<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 12, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
NEWPARK RESOURCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 72-1123385
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NO.)
3850 NORTH CAUSEWAY, SUITE 1770
METAIRIE, LOUISIANA 70002
(504) 838-8222
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
JAMES D. COLE, PRESIDENT
NEWPARK RESOURCES, INC.
3850 NORTH CAUSEWAY, SUITE 1770
METAIRIE, LOUISIANA 70002
(504) 838-8222
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
Copies to:
BERTRAM K. MASSING, ESQ. ROBERT F. GRAY, JR.
ERVIN, COHEN & JESSUP FULBRIGHT & JAWORSKI L.L.P.
9401 WILSHIRE BOULEVARD 1301 MCKINNEY, SUITE 5100
BEVERLY HILLS, CALIFORNIA 90212 HOUSTON, TEXAS 77010-3095
(310) 281-6366 (713) 651-5100
----------------
Approximate date of proposed sale to the public: As soon as practicable
after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF OFFERING AGGREGATE
SECURITIES TO BE AMOUNT TO BE PRICE PER OFFERING AMOUNT OF
REGISTERED REGISTERED(1) UNIT(2) PRICE(2) REGISTRATION FEE
- -------------------------------------------------------------------------------------------
Common Stock, $.01 par value..... 3,450,000 shares $36.25 $125,062,500 $43,125
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 450,000 shares subject to the over-allotment option granted to
the Underwriters.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be used
in connection with an offering in the United States and Canada (the "U.S.
Prospectus") and the other to be used in connection with a concurrent offering
outside the United States and Canada (the "International Prospectus"). The
U.S. Prospectus and the International Prospectus are identical in all respects
except that they contain different front, inside front and back cover pages,
miscellaneous different pages and different descriptions of the plan of
distribution (contained under the caption "Underwriting" in the U.S.
Prospectus and "Subscription and Sale" in the International Prospectus), and
the International Prospectus contains an additional section under the caption
"Certain United States Tax Consequences to Non-United States Holders".
The form of the U.S. Prospectus is included herein and is followed by those
pages to be used in the International Prospectus which differ from, or are in
addition to, those in the U.S. Prospectus. Each of the pages for the
International Prospectus included herein is labeled "Alternate Page for
International Prospectus".
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE , 1996
3,000,000 Shares
Newpark Resources, Inc.
Common Stock
($.01 par value)
--------
All the shares of Common Stock of Newpark Resources, Inc. ("Newpark" or the
"Company") offered hereby are being sold by the Company. Of the 3,000,000
shares of Common Stock being offered, 2,550,000 shares are initially being
offered in the United States and Canada (the "U.S. Shares") by the U.S.
Underwriters (the "U.S. Offering"), and 450,000 shares are initially being
concurrently offered outside the United States and Canada (the
"International Shares") by the Managers (the "International Offering"
and, together with the U.S. Offering, the "Offering"). The offering
price and underwriting discounts and commissions of the U.S. Offering
and the International Offering are identical.
A substantial portion of the net proceeds of the Offering will be used to
fund the acquisition of certain of the assets of Campbell Wells, Ltd.
(the "Acquisition"). The closing of the Offering will occur
concurrently with, and is conditioned upon, the closing of the
Acquisition. See "The Acquisition".
Newpark's Common Stock is listed on the New York Stock Exchange under
the symbol "NR". On June 11, 1996, the reported last sale
price of the Common Stock on The New York Stock
Exchange Composite Tape was $36.875 per share.
--------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" BEGINNING ON PAGE 8.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Newpark(1)
------------ -------------- -------------
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total(2)................................... $ $ $
</TABLE>
(1) Before deduction of expenses payable by Newpark estimated at $ .
(2) Newpark has granted the U.S. Underwriters and the Managers an option,
exercisable by CS First Boston Corporation for 30 days from the date of
this Prospectus, to purchase a maximum of 450,000 additional shares to
cover over-allotments of shares. If the option is exercised in full, the
total Price to Public will be $ , Underwriting Discounts and
Commissions will be $ and Proceeds to Newpark will be $ .
--------
The U.S. Shares are offered by the several U.S. Underwriters when, as and if
issued by Newpark, delivered to and accepted by the U.S. Underwriters and
subject to their right to reject orders in whole or in part. It is expected
that the U.S. Shares will be ready for delivery on or about , 1996.
CS First Boston
Deutsche Morgan Grenfell
The Robinson-Humphrey Company, Inc.
Jefferies & Company, Inc.
