 23
<PAGE> 25
(c) Exhibits.
2.1 - Agreement and Plan of Merger dated as of June 21, 1996,
between Energy Ventures, Inc., TCA Acquisition, Inc. and
Tubular Corporation of America.
2.2 - Form of Stockholder Agreement and Representation Letter
dated June 21, 1996, between Energy Ventures, Inc. and the
stockholders of Tubular Corporation of America.
2.3 - Asset Purchase Agreement dated as of June 21, 1996, by and
between Energy Ventures, Inc. and Mallard Bay Drilling,
Inc. and Noble Drilling (West Africa) Inc. and Noble
Drilling Corporation.
23.1 - Consent of Arthur Andersen LLP, with respect to financial
statements of Tubular Corporation of America.
99.1 - Press Release of the Company dated June 24, 1996,
announcing TCA transaction.
99.2 - Press Release of the Company dated June 24, 1996,
announcing Noble transaction.
Page 24
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ENERGY VENTURES, INC.
Dated: June 24, 1996 /s/ JAMES G. KILEY
------------------------------------
James G. Kiley
Vice President and
Chief Financial Officer
Page 25
<PAGE> 27
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Exhibit
------ -------
<S> <C>
2.1 Agreement and Plan of Merger dated as of June 21, 1996, between Energy
Ventures, Inc., TCA Acquisition, Inc. and Tubular Corporation of America.
2.2 Form of Stockholder Agreement and Representation Letter dated June 21,
1996, between Energy Ventures, Inc. and the stockholders of Tubular
Corporation of America.
2.3 Asset Purchase Agreement dated as of June 21, 1996, by and between Energy
Ventures, Inc. and Mallard Bay Drilling, Inc. and Noble Drilling (West
Africa) Inc. and Noble Drilling Corporation.
23.1 Consent of Arthur Andersen LLP, with respect to financial statements of
Tubular Corporation of America.
99.1 Press Release of the Company dated June 24, 1996, announcing TCA
transaction.
99.2 Press Release of the Company dated June 24, 1996, announcing Noble
transaction.
</TABLE>
Page 26
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as
of June 21, 1996, between Energy Ventures, Inc., a Delaware corporation
("EVI"), TCA Acquisition, Inc., a Delaware corporation and a direct wholly
owned subsidiary of EVI ("EVI Sub"), and Tubular Corporation of America, a
Delaware corporation (the "Company"),
W I T N E S S E T H:
WHEREAS, the Boards of Directors of each of EVI, EVI Sub and
Company each have determined that it is in the best interests of their
respective stockholders for EVI Sub to merge with and into Company (the
"Merger") upon the terms and subject to the conditions of this Agreement;
WHEREAS, EVI, EVI Sub and Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties agree as follows:
ARTICLE I
DEFINITIONS
The terms set forth below in this Article I shall have the
meanings ascribed to them below or in the part of this Agreement referred to
below:
Affiliate: with respect to any person, means any person that
directly or indirectly controls, is controlled by or is under common control
with such persons.
Agreement: as defined in the opening paragraph of this
Agreement.
Benefit Plan: means any collective bargaining agreement or
any bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
medical dependent care, cafeteria, employee assistance, scholarship program or
other plan, arrangement or understanding (whether or not legally binding)
providing benefits to any current or former employee or director of the
Company.
best efforts: means a party's efforts in accordance with
reasonable commercial practice and without the incurrence of unreasonable
expense.
Cash Amount: as defined in Section 3.1(c).
Cash Escrow: as defined in Section 3.2(c).
<PAGE> 2
CERCLA: means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
Certificate: as defined in Section 3.2(a).
Certificate of Merger: as defined in Section 2.1.
Claim: as defined in Section 6.4(f).
Claim Notice: as defined in Section 6.4(b).
Claims Defense Expenses: as defined in Section 6.2.
Closing: as defined in Section 2.1.
Closing Date: as defined in Section 2.2
Closing Date Balance Sheet: as defined in Section 3.5(a).
Code: means the Internal Revenue Code of 1986, as amended.
Company: as defined in the opening paragraph of this
Agreement.
Company Common Stock: as defined in Section 3.1.
Constituent Corporations: as defined in Section 2.3(a).
Conversion Number: as defined in Section 3.1(c).
Debt: means, under GAAP and with reference to a balance sheet
of the Company, the sum of (a) the outstanding principal and any unpaid
interest not included as a current liability as of the date of the applicable
balance sheet under any contract, agreement, note or other instrument relating
to the borrowing of money by or guaranteed by the Company or any of its
Subsidiaries and (b) the total amount required to be shown as a liability in
accordance with GAAP of all capitalized leases as of the date of the applicable
balance sheet.
December 31 Balance Sheet: as defined in Section 4.1(k).
DGCL: means the Delaware General Corporation Law, as amended.
Dissenting Stockholder: as defined in Section 3.4.
Effective Time: as defined in Section 2.1.
Election Period: as defined in Section 6.4(b).
-2-
<PAGE> 3
Environmental Laws: means any and all laws, statutes,
ordinances, rules, regulations, orders or determinations of any Governmental
Entity pertaining to the environment heretofore or currently in effect in any
and all jurisdictions in which the Company is conducting or at any time has
conducted business, or where any of the assets of the Company or any of the
Subsidiaries are located, or where any hazardous substances generated by or
disposed of by the Company are located. "Environmental Laws" shall include,
but not be limited to, the Clean Air Act, as amended, CERCLA, the Federal Water
Pollution Control Act, as amended, RCRA, the Safe Drinking Water Act, as
amended, the Toxic Substances Control Act, as amended, and all other laws,
statutes, ordinances, rules, regulations, orders and determinations of any
Governmental Entity relating to (a) the control of any potential pollutant or
protection of the air, water or land, (b) solid, gaseous or liquid waste
generation, handling, treatment, storage, disposal or transportation and (c)
exposure to hazardous, toxic or other harmful substances. The terms "hazardous
substance", "release" and "threatened release" have the meanings specified in
CERCLA, and the terms "solid waste" and "disposal" (or "disposed") have the
meanings specified in RCRA; provided, however, that, to the extent the laws of
the state in which any assets of the Company or any of the Subsidiaries are or
were located currently provide for a meaning for "hazardous substance",
"release", "solid waste" or "disposal" which is broader than that specified in
either CERCLA or RCRA, such broader meaning shall apply.
ERISA: means the Employee Retirement Income Security Act of
1974, as amended.
Escrow Agent: as defined in Section 3.2(c).
Escrow Agreement: as defined in Section 3.2(c).
Escrow Deposit: as defined in the Escrow Agreement.
EVI: as defined in the opening paragraph of this Agreement.
EVI Common Stock: as defined in Section 3.1(c).
EVI Sub: as defined in the opening paragraph of this
Agreement.
Financial Statements: as defined in Section 4.1(o)(i).
GAAP: as defined in Section 3.5(a).
Governmental Entity: means the United States of America, any
state, province, territory, county, city, municipality and any subdivision
thereof, any court, administrative or regulatory agency, commission, department
or body or other governmental authority or instrumentality or any entity or
person exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
HSR Act: means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
-3-
<PAGE> 4
Indemnifiable Damages: as defined in Section 6.2.
Indemnified EVI Parties: as defined in Section 6.2.
Indemnity Notice: as defined in Section 6.4(e).
Interim Financial Statements: as defined in Section
4.1(o)(ii).
IRS: means the United States Internal Revenue Service.
Lien: means any lien, pledge, mortgage, claim, charge,
security interest or other encumbrance, option or other rights of any third
person of any nature whatsoever.
Merger: as defined in the recitals to this Agreement.
Merger Consideration: as defined in Section 3.1(c).
Net Debt: means, with reference to a balance sheet of the
Company, Debt minus Working Capital.
Note: as defined in Section 3.1(d).
Option Exercise Price: means $95.29 per share of Company
Common Stock.
PBGC: means the Pension Benefit Guaranty Corporation.
Pension Plans: as defined in Section 4.1(h)(i).
Permitted Liens: means (a) Liens for current taxes and
assessments not yet due, (b) inchoate mechanic and materialmen liens for
construction in progress, (c) inchoate workmen, repairmen, warehousemen,
customer, employee and carriers liens arising in the ordinary course of
business, (d) Liens arising under this Agreement or the agreements entered into
or contemplated to be entered into in connection with this Agreement and (e)
Liens and imperfections of title (including Liens created by the operation of
law) that, singly or in the aggregate, would not materially affect the value or
operation of the asset subject to such Lien in the hands of a purchaser
thereof.
person: means any individual, firm, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization, government or agency or subdivision thereof or any other entity.
Post-Closing Adjustment: as defined in Section 3.5(a).
RCRA: means the Resource Conservation and Recovery Act of
1976, as amended.
Registration Rights Agreement: as defined in Section 3.3.
-4-
<PAGE> 5
Securities Act: means the Securities Act of 1933, as amended.
Statement: as defined in Section 3.5(a).
Stockholder Agreement: means a Stockholder Agreement and
Representation Letter substantially in the form attached hereto as Exhibit A,
to be executed by each of the stockholders of the Company.
Stockholder Group: as defined in Section 9.3(a).
Stockholders: as defined in Section 3.2(c).
Stockholders' Representative: as defined in Section 3.2(c).
Stock Options: as defined in Section 4.1(c).
Subsidiary: of any person, means any corporation more than
50% of the outstanding voting stock of which is owned, directly or indirectly,
by such person, by one or more other Subsidiaries of such person or by such
person and one or more other Subsidiaries of such person.
Surviving Corporation: as defined in Section 2.3(a).
Taxes: means all federal, state, local, foreign and other
taxes or other assessments, including, without limitation, all net income,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, profit share, license, lease, service, service use, value added,
withholding, payroll, employment, excise, estimated severance, stamp,
occupation, premium, property, windfall profits, or other taxes of any kind
whatsoever, together with any interests, penalties, additions to tax, fines or
other additional amounts imposed thereon or related thereto, and the term "Tax"
means any one of the foregoing Taxes.
Tax Returns: means all returns, declarations, reports,
statements and other documents of, relating to, or required to be filed in
respect of, any and all Taxes.
Third Party Claim: as defined in Section 6.4(b).
Transaction Agreements: means this Agreement, the Escrow
Agreement, any Notes and the Registration Rights Agreement.
Waste Materials: means any toxic or hazardous materials or
substances, or solid wastes, including asbestos, buried contaminants,
chemicals, flammable or explosive materials, radioactive materials, petroleum
and petroleum products, and any other chemical, pollutant, contaminant,
substance or waste that is regulated by any Governmental Entity under any
Environmental Law. "Waste Materials" does not include useful products that are
stored or maintained in authorized containers.
-5-
<PAGE> 6
Working Capital: means, in accordance with GAAP and with
reference to a balance sheet of the Company, the difference between current
assets and current liabilities (excluding the current portion of any Debt
included in current liabilities and including (i) the fees and expenses payable
to Simmons & Company International, or any other broker or adviser whose fees
are to be paid by the Company in connection with the transaction contemplated
hereby, to the extent not theretofore paid, and (ii) the amount of any
prepayment penalties, make whole charges or similar payments (other than LIBOR
breakage fees) that would be required to be paid with respect to all Debt if
such Debt were to be paid in full at the date of the applicable balance sheet
and all credit arrangements relating thereto terminated at the date of the
applicable balance sheet). There shall be added to Working Capital as of the
Closing Date an amount not exceeding $18,950 for capital expenditures made
after the date hereof for heat treating modifications at the Company's
facilities, to the extent cash has been paid for such capital expenditures or
an accrual has been made for such capital expenditures.
ARTICLE II
THE MERGER
2.1 The Merger; Effective Time of the Merger. Upon the
terms and conditions of this Agreement and in accordance with the DGCL, EVI Sub
shall be merged with and into the Company at the Effective Time. The Merger
shall become effective immediately when a certificate of merger (the
"Certificate of Merger"), prepared and executed in accordance with the relevant
provisions of the DGCL, is filed with the Secretary of State of the State of
Delaware or, if agreed to by the parties, at such time thereafter as is
provided in the Certificate of Merger (the "Effective Time"). The filing of
the Certificate of Merger shall be made as soon as practicable on or after the
closing of the transactions contemplated hereby (the "Closing").
2.2 Closing. The Closing of the transactions shall take
place at the offices of Fulbright & Jaworski L.L.P., 1301 McKinney, Suite 5100,
Houston, Texas, on a date mutually designated by Company and EVI, but in no
event later than the later of (i) September 30, 1996 and (ii) five business
days after the date when the conditions specified in Sections 7.1(d), (f) and
(g) and 7.2(d), (f) and (g) have been fulfilled. The date on which the Closing
is held is referred to in this Agreement as the "Closing Date." At the
Closing, the parties shall execute and deliver the documents referred to in
Sections 7.3 and 7.4.
2.3 Effects of the Merger. (a) At the Effective Time:
(i) EVI Sub shall be merged with and into the Company, the separate existence
of EVI Sub shall cease and the Company shall continue as the surviving
corporation (EVI Sub and the Company are sometimes referred to herein as the
"Constituent Corporations" and the Company is sometimes referred to herein as
the "Surviving Corporation"); (ii) the Certificate of Incorporation of the
Company shall be the Certificate of Incorporation of the Surviving Corporation;
and (iii) the Bylaws of the Company as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation.
(b) The directors and officers of EVI Sub at the
Effective Time shall, from and after the Effective Time, be the initial
directors and officers of the Surviving Corporation and shall
-6-
<PAGE> 7
serve until their successors have been duly elected or appointed and qualified
or until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and Bylaws.
(c) At and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises of
a public as well as of a private nature, and be subject to all the
restrictions, disabilities and duties of each of the Constituent Corporations;
and all and singular rights, privileges, powers and franchises of each of the
Constituent Corporations, and all property, real, personal and mixed, and all
debts due to either of the Constituent Corporations on whatever account, as
well as for stock subscriptions and all other things in action or belonging to
each of the Constituent Corporations, shall be vested in the Surviving
Corporation; and all property, rights, privileges, powers and franchises, and
all and every other interest shall be thereafter as effectually the property of
the Surviving Corporation as they were of the Constituent Corporations; and the
title to any real estate vested by deed or otherwise, in either of the
Constituent Corporations, shall not revert or be in any way impaired; but all
rights of creditors and all liens upon any property of either of the
Constituent Corporations shall be preserved unimpaired; and all debts,
liabilities and duties of the Constituent Corporations shall thenceforth attach
to the Surviving Corporation, and may be enforced against it to the same extent
as if said debts and liabilities had been incurred by it.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
3.1 Effect on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of common stock, par value $1.00 per share, of the Company ("Company
Common Stock") or capital stock of EVI Sub:
(a) Capital Stock of Sub. Each issued and outstanding
share of the capital stock of EVI Sub shall be converted into and
become one fully paid and nonassessable share of common stock, par
value $1.00 per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and EVI-Owned Stock.
Each share of Company Common Stock and all other shares of capital
stock of the Company that are owned by the Company as treasury stock
or by EVI, EVI Sub or any Subsidiary of the Company or EVI shall be
canceled and retired and shall cease to exist and no stock of EVI or
other consideration shall be delivered or deliverable in exchange
therefor.
(c) Consideration for Company Common Stock and Deemed
Shares. Subject to the provisions of Sections 3.1(d), 3.1(e) and 3.3,
each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares to be canceled in
accordance with Section 3.1(b)), and each Deemed Share (as defined in
Section 3.6), shall be converted into the right to receive a
combination of (1) cash in an amount based on the Cash Amount (as
defined below) and (2) a number of shares of Common Stock, par value
$1.00 per share, of EVI ("EVI Common Stock") based on the Conversion
Number (as
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defined below), as set forth below. The aggregate consideration (the
"Merger Consideration") paid for the shares of Company Common Stock
and Deemed Shares shall consist of 500,000 shares of EVI Common Stock
and $15,000,000 in cash (less an amount equal to the aggregate
principal amount of any Notes issued pursuant to Section 3.1(d)) plus
the amount of any additional cash consideration received by
Unaccredited Stockholders (as defined below) pursuant to Section
3.1(e).
Subject to the provisions of Sections 3.1(d), 3.1(e) and 3.3,
the Merger Consideration shall be allocated as follows: (i) each
share of Company Common Stock and each Deemed Share held by any person
that is not an "accredited investor" as defined in Rule 501(a) under
the Securities Act (an "Unaccredited Stockholder", each of whom are
designated on Schedule 4.1(c) by an asterisk (*) solely for purposes
of this Article III) shall be converted into the right to receive the
Cash Amount (the aggregate dollar amount payable in respect of the
shares of Company Common Stock and Deemed Shares so converted, the
"All-Cash Amount"); and (ii) each share of Company Common Stock and
each Deemed Share remaining following the conversion effected by
clause (i) above shall be converted into the right to receive (A) an
amount in cash equal to the Cash Amount multiplied by a fraction, the
numerator of which is $15,000,000 minus the All-Cash Amount and the
denominator of which is $30,000,000 minus the All-Cash Amount (such
fraction, the "Cash Fraction") and (B) a number of shares of EVI
Common Stock equal to (x) the Conversion Number multiplied by (y) one
minus the Cash Fraction. The "Cash Amount," based on the number of
shares of Company Common Stock and Stock Options outstanding at the
Effective Time, shall equal [$30,000,000 + (Number of Stock Options
Outstanding x Option Exercise Price)] divided by (Number of Shares
Outstanding + Number of Stock Options Outstanding). The "Conversion
Number" shall equal the Cash Amount divided by $30.00.
All shares of Company Common Stock, when so converted, shall
no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with
respect thereto, except the right to receive the shares of EVI Common
Stock or cash to be paid in consideration therefor upon the surrender
of such certificate in accordance with Section 3.2, without interest,
and the right to receive the Post-Closing Adjustment in accordance
with Section 3.4.
(d) Note Election. Subject to the provisions of this
Section 3.1(d), a stockholder of the Company who (i) is an "accredited
investor" as defined in Rule 501(a) promulgated under the Securities
Act and (ii) so represents such status to EVI, shall have the right to
elect to receive, in lieu of any cash amount otherwise payable to such
stockholder in accordance with Section 3.1(c) with respect to all or
any portion of such stockholder's shares of Company Common Stock, a
note substantially in form of Exhibit B hereto appropriately completed
(a "Note"), payable to the order of such stockholder, in the aggregate
principal amount equal to the Cash Amount multiplied by the Cash
Fraction multiplied by the number of shares of Company Common Stock or
Deemed Shares with respect to which such election is exercised. Any
such election must be made by written notice directly to EVI on or
before 5:00 p.m., Houston time, on July 15, 1996, or such later date
and time as the Company and
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EVI shall designate. The foregoing election may not be made so that
(i) the aggregate principal amount of Notes issued exceeds $5,000,000
or (ii) so that more than three Notes are issued. In the event
stockholders seek to make such an election such that the preceding
restrictions would be violated, elections shall be accepted in the
order received by EVI until such restrictions would no longer be
satisfied.
(e) Additional Cash Consideration for Unaccredited
Stockholders. In addition to the Merger Consideration provided for in
Section 3.1(c), if the EVI Market Value (as defined below) is in
excess of $30.00, each Unaccredited Stockholder shall also receive in
cash as part of the Merger Consideration an amount equal to the
product of (i) the number of the shares of Company Common Stock and
Deemed Shares held by such Unaccredited Stockholder as of the
Effective Time multiplied by (ii) one minus the Cash Fraction
multiplied by (iii) the Conversion Number multiplied by (iv) the
excess, if any, of the EVI Market Value over $30.00. "EVI Market
Value" means the average of the closing sales price of the EVI Common
Stock on the New York Stock Exchange Composite Tape, as reported by
The Wall Street Journal (Southwest Edition) for the five Trading Days
(as defined below) immediately preceding the date of the Effective
Time; provided that, in the event that the foregoing computation
results in a value of more than $34.00, then the EVI Market Value
shall be $34.00. As used herein, "Trading Day" means any day on which
the New York Stock Exchange, Inc. is open for business.
3.2 Exchange of Certificates.
(a) Exchange Procedure. Upon surrender of a certificate
representing outstanding shares of Company Common Stock (a "Certificate") for
cancellation to EVI, together with any other documents reasonably required by
EVI, the holder of such Certificate shall be entitled to receive in exchange
therefor the shares of EVI Common Stock, the cash or Notes that such holder has
the right to receive pursuant to the provisions of this Article III, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, the shares of EVI Common Stock, cash may be
paid or Notes delivered to a transferee if the Certificate representing such
Company Common Stock is presented to EVI accompanied by all documents required
to evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this
Section 3.2, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the cash or
Notes as contemplated by Section 3.1.
