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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): OCTOBER 20, 1997
EVI, INC.
(Exact name of registrant as specified in charter)
DELAWARE 1-13086 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 5
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ITEM 5. OTHER EVENTS.
THIRD QUARTER EARNINGS
On October 20, 1997, EVI, Inc., a Delaware corporation (the "Company"),
announced its earnings for the quarter ended September 30, 1997. A copy of the
press release announcing the Company's earnings for the quarter ended September
30, 1997, is filed as Exhibit 99.1 and is hereby incorporated herein by
reference.
DECEMBER 31, 1996 FINANCIAL STATEMENTS - RESTATEMENT TO REFLECT MAY 1997 STOCK
SPLIT
On May 12, 1997, the Company effected a two-for-one stock split.
Subsequent to the stock split, the Company has restated its financial
statements for the year ended December 31, 1996, to reflect the stock split.
Such restated financial statements are filed as Exhibit 99.2 and are hereby
incorporated herein by reference.
TRICO ACQUISITION
On October 9, 1997, the Company entered into an agreement ("Trico
Purchase Agreement") to acquire Trico Industries, Inc. ("Trico"), a Texas-based
manufacturer and distributor of sub-surface reciprocating pumps, sucker rods,
accessories and hydraulic lift systems, from PACCAR Inc ("PACCAR") for cash
consideration of $105 million, subject to adjustments for changes in the net
assets from August 31, 1997, to the date of closing. Trico has manufacturing
locations in San Marcos and Greenville, Texas, and operates 35 service locations
throughout the oil and natural gas producing regions in the United States. Trico
also owns a 30% interest in BMW Monarch (Lloydminster) Ltd. ("BMW Monarch"), a
Canadian distributor of progressing cavity pumps and other oilfield equipment.
Trico is the largest manufacturer of hydraulic lift systems in the world.
Hydraulic lift is a specialty technology that addresses high volume wells
typically in deviated configurations. Trico's hydraulic lift technology
constitutes an important addition to the Company's rod lift, progressing cavity
lift and gas lift product lines. The addition of Trico's hydraulic lift
technology is expected to further enhance the Company's ability to provide its
clients with a complete line of artificial lift solutions. The Company's
acquisition of Trico is subject to various conditions, including the receipt of
all necessary governmental consents and approvals and the expiration of all
applicable waiting periods.
BMW ACQUISITION
On October 9, 1997, the Company entered into an agreement ("BMW
Purchase Agreement") to acquire all of the outstanding shares of BMW Monarch not
owned by Trico and all of the outstanding shares of BMW Pump, Inc. ("BMW Pump")
for an aggregate cash consideration of C$130 million, subject to adjustments for
changes in the net assets of BMW Pump and BMW Monarch from March 31, 1997, to
the date of closing. BMW Pump is a Canadian-based manufacturer of progressing
cavity pumps and BMW Monarch is a Canadian supplier of progressing cavity pumps
as well as other production related oilfield products. The acquisition of BMW
Pump and BMW Monarch is expected to allow the Company to consolidate the
manufacturing, marketing, applications engineering and service operations of BMW
Pump and BMW Monarch with those of the Company in Canada. The Company also
intends to expand BMW Pump's sales outside of Canada through the use of the
Company's international and United States distribution network. The acquisition
of BMW Monarch and BMW Pump is subject to various conditions, including the
closing of the Company's acquisition of Trico and the receipt of all necessary
governmental consents and approvals and the expiration of all applicable waiting
periods.
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A copy of the press release announcing the signing of the Trico
Purchase Agreement and the BMW Purchase Agreement is filed as Exhibit 99.3 and
is hereby incorporated herein by reference.
Statements made herein that are forward-looking in nature are intended
to be "forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934. Although the Company believes that the
expectations described herein are reasonable, the actual results could differ
materially from those currently anticipated. Factors that could cause results
to differ materially include changes in industry conditions and demand for oil
and gas, changes in the market for artificial lift systems and progressing
cavity pumps and delays in the ability of the Company to fully integrate the
operations of Trico, BMW Monarch and BMW Pump and achieve the strategic
benefits described above.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
2.1 - Stock Purchase Agreement dated as of October 9, 1997,
between EVI, Inc. and PACCAR Inc.
2.2 - Stock Purchase Agreement dated as of October 9, 1997,
among certain shareholders of BMW Monarch (Lloydminster)
Ltd., the shareholders of BMW Pump Inc., the shareholder
of Makelki Holdings Ltd., the shareholder of 589979
Alberta Ltd., the shareholders of 600969 Alberta Ltd., the
shareholders of 391862 Alberta Ltd. and EVI, Inc.
23.1 - Consent of Arthur Andersen LLP with respect to the
financial statements of EVI, Inc.
23.2 - Consent of Arthur Andersen LLP with respect to the
financial statements of EVI, Inc.
99.1 - Press Release of the Company dated October 20, 1997,
announcing the Company's earnings for the quarter ended
September 30, 1997.
99.2 - Financial Statements of the Company restated to reflect
May 1997 stock split.
99.3 - Press Release of the Company dated October 9, 1997,
announcing the signing of the Trico Purchase Agreement and
the BMW Purchase Agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EVI, INC.
Dated: October 20, 1997 /s/ Frances R. Powell
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Frances R. Powell
Vice President, Accounting
and Controller
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Exhibit
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<S> <C>
2.1 - Stock Purchase Agreement dated as of October 9, 1997, between
EVI, Inc. and PACCAR Inc.
2.2 - Stock Purchase Agreement dated as of October 9, 1997, among
certain shareholders of BMW Monarch (Lloydminster) Ltd., the
shareholders of BMW Pump Inc., the shareholder of Makelki Holdings
Ltd., the shareholder of 589979 Alberta Ltd., the shareholders
of 600969 Alberta Ltd., the shareholders of 391862 Alberta Ltd.
and EVI, Inc.
23.1 - Consent of Arthur Andersen LLP with respect to the financial
statements of EVI, Inc.
23.2 - Consent of Arthur Andersen LLP with respect to the financial
statements of EVI, Inc.
99.1 - Press Release of the Company dated October 20, 1997, announcing
the Company's earnings for the quarter ended September 30, 1997.
99.2 - Financial Statements of the Company restated to reflect May 1997
stock split.
99.3 - Press Release of the Company dated October 9, 1997, announcing
the signing of the Trico Purchase Agreement and the BMW Purchase
Agreement.
</TABLE>
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement"), dated as of October 9,
1997, is by and between EVI, Inc., a Delaware corporation ("Purchaser"), and
PACCAR Inc, a Delaware corporation ("Seller").
Seller is interested in selling and Purchaser is interested in
purchasing all of the issued and outstanding shares of stock of Trico
Industries, Inc.
NOW, THEREFORE, Seller and Purchaser agree as follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 Assumed Liabilities. The term "Assumed Liabilities" means
those liabilities described in Section 2.2 hereof.
1.2 Benefit Plan. The term "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 or a Subsidiary of the Company, except for
the Excluded Assets and Liabilities.
1.3 BMW. The term "BMW" means BMW Monarch (Lloydminster) Ltd.
1.4 Closing Date. The "Closing Date" means October 31, 1997. If
the expiration of the waiting period under the Hart-Scott-Rodino Anti-Trust
Improvements Act of 1976, as amended ("HSR Act"), occurs after October 31, then
the Closing Date shall be the fifth day after the date on which the waiting
period expires unless Seller or Purchaser has terminated this Agreement under
Section 10.1. The Closing Date may be changed by mutual agreement of the
parties.
1.5 Code. The term "Code" means the Internal Revenue Code of 1986,
as amended.
1.6 Company. The term "Company" shall mean Trico Industries, Inc.
1.7 Company Assets. The term "Company Assets" means all of the
Company's and Kobe's properties, assets, rights, obligations and liabilities,
whether tangible or intangible, real or personal, contingent or otherwise, as
of the Closing Date (except the Excluded Assets and Liabilities) and which are
used or have arisen in connection with the business of the Company, including
without limitation, the
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following:
1.7.1 All real property, plants, buildings, cranes and
other improvements, and the interests in real property under any
option or lease ("Real Property"), which are further identified on
Schedule 1.7.1 hereto, except for the Excluded Assets and Liabilities;
1.7.2 All machinery, equipment (including without
limitation, all transportation, laboratory, testing, and office
equipment), fixtures, trade fixtures, tools, jigs, dies, furniture,
inventory racks and other tangible property of any kind, except for
the Excluded Assets and Liabilities;
1.7.3 All raw materials, work-in-process, finished goods,
inventories of parts, and other inventories of the Company, including
inventories consigned with dealers or customers, if any;
1.7.4 All office, production, and other miscellaneous
supplies of the Company;
1.7.5 All rights, liabilities and obligations existing
under leases of personal property (both as lessor and as lessee),
contracts, options, licenses, permits, distribution agreements,
domestic and foreign dealer agreements, sales agreements, purchase
agreements (including customer purchase orders), vehicle lease
agreements, parts support agreements, product availability
commitments, performance commitments, and all other agreements and
business arrangements entered into in the normal course of business
("Contracts") which are further described on Schedule 1.7.5 hereto by
category, with each contract with an outstanding obligation in excess
of $50,000 identified separately;
1.7.6 All patents and patent applications, registered and
unregistered trademarks, service marks, trade names and similar rights
to names, marks and slogans, common law and registered copyrights
which are further identified on Schedule 1.7.6 hereto, and all
applications for any of the foregoing, together with all rights to use
all of the foregoing forever, and all goodwill associated with any of
the foregoing;
1.7.7 All inventions, discoveries, improvements, processes,
methods, designs, formulae (secret or otherwise), data, engineering,
technical and shop drawings, specifications, trade secrets,
confidential information, know-how and ideas, whether patentable or
not, shop rights, licenses and other similar rights and all drawings,
records or other indicia, however evidenced, of the foregoing,
together with all rights to use all of the foregoing and any goodwill
associated with any of the foregoing;
1.7.8 All computer software resident on computers included
in the Company Assets and used solely for the business of the Company,
except the Excluded Assets and Liabilities, provided that Company has
the legal right to continue using such software after a change in
ownership of Company;
1.7.9 All bank and trust accounts and accounts receivable
of the
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Company, except the Excluded Assets and Liabilities;
1.7.10 All deposits and prepayments or prepaid expenses
reflected on the Statement of Net Assets, except the Excluded Assets
and Liabilities;
1.7.11 All shares of stock in subsidiaries and other
corporations owned by Company and described in Schedule 1.7.11, except
for the Excluded Assets and Liabilities, (the "Subsidiaries");
1.7.12 All of the Company's records pertaining to products,
customers, suppliers or personnel and all other files and business
records of every kind, including financial records;
1.7.13 All advertising materials and all other printed or
written materials;
1.7.14 All governmental and other licenses, permits,
franchises, approvals and certificates, to the extent transferable;
1.7.15 All goodwill, including that arising from business
acquisitions, and all other intangible properties; and
1.7.16 All other assets and liabilities of the Company not
referred to in 1.7.1 to 1.7.15 above which are reflected or noted on
the Statement of Net Assets or have arisen in the ordinary course of
the business of the Company, except for the Excluded Assets and
Liabilities.
1.8 Company Stock. The term "Company Stock" means all of the
issued and outstanding shares of stock of the Company.
1.9 Damages. The term "Damages" means any and all liabilities,
losses, damages, demands, assessments, claims, awards, judgments, penalties,
settlements, fines, interest, costs and expenses (including, without
limitation, reasonable fees and expenses of attorneys, consultants and other
professionals incurred in connection with investigating and defending any
claims or causes of action), but excluding incidental, consequential (including
without limitation loss of profits or loss of business opportunities), punitive
or exemplary damages, other than those imposed in connection with a third party
claim.
1.10 Employees. The term "Employees" means all of the employees of
the Company and Kobe on or before the Closing Date.
1.11 Encumbrance. The term "Encumbrance" means any security
interest, mortgage, pledge, trust, claim, lien, charge, option, defect,
restriction, encumbrance or other right or interest of any third party of any
nature whatsoever.
1.12 Environmental Laws. The term "Environmental Laws" means any
and all laws, statutes, ordinances, rules, regulations, orders, or
determinations of any Governmental Entity pertaining to health, safety or the
environment applicable to (i) the Company's business or operations, (ii) the
Company Assets, or (iii) the disposal of any hazardous substance by the
Company, including, but not limited to,
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the Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal
Water Pollution Control Act, as amended, the Resource Conservation and Recovery
Act of 1976, as amended ("RCRA"), the Safe Drinking Water Act, as amended, the
Toxic Substances Drinking Water Act, as amended, and the Superfund Amendments
and Reauthorization Act of 1986, as amended. The term "hazardous substance" has
the meaning specified in CERCLA, and the term "disposal" (or "disposed") has
the meaning specified in RCRA; provided that, to the extent the laws of the
state in which any Company Assets are located establish a meaning for
"hazardous substance" or "disposal" which is broader than that specified in
CERCLA or RCRA, such broader meaning shall apply with respect to such assets in
such state.
1.13 Excluded Assets and Liabilities. The term "Excluded Assets
and Liabilities" means the following assets and any related liabilities and
obligations of the Company as of the Closing Date (whether liquidated or
unliquidated, known or unknown, material or immaterial, fixed or contingent),
which are not included in the Company Assets and will not be acquired by
Purchaser hereunder, all of which are described below:
1.13.1 The real property listed in Schedule 1.13.1 attached
hereto;
1.13.2 All computer software licensed under a master
agreement with Seller or any affiliate of Seller (other than the
Company) or resident on any computer not owned or leased by the
Company, even if it is also used by the Company;
1.13.3 All bank and trust accounts listed on Schedule
1.13.3(a) and all cash in the bank accounts listed in Schedule
1.13.3(b);
1.13.4 All insurance recoveries for environmental claims
pending prior to the Closing concerning insurance policies issued for
years 1975 through 1988;
1.13.5 All intercompany receivables and payables between
Seller and Company or Kobe;
1.13.6 Taxes pertaining to or attributable to the Company or
any of its subsidiaries with respect to any and all taxable periods or
portions thereof ending on or before the Closing Date, but only to the
extent such Taxes arise from or relate to the inclusion of the Company
or such subsidiaries in a Tax Return of the Seller;
1.13.7 All letters of credit ("LC's") established by Seller
or relying on the credit of Seller for the benefit of Company, as
listed on Schedule 1.13.7;
1.13.8 Any amounts owing to any Employees under any deferred
compensation plan maintained by Seller for any period prior to the
Closing and which is not transferred to Purchaser under the terms of
this Agreement;
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1.13.9 The shares of stock in any subsidiaries of Company
listed on Schedule 1.13.9, which will be sold or assigned separately
prior to the Closing, (the "Excluded Subsidiaries"), any proceeds from
such sale or assignment, and all documents, records and other
information of any kind or nature concerning the business and
operations of the Excluded Subsidiaries;
1.13.10 All Seller proprietary items including without
limitation internal telephone directories, Seller trademarked items,
Seller promotional materials, compliance and policy materials, and
similar items;
1.13.11 The sponsorship of and all assets and liabilities
related to the Company and Seller Benefit Plans listed on Schedule
1.13.11;
1.13.12 All machinery, equipment, tooling, jigs, and fixtures
used solely in connection with the manufacture for Seller by Company
of the products and components listed on Schedule 1.13.12 ("Seller's
Components"), and all designs, specifications, copyrights and
trademarks of Seller and any other intangibles related solely to
Seller's Components, but excluding any rights to the name "Trico" and
any derivation thereof;
1.13.13 Any deferred intercompany gain as defined in Treasury
Regulation Section 1.1502-13;
1.13.14 All product liability, warranty and other claims,
actions, litigation or other proceedings listed on Schedule 1.13.14,
including any cross-claims, counter-claims, third party claims and
claims for indemnity or contribution related to the subject matter of
such listed proceeding; and
1.13.15 Any claim, obligation, liability or action (i)
related to the disposal of hazardous substances by the Company, Kobe
or any of their respective predecessors or subsidiaries prior to
Closing, (ii) related to any remediation, cleanup or other legal
obligation or obligation for contribution related to the ownership,
use or lease of any property, except for the Real Property, prior to
the Closing by the Company, Kobe or any of their respective
predecessors or subsidiaries, (iii) related to the exposure of a third
party (other than a present or former employee of the Company, Kobe or
any of their respective predecessors or subsidiaries) to a hazardous
substance prior to the Closing as a result of an action or omission by
the Company, Kobe or any of their respective predecessors or
subsidiaries, and (iv) related to the exposure of a present or former
employee of the Company, Kobe or any of their respective predecessors
or subsidiaries to a hazardous substance in the workplace prior to the
Closing as a result of an action or omission by the Company, Kobe or
any of their respective predecessors or subsidiaries, but only to the
extent that such injury or illness is not covered by the applicable
worker's compensation laws.
1.14 Final Statement of Net Assets. The term "Final Statement of
Net Assets" means the final statement of net assets of the Company, prepared as
set forth in Section 3.3, as of the later of October 31, 1997 or the end of the
calendar month preceding the Closing Date. The Final Statement of Net Assets
shall include reserve amounts that have been determined in accordance with GAAP
and
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calculated in a manner consistent with those shown on Schedule 1.20(b).
1.15 GAAP. The term "GAAP" means United States generally accepted
accounting principles as they apply to a statement of net assets for a
subsidiary with exceptions consistent with those used for the preparation of
the Statement of Net Assets. GAAP does not include footnote disclosures
required by generally accepted accounting principles.
1.16 Governmental Entity. The term "Governmental Entity" means the
United States of America and any state, county, city, municipality and any
subdivision thereof, and any court, administrative or regulatory agency,
commission, department or other governmental authority or instrumentality.
1.17 Kobe. The term "Kobe" means Kobe International Ltd.
1.18 Material Adverse Effect. The term "Material Adverse Effect"
means an adverse change in the financial condition, business or operations of
the Company or Kobe which, when taken together with all other matters having a
similar effect, is materially adverse, or will result in a change which is
materially adverse, to the Company and Kobe, taken as a whole.
1.19 Net Assets. The term "Net Assets" means, with reference to the
Statement of Net Assets and Final Statement of Net Assets, the difference
between total assets and total liabilities (including deferred income tax
liabilities and capital lease obligations) of the Company and Kobe on a
consolidated basis determined in accordance with GAAP; provided, however,
there shall be excluded from the calculation of Net Assets the Excluded Assets
and Liabilities, and there shall be excluded from the calculation of Net Assets
for the Final Statement of Net Assets any increase or decrease in the items
listed on Schedule 1.19 from the amounts shown for such items on the Statement
of Net Assets or Schedule 1.20(b).
1.20 Statement of Net Assets. The term "Statement of Net Assets"
means the adjusted statement of net assets of the Company as of August 31,
1997, which is attached as Schedule 1.20(a) hereto. Adjustments to the
Statement of Net Assets for Excluded Assets and Liabilities and corporate
reserves are also described in Schedule 1.20(a). The Statement of Net Assets
also includes the reserves described on Schedule 1.20(b).
1.21 Taxes. The term "Taxes" means all federal, state, local,
foreign and other taxes, assessments or duties, including, but not limited to,
all income, gross receipts, ad valorem, sales, use, franchise, transfer,
profits, value added, withholding, payroll, employment, excise, estimated
severance, property, windfall profits and other taxes, assessments or duties of
any kind whatsoever, imposed or collected by any Governmental Entity or
pursuant to any governmental requirement, together with any interest, penalty,
addition to tax, fine or other additional amounts imposed thereon or related
thereto, and the term "Tax" means any one of the foregoing items.
1.22 Tax Returns. The term "Tax Returns" means all returns
(including information returns), declarations, reports, statements and other
documents of, relating to, or required to be filed in respect of, any and all
Taxes based in whole or
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in part on net income (including but not limited to the Texas franchise tax),
and the term "Tax Return" shall mean any one of the foregoing Tax Returns.
ARTICLE II
PURCHASE OF COMPANY STOCK AND ASSUMPTION OF LIABILITIES
2.1 Purchase of Company Stock. Upon the terms and subject to the
conditions contained herein, Seller will sell, transfer, assign and deliver to
Purchaser and Purchaser will acquire the Company Stock, free and clear of all
Encumbrances, effective as of the end of business on the Closing Date.
2.2 Obligations and Liabilities Assumed by Company. Purchaser
shall cause the Company to assume, effective as of the close of business on the
Closing Date, all of the obligations and liabilities of Seller with respect to
the Company, the Company Assets and the Company's business except for the
Excluded Assets and Liabilities (the "Assumed Liabilities"), including without
limitation:
2.2.1 all liabilities and obligations accruing or becoming
due or payable to the Employees after the Closing Date (even if the
claim arose or relates to a period prior to the Closing Date) for
compensation or other benefits related to the employment or
termination of employment of such Employees, including without
limitation, liabilities and obligations, if any, for worker's
compensation, unemployment compensation or termination of employment
benefits, or under any of Seller's or Company's employee health and
benefit plans, pension and supplemental pension plans, annuities, or
employment contracts; and
2.2.2 all guarantees, loans, commitments, contracts and
other obligations made or entered into by Company or Seller in
connection with the business and operations of Company.
Purchaser shall indemnify, defend and hold Seller harmless (according to the
provisions of Section 9.8 hereof) from all Damages, (whether or not arising out
of third-party claims) arising from or otherwise related to any of the Assumed
Liabilities.
2.3 Obligations and Liabilities Assumed by Seller. Seller shall
assume, effective as of the close of business on the Closing Date, all Excluded
Assets and Liabilities. Seller shall indemnify, defend and hold the Company and
the Purchaser harmless (according to the provisions of Section 9.8 hereof) from
all Damages, (whether or not arising out of third-party claims) arising from or
otherwise related to any of the Excluded Assets and Liabilities.
2.4 Purchase Price and Adjustment. Upon the terms and subject to
the conditions contained herein, the purchase price for the sale, transfer,
assignment, conveyance and delivery of the Company Stock ("Purchase Price")
shall be One Hundred and Five Million Dollars ($105,000,000.00). There shall
be an adjustment to the Purchase Price equal to the amount, if any, by which
the absolute value of the sum of items (i) and (ii) below exceeds $1,000,000.
If the sum is positive, Purchaser shall pay the adjustment to Seller; if it is
negative, Seller shall pay the
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adjustment to Purchaser.
(i) The amount remaining after the value of the "Net Assets"
shown on the Statement of Net Assets is subtracted from the value of
the "Net Assets" shown on the Final Statement of Net Assets; plus
(ii) Two Hundred Twenty-Five Thousand U.S. Dollars ($225,000)
per month (with a prorata portion for any part of a month) from August
31, 1997 to the Closing Date, as the agreed adjustment for Seller's
share of the earnings of BMW during this period.
Payment of any amount due in adjustment of the Purchase Price hereunder shall
be paid by wire transfer of immediately available funds to the account
designated by Seller or Purchaser, as the case may be. Any adjustment to the
Purchase Price shall be received within five days after the acceptance of the
Final Statement of Net Assets pursuant to Section 3.3.
ARTICLE III
CLOSING
3.1 Closing. The Closing of the transactions contemplated herein
(the "Closing") shall be held on the Closing Date at Seller's corporate offices
in Bellevue, Washington.
3.2 Deliveries at Closing.
3.2.1 The Purchase Price shall be paid by Purchaser to
Seller on the Closing Date in immediately available funds, by wire
transfer to Seller's account as designated by Seller in writing prior
to the Closing.
3.2.2 To effect the transfers referred to in Article II
hereof, Seller will deliver to Purchaser on the Closing Date:
(i) All certificates for the Company Stock and duly
executed stock assignment(s);
(ii) All of the Company's books, records and files
not already located at the Company's offices; and
(iii) Any other instruments reasonably requested by
Purchaser to vest in Purchaser good and marketable
title to the Company Stock.
All instruments executed and delivered to Purchaser pursuant hereto
shall be reasonably satisfactory to Purchaser in form and substance.
3.3 Final Statement of Net Assets.
3.3.1 The amount for "Net Assets" shown on the Statement of
Net Assets and on the Final Statement of Net Assets has been and shall
be, respectively, determined consistently by Seller from the books and
records of
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the Company, in accordance GAAP, but subject to the limitations on
adjustment set forth in Section 1.19 hereof.
3.3.2 As soon as practicable after the Closing Date (but in
no event later than 30 days thereafter), Seller shall deliver the
Final Statement of Net Assets to Purchaser. Purchaser shall allow
Seller reasonable access to the Company's facilities, books and
records and shall cooperate with Seller as necessary to allow Seller
to prepare the Final Statement of Net Assets. Purchaser may, at its
expense, review the Final Statement of Net Assets, and Purchaser shall
have access to the work papers used in preparing the Final Statement
of Net Assets. Purchaser shall have the right to object, by written
notice to Seller, to the amount set forth as the "Net Assets" on the
Final Statement of Net Assets, if Purchaser's review reveals that (i)
the amounts included on the Final Statement of Net Assets for the
accounts receivable, accounts payable, inventories, machinery and
equipment, or any other assets (except for items listed on Schedule
1.19 hereof) are not equal to the amounts which should have been
included for such items to conform to GAAP or (ii) the amounts
included on the Final Statement of Net Assets for the liabilities
(except for items listed on Schedule 1.19 hereof) are not equal to the
amounts which should have been included for such items to conform to
GAAP. If Purchaser does not give Seller such notice within 20 days
after receipt of the Final Statement of Net Assets, Purchaser shall be
deemed to have accepted the Final Statement of Net Assets for all
purposes of this Agreement.
3.3.3 If Purchaser does give Seller notice of an objection,
Purchaser and Seller shall meet to resolve the objections. If disputes
with respect to the Final Statement of Net Assets cannot be resolved
within 30 calendar days after Purchaser's delivery of a notice of
objection, then, at the request of Purchaser or Seller, the specific
matters in dispute shall be submitted to Ernst & Young or such other
independent accounting firm as may be approved by Seller and
Purchaser. Such accounting firm shall render its opinion as to the
matters submitted to it, and its determination shall be final and
binding on the parties hereto. The fees and expenses of such
accounting firm shall be borne one-half by Seller one-half by
Purchaser.
3.4 Assumption Documents.
3.4.1 Upon the reasonable request of Seller and subject to
the terms and conditions contained herein, Purchaser shall or shall
cause the Company to deliver to Seller on the Closing Date or at any
time thereafter any documents reasonably requested by Seller
evidencing Company's assumption of the Assumed Liabilities. All such
documents shall be reasonably satisfactory to Seller and Purchaser in
form and substance.
3.4.2 Upon the reasonable request of Purchaser and subject
to the terms and conditions contained herein, Seller shall deliver to
Purchaser on the Closing Date or at any time thereafter any documents
reasonably requested by Purchaser evidencing Seller's assumption of
the Excluded Assets and Liabilities. All such documents shall be
reasonably satisfactory to Seller and Purchaser in form and substance.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser that:
4.1 Organization of Seller. Seller is duly organized, validly
existing and in good standing under the laws of the State of Delaware.
4.2 Organization of Company and Kobe. Company is duly organized,
validly existing and in good standing under the laws of the State of
California, and has full corporate power and authority to conduct its business
as it is presently being conducted and to own and lease its properties and
assets. Kobe is a corporation duly organized, validly existing and in good
standing under the laws of The Bahamas and has the requisite corporate power
and authority to carry on its business as it is now being conducted.
4.3 Authorization. Seller has full corporate power and authority
to enter into this Agreement, to consummate the transactions contemplated
hereby and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by Seller have been duly authorized by all requisite
corporate action on the part of Seller, and no approval of the stockholders of
Seller is required in connection herewith. When this Agreement has been duly
executed and delivered by Seller, it will be a valid and binding obligation of
Seller enforceable against it in accordance with its terms.
4.4 No Conflict or Violation. Neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will result in (i) a violation of or a conflict with any provision of the
Certificate of Incorporation or Bylaws of Seller or the Company, (ii) a breach
of or a default under any term or provision of any contract, agreement, lease,
commitment, license, franchise, permit, authorization or concession to which
Seller or the Company is a party or an event which with notice, lapse of time,
or both, would result in any such breach or default, or (iii) a violation by
Seller or the Company of any statute, rule, regulation, ordinance, code, order,
judgment, writ, injunction, decree, or award, or an event which with notice,
lapse of time, or both, would result in any such violation.
4.5 Title to Company Stock. Seller has good and marketable title
to the Company Stock, and the Company Stock will be transferred to Purchaser
free and clear of all Encumbrances. 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.
4.6 Title to Subsidiaries' Stock. Except for the Excluded
Subsidiaries, the Subsidiaries are the only entities in which the Company owns
any direct or indirect equity or similar ownership interest. Except as set
forth in Schedule 4.6, the shares of stock in the Subsidiaries set forth on
Schedule 1.7.11 are owned by the Company
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free and clear of all Encumbrances, including voting trusts or stockholders
agreements. There are no outstanding options, warrants, convertible securities,
calls, rights, commitments, preemptive rights, agreements, arrangements or
understandings of any character obligating Kobe (i) to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital stock or
other equity interests of Kobe or any securities or obligations convertible
into or exchangeable for such shares or equity interests 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.
4.7 Financial Records.
4.7.1 Seller has delivered to Purchaser the Statement of
Net Assets, and will deliver to Purchaser the Final Statement of Net
Assets, each of which has been or will be prepared (as the case may
be) in accordance with GAAP, except as otherwise provided in this
Agreement.
4.7.2 Seller has made and kept (and will make and keep)
books, records and accounts which accurately and fairly reflect in
reasonable detail its activities and the transactions and dispositions
of its assets for the period following the preparation of the
Statement of Net Assets.
4.8 Company Assets. The Company and Kobe own all of the Company
Assets, other than those that are leased, with respect to which they have valid
and enforceable leases. None of the Company Assets is subject to any
Encumbrance, except as reflected on the Statement of Net Assets or Schedule 4.8
and those which individually or in the aggregate do not exceed $50,000.
4.9 Real Property. Schedule 1.7.1 hereto contains a description
of all Real Property which is owned or leased by Company, except for the
Excluded Assets and Liabilities. Seller has good and marketable title to all
Real Property owned by the Company, and such Real Property is owned free and
clear of all Encumbrances, except for Encumbrances of record or as noted on
Schedule 4.9 hereto.
4.10 Certain Agreements. Except as set forth in Schedule 4.10,
neither Company nor any of the Company Assets is a party to or bound by any
agreement, contract or commitment (i) relating to the borrowing of funds, (ii)
relating to any loan or advance to, or investment in, any person or entity or
any agreement, contract, commitment or understanding relating to the making of
any such loan, advance or investment, (iii) relating to any guarantee or
financial assurance of any obligation or other contingent liability with
respect to any indebtedness or obligation of any unrelated person or entity,
(iv) relating to any management service, employment, consulting or other
similar type contract or agreement, (v) that would limit the freedom of the
Company or Purchaser, 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 entity or to engage in any business or activity in any
geographic area, or (vi) obligating the Company to provide indemnification or
contribution with respect to any matter outside the ordinary course of
business.
4.11 Contracts. Except as otherwise disclosed in Schedule 4.11
hereto, and
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to the best of Seller's knowledge and belief, Company is not in breach or
default under any Contract, and no event has occurred which constitutes, or
would constitute with the lapse of time or the giving of notice, a breach or
default under any such Contract.
4.12 Patents, Trademarks, Etc. To the best of Seller's knowledge
and belief, Schedule 1.7.6 hereto contains a true and complete list of all of
the patents, trademarks, trade names, service marks and copyrights, and
applications therefor, which are used in connection with the business, products
or processes of the Company. Except as otherwise disclosed in Schedule 4.12
hereto, and to the best of Seller's knowledge or belief, Company owns, or is
licensed or otherwise has the right to use, all patents, trademarks, trade
names, service marks, copyrights, technology, know-how, processes, methods and
designs used in or necessary for the conduct of the business of the Company as
presently being conducted. The consummation of the transactions contemplated by
this Agreement will not result in the loss of any licenses or rights to use any
patents, trademarks, trade names, service marks, copy rights, technology,
know-how or processes and will not conflict with, or constitute a breach,
violation or termination of, any agreement or understanding, whether written or
otherwise, relating to any licenses or rights to use any patents, trademarks,
trade names, service marks, copy rights, technology, know-how or processes
necessary for the conduct of the business by the Company as currently
conducted.
4.13 Accounts Receivable. The accounts receivable and other
receivables of the Company represent bona fide indebtedness arising out of the
ordinary course of business, and to the best of Seller's knowledge and belief,
except as otherwise disclosed in Schedule 4.13 hereto, all such receivables
will be collectable according to their terms and at the book amounts thereof,
less any reserve for bad debts shown on the Statement of Net Assets.
4.14 Litigation and Proceedings. To the best of Seller's knowledge
and belief, Schedule 1.13.14 hereto contains a list and brief description of
all litigation relating to product liability, warranty and other claims,
actions, or other proceedings pending, threatened against or otherwise
affecting the Company or Kobe and which involve any claim for injunctive relief
or for damages in excess of $10,000.
4.15 Licenses, Permits and Authorizations. Except as otherwise
disclosed in Schedule 4.15 hereto, the Company has obtained all approvals,
authorizations, consents, licenses, franchises, orders and other permits and
has made all filings with any Governmental Entity which are required for the
conduct of the business of the Company as presently being conducted, except
those where the failure to have any such approval, authorization, consent,
license, franchise, order or permit would not have a Material Adverse Effect.
4.16 Compliance with Law. Except as otherwise disclosed in
Schedule 4.16 hereto, the Company is in compliance in all material respects
(i.e., where noncompliance would have a Material Adverse Effect) with all
applicable statutes, rules, regulations, ordinances, codes, orders, licenses,
franchises, permits, authorizations and concessions, as such apply to the
Company.