The date of this Prospectus is , 1996.
<PAGE>
[PICTURES]
<PAGE>
IN CONNECTION WITH THIS OFFERING, CS FIRST BOSTON, ON BEHALF OF THE U.S.
UNDERWRITERS AND THE MANAGERS, MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH
STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT A LEVEL ABOVE
THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY
BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR
THE ACCOUNTS OF OTHERS IN SHARES OF COMMON STOCK PURSUANT TO EXEMPTIONS FROM
RULES 10B-6, 10B-7 AND 10B-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT").
AVAILABLE INFORMATION
Newpark is subject to the informational requirements of the Exchange Act and
in accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices at 7 World Trade Center, 13th Floor, New York,
NY 10048 and 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies of
such material can be obtained from the Public Reference section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates, and on the World Wide Web at "http://www.sec.gov".
Newpark's Common Stock is traded on the New York Stock Exchange, and such
reports and other information also can be inspected at the offices of the New
York Stock Exchange, 20 Broad Street, New York, NY 10005.
Newpark has filed with the Commission a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered hereby. This Prospectus does not contain all the
information set forth in the registration statement and the exhibits thereto,
to which reference is hereby made. Statements made in this Prospectus as to
the contents of any contract, agreement or other document are not necessarily
complete. With respect to each such contract, agreement or other document
filed as an exhibit to the registration statement, reference is made to the
exhibit for a more complete description of the matter involved, and each such
statement is qualified in its entirety by such reference. Any interested
parties may inspect the registration statement, without charge, at the public
reference facilities of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, and any interested parties may obtain copies of all or any part of
the registration statement from the Commission at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Newpark's Annual Report on Form 10-K for the year ended December 31, 1995
filed by Newpark with the Commission is incorporated by reference into this
Prospectus.
All documents filed by Newpark pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering made hereby shall be deemed to be incorporated by
reference into this Prospectus and made a part hereof from the date of filing
of such documents. Any statement contained in a document incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified, to constitute a part of
this Prospectus.
Newpark will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon written or oral request, a copy of any and all
documents incorporated by reference in this Prospectus, other than exhibits to
such documents, unless such exhibits are specifically incorporated by
reference in such documents. Requests should be directed to Ms. Edah Keating,
Corporate Secretary, Newpark Resources, Inc., 3850 North Causeway, Suite 1770,
Metairie, Louisiana 70002, or by telephone at (504) 838-8222.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the consolidated financial
statements, including the notes thereto, appearing elsewhere or incorporated by
reference in this Prospectus. Unless otherwise indicated, (i) all information
in this Prospectus assumes that the Underwriters' over-allotment option has not
been exercised, (ii) all references in this Prospectus to "Newpark" or the
"Company" include Newpark's subsidiaries, unless the context otherwise
requires, and (iii) all share and per share data in this Prospectus have been
adjusted to reflect the 5% stock dividend paid by Newpark effective December
1995.
THE COMPANY
Newpark is a leading provider of integrated environmental services to the oil
and gas exploration and production industry in the U.S. Gulf Coast area,
principally in Louisiana and Texas. These services are concentrated in three
key product lines: (i) processing and disposal of nonhazardous oilfield waste
("NOW"); (ii) processing and disposal of similar oilfield waste that is
contaminated with naturally occurring radioactive material ("NORM"); and (iii)
mat rental services in which patented prefabricated wooden mats are used as
temporary worksites in oilfield and other construction applications.
Over the past few years, Newpark has benefited from a stricter regulatory
environment surrounding the exploration for and the production of oil and gas.
In addition, Newpark's primary U.S. Gulf Coast service area is experiencing
increased oil and gas exploration and production activities. Consequently,
Newpark's sales increased to $98 million in 1995, from $56.3 million in 1993,
and net earnings increased to $12.2 million in 1995, compared to $2.4 million
in 1993. Including the Campbell Wells, Ltd., operations to be acquired by
Newpark concurrently with the closing of this Offering, Newpark would have had,
on a pro forma basis, 1995 sales of $116.8 million and 1995 net earnings of
$16.5 million, without taking into account the full benefit of potential cost
savings resulting from the Acquisition.