(b) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to EVI Common Stock declared or
made after the Effective Time with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Certificate with respect to the
right to receive shares of EVI Common Stock represented thereby and no cash
payment in lieu of fractional shares shall be paid to any such holder pursuant
to Section 3.2(e) until the holder of such Certificate shall surrender such
Certificate. Subject to the effect of applicable laws, following surrender of
any such Certificate, there shall be paid to the holder thereof, without
interest: (i) at the time of such surrender, the amount of any cash payable in
lieu of a fractional share
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<PAGE> 10
of EVI Common Stock to which such holder is entitled pursuant to Section 3.2(e)
and the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of EVI Common
Stock; and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of EVI Common Stock.
(c) Escrow. As security for the payment of Indemnifiable
Damages and Claims Defense Expenses, a portion of the Merger Consideration
equal to the Escrow Deposit shall be delivered by EVI to the Escrow Agent named
in the escrow agreement in substantially the form of Exhibit C hereto (the
"Escrow Agreement") to be entered into by and among EVI, the Escrow Agent and
one person designated by the Company and disclosed to EVI by written notice
prior to the Effective Time (or if the Company does not designate a person
prior to the Effective Time, a stockholder designated by EVI), as
representative (the "Stockholders' Representative") of the former stockholders
of the Company and the former holders of Deemed Shares (together, the
"Stockholders"). The Escrow Deposit shall consist of (i) cash in an amount
(the "Cash Escrow") equal to one-sixth of the cash payable to each Stockholder
who received only cash consideration pursuant to Section 3.1(c) and (ii) a
total number of shares of EVI Common Stock equal to 166,667 minus the quotient
of (A) the Cash Escrow divided by (B) $30.00. For purposes of this Agreement,
EVI and the Company shall treat the Escrow Deposit as separate subaccounts for
each Stockholder, with initial deposits of the applicable amounts of cash and
EVI Common Stock (with the shares of EVI Common Stock deposited in proportion
to the ownership of Company Common Stock and Deemed Shares by the Stockholders
other than those who received only cash pursuant to Section 3.1(c)).
(d) No Further Ownership Rights in Company Common Stock.
All shares of EVI Common Stock issued, cash paid or Notes delivered upon the
surrender for exchange of shares of Company Common Stock in accordance with the
terms hereof shall be deemed to have been issued, paid or delivered in full
satisfaction of all rights pertaining to such shares of Company Common Stock,
and after the Effective Time there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the
shares of Company Common Stock that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation for any reason, they shall be canceled and exchanged
as provided in this Article III.
(e) No Fractional Shares. No certificates or scrip
representing fractional shares of EVI Common Stock shall be issued upon the
surrender for exchange of Certificates or Stock Options pursuant to this
Article III, and, except as provided in this Section 3.2(e), no dividend or
other distribution, stock split or interest shall relate to any such fractional
security, and such fractional interests shall not entitle the owner thereof to
vote or to any rights as a security holder of EVI. In lieu of any fractional
security, each holder of shares of Company Common Stock or Deemed Shares who
would otherwise have been entitled to a fraction of a share of EVI Common Stock
upon surrender of Certificates for exchange pursuant to this Article III will
be paid an amount in cash (without interest) equal to the value thereof based
on the last reported sales price of the EVI Common Stock on the New York Stock
Exchange Composite Tape on the Closing Date.
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<PAGE> 11
(f) No Liability. Neither EVI nor the Company shall be
liable to any holder of shares of Company Common Stock or Deemed Shares for
such shares (or dividends or distributions with respect thereto) or any cash
amounts, EVI Common Stock or Notes delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. Any amounts
remaining unclaimed by holders of any such shares two years after the Effective
Time (or such earlier date immediately prior to the time at which such amounts
would otherwise escheat to or become property of any governmental entity)
shall, to the extent permitted by applicable law, become the property of EVI
free and clear of any claims or interest of any such holders or their
successors, assigns or personal representatives previously entitled thereto.
3.3 Registration Rights Agreement. At the Closing, EVI
and the former stockholders of the Company who received EVI Common Stock in the
Merger shall enter into a Registration Rights Agreement in substantially the
form of Exhibit D hereto (the "Registration Rights Agreement").
3.4 Shares of Dissenting Stockholders. Any issued and
outstanding shares of Company Common Stock held by an person who is entitled
under applicable law to exercise and has exercised rights of appraisal with
respect to the Merger and has taken all steps necessary under applicable law to
perfect such rights of appraisal (a "Dissenting Stockholder") shall not be
converted as described in Section 3.1, but shall become the right to receive
such consideration as may be determined to be due to such Dissenting
Stockholder pursuant to the DGCL; provided, however, that shares of Company
Common Stock outstanding at the Effective Time held by a Dissenting Stockholder
who shall, after the Effective Time, withdraw his demand for appraisal or
otherwise lose his right of appraisal as provided in such laws, shall be deemed
to be converted into the right to receive the Cash Amount.
3.5 Post-Closing Adjustment. (a) Within 45 calendar days
following the Closing, EVI shall prepare and deliver to the Stockholders a
consolidated balance sheet (the "Closing Date Balance Sheet") of the Company
and its Subsidiaries as of the Closing Date and a statement (the "Statement")
reflecting the calculation of the adjustment (the "Post-Closing Adjustment") to
the Purchase Price pursuant to this Section 3.5. The Closing Date Balance
Sheet shall be prepared in accordance with generally accepted accounting
principles as historically and consistently applied by the Company ("GAAP").
EVI shall provide the Stockholders with access to copies of all work papers and
other relevant documents to permit the Stockholders to verify the accuracy of
the entries contained in the Closing Date Balance Sheet. The Stockholders
(pursuant to the direction of the holders immediately prior to the Effective
Time of a majority of Company Common Stock) shall have a period of 30 calendar
days after delivery of the Closing Date Balance Sheet and the Statement to
review it and make any objections they may have in writing to EVI. If written
objections to the Closing Date Balance Sheet or the Statement are delivered to
EVI by the Stockholders (acting as provided above) within such 30-day period,
then the Stockholders and EVI shall attempt to resolve the matter or matters in
dispute. If no written objections are made by the Stockholders (acting as
provided above) within such 30-day period, then the Closing Date Balance Sheet
and the Statement shall be final and binding on the parties hereto. If
disputes with respect to the Closing Date Balance Sheet cannot be resolved by
the Stockholders and EVI within 30 calendar days after the delivery of the
objections to the Closing Date Balance Sheet or the Statement, then, at the
request of EVI or the
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<PAGE> 12
Stockholders (acting as provided above), the specific matters in dispute shall
be submitted to Arthur Andersen LLP or such other independent accounting firm
as may be approved by the Stockholders (acting as provided above) and EVI,
which firm shall render its opinion as to such matters. Based on such opinion,
such independent accounting firm will then send to the Stockholders and EVI its
determination on the specified matters in dispute, which determination shall be
final and binding on the parties hereto. The fees and expenses of such
independent accounting firm shall be borne one-half by the Stockholders (pro
rata based on the number of shares of Company Common Stock and shares issuable
upon exercise of Stock Options held as of the Effective Time) and one-half by
EVI.
(b) Within two business days following the date upon
which the Closing Date Balance Sheet becomes final and binding upon the parties
pursuant to Section 3.5(a), (i) if (A) the Net Debt shown on the December 31
Balance Sheet (the "Year-End Net Debt") is greater than (B) the Net Debt shown
on the Closing Balance Sheet (the "Closing Date Net Debt"), EVI shall pay the
Stockholders (pro rata based on the number of shares of Company Common Stock
and shares issuable upon exercise of Stock Options held as of the Effective
Time) in immediately available funds an amount equal to the difference of the
Year-End Net Debt minus the Closing Date Net Debt; and (ii) if the Closing Date
Net Debt is greater than the Year-End Net Debt, the Stockholders shall cause to
be offset against the Escrow Fund (pro rata as described in (i) above) an
amount equal to the difference of the Closing Date Net Debt minus the Year-End
Net Debt (as if such amount were an Indemnifiable Damage, but without regard to
the limitations in Section 6.4(a)).
(c) If a determination with respect to the Closing Date
Balance Sheet would, if such determination were similarly applied, also affect
the corresponding entries on the December 31 Balance Sheet, the December 31
Balance Sheet shall be adjusted consistent with such determination and the
Closing Date Balance Sheet.
3.6 Treatment of Stock Options. At the Effective Time,
each holder of a Stock Option outstanding on the date thereof shall be entitled
to receive the portion of the Merger Consideration attributable to a number of
shares of Company Common Stock (the "Deemed Shares") equal to the number of
shares of Company Common Stock subject to such holder's Stock Options
multiplied by a fraction, the numerator of which is the Cash Amount minus the
Option Exercise Price and the denominator of which is the Cash Amount. The
Company may extend until the Effective Time the term of any Stock Option that
would otherwise expire prior to the Effective Time or may lend the holder of
any such Stock Option the exercise price thereof (which loan shall be repaid
(without interest) by withholding from the cash portion of the Merger
Consideration payable to such holder). The Company shall take such action as
may be required to amend or modify the Stock Options such that the Stock
Options shall be cancelled at the Effective Time and the holders thereof shall
be entitled to receive only the payments and consideration provided herein,
subject to any required reporting and withholding.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
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4.1 Representations and Warranties by the Company. The
Company hereby represents and warrants to EVI and EVI Sub as follows:
(a) Organization and Good Standing. Each of the Company
and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of
incorporation and has full corporate power and authority to own,
operate and lease its assets in the manner currently owned, operated
and leased by it.
(b) Authority and Approval. The execution and delivery
of this Agreement by the Company, the performance by it of all the
terms and conditions hereof to be performed by it and the consummation
of the transactions contemplated hereby by it have been duly
authorized and approved by any requisite corporate action on the part
of the Company. This Agreement constitutes the legal, valid and
binding obligation of the Company enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy,
insolvency or other similar laws relating to or affecting the
enforcement of creditors' rights generally and to general principles
of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and the enforceability of the
indemnification provisions contained in the Registration Rights
Agreement being subject to limitations under public policy.
(c) Capital Structure. The authorized capital stock of
the Company consists of 100,000 shares of Company Common Stock, of
which 62,694 are issued and outstanding, and 20,000 shares of
preferred stock, par value $1.00 per share, none of which are issued
and outstanding. There are 5,078 shares of Company Common Stock
reserved for issuance pursuant to options (the "Stock Options")
granted under the Company's 1991 Stock Option Plan and 4,205 Stock
Options, of which 70 have lapsed, have been granted under such plan
with an exercise price per share of $95.29. All of the outstanding
shares of capital stock of the Company were duly authorized for
issuance and are validly issued, fully paid and nonassessable, were
not issued in violation of any preemptive rights or other preferential
rights of subscription or purchase of any person, and none of such
shares are held in treasury. Other than the Stock Options, there are
no outstanding options, warrants, convertible securities, calls,
rights, commitments, preemptive rights, agreements, arrangements or
understandings of any character obligating the Company (i) to issue,
deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of the Company or any securities or
obligations convertible into or exchangeable for such shares or (ii)
to grant, extend or enter into any such option, warrant, convertible
security, call, right, commitment, preemptive right, agreement,
arrangement or understanding described in clause (i) above. The
stockholders of the Company own the Company Common Stock beneficially
and of record, in the respective amounts set forth in Schedule 4.1(c)
hereto or (to the extent set forth in the aggregate on such Schedule)
the schedule of stock ownership previously furnished to EVI and, to
the best knowledge of the Company, free and clear of all Liens and
restrictive agreements, including, without limitation, voting trust or
stockholders' agreements.
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(d) Affiliates and Subsidiaries.
(i) Set forth in Schedule 4.1(d) is the name and
description of each person in which the Company owns any
equity or other similar ownership interests, including all
Subsidiaries, and a description, including amount and
percentage, of such interests. The interests set forth on
Schedule 4.1(d) are owned by the Company free and clear of all
Liens and restrictive agreements, including, voting trusts or
stockholders agreements.
(ii) With respect to each Subsidiary set forth on
Schedule 4.1(d):
(A) Each such Subsidiary that is a
corporation is a corporation duly organized, validly
existing and in good standing under the laws of its
jurisdiction of incorporation and has the requisite
corporate power and authority to carry on its
business as it is now being conducted, and to own,
operate and lease the assets it now owns, operates or
holds under lease. Each such Subsidiary that is not
a corporation is duly organized under the laws of its
jurisdiction of organization and has all requisite
power and authority to carry on its business as it is
now being conducted, and to own, operate and lease
the assets that it now owns, operates or holds under
lease.
(B) Such Subsidiary is duly qualified to
do business and is in good standing in each
jurisdiction in which the conduct of its business or
the ownership or leasing of its assets requires it to
be so qualified, except where the failure to be so
qualified or in good standing would not have a
material adverse effect on the Company and its
Subsidiaries taken as a whole.
(C) The Company has previously delivered
to EVI true and correct copies of the Articles or
Certificate of Incorporation and Bylaws, or other
similar organizational or constituent documents, of
each such Subsidiary as in effect on the date hereof.
The minute books of such Subsidiary previously made
available to EVI are complete in all material
respects and reflect all material action taken prior
to the Effective Date by their board of directors or
other governing bodies and stockholders or equity
owners, in their capacities as such.
(D) All the outstanding shares of
capital stock of each such Subsidiary that is a
corporation have been duly authorized and validly
issued and are fully paid and non-assessable and were
not issued in violation of any preemptive rights or
other preferential rights of subscription or purchase
of any person. All of the Company's direct or
indirect ownership interests in each such Subsidiary
that is not a corporation have been duly authorized
and validly issued or vested, were not issued in
violation of any preemptive rights or other
preferential rights of subscription or purchase of
any person, are fully paid and are non-assessable.
All such stock and ownership interests are
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owned of record and beneficially by the Company,
either directly or indirectly, free and clear of all
Liens and restrictive agreements, including, voting
trusts or stockholder agreements.
(E) There are no outstanding options,
warrants, convertible securities, calls, rights,
commitments, preemptive rights, agreements,
arrangements or understandings of any character
obligating such Subsidiary (1) to issue, deliver or
sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other equity
interests of such Subsidiary or any securities or
obligations convertible into or exchangeable for such
shares or equity interests or (2) to grant, extend or
enter into any such option, warrant, convertible
security, call, right, commitment, preemptive right,
agreement, arrangement or understanding described in
clause (1) of this Section 4.1(d)(ii)(E).
(e) No Violation; Consents. Except for the filing and
recordation of a Certificate of Merger as required by the DGCL, this
Agreement and the execution and delivery hereof by the Company do not,
and the fulfillment and compliance with the terms and conditions
thereof and the consummation of the transactions contemplated thereby
will not, violate or conflict with any provision of or constitute a
default under (whether with notice or the lapse of time or both), or
require any filing, consent, authorization or approval under any
constitutive documents of the Company or any Subsidiary of the Company
or any judicial, administrative or arbitration order, award, judgment,
writ, injunction or decree applicable to or binding upon the Company
or any Subsidiary of the Company or any provision of any indenture,
instrument creating any Lien, lease, agreement, instrument, order,
arbitration award, judgment or decree to which the Company or any
Subsidiary of the Company is a party or by which the Company or any
Subsidiary of the Company is bound or to which any of its assets or
properties is bound, including those contracts listed on Schedule
4.1(g).
(f) Litigation. Except as set forth in Schedule 4.1(f),
there are no actions, suits, claims, investigations or legal,
administrative, arbitration or other proceedings, or governmental
investigations, examinations or inquiries pending, or to the knowledge
of the Company threatened, against the Company or any of its
Subsidiaries or any of their respective properties, assets, operations
or business or against the Company or any of its Subsidiaries or the
Company that challenge the consummation of the transactions
contemplated hereby.
(g) Contracts. Except as set forth in Schedule 4.1(g),
neither the Company nor any of its Subsidiaries, nor any of their
respective properties, is a party to or bound by any agreement,
contract or commitment (i) relating to the borrowing of funds, (ii)
requiring the expenditure of funds in excess of $50,000 for all
unscheduled agreements, contracts or commitments, (iii) relating to
any loan or advance to, or investment in, any person or any agreement,
contract, commitment or understanding relating to the making of any
such loan, advance or investment, (iv) relating to any guarantee or
financial assurance of any obligation or other contingent liability
with respect to any indebtedness or obligation of any person, (v)
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relating to any management service, employment, consulting or other
similar type contract or agreement, (vi) that would limit the freedom
of the Company, any of its Subsidiaries or EVI, or any Affiliate
thereof, following the Closing, to engage in any line of business, to
own, operate, sell, transfer, pledge or otherwise dispose of or
encumber any of their respective assets or to compete with any person
or to engage in any business or activity in any geographic area, (vii)
obligating the Company or any of its Subsidiaries to provide
indemnification or contribution with respect to any matter or (viii)
that might reasonably be expected to have a material adverse effect on
the business, operation, assets or prospects of the Company or any of
its Subsidiaries. None of the Company, any Subsidiary or, to the best
knowledge of the Company, the other contracting parties thereto have
breached any provision of or are in default (and no event or
circumstance exists, to the best knowledge of the Company with respect
to other parties, that with notice, or the lapse of time or both, would
constitute a default) under the terms of any agreement listed in
Schedule 4.1(g) hereto, except, with respect to the Company and its
Subsidiaries, where such breach or default would not have a material
adverse effect on the Company and its Subsidiaries taken as a whole.
All contracts, agreements, indentures, leases and other instruments
listed in Schedule 4.1(g) hereto are in full force and effect. There
are no pending or, to the best knowledge of the Company, threatened
disputes with respect to the contracts, agreements, indentures, leases
or instruments described in Schedule 4.1(g). Neither the Company nor
any Subsidiary is currently obligated to pay any liquidated damages
under any of the contracts, agreements, indentures, leases or other
instruments described in Schedule 4.1(g) hereto and the Company is not
aware of any facts or circumstance that could reasonably be expected to
result in an obligation of the Company or any Subsidiary to pay any
such liquidated damages.
(h) Employee Matters.
(i) Schedule 4.1(h) contains a list and brief
description of all "employee pension benefit plans" (as
defined in Section 3(2) of ERISA) (sometimes referred to
herein as "Pension Plans"), "employee welfare benefit plans"
(as defined in Section 3(1) of ERISA) and all other Benefit
Plans maintained, or contributed to, by the Company for the
benefit of any present or former officers or employees of the
Company or any of its Subsidiaries. The Company has made
available to EVI true, complete and correct copies of (i) each
Benefit Plan (or, in the case of any unwritten Benefit Plans,
descriptions thereof), (ii) the most recent three annual
reports on Form 5500 filed with the IRS with respect to each
Benefit Plan (if any such report was required), (iii) the most
recent IRS determination letter, if any, and any rulings or
determinations requested subsequent to the date of that
letter, (iv) the most recent actuarial report for each Benefit
Plan for which an actuarial report is required, (v) the most
recent summary plan description for each Benefit Plan for
which such summary plan description is required and each
summary of material modifications prepared after the last
summary plan description, (vi) each trust agreement and group
annuity contract relating to any Benefit Plan and (vii) all
material correspondence for the last three years with the IRS
or Department of Labor relating to plan qualification, filing
of required forms, or pending, contemplated or announced plan
audits. No Pension
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Plan maintained or contributed to by the Company or its
Subsidiaries is, or has been during the last five years,
subject to Title IV of ERISA or Section 412 of the Code.
(ii) Except as set forth in Schedule 4.1(h), all
Pension Plans have been the subject of determination letters
from the IRS to the effect that such Pension Plans are
qualified and exempt from Federal income taxes under Section
401(a) and 501(a), respectively, of the Code and no such
determination letter has been revoked nor, to the best
knowledge of the Company, has revocation been threatened, nor
has any such Pension Plan been amended since the date of its
most recent determination letter or application therefor in
any respect that would adversely affect its qualification or
materially increase its costs.
(iii) Except as set forth in Schedule 4.1(h), each
Benefit Plan that has been or is sponsored, participated in or
contributed to by the Company or any Subsidiary: (A) is in
compliance in all material respects with all reporting and
disclosure requirements of ERISA, including, but not limited
to, Part 1 of Subtitle B of Title I of ERISA, (B) has had the
appropriate Form 5500 filed timely for each year of its
existence, if required, (C) has at all times complied with the
bonding requirements of Section 412 of ERISA, if required, and
(D) to the knowledge of the Company, has no controversy
pending with any Governmental Entity (other than the payment
of benefits in the normal course and controversies disclosed
on Schedule 4.1(h)), nor any controversy resolved adversely to
the Company or any Subsidiary, which may subject the Company
or any Subsidiary to the payment of any penalty, interest, tax
or other obligation.
(iv) All voluntary employee benefit associations
have been submitted to and approved as exempt from Federal
income tax under Section 501(c)(9) of the Code by the IRS.
(v) Except as set forth in Schedule 4.1(h), the
execution of this Agreement or the consummation of the
transactions contemplated by this Agreement will not give rise
to any, or trigger any, change of control, severance or other
similar provision in any Benefit Plan.
(vi) Neither the Company nor any Subsidiary
provides employee post-retirement medical or health coverage
or contributes to or maintains any employee welfare benefit
plan which provides for health benefit coverage following
termination of employment except as is required by Section
4980B(f) of the Code or other applicable statute, nor has it
made any representations, agreements, covenants or commitments
to provide that coverage.