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<PAGE> 13
4.17 Environmental Condition.
4.17.1 Except as otherwise disclosed in Schedule 4.17
hereto, on the Closing Date there is and will be no material
contamination of the soil and groundwater of the Real Property which
would serve as a basis for claims for injury to third persons, damage
to property of others or claims by governmental agencies requiring
remediation of contamination on such property.
4.17.2 Except as otherwise disclosed in Schedule 4.17
hereto, the Company is in compliance with all applicable limitations,
restrictions, conditions, standards, prohibitions, requirements and
obligations of Environmental Laws and any related orders of any
Governmental Entity, except where the failure to so operate in
compliance would not have a Material Adverse Effect.
4.17.3 Except as listed on Schedule 4.17, there are no
existing, pending or, to the best knowledge of Seller, threatened
actions, suits, claims, investigations, inquiries or proceedings by or
before any Governmental Entity directed against the Company or any of
the Company 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 hazardous substances or (iv) response,
removal or remedial costs under CERCLA or any similar state law.
4.17.4 No portion of the Company Assets is part of a
Superfund site under CERCLA or any similar ranking or listing under
any similar state law, and, except for the Excluded Assets and
Liabilities, to the best of Seller's knowledge no real property
previously owned or leased by the Company is part of a Superfund site
under CERCLA or any similar ranking or listing under any similar state
law.
4.18 Consents and Approvals. To the best of Seller's knowledge and
belief and except for the applicable requirements of the HSR Act and any
matters set forth on Schedule 4.18 hereto, no other consent, approval,
authorization, declaration, filing or registration with any Governmental Entity
or any other person or entity is required to be made or obtained by Seller or
the Company in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby.
4.19 No Broker's Fees. Seller represents and warrants that neither
Seller nor Company have taken any action which would give any third party a
right to claim a broker's or finder's fee or commission in connection with the
transactions contemplated herein.
4.20 Pension and Benefit Plans.
4.20.1 Schedule 4.20 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 Employees, except for the Excluded Assets and
Liabilities. Seller has made
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available to Purchaser 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 Plan maintained or contributed to by
the Company is, or has been during the last five years, subject to any
enforcement action under Title IV of ERISA or Section 412 of the Code.
4.20.2 Except as set forth in Schedule 4.20, 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 Seller, 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.
4.20.3 Except as set forth in Schedule 4.20, each Benefit
Plan that has been or is sponsored, participated in or contributed to
by the Company: (i) 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, (ii) has had the
appropriate Form 5500 filed timely for each year of its existence, if
required, (iii) has at all times complied with the bonding
requirements of Section 412 of ERISA, if required, and (iv) to the
knowledge of Seller, has no controversy pending with any Governmental
Entity (other than the payment of benefits in the normal course and
controversies disclosed on Schedule 4.20, nor any controversy resolved
adversely to the Company, which may subject the Company to the payment
of any penalty, interest, tax or other obligation.
4.20.4 All voluntary employee benefit associations under
United States law of the Company have been submitted to and approved
as exempt from Federal income tax under Section 501 (c)(9) of the Code
by the IRS.
4.20.5 Except as set forth in Schedule 4.20, 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.
4.20.6 Except as set forth in Schedule 4.20, the Company
does not provide employee post-retirement medical or health coverage
or
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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.
4.20.7 Except as set forth in Schedule 4.20, to the best
knowledge of Seller, none of the Company, any officer of the Company
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 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 Kobe or any officer of the Company or
Kobe 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.
4.20.8 With respect to any Benefit Plan that is an employee
welfare benefit plan, (i) no such Benefit Plan includes a welfare
benefits fund, as such term is defined in Section 419(e) of the Code
and (ii) 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.
4.21 Taxes.
4.21.1 Except as set forth in Schedule 4.21, (i) all Tax
Returns of or with respect to any Tax that are required to be filed on
or before the Closing Date by or with respect to the Company or any
affiliated group of corporations of which the Company was a member at
any time during the five year period ending on the Closing Date (a
"Seller Affiliated Group") have been or will be duly and timely filed,
(ii) all items of income, gain, loss, deduction and credit or other
items required to be included in each such Tax Return have been or
will be so included and all information provided in each such Tax
Return is true, correct and complete in all material respects, (iii)
all Taxes which have become or will become due with respect to the
period covered by each such Tax Return have been or will be timely
paid in full, (iv) all withholding Tax requirements imposed on or with
respect to the Company have been or will be satisfied in full, and (v)
no penalty, interest or other charge is or will become due with
respect to the late filing of any such Tax Return or late payment of
any such Tax.
4.21.2 All Tax Returns of, or with respect to the Company or
any Seller Affiliated Group have been audited by the applicable
governmental authority, or the applicable statute of limitations has
expired, for all periods up to and including the periods set forth in
Schedule 4.21.
4.21.3 There is no claim against the Company or any Seller
Affiliated Group for any Taxes, and no assessment, deficiency or
adjustment has been asserted or proposed with respect to any Tax
Return of or with respect to the Company or any Seller Affiliated
Group, other than those
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disclosed (and to which are attached true and complete copies of all
audit or similar reports) in Schedule 4.21.
4.21.4 Except as set forth in Schedule 4.21, there is not in
force any extension of time with respect to the due date for the
filing of any Tax Return of or with respect to the Company or any
Seller Affiliated Group or any waiver or agreement for any extension
of time for the assessment or payment of any Tax of or with respect to
the Company or any Seller Affiliated Group.
4.21.5 Schedule 4.21 contains a true and complete copy of
each written Tax allocation or sharing agreement and a true and
complete description of each unwritten Tax allocation or sharing
arrangement with any Seller Affiliated Group affecting the Company.
All such agreements shall be terminated prior to the Closing Date and
no payments are due or will become due by the Company or any
Subsidiary on or after the Closing Date pursuant to any such agreement
or arrangement.
4.21.6 Except as set forth in Schedule 4.21, none of the
property of the Company is held in an arrangement that could be
classified as a partnership for Tax purposes, and the Company does not
own any interest in any controlled foreign corporation (as defined in
Section 957 of the Code), passive foreign investment company (as
defined in Section 1296 of the Code) or other entity the income of
which is required to be included in the income of the Company.
4.21.7 Except as set forth in Schedule 4.21, none of the
property of the Company is subject to a safe- harbor lease (pursuant
to Section 168(f)(8) of the Internal Revenue Code of 1954 as in effect
after the Economic Recovery Tax Act of 1981 and before the Tax Reform
Act of 1986) or is "tax-exempt use property" (within the meaning of
Section 168(h) of the Code) or "tax-exempt bond financed property"
(within the meaning of Section 168(g)(5) of the Code).
4.21.8 Except as set forth in Schedule 4.21, the Company
will not be required to include any amount in income for any taxable
period beginning the Closing Date as a result of a change in
accounting method for any taxable period ending on or before the
Closing Date or pursuant to any agreement with any Tax authority with
respect to any such taxable period.
4.21.9 The Company has not consented to have the provisions
of Section 341 (f)(2) of the Code apply with respect to a sale of its
stock.
4.22 Effective Date of Representations and Warranties. All
representations and warranties of Seller contained in this Agreement are and
shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
5.1 Organization of Purchaser. Purchaser is duly organized,
validly existing and in good standing under the laws of the State of Delaware.
5.2 Authorization. Purchaser has full corporate power and
authority to enter into this Agreement, to consummate the transactions
contemplated hereby and to perform its obligations hereunder. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby by Purchaser have been duly authorized by all
requisite corporate action on the part of Purchaser. When this Agreement has
been duly executed and delivered by Purchaser, it will be a valid and binding
obligation of Purchaser enforceable against it in accordance with its terms.
5.3 No Conflict or Violation. Neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will result in (i) a violation of or a conflict with any provision of the
Certificate of Incorporation or Bylaws of Purchaser, (ii) a breach of or a
default under any term or provision of any contract, agreement, lease,
commitment, license, franchise, permit, authorization or concession to which
Purchaser is a party or an event which with notice, lapse of time, or both,
would result in any such breach or default, or (iii) a violation by Purchaser
of any statute, rule, regulation, ordinance, code, order, judgment, writ,
injunction, decree, or award, or an event which with notice, lapse of time, or
both, would result in any such violation, except, in each case, for violations,
conflicts, breaches or defaults which in the aggregate would not materially
hinder or impair the consummation of the transactions contemplated by this
Agreement.
5.4 Consents and Approvals. To the best of Purchaser's knowledge
and belief and except for the applicable requirements of the HSR Act and any
matters set forth on Schedule 5.4 hereto, no other consent, approval,
authorization, declaration, filing or registration with any Governmental Entity
or any other person or entity is required to be made or obtained by Purchaser
in connection with the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby.
5.5 No Broker's Fees. Purchaser represents and warrants that
Purchaser has not taken any action which would give any third party a right to
claim a broker's or finder's fee or commission in connection with the
transactions contemplated herein, except for any such fee payable solely by
Purchaser.
5.6 Effective Date of Representations and Warranties. All
representations and warranties of Purchaser contained in this Agreement are and
shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date.
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ARTICLE VI
ACTIONS BY SELLER AND PURCHASER
PRIOR TO THE CLOSING
Seller and Purchaser covenant as follows for the period from the date
of this Agreement through the Closing Date:
6.1 Maintenance of Company. Except as described on Schedule 6.1
hereto or as otherwise agreed to in writing by Purchaser, Seller shall and
shall cause the Company and Kobe to comply with the provisions set forth below:
6.1.1 The Company and Kobe shall conduct its business in
the ordinary and usual course and in the manner heretofore conducted.
6.1.2 The Company and Kobe shall not, except in accordance
with past practices, (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.
6.1.3 Neither the Company nor Kobe shall amend its charter
or by-laws or enter into any merger or consolidation agreement.
6.1.4 Neither the Company nor Kobe 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.
6.1.5 Neither the Company nor Kobe shall sell, assign or
dispose of any of the Company Assets, including the stock of the
Subsidiaries, or incur or assume any liabilities or enter into any
sale/leaseback or similar transaction, except for sales and
dispositions of inventory made, or liabilities incurred, in the
ordinary course of business consistent with past practices.
6.1.6 Consent to a sale of stock of BMW to any person or
entity other than Purchaser or an affiliate of Purchaser.
6.1.7 Neither the Company nor Kobe 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.
6.1.8 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
their tax methods or principles or the application thereof (including
depreciation lives).
6.1.9 Neither the Company nor Kobe 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, except as necessary
with respect to
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Seller's retention of the Excluded Assets and Liabilities, (ii) split,
combine or reclassify any of its capital stock or other ownership
interests or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for shares of, its
capital stock or other ownership interests, (iii) purchase, redeem or
otherwise acquire any shares of its capital stock or other ownership
interests, (iv) advance or otherwise loan any funds to Seller or any
affiliate of the Company or Seller other than the Company or Kobe or
(v) take any preliminary action with respect to the foregoing.
6.2 Confidentiality and Noninterference. Before either party
issues an initial press release disclosing this Agreement or the transactions
proposed herein, the parties shall agree on the text of such press release
before any public announcement or disclosure. Thereafter and until the Closing,
the parties shall consult with each other concerning any subsequent public
statements.
6.3 Access to Information. Upon Purchaser's request to a contact
person identified by Seller, Seller shall provide to Purchaser, from time to
time, reasonable information concerning the business, property, books and
records of the Company. All information furnished to Purchaser and its
representatives under this Section 6.3 shall be kept confidential by such
persons in accordance with the Confidentiality Agreement dated August 6,1997,
between the Purchaser and Seller, as amended from time to time (the
"Confidentiality Agreement").
6.4 HSR Filing.
6.4.1 Purchaser and Seller (collectively, the "HSR
Parties") shall make all premerger notification and report form
filings required under the HSR Act with respect to the transactions
contemplated hereby as promptly as reasonably possible following
execution and delivery of this Agreement. Each of the HSR Parties
agrees to use reasonable efforts to promptly respond to, and fully
address, any formal or informal inquiry or request for information by
a Governmental Entity regarding the transactions contemplated hereby.
Each HSR Party will keep the other HSR Party apprised of the status of
any inquiries made by any governmental agency or authority with
respect to this Agreement or the transactions contemplated hereby.
6.4.2 Each of the HSR Parties will furnish one another
copies of all correspondence, filings or communications (or memoranda
setting forth the substance thereof (collectively, "HSR Documents"))
between such HSR Party, or any of its respective representatives, on
the one hand, and any Governmental Entity, or members of the staff of
such agency or authority, on the other hand, with respect to this
Agreement or the transactions contemplated hereby; provided, however,
that (i) with respect to documents and other materials filed by or on
behalf an HSR Party with the Antitrust Division of the Department of
Justice, the Federal Trade Commission or any state attorneys general
that are otherwise available for review by the other HSR Parties,
copies will not be required to be so provided, (ii) the other HSR
Parties may delete all revenue figures relating to any service not
provided or any product not manufactured or sold by the other HSR
Parties or any of their respective subsidiaries (according to such
other HSR Party's HSR Documents) and (iii) with respect to any HSR
Party's Documents (a) that
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contain any information which, in the reasonable judgment of such HSR
Party's counsel, should not be furnished to such other HSR Party
because of antitrust considerations or (b) relate to a request for
additional information pursuant to Section (e)(1) of the HSR Act, the
obligation of an HSR Party to furnish any such HSR Documents to the
other HSR Party shall be satisfied by the delivery of such HSR
Documents on a confidential basis to such other HSR Parties' counsel
pursuant to an appropriate confidentiality agreement to be entered
into by Fulbright & Jaworski L.L.P., on behalf of Purchaser, and
Rogers and Wells on behalf of Seller.
6.4.3 Notwithstanding the foregoing provisions in this
Section 6.4, nothing contained in this Agreement shall be construed so
as to require any of the HSR Parties or any of their respective
subsidiaries or affiliates to sell, license, dispose of or hold
separate, or to operate in any specified manner, any of their
respective assets or businesses (or to require any of the HSR Parties
or any of their respective subsidiaries or affiliates to agree to any
of the foregoing). The obligations of each HSR Party under this
Section 6.4 to use reasonable efforts with respect to antitrust
matters shall be limited to compliance with the reporting provisions
of the HSR Act and with its obligations under this Section 6.4.
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATION
The obligations of Seller to consummate the transactions provided for
herein are subject to the satisfaction of each of the following conditions on
or before the Closing Date:
7.1 Representations True and Correct. The representations and
warranties of Purchaser set forth in this Agreement shall be true and correct
in all material respects at and as of the Closing Date.
7.2 Performance of Agreements. Purchaser shall have performed all
agreements and covenants required hereby to be performed prior to or at the
Closing Date.
7.3 Certificates. Purchaser will furnish Seller with such
certificates of Purchaser's officers and others as may be reasonably requested
by Seller to evidence compliance with the conditions set forth in this Article
VII.
7.4 Governmental Approvals. The waiting period (and any extension
thereof) under the HSR Act shall have expired or been terminated. No statute,
rule or regulation or order of any court or administrative agency shall be in
effect which prohibits Seller from consummating the transactions contemplated
hereby and no suit, action, investigation or other proceeding shall have been
instituted or threatened seeking to restrain or prohibit Purchaser or Seller
from consummating the transactions contemplated hereby.
7.5 Further Action. All consents, approvals, authorizations,
exemptions and waivers set forth in Schedule 4.18 hereto shall been obtained
and be effective
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and all other consents, approvals, authorizations, exceptions and waivers from
third persons that shall be required in order to enable Seller to consummate
the transactions contemplated hereby shall have been obtained.
7.6 Legal Opinion. Seller shall have been furnished an opinion of
Fulbright & Jaworski L.L.P., counsel to Purchaser, that (i) this Agreement and
the transactions contemplated hereby have been authorized by all necessary
corporate action on the part of Purchaser, and (ii) this Agreement is a valid
and binding obligation of the Purchaser.
ARTICLE VIII
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser to consummate the transactions provided
for herein are subject to the satisfaction, on or prior to the Closing Date, of
each of the following conditions:
8.1 Representations True and Correct. The representations and
warranties of Seller set forth in this Agreement shall be true and correct in
all material respects at and as of the Closing Date.
8.2 Performance of Agreements. Seller shall have performed all
agreements and covenants required hereby to be performed prior to or at the
Closing Date.
8.3 Certificates. Seller shall furnish Purchaser with such
certificates of Seller's officers and others as may be reasonably requested by
Purchaser to evidence compliance with the conditions set forth in this Article
VIII.
8.4 Governmental Approvals. The waiting period (and any extension
thereof) under the HSR Act shall have expired or been terminated. No statute,
rule or regulation or order of any court or administrative agency shall be in
effect which prohibits the Purchaser from consummating the transactions
contemplated hereby and no suit, action, investigation or other proceeding
shall have been instituted or threatened seeking to restrain or prohibit
Purchaser or Seller from consummating the transactions contemplated hereby.
8.5 Further Action. All consents, approvals, authorizations,
exemptions and waivers set forth in Schedule 5.4 hereto shall been obtained and
be effective and all other consents, approvals, authorizations, exceptions and
waivers from third persons that shall be required in order to enable Purchaser
to consummate the transactions contemplated hereby shall have been obtained.
8.6 Legal Opinion. The Purchaser shall have been furnished an
opinion of G. Glen Morie, Vice President and General Counsel of Seller, that
(i) this Agreement and the transactions contemplated hereby have been
authorized by all necessary action on the part of the Seller, (ii) this
Agreement is valid and enforceable according to its terms, subject to rules of
general application concerning equitable principles and debtor's rights, and
(iii) all of the outstanding shares of Company
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Stock have been duly authorized and validly issued and are fully paid and
nonassessable and free and clear of any Encumbrances.
ARTICLE IX
ACTIONS BY SELLER AND PURCHASER AFTER THE CLOSING
9.1 Transfer of Excluded Assets and Liabilities. Purchaser shall
cause Company to take whatever actions are necessary or useful to transfer to
Seller any portion of the Excluded Assets and Liabilities which may be in or
come into Company's possession at any time after the Closing.
9.2 Books and Records. Seller and Purchaser agree that so long as
any books, records and files retained by either party relating to the Company's
business and the Company Assets for any period prior to the Closing are
available, each party (at its expense) shall have the right to inspect and to
make copies at any time during business hours for any proper purpose. Neither
of the parties hereto will destroy any of such books, records and files without
first having offered to deliver such books and records to the other party.
Each party agrees that it will cooperate with and make available to the other
party during normal business hours any books, records, information and
employees necessary and useful in connection with (i) any tax inquiry, audit,
investigation or dispute, (ii) any litigation or investigation, (iii) any
environmental investigation or proceeding, or (iv) any other reasonable
business purpose requiring access to such books, records, information or
employees. The party requesting any such books, records, information or
employees shall bear all of the out-of-pocket costs and expenses (including
without limitation attorney's fees, but excluding reimbursement for salaries
and employee benefits) reasonably incurred in connection with providing such
books, records, information or employees.
9.3 Employee Matters. Except for the Employees listed on Schedule
9.3 attached hereto, Seller shall not employ or offer employment to any of the
Employees for a period of one year after the Closing Date, without the prior
written consent of Purchaser. Any employee who receives an offer from Seller as
permitted herein may decide to continue his employment with Company or to
accept the offer from Seller. Any Employee who leaves their assets in the
PACCAR Savings Investment Plan until January 1, 1998 will receive the matching
contribution from PACCAR for their contributions made during 1997 while a
member of the Plan.
9.4 Environmental Remediation. Seller will remediate any
contamination of the soil or groundwater listed in Schedule 4.17 to the level
necessary to satisfy applicable mandatory federal, state and local
requirements. All such remediation efforts shall be conducted by Seller at
Seller's expense and in a reasonable time period after the Closing, taking into
account the cost, urgency and effectiveness of the remediation efforts and
inconvenience to the Company's operations at such location. Purchaser will
cooperate with Seller and allow Seller access to any affected property in order
to remediate any such contamination. Seller shall be responsible for any fines
or penalties imposed because of the contamination listed on Schedule 4.17 or
related to the remediation thereof by Seller.
9.5 Survival of Representations and Warranties. The several
representations and warranties of the parties to this Agreement shall survive
the
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Closing Date and shall remain in full force and effect for a period of 6 months
following the Closing Date (the "Survival Period"), except that the
representations and warranties set forth in Sections 4.1, 4.2, 4.3, 4.5, 4.6,
4.19, 5.1, 5.2 and 5.5 shall survive the Closing Date without limitation. Any
claim for a breach of a representation or warranty must be made by the delivery
to the breaching party of a written notice providing specific details of the
alleged breach within the Survival Period. Any claim for breach of a
representation or warranty made during the Survival Period shall be timely,
notwithstanding such claim may not be resolved within the Survival Period. All
representations and warranties made by the parties shall not be affected by any
investigation heretofore or hereafter made by or on behalf of any party, except
for matters specifically disclosed in one of the Schedules to this Agreement or
to the extent taken into account in determining the "Net Assets" on the Final
Statement of Net Assets.
9.6 Survival of Covenants and Agreements. All covenants and
agreements contained herein shall survive the Closing without limitation;
provided, however, that such survival shall not operate to expand the
indemnification obligations set forth in Section 9.8.
9.7 Breach of Representations and Warranties by Seller. Subject
to the Survival Period limitation contained in Section 9.5 and the Threshold
Requirement of Section 9.9, in the event any representation or warranty made by
Seller herein in connection with the following matters shall be proved to be
incorrect when made, Purchaser's sole remedy shall be as follows:
9.7.1 If the representation or warranty related to any of
the Company Assets, Purchaser's sole remedy shall be to have the
Purchase Price adjusted as set forth in this Section 9.7.1. No
adjustment shall be made under this section for any change or alleged
change in the value of any specific Company Assets. The adjustment
shall be determined by reference to the amount (if any) by which the
"Net Assets" as shown on the Final Statement of Net Assets exceeds the
amount which would have been shown as "Net Assets" on the Final
Statement of Net Assets, if it had been prepared according to Section
3.3 based on the true facts and not in reliance on the incorrect
representation or warranty; provided that, if Company does not own the
shares of stock of BMW on the Closing Date free and clear of all
Encumbrances (except for agreements with the other shareholders of
BMW), such shares shall be valued at Fifteen Million U.S. Dollars
($15,000,000) for the purposes of the adjustment to the Purchase
Price.
9.7.2 If the representation or warranty related to the
environmental condition of the Real Property under Section 4.17,
Purchaser's sole remedy shall be to have Seller remediate such
contamination to the level necessary to satisfy applicable mandatory
federal, state and local requirements. All remediation efforts shall
be conducted by Seller at Seller's expense and in a reasonable time
period, taking into account the cost, urgency and effectiveness of the
remediation efforts and inconvenience to the Company's operations at
such location. Purchaser will cooperate with Seller and allow Seller
access to any affected property in order to remediate any such
contamination. Seller shall be responsible for any fines or penalties
imposed because of such contamination or related to the remediation
thereof by Seller.
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9.8 Indemnification.
9.8.1 By Seller. Except as otherwise provided in Section
9.7 hereof, and subject to the Survival Period limitation contained in
Section 9.5 and the Threshold Requirement of Section 9.9, Seller shall
indemnify, defend and hold harmless Purchaser, its affiliates and
subsidiaries, and its and their respective employees, representatives,
officers, directors and agents from and against any and all Damages
(whether or not arising out of third-party claims) incurred in
connection with or arising out of or resulting from or incident to:
(i) any breach of any of Seller's representations, warranties
or obligations under this Agreement; or
(ii) any Excluded Assets and Liabilities.
9.8.2 By Purchaser or Company. Purchaser shall (or shall
cause Company to) indemnify, defend and hold harmless Seller, its
affiliates and subsidiaries, and its and their respective employees,
representatives, officers, directors and agents from and against any
and all Damages (whether or not arising out of third-party claims)
incurred in connection with or arising out of or resulting from or
incident to:
(i) any breach of any of Purchaser's
representations, warranties or obligations under this
Agreement;
(ii) any Assumed Liability; or
(iii) any obligation, liability, claim or cause of
action arising from or relating to the Company or its
business, unless such obligation, liability, claim or cause of
action arises from or relates to (i) the Excluded Assets and
Liabilities, (ii) Seller's obligations under Sections 9.4 and
9.7.2 hereof, or (iii) a breach of Seller's representations,
warranties or obligations which Seller is obligated to
indemnify Purchaser for under Section 9.8.1 of this Agreement.
9.8.3 Defense of Claims. If any lawsuit or enforcement
action is filed against any party entitled to the benefit of indemnity
hereunder, written notice thereof shall be given to the indemnifying
party as promptly as practicable (and in any event within fifteen (15)
days after the service of the citation or summons); provided that the
failure of any indemnified party to give timely notice shall not
affect the right to indemnification hereunder except to the extent
that the indemnifying party demonstrates actual prejudice caused by
such failure. After such notice, the indemnifying party shall take
control of the defense and investigation of such lawsuit or action and
any appeal arising therefrom and shall pay any resulting judgment or
settlement, all at its sole cost and expense; provided, however, that
the indemnified party, at its own cost, may participate in such
investigation, trial and defense of such lawsuit or action and any
appeal arising therefrom without affecting the indemnifying party's
obligations hereunder. If the indemnifying party fails to provide a
defense to such suit or action, the
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indemnified party may defend itself and compromise or settle the
lawsuit or action on any commercially reasonable basis, at the full
risk and expense of the indemnifying party.
9.9 Materiality and Threshold Requirement.
9.9.1 There shall be no adjustment to the Purchase Price under
Section 9.7.1 or indemnification under Section 9.8.1 for a breach of
any representation or warranty, except only the representations and
warranties in Sections 4.3, 4.5 and 4.6 hereof, unless and until the
Damages for all breaches of representations and warranties by Seller
exceed $1,000,000 in the aggregate (the "Threshold Requirement"), and
once all such Damages exceed the Threshold Requirement, Seller shall
be obligated only for Damages for such breaches of representations and
warranties in the aggregate in excess of the Threshold Requirement.
The Threshold Requirement shall not apply to indemnification for
breaches of the representations and warranties under Sections 4.3, 4.5
and 4.6 hereof or to indemnification claims under Section 9.8.1(i) for
breaches of obligations under this Agreement or under Section
9.8.1(ii), which indemnification shall be without limitation.
9.9.2 For purposes of determining the right of a party to make a
claim for an adjustment to the Purchase Price under Section 9.7.1 or
for indemnification for a breach of representation or warranty under
Section 9.8.1, all representations and warranties that have been made
subject to a materiality or dollar qualification (including any
Material Adverse Effect) shall be deemed to have been made without
that qualification; it being understood and agreed that the Threshold
Requirement provided for under Section 9.9.1 is intended to be the
only materiality qualification for such matters for purposes of
indemnification.
9.10 Waiver of Contribution.
9.10.1 Seller acknowledges and agrees that it shall not seek
or receive indemnification or contribution from the Company, Kobe or
BMW with respect to any claim for indemnification properly made
against Seller under Section 9.8.1.
9.10.2 Purchaser (on its own behalf and on behalf of the
Company) acknowledges and agrees that it shall not seek or receive
indemnification or contribution from Seller with respect to any claim
for indemnification properly made against Purchaser (or the Company)
under Section 9.8.2.
9.11 EXPRESS NEGLIGENCE. THE INDEMNIFICATIONS TO BE PROVIDED UNDER
SECTION 9.8 SHALL APPLY NOTWITHSTANDING THAT ANY MATTER FOR WHICH
INDEMNIFICATION IS TO BE PROVIDED MAY RELATE TO THE ORDINARY SOLE OR
CONTRIBUTORY NEGLIGENCE, GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR VIOLATION OF
LAW BY THE INDEMNITEE, INCLUDING ITS OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS,
AND FOR LIABILITIES BASED ON THEORIES OF STRICT LIABILITY, AND SHALL BE
APPLICABLE WHETHER OR NOT NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE
IS ALLEGED OR
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PROVEN. IT IS THE INTENTION OF THE PARTIES TO ALLOCATE THE RISKS AND
OBLIGATIONS AS SET FORTH IN THIS AGREEMENT AND TO INDEMNIFY ANY SUCH INDEMNITEE
FROM AND AGAINST ITS ORDINARY SOLE AND CONTRIBUTORY NEGLIGENCE AND GROSS
NEGLIGENCE, AS WELL AS FOR LIABILITIES BASED ON THE WILLFUL ACTIONS OR
OMISSIONS OF THE INDEMNIFIED PARTY AND LIABILITIES BASED ON THEORIES OF STRICT
LIABILITY.
9.12 RELEASE. AS OF THE CLOSING DATE, EXCEPT FOR THE PROVISIONS OF
THIS AGREEMENT AND FOR MATTERS SET FORTH ON SCHEDULE 9.12 HERETO, SELLER DOES
HEREBY FOR ITSELF AND ITS SUCCESSORS AND ASSIGNS RELEASE AND FOREVER DISCHARGE
PURCHASER, THE COMPANY AND THEIR RESPECTIVE AFFILIATES, SUCCESSORS AND ASSIGNS,
FROM ANY AND ALL CLAIMS, CAUSES OF ACTION, LIABILITIES AND OBLIGATIONS OF EVERY
NATURE WHATSOEVER, LIQUIDATED OR UNLIQUIDATED, KNOWN OR UNKNOWN, MATURED OR
UNMATURED, FIXED OR CONTINGENT, THAT SELLER OR ITS AFFILIATES NOW HAS, OWNS OR
HOLDS OR HAS AT ANY TIME PREVIOUSLY HAD, OWNED OR HELD AGAINST SUCH PARTIES,
INCLUDING WITHOUT LIMITATION ALL LIABILITIES CREATED AS A RESULT OF THE
NEGLIGENCE, GROSS NEGLIGENCE AND WILLFUL ACTS OF THE COMPANY AND ITS RESPECTIVE
EMPLOYEES AND AGENTS, OR UNDER A THEORY OF STRICT LIABILITY, EXISTING AS OF THE
CLOSING DATE OR RELATING TO ANY ACTION, OMISSION OR EVENT OCCURRING ON OR PRIOR
TO THE CLOSING DATE.
9.13 Transition Period.
9.13.1 During a transition period lasting through March 31,
1998, Seller will provide any administrative services, including
without limitation fixed asset management, payroll and benefits,
worker's compensation, computing services, and credit, tax and legal
services, reasonably requested by Purchaser, at charges not to exceed
the fair market value of such services. Purchaser shall reimburse
Seller for all costs and expenses incurred and indemnify Seller from
any claims and causes of action which may arise in connection with the
services to be provided under this section.
9.13.2 Seller, if requested by Purchaser, shall cooperate
and assist in preparing such audited financial statements of the
Company that Purchaser may reasonably require in order to permit
Purchaser to timely file a Current Report on Form 8-K with the
Securities and Exchange Commission in accordance with the Securities
Exchange Act of 1934, as amended, and the rules and regulations
thereunder in connection with the transactions contemplated hereby and
to comply with any financial statement requirements with respect to
the Company applicable to Purchaser under the Securities Act of 1933,
as amended, the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder. The cost of such audit shall be
borne by Purchaser. Seller will cooperate with and assist Purchaser
in preparing such other audited financial statements for the Company
as may be specified by Purchaser. In addition, the Seller will provide
federal tax information to Purchaser as necessary for Purchaser to
prepare the first federal income tax return of the Company due after
the Closing.
9.14 Letters of Credit. Seller has established various LC's listed
in Schedule 1.13.7 for the benefit of the Company or the benefit of Seller and
its
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affiliates (including the Company) in connection with the Greenville Industrial
Revenue Bond ("IRB") and workers' compensation programs. Seller will terminate
these LC's (or terminate coverage of the Company under such LC's) effective the
Closing Date. Purchaser understands and agrees that it will replace these LC's
or make other arrangements in order to comply with the requirements of the IRB
and these other programs. Purchaser will indemnify Seller from and costs and
expenses Seller incurs after the Closing in connection with these matters,
until Purchaser has established replacement programs.
9.15 Covenants Not to Compete. Seller agrees that, for a period of
two (2) years following the Closing Date, Seller and its affiliates shall not
directly or indirectly manufacture or distribute anywhere in the world any
products that compete with products presently manufactured or distributed by
Company, but this restriction shall not apply to any Seller's Components. The
parties acknowledge and agree that any breach of this Section 9.15 will result
in irreparable harm to Purchaser and that a remedy at law will be inadequate.
Purchaser shall, in addition to any other remedy that may be available to it,
be entitled to specific performance and injunctive and other equitable relief
in case of any such breach or attempted breach. The parties acknowledge that
this covenant not to compete are being provided as an inducement to Purchaser
to engage in the transactions set forth herein and that this Section 9.15
contains reasonable limitations as to time, geographical area and scope of
activity to be restrained that do not impose a greater restraint than is
necessary to protect the goodwill or other business interest of Purchaser. In
the event that the provisions of this Section 9.15 should ever be deemed to
exceed the time or geographic limitations permitted by applicable laws, then
such provision shall be reformed to the maximum time or geographic limitations
permitted by applicable law.
9.16 Tax Basis. Within 3 months of the Closing, Seller will
provide to Purchaser information as to the tax basis for federal income tax
purposes of all Company Assets and liabilities as of the date of the Final
Statement of Net Assets. If the tax basis information provided by Seller
differs from the basis information used to calculate deferred taxes for
purposes of the Final Statement of Net Assets and such difference would result
in a lower net deferred tax asset or in a higher net deferred tax liability,
then the difference, multiplied by 0.37 (37%), will be considered as if it were
Damages caused by a breach of a representation or warranty made by Seller
herein.
9.17 Taxes. All sales, use, excise, or other transfer taxes, if
any, which are imposed on the transfer of the Company Stock or are imposed on
the Company because of the transfer of the Company Stock as set forth herein
shall be paid by the Purchaser, except for any taxes imposed by the State of
Washington which shall be paid by Seller.