OILFIELD WASTE DISPOSAL AND OTHER ENVIRONMENTAL SERVICES
Newpark collects, processes and disposes of oilfield waste, primarily NOW and
NORM. Newpark also treats NOW at the well site, remediates waste pits and
provides general oilfield services. In its NOW processing and disposal
business, Newpark processes the majority of the NOW received at its facilities
for injection into environmentally secure geologic formations deep underground
and creates from the remainder a product which is used as intermediate daily
cover material or cell liner and construction material at municipal waste
landfills. Since the fourth quarter of 1994, Newpark has provided processing
and disposal of NOW waste that is contaminated with NORM by processing the
waste into NOW for injection disposal into wells owned by Newpark. On May 21,
1996, Newpark was issued a license from the State of Texas authorizing the
direct injection of NORM into disposal wells at Newpark's Big Hill, Texas,
facility. The direct injection of NORM permitted under the new license expands
Newpark's NORM disposal capacity and significantly reduces the amount of pre-
injection processing and chemicals required, thereby reducing Newpark's cost of
disposal. On June 10, 1996, Newpark amended an agreement with a major oil
company to provide for a NORM waste disposal project, which Newpark estimates
will require disposal of more than 200,000 barrels of NORM and related NOW and
generate revenues of approximately $10 million over the first 12 months of the
project.
Newpark also provides industrial waste management, laboratory and consulting
services for the customers of its NOW and NORM services. Newpark's offsite
waste processing operations utilize a combination of proprietary preparation
technology to blend the waste into an injectable slurry and specific
underground geology into which the slurry is injected.
3
<PAGE>
MAT RENTAL
Newpark uses a patented interlocking wooden mat system to provide temporary
worksites in unstable soil conditions typically found along the U.S. Gulf
Coast. Prior to 1994, Newpark's mat rental services were provided primarily to
the oil and gas exploration and production industry. In 1994, Newpark began
marketing these temporary worksites to other industries. Increasing
environmental regulation affecting the construction of pipelines, electrical
distribution systems and highways in and through wetlands environments has
provided a substantial new outlet for these services and has broadened the
geographic area served by Newpark to include the coastal areas of the
Southeastern U.S., particularly Florida and Georgia, in addition to the U.S.
Gulf Coast. Mat rental revenue has increased from $11 million in 1990 to $31
million in 1995. In anticipation of increased demand for hardwood lumber used
in construction of its mats, Newpark purchased a sawmill in Batson, Texas, in
October 1992. Newpark has since doubled the capacity of the sawmill and expects
to fully utilize such capacity in serving its mat rental business.
The recent trend toward more strict environmental regulation of both drilling
and production operations conducted by Newpark's customers has resulted in
greater synergy between Newpark's mat rental and general oilfield construction
services and its other environmental services. Newpark offers its services
individually and as an integrated package and provides a comprehensive
combination of on-site waste management and construction services for both the
drilling of new sites and the remediation of existing sites.
STRATEGY
Newpark's growth strategy is focused on expanding its NOW and NORM processing
business and its mat rental business. By using proprietary technologies and
know-how in the processing of NOW and NORM and patented prefabricated mats,
Newpark believes it offers superior products and services. In addition, Newpark
believes that expansion opportunities exist in markets outside the U.S. Gulf
Coast, including foreign markets such as Venezuela, where heightened concerns
about environmental issues should increase demand for Newpark's products and
services.
Key elements of Newpark's growth strategy are:
. Expanding its NORM processing business by utilizing the increased
capacity and reduced cost that can be achieved through the direct
injection of NORM, as authorized under the terms of Newpark's recently
awarded direct injection license, to encourage large volume contracts;
. Expanding its NOW and NORM processing capacity, while more efficiently
handling the large quantities of waste generated from drilling and
remediation;
. Applying its direct injection technology to other non-hazardous
industrial waste markets;
. Expanding its mat rental business into other industries and other
geographic areas, domestically and internationally; and
. Extending its integrated environmental services and providing a
comprehensive integrated combination of on-site waste management and
construction services throughout the U.S. Gulf Coast region.
Newpark was organized in 1932 as a Nevada corporation and in April 1991
changed its state of incorporation to Delaware. Newpark's principal executive
offices are located at 3850 North Causeway Boulevard, Suite 1770, Metairie,
Louisiana 70002, and its telephone number is (504) 838-8222.
4
<PAGE>
THE ACQUISITION
On June 5, 1996, Newpark entered into an Asset Purchase and Lease Agreement
(the "Acquisition Agreement") with Sanifill, Inc. ("Sanifill") and Campbell
Wells, Ltd. ("Campbell Wells"), a wholly owned subsidiary of Sanifill, for the
purchase and lease of certain marine related assets of the NOW service business
of Campbell Wells (the "Acquired Business"), for an aggregate price of $70.5
million (the "Acquisition"). For the year ended December 31, 1995, Campbell
Wells' revenue from the Acquired Business was approximately $19 million.