(vii) Except as set forth in Schedule 4.1(h), to
the best knowledge of the Company, none of the Company or any
Subsidiary, any officer of the Company or any Subsidiary or
any of the Benefit Plans which are subject to ERISA, including
the Pension Plans, or any trusts created thereunder, or any
trustee or administrator
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thereof, has engaged in a "prohibited transaction" (as such
term is defined in Section 406, 407 or 408 of ERISA or Section
4975 of the Code) or any other breach of fiduciary
responsibility that could subject the Company or any
Subsidiary or any officer of the Company or any Subsidiary to
any material tax or penalty on prohibited transactions imposed
by such Section 4975 or to any material liability under
Section 502(l)(1) of ERISA.
(viii) With respect to any Benefit Plan that is an
employee welfare benefit plan, (A) no such Benefit Plan
includes a welfare benefits fund, as such term is defined in
Section 419(e) of the Code, (B) each such Benefit Plan that is
a group health plan, as such term is defined in Section
5000(b)(1) of the Code, complies in all material respects with
the applicable requirements of Section 4980B(f) of the Code
and (C) each such Benefit Plan (including any such Plan
covering retirees or other former employees) may be amended or
terminated without material liability to the Company or any
Subsidiary on or at any time after the consummation of the
Merger.
(i) Taxes. Except as set forth in Schedule 4.1(i)
hereto:
(i) All Tax Returns that are required to be filed
(taking into account all extensions) on or before the date of
Closing for, by, on behalf of or with respect to the Company
or any of its Subsidiaries, have been timely filed with the
appropriate foreign, federal, state and local authorities and
all Taxes shown to be due and payable on such Tax Returns or
related to such Tax Returns have been timely paid in full;
(ii) All such Tax Returns and the information and
data contained therein have been, in all material respects,
properly and accurately compiled and completed, fairly present
in all material respects the information purported to be shown
therein, and reflect all material liabilities for Taxes for
the periods covered by such Tax Returns;
(iii) None of such Tax Returns are now under audit
or examination by any foreign, federal, state or local
authority and there are no agreements, waivers or other
arrangements providing for an extension of time with respect
to the assessment or collection of any Tax or deficiency of
any nature against the Company or any of its Subsidiaries or
their respective properties, or with respect to any such Tax
Return, or any suits or other actions, proceedings,
investigations or claims now pending or threatened against the
Company or any of its Subsidiaries or their respective
properties with respect to any Tax, or any matters under
discussion with a foreign, federal, state or local authority
relating to any Tax, or any claims for any additional Tax
asserted by any such authority;
(iv) All Taxes due and required to be paid by the
Company or any of its Subsidiaries on or before the date on
Closing or assessed and due and required to be
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<PAGE> 19
paid by the Company or any of its Subsidiaries on or before
the date of Closing have been timely paid in full;
(v) All withholding Tax and Tax deposit
requirements imposed on the Company or any of its Subsidiaries
or their respective properties for any and all periods prior
to and including the date of the Closing have been timely
satisfied in full on or before the Closing Date; and
(vi) The Company and its Subsidiaries have each
made adequate provision for the payment in full of any and all
unpaid Taxes for any and all periods or portions thereof
ending on or before the date of the Closing.
(j) Title to and Condition of Properties.
(i) There is set forth on Schedule 4.1(j)(i) a
list of each item of tangible personal property classified as
a fixed asset in accordance with GAAP owned by the Company or
any Subsidiary that has a net book value greater than $5,000.
The Company and its Subsidiaries have good and indefeasible
title to all of their respective personal property (including,
without limitation, those items of personal property set forth
on Schedule 4.1(j)(i)), free and clear of all Liens, except
for Permitted Liens and those Liens set forth on Schedule
4.1(j)(i).
(ii) There is set forth on Schedule 4.1(j)(ii) a
list of each item of tangible personal property leased by the
Company or any Subsidiary that is material to the Company and
its Subsidiaries taken as a whole. The Company and its
Subsidiaries have good title to all the leasehold estates
pursuant to which all of the personal property leased by them
is leased, free and clear of all Liens, except for Permitted
Liens and those Liens set forth on Schedule 4.1(j)(ii).
Neither the Company nor any Subsidiary has breached any
provision of or is in default (and no event or circumstance
exists that with notice, or the lapse of time or both, would
constitute a default by the Company or any Subsidiary) under
the terms of any lease or other agreement pursuant to which
the personal property set forth on Schedule 4.1(j)(ii) is
leased, except for a default or breach that would not have a
material adverse effect on the Company and its Subsidiaries
taken as a whole. To the best knowledge of the Company, all
of such leases or other agreements are in full force and
effect. There are no pending or, to the best knowledge of the
Company, threatened disputes with respect to any lease or
other agreement pursuant to which the personal property set
forth on Schedule 4.1(j)(ii) is leased and, to the best
knowledge of the Company, the lessor thereunder has not
breached any provision of and is not in default (and no event
or circumstance exists that with notice, or the lapse or time
or both, would constitute a default by the lessor) under the
terms of any such lease or other agreement.
(iii) There is set forth on Schedule 4.1(j)(iii) a
description of all real property owned by the Company or any
Subsidiary. The Company and its
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<PAGE> 20
Subsidiaries have good and indefeasible title to all of the
real property set forth on Schedule 4.1(j)(iii) hereto, in fee
simple absolute, free and clear of all Liens, except for
Permitted Liens and Liens set forth on Schedule 4.1(j)(iii).
No parcel of the real property set forth on Schedule
4.1(j)(iii) is being condemned, expropriated or otherwise
taken by any public authority, with or without payment of
compensation therefor, and, to the best knowledge of the
Company, no such condemnation, expropriation or taking has
been proposed.
(iv) There is set forth on Schedule 4.1(j)(iv) a
description of all real property leased by the Company or any
Subsidiary. The Company and its Subsidiaries have good title
to all the leasehold estates pursuant to which the real
property set forth on Schedule 4.1(j)(iv) is leased, free and
clear of all Liens, except for Permitted Liens. Neither the
Company nor any Subsidiary has breached any provision of or is
in default (and no event or circumstance exists that with
notice, or the lapse of time or both, would constitute a
default by the Company or any Subsidiary) under the terms of
any lease or other agreement pursuant to which the real
property set forth on Schedule 4.1(j)(iv) is leased. To the
best knowledge of the Company, all of such leases or other
agreements are in full force and effect. There are no pending
or, to the best knowledge of the Company, threatened disputes
with respect to any lease or other agreement pursuant to which
the real property set forth on Schedule 4.1(j)(iv) is leased
and, to the best knowledge of the Company, the lessor
thereunder has not breached any provision of and is not in
default (and no event or circumstance exists that with notice,
or the lapse of time or both, would constitute a default by
the lessor) under the terms of any such lease or other
agreement.
(k) No Undisclosed Liabilities. Except as set forth or
reserved for on the audited December 31, 1995 balance sheet of the
Company, which has previously been delivered to EVI, or in the
footnotes thereto (the "December 31 Balance Sheet"), or on Schedule
4.1(k), neither the Company nor any of its Subsidiaries has any
liabilities of any nature, whether accrued, absolute, contingent,
unliquidated, civil, criminal or otherwise, and whether due or to
become due, other than those liabilities that (i) are fully reflected
or reserved against in the Balance Sheet or (ii) are expressly
disclosed in any other Schedule hereto.
(l) No Brokers. Except for Simmons & Company
International, which has been retained by the Company pursuant to a
letter agreement dated July 24, 1995, a copy of which has previously
been provided to EVI, neither the Company nor any of its Subsidiaries
has employed or retained any investment banker, broker, agent, finder
or any other party, or incurred any obligation for broker's fees,
finder's fees or commissions, with respect to the sale by the Company
of Company Common Stock or with respect to the transactions
contemplated by this Agreement, or otherwise dealt with anyone
purporting to act in the capacity of a finder or broker with respect
thereto whereby the Company, any of its Subsidiaries or EVI may be
obligated to pay such a fee or commission.
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<PAGE> 21
(m) Vote Required. The affirmative vote of the holders
of a majority of the outstanding shares of Company Common Stock is the
only vote of the holders of any class or series of the Company's
capital stock necessary to approve this Agreement and the transactions
contemplated hereby.
(n) Environmental Matters. Except as set forth in
Schedule 4.1(n),
(i) The Company and each of its Subsidiaries has
at all times operated in compliance with all applicable
limitations, restrictions, conditions, standards,
prohibitions, requirements and obligations of Environmental
Laws and related orders of any court or other Governmental
Entity, except where the failure to so operate in compliance
would not have a material adverse effect on the Company and
its subsidiaries taken as a whole.
(ii) There are no existing, pending or, to the
best knowledge of the Company, threatened actions, suits,
claims, investigations, inquiries or proceedings by or before
any court or any other Governmental Entity directed against
the Company, any Subsidiary or any of their respective assets
which pertain or relate to (i) any remedial obligations under
any applicable Environmental Law, (ii) violations of any
Environmental Law, (iii) personal injury or property damage
claims relating to the release of Waste Materials or (iv)
response, removal or remedial costs under CERCLA or any
similar state law.
(iii) All notices, permits, licenses or similar
authorizations required to be obtained or filed by the Company
or any Subsidiary under all applicable Environmental Laws in
connection with its current and previous operation or use of
the assets, any other assets or properties currently or
previously leased or owned by the Company or any Subsidiary or
the current and previous conduct of its business have been
duly obtained or filed and are in full force and effect,
except where the failure to do so would not have a material
adverse effect on the Company and its Subsidiaries taken as a
whole.
(iv) Neither the Company nor any Subsidiary has
received notice that any permit, license or similar
authorization is to be revoked or suspended by any
Governmental Entity.
(v) Neither the Company nor any Subsidiary owns
or operates any underground storage tanks.
(vi) No portion of the assets or properties
currently or previously leased or owned by the Company or any
of its Subsidiaries is part of a Superfund site under CERCLA
or any similar ranking or listing under any similar state law.
(vii) To the best knowledge of the Company, all
Waste Materials generated by the Company or any Subsidiary
that are stored or that require treatment or
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<PAGE> 22
disposal have been transported, stored, treated and disposed
of by carriers, and by storage, treatment and disposal
facilities authorized and maintaining valid permits under all
applicable Environmental Laws, except for such matters that
would not have a material adverse effect on the Company and
its Subsidiaries taken as a whole.
(viii) No person has disposed or released any Waste
Materials on or under any asset or property currently or, to
the best knowledge of the Company, previously leased or owned
by the Company or any Subsidiary and neither the Company nor
any Subsidiary has disposed or released Waste Materials on or
under the assets or properties currently or, to the best
knowledge of the Company, previously leased or owned by the
Company or any Subsidiary, except in compliance with all
applicable Environmental Laws, except for such matters that
would not have a material adverse effect on the Company and
its Subsidiaries taken as a whole.
(ix) To the best knowledge of the Company, no
facts or circumstances exist that could reasonably be expected
to result in any liability to any person with respect to the
current or past business and operations of the Company, any
Subsidiary, the assets or properties currently or previously
leased or owned by the Company or any Subsidiary in connection
with (i) any release, transportation or disposal of any Waste
Materials, hazardous substance or solid waste or (ii) action
taken or omitted that was not in full compliance with or was
in violation of any applicable Environmental Law, except for
such matters that would not have a material adverse effect on
the Company and its Subsidiaries taken as a whole.
(o) Financial Statements.
(i) True and correct copies of the audited
consolidated balance sheet of the Company as of December 31,
1995 and 1994, statement of cash flows for each of the two
years ended December 31, 1995 and 1994, and statement of
income for each of the years ended December 31, 1995, 1994 and
1993 (collectively, the "Financial Statements"), have been
previously delivered to EVI and EVI Sub. The Financial
Statements fairly present the financial position of the
Company and its Subsidiaries as at the dates thereof and the
cash flows and results of operations for the periods covered
thereby, and have been prepared in accordance with generally
accepted accounting principles consistently applied.
(ii) True and correct copies of the unaudited
consolidated balance sheet of the Company as of March 31, 1996
and the statement of income for the three months ended March
31, 1996 have been previously delivered to EVI and EVI Sub
(the "Interim Financial Statements"). The Interim Financial
Statements fairly present the financial position of the
Company and its Subsidiaries at March 31, 1996 and results of
operations for the three months ended March 31, 1996, and are
prepared in a manner consistent with the Financial Statements
and in accordance with generally accepted accounting
principles consistently applied.
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<PAGE> 23
(p) Except as set forth in Schedule 4.1(p), since March
31, 1996, the Company has not engaged in any of the transactions
described in subsections (c), (d), (e), (g), (h), (m) and (n) of
Section 5.1.
4.2 Representations and Warranties by EVI and EVI Sub.
EVI and EVI Sub hereby jointly and severally represent and warrant to the
Company that:
(a) Organization and Existence. Each of EVI and EVI Sub
is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has full corporate power
and authority to own, operate and lease its assets in the manner
currently owned, operated and leased by it.
(b) Authority and Approval. Each of EVI and EVI Sub has
all requisite corporate power and authority to execute and deliver the
Transaction Agreements, to consummate the transactions contemplated
hereby and to perform all the terms and conditions hereof to be
performed by it. The execution and delivery of the Transaction
Agreements by each of EVI and EVI Sub, the performance by it of all
the terms and conditions hereof to be performed by it and the
consummation of the transactions contemplated hereby have been duly
authorized and approved by all requisite corporate action on the part
of EVI and EVI Sub. Each of the Transaction Agreements constitutes
the legal, valid and binding obligation of each of EVI and EVI Sub,
enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency or other similar laws relating to or
affecting the enforcement of creditors' rights generally and to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) and the enforceability
of the indemnification provisions contained in the Registration Rights
Agreement may be subject to limitations under public policy.
(c) Capital Structure. The authorized capital stock of
EVI consists of 40,000,000 shares of EVI Common Stock, of which
18,867,797 are issued and outstanding as of June 12, 1996, and
3,000,000 shares of preferred stock, par value $1.00 per share, of
which none are issued and outstanding. The authorized capital stock of
EVI Sub consists of 1,000 shares of common stock, par value $0.01 per
share, of which 1,000 are issued and outstanding. There are 1,185,000
shares of EVI Common Stock reserved for issuance under EVI's employee
benefit plans and no shares of capital stock reserved for issuance
under any employee benefit plans of EVI Sub.
(d) No Violation; Consents. This Agreement and the
execution and delivery hereof by EVI and EVI Sub do not, and the
fulfillment and compliance with the terms and conditions hereof and
the consummation of the transactions contemplated hereby by it will
not, violate or conflict with any provision of or constitute a default
under (whether with notice or the lapse of time or both), or require
any filing, consent, authorization or approval under the certificate
of incorporation or bylaws of EVI or EVI Sub or any judicial,
administrative or arbitration order, award, judgment, writ, injunction
or decree applicable to or binding upon EVI or any of its Subsidiaries
or any provision of any material indenture, mortgage, lien, lease,
agreement, instrument, order, arbitration award, judgment or decree
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<PAGE> 24
to which EVI or any of its Subsidiaries thereof is a party or by which
EVI or any of its Subsidiaries thereof is bound or to which any of
their respective assets or properties is bound.
(e) Litigation. There are no material actions, suits,
proceedings or governmental investigations or inquiries pending, or
to the knowledge of EVI or EVI Sub threatened, against EVI or any of
its Subsidiaries or their respective properties, assets, operations or
businesses that challenge the consummation of the transactions
contemplated hereby.
ARTICLE V
COVENANTS
5.1 Conduct of the Business Pending the Closing. Until
the Closing, the Company shall comply with the provisions set forth below
(unless otherwise consented to in writing by EVI):
(a) The Company shall conduct its business in the
ordinary and usual course;
(b) The Company shall promptly notify EVI of, and furnish
to EVI any information that EVI may reasonably request with respect
to, the occurrence of any event or the existence of any state of facts
that may result in the representations and warranties of the Company
not being true if they were made at any time prior to or as of the
date of the Closing;
(c) Except as provided by the Benefit Plans or set forth
on Schedule 5.1, neither the Company nor any of its Subsidiaries shall
(i) grant or agree to grant any bonuses to any employee, (ii) grant
any general increase in the rates of salaries or compensation of its
or their employees or any specific increase to any employee, including
executive officers of the Company, (iii) provide for any new pension,
retirement or other employment benefits to any of its or their
employees or any increase in any existing benefits or (iv) terminate
or amend in any respect or provide for any material increase in
benefits under any Benefit Plan;
(d) Neither the Company nor any of its Subsidiaries shall
amend its charter or by-laws or enter into any merger or consolidation
agreement;
(e) Neither the Company nor any of its Subsidiaries shall
authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any capital stock of any class or any other securities or
equity equivalents or amend any of the terms of any such securities or
agreements;
(f) The Company shall use best efforts to maintain and
preserve the business of the Company intact, to retain their present
employees so that they will be available to EVI after the Closing and
to maintain existing relationships with customers, suppliers and
others so that those relationships will be preserved after the
Closing;
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<PAGE> 25
(g) Neither the Company nor any of its Subsidiaries shall
sell, assign or dispose of any of its assets or properties, tangible
or intangible, or incur or assume any liabilities or enter into any
sale/leaseback or similar transaction, except for sales and
dispositions made, or liabilities incurred, in the ordinary course of
business consistent with past practices;
(h) Neither the Company nor any of its Subsidiaries shall
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of
any other person or entity except in the ordinary and usual course of
business consistent with past practice and in amounts not material to
the Company and its Subsidiaries, taken as a whole, or make any loans,
advances or capital contributions to or investments in any other
person or entity, other than in the ordinary course of business
consistent with past practices and in amounts not material to the
Company and its Subsidiaries, taken as a whole;
(i) The Company and its Subsidiaries shall use best
efforts to maintain in full force and effect all insurance currently
maintained;
(j) Neither the Company nor any of its Subsidiaries shall
take, or agree in writing or otherwise to take, any of the actions
described in this Section 5.1 or any action that would make any
representation or warranty inaccurate or untrue in any material
respect or that would result in any of the conditions set forth in
Article VII hereof not being satisfied;
(k) The Company and its Subsidiaries shall use best
efforts to comply with all applicable local, state and federal laws,
rules and regulations, judgments, decrees, orders, governmental
permits, certificates and licenses;
(l) The Company shall maintain the books of account and
records in the usual, regular and customary manner consistent with
practices employed prior to the date hereof; and
(m) The Company shall not implement or adopt (i) any
change in its accounting methods or principles or the application
thereof (including depreciation lives) or (ii) any material change in
its tax methods or principles or the application thereof (including
depreciation lives).
(n) Neither the Company nor any of its Subsidiaries shall
(i) declare or pay any dividend on or make any other distribution in
respect of any of its capital stock or other ownership interests or
(ii) purchase, redeem, or otherwise acquire any shares of its capital
stock or other ownership interests.
5.2 Governmental Filings. As promptly as practicable
after the execution of this Agreement, each party shall, in cooperation with
the other, file any reports or notifications that may be required to be filed
by it under applicable law, including filings under the HSR Act with the
Federal Trade Commission and the Antitrust Division of the Department of
Justice, and shall furnish
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<PAGE> 26
to the other all such information in its possession as may be necessary for
the completion of the reports or notifications to be filed by the other.
5.3 Access to Information. Prior to the Closing, EVI may
make such investigation of the business and properties of the Company and its
Subsidiaries as EVI may desire and, upon reasonable notice, the Company shall
give to EVI and its counsel, accountants and other representatives reasonable
access, during normal business hours throughout the period prior to the
Closing, to the property, books, commitments, agreements, records, files and
personnel of the Company and its Subsidiaries, and the Company shall furnish to
EVI during that period all copies of documents and information concerning the
Company as EVI may reasonably request, subject to applicable law. EVI shall
hold, and shall cause its counsel, accountants and other agents and
representatives to hold, all such information and documents in confidence.
5.4 Public Announcements. Subject to applicable
securities law or stock exchange requirements, neither the Company nor EVI
shall, without the prior approval of the other party, issue, or permit any of
their respective partners, directors, officers, employees, agents, Subsidiaries
or other Affiliates to issue, any press release or other public announcement
with respect to this Agreement or the transactions contemplated hereby.
5.5 Employee Benefit Plan Amendments. Prior to the
Closing, the Company shall (i) amend its Long Term Security Plan and take such
other actions as may be reasonably acceptable to EVI so as to cure the
deficiencies noted with regard to such plan on Schedule 4.1(h) and (ii) take
such action to amend, modify or terminate the EBDIT Sharing Plan as requested
by EVI. The Company shall also accrue on the Closing Date Balance Sheet any
and all payments due or that may be requested to be paid in respect of the
EBDIT Plan.
5.6 Other Action. Each of the parties shall use its
reasonable efforts to cause the fulfillment at the earliest practicable date
but, in any event, prior to the Closing Date of all of the conditions to their
respective obligations to consummate the transactions under this Agreement.