9.18 Further Assurances and Cooperation. On and after the Closing
Date, Seller and Purchaser will take all appropriate actions and execute any
documents, instruments or conveyances of any kind which may be reasonably
necessary or advisable to carry out or to assist the other party to carry out
any of its or their obligations under the provisions of this Agreement.
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ARTICLE X
MISCELLANEOUS
10.1 Termination. If any condition precedent to Seller's
obligations hereunder is not satisfied and such condition is not waived by
Seller at or prior to the Closing Date, or if any condition precedent to
Purchaser's obligations hereunder is not satisfied and such condition is not
waived by Purchaser at or prior to the Closing Date, Seller or Purchaser, as
the case may be, may terminate this Agreement at its option by notice to the
other party, unless the party intending to give such notice is in default under
its obligations hereunder. If the approval conditions under Sections 7.4 and
8.4 hereof have not been satisfied by December 31, 1997, either party may
terminate this Agreement by giving 5 days written notice to the other party,
and this Agreement shall automatically terminate at the end of the notice
period unless the conditions have been satisfied by then. In the event of the
termination of this Agreement by either party as above provided, neither party
shall have any liability hereunder of any nature whatsoever (other than
pursuant to Sections 6.2 and 10.2 hereof) to the other party. In the event that
a condition precedent to its obligations is not satisfied, nothing contained
herein shall be deemed to require any party to terminate this Agreement, rather
than to waive such condition precedent and proceed with the Closing.
10.2 Confidential Information. In connection with the negotiation
of this Agreement and the preparation for the consummation of the transactions
contemplated herein, each party has had access to confidential information
relating to the other party. Each party agrees to restrict such information
(including knowledge of this Agreement and the transactions contemplated
herein) to those and only those employees, attorneys, accountants, advisors and
consultants who need to know such information. Each party shall treat all such
information as confidential, shall preserve the confidentiality thereof and
shall not duplicate or use such information except in connection with the
transactions contemplated hereby. In the event of the termination of this
Agreement for any reason whatsoever, each party shall return to the other all
documents, work papers and other material (including all copies thereof)
obtained in connection with the transactions contemplated hereby and will use
all reasonable efforts, including instructing its employees who have had access
to such information, to keep confidential and not to use any such information,
unless such information is now or is hereafter disclosed, through no act or
omission of such party, in any manner making it available to the general
public.
10.3 Assignment. Neither this Agreement nor any of the rights and
obligations hereunder may be assigned by either party without the prior written
consent of the other. The foregoing notwithstanding, the Purchaser may assign
all of its rights under this Agreement after the Closing, but such assignment
shall not release Purchaser from its obligations under this Agreement.
10.4 Notices. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by either party to
the others shall be in writing and delivered personally, by facsimile (with
confirmed transmission status) or mailed by certified mail, postage prepaid,
return receipt requested (such mailed notice to be effective on the date such
receipt is acknowledged), as follows:
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If to Seller, addressed to:
PACCAR Inc
P.O. Box 1518
Bellevue, WA 98009
Attention: Richard P. Fox, Senior Vice President
Facsimile: (425) 455-7464, until 10/20/97; (425) 468-8230 thereafter
Telephone: (425) 453-5936, until 10/20/97; (425) 468-7999 thereafter
With copies to:
PACCAR Inc
P.O. Box 1518
Bellevue, WA 98009
Attention: G. Glen Morie, Vice President and General Counsel
Facsimile: (425) 455-7421, until 10/20/97; (425) 468-8228 thereafter
Telephone: (425) 453-7499, until 10/20/97; (425) 468-7499 thereafter
If to Purchaser, addressed to:
EVI, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attention: James G. Kiley
Facsimile: (713) 297-8488
Telephone: (713) 297-8400
With copies to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attention: Curtis W. Huff
Facsimile: (713) 651-5246
Telephone: (713) 651-5151
or such other place and with such other copies as any party may designate by
written notice to the others.
10.5 Choice of Law and Interpretation. This Agreement shall be
construed and interpreted and the rights of the parties determined in
accordance with the laws of the State of Washington. Both parties acknowledge
that this Agreement has been negotiated and prepared with the participation of
legal counsel for both parties, and they agree that the Agreement shall be
interpreted and construed without reference to either party as being the author
or preparer of the Agreement.
10.6 Entire Agreement; Amendments and Waivers. This Agreement,
together with all Exhibits and Schedules hereto, constitutes the entire
Agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions
of the parties, whether oral or written. No supplement, modification or waiver
of this Agreement shall be
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binding unless executed in writing by the party to be bound thereby. No waiver
of any of the provisions of this Agreement shall be deemed to or shall
constitute a waiver of any other provision hereof, and the waiver of any
default shall not be deemed to be a waiver of any other or subsequent default.
10.7 Multiple Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
10.8 Expenses. Each party hereto shall pay its own expenses
incident to this Agreement and to any action taken by such party in performing
its obligations under this Agreement.
10.9 Invalidity. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law. If any provision of this Agreement shall be prohibited by
or invalid, illegal or unenforceable under applicable law, such provision shall
be ineffective to the extent of such prohibition or invalidity, illegality or
unenforceability without affecting the remaining provisions of this Agreement.
If any provision of this Agreement shall, for any reason, be judged by any
court of competent jurisdiction to be invalid or unenforceable, such judgment
shall not affect, impair or invalidate the other provisions of this Agreement,
but shall be confined in its operation to the provision directly involved in
the controversy in which such judgment shall have been rendered.
10.10 Headings. The headings of the Articles and Sections are not
intended to be a part of this Agreement.
10.11 Resolution of Disputes. In the event of any dispute
concerning this Agreement, the parties shall attempt in good faith to settle
the dispute among themselves, and if this is not successful, they shall seek
alternative methods to resolve the dispute in a cost effective manner before
commencing litigation.
10.12 Legal Fees. In the event of any arbitration or litigation
concerning the enforcement of this Agreement, the prevailing party shall be
entitled to recover its costs and expenses, including reasonable attorneys'
fees.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers, thereunto duly authorized, in
multiple originals, all as of the day and year first above written.
SELLER: PACCAR Inc PURCHASER: EVI, Inc.
By: /s/ Richard P. Fox By: /s/ James G. Kiley
-------------------------------- -------------------------------
Title: Senior Vice President Title: Vice President
----------------------------- ----------------------------
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As permitted by Item 601(b)(2) of Regulation S-K, the Company has not
filed any schedules or exhibits with this Exhibit No. 2.1. Listed below is a
brief description of the omitted schedules and exhibits. The Company agrees to
furnish supplementally a copy of any of such omitted schedules and exhibits to
the Commission upon request.
<TABLE>
<CAPTION>
Schedules
- - - - - - - - - - - - - - - ---------
<S> <C>
1.7.1 Real Property
1.7.5 Contracts with Obligations in Excess of $50,000
1.7.6 Patents and Trademarks
1.7.11 Shares of Stock in Subsidiaries
1.13.1 Excluded Real Property
1.13.3(a) Excluded Bank and Trust Accounts
1.13.3(b) Excluded Cash
1.13.7 Excluded Letters of Credit
1.13.9 Excluded Stock in Subsidiaries
1.13.11 Excluded Company and Seller Benefit Plans
1.13.12 Seller's Components
1.13.14 Litigation
1.19 Items Excluded from Adjustment of Net Assets
1.20(a) Statement of Net Assets
1.20(b) Statement of Reserves
4.6 Encumbrances on Stock of Subsidiaries (including Shareholders' Agreements)
4.8 Encumbrances on Company Assets
4.9 Encumbrances on Real Property
4.10 Exceptions to Certain Agreements
4.11 Exceptions to Contract Representations
4.12 Exceptions to Patents, Trademarks, Etc. Representations
4.13 Exceptions to Accounts Receivable Representations
4.15 Exceptions to Licenses, Permits and Authorizations Representations
4.16 Exceptions to Compliance Representations
4.17 Environmental Disclosures
4.18 Seller's Required Consents and Approvals
4.20 Pension and Benefit Plans
4.21 Taxes and Tax Returns
5.4 Purchaser's Required Consents and Approvals
6.1 Exceptions to Ordinary Course Transactions
9.3 Employees to Whom Seller May Make Offer of Employment
9.12 Company Obligations to Seller to Survive Closing
</TABLE>
<PAGE> 1
EXHIBIT 2.2
================================================================================
SHARE PURCHASE AGREEMENT
AMONG
CERTAIN SHAREHOLDERS OF
BMW MONARCH (LLOYDMINSTER) LTD.
ALL OF THE SHAREHOLDERS OF
BMW PUMP INC.
ALL OF THE SHAREHOLDERS OF
MAKELKI HOLDINGS LTD.
ALL OF THE SHAREHOLDERS OF
589979 ALBERTA LTD.
ALL OF THE SHAREHOLDERS OF
600969 ALBERTA LTD.
ALL OF THE SHAREHOLDERS OF
391862 ALBERTA LTD.
AND
EVI, INC.
DATED AS OF
OCTOBER 9, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
- - - - - - - - - - - - - - - ---------
PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-----------------
1.1 Sale of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
--------------
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-------
1.3 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
--------------
1.4 Purchase Price Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-------------------------
ARTICLE 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
- - - - - - - - - - - - - - - ---------
REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
OF THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-------------------
2.1 Organizational Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
----------------------
2.2 Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-------------------
2.3 Approvals, Licenses and Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . 9
--------------------------------------
2.4 Share Ownership; Title to and Condition of Properties . . . . . . . . . . . . . . . . . . 9
-----------------------------------------------------
2.5 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
-------------------------
2.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--------------------
2.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
-----
2.8 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
-------------
2.9 No Adverse Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
----------------------------
2.10 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
---------------------
2.11 Warranties and Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
--------------------------------
2.12 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
----------------
2.13 Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
-------------
2.14 Sales into the United States and Canada . . . . . . . . . . . . . . . . . . . . . . . . . 18
---------------------------------------
2.15 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
---------
ARTICLE 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
- - - - - - - - - - - - - - - ---------
REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
---------------------------------------
3.1 Corporate Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-----------------
3.2 Approvals, Licenses and Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . 19
--------------------------------------
3.3 Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-------------
ARTICLE 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
- - - - - - - - - - - - - - - ---------
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
---------------------
4.1 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
---------------------
4.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
---------
4.3 Negotiation with Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
-----------------------
4.4 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
-----------
4.5 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
------------------
4.6 Covenant Not to Compete With the Business . . . . . . . . . . . . . . . . . . . . . . . . 23
-----------------------------------------
4.7 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
-------
4.8 Transfer of Excluded Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
-------------------------------
ARTICLE 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
- - - - - - - - - - - - - - - ---------
BUYER'S CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
------------------
5.1 Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . 24
-----------------------------------------
5.2 Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
-------------
5.3 Instruments of Transfer and Share Certificates . . . . . . . . . . . . . . . . . . . . . . 25
----------------------------------------------
5.4 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
-------------
5.5 No Adverse Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
----------------
5.6 Other Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
-------------------
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
5.7 Licenses, Consents and Approvals by the Shareholders . . . . . . . . . . . . . . . . . . . 25
----------------------------------------------------
5.8 Consents of Third Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
-------------------------
5.9 Shareholder Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
----------------------
5.10 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
-------------
5.11 Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
------------
5.12 Shareholder and Intercompany Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
---------------------------------
ARTICLE 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
- - - - - - - - - - - - - - - ---------
SHAREHOLDERS' CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
------------------------
6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
------------------------------
6.2 Licenses, Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
--------------------------------
6.3 Other Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
-------------------
6.4 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
-------------
6.5 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
-------------
ARTICLE 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
- - - - - - - - - - - - - - - ---------
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
---------------
7.1 Indemnification by the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
-----------------------------------
7.2 Environmental Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
-----------------------------
7.3 Indemnification by Certain Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 30
---------------------------------------
7.4 Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
------------------------
7.5 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
---------
7.6 Indemnification Basket and Cap; Effect of Materiality Qualifiers . . . . . . . . . . . . . 31
----------------------------------------------------------------
7.7 Waiver of Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
----------------------
7.8 EXPRESS NEGLIGENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
------------------
7.9 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
-------
7.10 Failure to Pay Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
------------------------------
7.11 Adjustment of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-----------------------
ARTICLE 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
- - - - - - - - - - - - - - - ---------
NATURE OF STATEMENTS AND SURVIVAL OF COVENANTS,
-----------------------------------------------
REPRESENTATIONS,WARRANTIES AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-----------------------------------------
ARTICLE 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
- - - - - - - - - - - - - - - ---------
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-----------
9.1 Best Efforts to Satisfy Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
----------------------------------
9.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-----------
9.3 Liability Upon Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
--------------------------
9.4 Notice of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
---------------------
ARTICLE 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
- - - - - - - - - - - - - - - ----------
DEFINITIONS OF CERTAIN TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
----------------------------
ARTICLE 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
- - - - - - - - - - - - - - - ----------
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
-------------
11.1 Shareholder Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
--------------------------
11.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
--------
11.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
-------
11.4 Bulk Transfer Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
------------------
11.5 Assignment and Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
-------------------------
11.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
----------------
11.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
-------------
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
11.8 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
------
11.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
------------
11.10 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
----------------------------
11.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
------------
11.12 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
--------
11.13 Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
-------------------
</TABLE>
-iii-
<PAGE> 5
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 9th day of October, 1997, by and among the shareholders of BMW
Monarch (Lloydminster) Ltd., an Alberta corporation ("BMW Monarch"), listed on
the signature pages hereto (the "BMW Monarch Shareholders"), the shareholders
of BMW Pump Inc., an Alberta corporation ("BMW Pump"), listed on the signature
pages hereto (the "BMW Pump Shareholders"), the shareholder of Makelki Holdings
Ltd., an Alberta corporation ("Makelki"), listed on the signature pages hereto
(the "Makelki Shareholder"), the shareholder of 589979 Alberta Ltd., an Alberta
corporation ("589979"), listed on the signature pages hereto (the "589979
Shareholder"), the shareholders of 600969 Alberta Ltd., an Alberta corporation
("600969"), listed on the signature pages hereto (the "600969 Shareholders"),
the shareholders of 391862 Alberta Ltd., an Alberta corporation ("391862"),
listed on the signature pages hereto (the "391862 Shareholders", and together
with the BMW Monarch Shareholders, the BMW Pump Shareholders, the Makelki
Shareholder, the 589979 Shareholder and the 600969 Shareholders, the
"Shareholders"), and EVI, Inc., a Delaware corporation (the "Buyer").
W I T N E S S E T H :
WHEREAS, the BMW Monarch Shareholders and the BMW Pump Shareholders
desire to transfer, sell and assign to Buyer 44 shares of BMW Monarch common
stock, no par value ("BMW Monarch Stock"), and 5400 shares of BMW Pump common
stock, no par value ("BMW Pump Stock"), all upon the terms and subject to the
conditions set forth herein;
WHEREAS, the Makelki Shareholder desires to transfer, sell and assign
to Buyer all of the shares of Makelki common stock, no par value (the "Makelki
Stock"), the 589979 Shareholder desires to transfer, sell and assign to Buyer
all of the shares of 589979 common stock, no par value (the "589979 Stock"),
the 391862 Shareholders desire to transfer, sell and assign to Buyer all of the
shares of 391862 common stock, no par value (the "391862 Stock"), and the
600969 Shareholders desire to transfer, sell and assign to Buyer all of the
shares of 600969 common stock, no par value (the "600969 Stock"), all upon the
terms and subject to the conditions set forth herein;
WHEREAS, Makelki, 589979 and 391862 hold 12, 12 and 2 shares,
respectively, of BMW Monarch Stock, which together with the shares of BMW
Monarch Stock held by the BMW Monarch Shareholders represent 70% of the
outstanding shares of BMW Monarch Stock;
WHEREAS, 600969 holds 620 shares of BMW Pump Stock, which together
with the shares of BMW Pump Stock held by the BMW Pump Shareholders represent
all of the outstanding shares of BMW Pump Stock;
WHEREAS, the BMW Monarch Stock, the BMW Pump Stock, the Makelki Stock,
the 589979 Stock, the 600969 Stock and the 391862 Stock to be purchased from
the Shareholders are herein referred to as the "Shares"; and
WHEREAS, the parties hereto desire to set forth certain
representations, warranties and agreements, all as more fully set forth below;
NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements contained herein, the parties hereto agree as follows:
-1-
<PAGE> 6
ARTICLE 1
PURCHASE AND SALE
1.1 Sale of Shares. On the Closing Date, upon the terms and
subject to the conditions contained herein, each Shareholder shall transfer,
assign and convey to Buyer, and Buyer shall purchase from such Shareholder, the
number of shares of BMW Monarch Stock, BMW Pump Stock, Makelki Stock, 589979
Stock, 600969 Stock and 391862 Stock held by such Shareholder as set forth on
Schedule 1.1(a) hereto, free and clear of all Liens (other than those liens
created or suffered by Buyer and restrictions on sales of Shares under
applicable securities laws).
1.2 Closing. Subject to the conditions set forth in this
Agreement, the Closing shall take place at the offices of Milner Fenerty,
located at 2900, 10180-101 Street, ManuLife Place, Edmonton, Alberta, Canada,
at 9:00 a.m. on the first Business Day following the closing of Buyer's
purchase of all of the outstanding stock of Trico Industries, Inc. from PACCAR,
Inc., or at such other time, date and place as the parties hereto shall
mutually agree upon in writing (the "Closing Date"). Failure to consummate the
transactions contemplated hereby on such date shall not result in a termination
of this Agreement or relieve any party hereto of any obligation hereunder.
Title to, ownership of and control over the Shares shall pass to Buyer at the
Closing.
1.3 Purchase Price.
(a) Within one Business Day following the date hereof,
Buyer shall deliver to the Shareholders an earnest money deposit in the amount
of C$500,000 (the "Deposit"). The Deposit shall be paid to Reynolds, Mirth,
Richards & Farmer, counsel to the Shareholders, who shall hold the Deposit for
the benefit of the Shareholders pursuant to this Agreement. At the Closing,
the Deposit shall be applied against the payment of the Purchase Price pursuant
to Section 1.3(b) hereof. If this Agreement is terminated by the Shareholders
or the Shareholder Representative pursuant to Section 9.2(c), (d) or (e)
hereof, or by the Buyer pursuant to Section 9.2(e) hereof, the Shareholders
shall be entitled to retain the Deposit. If this Agreement is terminated
pursuant to Section 9.2(a) or (b) hereof, Buyer shall be entitled to a return
of the Deposit promptly following such termination.
(b) In consideration of the transfer to Buyer of the
Shares, Buyer shall pay to the Shareholders the Purchase Price, with the
Purchase Price to be allocated among the Shareholders in the manner and on the
basis set forth on Schedule 1.3 hereto. On the Closing Date, Buyer shall pay
an amount equal to the Estimated Purchase Price less the Deposit and the amount
of any Shareholder Loans that have not been paid as of the Closing, which shall
be allocated among the Shareholders in the manner and on the basis set forth on
Schedule 1.3 hereto. Such payments shall be made by wire transfer of same day
funds to Reynolds, Mirth, Richards & Farmer, counsel to the Shareholders, who
shall be responsible for the distribution of the Estimated Purchase Price to
the Shareholders. The Buyer will cause the Shareholder Loans to be paid at the
Closing.
1.4 Purchase Price Adjustment.
(a) Within 90 calendar days after the Closing Date, Buyer
and the Shareholder Representative shall jointly prepare a statement reflecting
the Purchase Price and the calculation thereof (the "Final Statement"). Buyer
shall provide the Shareholder Representative with access to copies of all work
papers and other relevant documents to prepare and verify the entries contained
in the Final Statement. Within ten calendar days following agreement between
Buyer and the Shareholder Representative as to the Final
-2-
<PAGE> 7
Statement, Buyer shall pay to the Shareholders, in the same proportions as the
Shareholders received the Estimated Purchase Price, the amount, if any, by
which the Purchase Price exceeds the Estimated Purchase Price and the
Shareholders, in the same proportions as the Shareholders received the
Estimated Purchase Price, shall reimburse Buyer the amount, if any, by which
the Estimated Purchase Price exceeds the Purchase Price. Unless the Buyer is
directed by the Shareholder Representative to make any payments to the
Shareholders in a different manner, Buyer shall make any payments pursuant to
this section to Reynolds, Mirth, Richards & Farmer, counsel to the
Shareholders, who shall be responsible for the distribution of such payments to
the Shareholders.
(b) If disputes with respect to the preparation of the
Final Statement arise, either party may submit the specific matters in dispute
to Ernst & Young or such other nationally recognized independent accounting
firm in Canada as may be approved by Buyer and the Shareholder Representative,
which firm shall render its opinion as to such matters. Based on such opinion,
such independent accounting firm will then send to Buyer and the Shareholder
Representative its determination on the specific matters in dispute within 30
days of the submission of all facts regarding the dispute to such independent
accounting firm, which determination shall be final and binding on the parties
hereto. Within five calendar days after delivery of such opinion to Buyer and
the Shareholder Representative, Buyer shall pay to Shareholders, in the same
proportions as the Shareholders received the Estimated Purchase Price, the
amount, if any, by which the Purchase Price exceeds the Estimated Purchase
Price and the Shareholders, in the same proportions as the Shareholders
received the Estimated Purchase Price, shall reimburse Buyer the amount, if
any, by which the Estimated Purchase Price exceeds the Purchase Price. The
fees and other costs charged by each party's own independent accounting firm
shall be borne by such party and the fees and other costs charged by the
independent accounting firm shall be borne by Buyer, on the one hand, and the
Shareholders, on the other hand, equally. Unless the Buyer is directed by the
Shareholder Representative to make any payments to the Shareholders in a
different manner, Buyer shall make any payments pursuant to this section to
Reynolds, Mirth, Richards & Farmer, counsel to the Shareholders, who shall be
responsible for the distribution of such payments to the Shareholders.
(c) The calculation of the Purchase Price for purposes of
the Final Statement shall be based on a combined consolidated balance sheet of
BMW Monarch and BMW Pump as of the end of the month during which the Closing
occurs (the "Closing Balance Sheet"). The Closing Balance Sheet shall be
prepared in a manner consistent with the March 31 Balance Sheet. For purposes
of preparing the Closing Balance Sheet (i) all intercompany transactions by and
between BMW Monarch and BMW Pump shall be eliminated and (ii) all indebtedness
owed to any of the Shareholders or any affiliates of any Shareholders shall be
eliminated. In addition, for purposes of preparing the Closing Balance Sheet,
(i) there shall be included as a liability an amount equal to 30% of any
increase in Net Assets applicable to BMW Monarch from that which existed at
March 31, 1997, (ii) all intercompany and intraparty transactions and balances
including sales, purchases and expenses, assets and liabilities between BMW
Monarch and BMW Pump or any Subsidiary, Affiliate or Shareholder shall be
eliminated, (iii) any unpaid or accrued bonuses and management fees shall be
fully accrued as liabilities, including any Tax withholding relating thereto,
(iv) all accrued and unpaid fees of any investment bankers, legal advisors,
accountants or other consultants or Persons providing services to any of the
Companies or their respective Subsidiaries shall be fully accrued as a
liability of BMW Monarch or BMW Pump as of the Closing Date notwithstanding
that such obligations may not be required to be paid or accrued under GAAP
until the Closing or after the Closing, (v) there shall not be any increases in
assets due to the recognition of any non-cash income after March 31, 1997,
other than in connection with sales of products and services in the
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<PAGE> 8
ordinary course of business, (vi) no increase in Net Assets shall be effected
as a result of any capital contributions or similar advances made by Buyer
after the Closing, (vii) there shall be no adjustments for extraordinary
charges from the Closing Date to the date of the Closing Balance Sheet, (viii)
all trade payables and accounts receivable entered into in the ordinary course
of business between or with Trico Industries, Inc. or West-Met Tool and
Machinery Ltd. shall be included, and (ix) any increase in assets as a result
of unrealized gains, translation adjustments, reversals of accruals for
contingent liabilities or changes of accounting shall not be considered. In
addition, if the Closing Date does not occur on the last day of a calendar
month, the increase in the Net Assets shall be determined by taking the
increase in Net Assets from March 31, 1997 through and including the last day
of the month in which the Closing occurs and multiplying that amount by a
fraction, the numerator of which shall be the number of days from March 31,
1997, through and including the Closing Date and the denominator of which shall
be the number of days from March 31, 1997, through and including the last day
of the month of the Closing. For purposes of clarification, there is attached
hereto as Exhibit 1.4 a sample calculation of the Purchase Price assuming a
Closing Date of November 15, 1997 and a Closing Balance Sheet date of November
30, 1997.
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SHAREHOLDERS
Except as otherwise set forth in the correspondingly numbered section
of the Disclosure Schedule delivered to and approved by Buyer at the signing of
this Agreement, (i) each Shareholder, severally and not jointly, with respect
to matters relating solely to such Shareholder, (ii) each BMW Monarch
Shareholder, the Makelki Shareholder, the 589979 Shareholder and each 391862
Shareholder, jointly and severally with the BMW Monarch Shareholders, the
Makelki Shareholder, the 589979 Shareholder and the 391862 Shareholders, with
respect to matters pertaining to BMW Monarch, (iii) each BMW Pump Shareholder
and the 600969 Shareholders, jointly and severally with the BMW Pump
Shareholders and the 600969 Shareholders, with respect to matters pertaining to
BMW Pump, (iv) the Makelki Shareholder, with respect to matters pertaining to
Makelki, (v) the 589979 Shareholder, with respect to matters pertaining to
589979, (vi) each 600969 Shareholder, jointly and severally with the other
600969 Shareholder, with respect to matters pertaining to 600969, (vii) each
391862 Shareholder, jointly and severally with the other 391862 Shareholder,
with respect to matters pertaining to 391862, hereby represent and warrant to
Buyer and covenant and agree as follows:
2.1 Organizational Matters.
(a) BMW Monarch, BMW Pump, Makelki, 589979, 600969 and
391862 are each a corporation duly organized, validly existing and in good
standing under the laws of the province of Alberta, Canada, and each is duly
authorized, qualified and licensed and have all requisite power and authority
under all applicable laws, ordinances and orders of public authorities to own,
operate and lease its properties and assets and to carry on its business in the
places and in the manner currently conducted.
(b) Each Company and its Subsidiaries is qualified to
transact business as extra-provincial or foreign corporations and is in good
standing in the jurisdictions, if any, specified in Section 2.1(b) of the
Disclosure Schedule, and there is no other jurisdiction in which the nature and
extent of its businesses or the character of its assets makes such
qualification necessary.
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<PAGE> 9
(c) All of the Subsidiaries of the Companies and their
respective ownership interests are set forth on Section 2.1(c) of the
Disclosure Schedule. Each such Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization set forth on Section 2.1(c) of the Disclosure
Schedule, and is duly authorized, qualified and licensed and has all requisite
power and authority under all applicable laws, ordinances and orders of public
authorities to own, operate and lease its properties and assets and to carry on
its business in the places and in the manner currently conducted. All of the
outstanding shares in the capital of such Subsidiaries have been duly
authorized and validly issued and are fully paid, non-assessable, were not
issued in violation of any preemptive rights or other preferential rights of
subscription or purchase of any Person and, except as set forth in Section
2.1(c) of the Disclosure Schedule, are owned of record and beneficially by the
Companies or their Subsidiaries identified on such schedule as owning such
interest free and clear of all Liens (other than restrictions on sales of
shares under applicable securities laws). There are no outstanding options,
warrants, convertible securities, calls, rights, commitments, preemptive
rights, agreements, arrangements or understandings of any character obligating
any Company (i) to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares in the capital of such 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.
None of the Companies nor their respective Subsidiaries own (directly or
indirectly) any equity interest or other interest or investment in any
corporation, partnership, joint venture, association or other entity or
organization, other than the Subsidiaries set forth in Section 2.1(c) of the
Disclosure Schedule.
(d) Set forth in Section 2.1(d) of the Disclosure
Schedule is a true, correct and complete copy of the organizational documents
and bylaws of each of the Companies and each of their respective Subsidiaries,
in each case as in full force and effect on the date hereof.
(e) No part of the business conducted by BMW Monarch or
BMW Pump or their Subsidiaries is conducted in any province, state or
commonwealth under any name other than "BMW Monarch" and "BMW Pump".
(f) The authorized shares in the capital of BMW Monarch
consists of an unlimited number of Class A common voting shares, of which 100
shares are issued and outstanding, an unlimited number of Class B common
non-voting shares, none of which are issued and outstanding, an unlimited
number of Class C redeemable preferred non-voting shares, none of which are
issued and outstanding, an unlimited number of Class D redeemable preferred
non-voting shares, none of which are issued and outstanding, and an unlimited
number of Class E redeemable preferred non-voting shares, none of which are
issued and outstanding. All of the shares of capital stock of BMW Monarch that
are issued and outstanding are fully paid and non-assessable and were not
issued in violation of any preemptive rights of any Person. There are no
outstanding options, warrants, convertible securities, calls, rights,
commitments, preemptive rights, agreements, arrangements or understandings of
any character obligating BMW Monarch, the BMW Monarch Shareholders, Makelki,
589979 or 391862 (i) to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares in the capital of BMW Monarch 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. Except for 30 shares of BMW Monarch that are held by Trico
Industries, Inc., all of the outstanding BMW Monarch Shares are held by the BMW
Monarch Shareholders, Makelki, 589979 and 391862.
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<PAGE> 10
(g) The authorized shares in the capital of BMW Pump
consists of an unlimited number of Class A common voting shares, of which 6,020
shares are issued and outstanding, an unlimited number of Class B common
non-voting shares, none of which are issued and outstanding, an unlimited
number of Class C redeemable preferred non-voting shares, none of which are
issued and outstanding, an unlimited number of Class D redeemable convertible
non-participating non-voting shares, none of which are issued and outstanding,
and an unlimited number of Class E voting non-participating redeemable shares,
none of which are issued and outstanding.. All of the shares of capital stock
of BMW Pump that are issued and outstanding are fully paid and non-assessable
and were not issued in violation of any preemptive rights of any Person. There
are no outstanding options, warrants, convertible securities, calls, rights,
commitments, preemptive rights, agreements, arrangements or understandings of
any character obligating BMW Pump, the BMW Pump Shareholders or 600969 (i) to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares in the capital of BMW Pump 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. All of the outstanding BMW
Pump Shares are held by the BMW Pump Shareholders and 600969.
(h) The authorized shares in the capital of Makelki
consists of an unlimited number of Class A common voting shares, 200 of which
are issued and outstanding, an unlimited number of Class B common non-voting
shares, none of which are issued and outstanding, an unlimited number of Class
C preferred non-voting shares, none of which are issued and outstanding, an
unlimited number of Class D preferred non-voting shares, none of which are
issued and outstanding, and an unlimited number of Class E preferred non-voting
shares, none of which are issued and outstanding, and all of which are owned of
record and beneficially by the Makelki Shareholder. All of the shares of
capital stock of Makelki that are issued and outstanding are fully paid and
non-assessable and were not issued in violation of any preemptive rights of any
Person. There are no outstanding options, warrants, convertible securities,
calls, rights, commitments, preemptive rights, agreements, arrangements or
understandings of any character obligating Makelki (i) to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares in the
capital of Makelki 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.
(i) The authorized shares in the capital of 589979
consists of an unlimited number of Class A common voting shares, 1,200 of which
are issued and outstanding, an unlimited number of Class B common non-voting
shares, none of which are issued and outstanding, an unlimited number of Class
C redeemable preferred non-voting shares, none of which are issued and
outstanding, an unlimited number of Class D shares, none of which are issued
and outstanding, and an unlimited number of Class E shares, none of which are
issued and outstanding, and all of which are owned of record and beneficially
by the 589979 Shareholder. All of the shares of capital stock of 589979 that
are issued and outstanding are fully paid and non-assessable and were not
issued in violation of any preemptive rights of any Person. There are no
outstanding options, warrants, convertible securities, calls, rights,
commitments, preemptive rights, agreements, arrangements or understandings of
any character obligating 589979 (i) to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares in the capital of 589979 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.
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<PAGE> 11
(j) The authorized shares in the capital of 600969
consists of an unlimited number of Class A common voting shares, 100 of which
are issued and outstanding, an unlimited number of Class B common non-voting
shares, none of which are issued and outstanding, an unlimited number of Class
C redeemable preferred non-voting shares, none of which are issued and
outstanding, an unlimited number of Class D shares, 1 of which is issued and
outstanding, and an unlimited number of Class E shares, none of which are
issued and outstanding, and all of which are owned of record and beneficially
by the 600969 Shareholders. All of the shares of capital stock of 600969 that
are issued and outstanding are fully paid and non-assessable and were not
issued in violation of any preemptive rights of any Person. There are no
outstanding options, warrants, convertible securities, calls, rights,
commitments, preemptive rights, agreements, arrangements or understandings of
any character obligating 600969 (i) to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares in the capital of 600969 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.
(k) The authorized shares in the capital of 391862
consists of an unlimited number of Class A shares, 100 of which are issued and
outstanding, an unlimited number of Class B shares, none of which are issued
and outstanding, an unlimited number of Class C shares, none of which are
issued and outstanding, an unlimited number of Class D shares, none of which
are issued and outstanding, and an unlimited number of Class E shares, none of
which are issued and outstanding, and all of which are owned of record and
beneficially by the 391862 Shareholders. All of the shares of capital stock of
391862 that are issued and outstanding are fully paid and non-assessable and
were not issued in violation of any preemptive rights of any Person. There are
no outstanding options, warrants, convertible securities, calls, rights,
commitments, preemptive rights, agreements, arrangements or understandings of
any character obligating 391862 (i) to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares in the capital of 391862 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.