Upon consummation of the Acquisition, Newpark will assume a NOW Disposal
Agreement (the "Disposal Agreement") with Campbell Wells and Sanifill providing
for the delivery by Newpark of an agreed annual quantity of NOW for disposal at
certain of Campbell Wells' landfarming facilities, none of which are being
acquired by Newpark. Also upon consummation of the Acquisition, Sanifill will
agree, with certain limitations, that it and its affiliates will not compete
with Newpark in the site remediation and closure business or in the collection
and disposal of NOW generated in a marine environment or transported in marine
vessels within the States of Louisiana, Texas, Mississippi and Alabama, and in
the Gulf of Mexico, for a period of five years from the closing of the
Acquisition.
The purchase price for the Acquisition and the related transaction costs will
be financed with the net proceeds of this Offering. The closing of this
Offering will occur concurrently with, and is conditioned upon, the closing of
the Acquisition.
Newpark believes that the Acquisition will provide economies of scale as
Newpark will be able to handle substantially higher volumes of NOW waste
through its facilities. While Newpark is acquiring from Campbell Wells
facilities and equipment used in the collection, transfer and treatment of NOW,
including docks, transfer stations and barges, Newpark intends to consolidate
these facilities and equipment with Newpark's existing or newly expanded
facilities, allowing Newpark to enjoy significant on-going consolidation
benefits. Such consolidation is expected to result in a one-time restructuring
charge against Newpark's third quarter earnings, which charge Newpark currently
estimates to be approximately $4.2 million before taxes.
For further information regarding the Acquisition, see "The Acquisition" and
"Use of Proceeds".
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by Newpark
U.S. Offering............................................. 2,550,000 shares
International Offering.................................... 450,000 shares
----------
Total................................................... 3,000,000 shares
Common Stock to be outstanding after this Offering (1)...... 13,795,973 shares
Use of Proceeds............................................. To finance the purchase price of
the Acquisition and to repay
indebtedness which may be
reborrowed for future expansion
New York Stock Exchange Symbol.............................. NR
</TABLE>
- --------
(1) Assumes no exercise of outstanding stock options, which, if fully
exercised, would result in the issuance of an additional 897,393 shares of
Common Stock.
5
<PAGE>
SUMMARY HISTORICAL FINANCIAL INFORMATION
The following table sets forth summary historical financial information of
Newpark for the five years ended December 31, 1995 and three months ended March
31, 1996 and 1995. The summary historical financial information for the five
years ended December 31, 1995 set forth below is derived from the audited
consolidated financial statements of Newpark. The summary historical financial
information for the three months ended March 31, 1996 and 1995 is derived from
the unaudited consolidated financial statements of Newpark included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
----------------- -------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Revenues................ $ 26,767 $ 22,209 $ 97,982 $ 79,632 $56,330 $49,457 $44,635
Operating income from
continuing operations.. 6,092 3,711 20,980 11,891 4,392 4,961 4,734
Income from continuing
operations before
provision for income
taxes.................. 5,215 2,913 16,987 9,309 3,118 4,132 3,064
Provision (benefit) for
income taxes........... 1,899 423 4,751 (85) (1,670) 51 73
-------- -------- -------- -------- ------- ------- -------
Income from continuing
operations............. 3,316 2,490 12,236 9,394 4,788 4,081 2,991
-------- -------- -------- -------- ------- ------- -------
Net income.............. $ 3,316 $ 2,490 $ 12,236 $ 9,394 $ 2,422 $ 5,286 $ 2,503
======== ======== ======== ======== ======= ======= =======
Income per common share:
Income from continuing
operations............. $ .31 $ .24 $ 1.16 $ .90 $ .49 $ .43 $ .46
-------- -------- -------- -------- ------- ------- -------
Net income per common
share.................. $ .31 $ .24 $ 1.16 $ .90 $ .25 $ .55 $ .38
======== ======== ======== ======== ======= ======= =======
Weighted average shares
outstanding............ 10,650 10,375 10,568 10,422 9,690 9,564 6,521
======== ======== ======== ======== ======= ======= =======
<CAPTION>
AS OF MARCH 31, AS OF DECEMBER 31,
----------------- -------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $ 31,026 $ 16,666 $ 32,108 $ 13,585 $ 5,361 $ 4,900 $12,121
Total assets............ 156,040 114,386 152,747 110,756 90,316 75,478 53,454
Short-term debt......... 10,113 8,566 7,911 10,032 14,928 12,212 1,377
Long-term debt.......... 46,907 30,110 46,724 28,892 12,446 10,432 3,774
Total stockholders'
equity................. 81,444 66,488 77,518 63,699 53,353 45,658 40,239