ARTICLE VI
EXTENT AND SURVIVAL OF REPRESENTATIONS,
WARRANTIES, COVENANTS AND AGREEMENTS
6.1 Scope of Representations. Except as and to the
extent expressly set forth in this Agreement, the parties make no
representations, warranties or indemnities whatsoever, and disclaim all
liability and responsibility for any other representation, warranty, statement
or information made or communicated (orally or in writing) to any other party
(including, but not limited to, any opinion, information or advice that may
have been provided by any officer, stockholder, director, partner, employee,
agent, consultant or representative of any party).
6.2 Right of Set-off. From and after the Effective Time
and subject to the limitations set forth herein, the Escrow Deposit shall be
subject to offset in favor of EVI for any and all Indemnifiable Damages. For
this purpose, "Indemnifiable Damages" means the aggregate of all
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<PAGE> 27
expenses, losses, costs and damages (including reasonable attorneys' fees and
court costs) incurred or suffered by EVI or the Surviving Corporation or any of
their directors, agents, employees or affiliates or their affiliates'
directors, agents or employees (collectively, the "Indemnified EVI Parties") as
a result of or in connection with (i) any inaccuracy in any representation or
warranty made by the Company in this Agreement, (ii) the matters described in
Schedule 6.2 and any litigation pending against the Company or any Subsidiary
as of the Effective Date and (iii) the exercise of any dissenters' rights with
respect to any Company Common Stock to the extent that the costs and expenses
of EVI or the Surviving Corporation with respect to the defense and
satisfaction of such dissenters' rights is in excess of the product equal to
(A) the number of shares of Company Common Stock held by all dissenters times
(B) the Cash Amount. In addition, the Escrow Deposit shall be subject to
offset by EVI for Claims Defense Expenses that EVI pays pursuant to Section
6.5. "Claims Defense Expenses" means any reasonable out-of-pocket expenses
incurred by or on behalf of the Stockholders' Representative in connection with
the investigation, negotiation, defense or settlement of any Claim.
6.3 Survival of Representations and Warranties. The
representations and warranties made by the Company pursuant to this Agreement
will survive until June 30, 1997, at which time they shall expire and have no
further force and effect; provided, that Claims first asserted in writing
pursuant to and in accordance with Section 6.4 hereof prior to such date
(whether or not judicial action has commenced or such Claim has been finally
determined within such period) shall not thereafter be barred.
6.4 Procedures For Set-off. EVI may set-off against the
Escrow Deposit any Indemnifiable Damages subject, however, to the following
terms and conditions and such other terms and conditions as provided in the
Escrow Agreement:
(a) Such right of set-off shall not apply to the first
$300,000 of Indemnifiable Damages, and shall apply thereafter only to
the extent the aggregate Indemnifiable Damages exceed $300,000;
provided, however, such $300,000 threshold does not apply to
Indemnifiable Damages as a result of or in connection with the matters
described in clauses (ii) and (iii) of the definition of Indemnifiable
Damages in Section 6.2.
(b) If EVI shall desire to set off from the Escrow
Deposit pursuant to this Agreement with respect thereto, EVI shall
with reasonable promptness (i) notify the Stockholder's Representative
of any third-party claim or claims asserted ("Third Party Claim") for
which set-off is sought and (ii) transmit to the Stockholders'
Representative a written notice ("Claim Notice") describing in
reasonable detail the nature of the Third Party Claim, a copy of all
papers served with respect to such claim (if any), an estimate of the
amount of damages attributable to the Third Party Claim to the extent
feasible (which estimate shall not be conclusive of the final amount
of such claim) and the basis of the EVI's request for set-off under
this Agreement. Failure to provide such notice shall not affect the
right of EVI to set-off except to the extent such failure shall have
resulted in liability to the Stockholders' Representative that could
have been actually avoided had such notice been provided within such
required time period.
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Within 30 days after receipt of any Claim Notice (the
"Election Period"), the Stockholders' Representative shall notify EVI
(i) whether the Stockholders' Representative disputes the potential
liability of the Stockholders to EVI under this Article Six with
respect to such Third Party Claim and (ii) whether the Stockholders'
Representative desires, on behalf of the Stockholder, to defend EVI
against such Third Party Claim. If the Stockholders' Representative
does not notify EVI within such 30 day period that the Stockholders'
Representative disputes potential liability with respect to such Third
Party Claim, any liability with respect to such Third Party Claim
shall be deemed a liability of the Stockholders subject to set-off
hereunder.
(c) If the Stockholders' Representative notifies EVI
within the Election Period that the Stockholders' Representative
elects to assume the defense of the Third Party Claim, then the
Stockholders' Representative shall have the right to defend, at the
cost and expense of the Stockholders, which cost and expense shall
constitute a Claims Defense Expense, such Third Party Claim by all
appropriate proceedings, which proceedings shall be prosecuted
diligently by the Stockholders' Representative to a final conclusion
or settled at the discretion of the Stockholders' Representative in
accordance with this Section 6.4(c). The Stockholders' Representative
shall have full control of such defense and proceedings, including any
compromise or settlement thereof. EVI is hereby authorized to file,
during the Election Period, any motion, answer or other pleadings that
EVI shall reasonably deem necessary or appropriate to protect its
interests or those of the Stockholders and not prejudicial to the
Stockholders. If requested by the Stockholders' Representative, EVI
agrees to cooperate with the Stockholders' Representative and its
counsel in contesting any Third Party Claim that the Stockholders'
Representative elects to contest, including, without limitation, the
making of any related counterclaim against the person asserting the
Third Party Claim or any cross-complaint against any person. Except
as otherwise provided herein, EVI may participate in, but not control,
any defense or settlement of any Third Party Claim controlled by the
Stockholders' Representative pursuant to this Section 6.4 and shall
bear its own costs and expenses with respect to such participation.
Notwithstanding the foregoing, the Stockholders' Representative may
not agree to any compromise or settlement which would require any
action other than the payment of money which shall be offset pursuant
hereto without the express written consent of EVI.
(d) If the Stockholders' Representative fails to notify
EVI within the Election Period that the Stockholders' Representative
elects to defend EVI pursuant to Section 6.4(c), or if the
Stockholders' Representative elects to defend EVI pursuant to Section
6.4(c) but fails diligently and promptly to prosecute or settle the
Third Party Claim as herein provided, then EVI shall have the right to
defend, and set off the cost and expense thereof (if EVI is entitled
to set-off hereunder), the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously
prosecuted by EVI to a final conclusion or settled. EVI shall have
full control of such defense and proceedings. Notwithstanding the
foregoing, if the Stockholders' Representative has delivered a written
notice to EVI to the effect that the Stockholders' Representative
disputes the Stockholders' potential liability to EVI under this
Article Six and if such dispute is resolved in favor of the
Stockholders, the Stockholders shall not be required to bear the costs
and expenses of EVI's defense pursuant
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to this Section or of the Stockholders' Representative's
participation therein at EVI's request, and EVI shall reimburse the
Stockholders' Representative in full for all costs and expenses of
such litigation. The Stockholders' Representative may participate in,
but not control, any defense or settlement controlled by EVI pursuant
to this Section, and the Stockholders shall bear the costs and
expenses of the Stockholders' Representative with respect to such
participation (which shall constitute Claims Defense Expense).
(e) In the event EVI should have a claim against the
Stockholders hereunder that does not involve a Third Party Claim, EVI
shall transmit to the Stockholders' Representative a written notice
(the "Indemnity Notice") describing in reasonable detail the nature of
the claim, an estimate of the amount of damages attributable to such
claim to the extent feasible (which estimate shall not be conclusive
of the final amount of such claim) and the basis of EVI's request for
set-off under this Agreement. If the Stockholders' Representative
does not notify EVI within 30 days from its receipt of the Indemnity
Notice that the Stockholders' Representative disputes such claim, the
claim specified by EVI in the Indemnity Notice shall be deemed a
liability of the Stockholders subject to set-off hereunder. If the
Stockholders' Representative has timely disputed such claim, as
provided above, such dispute shall be resolved by pursuant to Section
9.3.
(f) Set-off by EVI with respect to a Third Party Claim
or an Indemnity Notice (collectively, a "Claim") shall be effected on
the date the Stockholders' Representative agrees to such liability,
the date the period for disputing any liability lapses or the date on
which any dispute relating thereto is resolved by either (i) written
agreement between EVI and the Stockholders' Representative, (ii) any
final and nonappealable judgment rendered in a court of competent
jurisdiction or (iii) a written arbitration decision rendered pursuant
to the procedures specified herein, and any set-off determined by any
of such methods, upon delivery to the Escrow Agent of a copy of such
written agreement, judgment or arbitration decision, shall be
immediately charged against the Escrow Deposit attributable to each of
the Stockholders pro rata in proportion to the Stockholders'
respective initial deposits. Any written agreement between EVI and the
Stockholders' Representative pursuant to clause (i) of the preceding
sentence shall be binding and conclusive with respect to the subject
matter thereof and its effect on the Escrow Deposit held by the Escrow
Agent.
(g) For purposes of set-off pursuant to this Article Six,
shares of EVI Common Stock shall be valued at $30.00 per share,
regardless of their then-current market value. If the deposit of any
Stockholder consists both of cash and shares of EVI Common Stock, the
EVI Common Stock shall be subject to set off before the cash.
(h) Except with respect to any portions of the Escrow
Deposit transferred to EVI pursuant to its right of set-off, all
shares of EVI Common Stock (together with any dividends or
distributions issued in respect of such shares) deposited with the
Escrow Agent on behalf of a Stockholder pursuant to the provisions of
Section 3.2(c) hereof shall be deemed to be owned by such Stockholder
and such Stockholder shall be entitled to vote the same and to receive
all dividends declared thereon; provided, however, that there shall
also be deposited with EVI, subject to the terms of this Article Six,
all shares of EVI Common Stock issuable
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to such Stockholder as a result of any stock dividend or stock split
with respect to the Escrow Shares then on deposit with the Escrow
Agent pursuant to the Escrow Agreement.
(i) EVI agrees to cause the Escrow Agent to deliver to
the Stockholders no later than July 1, 1997 any portion of the Escrow
Deposit then on deposit with the Escrow Agent unless there then
remains unresolved any claim as to which notice has been given as
provided in this Section 6.4, in which event (i) the Escrow Agent
shall retain an amount equal to the maximum amount subject to the
Claim as reasonably determined by EVI with respect thereto but shall
immediately distribute the remaining balance of the Escrow Deposit and
(ii) any portion of the Escrow Deposit remaining on deposit after such
Claim shall have been satisfied shall be returned to the Stockholders
promptly after the time of satisfaction. Any such distribution of the
Escrow Deposit shall be made on a pro rata basis in relation to the
balance remaining in each Stockholder's account deposited with the
Escrow Agent on behalf of such Stockholder pursuant to the provisions
of Section 3.2(c).
(j) The Stockholders' Representative shall not be liable
to the Stockholders for any error of judgment or for any act done or
omitted by it in good faith or for any mistake in fact or law, except
its own willful misconduct or gross negligence.
(k) For purposes of determining EVI's right of set-off
for an inaccuracy in a representation or warranty made by the Company
in this Agreement, all such representations and warranties that have
been made subject to a materiality qualification (including any
material adverse effect) shall be deemed to have been made without
that qualification, it being understood and agreed that the threshold
provided for under Section 6.4(a) is intended to be the only
materiality qualification for purposes of set off.
6.5 Payment of Claims Defense Expenses. EVI shall pay
Claims Defense Expenses to the extent that (i) the recipient of such Claims
Defense Expenses has expressly acknowledged EVI's right to set-off regarding
the subject claim and (ii) EVI has been provided copies of invoices or other
billing documentation evidencing that the expenses reflected therein are Claims
Defense Expenses; provided that EVI shall not be obligated to pay any Claim
Defense Expense to the extent that the value of the Escrow Deposit remaining in
Escrow, at the time of EVI's receipt of any invoice or other billing
documentation therefor, would be insufficient, if delivered to EVI pursuant to
its right to offset for Claims Defense Expenses paid by it, to reimburse EVI in
full for such payment (for this purpose giving each share of EVI Common Stock
held as part of the Escrow Fund at a value equal to $30.00).
6.6 Sole Remedy For Indemnifiable Damages. The remedy
provided for in this Article VI shall be the only remedy available to EVI or
the Surviving Corporation following the Effective Time with respect to Claims
for Indemnifiable Damages under this Agreement or otherwise with respect to the
representations and warranties made by the Company pursuant to this Agreement
or otherwise with respect to the transactions contemplated hereby. SUCH REMEDY
IS INTENDED TO COMPENSATE EVI FOR INDEMNIFIABLE DAMAGES UNDER THIS AGREEMENT
AND SHALL APPLY NOTWITHSTANDING THE FACT THAT SUCH INDEMNIFIABLE DAMAGES MAY
RELATE TO THE ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE, GROSS NEGLIGENCE,
WILLFUL MISCONDUCT OR VIOLATION OF LAW BY THE
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<PAGE> 31
COMPANY OR ITS SUBSIDIARIES, OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS. In no
event shall any Stockholder be liable for special, punitive or consequential
damages with respect to this Agreement. Notwithstanding the foregoing, the
Company retains all rights and remedies it may have against the Stockholders
individually under each of the Stockholder Agreements.
ARTICLE VII
CONDITIONS TO CLOSING
7.1 Conditions Precedent to Obligations of EVI. The
obligation of EVI to consummate the purchase under this Agreement is subject to
the fulfillment, prior to or at the Closing, of each of the following
conditions (any or all of which may be waived by EVI):
(a) all representations and warranties of the Company
contained in this Agreement shall be true and correct at and as of the
time of the Closing with the same effect as though made again at, and
as of, that time (except to the extent such representations and
warranties are made as of another specified date), except such as
would not have a material adverse effect on the Company and its
Subsidiaries, taken as a whole;
(b) the Company shall have performed and complied in all
material respects with all obligations and covenants required by this
Agreement to be performed or complied with by the Company prior to or
at the Closing;
(c) EVI shall have been furnished with a certificate,
dated the Closing Date, executed by an officer of the Company
certifying to the fulfillment of the conditions specified in Sections
7.1(a) and 7.1(b) hereof;
(d) the waiting period (and any extension thereof) under
the HSR Act shall have expired or been terminated;
(e) no provision of any applicable law or regulation
shall prohibit, and there shall not be pending any suit by any
Governmental Entity seeking any injunction or restraining order from a
court of competent jurisdiction in any action or proceeding against,
the consummation of this Agreement;
(f) any consents required under the (i) Processing
Agreement dated March 8, 1990 between USS/Kobe Steel Company and the
Company, (ii) Steel Supply Agreement dated August 21, 1989, between
the Company and USS Division, USX Corporation or (iii) Credit
Agreement dated May 29, 1996, between the Company and First Interstate
Bank of Texas, N.A., (iv) Equipment Lease Agreement dated September
20, 1994, between ICO, Inc. and the Company, (v) Lease Agreement dated
September 19, 1980, as amended, between Muskogee City-County Trust
Port Authority and the Company, (vi) documents referred to in items
(i)(4) and (iv)(1)-(4) of Schedule 4.1(g), and (vii) Promissory Note
payable to USS Division, USX Corporation, in the original principal
amount of $360,000, to permit the transactions contemplated by this
Agreement and the occurrence after the
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Effective Time of a merger of the Surviving Corporation into Grant
Prideco, Inc., or another wholly-owned subsidiary of EVI shall have
been obtained, and the document referred to in item (vi)(3) of
Schedule 4.1(g) shall have been modified to the reasonable
satisfaction of EVI so that the provisions thereof shall not apply to
operations other than those currently conducted by the Company;
(g) Stockholders holding an aggregate of at least 95% of
the outstanding shares of Company Common Stock shall have executed and
delivered to EVI a Stockholder Agreement, and Stockholders holding 5%
or more of the outstanding shares of Company Common Stock shall not
have properly perfected (and not withdrawn) dissenters' rights
pursuant to Section 262(d) of the DGCL; and
(h) EVI shall have been furnished an opinion of Baker &
Botts, L.L.P., counsel to the Company, that (i) this Agreement and the
transactions contemplated hereby have been authorized by all necessary
corporate action on the part of the Company, (ii) upon filing of the
Certificate of Merger with the Secretary of State of the State of
Delaware, the Merger will be effective and (iii) all of the
outstanding shares of Company Common Stock have been duly authorized
and validly issued and are fully paid and nonassessable.
7.2 Conditions Precedent to Obligations of the Company.
The obligation of the Company to consummate the sale under this Agreement is
subject to the fulfillment, prior to or at the Closing, of each of the
following conditions (any or all of which may be waived by the Company):
(a) all representations and warranties of EVI contained
in this Agreement shall be true and correct at and as of the time of
the Closing with the same effect as though made again at, and as of,
that time (except to the extent such representations and warranties
are made as of another specified date) except such as would not have a
material adverse effect on EVI and its Subsidiaries, taken as a whole;
(b) EVI shall have performed and complied in all material
respects with all obligations and covenants required by this Agreement
to be performed or complied with by EVI prior to or at the Closing;
(c) the Company shall have been furnished with a
certificate, dated the Closing Date, executed by an officer of EVI
certifying to the fulfillment of the conditions specified in Sections
7.2(a) and 7.2(b) hereof;
(d) the waiting period (and any extension thereof) under
the HSR Act shall have expired or been terminated;
(e) no provision of any applicable law or regulation
shall prohibit, and there shall not be pending any suit by any
Governmental Entity seeking any injunction or restraining order issued
by a court of competent jurisdiction in any action or proceeding
against, the consummation of this Agreement;
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(f) any consents required under the Credit Agreement
dated May 29, 1996 between the Company and First Interstate Bank of
Texas, N.A., shall have been obtained;
(g) the Stockholders shall have been furnished an opinion
of Fulbright & Jaworski L.L.P., counsel to EVI and EVI Sub, that (i)
the Transaction Agreements to which either of EVI or EVI Sub is a
party and the transactions contemplated thereby have been authorized
by all necessary corporate action on the part of EVI or EVI Sub, as
the case may be, and (ii) the shares of EVI Common Stock to be issued
in the Merger have been duly authorized and validly issued and are
fully paid and nonassessable.
7.3 Documents to be Delivered by the Company. At the
Closing, the Company shall deliver, or cause to be delivered, to EVI the
following:
(a) a copy of the resolutions of the board of directors
of the Company authorizing the execution, delivery and performance of
this Agreement by the Company and a certificate of the secretary or
assistant secretary of the Company, dated the Closing Date, that such
resolutions were duly adopted and are in full force and effect;
(b) the officer's certificate referred to in Section
7.1(c);
(c) an executed copy of the Registration Rights Agreement
referred to in Section 3.3; and
(d) the legal opinion referenced in Section 7.1(h).
7.4 Documents to be Delivered by EVI. At the Closing,
EVI shall deliver, or cause to be delivered, to the Company the following:
(a) a copy of the resolutions of the board of directors
of each of EVI and EVI Sub authorizing the execution, delivery and
performance of this Agreement by EVI and EVI Sub and a certificate of
the secretary or assistant secretary of each of EVI and EVI Sub, dated
the Closing Date, that such resolutions were duly adopted and are in
full force and effect;
(b) the officer's certificate referred to in Section
7.2(c);
(c) an executed copy of the Registration Rights Agreement
referred to in Section 3.3; and
(d) the legal opinion referenced in Section 7.2(g).
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ARTICLE VIII
EXPENSES
Regardless of whether the Closing shall occur, each of the
parties will be responsible for its own expenses and fees incurred by it in
connection with the transactions contemplated herein.
ARTICLE IX
GENERAL PROVISIONS
9.1 Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by mutual written agreement executed by the Company
and EVI;
(b) by EVI, if any of the conditions specified in Section
7.1 hereof shall not have been satisfied or waived in writing by EVI
on or before September 30, 1996; or
(c) by the Company, if any of the conditions specified in
Section 7.2 hereof shall not have been satisfied or waived in writing
by the Company on or before September 30, 1996;
provided, however, that a party shall not be allowed to exercise any right of
termination pursuant to this Section 9.1 if the event giving rise to such
termination right shall be due to the failure of the party seeking to terminate
this Agreement to perform or observe in any material respect any of the
covenants or agreements set forth herein to be performed or observed by such
party.
Upon such termination, neither of the parties nor any other
person shall have any liability or further obligation arising out of this
Agreement except for any liability resulting from its breach of this Agreement
prior to termination, except that the provisions of Article VIII and Section
9.4(a) shall continue to apply.
9.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given when delivered
personally or when received if sent by registered or certified mail, return
receipt requested, or by facsimile transmission to the parties at the following
addresses (or at such other address as a party may specify by like notice):
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(a) If to EVI, to:
Energy Ventures, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attention: Bernard J. Duroc-Danner
Facsimile: 713/297-8488
with a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010
Attention: Curtis W. Huff
Facsimile: 713/651-5246
(b) If to the Company:
Tubular Corporation of America
14530 Wunderlich, Suite 202
Houston, Texas 77069
Attention: Tom McGrann
Facsimile: 713/537-8022
with a copy to:
Baker & Botts, L.L.P.