2.2 Effect of Agreement.
(a) Each Shareholder has full power and authority to enter into
this Agreement, to consummate the transactions contemplated hereby and to
perform its obligations hereunder. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby by
such Shareholder has been duly authorized by all requisite action on the part
of such Shareholder. When this Agreement has been duly executed and delivered
by such Shareholder, it will be a valid and binding obligation of such
Shareholder enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect that
affect creditors' rights generally and by legal and equitable limitations on
the availability of specific remedies. Except as set forth in Section 2.2(a)
of the Disclosure Schedule, the execution, delivery and performance of this
Agreement by the Shareholders and the consummation of the transactions
contemplated hereby (i) do not violate any provision of the organizational
documents or bylaws of the Companies or any Subsidiaries, and (ii) do not
conflict with, or result in any breach of, or default or loss of any right
under (or an event or circumstance that, with notice or the lapse of time, or
both, may result in a default), or the creation of a Lien pursuant to, or cause
or permit the acceleration prior to maturity of any amounts owing under, any
indenture, mortgage, deed of trust, lease, or
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<PAGE> 12
other agreement to which the Companies or any Subsidiaries are a party or to
which any of their respective assets are subject.
(b) Except as set forth in Section 2.2(b) of the Disclosure
Schedule, the execution, delivery and performance of this Agreement by such
Shareholder will not result in the loss of any license, franchise or permit
possessed by the Companies or any Subsidiaries or give a right of acceleration
or termination to any party to any agreement or other instrument to which the
Companies or any Subsidiaries are a party or by which any of their respective
assets are bound, or the loss of any right or benefit under such agreement or
instrument.
2.3 Approvals, Licenses and Authorizations. All material
licenses, permits, concessions, warrants, franchises and other governmental
authorizations and approvals of all Governmental Entities required or necessary
for the Companies and their Subsidiaries to carry on their respective
businesses in the places and in the manner currently conducted have been duly
obtained, are in full force and effect and are set forth truly, correctly and
completely in Section 2.3 of the Disclosure Schedule. No violations are in
existence or have been recorded with respect to such licenses, permits or other
authorizations and no proceeding is pending or, to the knowledge of the
Shareholders, threatened with respect to the revocation or limitation of any of
such licenses, permits or other authorizations. The Companies and their
Subsidiaries have complied with all laws, rules, regulations and orders
applicable to them, and all rules, regulations and orders respecting the
provision of services by the Companies and their Subsidiaries, except for
violations that would not have a Material Adverse Effect.
2.4 Share Ownership; Title to and Condition of Properties.
(a) Each Shareholder owns beneficially and of record the
Shares set forth in Section 2.4(a) of the Disclosure Schedule next to such
Shareholder's name, free and clear of all Liens. Upon the purchase of the such
Shares as contemplated by this Agreement, Buyer will obtain good and valid
title to such Shares free and clear of all Liens (other than those Liens
created or suffered by Buyer and restrictions on sales of Shares under
applicable securities laws).
(b) The shares of BMW Monarch held by Makelki, 589979 and
391862 are owned of record and beneficially by such Companies free and clear of
all Liens (other than restrictions on sales of shares under applicable
securities laws). The shares of BMW Pump held by 600969 are owned of record
and beneficially by it free and clear of all Liens (other than restrictions on
sales of shares under applicable securities laws).
(c) The Companies and their Subsidiaries have good title
to, or valid and subsisting leasehold interests in, all personal property owned
or leased by it free and clear of all Liens, except as set forth in Section
2.4(c) of the Disclosure Schedule.
(d) Except as set forth in Section 2.4(d) of the
Disclosure Schedule, each parcel of real estate owned or leased by the
Companies or any Subsidiaries (i) is free and clear of any Liens, other than
Permitted Liens, and (ii) is neither subject to any governmental decree or to
be sold nor, to the knowledge of the Shareholders, is being condemned,
expropriated or otherwise taken by any public authority with or without payment
of compensation therefor, nor, to the knowledge of the Shareholders, has any
such condemnation, expropriation or taking been proposed.
(e) Except as set forth in Section 2.4(e) of the
Disclosure Schedule, the Companies and their Subsidiaries own, or are licensed,
or otherwise have the right to use, all patents, patent rights, trademarks,
trademark rights, trade names, trade name rights,
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<PAGE> 13
service marks, service mark rights, copyrights and other proprietary
intellectual property rights and computer programs (collectively "Intellectual
Property") that are material to the conduct of the business of the Companies or
any of their respective Subsidiaries. The consummation of the transactions
contemplated by this Agreement will not result in the loss of any Intellectual
Property that is material to any Company or any of its Subsidiaries. Except as
set forth on Section 2.4(e) of the Disclosure Schedule, no claims are pending
or, to the knowledge of such Shareholder, threatened that the Companies or any
of their Subsidiaries are infringing or otherwise adversely affecting the
rights of any Person with regard to any Intellectual Property.
2.5 Contracts and Commitments.
(a) Except as set forth in Section 2.5(a) of the
Disclosure Schedule, none of the Companies nor any of their Subsidiaries is a
party to or are bound by:
(i) any agreement, contract or commitment
requiring the expenditure or series of related expenditures
of funds in excess of C$50,000 (other than purchase orders in
the ordinary course of business for raw materials necessary
to complete then existing contracts or purchase orders);
(ii) any agreement, contract or commitment
requiring (A) the customer's payment for goods or services
(whether or not such goods or services are actually provided)
or (B) the provision of goods or services, in either case at
a price less than the cost of producing such goods or
providing such services;
(iii) 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) any agreement or obligation with any
director, officer, shareholder or Affiliate of the Companies,
including PACCAR, Inc. or Trico Industries, Inc.
(v) any Debt Obligations;
(vi) any management service, employment,
consulting, collective bargaining or other similar type
contract or agreement;
(vii) any agreement, contract or commitment that
would limit the freedom of Buyer or any Affiliate thereof
following the Closing Date to engage in any line of business,
to own, operate, sell, transfer, pledge or otherwise dispose
of or encumber any of the assets of any of the Companies or
any of their Subsidiaries or to compete with any Person or to
engage in any business or activity in any geographic area;
(viii) any agreement, lease, contract or commitment
or series of related agreements, leases, contracts or
commitments not entered into in the ordinary course of
business or, except for agreements to purchase or sell goods
and services entered into in the ordinary course of business,
not cancelable by the Companies or one of their Subsidiaries
without penalty within 90 calendar days;
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<PAGE> 14
(ix) any agreement or contract obligating the
Companies or any of their Subsidiaries to provide for
indemnification or contribution with respect to any matter;
(x) any manufacturing, supply, sales,
distributorship or similar agreement relating to the products
manufactured or sold or services provided by the Companies or
any of their Subsidiaries;
(xi) any license, royalty or similar agreement; or
(xii) any other agreement, contract or commitment
that might reasonably be expected to have a Material Adverse
Effect.
(b) None of the Companies nor any of their Subsidiaries
is in breach of any provision of, or are in default (and such Shareholder does
not know of any event or circumstance that with notice, or lapse of time or
both, would constitute an event of default) under the terms of any of the
contracts or agreements listed on Section 2.5(a) of the Disclosure Schedule.
All of the contracts and agreements listed on Section 2.5(a) of the Disclosure
Schedule are in full force and effect. Such Shareholder is not aware of any
pending or threatened disputes with respect to any of the contracts or
agreements listed on Section 2.5(a) of the Disclosure Schedule.
(c) Except as set forth in Section 2.5(c) of the
Disclosure Schedule, the enforceability of the contracts and agreements set
forth on Section 2.5(a) of the Disclosure Schedule will not be affected in any
manner by the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby.
2.6 Financial Statements.
(a) Attached as Section 2.6(a) of the Disclosure Schedule
are true, correct and complete copies of:
(i) the audited balance sheet, statements of
income and statements of cash flow of BMW Monarch as of and
for the years ended March 31, 1996 and 1997;
(ii) the audited balance sheet, statements of
income and statements of cash flow of BMW Pump as of and for
the years ended March 31, 1996 and 1997;
(iii) an unaudited combined consolidated balance
sheet of BMW Monarch and BMW Pump as of March 31, 1997 (the
"March 31 Balance Sheet")
(collectively, the "Financial Statements").
(b) The Financial Statements (other than the March 31
Balance Sheet):
(i) fairly present the financial position of BMW
Monarch or BMW Pump and their respective Subsidiaries on a
consolidated basis as of their respective dates and the
results of operations of BMW Monarch or BMW Pump, as
applicable, and their Subsidiaries on a consolidated basis
for the periods indicated therein;
(ii) have been prepared in accordance with GAAP;
and
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<PAGE> 15
(iii) have not been rendered untrue, incomplete or
unfair as representations of the financial condition of BMW
Monarch or BMW Pump, as applicable, and their Subsidiaries on
a consolidated basis by events subsequent to the date of the
respective Financial Statements.
(c) The March 31 Balance Sheet reflects the balance sheet
of BMW Monarch and BMW Pump on a combined consolidated basis as of March 31,
1997, and has been prepared in accordance with GAAP except for the inclusion of
a liability for the 30% share ownership interest in BMW Monarch held by Trico
Industries, Inc. being reflected as a liability and except for such adjustments
to the balance sheet to reflect the Net Assets of the Companies as set forth in
the definition of Net Assets. Except as set forth in Section 2.6(c) of the
Disclosure Schedule, the Companies do not have any material liability of any
kind or matter, either direct, accrued, absolute or otherwise, that is not
reflected or disclosed in the Financial Statements.
(d) Except as set forth in Section 2.6(d) of the
Disclosure Schedule, the Makelki Shareholder represents and warrants that
Makelki has no liabilities and owns no other assets other than 12 of the BMW
Monarch Shares. Except as set forth in Section 2.6(d) of the Disclosure
Schedule, the 589979 Shareholder represents and warrants that 589979 has no
liabilities and owns no other assets other than 12 of the BMW Monarch Shares.
Except as set forth in Section 2.6(d) of the Disclosure Schedule, each 600969
Shareholder, severally and not jointly, represents and warrants that 600969 has
no liabilities and owns no other assets other than 620 of the BMW Pump Shares.
Except as set forth in Section 2.6(d) of the Disclosure Schedule, each 391862
Shareholder, severally and not jointly, represents and warrants that 391862 has
no liabilities and owns no other assets other than 2 of the BMW Monarch Shares.
The Shareholder Loans referred to in Section 2.6(d) of the Disclosure Schedule
are herein referred to as the "Shareholder Loans".
2.7 Taxes. Except as set forth in Section 2.7 of the Disclosure
Schedule:
(a) all Tax Returns of or relating to any Tax that are
required to be filed on or before the Closing Date for, by, on behalf of or
with respect to any Company or any of its Subsidiaries, including, but not
limited to, those relating to the income, business, operations or property of
such Company or any of its Subsidiaries and those which include or should
include such Company or any of its Subsidiaries (whether on a separate,
consolidated, affiliated, combined, unitary or any other basis), have been or
will be timely filed with the appropriate foreign, federal, provincial, state
and local authorities on or before the Closing Date, and all Taxes shown to be
due and payable on such Tax Returns or related to such Tax Returns have been or
will be paid in full on or before the Closing Date;
(b) all such Tax Returns and the information and data
contained therein have been or will be properly and accurately compiled and
completed, fairly present or will fairly present the information purported to
be shown therein, and reflect or will reflect all liabilities for Taxes for the
periods covered by such Tax Returns;
(c) none of such Tax Returns are under audit or
examination by any foreign, federal, provincial, 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 any Company or any of its Subsidiaries or with
respect to any such Tax Return, or any suits or other actions, proceedings,
investigations or claims now pending or threatened against any Company or any
of its Subsidiaries with respect to any Tax, or any matters under discussion
with any
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<PAGE> 16
foreign, federal, state or local authority relating to any Tax, or any claims
for any additional Tax asserted by any such authority;
(d) all Taxes assessed and due and owing from or against
any Company or any of its Subsidiaries on or before the Closing Date
(including, but not limited to, value added Taxes or ad valorem Taxes relating
to any property of any Company or any of its Subsidiaries) have been or will be
timely paid in full on or before the Closing Date;
(e) all withholding Tax and Tax deposit requirements
imposed on any Company or any of its Subsidiaries for any and all periods
ending on or before the Closing Date, or through and including the Closing Date
for periods that have not ended on or before the Closing Date, have been or
will be timely satisfied in full on or before the Closing Date;
(f) the Financial Statements reflect and include adequate
charges, accruals, reserves and provisions for the payment in full of any and
all Taxes payable with respect to any and all periods ending on or before the
respective dates thereof; and
(g) the liquidation of the Subsidiaries listed on Section
2.7 of the Disclosure Schedule may be effected without any Tax or liability to
any Company in an amount greater than C$50,000 for all the Subsidiaries in
aggregate.
2.8 No Litigation. Except as set forth in Section 2.8 of the
Disclosure Schedule, there is no action, suit, claim, investigation or legal,
administrative, arbitration or other proceeding, or governmental investigation
or examination, or any change in any zoning or building ordinance pending or,
to the knowledge of the Shareholder, threatened against or affecting any
Company or any of its Subsidiaries or their respective properties or assets, at
law or in equity, before or by any Governmental Entity and, to the knowledge of
such Shareholder, no basis exists for any such action, suit, claim,
investigation or proceeding. The matters set forth on Section 2.8 of the
Disclosure Schedule will not prevent the Shareholders from selling the Shares
to Buyer or prevent any Company or any of its Subsidiaries from carrying on its
business in the ordinary course.
2.9 No Adverse Changes or Events. Since March 31, 1997, the
Companies and their Subsidiaries have been consistently operated only in the
ordinary course, and, except as set forth in Section 2.9 of the Disclosure
Schedule, there has not been:
(a) any adverse change in the financial condition,
assets, liabilities (contingent or otherwise), results of operations, business
or prospects of the Companies and their Subsidiaries on a combined consolidated
basis except for such changes that in the aggregate have not had a Material
Adverse Effect, or any occurrence, circumstance or combination thereof that
might reasonably be expected to have a Material Adverse Effect before or after
the Closing;
(b) any damage, destruction or loss, whether or not
covered by insurance, adversely affecting any Company or any of its
Subsidiaries;
(c) except for those bonuses described in Section 2.9 of
the Disclosure Schedule and bonuses and increases effected in the ordinary
course of business for employees who are not Shareholders and are not
affiliated with any Shareholder, all of which shall have been paid prior to the
Closing or fully accrued on the Closing Balance Sheet, any increase in the
compensation or rate of compensation or commissions or bonuses payable or to
become payable by any Company or any of its Subsidiaries to any officer or
Shareholder employee, any payment or accrual of, or commitment with respect
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<PAGE> 17
to, any bonus plan or severance arrangement that is not consistent with past
practice or any change or modification to any severance arrangement;
(d) any sale, assignment, transfer or other disposition
or lapse of any proprietary rights of any Company or any of its Subsidiaries or
disclosure to any Person (other than employees of any Company or any of its
Subsidiaries in the scope of their employment) of any such proprietary rights
material to such Company or any of its Subsidiaries;
(e) any cancellation or compromise of any material
claims, or any waiver of any other material rights relating to any Company or
any of its Subsidiaries, or any sale, transfer or other disposition of any
properties or assets, real, personal or mixed, tangible or intangible, material
to any Company or any of its Subsidiaries (other than sales of inventory of the
Companies and their respective Subsidiaries in the ordinary course of
business);
(f) any change in any Company's or its Subsidiaries'
method of accounting for financial, Tax or other purposes; or
(g) any action taken or omitted to be taken that would
have been prohibited under Section 4.2 had such action been taken or omitted to
be taken after the date hereof.
2.10 Environmental Matters. Except as set forth in Section 2.10
of the Disclosure Schedule:
(a) none of the Companies, any of their respective
Subsidiaries or, to the knowledge of such Shareholder, any prior owner or
operator of the business conducted by any Company or any of its Subsidiaries
have caused or allowed the generation, use, treatment, storage, or disposal of
Hazardous Materials at any site or facility owned, leased or operated by any
Company or any of its Subsidiaries except in accordance with all applicable
Environmental Laws or except to the extent the same would not have a Material
Adverse Effect and would not result in any liability, contingent or otherwise,
to Buyer or its Affiliates or the Companies and their Subsidiaries;
(b) to the knowledge of such Shareholder, no Company nor
any of its Subsidiaries owns or leases or previously owned or leased any real
property, improvements or related assets that have been subject to the release
of any Hazardous Materials except to the extent that the same would not have a
Material Adverse Effect;
(c) each of the Companies and each of their respective
Subsidiaries have secured all Environmental Permits necessary to the conduct
the business of the Companies and the Subsidiaries, all such Environmental
Permits are subsisting and in good standing and each of the Companies and each
of their respective Subsidiaries are in compliance with such permits;
(d) None of the Companies nor any of their respective
Subsidiaries have received any notice, nor are the Shareholders aware, of any
proposal to amend, revoke or replace any Environmental Permit, or requiring the
issuance of any additional Environmental Permit;
(e) None of the Companies nor any of their respective
Subsidiaries have received inquiry or notice nor does such Shareholder have any
reason to suspect or believe that any Company or its Subsidiaries will receive
inquiry or notice of any actual or
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<PAGE> 18
potential proceedings, claims, lawsuits or losses related to or arising under
any Environmental Law and relating to any Company or its Subsidiaries;
(f) None of the Companies nor any of their respective
Subsidiaries are currently operating or required to be operating under any
compliance order, schedule, decree or agreement, any consent decree, order or
agreement, or corrective action decree, order or agreement issued or entered
into under any federal, state, provincial or local statute, regulation or
ordinance regarding the environment or health or safety in the work place; and
(g) Each Company and each of its Subsidiaries is in
compliance in all material respects with all applicable limitations,
restrictions, conditions, standards, prohibitions, requirements and obligations
established under Environmental Laws.
2.11 Warranties and Product Liability. Except as disclosed in
Section 2.11 of the Disclosure Schedule, none of the Companies nor any of their
respective Subsidiaries have provided any warranties with respect to goods or
services provided by them which cover consequential, punitive or exemplary
damages. Except as disclosed in Section 2.11 of the Disclosure Schedule, such
Shareholder is not aware of any state of facts or the occurrence of any event
forming the basis of any present claim against any Company or its Subsidiaries
with respect to warranties relating to products manufactured, sold or
distributed by it, or services performed by or on behalf of it on or prior to
the Closing except any claim that would not individually or in the aggregate
for the Companies and their Subsidiaries exceed C$250,000. The Companies and
the Subsidiaries have provided to Buyer all information relating to any known
or alleged material design or other defect with respect to the products
manufactured or sold by the Companies or Subsidiaries.
2.12 Employee Matters.
(a) There are no collective bargaining or other labor
union agreements to which any Company or any of its Subsidiaries is a party or
by which they are bound. To the knowledge of such Shareholder, none of the
Companies nor any of their respective Subsidiaries have encountered any labor
union organizing activity or had any actual or threatened employee strikes,
work stoppages, slowdowns or walkouts. There have been no allegations made by
any employees of any Company or any of its Subsidiaries regarding unfair labor
practices and there have been no union grievances filed.
(b) Section 2.12 of the Disclosure Schedule contains a
list and brief description of all employee pension plans (sometimes referred to
herein as "Pension Plans"), employee welfare benefit plans and all other
Benefit Plans maintained, or contributed to, by any Company, its Subsidiaries
or any of its Affiliates for the benefit of any present or former officers or
employees of any of the Companies or their Subsidiaries. The Companies and
their Subsidiaries have made available to Buyer prior to Closing true, complete
and correct copies of all filings for the past three years relating to the
foregoing Benefit Plans.
(c) Except as set forth in Section 2.12 of the Disclosure
Schedule, each Benefit Plan that has been or is sponsored, participated in or
contributed to by any of the Companies, their respective Subsidiaries or any of
their respective Affiliates, (i) is in compliance in all material respects with
all registration, reporting and disclosure requirements of all applicable laws,
(ii) has had all appropriate filings filed timely for each year of its
existence, if required, (iii) has at all times complied with any bonding
requirements, (iv) is in good standing, (v) has been properly funded and (vi)
has no controversy pending with any Governmental Entity, nor any controversy
resolved adversely to the Companies, Subsidiaries or any of their respective
Affiliates, which may
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<PAGE> 19
subject Buyer or any Company or its Subsidiaries to the payment of any penalty,
interest, tax or other obligation.
(d) Except as set forth in Section 2.12 of the Disclosure
Schedule, 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.
(e) No Company or any of its Subsidiaries or Affiliates
provides employee post-retirement medical or health coverage for any employee
or contributes to or maintains any employee welfare benefit plan which provides
for health benefit coverage following termination of employment of any
employee, except as described in Section 2.12 of the Disclosure Schedule, nor
has it made any representations, agreements, covenants or commitments to
provide that coverage.
(f) Except as set forth in Section 2.12 of the Disclosure
Schedule, no Company or any of its Subsidiaries or Affiliates or any officer or
director of any of the foregoing or any of the Benefit Plans, including the
Pension Plans, or any trusts created thereunder, or any trustee or
administrator thereof, have engaged in any prohibited transaction or act or any
other breach of fiduciary responsibility that could subject Buyer or any
Company or its Subsidiaries to any Tax or penalty or to any liability under any
applicable law or regulation.
(g) With respect to any Benefit Plan that is an employee
welfare benefit plan, such Benefit Plan (i) complies in all material respects
with the applicable requirements of law for such plan and (ii) may be amended
or terminated without liability to Buyer on or at any time after the Closing.
2.13 Finder's Fees. Such Shareholder has not, and no Company nor
any of its Subsidiaries or Affiliates has, employed or retained any investment
banker, broker, agent, finder or other party, or incurred any obligation for
brokerage fees, finder's fees or commissions, with respect to the sale of the
Shares 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 any party hereto may be obligated to pay
such a fee or commission. Each of the Shareholders, jointly and severally with
the other Shareholders, agrees to indemnify and hold Buyer and its Affiliates
harmless from and against any and all claims, liabilities or obligations with
respect to all fees, commissions or expenses asserted by any Person against any
Company or any of its Subsidiaries or Buyer on the basis of any act, statement,
agreement or commitment alleged to have been made by any Company or any of its
Subsidiaries with respect to any such fee, commission or expense. Each
Shareholder also agrees to severally indemnify Buyer from and against any and
all claims, liabilities and obligations with respect to fees, commission and
expenses asserted by any Person against any Company, any Subsidiary of any
Company or Buyer on the basis of any act, statement, agreement, or commitment
alleged to have been made by such Shareholder with respect to any such fee,
commission or expense.
2.14 Sales into the United States and Canada. Revenues from sales
of goods and services attributable to the Companies and the Subsidiaries into
and for use in the United States have, for each of the three years preceding
the date hereof, been less than an aggregate total of US$25,000,000. The
Companies and the Subsidiaries do not, in the aggregate, have assets in the
United States having a fair value in excess of US$15,000,000. Based on the
Financial Statements, which include the latest available audited financial
statements of BMW Pump and BMW Monarch, the total sales in Canada of the
Companies and any Person that controls any Company for the year ended March
-15-
<PAGE> 20
31, 1997 were less than C$190,000,000. Based on the Financial Statements,
which include the latest available audited financial statements of BMW Pump and
BMW Monarch, the total assets of the Companies at March 31, 1997 were less than
C$100,000,000.
2.15 Insurance. Section 2.15 of the Disclosure Schedule sets
forth all existing insurance policies held by the Companies and their
respective Subsidiaries relating to the business, assets, employees or agents
of the Companies and their respective Subsidiaries. Each such policy is in
full force and effect and is with responsible insurance carriers. There is no
dispute with respect to such policies and all claims arising from events or
circumstances occurring prior to the date hereof have been paid in full or
adequate reserves therefor are recorded in the Financial Statements. All
retroactive premium adjustments for any period ended on or before December 31,
1996 under any worker's compensation policy or any other insurance policies of
any Company or any of its Subsidiaries have been recorded in accordance with
GAAP and are reflected in the Financial Statements. None of such policies will
terminate as a result of the transactions contemplated by this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Shareholders as follows:
3.1 Corporate Matters. Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware,
United States of America. Buyer has all requisite corporate power and
authority to enter into this Agreement and to perform its obligations under
this Agreement. This Agreement has been duly authorized, executed and
delivered by Buyer and is a legal, valid and binding obligation of Buyer,
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws from time to time in effect that affect creditors' rights
generally and by legal and equitable limitations on the availability of
specific remedies. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by Buyer will not violate
any provision of, or constitute a default under, any contract or other
agreement to which Buyer is a party or by which it is bound, or conflict with
its organizational documents or Bylaws, other than violations, defaults or
conflicts that would not materially and adversely affect the ability of Buyer
to consummate the transactions provided for in this Agreement.
3.2 Approvals, Licenses and Authorizations. Based on the
representations regarding the Companies set forth in Article 2, particularly
Sections 2.6 and 2.14, except for a filing under the Investment Canada Act, no
order, license, consent, waiver, authorization or approval of, or exemption by,
or the giving of notice to, or the registration with, or the taking of any
other action in respect of, any Person not a party to this Agreement, including
any Governmental Entity, and no filing, recording, publication or registration
in any public office or any other place is now, or under existing law in the
future will be, necessary on behalf of Buyer to authorize its execution,
delivery and performance of this Agreement or any other agreement contemplated
hereby to be executed and delivered by Buyer and the consummation by Buyer of
the transactions contemplated hereby or thereby, or to effect the legality,
validity, binding effect or enforceability thereof.
3.3 Finder's Fees. Neither Buyer nor any Affiliate of Buyer has
employed or retained any investment banker, broker, agent, finder or other
party, or incurred any
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<PAGE> 21
obligation for brokerage fees, finder's fees or commissions, 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 any party hereto may be obligated to pay such a fee or a commission.
Buyer agrees to indemnify and hold the Shareholders and their Affiliates
harmless from and against any and all claims, liabilities or obligations with
respect to all fees, commissions or expenses asserted by any Person on the
basis of any act, statement, agreement or commitment alleged to have been made
by Buyer or any Affiliate of Buyer with respect to any such fee, commission or
expense.
ARTICLE 4
ADDITIONAL AGREEMENTS
4.1 Access to Information.
(a) Until the Closing, the Shareholders shall cause the
Company in which they are shareholders to furnish Buyer and its employees,
officers, accountants, attorneys, agents, investment bankers and other
authorized representatives with all financial, operating and other data and
information concerning the Companies and their Subsidiaries as Buyer shall from
time to time reasonably request and will afford Buyer and its employees,
officers, accountants, attorneys, agents, investment bankers and other
authorized representatives access to the Companies' and its Subsidiaries'
offices, properties, books, records, contracts and documents and will be given
the opportunity to ask questions of, and receive answers from, representatives
of the Companies and the Subsidiaries. No investigations by Buyer or its
employees, representatives or agents shall reduce or otherwise affect the
obligation or liability of the Shareholders with respect to any
representations, warranties, covenants or agreements made herein or in any
Exhibit, Schedule or other certificate, instrument, agreement or document,
including the Disclosure Schedule, executed and delivered in connection with
this Agreement. The Shareholders will cooperate with Buyer and its employees,
officers, accountants, attorneys, agents and other authorized representatives
in the preparation of any documents or other materials that may be required by
any Governmental Entity.
(b) The Shareholders agree to cooperate with Buyer, and
cause the Companies' outside auditors to assist Buyer, in the preparation of
any financial statements relating to the Companies and the Subsidiaries that
may be reasonably requested by Buyer for filing with the United States
Securities and Exchange Commission in connection with any filings that may be
made by the Buyer under the United States Securities Act of 1933 or the United
States Securities Exchange Act of 1934. Such financial statements shall, if
requested by Buyer, consist of (i) such audited balance sheets and audited
statements of operations, cash flows and changes in equity together with the
notes thereon and (ii) such unaudited interim balance sheets and unaudited
interim statements of operations, cash flows and changes in equity, if any, in
each case as Buyer or EVI, Inc. shall reasonably deem to be required. All
costs with respect to the preparation of the foregoing financial statements
shall be borne by Buyer.
4.2 Covenants. Until the Closing, except as described in Section
4.2 of the Disclosure Schedule, (i) each Shareholder shall and shall cause each
Company in which such Shareholder is a shareholder, (ii) each BMW Pump
Shareholder and each 600969 Shareholder shall and shall cause BMW Pump, and
(iii) each BMW Monarch Shareholder, the 391862 Shareholders, the Makelki
Shareholder and the 589979 Shareholder shall and shall cause BMW Monarch, to
comply with the provisions set forth below (unless otherwise consented to in
writing by Buyer):
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<PAGE> 22
(a) Each Company and its Subsidiaries shall conduct its
business in the ordinary and usual course;
(b) Each Company and its Subsidiaries will not (i) grant
or agree to grant any bonuses to any employee, except for bonuses
expressly noted in Section 4.2 of the Disclosure Schedule and bonuses
and increases in compensation effected in the ordinary course of
business for employees who are not Shareholders and who are not
Affiliates of any Shareholder that will have been paid or fully
accrued in the Closing Balance Sheet, (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
such Company or its Subsidiaries, (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;
(c) Each Company and its Subsidiaries will not amend its
charter or by-laws or enter into any merger or consolidation
agreement;
(d) Each Company and its Subsidiaries shall not 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;
(e) Each Company and its Subsidiaries shall not 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;
(f) The BMW Monarch Shareholders shall not consent to a
sale of BMW Monarch Stock to any Person other than Buyer or an
Affiliate of Buyer;
(g) Each Company and its Subsidiaries shall not assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
Person except in the ordinary and usual course of business consistent
with past practice;
(h) Each Company and its Subsidiaries 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); and
(i) Each Company and its Subsidiaries shall not (i)
declare or pay any dividend on or make any other distribution in
respect of any of its capital stock or other ownership interests, (ii)
split, combine or reclassify any of its capital stock or other
ownership interests or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of,
its capital stock or other ownership interests, (iii) purchase, redeem
or otherwise acquire any shares of its capital stock or other
ownership interests, (iv) advance or otherwise loan any funds to any
Shareholder or any Affiliate of such Company or any Shareholder other
than such Company and its Subsidiaries or (v) take any preliminary
action with respect to the foregoing.
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<PAGE> 23
4.3 Negotiation with Others. The Shareholders agree that from
the date hereof until the Closing Date or the termination of this Agreement
pursuant to Article 9 none of the Shareholders nor any Affiliate of the
Shareholders will, directly or indirectly, negotiate with any Person not a
party hereto or not affiliated with a party hereto with respect to a sale or
disposition of the Companies or Subsidiaries or authorize or encourage any
other Person to do the same. During such period, the Shareholders will return
without discussion all offers or proposals for the acquisition of the Shares or
any of the operating assets of any Company or its Subsidiaries.
4.4 Information. During the period from the date of this
Agreement to the Closing Date, Buyer and the Shareholders will promptly inform
each other in writing of (a) any claim, action or any proceeding commenced
against such party with respect to the transactions contemplated by this
Agreement or any assets or property of any Company or its Subsidiaries and (b)
any event or circumstance which renders untrue or inaccurate any representation
or warranty.
4.5 Further Assurances.
(a) Each Shareholder shall execute, acknowledge and
deliver or cause to be executed, acknowledged and delivered to Buyer such bills
of sale, assignments and other instruments of transfer, assignment and
conveyance, in form and substance satisfactory to counsel for Buyer, as shall
be necessary to vest in Buyer all the right, title and interest in and to the
Shares held by such Shareholder free and clear of all Liens (including the
release of all Liens of record) other than Permitted Liens) and shall use its
best efforts to cause to be taken such other action, including Tax filings and
filings in the Alberta personal property registry, as Buyer reasonably may
require to more effectively implement and carry into effect the transactions
contemplated by this Agreement.
(b) Buyer agrees that if it acquires the BMW Monarch
Shares held by Trico Industries, Inc., it will consent to the transactions
contemplated hereby and will not exercise any right to acquire the shares of
BMW Monarch held by the BMW Monarch Shareholders pursuant to the buy-sell
agreements between Trico Industries, Inc. and the BMW Monarch Shareholders as a
result of the proposed sale of the BMW Monarch Shares to Buyer by the BMW
Monarch Shareholders pursuant to this Agreement. Buyer agrees to promptly
advise the Shareholder Representative in the event its agreement to purchase
all the outstanding shares of Trico Industries, Inc. from PACCAR, Inc. is
terminated.
4.6 Covenant Not to Compete With the Business. Each of the
Shareholders agrees that, effective as of the Closing Date and for a period of
three years thereafter, neither such Shareholder nor such Shareholder's
Affiliates shall, without the consent of Buyer, directly or indirectly, design,
develop, market, produce, manufacture or provide any product, good or service
that competes with the business conducted by any Company or its Subsidiaries as
of the date of this Agreement in any geographic location in the world except
for the account of Buyer and its Affiliates. Each Shareholder acknowledges
that a remedy at law for any breach or attempted breach of this Section 4.6
will be inadequate and further agree that any breach of this Section 4.6 will
result in irreparable harm to the Companies and the Subsidiaries, and,
accordingly, Buyer and the Companies and their Subsidiaries shall, in addition
to any other remedy that may be available to any of them, be entitled to
specific performance and injunctive and other equitable relief in case of any
such breach or attempted breach. Each Shareholder acknowledges that this
covenant not to compete is being provided as an inducement to Buyer to acquire
the Shares from such Shareholder and that this Section 4.6 contains reasonable
limitations as to time, geographical area and scope of activity to be
restrained that do not impose a greater restraint than is necessary to protect
the goodwill or other business interest of Buyer and the Companies and their
Subsidiaries. Whenever possible, each provision of this
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<PAGE> 24
Section 4.6 shall be interpreted in such a manner as to be effective and valid
under applicable law but if any provision of this Section 4.6 shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remaining provisions of this Section 4.6. If any provision of
this Section 4.6 shall, for any reason, be judged by any court of competent
jurisdiction to be invalid or unenforceable, such judgment shall not affect,
impair or invalidate the remainder of this Section 4.6 but shall be confined in
its operation to the provision of this Section 4.6 directly involved in the
controversy in which such judgment shall have been rendered. In the event that
the provisions of this Section 4.6 should ever be deemed to exceed the time or
geographic limitations permitted by applicable laws, then such provision shall
be reformed to the maximum time or geographic limitations permitted by
applicable law.