</TABLE>
6
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following table sets forth summary historical financial information and
pro forma financial information of Newpark for the year ended December 31, 1995
and the three months ended March 31, 1996. The summary historical financial
information for the year ended December 31, 1995 set forth below is derived
from the Consolidated Financial Statements of Newpark included elsewhere in
this Prospectus, which have been audited by Deloitte & Touche LLP, independent
auditors. The summary historical financial information for the three months
ended March 31, 1996 is derived from the unaudited Consolidated Financial
Statements of Newpark included elsewhere in this Prospectus. The summary pro
forma information provides financial information giving effect to this
Offering, the Acquisition and the repayment of indebtedness as described in
"Use of Proceeds" for the periods presented. The pro forma information is
provided for informational purposes only and is not necessarily indicative of
actual results that would have been achieved had this Offering and the
Acquisition been consummated at the beginning of the periods presented, or of
future results. Management expects to implement net cost reductions which are
not reflected in the pro forma statements of income. These cost reductions are
related to the consolidation of certain duplicate administrative and personnel
costs. See "Pro Forma Financial Information".
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
-------------------------- -----------------------
ACTUAL PRO FORMA ACTUAL PRO FORMA
----------- ------------- ---------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues..................... $ 97,982 $ 116,819 $ 26,767 $ 32,359
Cost of services provided.... 64,467 76,474 17,599 21,138
Operating costs.............. 9,414 10,128 2,359 3,205
General and administrative
expenses..................... 2,658 4,604 717 1,206
Provision for uncollectible
accounts and notes
receivable................... 463 463 -- --
----------- ----------- ---------- ----------
Operating income from
continuing operations....... 20,980 25,150 6,092 6,810
Interest income.............. (183) (183) (30) (30)
Interest expense............. 3,740 1,410 907 346
Non-recurring expense........ 436 436 -- --
----------- ----------- ---------- ----------
Income from continuing
operations before provision
for income taxes............ 16,987 23,487 5,215 6,494
Provision for income taxes... 4,751 7,002 1,899 2,327
----------- ----------- ---------- ----------
Net income................... $ 12,236 $ 16,485 $ 3,316 $ 4,167
=========== =========== ========== ==========
Income per common share:
Net income per common
share..................... $ 1.16 $ 1.22 $ .31 $ .31
=========== =========== ========== ==========
Weighted average shares
outstanding............... 10,568 13,568 10,650 13,650
=========== =========== ========== ==========
<CAPTION>
AS OF DECEMBER 31, 1995 AS OF MARCH 31, 1996
-------------------------- -----------------------
ACTUAL PRO FORMA ACTUAL PRO FORMA
----------- ------------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............. $ 32,108 $ 33,108 $ 31,026 $ 32,026
Total assets................. 152,747 230,327 156,040 233,596
Short-term debt.............. 7,911 7,911 10,113 10,113
Long-term debt............... 46,724 19,507 46,907 19,690
Total stockholders' equity... 77,518 176,235 81,444 180,161
</TABLE>
7
<PAGE>
RISK FACTORS
In addition to the other information contained in or incorporated by
reference into this Prospectus, prospective investors should carefully
consider the following factors relating to the business of Newpark in
evaluating an investment in the Common Stock.
DEPENDENCE ON OIL AND GAS INDUSTRY
Demand for Newpark's environmental and oilfield services depends in large
part upon the level of exploration and production of oil and gas and the
industry's willingness to spend capital on environmental and oilfield
services. This in turn depends on oil and gas prices, expectations about
future prices, the cost of exploring for, producing and delivering oil and
gas, the discovery rate of new oil and gas reserves and the ability of oil and
gas companies to raise capital. Domestic and international political,
military, regulatory and economic conditions also affect the industry. Prices
for oil and gas historically have been extremely volatile and have reacted to
changes in the supply of and the demand for oil and natural gas, domestic and
worldwide economic conditions and political instability in oil producing
countries. No assurance can be given that current levels of oil and gas
activities will be maintained or that demand for Newpark's services will
reflect the level of such activities. Prices for oil and natural gas are
expected to continue to be volatile and affect the demand for Newpark's
services. A material decline in oil or natural gas prices or activities could
materially affect the demand for the Company's services and, therefore, the
Company's results of operations and financial condition.