910 Louisiana
One Shell Plaza
Houston, Texas 77002-4995
Attention: J. David Kirkland, Jr.
Facsimile: 713/229-1522
9.3 Arbitration.
(a) In the event there shall exist any dispute or
controversy between the Company (or the Stockholders) and EVI with
respect to this Agreement or the several Stockholder Agreements or any
matter relating hereto or the transactions contemplated hereby, the
parties hereto agree to seek to resolve such dispute or controversy by
mutual agreement. If such dispute or controversy is unable to be
resolved by agreement within 60 days following notice by EVI or by the
Company or, after the Effective Time, the prior holders of a majority
of the
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Company Common Stock (the "Stockholder Group") of the nature of such
dispute or controversy setting forth in reasonable detail the
circumstances and basis of such dispute or controversy, either EVI or
the Company or the Stockholder Group, as the case may be, may require
that such dispute or controversy be resolved by binding arbitration
pursuant to the provisions of this Section 9.3. If a party elects to
submit such matter to arbitration, such party shall provide notice to
the other party of its election to do so, which notice shall name one
arbitrator. Within 10 days after the receipt of such notice, the
other party shall name a second arbitrator. The two arbitrators so
appointed shall name a third arbitrator, or failing to do so, a third
arbitrator shall be appointed pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. Each arbitrator
selected to act hereunder shall be qualified by education and
experience to pass on the particular question in dispute. The
arbitrators shall resolve all disputes in controversy in accordance
with the applicable substantive law. All statutes of limitations that
would otherwise be applicable shall apply to any arbitration
proceeding.
(b) The arbitrators appointed pursuant to this Section
9.2 shall promptly hear and determine (after due notice and hearing
and giving the parties reasonable opportunity to be heard) the
questions submitted, and shall render their decision within 60 days
after appointment of the third arbitrator or as soon as practical
thereafter. If within such period a decision is not rendered by the
board or a majority thereof, new arbitrators may be named and shall
act hereunder at the election of either party in like manner as if
none had previously been named. The decision of the arbitrators, or a
majority thereof, made in writing, shall absent manifest error be
final and binding upon the parties hereto as to the questions
submitted, and each party shall abide by such decision.
(c) All expenses of arbitration, including reasonable
compensation to the arbitrators, shall be borne equally by EVI and by
the Company or the Stockholders (collectively), as the case may be,
except each party shall bear the compensation and expenses of its own
counsel, witnesses and employees.
9.4 Miscellaneous.
(a) Choice of Law; Amendments; Headings. THIS AGREEMENT
SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF DELAWARE
(WITHOUT REGARD TO THE CHOICE OF LAW PROVISIONS THEREOF). No
amendment of any provision of this Agreement shall be valid unless the
same shall be in writing and signed by the parties. No waiver by any
party of any default, misrepresentation or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation or breach
of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence. The
headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this
Agreement.
(b) Assignments and Third Parties. Except as
specifically contemplated by this Agreement, no party hereto shall
assign this Agreement or any part hereof without the prior
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written consent of the other party; provided, however, EVI Sub may
assign its rights in this Agreement to an affiliate. Except as
otherwise provided herein, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns. No such assignment shall release a party of
any of its obligations under this Agreement. Nothing in this
Agreement shall entitle any person other than the Company, the
Stockholders or EVI, or their respective successors and assigns
permitted hereby, to any claim, cause of action, remedy or right of
any kind.
(c) Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any
rule of law or public policy, all other conditions and provisions of
this Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse
to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
(d) Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute but one and the
same agreement.
(e) Further Assurances. The Company and EVI agree to
deliver or cause to be delivered to each other on the Closing Date and
at such other times thereafter as shall be reasonably agreed any such
additional instrument as any of them may reasonably request for the
purpose of carrying out this Agreement.
(f) Incorporation of Schedules and Exhibits. The
Schedules and Exhibits identified in this Agreement are incorporated
herein by reference and made a part hereof.
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
ENERGY VENTURES, INC.
By: /s/ JAMES G. KILEY
------------------------------------
James G. Kiley
Vice President-Finance
TCA ACQUISITION, INC.
By: /s/ JAMES G. KILEY
------------------------------------
James G. Kiley
Vice President
TUBULAR CORPORATION OF AMERICA
By: /s/ THOMAS P. MCGRANN
------------------------------------
Thomas P. McGrann
President
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<PAGE> 1
EXHIBIT 2.2
STOCKHOLDER AGREEMENT AND REPRESENTATION LETTER
June 21, 1996
Energy Ventures, Inc.
TCA Acquisition, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Dear Sirs:
Reference is hereby made to the Agreement and Plan of Merger dated as of
June 21, 1996 (the "Merger Agreement"), among Tubular Corporation of America, a
Delaware corporation ("TCA"), Energy Ventures, Inc., a Delaware corporation
("EVI"), and TCA Acquisition, Inc., a Delaware corporation ("EVI Sub"), and
being executed in connection with this Stockholder Agreement and Representation
Letter (this "Agreement"). All capitalized terms used and not otherwise
defined herein shall have the meanings set forth in the Merger Agreement. In
order to induce you to enter into the Merger Agreement, the undersigned (the
"Stockholder") hereby agrees as follows:
1. Representations and Warranties. The Stockholder covenants and
agrees with EVI and EVI Sub and represents and warrants to EVI and EVI Sub as
follows:
(a) The Stockholder has the requisite legal capacity and
full power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby and in the Merger
Agreement.
(b) The Stockholder has duly executed and delivered this
Agreement. This Agreement constitutes a legal, valid and binding
obligation of the Stockholder, enforceable against the Stockholder
in accordance with its terms, except as such enforceability may be
limited by or subject to (a) any bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to
creditors' rights generally and (b) general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(c) The execution, delivery and performance by the
Stockholder of this Agreement, the consummation by the Stockholder
of the transactions contemplated hereby and by the Merger
Agreement and the compliance by the Stockholder with the
provisions hereof and thereof will not conflict with, or result in
any violation of or default by the Stockholder (with or without
notice or lapse of time, or both) under, (i) any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Stockholder is a party or by which the
Stockholder or any of the Stockholder's assets or properties may
be bound, or (ii) any statute or any judgment, decree, order, rule
or regulation
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<PAGE> 2
of any governmental entity to which the Stockholder is a party or
by which the Stockholder or any of the assets or properties of the
Stockholder may be bound.
(d) Except for those consents described in the Merger
Agreement, no consents, approvals or authorizations of any person
(other than those which have been obtained) are required on the
part of the Stockholder in connection with the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby and by the Merger Agreement.
(e) There is no legal, judicial, administrative,
governmental, arbitration or other action or proceeding pending
or, to the best knowledge of the Stockholder, threatened against
the Stockholder that could affect the ability of the Stockholder
to perform the Stockholder's obligations under this Agreement and
the Merger Agreement.
(f) The Stockholder is the record and beneficial owner of
the shares of Company Common Stock set forth next to the
Stockholder's name in Schedule 4.1(c) of the Merger Agreement (or,
if not set forth therein, the number of shares set forth on the
schedule delivered to EVI by the Company), and has full authority
to vote all of such shares as contemplated by the Merger
Agreement. Such shares of Company Common Stock are owned free and
clear of all Liens and restrictive agreements, including, without
limitation, voting trust or stockholders agreements.
(g) The Stockholder recognizes and understands that the
shares of EVI Common Stock, if any, and the Notes, if any, to be
issued to the Stockholder pursuant to the Merger (the
"Securities") will not be registered under the Securities Act of
1933, as amended (the "Securities Act"), or under the securities
laws of any state (the "Blue Sky Laws"). The Securities are not
being so registered in reliance upon exemptions from the
Securities Act and the Blue Sky Laws which are predicated, in
part, on the representations, warranties and agreements of the
Stockholder contained herein.
(h) If the Stockholder is receiving Securities in the
Merger, the Stockholder represents and warrants that (i) the
Stockholder is an accredited investor as defined in Rule 501(a)
promulgated under the Securities Act and has knowledge and
experience in business, finance, securities and investments, such
experience being based on actual participation therein, (ii) the
Stockholder is capable of evaluating the merits and risks of an
investment in the Securities and the suitability thereof as an
investment therefor, (iii) the Stockholder is an experienced and
sophisticated investor in investments, including investments
similar to that of the Securities, (iv) the Securities to be
acquired by the Stockholder in connection with the Merger will be
acquired solely for investment and not with a view toward resale
or redistribution, (v) in connection with the transactions
contemplated hereby and by the Merger Agreement, no assurances
have been made concerning the future results of the Company or EVI
and (vi) the Stockholder has made investments of a nature similar
to the Securities and, by reason of such investments, has acquired
the capability to protect the interest of the Stockholder in
investments similar to that of the Securities. The Stockholder
-2-
<PAGE> 3
understands that none of EVI, EVI Sub or the Company is under any
obligation to file a registration statement or to take any other
action under the Securities Act or the Blue Sky Laws with respect
to the Notes. The Stockholder acknowledges that EVI, EVI Sub and
the Company are relying upon the truth and accuracy of the
representations and warranties in this Agreement by the
Stockholder in consummating the transactions contemplated by this
Agreement and the Merger Agreement without registering the
Securities under the Securities Act or the Blue Sky Laws.
(i) If the Stockholder is receiving Securities in the
Merger, the Stockholder has been furnished with the complete
financial statements of the Company for the fiscal years ended
December 31, 1994 and 1995, and the fiscal quarter ended March 31,
1996. The Company and Sub have made available to the Stockholder
the opportunity to ask questions and receive answers concerning
the terms and conditions of the transactions contemplated by this
Agreement or the Merger Agreement and access to obtain any
additional information which the Stockholder could reasonably
request for the purpose of verifying the accuracy of information
furnished to the Stockholder as set forth herein or for the
purpose of considering the transactions contemplated hereby or by
the Merger Agreement. EVI has offered to make available to the
Stockholder upon request at any time all exhibits filed by EVI
with the Commission as part of any of the reports filed therewith.
(j) No investment banker, broker, finder or other person
is entitled to any brokerage or finder's fee or similar commission
from the Company in connection with this Agreement, the Merger
Agreement or the transactions contemplated hereby or by the Merger
Agreement based in any way on agreements, arrangements or
understandings made by or on behalf of the Stockholder.
(k) As of the date of this Agreement and after giving
effect to the acquisition of EVI Common Stock pursuant to the
Merger, the Stockholder will not hold more than $15 million in
value of EVI Common Stock.
2. Covenants and Agreements. The Stockholder covenants and
agrees with EVI and EVI Sub as follows:
(a) The Stockholder hereby consents with respect to all
shares of Company Common Stock which the Stockholder owns,
beneficially or of record, in favor of the adoption of the Merger
Agreement and the transactions contemplated hereby and by the
Merger Agreement. This consent is provided pursuant to Section
228 of the DGCL. The Stockholder further waives any dissenters or
other similar rights that the Stockholder may have under the DGCL
or otherwise with respect to the Merger and the transactions
contemplated by the Merger Agreement.
(b) The Stockholder shall execute, acknowledge and
deliver (or cause to be executed, acknowledged and delivered),
such agreements and other instruments (including written consents)
and shall take (or cause to be taken) such other action as may
be necessary
-3-
<PAGE> 4
or appropriate to cause the Company to comply with its covenants
and agreements set forth in the Merger Agreement and to implement
and carry into effect the transactions contemplated by this
Agreement and the Merger Agreement.
(c) As of the Effective Time, the Stockholder does hereby
for the Stockholder and the Stockholder's Affiliates, heirs,
executors, administrators and legal representatives remise,
release, acquit and forever discharge the Company and its
Affiliates, partners, officers, directors, controlling persons or
entities, employees, attorneys and successors and assigns
(collectively with the Company, the "Company Released Parties") of
and from any and all claims, demands, liabilities,
responsibilities, disputes, causes of action and obligations of
every nature whatsoever, liquidated or unliquidated, known or
unknown, matured or unmatured, fixed or contingent, which the
Stockholder and the Stockholder's Affiliates now have, own or hold
or have at any time previously had, owned or held against the
Company Released Parties, including without limitation any
indemnification obligation of the Company to the Stockholder and
all liabilities created as a result of the sole or contributory
negligence, gross negligence and willful acts of any Company
Released Party, existing as of the Effective Time or relating to
any matter that occurred on or prior to the Effective Time, except
for (i) the right to cash payments of salary and bonus, if any,
that (a) are unpaid to the Stockholder as of the Effective Date,
and (b) accrued and reflected in the Company's financial
statements from and after March 31, 1996 in the ordinary course of
the Company's business consistent with prior cash payments of
salary or bonus or required to be paid under agreements listed on
Schedule 4.1(h) of the Merger Agreement, (ii) reimbursement of
expenses incurred after March 31, 1996 in the ordinary course of
the Company's business, (iii) claims for reimbursement for medical
expenses under the Company's health plan and (iv) the right to
unused vacation time in accordance with the Company's vacation
policy; provided, however, that any claims, liabilities, debts or
causes of action that may arise in connection with the failure of
any of the parties hereto to perform any of their obligations
hereunder or under any other agreement relating to the
transactions contemplated hereby or from any breaches by any of
them of any representations or warranties herein or in connection
with any of such other agreements shall not be released or
discharged pursuant to this Agreement. The Stockholder represents
and warrants that the Stockholder has not previously assigned or
transferred, or purported to assign or transfer, to any person or
entity whatsoever all or any part of the claims, demands,
liabilities, responsibilities, disputes, causes of action or
obligations released in this Section 2(c). The Stockholder
covenants and agrees that the Stockholder will not assign or
transfer to any person or entity whatsoever all or any part of the
claims, demands, liabilities, responsibilities, disputes, causes
of action or obligations released in this Section 2(c). The
Stockholder represents and warrants that the Stockholder has read
and understands all of the provisions of this Section 2(c) and
that he has to the extent desired been represented or advised by
legal counsel and other professional advisors in connection with
the negotiation, execution and delivery of this Agreement.
(d) The Stockholder agrees that, except for expense
advances in the ordinary course of business, which shall be repaid
or accounted for to the Company by the
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<PAGE> 5
Stockholder, all indebtedness by the Stockholder or any Affiliate
of the Stockholder to the Company or any of its subsidiaries has
been paid in full. The Stockholder agrees that immediately
subsequent to the Effective Time, except for any existing
indemnification obligations of the Stockholder to the Company,
which shall continue in effect, there will be no agreements,
contracts, leases, arrangements or other understandings (either
written or oral) between the Stockholder and the Surviving
Corporation or any subsidiary thereof, except for this Agreement,
the Merger Agreement and any agreement for employment of the
Stockholder with the Company that may be listed on a Schedule to
the Merger Agreement or on Schedule 2(e) hereof. The Stockholders
Agreement dated April 29, 1991, among the Company and certain
stockholders of the Company, the Employee Stockholders Agreement
dated April 29, 1991, among the Company and certain stockholders
of the Company, and the Registration Rights Agreement dated April
29, 1991, among the Company and certain stockholders of the
Company, are all hereby declared null and void and of no further
force or effect.
3. Spousal Consent. If the Stockholder is an individual and
is married, the spouse of the undersigned is also executing this Agreement. By
executing this Agreement, the spouse of the Stockholder (a) acknowledges that
such spouse knows of the contents of this Agreement and the Merger Agreement,
(b) consents to the entering into of this Agreement by the Stockholder and (c)
agrees that this Agreement shall be binding upon such spouse to the extent of
such spouse's community property interest.
4. Miscellaneous. The representations and warranties set
forth in this Agreement shall survive the Closing. Neither this Agreement nor
any of the rights, interest or obligations hereunder or under the Merger
Agreement shall be assigned by the Stockholder without the prior written
consent of EVI and EVI Sub. The headings of the Sections and paragraphs of
this Agreement are included for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction or
interpretation hereof or thereof. This Agreement shall be construed in
accordance with and governed by the laws of the State of Texas, without regard
to the conflicts or choice of law rules of the State of Texas.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the Stockholder and the Stockholder's spouse, if
any, hereby execute this Agreement as of the day first written above.
INDIVIDUAL STOCKHOLDER:
------------------------------------------
Name:
-------------------------------------
SPOUSE OF INDIVIDUAL STOCKHOLDER:
------------------------------------------
Name:
-------------------------------------
AGREED AND ACKNOWLEDGED:
ENERGY VENTURES, INC.
By:
------------------------------------------------
James G. Kiley, Vice President-Finance
TCA ACQUISITION, INC.
By:
------------------------------------------------
James G. Kiley, Vice President
<PAGE> 1
EXHIBIT 2.3
ASSET PURCHASE AGREEMENT
By and Between
ENERGY VENTURES, INC.
MALLARD BAY DRILLING, INC.
and
NOBLE DRILLING (WEST AFRICA) INC.
NOBLE DRILLING CORPORATION
for the purchase of the
CHUCK SYRING AND LEWIS DUGGER RIGS
June 21, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . 4
2.1 Assets to be Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Limitation of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Limitation on Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.6 Delivery of Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III
PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 Consideration for the Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV
THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Deliveries by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Deliveries by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . 8
5.1 Organization and Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2 Authority; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.3 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.4 Ownership of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.5 Rig Classifications and Certifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.6 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.7 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.8 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.9 Governmental Approval. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.10 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.11 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
-i-
<PAGE> 3
<TABLE>
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . 12
6.1 Organization and Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.2 Authority; Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.3 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.4 Governmental Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.6 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF SELLER . . . . . . . . . . . . . . . . . . 14
7.1 Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.2 Covenants and Agreements Performed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.3 Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.4 Shell Nigeria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.5 MARAD Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VIII
CONDITIONS TO THE OBLIGATION OF BUYER . . . . . . . . . . . . . . . . . . 14
8.1 Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.2 Covenants and Agreements Performed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.3 Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 Shell Nigeria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.5 Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.6 MARAD Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.7 No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.9 Export Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.10 Import Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IX
COVENANTS AND AGREEMENTS OF THE PARTIES BEFORE,
RELATING TO AND SUBSEQUENT TO THE CLOSING . . . . . . . . . . . . . . . . . 16
9.1 Access to Information; Confidentiality; Financial Information . . . . . . . . . . . . . . . . . . . 16
9.2 Preservation of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.3 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.4 Certain Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.5 Actions with Respect to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.6 Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.7 Rig Loss or Damage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
-ii-
<PAGE> 4
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9.8 Use of Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.9 Continued Effectiveness of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 19
9.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE X
EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE XI
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 20
11.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
11.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE XII
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . 22
12.1 Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12.2 Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
12.3 Limitation of Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
12.4 Applicability of Indemnification Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE XIII
EXTENT AND SURVIVAL OF REPRESENTATIONS,
WARRANTIES, COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . 24
13.1 Scope of Representations of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE XIV
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 25
14.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
14.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
14.3 Amendments and Waiver; Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
14.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
14.5 Binding Effect; Assignment; No Third Party Benefit . . . . . . . . . . . . . . . . . . . . . . . . . 26
14.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
14.7 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
14.8 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
14.9 Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
14.10 Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
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<PAGE> 5
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is dated as of June
___, 1996, by and between ENERGY VENTURES, INC., a Delaware corporation
("EVI"), and MALLARD BAY DRILLING, INC., a Louisiana corporation ("Mallard",
together with EVI, the "Buyer"), and NOBLE DRILLING (WEST AFRICA) INC., a
Delaware corporation ("Noble Nigeria"), and NOBLE DRILLING CORPORATION, a
Delaware corporation ("Noble", together with Noble Nigeria, the "Seller");
W I T N E S S E T H :
WHEREAS, Buyer desires to purchase the Assets (as hereinafter defined)
from Noble Nigeria; and
WHEREAS, Noble Nigeria desires to sell the Assets to Buyer for the
consideration provided herein;
NOW, THEREFORE, in consideration of the premises and the mutual terms,
covenants and conditions herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms have the following
respective meanings:
"Affiliate" means, as to the person specified, any person controlling,
controlled by or under common control with such person, with the concept of
control in such context meaning the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of
another, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" has the meaning specified in the preamble.
"Applicable laws" has the meaning specified in Section 5.10.