4.7 Release.
(a) AS OF THE CLOSING, EACH OF THE SHAREHOLDERS DOES
HEREBY FOR ITSELF AND FOR HIMSELF OR HIS HEIRS, EXECUTORS, ADMINISTRATORS AND
LEGAL REPRESENTATIVES REMISE, RELEASE, ACQUIT AND FOREVER DISCHARGE EACH
COMPANY AND ITS RESPECTIVE AFFILIATES, PARTNERS, SHAREHOLDERS, OFFICERS,
DIRECTORS AND EMPLOYEES, 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 EACH OF SUCH SHAREHOLDERS NOW HAS, OWNS OR HOLDS OR
HAS AT ANY TIME PREVIOUSLY HAD, OWNED OR HELD AGAINST ANY COMPANY OR SUCH
PERSON, INCLUDING WITHOUT LIMITATION ALL LIABILITIES CREATED AS A RESULT OF THE
NEGLIGENCE, GROSS NEGLIGENCE AND WILLFUL ACTS OF ANY COMPANY, ANY OF THEIR
SUBSIDIARIES AND THEIR RESPECTIVE EMPLOYEES AND AGENTS, EXISTING AS OF THE
CLOSING OR RELATING TO ANY MATTER THAT OCCURRED ON OR PRIOR TO THE CLOSING;
PROVIDED, HOWEVER, THAT ANY CLAIMS, LIABILITIES, DEBTS OR CAUSES OF ACTION THAT
MAY ARISE (i) IN THE 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 (ii) FROM ANY BREACHES BY
ANY OF THEM OF THIS AGREEMENT OR ANY OTHER AGREEMENT SHALL NOT BE RELEASED OR
DISCHARGED PURSUANT TO THIS AGREEMENT; AND PROVIDED FURTHER (x) ANY LIABILITIES
UNDER BENEFIT PLANS LISTED IN THE DISCLOSURE SCHEDULE, INCLUDING EMPLOYMENT
RELATED MATTERS, ACCRUED VACATION AND SEVERANCE BASED ON SENIORITY, AND (y) ANY
SHAREHOLDER LOANS THAT ARE NOT PAID PRIOR TO THE CLOSING SHALL NOT BE RELEASED.
(b) EACH OF THE SHAREHOLDERS REPRESENTS AND WARRANTS THAT
SUCH SHAREHOLDER 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 HEREIN. EACH OF THE SHAREHOLDERS COVENANTS AND AGREES
THAT SUCH SHAREHOLDER 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 TO BE RELEASED
HEREIN. EACH OF THE SHAREHOLDERS REPRESENTS AND WARRANTS THAT SUCH SHAREHOLDER
HAS READ AND UNDERSTANDS ALL OF THE PROVISIONS OF THIS SECTION 4.7 AND THAT
SUCH SHAREHOLDER HAS BEEN REPRESENTED BY LEGAL COUNSEL OF SUCH SHAREHOLDER'S
OWN CHOOSING IN CONNECTION WITH THE NEGOTIATION, EXECUTION AND DELIVERY OF THIS
AGREEMENT.
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<PAGE> 25
4.8 Transfer of Excluded Properties. Prior to the Closing, BMW
Monarch shall transfer to 753646 Alberta Ltd. the property described in Section
4.8 of the Disclosure Schedule (the "Monarch Property") without representation
or warranty of any kind in consideration for the payment of the net book value
of such property.
ARTICLE 5
BUYER'S CONDITIONS
The obligation of Buyer to purchase the Shares as contemplated hereby
is, at the option of Buyer, subject to the satisfaction on or before the
Closing Date of the conditions set forth below, any of which may be waived by
Buyer in writing; provided, however, Buyer's election to proceed with the
Closing shall not be deemed a waiver of any breach of any representation,
warranty or covenant herein and such action shall not prejudice Buyer's right
to recover damages for any such breach.
5.1 Representations, Warranties and Covenants. The
representations and warranties of the Shareholders contained in this Agreement
shall be true, correct and complete in all material respects on and as of the
Closing Date with the same force and effect as though such representations and
warranties had been made or given on and as of such date; each and all of the
agreements and covenants of the Shareholders to be performed or complied with
by it on or before the Closing Date pursuant to this Agreement shall have been
performed or complied with in all material respects; and the Shareholders shall
have delivered to Buyer a certificate dated the Closing Date regarding the
matters set forth in this Section 5.1.
5.2 Good Standing. The Shareholders shall have delivered to
Buyer certificates issued by appropriate Governmental Entities evidencing the
status of each Company and its Subsidiaries, as of a date not more than five
calendar days prior to the Closing Date, in the province of Alberta, Canada and
in each other jurisdiction in which the Companies and their Subsidiaries
conduct their respective businesses.
5.3 Instruments of Transfer and Share Certificates. The
Shareholders shall have executed, acknowledged and delivered to Buyer stock
powers accompanying each share certificate evidencing the Shares, and other
instruments of transfer, assignment and conveyance as shall be reasonably
requested by Buyer to vest in Buyer all the right, title and interest in and to
the Shares.
5.4 No Litigation. No preliminary or permanent injunction or
other order of any court or other Governmental Entity shall be in effect or
threatened nor shall there be in effect any statute, rule, regulation or
executive order promulgated or enacted by any Governmental Entity that, in any
such case, prevents the consummation of the transactions contemplated by this
Agreement. No suit, action, claim, proceeding or investigation before any
Governmental Entity shall have been commenced or threatened by any Person
(other than Buyer or its Affiliates) seeking to prevent the sale of the Shares
or asserting that the sale of all or a portion of the Shares would be unlawful.
5.5 No Adverse Event. No Company nor its Subsidiaries shall be
affected or threatened to be affected by any loss or damage to any of their
respective assets, whether or not covered by insurance, except to the extent
that the same would not have a Material Adverse Effect.
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5.6 Other Legal Matters. All Exhibits, Schedules, certificates,
documents and legal matters in connection with this Agreement and the
transactions contemplated hereby shall be in substantially the forms required
by this Agreement.
5.7 Licenses, Consents and Approvals by the Shareholders. The
Shareholders shall have delivered to Buyer a copy of each of the licenses,
consents, approvals and other authorizations from Governmental Entities
necessary or appropriate for the Shareholders to consummate the transactions
contemplated by this Agreement.
5.8 Consents of Third Persons. Buyer, or an affiliate of Buyer,
shall have closed its acquisition of all of the outstanding shares of Trico
Industries, Inc. All material consents from third Persons, including those
consents necessary for the consummation of the transactions contemplated by
this Agreement and those consents listed in Section 2.2 of the Disclosure
Schedule, shall have been obtained on terms satisfactory to Buyer and delivered
to Buyer.
5.9 Shareholder Agreements. Buyer shall have received from each
Shareholder a release by such Shareholder of any and all rights that such
Shareholder may have under any shareholder agreements between such Shareholder,
any of the other Shareholders or any of the Companies.
5.10 Legal Opinion. Buyer shall have received from Reynolds,
Mirth, Richards & Farmer, counsel to the Companies and the Shareholders, a
legal opinion in substantially the form set forth in Exhibit 5.10.
5.11 Resignations. Buyer shall have received written resignations
from all of the directors and officers of each of the Companies.
5.12 Shareholder and Intercompany Debt. Except for the
Shareholder Loans, all indebtedness owed between any Company or its
Subsidiaries not eliminated on the combined consolidated financial statements
of BMW Pump and BMW Monarch and any Shareholder shall have been paid in full or
released (other than amounts due from 708621 Alberta Ltd., a subsidiary of BMW
Monarch and BMW Pump).
ARTICLE 6
SHAREHOLDERS' CONDITIONS
The obligation of the Shareholders to transfer the Shares as
contemplated hereby is, at the option of the Shareholders, subject to the
satisfaction on or before the Closing Date of the conditions set forth below,
any of which may be waived by the Shareholders in writing; provided, however,
the Shareholders' election to proceed with the closing of the transactions
contemplated hereby shall not be deemed a waiver of any breach of any
representation, warranty or covenant herein and such action shall not prejudice
the Shareholders' rights to recover damages for any breach.
6.1 Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true, correct and
complete in all material respects on and as of the Closing Date with the same
force and effect as though such representations and warranties had been made or
given on and as of such date; each and all of the agreements and covenants of
Buyer to be performed or complied with by it on or before the Closing Date
pursuant to this Agreement shall have been performed or complied with in all
material respects; and Buyer shall have delivered to the Shareholders
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a certificate signed by one of its duly authorized officers, dated the Closing
Date, regarding the matters set forth in this Section 6.1.
6.2 Licenses, Consents and Approvals. Buyer, or an affiliate of
Buyer, shall have closed its acquisition of all of the outstanding shares of
Trico Industries, Inc. and evidence of the same shall have been provided to the
Shareholders Representative. Buyer shall have delivered to Shareholders a copy
of each of the licenses, consents, approvals and other authorizations from
Governmental Entities necessary or appropriate for Buyer to consummate the
transactions contemplated by this Agreement.
6.3 Other Legal Matters. All Exhibits, Schedules, certificates,
documents and legal matters in connection with this Agreement and the
transactions contemplated hereby shall be in substantially the forms required
by this Agreement.
6.4 No Litigation. No preliminary or permanent injunction or
other order of any Governmental Entity shall be in effect or threatened nor
shall there be any statute, rule, regulation or executive order promulgated or
enacted by any Governmental Entity that, in any such case, prevents the
consummation of the transactions contemplated by this Agreement.
6.5 Legal Opinion. The Shareholders shall have received from
Fulbright & Jaworski L.L.P. and Milner Fenerty, counsels to Buyer, a legal
opinion in substantially the form set forth in Exhibit 6.5.
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification by the Shareholders. Except as otherwise
limited by this Article 7, Article 8 and Article 9 hereof, (i) each
Shareholder, severally and not jointly, with respect to matters relating solely
to such Shareholder, (ii) each BMW Monarch Shareholder, the Makelki
Shareholder, the 589979 Shareholder and each 391862 Shareholder, jointly and
severally with each BMW Monarch Shareholder, the Makelki Shareholder, the
589979 Shareholder and each 391862 Shareholder, with respect to matters
pertaining to BMW Monarch, (iii) each BMW Pump Shareholder and each 600969
Shareholder, jointly and severally with each BMW Pump Shareholder and each
600969 Shareholder, with respect to matters pertaining to BMW Pump, (iv) the
Makelki Shareholder, with respect to matters pertaining to Makelki, (v) the
589979 Shareholder, with respect to matters pertaining to 589979, (vi) each
600969 Shareholder, jointly and severally with the other 600969 Shareholder,
with respect to matters pertaining to 600969, and (vii) each 391862
Shareholder, jointly and severally with the other 391862 Shareholder, with
respect to matters pertaining to 391862, agrees to indemnify, defend and hold
Buyer and its successors and assigns harmless from and against and in respect
of Damages actually suffered, incurred or realized by such party, arising out
of or resulting from or relating to:
(a) any breach of representation or warranty made in
Article 2 of this Agreement, including those portions of the
Disclosure Schedule referenced in Article 2; provided, however, to the
extent a breach of Section 2.10 of this Agreement requires remediation
or other action with respect to an Identified Property to bring that
Identified Property in compliance with Environmental Laws, the Buyer's
sole remedy for such breach shall be limited to the remedies provided
in Section 7.2 hereof;
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(b) any breach of a covenant or agreement in this
Agreement by such Shareholder;
(c) any liability or claim for liability (whether in
contract, in tort or otherwise, and whether or not successful) related
to the operations and business of a Company or any of its Subsidiaries
prior to the Closing except to the extent such liability has been
fully accrued on the Closing Balance Sheet; and
(d) any and all Taxes pertaining or attributable to any
Company or any of its Subsidiaries with respect to any and all taxable
periods or portions thereof ending on or prior to the Closing Date to
the extent not fully accrued on the Closing Balance Sheet.
7.2 Environmental Indemnification.
(a) For a period of nine months following the Closing
Date, Buyer shall evaluate the real property owned by or leased to any of the
Companies or its Subsidiaries to determine the Environmental Condition thereof
and the compliance of such properties with applicable Environmental Laws. If
the Buyer shall have determined during such review that (i) the Environmental
Condition of any of such properties is not in compliance with applicable
Environmental Laws or (ii) any such properties require remediation to be in
compliance with applicable Environmental Laws or (iii) any of such properties
present a material risk of Environmental Liability, Buyer may request that the
Shareholders remediate and otherwise bring an affected property into compliance
with applicable Environmental Laws (each such property herein referred to as an
"Identified Property" and collectively referred to as the "Identified
Properties").
(b) If Buyer requests the Shareholders to remediate and
bring an Identified Property into compliance with applicable Environmental Laws
and the Shareholder Representative, after consultation with Buyer, determine in
good faith that the cost of remediation and compliance with respect to the
Identified Property is (i) C$100,000 or less for an Identified Property that is
owned or leased by BMW Pump or (ii) C$50,000 or less for an Identified Property
that is owned or leased by BMW Monarch, the Shareholders shall remediate and
take such other action as may be required to bring such Identified Property
into compliance with all applicable Environmental Laws.
(c) If Buyer requests the Shareholders to remediate and
bring an Identified Property into compliance with applicable Environmental Laws
and the Shareholder Representative, after consultation with Buyer, determine in
good faith that the cost of remediation and compliance with respect to the
Identified Property is (i) greater than C$100,000 for an Identified Property
that is owned or leased by BMW Pump or (ii) greater than C$50,000 for an
Identified Property owned or leased by BMW Monarch, the Shareholders may, at
their election:
(x) remediate and otherwise take action to bring such Identified
Property into compliance with all applicable Environmental Laws;
(y) purchase the Identified Property from BMW Pump or BMW Monarch, as
the case may be, if such Identified Property is owned by BMW Pump or
BMW Monarch at a purchase price equal to the net book value of such
Identified Property, with the sale being effected without any
representation or warranty of any kind; or
(z) assume the leasehold obligations of BMW Pump or BMW Monarch with
respect to the Identified Property to the extent the Identified
Property is leased by BMW Pump or BMW Monarch.
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If the Shareholders elect to purchase any Identified Properties pursuant to
this Section 7.2(c), the Shareholders agree to lease such Identified Property
to BMW Pump or BMW Monarch, as the case may be, or their respective successors
and assigns, at an agreed upon rental equal to the fair market value thereof if
BMW Pump, BMW Monarch or their respective successors and assigns request to
lease such property. Any such lease shall be on commercial and reasonable
market terms.
(d) The Identified Properties that are remediated
pursuant to clause (x) of Section 7.2(c) hereof and pursuant to Section 7.2(b)
hereof are referred to herein as the "Designated Real Estate". The Identified
Properties that may be purchased by the Shareholders from BMW Pump and BMW
Monarch and the leasehold interests that may be assumed by the Shareholders
from BMW Pump and BMW Monarch are, together with the Monarch Property,
collectively referred to as the "Excluded Real Estate".
(e) To the extent that the Shareholders are obligated to
remediate any Designated Real Estate, they shall remediate such properties in a
reasonably prompt manner so as to bring the properties into compliance with any
applicable Environmental Laws for properties of that nature and indemnify Buyer
in respect of any Damages from third parties relating thereto and, in the case
of any leased Designated Real Estate, the Shareholders shall also remediate
such property in a manner so as to be in compliance with the leasehold
obligations relating to such property.
(f) With respect to the Excluded Real Estate, (i) each
BMW Monarch Shareholder, the Makelki Shareholder, the 589979 Shareholder and
each 391862 Shareholders, jointly and severally with each BMW Monarch
Shareholder, the Makelki Shareholder, the 589979 Shareholder and each 391862
Shareholder, with respect to Excluded Real Estate previously held by BMW
Monarch, and (ii) each BMW Pump Shareholder and each 600969 Shareholder,
jointly and severally with each BMW Pump Shareholder and each 600969
Shareholder, with respect to Excluded Real Estate previously held by BMW Pump,
agrees to indemnify, defend and hold Buyer and its successors and assigns
harmless from and against and in respect of Damages actually suffered, incurred
or realized by such party, arising out of or resulting from or relating to all
Environmental Liabilities relating to such Excluded Real Estate, regardless of
whether such Environmental Liabilities are known, unknown, disclosed,
undisclosed, fixed or contingent, or whether such Environmental Liabilities
relate to on-site or off-site Environmental Conditions, including without
limitation any such Environmental Liabilities arising from the use, storage,
handling, treatment, disposal, generation, transportation or release of any
Hazardous Materials on or prior to the Closing Date.
7.3 Indemnification by Certain Shareholders. In addition to the
indemnities provided elsewhere herein, (i) the Makelki Shareholder agrees to
indemnify, defend and hold BMW Pump, BMW Monarch and the Buyer and their
respective successors and assigns harmless from and against and in respect of
Damages suffered, incurred or realized by such party, arising out of or
resulting from or relating to Makelki and its business, operations or assets
prior to the Closing or any action or omission relating to it prior to the
Closing, (ii) the 589979 Shareholder agrees to indemnify, defend and hold BMW
Pump, BMW Monarch and the Buyer and their respective successors and assigns
harmless from and against and in respect of Damages suffered, incurred or
realized by such party, arising out of or resulting from or relating to 589979
and its business, operations or assets prior to the Closing or any action or
omission relating to it prior to the Closing, (iii) each 600969 Shareholder,
jointly and severally with the other 600969 Shareholder, agrees to indemnify,
defend and hold BMW Pump, BMW Monarch and the Buyer and their respective
successors and assigns harmless from and against and in respect of Damages
suffered, incurred or realized by such party, arising out of or resulting from
or relating to 600969 and its business, operations or assets prior to the
Closing or
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<PAGE> 30
any action or omission relating to it prior to the Closing, and (iv) each
391862 Shareholder, jointly and severally with the other 391862 Shareholder,
agrees to indemnify, defend and hold BMW Pump, BMW Monarch and the Buyer and
their respective successors and assigns harmless from and against and in
respect of Damages suffered, incurred or realized by such party, arising out of
or resulting from or relating to 391862 and its business, operations or assets
prior to the Closing or any action or omission relating to it prior to the
Closing.
7.4 Indemnification by Buyer. Except as otherwise limited by
this Article 7, Article 8 and Article 9 hereof, Buyer agrees to indemnify,
defend and hold the Shareholders and their successors and assigns harmless from
and against and in respect of Damages actually suffered, incurred or realized
by such party, arising out of or resulting from any misrepresentation, breach
of warranty or breach of any covenant or agreement made or undertaken by Buyer
in this Agreement or any misrepresentation in or omission from any other
agreement, certificate, Exhibit or writing delivered to the Shareholders
pursuant to this Agreement.
7.5 Procedure. All claims for indemnification under this Article
7 shall be asserted and resolved as follows:
(a) An Indemnitee shall promptly give the Indemnitor
notice of any matter which an Indemnitee has determined has given or could give
rise to a right of indemnification under this Agreement, stating the amount of
Damages, if known, and method of computation thereof, all with reasonable
particularity, and stating with particularity the nature of such matter.
Failure to provide such notice shall not affect the right of the Indemnitee to
indemnification except to the extent such failure shall have resulted in
liability to the Indemnitor that could have been actually avoided had such
notice been provided within such required time period.
(b) The obligations and liabilities of an Indemnitor
under this Article 7 with respect to Damages arising from claims of any third
party that are subject to the indemnification provided for in this Article 7
("Third Party Claims") shall be governed by and contingent upon the following
additional terms and conditions: if an Indemnitee shall receive notice of any
Third Party Claim, the Indemnitee shall give the Indemnitor prompt notice of
such Third Party Claim and the Indemnitor may, at its option, assume and
control the defense of such Third Party Claim at the Indemnitor's expense and
through counsel of the Indemnitor's choice reasonably acceptable to Indemnitee.
In the event the Indemnitor assumes the defense against any such Third Party
Claim as provided above, the Indemnitee shall have the right to participate at
its own expense in the defense of such asserted liability, shall cooperate with
the Indemnitor in such defense and will attempt to make available on a
reasonable basis to the Indemnitor all witnesses, pertinent records, materials
and information in its possession or under its control relating thereto as is
reasonably required by the Indemnitor. In the event the Indemnitor does not
elect to conduct the defense against any such Third Party Claim, the Indemnitor
shall pay all reasonable costs and expenses of such defense as incurred and
shall cooperate with the Indemnitee (and be entitled to participate) in such
defense and attempt to make available to it on a reasonable basis all such
witnesses, records, materials and information in its possession or under its
control relating thereto as is reasonably required by the Indemnitee. Except
for the settlement of a Third Party Claim that involves the payment of money
only and for which the Indemnitee is totally indemnified by the Indemnitor, or
which does not affect any right of the Indemnitee or impose any obligations on
the Indemnitee, no Third Party Claim may be settled without the written consent
of the Indemnitee.
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7.6 Indemnification Basket and Cap; Effect of Materiality
Qualifiers.
(a) Except as provided in this Section 7.6, there shall
be no indemnification by the BMW Monarch Shareholders, the Makelki Shareholder,
the 391862 Shareholders or the 589979 Shareholder for Damages for (i) a
misrepresentation or breach of representation or warranty (except the
representations and warranties in Sections 2.1, 2.2, 2.4, 2.6(d), 2.13 and
2.14, which shall not be subject to the Monarch Basket Amount) or (ii) Damages
under Section 7.1(c) or (d) recoverable against a party obligated to provide
indemnification therefor under this Article 7 until the Damages for (x) all
misrepresentations and breaches of representations and warranties by the BMW
Monarch Shareholders, the Makelki Shareholder, the 391862 Shareholders and the
589979 Shareholder as a group and (y) matters subject to indemnity by such
Shareholders under Section 7.1(c) and (d) exceed C$500,000 in the aggregate
(the "Monarch Basket Amount"), and once all such Damages exceeds the Monarch
Basket Amount, the BMW Monarch Shareholders, the Makelki Shareholder, the
391862 Shareholders and the 589979 Shareholder shall only be obligated to the
other party for such aggregate Damages in excess of the Monarch Basket Amount.
(b) Except as provided in this Section 7.6, there shall
be no indemnification by the BMW Pump Shareholders or the 600969 Shareholders
for Damages for (i) a misrepresentation or breach of representation or warranty
(except the representations and warranties in Sections 2.1, 2.2, 2.4, 2.6(d),
2.13 and 2.14, which shall not be subject to the Pump Basket Amount) or (ii)
Damages under Section 7.1(c) or (d) recoverable against a party obligated to
provide indemnification therefor under this Article 7 until the Damages for (x)
all misrepresentations and breaches of representations and warranties by the
BMW Pump Shareholders and the 600969 Shareholders as a group and (y) matters
subject to indemnity by such Shareholders under Section 7.1(c) and (d) exceed
C$500,000 in the aggregate (the "Pump Basket Amount"), and once all such
Damages exceeds the Pump Basket Amount, the BMW Pump Shareholders and the
600969 Shareholders shall only be obligated to the other party for such
aggregate Damages in excess of the Pump Basket Amount.
(c) In no case shall an individual Shareholder's
aggregate liability under this Article 7 exceed for all claims the lesser of
the Shareholder's pro rata portion of the Purchase Price or pro rata portion of
the claims with respect to which such Shareholder is jointly and severally
liable for with any other Shareholder.
(d) For purposes of determining the right of a party to
make a claim for indemnification for a breach of representation or warranty
under Sections 7.1, 7.2, 7.3 and 7.4, all representations and warranties that
have been made subject to a materiality or dollar qualification (including any
Material Adverse Effect) shall be deemed to have been made without that
qualification, it being understood and agreed that the thresholds provided for
under Sections 7.6(a) and 7.6(b) are intended to be the only materiality
qualification for such matters for purposes of indemnification.
(e) Payments of any indemnification claim with respect to
a matter pertaining to BMW Monarch shall be paid pro rata by the BMW Monarch
Shareholders, the Makelki Shareholder, the 391862 Shareholders and the 589979
Shareholder unless such matter relates solely to a BMW Monarch Shareholder, the
Makelki Shareholder, the 391862 Shareholders or the 589979 Shareholder, in
which case it shall be paid solely by such Shareholder.
(f) Payments of any indemnification claim with respect to
a matter pertaining to BMW Pump shall be paid pro rata by the BMW Pump
Shareholders and the 600969 Shareholders unless such matter relates solely to a
BMW Pump Shareholder or a 600969 Shareholder, for which use it shall be paid
solely by such Shareholder.
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(g) Payments of any indemnification claim with respect to
a matter pertaining to Makelki shall be paid by the Makelki Shareholder.
(h) Payments of any indemnification claim with respect to
a matter pertaining to 589979 shall be paid by the 589979 Shareholder.
(i) Payments of any indemnification claim with respect to
a matter pertaining to 600969 shall be paid pro rata by the 600969 Shareholders
unless such matter relates solely to a 600969 Shareholder, in which case it
shall be paid solely by such 600969 Shareholder.
(j) Payments of any indemnification claim with respect to
a matter pertaining to 391862 shall be paid pro rata by the 391862 Shareholders
unless such matter relates solely to a 391862 Shareholder, in which case it
shall be paid solely by such 391862 Shareholder.
7.7 Waiver of Contribution. Each of the Shareholders hereby
expressly acknowledges and agrees that the indemnity obligations under Sections
7.1, 7.2 and 7.3 shall apply notwithstanding the matter subject to
indemnification involves an act or omission by a Company or one of its
Subsidiaries and that such Shareholder shall not seek or receive
indemnification or contribution from a Company or its Subsidiaries with respect
to such claim for indemnification.
7.8 EXPRESS NEGLIGENCE. THE INDEMNIFICATION TO BE PROVIDED BY
THE SHAREHOLDERS TO AN INDEMNITEE HEREUNDER PURSUANT TO THIS ARTICLE 7 SHALL
APPLY NOTWITHSTANDING SUCH MATTER FOR WHICH INDEMNIFICATION IS TO BE PROVIDED
MAY RELATE TO THE ORDINARY SOLE OR CONTRIBUTORY NEGLIGENCE, GROSS NEGLIGENCE,
WILLFUL MISCONDUCT OR VIOLATION OF LAW BY AN INDEMNITEE, INCLUDING ANY COMPANY,
ITS SUBSIDIARIES AND ITS OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS, AND SHALL
EXTEND TO LIABILITIES BASED ON THEORIES OF STRICT LIABILITY, AND SHALL BE
APPLICABLE WHETHER OR NOT NEGLIGENCE OF SUCH INDEMNITEE IS ALLEGED OR PROVEN,
IT BEING THE INTENTION OF THE PARTIES TO INDEMNIFY ANY INDEMNITEE FROM AND
AGAINST ITS ORDINARY SOLE AND CONTRIBUTORY NEGLIGENCE AND GROSS NEGLIGENCE AS
WELL AS LIABILITIES BASED ON THE WILLFUL ACTIONS OR OMISSIONS OF THE
INDEMNIFIED PARTY AND LIABILITIES BASED ON THEORIES OF STRICT LIABILITY.
7.9 Payment. Payment of any amounts due pursuant to this Article
7 shall be made within 30 calendar days after notice is sent by the Indemnitee.
7.10 Failure to Pay Indemnification. If and to the extent the
Indemnitee shall make written demand upon the Indemnitor for indemnification
pursuant to this Article 7 and the Indemnitor shall refuse or fail to pay in
full within ten Business Days of such written demand the amounts demanded
pursuant hereto and in accordance herewith, then the Indemnitee may utilize any
legal or equitable remedy to collect from the Indemnitor the amount of its
Losses. Nothing contained herein is intended to limit or constrain the
Indemnitee's rights against the Indemnitor for indemnity, the remedies herein
being cumulative and in addition to all other rights and remedies of the
Indemnitee.
7.11 Adjustment of Liability. The amount which an Indemnitee
shall be entitled to receive from an Indemnitor with respect to any
indemnifiable Loss under this Article 7 shall be net of any insurance recovery
by the Indemnitee on account of such Loss.
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ARTICLE 8
NATURE OF STATEMENTS AND SURVIVAL OF COVENANTS,
REPRESENTATIONS,WARRANTIES AND AGREEMENTS
All statements of fact contained in any written statement (including
financial statements), certificate, instrument or document delivered by or on
behalf of the Shareholders pursuant to this Agreement shall be deemed
representations and warranties of the Shareholders. The several
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 (except that (a) the representations and
warranties set forth in Sections 2.1, 2.2(a), 2.4(a) and (b), 2.6(d), 3.1 and
3.3 shall survive the Closing Date without limitation and (b) the
representations and warranties set forth in Sections 2.2(b), 2.4(c), (d) and
(e), 2.7, 2.10 and 2.13 shall survive for a period of three years following the
Closing (the period during which the representations and warranties shall
survive being referred to herein with respect to such representations and
warranties as the "Survival Period"), and shall be effective with respect to
any inaccuracy therein or breach thereof (and a claim for indemnification under
Article 7 hereof may be made thereon) if a written notice asserting the claim
shall have been duly given in accordance with Article 7 hereof within the
Survival Period with respect to such matter. Any claim for indemnification
made during the Survival Period shall be valid and the representations and
warranties relating thereto shall remain in effect for purposes of such
indemnification notwithstanding such claim may not be resolved within the
Survival Period. The agreements and covenants set forth herein shall survive
without limitation. 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
this Agreement or otherwise in connection with the transactions contemplated
hereby.
ARTICLE 9
TERMINATION
9.1 Best Efforts to Satisfy Conditions. Subject to the
provisions of this Agreement, Buyer and the Shareholders agree to use their
best efforts to bring about the satisfaction of the conditions specified in
Article 5 and Article 6 hereof.
9.2 Termination. The obligation to close the transactions
contemplated by this Agreement may be terminated by:
(a) mutual agreement of Buyer and the Shareholders;
(b) Buyer, if a material default shall be made in the
observance or in the due and timely performance by the Shareholders of any
agreements and covenants of the Shareholders herein contained, or if there
shall have been a breach by the Shareholders of any of the warranties and
representations of the Shareholders herein contained, and such default or
breach has not been cured or has not been waived;
(c) the Shareholders, if a material default shall be made
by Buyer in the observance or in the due and timely performance by Buyer of any
agreements and covenants of Buyer herein contained, or if there shall have been
a breach by Buyer of any
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of the warranties and representations of Buyer herein contained, and such
default or breach has not been cured or has not been waived;
(d) Buyer or the Shareholders (provided the terminating
party has not materially breached any of its agreements, covenants or
representations and warranties) if the Closing shall not have occurred on or
before December 31, 1997;
(e) Buyer or the Shareholders Representative if the Stock
Purchase Agreement between Buyer and PACCAR, Inc. dated as of the date hereof
providing for Buyer's purchase of Trico Industries, Inc. is terminated other
than by reason of the closing of the transactions contemplated therein.
9.3 Liability Upon Termination. If the obligation to close the
transactions contemplated by this Agreement is terminated pursuant to any
provision of Section 9.2, then this Agreement shall, except as provided in
Section 1.3 hereof or in this Section 9.3, forthwith become void and there
shall not be any liability or obligation with respect to the terminated
provisions of this Agreement on the part of the Shareholders or Buyer except
and to the extent such termination results from the willful breach by a party
of any of its representations, warranties or agreements hereunder. The
termination of this Agreement shall not relieve any party of its obligations
under this Section 9.3.
9.4 Notice of Termination. The parties hereto may exercise their
respective rights of termination under this Article 9 only by delivering
written notice to that effect to the other party or parties, and such notice is
received on or before the Closing Date.
ARTICLE 10
DEFINITIONS OF CERTAIN TERMS
In addition to terms defined elsewhere in this Agreement, the
following terms shall have the meanings assigned to them herein, unless the
context otherwise indicates, both for purposes of this Agreement and all
Exhibits hereto and the Disclosure Schedule:
10.1 "391862" shall have the meaning set forth in the opening
paragraph of this Agreement.
10.2 "391862 Shareholders" shall have the meaning set forth in the
opening paragraph of this Agreement.
10.3 "391862 Stock" shall have the meaning set forth in the
recitals of this Agreement.
10.4 "589979" shall have the meaning set forth in the opening
paragraph of this Agreement.
10.5 "589979 Shareholder" shall have the meaning set forth in the
opening paragraph of this Agreement.
10.6 "589979 Stock" shall have the meaning set forth in the
recitals of this Agreement.
10.7 "600969" shall have the meaning set forth in the opening
paragraph of this Agreement.
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<PAGE> 35
10.8 "600969 Shareholders" shall have the meaning set forth in the
opening paragraph of this Agreement.
10.9 "600969 Stock" shall have the meaning set forth in the
recitals of this Agreement.
10.10 "Affiliate" with respect to any Person, means any Person
that directly or indirectly controls, is controlled by or is under common
control with such Person.
10.11 "Agreement" means this Share Purchase Agreement among the
Shareholders and Buyer, as amended from time to time by the parties hereto.
10.12 "Benefit Plan" means any collective bargaining agreement or
any bonus, pension, profit sharing, deferred compensation, incentive
compensation, share ownership, share 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, officer or director of
any Company or any Subsidiary or Affiliate thereof.
10.13 "BMW Monarch" shall have the meaning set forth in the opening
paragraph of this Agreement.
10.14 "BMW Monarch Shareholders" shall have the meaning set forth
in the opening paragraph of this Agreement.
10.15 "BMW Monarch Stock" shall have the meaning set forth in the
recitals of this Agreement.
10.16 "BMW Pump" shall have the meaning set forth in the opening
paragraph of this Agreement.