"Assets" means, collectively, all the property, assets and rights to
be acquired by Buyer pursuant to this Agreement and consisting of the
following:
(a) the barge drilling units known as the Lewis Dugger and the
Chuck Syring, together with the pipe barges known as PB-7 and PB-9, and all
such drilling units' respective drilling machinery and equipment (including,
without limitation, floor tools
<PAGE> 6
and blow-out preventers), engines, machinery, boats, covers, anchors, chains,
cables, tackle, rigging, apparel, furniture, computers and computer equipment,
fittings and equipment, pumps and pumping equipment, spare components and
parts, drill pipe, case barrels, drill collars, heavy-weight drill pipe,
racking, supporting inventory and stores, living quarters located thereon and
all appurtenances thereto appertaining or belonging located thereon on the
Closing Date, including those assets set forth in Schedule 1(a) hereto
(collectively, the "Rigs");
(b) the shore based stocks owned by Seller or any of its
Affiliates of all drilling machinery and equipment (including, without
limitation, floor tools and blow-out preventers), engines, machinery, boats,
covers, anchors, chains, cables, tackle, rigging, apparel, furniture, fittings
and equipment, pumps and pumping equipment, spare components and parts, drill
pipe, drill collars, racking, supporting inventory and stores that are used or
held for use in connection with the operation or maintenance of the Rigs and
that are described on Schedule 1(b) hereto (collectively, "Inventory"), as such
Inventory may be reduced through consumption thereof, or increased through
replacement thereof or addition thereto, in the ordinary course of the
maintenance and operation of the Rigs through the Closing Date;
(c) the following tangible and intangible assets used or held for
use solely in connection with the operation or maintenance of the Rigs:
(i) all records to be delivered to Buyer pursuant to
Section 2.6; and
(ii) the certificates, licenses, permits, consents,
operating authorities, orders, exemptions, franchises,
approvals, registrations and other authorizations and
applications therefor specifically associated with the
ownership, maintenance and operation of a Rig and listed on
Schedule 1(c)(ii) hereto ("Permits"); and
(d) all rights and benefits under the drilling contracts
identified on Schedule 1(d) hereto that are in force and effect on the Closing
Date (the "Drilling Contracts").
"Assumed Liabilities" has the meaning specified in Section 2.3.
"Best Efforts" means a party's best efforts in accordance with
reasonable commercial practice and without the incurrence of unreasonable
expense.
"Business Day" means a day on which national banks are generally open
for the transaction of business in Houston, Texas.
"Buyer" has the meaning specified in the preamble.
"Buyer Basket" has the meaning specified in Section 12.2(a).
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<PAGE> 7
"Buyer's Designee" has the meaning specified in Section 14.5.
"Buyer's Inspection" has the meaning specified in Section 2.6(c).
"Cash Purchase Price" has the meaning specified in Section 3.1.
"Claims" has the meaning specified in Section 12.1.
"Closing" means the consummation of the transactions contemplated by
Article II of this Agreement in accordance with the terms and upon the
conditions set forth in Article II.
"Closing Date" has the meaning specified in Section 4.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Drilling Contracts" has the meaning specified in paragraph (d) of the
definition of Assets.
"Encumbrances" means liens, charges, pledges, options, mortgages,
security interests, claims, rights of third parties and other encumbrances of
every type and description, whether imposed by law, agreement, understanding or
otherwise.
"Equipment Credit" has the meaning specified in Section 3.1.
"Excluded Assets" has the meaning specified in Section 2.2.
"General Assignment" has the meaning specified in Section 4.2(a).
"Governmental Entity" means any court or tribunal in any jurisdiction
(domestic or foreign) or any public, governmental, or regulatory body, agency,
department, commission, board, bureau, or other authority or instrumentality
(domestic or foreign).
"Inventory" has the meaning specified in paragraph (b) of the
definition of Assets.
"Material Adverse Effect" means a single event, occurrence or fact
that, together with all other events, occurrences and facts that (i) would
have, or might reasonably be expected to have, (x) a material adverse effect on
the condition, business, prospects or operations of the Rigs or (y) a material
adverse effect on the ability of the Buyer to operate the Rigs after the date
of Closing, or (ii) may constitute a criminal violation of law involving a
felony.
"Permits" has the meaning specified in paragraph (c)(ii) of the
definition of Assets.
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"Permitted Encumbrances" means (i) Encumbrances for taxes, assessments
and governmental charges not yet due and payable or the validity of which are
being contested in good faith by appropriate proceedings; (ii) statutory and
maritime liens arising in the ordinary course of business relating to
obligations as to which there is no default on the part of Seller, excluding
any mortgage, and (iii) the Drilling Contracts; provided, however, that at the
Closing "Permitted Encumbrances" shall not include any Encumbrances for taxes,
assessments or governmental charges filed of record against the Assets, or
statutory or maritime liens filed of record against the Assets.
"Purchase Price" has the meaning specified in Section 3.1.
"Retained Liabilities" has the meaning specified in Section 2.4.
"Rigs" has the meaning specified in paragraph (a) of the definition of
Assets.
"Seller" has the meaning specified in the preamble.
"Seller Basket" has the meaning specified in Section 12.1(a).
"Seller Retained Transaction Taxes" has the meaning specified in
Section 2.4.
"Survival Period" has the meaning specified in Section 13.2.
"Taxes" means all federal, state, local, foreign and other taxes,
charges, fees, duties, levies, imposts, customs or other assessments,
including, without limitation, all net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, profit sharing, license,
lease, service, service use, value added, withholding, payroll, employment,
excise, estimated, severance, stamp, recording, occupation, premium, property,
windfall profits, or other taxes, fees, assessments, customs, duties, levies,
imposts, or charges of any kind whatsoever, together with any interest,
penalties, additions to tax, fines or other additional amounts imposed thereon
or related thereto, and the term "Tax" means any one of the foregoing Taxes.
"Termination Event" has the meaning specified in Section 9.7(a).
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Assets to be Purchased. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, Seller shall sell,
assign, transfer, deliver and convey to Buyer, and Buyer shall purchase,
acquire, accept and pay for, as hereinafter provided, the Assets, free and
clear of any Encumbrances other than Permitted Encumbrances.
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2.2 Excluded Assets. The Assets shall not include any claims and
rights, including any claims and rights under the Drilling Contracts, that
relate to the operation of the Rigs before the close of business on the Closing
Date, including, without limitation, claims for reimbursements, day rates, lost
equipment, indemnity or escalation of fees that relate to periods prior to the
Closing Date, whether or not billed on the Closing Date (collectively, the
"Excluded Assets"); notwithstanding the foregoing, any claims or rights of
Seller or any of its Affiliates under warranties relating to the Assets given
by third parties shall be considered an Asset, to the extent transferrable.
2.3 Assumed Liabilities. As of the Closing Date, subject to
Section 2.5, Mallard shall assume the obligations of Seller under the express
written terms of the Drilling Contracts to the extent and only to the extent
such obligations relate to the ownership, operation and maintenance of the Rigs
after the Closing, excluding any Retained Liabilities (collectively, the
"Assumed Liabilities").
2.4 Limitation of Liabilities. Buyer shall not assume or in any
way be liable or responsible for any liabilities or obligations of Seller
except as specifically provided herein, it being expressly acknowledged that it
is the intention of the parties hereto that all liabilities that Seller or its
Affiliates has or may have in the future, whether fixed or contingent, and
whether known or unknown, not expressly described in the definition of Assumed
Liabilities shall be "Retained Liabilities" and remain the liabilities of
Seller and its Affiliates. Without limiting the generality of the foregoing,
except to the extent specifically provided in Section 2.3, Buyer shall not
assume, or take title to the Assets subject to, (a) any obligation or
liability, including indemnification, relating to the ownership, operation or
maintenance of the Rigs or the performance of the Drilling Contracts prior to
the Closing, (b) Taxes relating to the ownership, operation or maintenance of
the Rigs for any period ending on or prior to the Closing, any income (or
similar) Taxes of Seller or its Affiliates on the sale of the Assets and any
Taxes or payments payable in connection with the export of the Rigs for sale to
Buyer as contemplated hereby ("Seller Retained Transaction Taxes"), (c) any
liability or obligation of Seller or any of its Affiliates under any note, bond
or other instrument secured by the Assets, (d) any liability or obligation of
Seller or any of its Affiliates in respect of any express or implied
representation, warranty, agreement or guaranty made (or claimed to have been
made) by Seller or any of its Affiliates or imposed or asserted to be imposed
by operation of law (except obligations or liabilities imposed on Buyer by
operation of law after the Closing), (e) any account payable to any Affiliate
of Seller, (f) any statutory or maritime liens accrued or existing at the time
of Closing on the Closing Date against the Assets or (g) any liability
resulting from or relating to the employment relationship between Seller or its
Affiliates and any of their present or former employees or the termination of
any such employment relationship with Seller or any of its Affiliates,
including, without limitation, accrued severance pay and other similar
benefits, if any, and any claim filed on or prior to the Closing Date or which
may thereafter be filed by or on behalf of any employee or former employee of
Seller or its Affiliates relating to the employment or termination of
employment of any such employee by Seller or its Affiliates, including, but not
limited to, any claim for
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wrongful discharge, breach of contract, unfair labor practice, employment
discrimination, unemployment compensation or workers' compensation.
2.5 Limitation on Assignments. Notwithstanding any other
provision hereof, this Agreement shall not constitute nor require an assignment
to Buyer of any Permit if assignment is not permitted or if an attempted
assignment of the same without the consent of any party would constitute a
breach thereof or a violation of any law or any judgment, decree, order, writ,
injunction, rule or regulation of any Governmental Entity unless and until such
consent shall have been obtained. In the case of any such Permit that cannot
be effectively transferred to Buyer without such consent, Seller agrees that
between the date hereof and the Closing Date it will use its Best Efforts to
obtain or cause to be obtained the necessary consents to the transfer of any
such Permit. In this connection, Buyer agrees to cooperate and to cause any
Buyer's Designee to cooperate with Seller in obtaining such consents and to
enter into such arrangement of assumption as may be reasonably requested by
Seller or the other party under such a Permit.
2.6 Delivery of Records.
(a) Buyer shall be entitled to all records physically located on
board the Rigs at the Closing Date; provided that Seller shall be entitled to
make copies thereof prior to the Closing Date and if any such records shall
become useful to Seller after the Closing Date, Buyer shall permit Seller to
inspect during normal business hours such records and shall provide or cause to
be provided to Seller at Seller's expense a copy of such records as Seller
shall reasonably request.
(b) At the Closing, Seller shall deliver or cause to be delivered
to Buyer at the offices where such records are located or such other location
as mutually agreed, a copy of the following records related to the Rigs,
Inventory and the Drilling Contracts that are not physically located on board
the Rigs:
(i) engineering drawings, designs, schematics,
blueprints, instruction manuals, flowsheets, models,
maintenance schedules and similar technical records in the
possession or control of Seller or its Affiliates related to
the Rigs;
(ii) all import and export certificates;
(iii) all documentation regarding the registration,
classification and flagging of the Rigs;
(iv) all regulatory certification and documentation, all
pertinent correspondence relating thereto, all technical
manuals relating to equipment on the Rigs and all equipment
history files and preventive maintenance data; and
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(v) all regulations and files provided by The Shell
Petroleum Development Company of Nigeria Ltd. ("Shell
Nigeria") with respect to each Rig and Drilling Contract.
(c) Delivery of Rigs. The Rigs shall be delivered on the Closing
Date at such locations as may be agreed upon by the parties in substantially
the same condition as when inspected by Buyer on May 23, 1996, to May 25, 1996,
with respect to the Chuck Syring and May 27, 1996, to May 28, 1996, with
respect to the Lewis Dugger (the "Buyer's Inspection"), fair wear and tear
excepted and subject to Section 9.7.
ARTICLE III
PURCHASE PRICE
3.1 Consideration for the Assets.
(a) The aggregate consideration for the Assets (subject to
adjustment as provided in Section 9.7) shall consist of (a) cash in the amount
of $24.5 million (the "Cash Purchase Price") and (b) a credit of $7.5 million
(the "Equipment Credit") to be applied against purchases of drill pipe and
other products purchased by Seller from Grant Prideco, Inc. under purchase
orders provided from time to time in accordance with the letter from Noble to
Grant Prideco, Inc. dated May 6, 1996 (the "Noble Letter"), a copy of which is
attached hereto. Additionally, Mallard will assume the Assumed Liabilities.
The Cash Purchase Price, Equipment Credit and Assumed Liabilities are referred
to collectively as the "Purchase Price".
(b) All purchases applied against the Equipment Credit shall be
made by Noble in accordance with the terms and procedures contemplated by the
Noble Letter. Pricing of products purchased pursuant to the Noble Letter shall
be at the prices described therein. The Equipment Credit may only be applied
against purchases contemplated to be made pursuant to the Noble Letter.
3.2 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Assets in the manner set forth on Schedule 3.2. After the
Closing, Seller and Buyer shall cooperate with each other in the preparation,
execution and filing of all filings required to be filed with respect to the
transactions contemplated by this Agreement with the United States Internal
Revenue Service and other appropriate taxing authorities.
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ARTICLE IV
THE CLOSING
4.1 Time and Place of Closing. The Closing shall take place at
the offices of Fulbright & Jaworski L.L.P., 1301 McKinney Street, Houston,
Texas 77002, at 9:00 a.m., local time, or at such other place or time as the
parties may agree in writing, on the third Business Day following the
satisfaction or waiver of each of the conditions to the obligations of the
parties set forth in Articles VII and VIII. The date on which the Closing is
required to take place is herein referred to as the "Closing Date."
4.2 Deliveries by Seller. At the Closing, Seller shall deliver the
following to Buyer:
(a) a duly executed General Conveyance, Assignment and Bill of
Sale and Transfer and Assumption of Liabilities (the "General Assignment") in
the form of Exhibit 4.2(a), together with such other bills of sale, assignments
and other instruments of transfer, assignment and conveyance as Buyer shall
reasonably request to vest in Buyer or Buyer's Designee good and marketable
title to the Assets;
(b) copies of any consents obtained as contemplated by Section
2.5; and
(c) the certificates contemplated by Section 8.3.
4.3 Deliveries by Buyer. At the Closing, Buyer shall deliver the
following to Seller:
(a) the Cash Purchase Price by the wire transfer of immediately
available funds to a bank account designated by Seller in any bank in the
continental United States;
(b) an acknowledgement by Grant Prideco, Inc. of the Equipment
Credit;
(c) a duly executed General Assignment and such other instruments
of transfer and assumption as Seller shall reasonably request in order to cause
an effective assignment to and assumption by Mallard of the Drilling Contracts;
and
(d) the certificates contemplated by Section 7.3.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Each Seller, jointly and severally, hereby represents and warrants to
Buyer as follows:
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5.1 Organization and Existence. Each Seller is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, with all necessary corporate power and authority to own and
lease the assets it currently owns and leases and to carry on its business as
such business is currently conducted.
5.2 Authority; Etc.
(a) Each Seller has all necessary corporate power and authority to
execute and deliver this Agreement and all agreements, instruments and
documents to be executed and delivered hereunder by such Seller, to consummate
the transactions contemplated hereby and to perform all terms and conditions
hereof to be performed by it. The execution and delivery of this Agreement by
each Seller and all agreements, instruments and documents to be executed and
delivered by such Seller hereunder, the performance by such Seller of all the
terms and conditions hereof to be performed by it and the consummation of the
transactions contemplated hereby have been duly authorized and approved by the
board of directors of such Seller and no other corporate proceedings of such
Seller are necessary with respect thereto.
(b) All persons who have executed and delivered this Agreement,
and all persons who will execute and deliver the other agreements, documents
and instruments to be executed and delivered by each Seller, have been duly
authorized to do so by all necessary actions on the part of such Seller.
(c) This Agreement constitutes, and each other agreement or
instrument to be executed by each Seller hereunder, when executed and delivered
by such Seller, will constitute, the legal, valid and binding obligation of
such Seller, enforceable against it in accordance with its terms, except to the
extent the enforceability hereof and thereof may be limited by bankruptcy,
insolvency, moratorium, reorganization or other laws relating to or affecting
creditors' rights generally or by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
5.3 No Violations. Except as set forth on Schedule 5.3, the
execution and delivery of this Agreement by each Seller, the fulfillment of and
compliance by it with the terms and conditions hereof and the consummation by
it of the transactions contemplated hereby will not:
(a) violate any of the terms of the certificate of incorporation
or bylaws of such Seller;
(b) (i) result in a breach of or constitute a default under
(whether with notice of the lapse of time or both) any note, bond, mortgage,
loan agreement, indenture or other instrument evidencing borrowed money to
which such Seller is a party or by which such Seller is bound or to which any
of the Assets is subject, which breach or default would reasonably be expected
to have a Material Adverse Effect, or (ii) result
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in the creation of any Encumbrance on any of the Assets, or otherwise give any
person the right to terminate any Drilling Contract or Permit assumed by Buyer;
or
(c) to Seller's knowledge, violate any law, statute, rule or
administrative regulation in the United States, Nigeria or in any other country
or in any state, province or governmental authority therein or any judgment,
order, injunction or decree of any Governmental Entity applicable to or binding
upon either Seller or its Affiliates, or its assets, including the Assets,
which violation could reasonably be expected to have a Material Adverse Effect.
5.4 Ownership of Assets. Noble Nigeria owns good and marketable
title to the Assets, free and clear of all Encumbrances except for Permitted
Encumbrances. Upon Noble Nigeria's execution and delivery of the General
Assignment and appropriate bills of sale with respect to the Rigs, Buyer will
own good and marketable title to the Assets, free and clear of all Encumbrances
except for Permitted Encumbrances.
5.5 Rig Classifications and Certifications.
(a) The classification of each Rig and the flag, if any, under
which it is documented is set forth on Schedule 5.5(b).
(b) Set forth on Schedule 5.5(b) or Schedule 1(a) is a summary of
the recommendations to class for each of the Rigs based on the most recent
survey received by Seller for such Rig as of the date of this Agreement, as
well as a listing of required certifications (including American Bureau of
Shipping) and the expiration date of each such certification. Each of the Rigs
has in full force and effect all required certifications necessary for its
present operations. Except as disclosed by Seller to Buyer in writing, neither
of the Rigs has suffered any damage to its condition (excepting normal wear and
tear) since the date of Buyer's Inspection.
5.6 Inventory. Since the date of Buyer's Inspection, none of the
Inventory or the equipment on the Rigs has been removed, except for the
consumption of Inventory in the ordinary course of business of the operation of
the Rigs.
5.7 Contracts.
(a) Seller or an Affiliate of Seller has made available to Buyer
for review complete and correct copies of the Drilling Contracts. Except as
set forth on Schedule 1(d) hereto, each of the Drilling Contracts may be
transferred to Buyer without the consent of any person. Each of the Drilling
Contracts is valid, binding and in full force and effect against Seller or its
Affiliates, as the case may be, and, to Seller's knowledge, is valid, binding
and in full force and effect against the other party or parties thereto. As of
the Closing, neither Rig will be subject to any material agreement, contract or
commitment of Seller or any of its Affiliates other than the Drilling
Contracts.
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(b) Except as set forth on Schedule 5.7(b) hereto, neither Seller
nor any of its Affiliates is in default in any material respect, and no notice
of alleged default has been received by Seller or any of its Affiliates, under
any of the Drilling Contracts, no other party thereto is, to the knowledge of
Seller or its Affiliates, in default thereunder in any material respect, and,
to the knowledge of Seller or its Affiliates, there exists no condition or
event which, with or without notice or lapse of time or both, would constitute
a material default under any of the Drilling Contracts by Seller, any of its
Affiliates or any other party thereto.
5.8 Litigation. Except as set forth in Schedule 5.8 hereto, there
is no litigation and there are no arbitration proceedings or governmental
proceedings, suits or investigations pending, instituted or, to the knowledge
of Seller, overtly threatened against any of the Assets or against either
Seller or any of its Affiliates and relating to the ownership or operation of
the Assets that could reasonably be expected to have a Material Adverse Effect
or, if adversely determined, would delay or prevent the consummation of the
transactions contemplated by this Agreement.
5.9 Governmental Approval. Except for action, if any, required to
be taken with respect to the United States Department of Transportation,
Maritime Administration or as set forth on Schedule 5.9, no consent, approval,
waiver, order or authorization of, or registration, declaration or filing with,
any Governmental Entity is required to be obtained or made in connection with
the execution and delivery of this Agreement by Seller or the consummation by
Seller of the transactions contemplated hereby.
5.10 Compliance With Laws. Except as set forth on Schedule 5.10
hereto, to Seller's knowledge, neither Noble Nigeria nor any of its Affiliates
is in violation of or in default under any applicable law, rule, regulation,
code, governmental determination, order, governmental certification requirement
or other public limitation (collectively, "Applicable Laws") relating to the
ownership or operation of the Assets, including, without limitation, any
applicable maritime law relating to the Rigs, which violation or default
materially and adversely affects Seller's ownership or operation (as presently
conducted) of the Assets, and no claim is pending or, to Noble Nigeria's
knowledge, overtly threatened with respect to any such matters which if
determined adversely to such person would have such effect.
5.11 No Brokers. Except for Simmons & Company International, whose
fee in respect of the transactions contemplated hereby shall be paid solely by
Seller, Seller has not employed or authorized anyone to represent it as a
broker or finder in connection with the transactions contemplated by this
Agreement, and no broker or other person is entitled to any commission or
finder's fee from Seller in connection with such transactions. Seller agrees
to indemnify and hold harmless Buyer from and against any and all losses,
claims, demands, damages, costs and expenses, including, without limitation,
reasonable attorneys' fees and expenses, Buyer may sustain or incur as a result
of any claim for a commission or fee by a broker or finder acting on behalf of
Seller.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Each Buyer, jointly and severally, hereby represents and warrants to
Seller as follows:
6.1 Organization and Existence. Each Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, with all necessary corporate power and authority to own and
lease the assets it currently owns and leases and to carry on its business as
such business is currently conducted.