10.17 "BMW Pump Shareholders" shall have the meaning set forth in
the opening paragraph of this Agreement.
10.18 "BMW Pump Stock" shall have the meaning set forth in the
recitals of this Agreement.
10.19 "Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in Houston, Texas or Calgary,
Alberta are authorized by law to close.
10.20 "Buyer" shall mean EVI, Inc., a Delaware corporation, or one
or more of its designees.
10.21 "C$" shall mean Canadian dollars.
10.22 "Closing" shall mean the transfer by the Shareholders to
Buyer of the Shares and the transfer by Buyer to the Shareholders of the
consideration for the Shares set forth herein.
10.23 "Closing Balance Sheet" shall have the meaning given such
term in Section 1.4(c) hereof.
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<PAGE> 36
10.24 "Closing Date" shall have the meaning given such term in
Section 1.2 hereof.
10.25 "Companies" shall mean, collectively, BMW Monarch, BMW Pump,
Makelki, 589979, 600969 and 391862.
10.26 "Damages" shall mean any and all liabilities, losses,
damages, demands, assessments, claims, costs and expenses (including interest,
awards, judgments, penalties, settlements, fines, costs of remediation,
diminutions in value, costs and expenses incurred in connection with
investigating and defending any claims or causes of action (including, without
limitation, attorneys' fees and expenses calculated on a solicitor and client
basis and all fees and expenses of consultants and other professionals)).
10.27 "Debt Obligations" shall mean any contract, agreement,
indenture, note or other instrument relating to the borrowing of money or any
guarantee or other contingent liability in respect of any indebtedness or
obligation of any Person (other than the endorsement of negotiable instruments
for deposit or collection in the ordinary course of business).
10.28 "Deposit" shall have the meaning given such term in Section
1.3(a) hereof.
10.29 "Designated Real Estate" shall have the meaning given such
term in Section 7.2(d) hereof.
10.30 "Disclosure Schedule" shall mean the disclosure schedule of
even date delivered to Buyer by the Shareholders.
10.31 "Documents and Other Papers" shall mean and include any
document, agreement, instrument, certificate, writing, notice, consent,
affidavit, letter, telegram, telex, statement, file, computer disk, microfiche
or other document in electronic format, schedule, exhibit or any other paper or
record whatsoever.
10.32 "Environmental Condition" means any pollution, contamination,
degradation, damage or injury caused by, related to or arising from the
generation, handling, use, treatment, storage, transportation, disposal,
discharge, release or emission of any Hazardous Materials.
10.33 "Environmental Laws" shall mean all federal, state,
provincial or municipal laws, rules, regulations, statutes, ordinances, or
orders 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 substances alleged
to be harmful. The term "Environmental Laws" shall also include all state,
provincial, local and municipal laws, rules, regulations, statutes, ordinances
and orders dealing with the same subject matter or promulgated by any
governmental or quasi-governmental agency thereunder or to carry out the
purposes of any federal, state, provincial, local and municipal law.
10.34 "Environmental Liabilities" shall mean any and all Damages
(including remediation, removal, response, abatement, clean-up, investigative
and/or monitoring costs and any other related costs and expenses) incurred or
imposed (a) pursuant to any agreement, order, notice, requirement,
responsibility or directive (including directives embodied in Environmental
Laws), injunction, judgment or similar documents (including settlements)
arising out of, in connection with or under Environmental Laws, or (b) pursuant
to any claim by a Governmental Entity or other third Person or entity for
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<PAGE> 37
personal injury, property damage, damage to natural resources, remediation or
similar costs or expenses incurred or asserted by such entity or person
pursuant to common law or statute and arising out of or in connection with a
release, as such term is defined in Environmental Laws, of Hazardous Materials.
10.35 "Environmental Losses" shall have the meaning given such term
in Section 7.2 hereof.
10.36 "Environmental Permit" shall mean any permit, license,
approval, registration, identification number or other authorization with
respect to any Company or its Subsidiaries under any applicable law, regulation
or other requirement of the United States, Canada or any other country or of
any state, province, municipality or other subdivision thereof relating to the
control of any pollutant or protection of health or the environment, including
laws, regulations or other requirements relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants or hazardous or
toxic materials or wastes into ambient air, surface water, groundwater or land,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of chemical substances,
pollutants, contaminants or hazardous or toxic materials or wastes.
10.37 "Estimated Purchase Price" shall mean C$130,000,000.
10.38 "Excluded Real Estate" shall have the meaning given such term
in Section 7.2(d) hereof.
10.39 "Final Statement" shall have the meaning given such term in
Section 1.4(a) hereof.
10.40 "Financial Statements" shall have the meaning given such term
in Section 2.6(a) hereof.
10.41 "GAAP" shall mean generally accepted accounting principles in
Canada as consistently applied by the Companies.
10.42 "Governmental Entity" shall mean Canada, the United States of
America, any arbitrator, court, administrative or regulatory agency,
commission, department, board or bureau or body or other government or
authority or instrumentality or any entity or Person exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
10.43 "Hazardous Materials" shall mean (a) any petroleum or
petroleum products, (b) radioactive materials, urea formaldehyde, asbestos and
PCBs and (c) any other chemical, substance or waste that is regulated by any
Governmental Entity under any Environmental Law.
10.44 "Identified Properties" shall have the meaning given such
term in Section 7.2(a) hereof.
10.45 "Indemnitee" shall mean the Person or Persons indemnified, or
entitled, or claiming to be entitled to be indemnified, pursuant to the
provisions of Sections 7.1, 7.2, 7.3 or 7.4 hereof, as the case may be.
10.46 "Indemnitor" shall mean the Person or Persons having the
obligation to indemnify pursuant to the provisions of Sections 7.1, 7.2, 7.3 or
7.4 hereof, as the case may be.
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<PAGE> 38
10.47 "Intellectual Property" shall have the meaning given such
term in Section 2.4(e) hereof.
10.48 "Lien" shall mean any lien, pledge, claim, charge, security
interest or other encumbrance, option, defect or other rights of any third
Person of any nature whatsoever (including, without limitation, lessor
ownership rights).
10.49 "Makelki" shall have the meaning set forth in the opening
paragraph of this Agreement.
10.50 "Makelki Shareholder" shall have the meaning set forth in the
opening paragraph of this Agreement.
10.51 "Makelki Stock" shall have the meaning set forth in the
recitals of this Agreement.
10.52 "March 31 Balance Sheet" shall have the meaning given such
term in Section 2.6(a) hereof.
10.53 "Material Adverse Effect" shall mean a single event,
occurrence or fact that (together with all other events, occurrences and facts
that could reasonably be expected to result in a loss to BMW Pump, BMW Monarch
and their Subsidiaries, taken as a whole) would have, or might reasonably be
expected to have, a material adverse effect on the assets, business,
operations, prospects or financial condition of BMW Pump, BMW Monarch and their
Subsidiaries, taken as a whole, or that would constitute a criminal violation
of law involving a felony or indictable offense.
10.54 "Monarch Basket Amount" shall have the meaning given such
term in Section 7.6(a) hereof.
10.55 "Monarch Property" shall have the meaning given such term in
Section 4.8 hereof.
10.56 "Net Assets" shall mean, in accordance with GAAP and with
reference to the March 31 Balance Sheet and the Closing Balance Sheet, the
difference between total assets and total liabilities (including deferred
income tax liabilities and capital lease obligations), subject to the
adjustments provided for in Section 1.4(c) hereof.
10.57 "Pension Plans" shall have the meaning given such term in
Section 2.12(b) hereof.
10.58 "Permitted Liens" shall mean (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 and
carriers Liens arising in the ordinary course of business, (d) Liens created by
Buyer and (e) Liens disclosed in Section 10.58 of the Disclosure Schedule;
provided, however, at the Closing, the term "Permitted Liens" shall not include
any Liens for tax assessments filed of record against any Company or any of its
Subsidiaries or assets.
10.59 "Person" shall mean a corporation, an association, a
partnership, an organization, a business, an individual or a Governmental
Entity.
10.60 "Pump Basket Amount" shall have the meaning given such term
in Section 7.6(b).
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<PAGE> 39
10.61 "Purchase Price" shall mean C$130,000,000 (a) plus the
amount, if any, by which Net Assets on the Closing Date exceeds C$20,527,127
(Net Assets at March 31, 1997), (b) minus the amount, if any, by which
C$20,527,127 exceeds Net Assets on the Closing Date and (c) plus the amount of
depreciation of fixed assets from April 1, 1997, through the Closing Date,
excluding the depreciation attributable to the Trico Industries, Inc. interest
in BMW Monarch. Net Assets at March 31, 1997, are taken from Section 2.6(a) of
the Disclosure Schedule and represent the combined consolidated equity of BMW
Pump and BMW Monarch as represented by the Shareholders excluding the 30%
equity held by Trico Industries, Inc.
10.62 "Shareholder Loans" shall have the meaning given such term in
Section 2.6(d) hereof.
10.63 "Shareholder Representative" shall have the meaning given
such term in Section 11.1.
10.64 "Shareholders" shall have the meaning given such term in the
opening paragraph of this Agreement.
10.65 "Shares" shall have the meaning given such term in the
recitals to this Agreement;
10.66 "Subsidiaries" shall mean any and all Persons in which the
Companies, directly or indirectly, own any equity or other similar ownership
interests.
10.67 "Survival Period" shall have the meaning given such term in
Article 8 hereof.
10.68 "Taxes" shall mean all federal, state, provincial, 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, goods and services, 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, fees,
assessments, customs, duties, levies, imposts, or charges of any kind
whatsoever, together with any interests, penalties, additions to tax, fines or
other additional amounts imposed thereon or related thereto.
10.69 "Tax Returns" shall mean all returns, declarations, reports,
statements and other documents of, relating to, or required to be filed in
respect of, any and all Taxes.
10.70 "Third Party Claims" shall have the meaning given such term
in Section 7.5(b) hereof.
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<PAGE> 40
ARTICLE 11
MISCELLANEOUS
11.1 Shareholder Representative. Each of the Shareholders hereby
irrevocably appoints Larry Makelki to be the representative (the "Shareholder
Representative") of the Shareholders following the Closing Date in any matter
arising out of this Agreement. For any matter in which Buyer is entitled to
rely on or otherwise deal with the Shareholders, Buyer shall be entitled to
communicate solely with the Shareholder Representative and shall be entitled to
rely on any such communications as being the desire and will of the
Shareholders. Notice delivered to the Shareholder Representative in accordance
with Section 11.3 hereof shall be deemed to be notice to all of the
Shareholders.
11.2 Expenses. Except as otherwise set forth herein, and
whether or not the transactions contemplated by this Agreement shall be
consummated, each party agrees to pay, without right of reimbursement from any
other party, the costs incurred by such party incident to the preparation and
execution of this Agreement and performance of its obligations hereunder,
including without limitation the fees and disbursements of legal counsel,
accountants and consultants employed by such party in connection with the
transactions contemplated by this Agreement.
11.3 Notices. All notices, requests, consents, directions and
other instruments and communications required or permitted to be given under
this Agreement shall be in writing and shall be deemed to have been duly given
if delivered in person, by courier, by overnight delivery service with proof of
delivery or by prepaid registered or certified first-class mail, return receipt
requested, addressed to the respective party at the address set forth below, or
if sent by facsimile or other similar form of communication (with receipt
confirmed) to the respective party at the facsimile number set forth below:
If to the Shareholders or Shareholder Representative, to:
BMW Monarch (Lloydminster) Ltd.
4206 - 59 Avenue
Lloydminster, Alberta, Canada T9V 2V4
Attention: Larry Makelki
Facsimile: (403) 875-6005
Confirm: (403) 875-2730
Copies to:
Reynolds, Mirth, Richards & Farmer
#3200, 10180 - 101 Street
Edmonton, Alberta, Canada T5J 3W8
Attention: R. Allan Farmer
Facsimile: (403) 429-3044
Confirm: (403) 497-3360
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<PAGE> 41
If to Buyer, to:
EVI, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attention: James G. Kiley
Facsimile: (713) 297-8488
Confirm: (713) 297-8400
Copies to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010
Attention: Curtis W. Huff
Facsimile: (713) 651-5246
Confirm: (713) 651-5151
or to such other address or facsimile number and to the attention of such other
Person as either party may designate by written notice. Any notice mailed
shall be deemed to have been given and received on the seventh Business Day
following the day of mailing.
11.4 Bulk Transfer Laws. The Shareholders agree with Buyer that
the provisions of any statute of any state, province or jurisdiction regulating
bulk sales or transfers do not apply to this Agreement.
11.5 Assignment and Successors. Except as specifically
contemplated by this Agreement, prior to the Closing no party hereto shall
assign this Agreement or any part hereof without the prior written consent of
the other party; provided, however, Buyer may, prior to the Closing, assign its
rights and obligations in this Agreement to an Affiliate of Buyer. This
Agreement shall inure to the benefit of, be binding upon and be enforceable by
the parties hereto and their respective successors and assigns.
11.6 Entire Agreement. This Agreement and the Exhibits hereto and
the Disclosure Schedule constitute the entire agreement and understanding
between the parties relating to the subject matter hereof and thereof and
supersedes all prior representations, endorsements, premises, agreements,
memoranda communications, negotiations, discussions, understandings and
arrangements, whether oral, written or inferred, between the parties relating
to the subject matter hereof. This Agreement may not be modified, amended,
rescinded, canceled, altered or supplemented, in whole or in part, except upon
the execution and delivery of a written instrument executed by a duly
authorized representative of each of the parties hereto.
11.7 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the province of Alberta,
Canada without giving effect to choice of law principles.
11.8 Waiver. The waiver of any breach of any term or condition of
this Agreement shall not be deemed to constitute the waiver of any other breach
of the same or any other term or condition.
11.9 Severability. Any provision hereof that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and
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<PAGE> 42
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
11.10 No Third Party Beneficiaries. Any agreement contained,
expressed or implied in this Agreement shall be only for the benefit of the
parties hereto and their respective legal representatives, successors and
assigns, and such agreements shall not inure to the benefit of the obligees of
any indebtedness of any party hereto, it being the intention of the parties
hereto that no Person shall be deemed a third party beneficiary of this
Agreement, except to the extent a third party is expressly given rights herein.
11.11 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.12 Headings. Each statement set forth in the Disclosure
Schedule with respect to a particular section herein shall be deemed made
solely with respect to such section and not with respect to any other section
hereof unless specifically set forth in the Disclosure Schedule as also being
made with respect to such other section. The headings of the Articles and
Sections of this Agreement have been inserted for convenience of reference only
and shall in no way restrict or otherwise modify any of the terms or provisions
hereof or affect in any way the meaning or interpretation of this Agreement.
11.13 Time of the Essence. Time shall be of the essence under this
Agreement.
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<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
BMW MONARCH SHAREHOLDERS
/s/ Ron Christie
--------------------------------------
Ron Christie
/s/ Larry Makelki
--------------------------------------
Larry Makelki
/s/ David White
--------------------------------------
David White
/s/ Mel Woods
--------------------------------------
Mel Woods
/s/ Jim Heinrich
--------------------------------------
Jim Heinrich
/s/ Brian Chateauvert
--------------------------------------
Brian Chateauvert
/s/ B. James Brown
--------------------------------------
B. James Brown
/s/ Robert Holmes
--------------------------------------
Robert Holmes
/s/ Lorne Strang
--------------------------------------
Lorne Strang
<PAGE> 44
BMW PUMP SHAREHOLDERS
/s/ Dave Addie
--------------------------------------
Dave Addie
/s/ Rick Murphy
--------------------------------------
Rick Murphy
/s/ David Anderson
--------------------------------------
David Anderson
/s/ Darcy Sallis
--------------------------------------
Darcy Sallis
/s/ Richard Fritsch
--------------------------------------
Richard Fritsch
/s/ Roland Moneta
--------------------------------------
Roland Moneta
/s/ James Zanello
--------------------------------------
James Zanello
/s/ Jakob Ambrosius
--------------------------------------
Jakob Ambrosius
/s/ Mel Woods
--------------------------------------
Mel Woods
/s/ Jim Heinrich
--------------------------------------
Jim Heinrich
/s/ Larry Makelki
--------------------------------------
Larry Makelki
<PAGE> 45
/s/ Ron Christie
--------------------------------------
Ron Christie
MAKELKI SHAREHOLDER:
/s/ Larry Makelki
--------------------------------------
Larry Makelki
589979 SHAREHOLDER:
/s/ Ron Christie
--------------------------------------
Ron Christie
600969 SHAREHOLDERS:
/s/ Mike Dalton
--------------------------------------
Mike Dalton
/s/ Shannon Dalton
--------------------------------------
Shannon Dalton
<PAGE> 46
391862 SHAREHOLDERS:
/s/ Dave Addie
--------------------------------------
Dave Addie
/s/ Peggy Addie
--------------------------------------
Peggy Addie
BUYER:
EVI, INC.
By:/s/ James G. Kiley
-----------------------------------
James G. Kiley
Vice President-Finance
<PAGE> 47
As permitted by Item 601(b)(2) of Regulation S-K, the Company has not
filed any schedules or exhibits with this Exhibit No. 2.2. Listed below is a
brief description of the omitted schedules and exhibits. The Company agrees to
furnish supplementally a copy of any of such omitted schedules and exhibits to
the Commission upon request.
<TABLE>
<CAPTION>
Exhibits
- - - - - - - - - - - - - - - --------
<S> <C>
1.4 Sample Calculation of the Purchase Price
5.10 Form of legal opinion from Reynolds, Mirth, Richards & Farmer, counsel to the Companies and the
Shareholders
6.5 Form of legal opinion from Fulbright & Jaworski L.L.P. and Milner Fenerty, counsels to Buyer
Schedules
- - - - - - - - - - - - - - - ---------
1.1(a) Number of Shares Being Transferred by Each Shareholder
1.3 Allocation of Purchase Price
2.1(b) Foreign Qualifications
2.1(c) Subsidiaries of the Companies
2.1(d) Organizational Documents of the Companies and their Subsidiaries
2.2(a) Violations and Conflicts
2.2(b) Loss of License, Franchise or Permit
2.3 Approvals, Licenses and Authorizations
2.4(a) Share Ownership
2.4(c) Liens on Personal Property
2.4(d) Liens, Governmental Decrees, Condemnations, etc. on Real Estate
2.4(e) Limitations on Intellectual Property
2.5(a) Contracts and Commitments of the Companies and their Subsidiaries
2.5(b) Enforceability of Contracts and Agreements
2.6(a) Financial Statements of BMW Monarch and BMW Pump
2.6(c) Material Liabilities of the Companies Not Reflected or Disclosed in the Financial Statements
2.6(d) Liabilities and Assets of Makelki, 589979, 600969 and 391862
2.7 Tax Matters
2.8 Litigation
2.9 Adverse Changes or Events since March 31, 1997
2.10 Environmental Matters
2.11 Warranties and Product Liability
2.12 Employee Benefit Plans
2.15 Insurance
4.2 Exceptions to Shareholder covenants
4.8 The Monarch Property to be Transferred
10.58 Certain Permitted Liens
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the application of our
report dated February 10, 1997 in EVI, Inc.'s (formerly known as Energy
Ventures, Inc.) annual report to shareholders included in this Form 8-K to the
supplemental note to the financial statements included herein and labeled
"Change and Stock Split." It should be noted that we have performed no audit
procedures subsequent to February 10, 1997, the date of our report, except with
respect to the supplemental note as to which the date is October 20, 1997.
Furthermore, we have not audited any financial statements of EVI, Inc. as of
any date or for any period subsequent to December 31, 1996.
ARTHUR ANDERSEN LLP
Houston, Texas
October 20, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report included in this Form 8-K, into EVI, Inc.'s previously
filed Registration Statement File Nos. 33-31662, 33-56384, 33-56386, 33-65790,
33-77960, 33-64349, 333-13561, and 333-24133.
Arthur Andersen LLP
Houston, Texas
October 20, 1997
<PAGE> 1
EXHIBIT 99.1
EVI ANNOUNCES THIRD QUARTER RESULTS
October 20, 1997, Houston, Texas - EVI, Inc. (NYSE-EVI) today announced income
from continuing operations of $23,094,000, or $.50 per share, on revenues of
$236,760,000 for the third quarter of 1997 compared to income from continuing
operations of $6,917,000, or $.16 per share, on revenues of $134,376,000 for
the third quarter of 1996. Operating income for the third quarter of 1997 was
$39,938,000 compared to $14,656,000 for the third quarter of 1996. The third
quarter results reflect continued strength in the Company's drilling products
segment as well as marked improvement in the operating performance of the
Company's production equipment segment.
Income from continuing operations for the nine months ended September 30, 1997,
was $56,501,000, or $1.23 per share, on revenues of $612,868,000 compared to
income from continuing operations of $13,710,000, or $.35 per share, on
revenues of $323,639,000 for the nine months ended September 30, 1996.
Operating income for the nine months ended September 30, 1997, was $92,147,000
versus $33,118,000 for the nine months ended September 30, 1996.
Operating income at the Company's drilling products segment increased to
$34,587,000 on revenues of $169,515,000 for the 1997 third quarter up from
$13,866,000 on revenues of $99,549,000 for the 1996 third quarter. Results in
the drilling products segment reflect increased sales of drill pipe and other
drilling tools, continued strength in the premium tubular market and the
Company's third quarter acquisition of XL Systems, the Company's marine
connector division.
<PAGE> 2
Shipments of the Company's drill pipe and related drilling tools continue to
increase. Compared to the second quarter of 1997, total shipments increased by
approximately 6% in the third quarter of 1997. Premium tubular revenues
increased to approximately $80 million during the 1997 third quarter up from
approximately $52 million for the third quarter of 1996. The increase in
premium tubular revenues reflects continued strength in the Gulf of Mexico and
the April 1997 acquisition of TA Industries. Total revenues at the Company's
recently acquired marine connector business, XL Systems, were approximately $9
million in the 1997 third quarter. The Company believes that XL Systems
technologies provide a high performance and cost effective alternative to
existing technologies currently dominating the marine connector business.
Operating income at the Company's production equipment segment was $7,238,000
for the third quarter of 1997 compared to $2,419,000 for the third quarter of
1996. Operating margins at the division improved to 10.8% in the current
quarter up from 6.9% for the 1996 third quarter and 8.0% in the second quarter
of 1997. Total revenues for the segment nearly doubled from $34,827,000 for
the third quarter of 1996 to $67,245,000 for the third quarter of 1997. The
increase in revenues was primarily attributable to the Company's acquisitions
of Arrow Completion Systems, Griffin Legrand and McAllister Petroleum Services,
all completed during the past nine months. The increase in operating income
and margins reflect the benefits of these acquisitions as well as improvements
in the segment's domestic cost structure. In addition, the Company continues
to benefit from strong growth in the Canadian and South American markets, in
particular for the Company's Corod and progressing cavity pump product lines.
The Company recently announced proposed acquisitions of BMW Monarch and BMW
Pump. These acquisitions when completed will expand the Company's presence in
the Canadian progressing cavity pump market. The Company believes that
progressing cavity pumps, with
<PAGE> 3
their low initial capital costs, high efficiency rates and overall versatility
are the fastest growing form of artificial lift in the world today. The Company
recently began construction of a new progressing cavity pump manufacturing
facility in Edmonton, Canada, which is expected to be completed during the
fourth quarter of 1998. The Company currently expects that the production from
this plant should have a positive impact on both the manufacturing cost of
progressing cavity pumps and the Company's ability to expand the markets it
currently serves.
This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 concerning, among other
things, EVI's prospects and development for its operations and the integration
of recent and proposed acquisitions, all of which are subject to certain risks,
uncertainties and assumptions. These risks and uncertainties, which are more
fully described in EVI's Annual, Quarterly and Current Reports filed with the
Securities and Exchange Commission, include changes in market conditions in the
oil and gas industry as well as declines in prices of oil and gas. Should one
or more of these risks or uncertainties materialize, or should the assumptions
prove incorrect, actual results may vary in material aspects from those
currently anticipated.
EVI is an international manufacturer of engineered oilfield products. The
Company manufactures drilling tools, premium tubulars, production equipment and
marine connectors.
Contact:
James G. Kiley
Vice President and
Chief Financial Officer
(713) 297-8400
<PAGE> 4
EVI, Inc.
Consolidated Condensed Statements of Operations
(In 000's Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------------- %
1997 1996 Change
-------- -------- ------
<S> <C> <C> <C>
Net Revenues:
Drilling Products $169,515 $ 99,549 70%
Production Equipment 67,245 34,827 93%
-------- -------- ----
236,760 134,376 76%
-------- -------- ----
Operating Income:
Drilling Products 34,587 13,866 149%
Production Equipment 7,238 2,419 199%
Corporate Expenses (1,887) (1,629) --
-------- -------- ----
39,938 14,656 173%
Other Income (Expense):
Other, Net 505 130
Interest Expense (4,914) (4,145)
-------- --------
Income Before Income Taxes 35,529 10,641
Provision For Income Taxes 12,435 3,724
-------- --------
Income From Continuing Operations 23,094 6,917
Income From Discontinued Operations, Net of Taxes -- 2,842
Extraordinary Charge, Net of Taxes -- --
-------- --------
Net Income $ 23,094 $ 9,759
======== ========
Earnings Per Share:
Income From Continuing Operations $ 0.50 $ 0.16 213%
Income From Discontinued Operations -- 0.07
Extraordinary Charge -- --
-------- --------
Net Income Per Share $ 0.50 $0.23
======== ========
Weighted Average Shares Outstanding 46,460 43,026
======== ========
Depreciation and Amortization:
Drilling Products $ 5,324 $ 3,035
Production Equipment 2,283 1,186
Corporate 27 20
-------- --------
$ 7,634 $ 4,241
======== ========
</TABLE>
<PAGE> 5
EVI, Inc.
Consolidated Condensed Statements of Operations
(In 000's Except Per Share Amounts)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1997 1996 Change
-------- -------- ------
<S> <C> <C> <C>
Net Revenues:
Drilling Products $439,401 $228,985 92%
Production Equipment 173,467 94,654 83%
-------- -------- ---
612,868 323,639 89%
-------- -------- ---
Operating Income:
Drilling Products 81,953 31,706 158%
Production Equipment 15,590 6,083 156%
Corporate Expenses (5,396) (4,671) --
-------- -------- ---
92,147 33,118 178%
Other Income (Expense):
Other, Net 8,028 238
Interest Expense (13,080) (12,265)
-------- --------
Income Before Income Taxes 87,095 21,091
Provision For Income Taxes 30,594 7,381
-------- --------
Income From Continuing Operations 56,501 13,710
Income From Discontinued Operations, Net of Taxes -- 6,190
Extraordinary Charge, Net of Taxes -- (731)
-------- --------
Net Income $ 56,501 $ 19,169
======== ========
Earnings Per Share:
Income From Continuing Operations $ 1.23 $ 0.35 251%
Income From Discontinued Operations -- 0.16
Extraordinary Charge -- (0.02)
-------- --------
Net Income Per Share $ 1.23 $ 0.49
======== ========
Weighted Average Shares Outstanding 45,961 39,056
======== ========
Depreciation and Amortization:
Drilling Products $ 13,315 $ 7,421
Production Equipment 6,750 3,848
Corporate 67 63
-------- --------
$ 20,132 $ 11,332
======== ========
</TABLE>
<PAGE> 1
EXHIBIT 99.2
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... 2
Consolidated Balance Sheets -- December 31, 1996 and 1995... 3
Consolidated Statements of Income, for each of the three
years in the period ended December 31, 1996............... 4
Consolidated Statements of Stockholders' Investment, for
each of the three years in the period ended December 31,
1996...................................................... 5
Consolidated Statements of Cash Flows, for each of the three
years in the period ended December 31, 1996............... 6
Notes to Consolidated Financial Statements.................. 7
</TABLE>
1
<PAGE> 2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO EVI, INC.
We have audited the accompanying consolidated balance sheets of EVI, Inc.
(formerly Energy Ventures, Inc.) (a Delaware corporation) and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of income,
stockholders' investment and cash flows for each of the three years in the
period ended December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
EVI, Inc. and subsidiaries as of December 31, 1996 and 1995 and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1997
(except with respect to the matter discussed
in footnote 18, as to which the
date is October 20, 1997)
2
<PAGE> 3
EVI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents................................. $223,966 $ 2,885
Accounts Receivable, Net of Allowance for Uncollectible
Accounts of $583,000 in 1996 and $362,000 in 1995....... 119,152 76,417
Inventories............................................... 157,631 124,772
Marketable Securities..................................... 23,841 --
Net Assets of Discontinued Operations..................... -- 95,491
Other Current Assets...................................... 34,091 9,620
-------- --------
558,681 309,185
-------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land, Buildings and Other Property........................ 51,037 31,964
Machinery and Equipment................................... 154,945 91,958
Furniture and Vehicles.................................... 16,339 13,991
-------- --------
222,321 137,913
Less: Accumulated Depreciation............................ 49,597 37,754
-------- --------
172,724 100,159
-------- --------
GOODWILL, NET............................................... 102,474 35,784
OTHER ASSETS................................................ 18,964 7,997
-------- --------
$852,843 $453,125
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-Term Borrowings, Primarily Under Revolving Lines of
Credit.................................................. $ 4,451 $ 4,577
Current Maturities of Long-Term Debt...................... 3,622 3,492
Accounts Payable.......................................... 80,783 44,254
Accrued Salaries and Benefits............................. 11,817 5,153
Current Tax Liability..................................... 81,916 1,342
Other Accrued Liabilities................................. 50,537 19,473
-------- --------
233,126 78,291
-------- --------
LONG-TERM DEBT.............................................. 126,710 124,183
DEFERRED INCOME TAXES AND OTHER............................. 38,923 22,585
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' INVESTMENT:
Common Stock, $1 Par Value, Authorized 80,000,000 Shares,
Issued 45,929,250 Shares in 1996 and 37,044,366 Shares
in 1995................................................. 45,930 37,044
Capital in Excess of Par Value............................ 258,721 139,431
Retained Earnings......................................... 158,333 60,167
Cumulative Foreign Currency Translation Adjustment........ (8,712) (6,915)
Treasury Stock, at Cost................................... (2,569) (1,661)
Unrealized Gain on Marketable Securities.................. 2,381 --
-------- --------
454,084 228,066
-------- --------
$852,843 $453,125
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(All share and per share amounts adjusted for the May 1997 two-for-one stock
split)
3
<PAGE> 4
EVI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
REVENUES................................................... $478,020 $271,675 $185,285
-------- -------- --------
COSTS AND EXPENSES:
Cost of Sales............................................ 373,509 205,230 139,901
Selling, General and Administrative Attributable to
Segments.............................................. 51,885 43,357 36,998
Corporate General and Administrative..................... 6,339 5,123 4,748
-------- -------- --------
431,733 253,710 181,647
-------- -------- --------
OPERATING INCOME........................................... 46,287 17,965 3,638
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest Income.......................................... 2,163 21 194
Interest Expense......................................... (16,454) (16,287) (13,537)
Other, Net............................................... (450) 663 218
-------- -------- --------
(14,741) (15,603) (13,125)
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES.......................... 31,546 2,362 (9,487)
PROVISION (BENEFIT) FOR INCOME TAXES....................... 7,041 (240) (3,795)
-------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS................... 24,505 2,602 (5,692)
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAXES.......... 7,468 8,709 10,334
GAIN ON DISPOSAL OF DISCONTINUED OPERATIONS, NET OF
TAXES.................................................... 66,924 -- --
EXTRAORDINARY CHARGE, NET OF TAXES......................... (731) -- (3,784)
-------- -------- --------
NET INCOME................................................. $ 98,166 $ 11,311 $ 858
======== ======== ========
EARNINGS PER COMMON SHARE:
Income (Loss) from Continuing Operations................. $ .60 $ .09 $ (.23)
Income from Discontinued Operations...................... .18 .29 .41
Gain on Disposal of Discontinued Operations.............. 1.65 -- --
Extraordinary Charge..................................... (.02) -- (.15)
-------- -------- --------
Net Income............................................... $ 2.41 $ .38 $ .03
======== ======== ========
Weighted Average Common Shares Outstanding............... 40,706 29,448 25,258
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(All share and per share amounts adjusted for the May 1997 two-for-one stock
split)
4
<PAGE> 5
EVI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
CUMULATIVE
CAPITAL FOREIGN UNREALIZED
COMMON STOCK IN CURRENCY TREASURY STOCK GAIN ON
-------------------- EXCESS RETAINED TRANSLATION ------------------ MARKETABLE
SHARES $1 PAR OF PAR EARNINGS ADJUSTMENT SHARES AMOUNT SECURITIES
---------- ------- -------- -------- ----------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993........................ 24,631,512 $24,632 $ 38,126 $47,998 $(2,111) (129,950) $ (909) $ --
Net Income.................. -- -- -- 858 -- -- -- --
Shares Issued in Connection
with Acquisition.......... 866,666 866 4,259 -- -- -- -- --
Options Exercised........... 10,320 10 3 -- -- -- -- --
Purchase of Treasury Stock,
at Cost, for Executive
Deferred Compensation
Plan...................... -- -- -- -- -- (58,468) (394) --
Foreign Currency
Translation Adjustment.... -- -- -- -- (2,425) -- -- --
---------- ------- -------- -------- ------- -------- ------- ------
Balance at December 31,
1994........................ 25,508,498 25,508 42,388 48,856 (4,536) (188,418) (1,303) --
Net Income.................. -- -- -- 11,311 -- -- -- --
Shares Issued in Connection
with Acquisition.......... 4,510,396 4,510 30,765 -- -- -- -- --
Options Exercised........... 125,472 126 530 -- -- -- -- --
Issuance of Common Stock.... 6,900,000 6,900 65,748 -- -- -- -- --
Purchase of Treasury Stock,
at Cost, for Executive
Deferred Compensation
Plan...................... -- -- -- -- -- (38,784) (358) --
Foreign Currency
Translation Adjustment.... -- -- -- -- (2,379) -- -- --
---------- ------- -------- -------- ------- -------- ------- ------
Balance at December 31,
1995........................ 37,044,366 37,044 139,431 60,167 (6,915) (227,202) (1,661) --
Net Income.................. -- -- -- 98,166 -- -- -- --
Shares Issued in Connection
with Acquisitions......... 1,625,420 1,626 22,588 -- -- -- -- --
Options Exercised........... 359,464 360 2,742 -- -- -- -- --
Issuance of Common Stock.... 6,900,000 6,900 93,960 -- -- -- -- --
Purchase of Treasury Stock,
at Cost, for Executive
Deferred Compensation
Plan...................... -- -- -- -- -- (44,206) (908) --
Foreign Currency Translation
Adjustment................ -- -- -- -- (1,797) -- -- --
Unrealized Gain on
Marketable Securities..... -- -- -- -- -- -- -- 2,381
---------- ------- -------- -------- ------- -------- ------- ------
Balance at December 31,
1996........................ 45,929,250 $45,930 $258,721 $158,333 $(8,712) (271,408) $(2,569) $2,381
========== ======= ======== ======== ======= ======== ======= ======
<CAPTION>
TOTAL
STOCKHOLDERS'
INVESTMENT
-------------
<S> <C>
Balance at December 31,
1993........................ $107,736
Net Income.................. 858
Shares Issued in Connection
with Acquisition.......... 5,125
Options Exercised........... 13
Purchase of Treasury Stock,
at Cost, for Executive
Deferred Compensation
Plan...................... (394)
Foreign Currency
Translation Adjustment.... (2,425)
--------
Balance at December 31,
1994........................ 110,913
Net Income.................. 11,311
Shares Issued in Connection
with Acquisition.......... 35,275
Options Exercised........... 656
Issuance of Common Stock.... 72,648
Purchase of Treasury Stock,
at Cost, for Executive
Deferred Compensation
Plan...................... (358)
Foreign Currency
Translation Adjustment.... (2,379)
--------
Balance at December 31,
1995........................ 228,066
Net Income.................. 98,166
Shares Issued in Connection
with Acquisitions......... 24,214
Options Exercised........... 3,102
Issuance of Common Stock.... 100,860
Purchase of Treasury Stock,
at Cost, for Executive
Deferred Compensation
Plan...................... (908)
Foreign Currency Translation
Adjustment................ (1,797)
Unrealized Gain on
Marketable Securities..... 2,381
--------
Balance at December 31,
1996........................ $454,084
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(All share and per share data have been adjusted for the May 1997 two-for-one
stock split)
5
<PAGE> 6
EVI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................ $ 98,166 $ 11,311 $ 858
Adjustments to Reconcile Net Income to Net Cash Provided
(Used) by Operations:
Depreciation and Amortization.......................... 16,771 12,446 9,398
Net Income from Discontinued Operations................ (7,468) (8,709) (10,334)
Gain on Disposal of Discontinued Operations, Net....... (66,924) -- --
Extraordinary Charge on Prepayment of Debt, Net........ 731 -- 3,784
Deferred Income Tax Provision (Benefit) from Continuing
Operations........................................... (7,965) 2,109 (2,454)
Tax Dispute Settlement................................. (6,412) -- --
Provision for Uncollectible Accounts Receivable........ 486 252 158
Change in Assets and Liabilities, Net of Effects of
Businesses Acquired:
Accounts Receivable.................................. (20,853) (16,104) (13,832)
Inventories.......................................... (16,296) (33,076) (8,463)
Other Current Assets................................. 2,469 (5,283) (756)
Accounts Payable..................................... 17,196 17,045 (8,215)
Accrued Salaries and Benefits and Other.............. (10,123) (10,246) (1,681)
Other Assets......................................... (2,697) 1,661 (1,709)
Other, Net........................................... (2,553) (2,257) 5,545
-------- -------- --------
Net Cash Used by Continuing Operations............ (5,472) (30,851) (27,701)
Net Cash Provided by Discontinued Operations...... 8,294 10,745 6,906
-------- -------- --------
Net Cash Provided (Used) by Operating
Activities...................................... 2,822 (20,106) (20,795)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Disposal of Discontinued Operations......... 306,854 -- --
Acquisitions and Capital Expenditures of Discontinued
Operations............................................. (63,136) (22,884) (11,738)
Acquisition of Businesses, Net of Cash Acquired........... (87,814) (8,105) (10,452)
Capital Expenditures for Property, Plant and Equipment.... (25,890) (11,132) (7,869)
Proceeds from Sale of Assets.............................. 1,261 3,369 28
-------- -------- --------
Net Cash Provided (Used) by Investing
Activities...................................... 131,275 (38,752) (30,031)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock, Net............................. 100,860 72,648 --
Issuance of Long-Term Debt................................ -- -- 120,000
Termination Costs on Retirement of Debt................... (1,125) -- (4,872)
Debt Issuance Costs....................................... (1,602) -- (4,155)
Repayments Under Revolving Lines of Credit, Net........... (1,653) (11,105) (22,095)
Repayments on Term Debt, Net.............................. (11,711) (2,434) (38,752)
Stock Options Exercised, Purchase of Treasury Stock and
Other Financing Activities, Net........................ 2,194 298 (381)
-------- -------- --------
Net Cash Provided by Financing Activities......... 86,963 59,407 49,745
-------- -------- --------
EFFECT OF TRANSLATION ADJUSTMENT ON CASH.................... 21 81 (300)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 221,081 630 (1,381)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR...................................................... 2,885 2,255 3,636
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF
YEAR...................................................... $223,966 $ 2,885 $ 2,255
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE> 7
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of EVI, Inc.,
formerly Energy Ventures, Inc., and all majority-owned subsidiaries (the
"Company"). All material intercompany accounts and transactions have been
eliminated in consolidation.