6.2 Authority; Etc. Each Buyer has all necessary corporate power
and authority to execute and deliver this Agreement and all agreements,
instruments and documents to be executed and delivered hereunder by such Buyer,
to consummate the transactions contemplated hereby and to perform all terms and
conditions hereof to be performed by it. The execution and delivery of this
Agreement by each Buyer and all agreements, instruments and documents to be
executed and delivered by such Buyer hereunder, the performance by such Buyer
of all the terms and conditions hereof to be performed by it and the
consummation of the transactions contemplated hereby have been duly authorized
and approved by the board of directors of such Buyer, and no other corporate
proceedings of such Buyer are necessary with respect thereto. All persons who
have executed and delivered this Agreement, and all persons who will execute
and deliver the other agreements, documents and instruments to be executed and
delivered by each Buyer hereunder have been duly authorized to do so by all
necessary actions on the part of such Buyer. This Agreement constitutes, and
each other agreement or instrument to be executed by each Buyer hereunder, when
executed and delivered by such Buyer, will constitute, the legal, valid and
binding obligation of such Buyer, enforceable against it in accordance with its
terms, except to the extent the enforceability hereof and thereof may be
limited by bankruptcy, insolvency, moratorium, reorganization or other laws
relating to or affecting creditors' rights generally or by general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
6.3 No Violations. The execution and delivery of this Agreement
by each Buyer, the fulfillment of and compliance by it with the terms and
conditions hereof and the consummation by it of the transactions contemplated
hereby will not:
(a) violate any of the terms of the certificate of incorporation
or bylaws of Buyer;
(b) result in a breach of or constitute a default under (whether
with notice or the lapse of time or both) any note, bond, mortgage, loan
agreement, indenture or other instrument evidencing borrowed money to which
such Buyer is a party or by which
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<PAGE> 17
such Buyer is bound or to which any of its assets is subject or result in the
creation of any Encumbrance on any of its assets, which breach or default would
reasonably be expected to have a material adverse effect on such Buyer's
business, financial condition, prospects or the results of its operations or on
its ability to perform its obligations hereunder; or
(c) to Buyer's knowledge, violate any federal or state law,
statute, rule or administrative regulation or any judgment, order, injunction
or decree of any Governmental Entity applicable to or binding upon Buyer or any
of its Affiliates, except that no representation is made as to the application
of any United States antitrust law or regulation to the transactions
contemplated by this Agreement, which violation would reasonably be expected to
have a material adverse effect on Buyer's business, financial condition,
prospects or the results of its operations or on its ability to perform its
obligations hereunder.
6.4 Governmental Approval. Except for action, if any, required to
be taken with respect to the United States Department of Transportation,
Maritime Administration or as set forth on Schedule 6.4, no consent, approval,
waiver, order or authorization of, or registration, declaration or filing with,
any Governmental Entity is required to be obtained or made in connection with
the execution and delivery of this Agreement by Buyer or the consummation by
Buyer of the transactions contemplated hereby.
6.5 Litigation. There is no litigation and there are no
arbitration proceedings or governmental proceedings, suits or investigations
pending, instituted or, to the knowledge of Buyer, overtly threatened against
Buyer or its Affiliates that could reasonably be expected to have a material
adverse effect on the business or financial condition of Buyer and its
Affiliates taken as a whole or that, if adversely determined, would delay or
prevent the consummation of the transactions contemplated by this Agreement.
6.6 No Brokers. Buyer has not employed or authorized anyone to
represent it as a broker or finder in connection with the transactions
contemplated by this Agreement, and no broker or other person is entitled to
any commission or finder's fee from Buyer in connection with such transactions.
Buyer will indemnify and hold harmless Seller from and against any and all
losses, claims, demands, damages, costs and expenses, including, without
limitation, reasonable attorneys' fees and expenses, Seller may sustain or
incur as a result of any claim for a commission or fee by a broker or finder
acting on behalf of Buyer.
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ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF SELLER
The obligations of Seller to proceed with the Closing contemplated by
this Agreement are subject to the satisfaction, on or before the Closing Date,
of all the following conditions, any one or more of which may be waived, in
whole or in part, by Seller:
7.1 Accuracy of Representations and Warranties. Each
representation and warranty of Buyer contained in this Agreement shall be true
and correct as of the Closing Date with the same effect as though made on the
Closing Date, except as otherwise specifically contemplated by this Agreement.
7.2 Covenants and Agreements Performed. Buyer shall have complied
on or before the Closing Date in all material respects with each of its
covenants or agreements contained in this Agreement to be performed on or
before the Closing Date.
7.3 Officer's Certificate. Seller shall have received
certificates in the form of Exhibit 7.3 hereto, dated as of the Closing Date,
of the President or Vice President of each Buyer certifying as to the matters
specified in Sections 7.1 and 7.2.
7.4 Shell Nigeria. Shell Nigeria shall have (i) consented to the
assignment to and assumption by Mallard of the Drilling Contracts, such consent
to be on terms reasonably acceptable to Seller, or (ii) released Seller from
any obligation to perform under any drilling contract that contemplates the
utilization of either Rig.
7.5 MARAD Approval. Seller shall have received the written
approval of the United States Department of Transportation, Maritime
Administration, to the sale by Seller of the Rigs to Buyer on terms and
conditions reasonably acceptable to Seller.
ARTICLE VIII
CONDITIONS TO THE OBLIGATION OF BUYER
The obligations of Buyer to proceed with the Closing contemplated by
this Agreement are subject to the satisfaction, on or before the Closing Date,
of all the following conditions, any one or more of which may be waived, in
whole or in part, by Buyer:
8.1 Accuracy of Representations and Warranties. Each
representation and warranty of Seller contained in this Agreement shall be true
and correct as of the Closing Date with the same effect as though made on the
Closing Date, except as otherwise specifically contemplated by this Agreement.
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8.2 Covenants and Agreements Performed. Seller shall have
complied on or before the Closing Date in all material respects with each of
its covenants or agreements contained in this Agreement to be performed on or
before the Closing Date.
8.3 Officer's Certificate. Buyer shall have received certificates
in the form of Exhibit 8.3 hereto, dated as of the Closing Date, of the
President or a Vice President of each Seller certifying as to the matters
specified in Sections 8.1 and 8.2.
8.4 Shell Nigeria.
(a) Drilling Contracts. Shell Nigeria shall have consented to the
assignment to and assumption by Mallard of the Drilling Contracts or entered
into new drilling contracts with Mallard, in each case, on terms acceptable to
Mallard.
(b) The letter of intent between Shell Nigeria and Noble Nigeria
dated December 27, 1995, shall have been terminated, unless a Drilling Contract
has been entered into with the consent of the Buyer, and having terms
acceptable to Buyer, pursuant to such letter of intent.
8.5 Classification.
(a) The Rigs shall be "in Class Maltese A1" according to the
American Bureau of Shipping at Closing and shall have a minimum of six months
validity remaining on all regulatory certification as of Closing.
(b) Seller shall have delivered to Buyer approximately $15,000
worth of steel plate to be utilized by Buyer to conduct repairs to the CHUCK
SYRING required in order to remove an outstanding recommendation to class
regarding such Rig.
8.6 MARAD Approval. Buyer shall have received the written
approval of the United States Department of Transportation, Maritime
Administration, to the sale by Seller of the Rigs to Buyer on terms and
conditions reasonably acceptable to Buyer.
8.7 No Adverse Change. There shall not have occurred any Material
Adverse Event.
8.8 Taxes. Buyer shall have determined to its satisfaction that
no transfer or similar Taxes in excess of $10,000 shall be required to be paid
as a result of the transactions contemplated hereby.
8.9 Export Documentation. Seller shall have delivered to Buyer
documentation of the Nigeria Customs Service reflecting that each of the Rigs
has been exported from Nigeria.
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8.10 Import Documentation. Buyer shall have obtained all such
documentation and approvals as it deems necessary and appropriate for the
importation of the Rigs to Nigeria at a cost to the Buyer not in excess of
$150,000.
ARTICLE IX
COVENANTS AND AGREEMENTS OF THE PARTIES BEFORE,
RELATING TO AND SUBSEQUENT TO THE CLOSING
Seller and Buyer hereby covenant and agree as follows:
9.1 Access to Information; Confidentiality; Financial Information.
(a) Between the date hereof and the Closing, Seller shall give
Buyer and its authorized representatives reasonable access, during regular
business hours and upon reasonable advance notice, to the representatives and
personnel of Seller and to all Assets, including those books and records to be
delivered at Closing to Buyer pursuant to Section 2.6; provided that Seller
shall have the right to have a representative present at all times during any
inspections, interviews and examinations conducted at or on the offices,
facilities or properties of Seller or its Affiliates or representatives.
(b) Buyer agrees that all Confidential Information (as defined
below) shall be kept confidential by Buyer and shall not be disclosed by Buyer
in any manner whatsoever; provided, however, that (i) any of such Confidential
Information may be disclosed to such directors, officers, employees and
authorized representatives (including, without limitation, attorneys,
accountants, consultants, bankers and financial advisors) of Buyer
(collectively, for purposes of this Section, "Buyer Representatives") as need
to know such information for the purpose of evaluating the transactions
contemplated hereby (it being understood that such Buyer Representatives shall
be informed by Buyer of the confidential nature of such information and shall
be required to treat such information confidentially), (ii) any disclosure of
Confidential Information may be made to the extent to which Seller consents in
writing and (iii) Confidential Information may be disclosed by Buyer or any
Buyer Representative to the extent that Buyer or such Buyer Representative is
legally compelled to do so, provided that, prior to making such disclosure,
Buyer or such Buyer Representative, as the case may be, advises and consults
with Seller regarding such disclosure and provided further that Buyer or such
Buyer Representative, as the case may be, discloses only that portion of the
Confidential Information as is legally required. Buyer agrees that none of the
Confidential Information will be used for any purpose other than in connection
with the transactions contemplated hereby. The term "Confidential
Information", as used herein, means all information (irrespective of the form
of communication) obtained by or on behalf of Buyer from Seller or its
representatives pursuant to this Section and all similar information obtained
from Seller or its representatives by or on behalf of Buyer prior to the date
of this Agreement, other than information which (i) was or becomes generally
available to the public other than as a
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result of disclosure by Buyer or any Buyer Representative, (ii) was or becomes
available to Buyer on a nonconfidential basis prior to disclosure to Buyer by
Seller or its representatives, or (iii) was or becomes available to Buyer from
a source other than Seller and its representatives, provided that such source
is not known by Buyer to be bound by a confidentiality agreement with Seller.
(c) If this Agreement is terminated, Buyer shall promptly return,
and shall use its Best Efforts to cause all Buyer Representatives to promptly
return, all Confidential Information to Seller without retaining any copies
thereof, provided that such portion of the Confidential Information as consists
of notes, compilations, analyses, reports, studies or other documents prepared
by Buyer or Buyer Representatives shall be destroyed.
(d) If Buyer is required under applicable United States federal
securities laws to include historical accounting information for periods prior
to Closing relating to the Assets and the operations of the Rigs in any of
Buyer's filings with the Securities and Exchange Commission, then Seller shall
cooperate with and provide Buyer reasonable access, during regular business
hours and upon reasonable advance notice, to Seller's accounting records
relating to the historical operations of the Rigs and shall cause its outside
auditors to cooperate, at Buyer's expense, with Buyer in the preparation of
such historical financial statements relating to the operation of the Rigs
prior to Closing as may be required under such securities laws to be included
in such filings.
9.2 Preservation of Assets. Until the Closing, Buyer and Seller
agree to cooperate with each other to effect an orderly transition of the
ongoing operation of the Assets and Seller shall use its Best Efforts to
preserve, maintain and protect the Assets. From and after the date of this
Agreement and until the Closing Date, without the prior express written consent
of Buyer, Seller will not, and Seller will not permit any of its Affiliates to,
(i) make any material change in the conduct of the ongoing operation of the
Rigs, (ii) enter into any new drilling contracts with respect to the Rigs,
other than as contemplated on Schedule 1(d) hereto, enter into any other
contracts or agreements with respect to the Rigs other than in the ordinary
course of business, or amend, in any respect adverse to Seller or Buyer, any
Drilling Contract, (iii) move any Rig to a different geographic region, or (iv)
commit itself to do any of the foregoing.
9.3 Litigation. Until the Closing, Seller will promptly notify
Buyer of any action, suit, proceeding, claim or investigation which is overtly
threatened or commenced against Seller which relates to or affects the Assets
or this Agreement or the transactions contemplated hereby, and Buyer will
promptly notify Seller of any action, suit, proceeding, claim or investigation
which is overtly threatened or commenced against Buyer which relates to and
materially and adversely affects Buyer or the Rigs or affects this Agreement or
the transactions contemplated hereby.
9.4 Certain Taxes. Seller shall be liable for and shall pay all
Seller Retained Transaction Taxes. Buyer shall be liable for and shall pay all
applicable Taxes resulting from the consummation of the transactions
contemplated hereby, except any Seller
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Retained Transaction Taxes, and Seller, at Buyer's expense, agrees to cooperate
with Buyer to obtain all available exemptions from such Taxes. All Taxes
(other than those incurred as a result of the consummation of the transactions
contemplated hereby, which shall be allocated between Buyer and Seller as
provided above) relating to the Assets for all periods prior to the Closing
shall be the obligation of Seller and for all periods following the Closing
shall be the obligation of Buyer. All such Taxes relating to periods prior to
the Closing that have been assessed prior to Closing and that are not then
being diligently contested in good faith by appropriate proceedings shall be
paid by Seller prior to the Closing. Seller shall promptly pay from time to
time Seller's prorated share of all Taxes to Buyer upon Buyer's request
accompanied by appropriate documentation that such Taxes are due and payable.
Buyer agrees to pay such amounts on behalf of Seller and to indemnify Seller
with respect to any Claims (as defined in Section 12.1) for such Taxes to the
extent that Seller shall have paid to Buyer Seller's pro rata share thereof, if
any.
9.5 Actions with Respect to Closing. Seller will use its Best
Efforts to obtain the satisfaction of the conditions to Closing applicable to
Seller set forth in Article VIII as soon as practicable. Buyer will use its
Best Efforts to obtain and to cause Buyer's Designee to obtain the satisfaction
of the conditions to Closing applicable to Buyer set forth in Article VII as
soon as practicable.
9.6 Public Statements. Prior to making any news release or other
announcement concerning the transactions contemplated hereby, Buyer and Seller
shall consult with each other regarding the proposed contents thereof (but no
approval thereof shall be required).
9.7 Rig Loss or Damage. Notwithstanding any other provision of
this Agreement, but subject to the last sentence of subsection (a) of this
Section 9.7 and to Section 11.1:
(a) If either Rig shall become an actual, constructive, arranged
or compromised total loss (as determined by Seller's insurance underwriters'
marine surveyor) prior to the Closing: (i) Buyer shall not be required to
purchase such Rig, (ii) the Purchase Price shall be reduced (pro rata among the
two types of consideration, other than Buyer's assumption of the Assumed
Liabilities, which shall exclude any liabilities associated with that Rig and
the Drilling Contract relating thereto, constituting the Purchase Price) by the
amount allocated to such Rig pursuant to Schedule 3.2, (iii) the term "Assets"
shall be deemed not to include such Rig or the Drilling Contract relating to
that Rig and (iv) the other provisions of this Agreement shall continue to be
in effect and the Closing shall take place in the manner contemplated herein.
The actual, constructive, arranged or compromised total loss (as determined by
Seller's insurance underwriters' marine surveyor) of both Rigs shall, however,
constitute a "Termination Event."
(b) If a Rig sustains damage in an amount not exceeding $150,000
subsequent to the date of Buyer's Inspection but prior to the Closing Date,
either (i) at Buyer's
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option, Seller shall repair or cause to be repaired the damage to the Rig at
Seller's own expense or the Purchase Price shall be reduced (pro rata among the
two types of consideration, other than Buyer's assumption of the Assumed
Liabilities, which shall exclude any liabilities associated with that Rig and
the Drilling Contract relating thereto, constituting the Purchase Price) by the
amount necessary to allow Buyer to restore the Rig to its prior condition or
(ii) in the case of damage to a Rig in respect of which insurance proceeds are
available, Buyer, at its option, may require Seller to assign to Buyer at the
Closing the rights of Seller to receive insurance proceeds in respect of such
loss or damage and pay to Buyer the amount by which any such insurance proceeds
otherwise payable to Buyer are reduced by any deductible or deductibles under
the terms of the relevant policy or policies (offset by any amounts paid
through the Closing Date by Seller for such repair), and, in the case of either
(i) or (ii) above, Buyer shall remain obligated to purchase the Assets on the
Closing Date and, except as otherwise provided in (i) above, the Purchase Price
shall not be reduced; provided, however, that if Buyer does not receive
sufficient insurance proceeds as may be reasonably necessary to restore the Rig
to its prior condition, Seller shall restore the Rig to its prior condition or
pay to Buyer an amount necessary to allow Buyer to restore the Rig to its prior
condition. If, pursuant to this subsection (b), Buyer is to conduct or cause
to be conducted repairs to a damaged Rig subsequent to Closing, then Seller and
Buyer shall agree on a plan for the manner of conduct and the scope of such
repairs and to the extent that the repairs deviate from such plan in a material
respect without the consent of Seller, Seller shall not be obligated to pay the
additional costs resulting solely from such deviation.
(c) If a Rig suffers damage exceeding $150,000, but not
constituting an actual, constructive, arranged or compromised total loss, then,
notwithstanding Section 2.6(c), Seller shall not be required to repair such
damage, in which event Buyer may elect not to purchase such Rig and (i) the
Purchase Price shall be reduced (pro rata among the two types of consideration,
other than Buyer's assumption of the Assumed Liabilities, which shall exclude
any liabilities associated with that Rig and the Drilling Contract relating
thereto, constituting the Purchase Price) by the amount allocated to such Rig
pursuant to Schedule 3.2, (ii) the term "Assets" shall be deemed not to include
such Rig or the Drilling Contract relating to that Rig and (iii) the other
provisions of this Agreement shall continue to be in effect and the Closing
shall take place in the manner contemplated herein.
9.8 Use of Name. Seller will not convey to Buyer any right, title
or interest to the names "CHUCK SYRING" or "LEWIS DUGGER". Buyer agrees that
it will not use the names "CHUCK SYRING" or "LEWIS DUGGER" for the Rigs, and as
promptly as practical following delivery of the Rigs, it will register the Rigs
under different names. As promptly as practical following the delivery of the
Rigs to Buyer, Buyer will remove all insignia and marks relating to Seller.
9.9 Continued Effectiveness of Representations and Warranties.
Each of Seller and Buyer shall use its Best Efforts to cause the
representations and warranties made by it herein to continue to be true and
correct on and as of the Closing Date as
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if made on and as of the Closing Date. Seller and Buyer shall each advise the
other promptly in writing of any condition or circumstance occurring from the
date hereof up to and including the Closing Date that would cause the
representations and warranties made by it herein to become untrue in any
material respect. Nothing contained in this Section 9.9 shall be construed as
being inconsistent with or in derogation of Section 13.1.
9.10 Further Assurances. At and after the Closing Date, and
without further consideration, at Buyer's expense Seller shall execute and
deliver any bills of sale, assignments or assurances, and shall take and do any
other actions and things, to vest, perfect or confirm of record or otherwise in
Buyer any and all right, title and interest in, to and under any of the Assets
as Buyer may reasonably request.
ARTICLE X
EXPENSES
Except as otherwise expressly provided in this Agreement, each of the
parties hereto shall assume and bear all expenses, costs and fees incurred or
assumed by such party in the preparation and execution of this Agreement and in
compliance with and performance of the agreements and covenants contained in
this Agreement, regardless of whether the transactions contemplated hereby are
consummated.
ARTICLE XI
TERMINATION
11.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by mutual written consent of Buyer and Seller;
(b) by either Buyer or Seller, if there shall be any statute, rule
or regulation that makes consummation of the transactions contemplated hereby
illegal or otherwise prohibited or a Governmental Entity shall have issued an
order, decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated hereby, and such order, decree, ruling or other action shall have
become final and nonappealable;
(c) by Buyer, if
(i) the Closing shall not have occurred by September 30,
1996 (provided that the right to terminate this Agreement
under this clause (i) shall not be available to Buyer if
Buyer's failure to fulfill any of its
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obligations under this Agreement or its misrepresentation or
breach of warranty hereunder has been the sole cause thereof);
(ii) a Termination Event shall have occurred;
(iii) there has been a material breach by Seller of any
covenant or agreement, or a material inaccuracy of any
representation or warranty of Seller, contained in this
Agreement which has rendered the satisfaction of any condition
to the obligations of Buyer impossible and such breach or
inaccuracy has not been cured by Seller within five Business
Days after Seller's receipt of notice thereof from Buyer, or
waived by Buyer; or
(iv) there shall occur an event which results in or would
reasonably be expected to result in a Material Adverse Effect.