NATURE OF OPERATIONS
The Company is an international manufacturer and supplier of oilfield
equipment. The Company manufactures drill pipe, premium tubulars and a complete
line of artificial lift and production equipment used in the exploration and
production of oil and natural gas.
INVENTORIES
Inventories are valued using the first-in, first-out ("FIFO") method and
are stated at the lower of cost or market.
INVESTMENTS IN MARKETABLE SECURITIES
Investments in marketable securities are accounted for in accordance with
Statement of Financial Standards No. 115 ("SFAS No. 115") and accordingly, these
investments are recorded at their fair market value with unrealized gains or
losses recorded as a separate component of stockholders' investment. The Company
has classified these investments as available for sale with any other than
temporary decline in fair value of securities charged to earnings.
The marketable securities of $23.8 million held as of December 31, 1996
consists of 3,056,600 shares of Parker Drilling Company ("Parker") common stock.
The Company has applied a 20% discount factor to the common stock as the shares
are restricted and the Company's ability to sell such shares is subject to the
terms of a registration rights agreement with Parker that allows Parker to
restrict the ability of the Company to resell such shares.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is carried at cost. Maintenance and repairs
are expensed as incurred. The costs of renewals, replacements and betterments
are capitalized. Depreciation on fixed assets is computed using the
straight-line method over the estimated useful lives for the respective
categories. The useful lives of the major classes of property, plant and
equipment are as follows:
<TABLE>
<CAPTION>
LIFE
-------------
<S> <C>
Buildings................................................... 15 - 40 years
Machinery and equipment..................................... 5 - 20 years
Furniture and vehicles...................................... 3 - 7 years
</TABLE>
INTANGIBLE ASSETS AND AMORTIZATION
The Company's intangible assets are comprised primarily of goodwill and
identifiable intangible assets, primarily patents and technology licenses. The
Company reviews intangible assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of any applicable assets may not
be recoverable. In assessing recoverability of such assets, the Company
estimates the future cash flows expected to result from the use of the asset and
its eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying amount of
the asset, an impairment loss is recognized. Management believes that there have
been no events or circumstances which warrant revision to
7
<PAGE> 8
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the remaining useful life or which affect the recoverability of goodwill. The
goodwill is being amortized on a straight-line basis over 40 years. Other
identifiable intangible assets, included as a component of other assets, are
amortized on a straight-line basis over the years expected to be benefited,
ranging from 5 to 15 years.
Amortization expense for goodwill and other intangible assets was
$2,063,000, $1,307,000 and $726,000 for 1996, 1995 and 1994, respectively.
Accumulated amortization for goodwill at December 31, 1996 and 1995 was
$3,465,000 and $1,846,000, respectively.
FOREIGN CURRENCY TRANSLATION
Results of operations for foreign subsidiaries with functional currencies
other than the U.S. dollar are translated using average exchange rates during
the period. Assets and liabilities of these foreign subsidiaries are translated
using the exchange rates in effect at the balance sheet date and the resulting
translation adjustments are included as a separate component of stockholders'
investment. Currency transaction gains and losses are reflected in income for
the period.
At the end of 1996, Mexico became a highly inflationary economy.
Accordingly, effective January 1, 1997, the translation adjustments related to
the Company's operations in Mexico will be reflected in the results of
operations. The Company does not expect this change to have a material effect on
its consolidated financial position or future results of operations.
REVENUE RECOGNITION
The Company recognizes revenue as products are shipped or accepted by the
customer. Service revenues are recognized as services are performed.
ACCOUNTING FOR INCOME TAXES
Under Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes" ("SFAS No. 109"), deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases.
WEIGHTED AVERAGE SHARES
Earnings per share has been computed based on the weighted average number
of common shares outstanding during the respective periods. Stock options
outstanding are excluded from the weighted average number of shares since the
dilutive effect is not material.
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 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.
ADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standards No. 121
("SFAS No. 121"), Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, effective January 1, 1996. SFAS No. 121
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill related to those assets to be held
and used, and for long-lived assets and certain identifiable intangibles to be
disposed of. Accordingly, the Company's long-lived assets for
8
<PAGE> 9
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
certain identifiable intangibles are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of any assets may not
be recoverable. In performing the review for recoverability, the Company
estimates the future cash flows expected to result from the use of the asset and
its eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying amount of
the asset, an impairment loss is recognized. The adoption of SFAS No. 121 did
not impact the Company's consolidated financial position or results of
operations.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Standards No. 123 ("SFAS No. 123"), Accounting for Stock-Based
Compensation. SFAS No. 123 establishes financial accounting and reporting
standards for stock-based employee compensation. The pronouncement allows an
entity to continue to measure compensation cost for those instruments using the
intrinsic value-based method of accounting prescribed by the Accounting
Principles Board Opinion No. 25 ("APB No. 25"), under which no compensation cost
has been recognized in the accompanying financial statements for stock options
since the exercise price of the Company's stock options issued equals the market
value of the underlying stock on the date of grant. The Company does not intend
to adopt the fair value method of accounting for stock-based compensation under
SFAS No. 123.
RECLASSIFICATIONS AND RESTATEMENTS
Certain reclassifications of prior year balances have been made to conform
such amounts to corresponding 1996 classifications. The consolidated financial
statements have been restated to reflect the sale of the Company's Mallard
Division on November 11, 1996. See Note 5.
2. SUPPLEMENTAL CASH FLOW INFORMATION
For purposes of the Consolidated Statements of Cash Flows, the Company
considers all highly liquid investments with original maturities of three months
or less to be cash equivalents.
Cash paid during the years ended December 31, 1996, 1995, and 1994 for
interest and income taxes (net of refunds) was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest paid......................................... $15,242 $15,254 $13,012
Income taxes paid, net of refunds..................... $ 6,715 $ 1,529 $ 1,566
</TABLE>
Refer to Note 4 for additional information concerning noncash investing and
financing activities.
3. INVENTORIES
Inventories by category are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and components................................ $ 88,595 $ 61,578
Work in process............................................. 20,889 17,167
Finished goods.............................................. 39,129 39,191
Supplies.................................................... 9,018 6,836
-------- --------
$157,631 $124,772
======== ========
</TABLE>
Work in process and finished goods inventories include the cost of
materials, labor and plant overhead.
9
<PAGE> 10
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. ACQUISITIONS AND DISPOSITIONS
On December 10, 1996, the Company acquired Arrow Completion Systems
("Arrow") for total cash consideration of approximately $21.5 million. The
operations of Arrow are currently being integrated into the production equipment
division through plant consolidations.
The allocation of the purchase price to the fair market value of the net
assets acquired in the Arrow acquisition is subject to revision as the purchase
price is subject to adjustment pending the resolution of certain asset
valuations which must be agreed to by the buyer and seller. The Company believes
the ultimate resolution to the cost of the acquisition will not have a material
impact on the assets acquired or the Company's results of operations as a result
of such revision.
On October 1, 1996, the Company acquired the stock of Irmaos Geremia Ltd.
("Geremia"), a Porto Alegre, Brazil based designer, manufacturer and marketer of
progressing cavity pumps, for approximately $24.5 million in cash and assumed
debt.
The Company acquired Superior Tube Limited ("Superior"), an Alberta, Canada
based premium tubular manufacturer, for total cash consideration of
approximately $16 million on September 4, 1996.
On August 5, 1996, the Company acquired Tubular Corporation of America,
Inc. ("TCA") for approximately 1,000,000 shares of Common Stock, $14.35 million
in cash, a $650,000 note due January 1997 and assumed debt of approximately $15
million.
On May 3, 1996, the Company acquired ENERPRO International, Inc.
("ENERPRO"), a manufacturer of premium threads and thread connections, for
625,428 shares of Common Stock and the assumption of approximately $3.1 million
in indebtedness.
In April 1996, the Company acquired Production Specialties, Inc.
("Production Specialties"), a manufacturer of gas lift equipment, for
approximately $3.1 million.
In February 1996, the Company sold its United States retail store
distribution system to Continental Emsco for approximately $7.5 million. The
Company received $3 million in cash, a $4 million vendor credit and a $0.5
million note receivable. The consideration received in the sale approximated the
net book value of the assets sold, resulting in no material gain or loss.
In July 1995, the Company acquired Engemaq S.A. ("Engemaq"), a Brazilian
completion tool business, for $4 million.
On June 30, 1995, the Company acquired Prideco, Inc. ("Prideco") in a
transaction which involved the issuance of approximately 4,500,000 shares of
Common Stock.
On September 1, 1994, the Company completed the acquisition of the Fluid
Packed(TM) pumps line of rod pumps, parts and accessories, and the sucker rod
line from National-Oilwell for $13.5 million in cash.
On July 29, 1994, the Company acquired a tubular finishing facility located
in Bryan, Texas ("Bryan facility"). The Company exchanged Eastman Cherrington
Environmental, Inc. ("Eastman Cherrington") including a cash payment of
approximately $2 million for the Bryan facility. See Note 5 for additional
information on Eastman Cherrington.
The acquisitions discussed above were accounted for using the purchase
method of accounting, and their results of operations are included in the
Consolidated Statements of Income from the respective dates of acquisition. The
results of operations related to the acquisitions of Arrow, Geremia, Superior,
ENERPRO, Production Specialties and Engemaq are not material individually nor in
the aggregate, therefore, pro forma information is not presented.
10
<PAGE> 11
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents selected unaudited consolidated financial
information for the Company on a pro forma basis assuming the Prideco and TCA
acquisitions, the July 1996 equity offering of 6,900,000 shares of Common Stock
and the October 1995 equity offering of 6,900,000 shares of Common Stock had
occurred on January 1, 1995. The pro forma information set forth below is not
necessarily indicative of the results that actually would have been achieved had
such transactions been consummated as of January 1, 1995, or that may be
achieved in the future.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------
1996 1995
--------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Revenues.................................................... $506,280 $350,456
Income from continuing operations........................... 26,456 5,078
Net income.................................................. 100,117 13,787
Earnings per common share from continuing operations........ 0.59 0.12
</TABLE>
PLANT CLOSURES
The Company adopted a plan to close its Bastrop, Texas, tool joint
manufacturing facility and to combine its two packer facilities through the
closure of one facility in Arlington, Texas in the fourth quarter of 1996. In
connection with these decisions, the Company incurred a charge of $5.8 million
associated with these closures. Of this charge, $4.3 million related to the tool
joint facility closure and relocation of equipment from this facility and $1.5
million related to the consolidation of its packer facilities and the closure of
one of the plants. The Company incurred $3.8 million in 1996 for costs
associated with these actions during 1996, including costs relating to the
relocation of equipment at its Bastrop facility to other facilities. The Company
also accrued $2 million as part of the $5.8 million charge for exit costs that
it expected to be incurred in 1997 relating to the closure of its Bastrop and
Arlington facilities. Such costs included $800,000 for severance and termination
costs, $850,000 for the reduction in the carrying value of its Bastrop facility
in light of the intended plan of disposition of the facility and $350,000 for
the termination of the Arlington lease. Approximately 400 employees were
affected by these closures, of which the employment of approximately 275 had
been terminated as of December 31, 1996. The closure of both the Bastrop and
Arlington facilities had been substantially completed by March 1997.
5. DISCONTINUED OPERATIONS
On November 11, 1996, the Company completed the sale of its contract
drilling segment which was comprised of the Mallard Bay contract drilling
division ("Mallard Division") to Parker, in exchange for cash of approximately
$306 million and 3,056,600 shares of Parker preferred stock valued by the
Company at $20 million. The Company reported a net gain on the disposal of the
Mallard Division of $66.9 million, net of taxes of $44.6 million. The Company
applied a 20% discount factor to the Parker preferred stock because of the
restricted nature of the stock received. Subsequently Parker converted the
preferred stock to Parker common stock. At December 31, 1996, the Company
reported in connection with the Parker common stock a $2.4 million unrealized
gain, net of taxes, as a component of stockholders' investment.
11
<PAGE> 12
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The results of operations for the Mallard Division are reflected in the
accompanying Consolidated Statements of Income as "Discontinued Operations, Net
of Taxes" and the Company's Consolidated Balance Sheets and Statements of Income
for prior periods have been restated. Condensed results of the Mallard Division
discontinued operations were as follows:
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED
NOVEMBER 11, DECEMBER 31,
1996 1995
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Revenues.................................................. $81,310 $79,912
------- -------
Income before income taxes................................ 11,490 14,029
Provision for income taxes................................ 4,022 5,320
------- -------
Net income................................................ $ 7,468 $ 8,709
======= =======
</TABLE>
In 1992, the Company established an environmental services group, Eastman
Cherrington Environmental ("Eastman Cherrington"), which provided horizontal
drilling and related services for the purpose of performing remediation,
sampling, containment and monitoring. In December 1993, the Company determined
that the business of Eastman Cherrington was not consistent with the Company's
long-term strategic objectives and adopted a plan of disposition of the
division. The Company's plan of disposition contemplated a disposition of the
division in April 1994. At the time the Company adopted its plan of disposition,
the Company had contacted and had preliminary discussions with a number of
potential purchasers for the division that would have involved a disposition of
the division through a sale to an institutional purchaser. Based on these
discussions, the historical operations of the division and the operating budget
and outstanding contracts of the division, the Company estimated the incurrence
of approximately $330,000 in net losses through the anticipated date of
disposition after giving effect to the projected disposition and accrued this
amount in 1993.
During the first quarter of 1994, the Company worked toward a definitive
agreement with one of the potential purchasers. These negotiations failed to
result in a definitive agreement due to the purchaser's desire for one of the
directors of the Company to participate in the purchase and the Board's view
that it would be inappropriate to sell Eastman Cherrington to that purchaser
under those circumstances. Following this occurrence, the Company proceeded with
negotiations with alternative purchasers, including the ultimate purchaser. At
this time, the Company estimated the potential additional operating losses
pending the new projected disposition date in the third quarter of 1994. In
light of this estimate and the consideration that was then projected to be
received on the disposition based on discussions with the ultimate purchaser,
the Company deferred losses of $797,000 until the disposition of Eastman
Cherrington in July 1994 in exchange for a tubular finishing facility in Bryan,
Texas. At the time of disposition, the consideration received approximated the
then book value of the division plus the 1994 deferred losses. As a result,
there was no material gain or loss realized on the disposition. Eastman
Cherrington had revenues of $3.3 million and a net loss of $2.1 million in 1993,
including the $330,000 accrual for 1994 losses, and revenues of $1.4 million and
a net loss of $797,000 in 1994, excluding the $330,000 accrued at year end 1993.
12
<PAGE> 13
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. SHORT-TERM BORROWINGS AND LINES OF CREDIT
The Company's short-term borrowings at December 31, 1996 and 1995 consisted
of the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS,
EXCEPT PERCENTAGES)
<S> <C> <C>
Payable to banks under lines of credit, interest of 8.75% at
December 31, 1996; principal and interest payable on
demand.................................................... $ 2,924 $ 4,577
Other short-term borrowings................................. $ 1,527 $ --
Weighted average interest rate on notes outstanding during
the year.................................................. 8.48% 10.22%
Average borrowings during the year.......................... $23,871 $24,382
Maximum outstanding during the year......................... $57,619 $43,189
</TABLE>
On June 26, 1996, the Company entered into a new $120 million working
capital facility which replaced the Company's prior U.S. working capital line of
credit. In the second quarter of 1996, the Company incurred an extraordinary
charge of $731,000, net of taxes of $394,000, relating to the termination of its
prior working capital facility.
The Company currently has available to it working capital facilities
providing for up to $130.9 million in borrowings. Borrowings under these
facilities are subject to certain borrowing base requirements relating to the
Company's accounts receivable and inventory securing the borrowings. Borrowings
bear interest at variable rates and are secured by accounts receivables,
inventory and stock of various of the Company's domestic and foreign
subsidiaries. These facilities contain customary affirmative and negative
covenants relating to working capital, earnings and net worth. These facilities
also impose limitations on the Company's and its subsidiaries' use of funds for
future acquisitions and capital expenditures, the incurrence of additional debt
and other operational matters and certain expenditures. At December 31, 1996,
the Company was limited under the principal credit facility in the amount of
cash dividends, distributions and other restricted payments that could be made
by it to $133 million.
At December 31, 1996, approximately $2.9 million was outstanding under the
revolving lines of credit and approximately $10.1 million had been used to
support outstanding letters of credit. Additional borrowings of approximately
$117.9 million were available based on collateral values at December 31, 1996.
7. LONG-TERM DEBT
The Company's long-term debt at December 31, 1996 and 1995 consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Senior Notes due in 2004, interest at 10.25%................ $120,000 $120,000
Capitalized lease obligations under various leases with
various installment amounts............................... 5,475 4,505
Other notes payable at various rates........................ 4,857 3,170
-------- --------
130,332 127,675
Less: current maturities of long-term debt.................. 3,622 3,492
-------- --------
$126,710 $124,183
======== ========
</TABLE>
13
<PAGE> 14
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a summary of scheduled debt maturities by year (in
thousands):
<TABLE>
<S> <C>
1997.............................................. $ 3,622
1998.............................................. 2,832
1999.............................................. 1,652
2000.............................................. 787
2001.............................................. 348
Thereafter........................................ 121,091
--------
$130,332
========
</TABLE>
On March 24, 1994, the Company sold pursuant to a private placement $120
million of 10.25% Senior Notes due 2004. In July 1994, substantially all of
these notes were exchanged for a substantially identical series of 10.25% Senior
Notes due 2004 with semi-annual interest payments in March and September. Both
issues of Senior Notes were issued pursuant to the terms of an Indenture dated
March 15, 1994. Certain subsidiaries of the Company have unconditionally
guaranteed the Company's obligations under the Senior Notes. See Note 17. The
Company is restricted to a specific formula in the amount of cash dividends,
distributions and other restricted payments that could be made by it under the
terms of the Senior Notes to approximately $278 million at December 31, 1996.
The estimated fair value of the Company's $120 million Senior Notes at
December 31, 1996 and 1995 was $126 million and $125 million, respectively,
using a rate currently available to the Company for similar debt.
8. STOCKHOLDERS' INVESTMENT
PUBLIC STOCK OFFERINGS
On July 25, 1996, the Company completed a public offering of 6,900,000
shares of its Common Stock ("Public Offering"). The net proceeds of this
offering were approximately $100.9 million. The Company also completed a public
offering early in the fourth quarter of 1995, of 6,900,000 shares of its Common
Stock. The net proceeds of this offering were approximately $72.6 million.
STOCK OPTION PLANS
In May 1981, the Company's stockholders approved the Company's Employee
Stock Option Plan ("Option Plan"), a non-qualified stock option plan. The plan
expired in May 1991. Under the Option Plan, options were provided to officers
and key employees of the Company (including directors who are also key
employees) and its subsidiaries to purchase up to an aggregate of 2,000,000
shares of Common Stock of the Company.
The Company maintains a Non-Employee Director Stock Option Plan ("Director
Plan"), a non-qualified stock option plan. Under the Director Plan, options to
purchase up to an aggregate of 1,000,000 shares of Common Stock of the Company
may be granted to non-employee directors of the Company. Options to purchase
10,000 shares of Common Stock are automatically granted to each non-employee
director on the date of their initial election and their re-election. At
December 31, 1996, 660,000 shares were available for the granting of options.
The Company also has in effect a 1992 Employee Stock Option Plan ("ESO
Plan"). Under the ESO Plan, options to purchase up to an aggregate of 2,000,000
shares of Common Stock of the Company may be granted to officers and key
employees of the Company (including directors who are also key employees) and
its subsidiaries. At December 31, 1996, 572,000 shares were available for
granting of such options.
14
<PAGE> 15
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock options vest after one to five years and expire after ten years from
the date of grant. Information about the above stock option plans for the three
years ended December 31, 1996, is set forth below:
<TABLE>
<CAPTION>
OPTION WEIGHTED AVERAGE
NUMBER OF PRICE/RANGE EXERCISE PRICE
SHARES PER SHARE PER SHARE
--------- --------------- ----------------
<S> <C> <C> <C>
Options outstanding, December 31, 1993... 1,334,126 $ 1.35 - $11.94 $ 6.36
Granted................................ 104,000 6.88 6.88
Exercised.............................. (10,320) 1.35 1.35
Canceled............................... (148,334) 5.75 - 9.13 6.69
---------
Options outstanding, December 31, 1994... 1,279,472 1.35 - 11.94 7.26
Granted................................ 254,000 6.88 - 9.00 8.45
Exercised.............................. (125,472) 1.35 - 8.25 5.23
---------
Options outstanding, December 31, 1995... 1,408,000 4.69 - 11.94 7.60
Granted................................ 570,000 13.07 - 14.75 13.27
Exercised.............................. (359,464) 5.75 - 11.94 8.88
---------
Options outstanding, December 31, 1996... 1,618,536 4.69 - 14.75 9.37
=========
Options exercisable as of December 31,
1996................................... 866,666 4.69 - 11.94 7.09
=========
</TABLE>
The 1,618,536 options outstanding at December 31, 1996, have a weighted
average remaining contractual life of 7.4 years. The 866,666 options exercisable
at December 31, 1996, have a weighted average remaining contractual life of 5.4
years. The weighted average fair value of the options granted in 1996 and 1995
were $9.80 and $5.83, respectively.
STOCK-BASED COMPENSATION
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123 and has been determined as if the Company had accounted
for its stock options under the fair value method as provided therein. The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for options issued in 1996 and 1995, respectively: risk-free
interest rates: 6.6% and 6.7%; expected lives of 7 years; expected volatility of
48% and 47%; and no expected dividends.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Set forth
below is a summary of the Company's net income and earnings per share as
reported and pro forma as if the fair value based method of accounting defined
in SFAS No. 123 had been applied. The pro forma information is not meant to be
representative of the effects on reported net income for future years, because
as provided by SFAS No. 123, only the effects of awards granted after January 1,
1995 are considered in the pro forma calculation.
<TABLE>
<CAPTION>
1996 1995
------------------------ --------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Net income (in thousands)............ $98,166 $96,808 $11,311 $10,942
Earnings per share................... $ 2.41 $ 2.36 $ 0.38 $ 0.37
</TABLE>
PREFERRED STOCK
The Company is authorized to issue up to 3,000,000 shares of $1.00 par
value preferred stock. As of December 31, 1996, none has been issued.
15
<PAGE> 16
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PROFIT SHARING PLANS
The Company and certain of its subsidiaries have adopted retirement plans
which qualify under Section 401(k) of the Internal Revenue Code. The plans
generally provide for 40% matching contributions by the Company, up to a maximum
liability of 1.2% of each participating employee's annual compensation. The
Company, under each plan, also has the right to make additional discretionary
matching contributions. Total contributions by the Company under these plans
were $513,000, $226,000 and $138,000 during 1996, 1995 and 1994, respectively.
EXECUTIVE DEFERRED COMPENSATION PLAN
In May 1992, the Company's stockholders approved the Executive Deferred
Compensation Stock Ownership Plan (the "EDC Plan"). Under the EDC Plan, a
portion of the compensation for certain key employees of the Company and its
subsidiaries, including officers and employee directors, can be deferred for
payment after retirement or termination of employment.
The Company has established a grantor trust to fund the benefits under the
EDC Plan. The funds provided to such trust are invested by a trustee independent
of the Company primarily in Common Stock of the Company which is purchased by
the trustee on the open market. The assets of the trust are available to satisfy
the claims of all general creditors of the Company in the event of bankruptcy or
insolvency. Accordingly, the Common Stock held by the trust has been
consolidated for accounting purposes and is included in the accompanying
Consolidated Statements of Stockholders' Investment as "Treasury Stock, at Cost"
and reflected as such on the Consolidated Balance Sheets.
9. INCOME TAXES
The domestic and foreign components of Income before Income Taxes from
Continuing Operations consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic................................................ $22,755 $(2,840) $(9,418)
Foreign................................................. 8,791 5,202 (69)
------- ------- -------
$31,546 $ 2,362 $(9,487)
======= ======= =======
</TABLE>
Total income tax provision (benefit) was recorded as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Income (loss) from continuing operations................. $ 7,041 $ (240) $(3,795)
Discontinued operations.................................. 4,022 5,320 5,601
Gain on disposal of discontinued operations.............. 44,600 -- --
Extraordinary charge..................................... (394) -- (1,949)
------- ------ -------
$55,269 $5,080 $ (143)
======= ====== =======
</TABLE>
16
<PAGE> 17
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's provision (benefit) for income taxes of continuing operations
for the three years ended December 31, 1996, consisted of:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current
U.S. Federal.......................................... $11,878 $(4,060) $(2,817)
Foreign............................................... 2,845 1,317 1,531
State................................................. 283 394 (55)
------- ------- -------
15,006 (2,349) (1,341)
------- ------- -------
Deferred
U.S. Federal.......................................... (9,454) (55) (2,631)
Foreign............................................... 1,250 2,126 177
State................................................. 239 38 --
------- ------- -------
(7,965) 2,109 (2,454)
------- ------- -------
$ 7,041 $ (240) $(3,795)
======= ======= =======
</TABLE>
The difference between the tax provision at the statutory federal income
tax rate and the tax provision attributable to income from continuing operations
before income taxes for the three years ended December 31, 1996, in the
accompanying Consolidated Statements of Income is analyzed below:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Statutory federal income tax rate........................... 35.0% 35.0% (34.0)%
Effect of state income tax, net............................. 1.1 3.4 0.5
Effect of non-deductible expenses........................... 1.8 14.9 2.4
Utilization of net operating loss carryforward.............. (1.3) (37.7) (10.5)
Effect of foreign income tax, net........................... (.6) (11.8) 5.4
Foreign losses not benefited (benefited).................... (1.8) (6.4) 3.7
Foreign Sales Corporation benefit........................... (1.0) (3.3) --
Research and development credit benefit..................... -- (8.2) --
Benefit of tax dispute settlement........................... (12.7) -- --
Other....................................................... 1.8 3.9 (7.5)
----- ----- -----
22.3% (10.2)% (40.0)%
===== ===== =====
</TABLE>
Deferred tax assets and liabilities are recognized for the estimated future
tax effects of temporary differences between the tax basis of an asset or
liability and its reported amount in the financial statements. The measurement
of deferred tax assets and liabilities is based on enacted tax laws and rates
currently in effect in each of the jurisdictions in which the Company has
operations. Generally, deferred tax assets and liabilities
17
<PAGE> 18
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
are classified as current or noncurrent according to the classification of the
related asset or liability for financial reporting. The components of the net
deferred tax asset (liability) were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Domestic and foreign operating losses..................... $ 7,505 $ 6,236
Alternative minimum tax credit carryforward............... -- 864
Accrued liabilities and reserves.......................... 36,976 7,374
Foreign tax credits....................................... 7,443 5,310
Tax benefit transfer leases acquired...................... 4,807 --
Valuation allowance....................................... (2,630) (3,046)
-------- --------
Total deferred tax asset.......................... 54,101 16,738
-------- --------
Deferred tax liabilities:
Property and equipment.................................... (21,452) (11,080)
Unremitted foreign earnings............................... (7,971) (4,340)
Inventory basis differences............................... (11,191) (3,989)
Goodwill basis differences................................ (5,561) (799)
COLEVE production payment................................. -- (14,907)
Other..................................................... (2,131) (95)
-------- --------
Total deferred tax liability...................... (48,306) (35,210)
-------- --------
Net deferred tax asset (liability)........................ $ 5,795 $(18,472)
======== ========
</TABLE>
At December 31, 1996 the Company had $13,229,000 of U.S. net operating
losses which were generated by certain subsidiaries prior to their acquisition.
The use of these pre-acquisition operating losses is subject to limitations
imposed by the Internal Revenue Code and is also restricted to the taxable
income of one subsidiary. These U.S. carryforwards, if not utilized, will expire
between 2001 and 2009. The Company also had approximately $7,743,000 of foreign
net operating loss carryforwards of which $7,357,000 will expire between 1998
and 2001 and the remainder can be carried forward indefinitely.