(d) by Seller, if
(i) the Closing shall not have occurred by September 30,
1996 (provided that the right to terminate this Agreement
under this clause (i) shall not be available to Seller if
Seller's failure to fulfill any of its obligations under this
Agreement or its misrepresentation or breach of warranty
hereunder has been the sole cause thereof);
(ii) there has been a material breach by Buyer of any
covenant or agreement, or a material inaccuracy of any
representation or warranty of Buyer, contained in this
Agreement which has rendered the satisfaction of any condition
to the obligations of Seller impossible and such breach or
inaccuracy has not been cured by Buyer within five Business
Days after Buyer's receipt of notice thereof from Seller, or
waived by Seller; or
(iii) a Termination Event shall have occurred.
11.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 11.1 by Buyer or Seller, written notice
thereof shall forthwith be given to the other party specifying the provision
hereof pursuant to which such termination is made, and this Agreement shall
become void and have no effect, and there shall be no liability hereunder on
the part of Buyer or Seller or any of their respective directors, officers,
employees, stockholders or representatives, except that the agreements
contained in this Section 11.2 and in Articles X and XII and Sections 5.11,
6.6, 9.1 and 9.6 shall survive the termination hereof. Nothing contained in
this Section 11.2 shall relieve any party from liability for damages actually
incurred (excluding consequential damages) for breach of any covenant or
agreement, or for the inaccuracy of any representation or warranty, contained
herein.
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ARTICLE XII
INDEMNIFICATION
12.1 Indemnification by Buyer.
(a) Each Buyer, jointly and severally, agrees to indemnify, defend
and hold Seller and its Affiliates harmless from and against any and all
losses, liabilities, claims, demands, damages, costs and expenses (including
reasonable attorneys' fees and disbursements) of every kind, nature and
description (collectively, "Claims") sustained by Seller or any of its
Affiliates based upon, arising out of or otherwise in respect of (i) the
inaccuracy of any representation or warranty, or the breach of any covenant or
agreement, of Buyer contained in this Agreement or in any certificate,
agreement, document or instrument delivered pursuant to this Agreement, or (ii)
the ownership, management or use of the Assets after the Closing, unless and to
the extent that such Claim arises solely from any action of Seller or any of
its Affiliates after the Closing; provided, however, that Buyer shall have no
liability pursuant to this Section 12.1(a) for the first $60,000 of aggregate
Claims in respect of the matters described in clause (i) above incurred by
Seller or its Affiliates (the "Seller Basket") and Buyer shall be responsible
only for such amounts of such Claims as exceed the Seller Basket. For purposes
of the above indemnity, any representation or warranty given subject to a
materiality qualifier, including an exception for those matters that would not
have a Material Adverse Effect, shall be deemed to have been given without such
qualifier.
(b) Seller shall notify Buyer within 45 Business Days of the
assertion of any Claim or the discovery of any fact (which fact has been
brought to the attention of a responsible executive officer of Seller) upon
which Seller intends to base a claim for indemnification hereunder; provided,
however, that the failure of Seller so to notify Buyer shall not relieve Buyer
from any liability under this Agreement to Seller with respect to such Claim
unless Buyer is prejudiced or damaged by the failure to receive timely notice.
In the event of any Claims, Buyer, at its option, may assume (with legal
counsel reasonably acceptable to Seller) the defense of any claim, demand,
lawsuit or other proceeding brought against Seller, which claim, demand,
lawsuit or other proceeding may give rise to the indemnity obligation of Buyer
under this Section 12.1, and may assert any defense of Buyer or Seller;
provided, however, that Seller shall have the right at its own expense to
participate jointly with Buyer in the defense of any claim, demand, lawsuit or
other proceeding in connection with which Seller claims indemnification
hereunder. Notwithstanding the right of Seller so to participate, Buyer shall
have the sole right to settle or otherwise dispose of such claim, demand,
lawsuit or other proceeding on such terms as Buyer, in its sole discretion,
shall deem appropriate with respect to any issue involved in such claim,
demand, lawsuit or other proceeding as to which (i) Buyer shall have
acknowledged the obligation to indemnify Seller hereunder or (ii) Seller shall
have declined so to participate.
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12.2 Indemnification by Seller.
(a) Each Seller, jointly and severally, agrees to indemnify,
defend and hold Buyer and its Affiliates harmless from and against any and all
Claims sustained by Buyer or any of its Affiliates based upon, arising out of
or otherwise in respect of (i) the inaccuracy of any representation or
warranty, or the breach of any covenant or agreement, of Seller contained in
this Agreement or in any certificate, agreement, document or instrument
delivered pursuant to this Agreement, (ii) the ownership, management or use of
the Assets prior to the Closing unless and to the extent that such Claim shall
have arisen solely from any action of Buyer or any of its Affiliates prior to
the Closing or (iii) any Retained Liabilities; provided, however, that Seller
shall have no liability pursuant to this Section 12.2(a) for the first $60,000
of aggregate Claims in respect of the matters described in clause (i) above
incurred by Buyer or its Affiliates (the "Buyer Basket") and Seller shall be
responsible only for such amounts of such Claims as exceed the Buyer Basket.
For purposes of the above indemnity, any representation or warranty given
subject to a materiality qualifier shall be deemed to have been given without
such qualifier.
(b) Buyer shall notify Seller within 45 Business Days of the
assertion of any Claim or discovery of any fact (which fact has been brought to
the attention of a responsible executive officer of Buyer) upon which Buyer
intends to base a claim for indemnification hereunder; provided, however, that
the failure of Buyer so to notify Seller shall not relieve Seller from any
liability under this Agreement to Buyer with respect to such Claim unless
Seller is prejudiced or damaged by the failure to receive timely notice. In
the event of any Claims, Seller, at its option, may assume (with legal counsel
reasonably acceptable to Buyer) the defense of any claim, demand, lawsuit or
other proceeding brought against Buyer, which claim, demand, lawsuit or other
proceeding may give rise to the indemnity obligation of Seller under this
Section 12.2, and may assert any defense of Seller or Buyer; provided, however,
that Buyer shall have the right at its own expense to participate jointly with
Seller in the defense of any claim, demand, lawsuit or other proceeding in
connection with which Buyer claims indemnification hereunder. Notwithstanding
the right of Buyer so to participate, Seller shall have the sole right to
settle or otherwise dispose of such claim, demand, lawsuit or other proceeding
on such terms as Seller, in its sole discretion, shall deem appropriate with
respect to any issue involved in such claim, demand, lawsuit or other
proceeding as to which (i) Seller shall have acknowledged the obligation to
indemnify Buyer hereunder or (ii) Buyer shall have declined so to participate.
12.3 LIMITATION OF REMEDIES. THE INDEMNIFICATION OBLIGATIONS OF
BUYER AND SELLER SET FORTH IN THIS AGREEMENT, INCLUDING IN THIS ARTICLE XII,
SHALL BE LIMITED TO INDEMNIFICATION FOR ACTUAL DAMAGES SUFFERED AND SHALL NOT
INCLUDE INCIDENTAL, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES; PROVIDED,
HOWEVER, THAT ANY SUCH INCIDENTAL, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES
RECOVERED BY A THIRD PARTY AGAINST A PARTY ENTITLED TO INDEMNITY UNDER THIS
AGREEMENT SHALL BE INCLUDED IN THE DAMAGES RECOVERABLE PURSUANT TO THE
INDEMNITIES HEREIN.
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12.4 APPLICABILITY OF INDEMNIFICATION OBLIGATION. EACH OF THE
AGREEMENTS TO INDEMNIFY, DEFEND OR HOLD HARMLESS CONTAINED IN SECTION 12.1 OR
12.2 SHALL APPLY IRRESPECTIVE OF WHETHER THE SUBJECT CLAIM IS BASED IN WHOLE OR
IN PART UPON THE SOLE OR CONTRIBUTORY NEGLIGENCE (WHETHER ACTIVE, PASSIVE OR
GROSS), BREACH OF WARRANTY, STRICT LIABILITY, OR BREACH OR VIOLATION OF ANY
DUTY IMPOSED BY ANY LAW OR REGULATION, ON THE PART OF THE BENEFICIARY OF THE
AGREEMENT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT.
ARTICLE XIII
EXTENT AND SURVIVAL OF REPRESENTATIONS,
WARRANTIES, COVENANTS AND AGREEMENTS
13.1 Scope of Representations of Seller. BUYER ACKNOWLEDGES THAT
IT HAS MADE ITS OWN INDEPENDENT INSPECTION OF THE RIGS AND THE OTHER ASSETS.
BUYER UNDERSTANDS AND AGREES THAT, OTHER THAN REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS SET FORTH HEREIN AND THE OTHER AGREEMENTS AND
INSTRUMENTS PROVIDING FOR THE TRANSFER OF THE ASSETS AND ANY WARRANTIES OF OR
CONCERNING TITLE SET FORTH HEREIN OR THEREIN, NEITHER SELLER NOR ANYONE ACTING
ON ITS BEHALF, MAKES ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WITH
RESPECT TO THE RIGS, THE DRILLING CONTRACTS OR THE ASSETS (CURRENT, FIXED,
PERSONAL, REAL, TANGIBLE OR INTANGIBLE) REFERRED TO HEREIN, INCLUDING BUT NOT
LIMITED TO SEAWORTHINESS, CONDITION OR WORKMANSHIP THEREOF, OR THE ABSENCE OF
ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, CAPACITY, SUITABILITY, UTILITY,
SALABILITY, AVAILABILITY, COLLECTIBILITY, OPERATIONS, CONDITION,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND BUYER ACCEPTS SAID
RIGS AND ASSETS ON AN "AS IS, WHERE IS, WITH ALL FAULTS" BASIS.
13.2 Survival. All representations and warranties of the parties
to this Agreement shall survive the Closing Date and shall remain in full force
and effect for a period of two years following the Closing Date; provided,
however, that (a) the representations and warranties set forth in Sections 5.1,
5.2, 5.4, 6.1 and 6.2 shall survive the Closing Date without limitation, (b)
the representations and warranties contained in Sections 5.11 and 6.6 hereof
shall survive the Closing Date and shall not terminate until 20 days after the
expiration of all applicable statutes of limitations (including any and all
extensions thereof) and (c) any representation and warranty that is the subject
of an indemnification claim made in accordance with this Agreement shall
survive with respect to that claim for so long as such indemnification claim is
outstanding (the period during which the representations and warranties shall
survive being referred to herein with respect to such representations and
warranties as the
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"Survival Period"). All representations, warranties and covenants and
agreements made by the parties shall not be affected by any investigation
heretofore or hereafter made by and on behalf of any of them and shall not be
deemed merged into any instruments or agreements delivered in connection with
the transactions contemplated hereby. The covenants and agreements entered
into pursuant to this Agreement shall survive the Closing Date without
limitation.
ARTICLE XIV
MISCELLANEOUS
14.1 Notices. All notices and other communications required or
permitted to be given or made hereunder by either party hereto shall be in
writing and shall be deemed to have been duly given if delivered personally or
transmitted by first class registered or certified mail, postage prepaid,
return receipt requested, or sent by prepaid overnight delivery service, or
sent by cable, telegram, facsimile or telex, to the parties at the following
addresses (or at such other addresses as shall be specified by the parties by
like notice):
If to Seller:
James C. Day
Chairman, President and Chief Executive Officer
Noble Drilling Corporation
10370 Richmond Avenue, Suite 400
Houston, Texas 77042
Facsimile: 713-953-1126
with a copy to:
Robert D. Campbell
Thompson & Knight, P.C.
1700 Pacific Avenue, Suite 3300
Dallas, Texas 75201
Facsimile: 214-969-1751
If to Buyer:
Bernard J. Duroc-Danner
President and Chief Executive Officer
Energy Ventures, Inc.
5 Post Oak Drive, Suite 1760
Houston, Texas 77027
Facsimile: 713-297-8488
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with a copy to:
Curtis W. Huff
Fulbright & Jaworski L.L.P.
1301 McKinney Street, Suite 5100
Houston, Texas 77010-3095
Facsimile: 713-651-5246
14.2 Entire Agreement. This Agreement, including the Schedules,
Exhibits, Annexes and other writings referred to herein or delivered pursuant
hereto, constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.
14.3 Amendments and Waiver; Rights and Remedies. This Agreement
may be amended, superseded, cancelled, renewed or extended, and the terms
hereof may be waived, only by a written instrument signed by the parties or, in
the case of a waiver, by the party waiving compliance. No delay on the part of
either party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of either party
of any such right, power or privilege, or any single or partial exercise of any
such right, power or privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege. The rights and remedies
herein provided are cumulative and are not exclusive of any rights or remedies
that any party may otherwise have at law or in equity. The rights and remedies
of either party based upon, arising out of or otherwise in respect of any
inaccuracy in or breach of any representation, warranty, covenant or agreement
contained in this Agreement shall in no way be limited by the fact that the
act, omission, occurrence or other state of facts upon which any claim of any
such inaccuracy or breach is based may also be the subject matter of any other
representation, warranty, covenant or agreement contained in this Agreement (or
in any other agreement between the parties) as to which there is no inaccuracy
or breach.
14.4 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Texas,
without regard to the principles of conflicts of laws thereof.
14.5 Binding Effect; Assignment; No Third Party Benefit.
(a) This Agreement and all the provisions hereof shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns; provided, however, that neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either of the parties hereto (by operation of law or otherwise)
without the prior written consent of the other party, except Buyer may upon
notice to Seller direct that title to all or part of the Assets be taken in one
or more of Buyer's wholly owned subsidiaries (direct or indirect) (a "Buyer's
Designee"); provided, however, that (i) each Buyer's Designee shall be made a
party to this
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Agreement at or prior to the Closing and (ii) no such designation shall relieve
Buyer of any of its duties, liabilities or obligations hereunder.
(b) Nothing in this Agreement, express or implied, is intended
to or shall confer upon any person other than Buyer and Seller any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
14.6 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 shall constitute one and the same
agreement.
14.7 References. All references in this Agreement to Articles,
Sections and other subdivisions refer to the Articles, Sections and other
subdivisions of this Agreement unless expressly provided otherwise. The words
"this Agreement," "herein," "hereof," "hereby," "hereunder" and words of
similar import refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited.
14.8 Severability of Provisions. If any provision of this
Agreement is held to be unenforceable, this Agreement shall be considered
divisible and such provision shall be deemed inoperative to the extent it is
deemed unenforceable, and in all other respects this Agreement shall remain in
full force and effect; provided, however, that if any such provision may be
made enforceable by limitation thereof, then such provision shall be deemed to
be so limited and shall be enforceable to the maximum extent permitted by
applicable law.
14.9 Gender. Pronouns in masculine, feminine, and neuter
genders shall be construed to include any other gender, and words in the
singular form shall be construed to include the plural and vice versa, unless
the context otherwise requires.
14.10 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only, do not constitute a part of this
Agreement, and shall not affect in any manner the meaning or interpretation of
this Agreement.
-27-
<PAGE> 32
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers hereunto duly authorized as of the date
first above written.
ENERGY VENTURES, INC.
By: /s/ JAMES G. KILEY
------------------------------------
Name: James G. Kiley
Title: Vice President
MALLARD BAY DRILLING, INC.
By: /s/ JAMES G. KILEY
-------------------------------------
Name: James G. Kiley
Title: Vice President
NOBLE DRILLING CORPORATION
By: /s/ JAMES C. DAY
------------------------------------
James C. Day, Chairman,
President and Chief Executive
Officer
NOBLE DRILLING (WEST AFRICA) INC.
By: /s/ BYRON L. WELLIVER
------------------------------------
Byron L. Welliver
Senior Vice President
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our report dated April 18, 1996 on our audits of
the consolidated financial statements of Tubular Corporation of America and
subsidiary included in the Energy Ventures, Inc. (the "Company") Form 8-K dated
June 24, 1996, into the Company's previously filed Registration Statement File
Nos. 333-03407, 33-31662, 33-56884, 33-56386, 33-65790, 33-77960 and 33-64349.
It should be noted that we have not audited any financial statements of Tubular
Corporation of America and subsidiary subsequent to December 31, 1995 or
performed any audit procedures subsequent to the date of our report.
/s/ ARTHUR ANDERSEN LLP
Arthur Andersen LLP
Tulsa Oklahoma
June 24, 1996
<PAGE> 1
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
EVI TO ACQUIRE TCA FOR $45 MILLION
June 24, 1996, Houston, Texas - Energy Ventures, Inc. (NYSE-EVI) today
announced the signing of a definitive agreement to purchase the stock of
Tubular Corporation of America ("TCA"), a manufacturer of premium casing used
in oil and gas exploration and development. TCA, with 1995 revenues of
approximately $50 million will be combined with EVI's tubular subsidiary Grant
Prideco.
TCA manufactures its products at a tubular mill located in Muskogee, Oklahoma.
The Muskogee plant was built in two stages, 1982 and 1992, and currently
operates at about 50% of its capacity. Premium casing are wide diameter
seamless tubulars whose chemistry, molecular structure and engineered
connections are designed to withstand pressure, temperature and corrosion such
as can be encountered in hostile downhole conditions. Such downhole conditions
are typically found in deep offshore and gas wells worldwide.
Upon completion of the acquisition, the TCA line of premium casing products
will be integrated with Grant's Atlas Bradford line of engineered connections
and premium tubulars. The TCA acquisition will provide product line synergies,
manufacturing cost savings and will allow for consolidation of overhead.
The purchase price of TCA will be comprised of 500,000 EVI common shares and
approximately $30 million in cash, notes and assumed debt. The acquisition of
TCA is subject to various conditions, including the receipt of all required
regulatory approvals
<PAGE> 2
and the expiration of all waiting periods. The acquisition, which will be
accounted for as a purchase, is expected to close as soon as possible after the
receipt of the necessary approvals.
EVI is an international oilfield service and equipment company with
manufacturing and rig operations in nine countries. The Company manufactures
drill pipe and premium tubulars, production equipment and provides rig
contracting services.
Contact:
James G. Kiley
Vice President and
Chief Financial Officer
(713) 297-8440
<PAGE> 1
EXHIBIT 99.2
FOR IMMEDIATE RELEASE
EVI TO ACQUIRE BARGE RIGS FOR $32 MILLION; SIGNS LETTER OF INTENT WITH CHEVRON
FOR ADDITIONAL BARGE RIG IN NIGERIA AND EXTENSION OF CURRENT CONTRACT
June 24, 1996, Houston, Texas - Energy Ventures, Inc. (NYSE-EVI) today
announced the signing of a definitive agreement to acquire two drilling barge
rigs, the Lewis Dugger and the Chuck Syring, from Noble Drilling Corporation.
The consideration for the rigs will be $32 million, consisting of $24.5 million
in cash and a $7.5 million drill pipe credit. Built in the early eighties and
substantially reconstructed in 1991, both barges are deep drilling rigs
equipped to drill well depths up to 30,000 feet. As submersible barge rigs,
both Lewis Dugger and Chuck Syring are designed to operate in shallow inland or
coastal waters, areas commonly referred to as transition zones.
The acquisition of the Noble rigs is being pursued to increase the Company's
international barge drilling rig fleet at what the Company believes are
attractive terms. Upon completion of the transaction, the rigs will become part
of the Company's Mallard Drilling rig contracting division. Mallard operates
the world's second largest barge rig company with a current fleet of 36 barge
rigs. The Company is negotiating long-term drilling contracts with the Shell
Petroleum Development Company of Nigeria Ltd. ("Shell Nigeria") for the
operation after closing of both Lewis Dugger and Chuck Syring. The acquisition
of the rigs is subject to various conditions, including the Company's receipt
of satisfactory drilling contracts with Shell Nigeria.
The Company also announced two contract signings with Chevron Nigeria Limited
("Chevron"). In the first instance, the Company has signed a letter of intent
with Chevron for the mobilization of Mallard rig #60, one of the Company's
stacked barge
<PAGE> 2
rigs in the United States, to Nigeria to operate for Chevron under a three year
contract. The cost to retrofit the stacked rig for international operations is
expected to be approximately $9 million. The Company expects to begin
operations under the new Chevron contract during the latter part of the fourth
quarter of 1996. In the second instance, the Company announced that Mallard
rig #71, which is currently under contract with Chevron, will have its contract
extended until September 1998 and its day rate increased from its present
base.
The Company's objectives are to expand and enhance its international barge
drilling fleet to take advantage of anticipated improvements in barge drilling
activity in oil and gas transition zones around the world. The purchase of the
Noble rigs as well as the retrofit to international standards of the second rig
for Chevron are consistent with these objectives.
EVI is an international oilfield service and equipment company with
manufacturing and rig operations in nine countries. The Company manufactures
drill pipe and premium tubulars, production equipment and provides rig
contracting services.
Contact:
James G. Kiley
Vice President and
Chief Financial Officer
(713) 297-8440