The realization of a portion of the deferred tax asset is dependent on
generating sufficient taxable income prior to expiration of the carryforward
amounts. Although realization is not assured, management believes it is more
likely than not that the net deferred tax asset will be realized. The amount of
the deferred tax asset considered realizable, however, could be reduced in the
near term if estimates of future taxable income during the carryforward period
are reduced.
The Company had a valuation allowance to reflect the estimated amount of
deferred tax assets for which realization is uncertain. The net change in the
valuation allowance for the year ended December 31, 1996 was a decrease of
$416,000. The net change principally relates to a reduction in the valuation
allowance required for certain deferred tax assets which realization became
certain during 1996.
On October 11, 1996, the Company entered into a $3.9 million tax settlement
plus accrued interest of $2.5 million with the United States Internal Revenue
Service ("IRS") relating to a dispute regarding the tax impact to the Company
upon the dissolution of the COLEVE joint venture in 1990. The tax liability with
respect to the dissolution had been previously provided for as a deferred tax
liability in the Company's consolidated financial statements. This settlement
resulted in the Company recognizing a $4 million tax benefit in the fourth
quarter due to the elimination of certain previously accrued deferred taxes that
will no longer be required to be paid as a result of this settlement.
18
<PAGE> 19
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. DISPUTES, LITIGATION AND CONTINGENCIES
LITIGATION AND OTHER DISPUTES
The Company is aware of various disputes and potential claims and is a
party in various litigation involving claims against the Company, some of which
are covered by insurance. Based on facts currently known, the Company believes
that the ultimate liability, if any, which may result from known claims,
disputes and pending litigation would not have a material adverse effect on the
Company's consolidated financial position or its results of operations with or
without consideration of insurance coverage.
INSURANCE
The Company is partially self-insured for employee health insurance claims
and for workers' compensation for certain of its employees. Although the Company
believes that adequate reserves have been provided for expected liabilities
arising from its self-insured obligations, it is reasonably possible that
management's estimates of these liabilities will change over the near term as
circumstances develop.
11. INSURANCE SETTLEMENT
On September 30, 1994, the Company settled all of its claims with its
insurance carriers with respect to the termination of its workover contract with
the National Iranian Oil Company ("NIOC"). Under the terms of the settlement
with the Company's insurance carriers, the Company received a net cash payment
of $23 million for reimbursement of certain operating costs incurred and amounts
to be received in accordance with the terms of the workover drilling contract.
The Company also retained all rights to any funds collected or recovered by the
Company from NIOC and to the rigs and equipment deployed in Iran. The rigs and
equipment were moved out of Iran by December 31, 1994.
In 1994, the Company reduced the carrying value of the receivables by $8.8
million to reflect the uncertainties with respect to the collection of the
entire amount of the NIOC receivables and the value of its rigs and equipment by
$3.5 million to reflect the estimated fair value of those rigs. The Company also
wrote off $2.6 million in mobilization costs that were being amortized over the
life of the Company's contract with NIOC and that were required to be reimbursed
to the Company by NIOC. In addition, the Company established a reserve of $2.8
million to cover its anticipated costs for the demobilization of its rigs
outside of Iran, including estimated costs of export, storage, overseas shipping
and local transportation, and $500,000 relating to additional costs anticipated
to be incurred by it in connection with the final settlement of its contract and
arrangements with NIOC. These reductions in carrying value and reserves were
based on information available to the Company at the time of the settlement.
12. COMMITMENTS
The Company is committed under various noncancelable operating leases which
primarily relate to office space and equipment. Total lease expense incurred
under noncancelable operating leases was approximately $5,230,000, $3,812,000
and $3,698,000 for the years ended December 31, 1996, 1995, and 1994,
respectively.
Future minimum rental commitments under these operating leases are as
follows (in thousands):
<TABLE>
<S> <C>
1997............................................... $ 7,632
1998............................................... 7,907
1999............................................... 6,666
2000............................................... 5,369
2001............................................... 4,688
Thereafter......................................... 8,699
-------
$40,961
=======
</TABLE>
19
<PAGE> 20
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In January 1996, the Company entered into a long-term manufacturing and
sales agreement with Oil Country Tubular, Ltd. ("OCTL") pursuant to which OCTL
manufactures drill pipe and premium tubulars for the Company on an exclusive
basis at OCTL's plant in India. The OCTL arrangement is being used by the
Company to pursue a strategic expansion of its sales and operations in the
Eastern Hemisphere.
13. RELATED PARTY TRANSACTIONS
The Company incurred legal fees of $1,596,000, $594,000, and $748,000
during 1996, 1995 and 1994, respectively, with a law firm in which a director of
the Company is a partner.
The Company paid Lehman Brothers, an affiliate of Lehman Brothers Holdings
Inc., a major stockholder of the Company, approximately $5,175,000 and
$4,037,000 for underwriting fees associated with the Public Offerings in 1996
and 1995, respectively and approximately $1,536,000 for fees related to the
disposition of Mallard in 1996. The fee arrangements associated with these
offerings were on terms standard in the industry.
14. SUBSEQUENT EVENT
On February 13, 1997, the Company acquired Anbert Cilindros S.A.I.C.
("Anbert"), an Argentina based sucker rod business, for total consideration of
approximately $8 million.
On February 24, 1997, the Company entered into an agreement to acquire TA
Industries, Inc. ("TA"), a manufacturer of premium couplings and premium
accessories, for total cash consideration of approximately $64 million. The
acquisition of TA is subject to various conditions, including the receipt of all
required regulatory approvals and expiration of all waiting periods. The
transaction is expected to close prior to April 30, 1997.
On March 14, 1997, the Company acquired Griffin Legrand for total cash
consideration of approximately $21 million. Griffin Legrand, based in Alberta,
Canada, designs, manufactures and markets progressing cavity pumps and
conventional pumping units.
In December 1996, the Company entered into an agreement to acquire GulfMark
International, Inc., ("GulfMark") pursuant to a tax free merger in which
approximately 4.4 million shares of the Company's Common Stock currently held by
GulfMark will be issued to the stockholders of GulfMark. Prior to the merger,
GulfMark will spin-off to its stockholders its marine transportation services
business. Such merger is subject to, among other things, approval by the
stockholders of the Company and GulfMark. The Company expects that the merger
will be consummated in the second quarter of 1997.
At the Company's Annual Meeting on May 6, 1997, the agenda includes, among
other things, a proposal to increase the Company's authorized shares of Common
Stock from 40 million shares to 80 million shares to effect a two for one stock
split and a proposal to change the name of the Company from Energy Ventures,
Inc. to EVI, Inc.
15. SEGMENT INFORMATION
BUSINESS SEGMENTS
The Company operates through two business segments: tubular products and
production equipment. The tubular products segment manufactures drill pipe and
high performance tubulars and the production equipment segment manufactures a
complete line of artificial lift and production equipment. The Company's
products are used in the exploration and production of oil and natural gas.
Financial information by industry segment for each of the three years ended
December 31, 1996, is summarized below (in thousands). The information presented
has been restated to reflect the Mallard Division as discontinued operations.
Identifiable assets exclude net assets relating to the Mallard Division of
20
<PAGE> 21
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximately $95.5 million and $74.7 million at December 31, 1995 and 1994,
respectively. Identifiable assets included in the Corporate and Other column
includes the elimination of intercompany transactions.
<TABLE>
<CAPTION>
CORPORATE
TUBULAR PRODUCTION AND
PRODUCTS EQUIPMENT OTHER TOTAL
-------- ---------- --------- --------
<S> <C> <C> <C> <C>
1996
Sales to unaffiliated customers...... $342,530 $135,490 $ -- $478,020
Operating income (loss).............. 44,394 8,237 (6,344) 46,287
Identifiable assets.................. 388,096 225,579 239,168 852,843
Depreciation and amortization........ 11,046 5,642 83 16,771
Capital expenditures and
acquisitions...................... 62,008 27,871 68 89,947
1995
Sales to unaffiliated customers...... $154,241 $117,434 $ -- $271,675
Operating income (loss).............. 15,248 7,843 (5,126) 17,965
Identifiable assets.................. 218,592 130,266 8,776 357,634
Depreciation and amortization........ 7,170 5,187 89 12,446
Capital expenditures and
acquisitions...................... 25,422 7,939 18 33,379
1994
Sales to unaffiliated customers...... $ 94,941 $ 90,344 $ -- $185,285
Operating income (loss).............. 3,082 5,144 (4,588) 3,638
Identifiable assets.................. 122,638 105,923 8,194 236,755
Depreciation and amortization........ 5,329 3,973 96 9,398
Capital expenditures and
acquisitions...................... 15,770 16,764 91 32,625
</TABLE>
During 1996, the Company incurred a charge of $5.8 million associated with
plant closures. Of this charge, $4.3 million related to the closure of a tool
joint facility within the Tubular Products Segment and $1.5 million related to
the closure of a packer facility within the Production Equipment Segment.
Operating income for 1996 for the Tubular Products and Production Equipment
segments include accruals included within the $5.8 million charge of $1.5
million and $500,000, respectively, for such plant closures.
MAJOR CUSTOMERS AND CREDIT RISK
Substantially all of the Company's customers are engaged in the energy
industry. This concentration of customers may impact the Company's overall
exposure to credit risk, either positively or negatively, in that customers may
be similarly affected by changes in economic and industry conditions. The
Company performs ongoing credit evaluations of its customers and does not
generally require collateral in support of its trade receivables. The Company
maintains reserves for potential credit losses, and actual losses have
historically been within the Company's expectations. Foreign sales also present
various risks, including risks of war, civil disturbances and governmental
activities that may limit or disrupt markets, restrict the movement of funds or
result in the deprivation of contract rights or the taking of property without
fair consideration. Most of the Company's foreign sales, however, are to large
international companies or are secured by letter of credit or similar
arrangements.
In 1996, 1995 and 1994, there was no individual customer who accounted for
10% of consolidated revenues.
FOREIGN OPERATIONS AND EXPORT SALES
The Company's equipment and services are used in approximately 55 countries
by U.S. customers operating abroad and by foreign customers. Sales of equipment
and services outside the United States
21
<PAGE> 22
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accounted for 51%, 46% and 46% of total revenues in 1996, 1995 and 1994,
respectively, based upon the ultimate destination in which equipment or services
were sold, shipped or provided to the customer by the Company.
<TABLE>
<CAPTION>
FOREIGN
-----------------------------
LATIN
UNITED STATES CANADA AMERICA OTHER ELIMINATIONS TOTAL
------------- ------- ------- ------- ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1996
Operating revenues from unaffiliated
customers............................ $253,675 $65,113 $36,214 $34,048 $(21,395) $367,655
Export sales to unaffiliated
customers............................ 110,365 -- -- -- -- 110,365
-------- ------- ------- ------- -------- --------
Total revenues......................... 364,040 65,113 36,214 34,048 (21,395) 478,020
Operating income....................... 24,037 6,985 15,125 521 (381) 46,287
Identifiable assets ................... 681,906 89,609 95,352 31,325 (45,349) 852,843
1995
Operating revenues from unaffiliated
customers............................ $166,627 $37,575 $23,068 $ 1,156 $(19,754) $208,672
Export sales to unaffiliated
customers............................ 63,003 -- -- -- -- 63,003
-------- ------- ------- ------- -------- --------
Total revenues......................... 229,630 37,575 23,068 1,156 (19,754) 271,675
Operating income (loss)................ 7,046 4,386 7,915 (291) (1,091) 17,965
Identifiable assets ................... 298,135 30,197 21,068 20,857 (12,623) 357,634
1994
Operating revenues from unaffiliated
customers............................ $109,197 $26,774 $8,812 $ 1,601 $ (9,101) $137,283
Export sales to unaffiliated
customers............................ 48,002 -- -- -- -- 48,002
-------- ------- ------- ------- -------- --------
Total revenues......................... 157,199 26,774 8,812 1,601 (9,101) 185,285
Operating income (loss)................ 139 3,876 1,296 (1,091) (582) 3,638
Identifiable assets ................... 214,446 26,572 5,837 8,040 (18,140) 236,755
</TABLE>
22
<PAGE> 23
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following tabulation sets forth unaudited quarterly financial data for
1996 and 1995. The information presented has been restated to reflect the
Mallard Division as discontinued operations.
<TABLE>
<CAPTION>
1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. TOTAL
---------- ---------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
1996
Revenues.................................................. $90,326 $98,937 $134,376 $154,381 $478,020
Gross Profit.............................................. 21,036 24,044 29,328 30,103 104,511
Income before Income Taxes................................ 4,224 6,226 10,641 10,455 31,546
Income from Continuing Operations......................... 2,747 4,046 6,917 10,795 24,505
Income from Discontinued Operations, Net of Taxes......... 1,600 1,748 2,842 1,278 7,468
Gain on Disposal of Discontinued Operations, Net of
Taxes................................................... -- -- -- 66,924 66,924
Extraordinary Charge, Net of Taxes........................ -- (731) -- -- (731)
Net Income................................................ $ 4,347 $ 5,063 $ 9,759 $ 78,997 $ 98,166
Net Income (Loss) Per Common Share:
Income from Continuing Operations....................... $ .08 $ .11 $ .16 $ .24 $ .60(1)
Income from Discontinued Operations..................... .04 .05 .07 .03 .18
Gain on Disposal of Discontinued Operations............. -- -- -- 1.46 1.65(1)
Extraordinary Charge.................................... -- (.02) -- -- (.02)
Net Income.............................................. $ .12 $ .14 $ .23 $ 1.73 $ 2.41(1)
======= ======= ======== ======== ========
1995
Revenues.................................................. $53,270 $61,198 $ 72,196 $ 85,011 $271,675
Gross Profit.............................................. 13,954 15,003 17,638 19,850 66,445
Income (Loss) before Income Taxes......................... (1,243) (785) 736 3,654 2,362
Income (Loss) from Continuing Operations.................. (772) (438) 1,104 2,708 2,602
Income from Discontinued Operations, Net of Taxes......... 2,403 2,191 2,452 1,663 8,709
Net Income................................................ $ 1,631 $ 1,753 $ 3,556 $ 4,371 $ 11,311
Net Income Per Common Share:
Income from Continuing Operations....................... $ (.03) $ (.02) $ .04 $ .07 $ .09(2)
Income from Discontinued Operations..................... .09 .09 .08 .05 .29(2)
------- ------- -------- -------- --------
Net Income.............................................. $ .06 $ .07 $ .12 $ .12 $ .38(2)
======= ======= ======== ======== ========
</TABLE>
- - - - - - - - - - - - - - - ---------------
(1) Net Income Per Common Share for the year ended December 31, 1996, differs
from the summation of the individual quarters within that year due to the
impact of the Public Offering of Common Stock and shares issued in
connection with the TCA and ENERPRO acquisitions.
(2) Net Income Per Common Share for the year ended December 31, 1995, differs
from the summation of the individual quarters within that year due to the
impact of the Public Offering of Common Stock and shares issued in
connection with the Prideco acquisition.
23
<PAGE> 24
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
The $120 million Senior Notes which are described in Note 7 are
unconditionally guaranteed on a full and unconditional, joint and several, basis
by certain subsidiaries of the Company. Each of the subsidiary guarantors are
wholly owned by the Company or a subsidiary guarantor. Accordingly, the
following condensed consolidating balance sheets as of December 31, 1996 and
1995, and the related condensed consolidating statements of income and cash
flows for each of the three years in the period ended December 31, 1996, have
been provided. The condensed consolidating financial statements herein are
followed by notes which are an integral part of these statements.
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents........... $221,275 $ 1,625 $ 1,066 $ -- $223,966
Other Current Assets................ 40,694 233,862 60,159 -- 334,715
-------- -------- -------- -------- --------
261,969 235,487 61,225 -- 558,681
-------- -------- -------- -------- --------
PROPERTY, PLANT AND EQUIPMENT, AT
COST, NET OF ACCUMULATED
DEPRECIATION........................ 144 124,804 47,776 -- 172,724
INTERCOMPANY AND INVESTMENT IN
SUBSIDIARIES, NET................... 412,287 (241,456) (87,064) (83,767) --
OTHER ASSETS.......................... 5,850 84,322 31,266 -- 121,438
-------- -------- -------- -------- --------
$680,250 $203,157 $ 53,203 $(83,767) $852,843
======== ======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-Term Borrowings............... $ -- $ -- $ 4,451 $ -- $ 4,451
Current Maturities of Long-Term
Debt............................. -- 1,883 1,739 -- 3,622
Accounts Payable and Other Accrued
Liabilities...................... 89,692 107,712 27,649 -- 225,053
-------- -------- -------- -------- --------
89,692 109,595 33,839 -- 233,126
-------- -------- -------- -------- --------
LONG-TERM DEBT........................ 120,000 3,895 2,815 -- 126,710
DEFERRED INCOME TAXES AND OTHER....... 16,474 18,707 3,742 -- 38,923
-------- -------- -------- -------- --------
STOCKHOLDERS' INVESTMENT.............. 454,084 70,960 12,807 (83,767) 454,084
-------- -------- -------- -------- --------
$680,250 $203,157 $ 53,203 $(83,767) $852,843
======== ======== ======== ======== ========
</TABLE>
24
<PAGE> 25
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1995
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents.............. $ 532 $ 1,492 $ 861 $ -- $ 2,885
Other Current Assets................... 1,564 174,653 34,592 -- 210,809
Net Assets of Discontinued
Operations.......................... -- 94,650 841 -- 95,491
-------- -------- ------- --------- --------
2,096 270,795 36,294 -- 309,185
-------- -------- ------- --------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST,
NET OF ACCUMULATED DEPRECIATION........ 159 85,429 14,571 -- 100,159
INTERCOMPANY AND INVESTMENT IN
SUBSIDIARIES, NET...................... 342,844 (169,153) 18,416 (192,107) --
OTHER ASSETS............................. 4,969 42,322 (3,510) -- 43,781
-------- -------- ------- --------- --------
$350,068 $229,393 $65,771 $(192,107) $453,125
======== ======== ======= ========= ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-Term Borrowings.................. $ -- $ 546 $ 4,031 $ -- $ 4,577
Current Maturities of Long-Term Debt... -- 3,082 410 -- 3,492
Accounts Payable and Other Accrued
Liabilities......................... 4,055 56,408 9,759 -- 70,222
-------- -------- ------- --------- --------
4,055 60,036 14,200 -- 78,291
-------- -------- ------- --------- --------
LONG-TERM DEBT........................... 120,000 3,596 587 -- 124,183
DEFERRED INCOME TAXES AND OTHER.......... (2,053) 5,950 18,688 -- 22,585
-------- -------- ------- --------- --------
STOCKHOLDERS' INVESTMENT................. 228,066 159,811 32,296 (192,107) 228,066
-------- -------- ------- --------- --------
$350,068 $229,393 $65,771 $(192,107) $453,125
======== ======== ======= ========= ========
</TABLE>
25
<PAGE> 26
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES................................ $ -- $373,725 $104,295 $ -- $478,020
COSTS AND EXPENSES...................... 6,339 335,817 89,577 -- 431,733
------- -------- -------- -------- --------
OPERATING INCOME (LOSS)................. (6,339) 37,908 14,718 -- 46,287
------- -------- -------- -------- --------
OTHER INCOME (EXPENSE)
Interest Expense...................... 15,811 (26,870) (5,395) -- (16,454)
Equity in Subsidiaries, Net of
Taxes............................... 18,577 -- -- (18,577) --
Other, Net............................ 2,002 166 (455) -- 1,713
------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES.............. 30,051 11,204 8,868 (18,577) 31,546
PROVISION (BENEFIT) FOR INCOME TAXES.... (1,285) 4,893 3,433 -- 7,041
------- -------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS....... 31,336 6,311 5,435 (18,577) 24,505
INCOME FROM DISCONTINUED OPERATIONS, NET
OF TAXES.............................. -- 7,521 (53) -- 7,468
GAIN ON DISPOSAL OF DISCONTINUED
OPERATIONS, NET OF TAXES.............. 66,924 -- -- -- 66,924
EXTRAORDINARY CHARGE, NET OF TAXES...... (94) (637) -- -- (731)
------- -------- -------- -------- --------
NET INCOME.............................. $98,166 $ 13,195 $ 5,382 $(18,577) $ 98,166
======= ======== ======== ======== ========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES................................ $ -- $210,603 $ 61,072 $ -- $271,675
COSTS AND EXPENSES...................... 5,123 199,525 49,062 -- 253,710
------- -------- -------- -------- --------
OPERATING INCOME (LOSS)................. (5,123) 11,078 12,010 -- 17,965
------- -------- -------- -------- --------
OTHER INCOME (EXPENSE)
Interest Expense...................... 2,539 (16,856) (1,970) -- (16,287)
Equity in Subsidiaries, Net of
Taxes............................... 11,179 -- -- (11,179) --
Other, Net............................ 360 1,134 (810) -- 684
------- -------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES....... 8,955 (4,644) 9,230 (11,179) 2,362
PROVISION (BENEFIT) FOR INCOME TAXES.... (2,356) (1,214) 3,330 -- (240)
------- -------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING
OPERATIONS............................ 11,311 (3,430) 5,900 (11,179) 2,602
INCOME FROM DISCONTINUED OPERATIONS, NET
OF TAXES.............................. -- 8,662 47 -- 8,709
------- -------- -------- -------- --------
NET INCOME.............................. $11,311 $ 5,232 $ 5,947 $(11,179) $ 11,311
======= ======== ======== ======== ========
</TABLE>
26
<PAGE> 27
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES................................ $ -- $148,299 $ 36,986 $ -- $185,285
COSTS AND EXPENSES...................... 4,748 144,030 32,869 -- 181,647
------- -------- -------- -------- --------
OPERATING INCOME (LOSS)................. (4,748) 4,269 4,117 -- 3,638
------- -------- -------- -------- --------
OTHER INCOME (EXPENSE)
Interest Expense...................... (6,973) (6,074) (490) -- (13,537)
Equity in Subsidiaries, Net of
Taxes............................... 11,343 -- -- (11,343) --
Other, Net............................ 153 512 (253) -- 412
------- -------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES....... (225) (1,293) 3,374 (11,343) (9,487)
PROVISION (BENEFIT) FOR INCOME TAXES.... (4,867) (1,022) 2,094 -- (3,795)
------- -------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING
OPERATIONS............................ 4,642 (271) 1,280 (11,343) (5,692)
INCOME FROM DISCONTINUED OPERATIONS, NET
OF TAXES.............................. -- 10,113 221 -- 10,334
EXTRAORDINARY CHARGE, NET OF TAXES...... (3,784) -- -- -- (3,784)
------- -------- -------- -------- --------
NET INCOME.............................. $ 858 $ 9,842 $ 1,501 $(11,343) $ 858
======= ======== ======== ======== ========
</TABLE>
27
<PAGE> 28
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.................................. $ 98,166 $ 13,195 $ 5,382 $(18,577) $ 98,166
Net (Income) Loss from Discontinued
Operations................................ -- (7,521) 53 -- (7,468)
Gain on Disposal of Discontinued Operations,
Net....................................... (66,924) -- -- -- (66,924)
Equity in Earnings of Subsidiaries.......... (18,577) -- -- 18,577 --
Other Adjustments and Charges............... (18,329) 5,571 (16,488) -- (29,246)
--------- --------- -------- -------- --------
Net Cash Provided (Used) by
Continuing Operations.............. (5,664) 11,245 (11,053) -- (5,472)
Net Cash Provided (Used) by
Discontinued Operations............ -- 8,699 (405) -- 8,294
--------- --------- -------- -------- --------
Net Cash Provided (Used) by Operating
Activities......................... (5,664) 19,944 (11,458) -- 2,822
--------- --------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Disposal of Discontinued
Operations................................ 306,854 -- -- -- 306,854
Capital Expenditures of Discontinued
Operations................................ -- (63,136) -- -- (63,136)
Acquisition of Businesses................... -- (47,934) (39,880) -- (87,814)
Capital Expenditures for Property, Plant and
Equipment................................. (67) (11,358) (14,465) -- (25,890)
Proceeds from Sale of Assets................ -- 521 740 -- 1,261
--------- --------- -------- -------- --------
Net Cash Provided (Used) by Investing
Activities......................... 306,787 (121,907) (53,605) -- 131,275
--------- --------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock, Net............... 100,860 -- -- -- 100,860
Repayments Under Revolving Lines of Credit,
Net....................................... -- (546) (1,107) -- (1,653)
Borrowings (Repayments) on Term Debt, Net... -- (11,829) 118 -- (11,711)
(Increase) Decrease in amounts Due to and
from Subsidiaries, Net.................... (183,434) 115,502 67,932 -- --
Other, Net.................................. 2,194 (1,031) (1,696) -- (533)
--------- --------- -------- -------- --------
Net Cash Provided (Used) by Financing
Activities......................... (80,380) 102,096 65,247 -- 86,963
--------- --------- -------- -------- --------
Effect of Translation Adjustment on Cash...... -- -- 21 -- 21
--------- --------- -------- -------- --------
Net Increase in Cash and Cash Equivalents..... 220,743 133 205 -- 221,081
Cash and Cash Equivalents at Beginning of
Year........................................ 532 1,492 861 -- 2,885
--------- --------- -------- -------- --------
Cash and Cash Equivalents at End of Year...... $ 221,275 $ 1,625 $ 1,066 $ -- $223,966
========= ========= ======== ======== ========
</TABLE>
28
<PAGE> 29
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income............................ $ 11,311 $ 5,232 $ 5,947 $(11,179) $ 11,311
Net Income from Discontinued
Operations.......................... -- (8,662) (47) -- (8,709)
Equity in Earnings of Subsidiaries.... (11,179) -- -- 11,179 --
Other Adjustments and Charges......... (3,808) (42,820) 13,175 -- (33,453)
-------- -------- ------- -------- --------
Net Cash Provided (Used) by
Continuing Operations........ (3,676) (46,250) 19,075 -- (30,851)
Net Cash Provided (Used) by
Discontinued Operations...... -- 11,326 (581) -- 10,745
-------- -------- ------- -------- --------
Net Cash Provided (Used) by
Operating Activities......... (3,676) (34,924) 18,494 -- (20,106)
-------- -------- ------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures of Discontinued
Operations.......................... -- (22,884) -- -- (22,884)
Acquisition of Businesses............. -- (4,007) (4,098) -- (8,105)
Capital Expenditures for Property,
Plant and Equipment................. (19) (4,751) (6,362) -- (11,132)
Proceeds from Sale of Assets.......... -- 2,880 489 -- 3,369
-------- -------- ------- -------- --------
Net Cash Used by Investing
Activities................... (19) (28,762) (9,971) -- (38,752)
-------- -------- ------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock, Net......... 72,648 -- -- -- 72,648
Borrowings (Repayments) Under
Revolving Lines of Credit, Net...... -- (11,498) 393 -- (11,105)
Repayments on Term Debt, Net.......... -- (2,082) (352) -- (2,434)
(Increase) Decrease in amounts Due to
and from Subsidiaries, Net.......... (68,885) 78,005 (9,120) -- --
Other, Net............................ 298 -- -- -- 298
-------- -------- ------- -------- --------
Net Cash Provided (Used) by
Financing Activities......... 4,061 64,425 (9,079) -- 59,407
-------- -------- ------- -------- --------
Effect of Translation Adjustment on
Cash.................................. -- -- 81 -- 81
-------- -------- ------- -------- --------
Net Increase (Decrease) in Cash and Cash
Equivalents........................... 366 739 (475) -- 630
Cash and Cash Equivalents at Beginning
of Year............................... 166 753 1,336 -- 2,255
-------- -------- ------- -------- --------
Cash and Cash Equivalents at End of
Year.................................. $ 532 $ 1,492 $ 861 $ -- $ 2,885
======== ======== ======= ======== ========
</TABLE>
29
<PAGE> 30
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income............................ $ 858 $ 9,842 $ 1,501 $(11,343) $ 858
Net Income from Discontinued
Operations.......................... -- (10,113) (221) -- (10,334)
Equity in Earnings of Subsidiaries.... (11,343) -- -- 11,343 --
Other Adjustments and Charges......... 11,329 (22,736) (6,818) -- (18,225)
-------- -------- ------- -------- --------
Net Cash Provided (Used) by
Continuing Operations........ 844 (23,007) (5,538) -- (27,701)
Net Cash Provided by
Discontinued Operations...... -- 6,903 3 -- 6,906
-------- -------- ------- -------- --------
Net Cash Provided (Used) by
Operating Activities......... 844 (16,104) (5,535) -- (20,795)
-------- -------- ------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures of Discontinued
Operations.......................... -- (11,738) -- -- (11,738)
Acquisition of Businesses............. -- (8,163) (2,289) -- (10,452)
Capital Expenditures for Property,
Plant and Equipment................. (91) (5,293) (2,485) -- (7,869)
Proceeds from Sale of Assets.......... -- -- 28 -- 28
-------- -------- ------- -------- --------
Net Cash Used by Investing
Activities................... (91) (25,194) (4,746) -- (30,031)
-------- -------- ------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Long-Term Debt............ 120,000 -- -- -- 120,000
Repayments Under Revolving Lines of
Credit, Net......................... -- (21,050) (1,045) -- (22,095)
Repayments on Term Debt, Net.......... (34,442) (2,242) (2,068) -- (38,752)
(Increase) Decrease in Amounts Due to
and from Subsidiaries, Net.......... (78,181) 64,227 13,954 -- --
Other, Net............................ (9,408) -- -- -- (9,408)
-------- -------- ------- -------- --------
Net Cash Provided (Used) by
Financing Activities......... (2,031) 40,935 10,841 -- 49,745
-------- -------- ------- -------- --------
Effect of Translation Adjustment on
Cash.................................. -- -- (300) -- (300)
-------- -------- ------- -------- --------
Net Increase (Decrease) in Cash and Cash
Equivalents........................... (1,278) (363) 260 -- (1,381)
Cash and Cash Equivalents at Beginning
of Year............................... 1,444 1,116 1,076 -- 3,636
-------- -------- ------- -------- --------
Cash and Cash Equivalents at End of
Year.................................. $ 166 $ 753 $ 1,336 $ -- $ 2,255
======== ======== ======= ======== ========
</TABLE>
30
<PAGE> 31
EVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A. SIGNIFICANT ACCOUNTING POLICIES
Reclassifications and Restatements
Certain reclassifications of prior year balances have been made to conform
such amounts to corresponding 1996 classifications. The consolidated financial
statements have been restated to reflect the sale of the Company's Mallard
Division on November 11, 1996. See Note 5 for additional information.
Elimination Entries
Revenues and related Cost of Sales by individual category have been
presented net of intercompany transactions.
B. LONG-TERM DEBT
The Company's summary of scheduled debt maturities by year, description of
debt and other information is disclosed in Note 7.
C. INSURANCE SETTLEMENT
On September 30, 1994, the Company received a net cash payment of $23
million from its insurance carriers as settlement for the termination of its
workover drilling contract with NIOC. See Note 11 for additional information
regarding this settlement.
D. OTHER
Notes 1 through 16 should be read in conjunction with the Condensed
Consolidating Financial Statements.
18. CHANGE AND STOCK SPLIT
At the Company's annual stockholders meeting on May 6, 1997, the
stockholders approved a two-for-one stock split of the Company's common stock,
$1.00 par value (the "Common Stock"), through a stock dividend and related
amendment to the Company's Restated Certificate of Incorporation that increased
the number of authorized shares of the Company's Common Stock from 40 million
shares to 80 million shares. The record date for the two-for-one stock split was
May 12, 1997. As a result of the stock split, all stock and per share data
contained herein have been restated to reflect the effect of the two-for-one
stock split.
31
<PAGE> 1
EXHIBIT 99.3
[EVI, INC. LETTERHEAD]
EVI TO ACQUIRE TRICO, BMW MONARCH AND BMW
PUMP FOR $210 MILLION
October 9, 1997, Houston, Texas-EVI, Inc. (NYSE-EVI) today announced it has
signed a definitive agreement to acquire the stock of Trico Industries, Inc.
("Trico") from PACCAR Inc (NASDAQ-PCAR). The Company also announced that it
has signed definitive agreements to acquire the stock of BMW Monarch and BMW
Pump from their current owners. Total consideration for all three acquisitions
is approximately $210 million in cash and assumed debt. Trico, BMW Monarch and
BMW Pump had combined revenues for the twelve months ended June 30, 1997 of
approximately $190 million.
Trico is a Texas based manufacturer and distributor of sub-surface
reciprocating pumps, sucker rods, accessories and hydraulic life systems.
Trico has manufacturing locations in San Marcos and Greenville, Texas. The
acquisition of Trico will further expand the range of artificial lift products
and technology offered by the Company's artificial lift and completion tool
segment. Trico is the largest manufacturer of hydraulic lift systems in the
world. Hydraulic lift is a specialty technology that addresses high volume
wells typically in deviated configurations. Trico's hydraulic lift technology
will join the Company's rod lift, progressing cavity lift and gas lift product
lines. The addition of Trico's hydraulic lift technology enhances the
Company's ability to provide its clients with a complete line of artificial
lift solutions.
BMW Pump is a Canadian based manufacturer of progressing cavity pumps, and BMW
Monarch is a Canadian supplier of progressing cavity pumps as well as other
production related oilfield products. The acquisition of BMW Pump and BMW
Monarch will allow the Company to consolidate the manufacturing operations,
marketing, applications engineering and service operations with those of the
Company in Canada. The Company believes that progressing cavity pumps, with
their low initial capital costs, high efficiency rates and overall versatility
are the fastest growing form of artificial lift in the world today.
The Company's acquisition of Trico, BMW Monarch and BMW Pump are subject to
various conditions, including the receipt of all necessary governmental
consents and approvals and the expiration of all applicable waiting periods.
EVI is a manufacturer of engineered oilfield products. The Company
manufactures drilling tools, premium tubulars, marine connectors and production
equipment.
Contact:
James G. Kiley
Vice President and
Chief Financial Officer
(713) 297-8440