IMPACT OF GOVERNMENTAL REGULATIONS
Newpark believes that the demand for its principal environmental services is
directly related to state regulation of NOW and NORM. Any rescission or
relaxation of such regulations, or a failure of governmental authorities to
enforce such regulations, could result in decreased demand for the Company's
services and, therefore, could materially affect the Company's results of
operations and financial condition. Newpark's business may also be adversely
affected by new regulations or changes in other applicable regulations. For
example, in 1993, the Louisiana market for Newpark's pit closure and site
remediation services was drastically curtailed as a result of uncertainty
caused by proposed changes in regulations governing the possession, use,
transfer and disposition of NORM. This uncertainty was resolved by the
adoption of new regulations in January 1995.
NOW is currently exempt from the principal Federal statute governing the
handling and disposal of hazardous waste. In recent years, proposals have been
made to rescind this exemption. The repeal or modification of the exemption
covering NOW or modification of applicable regulations or their interpretation
regarding the treatment and/or disposal of NOW or NORM waste could require
Newpark to alter significantly its method of doing business. Such repeal or
modification could have a material adverse effect on Newpark's results of
operations and financial condition.
LOW BARRIERS TO ENTRY; LOSS OF TECHNOLOGY RIGHTS
Although Newpark has applied for U.S. patents on certain aspects of its
system for processing NOW and NORM, there is no assurance, even if such
patents are granted, that such patents will give Newpark a meaningful
competitive advantage. Barriers to entry by competitors for the Company's
environmental and oilfield services are low. Therefore, competitive products
and services have been and may be successfully developed and marketed by
others. In addition, the environmental services business in the oilfield could
be impacted by future technological change and innovation, which could result
in a reduction in the amount of waste being generated or alternative methods
of disposal being developed.
INCREASED COMPETITION
The processing of NOW and NORM waste is a relatively new industry.
Competition in this market can be expected to increase as the industry
develops. In the meantime, Newpark expects to encounter significant
competition from third party competitors in connection with any proposed
expansion into additional geographic areas and services. Newpark also faces
competition from oil and gas producing customers who are continually
8
<PAGE>
seeking to enhance and develop their own methods of disposal instead of
utilizing the services of third party NOW and NORM disposal companies such as
Newpark. The desire to use such internal disposal methods or of third parties
to enter the disposal market could be increased by future technological change
and innovation and limits the ability of Newpark to increase prices. The
increased use by Newpark's oil and gas producing customers of their own
disposal methods and other competitive factors could have a material adverse
effect on Newpark's results of operations and financial condition.
FAILURE TO COMPLY WITH GOVERNMENTAL REGULATIONS
Newpark's business is subject to numerous and continually evolving Federal,
state and local laws, regulations and policies that govern environmental
protection, zoning and other matters. If existing regulatory requirements
change, Newpark may be required to make significant unanticipated capital and
operating expenditures. Although Newpark believes that it is presently in
material compliance with applicable laws and regulations, there is no
assurance that it will be deemed to be in compliance in the future.
Governmental authorities may seek to impose fines and penalties on Newpark or
to revoke or deny the issuance or renewal of operating permits for failure to
comply with applicable laws and regulations. Under such circumstances, Newpark
might be required to curtail or cease operations or conduct site remediation
until a particular problem is remedied, which could have a material adverse
effect on Newpark's results of operations and financial condition.
POTENTIAL ENVIRONMENTAL LIABILITY; INSUFFICIENCY OF INSURANCE
Newpark's business exposes it to risks such as the potential for harmful
substances escaping into the environment resulting in personal injury or loss
of life, severe damage to or destruction of property, environmental damage and
suspension of operations. The current and past activities of Newpark and the
activities of its former divisions and subsidiaries could result in the
imposition of substantial environmental, regulatory and other liabilities on
Newpark, including the costs of cleanup of contaminated sites and site closure
obligations. Such liabilities could also be imposed on the basis of
negligence, strict liability, breach of contract with customers or, in many
instances, as a result of contractual indemnification by Newpark of its
customers in the normal course of its business. Injection wells have been used
for many years for disposal of oilfield waste; however, certain aspects of
Newpark's technology have not been used previously by others and its future
performance is uncertain.
While Newpark maintains liability insurance, the insurance is subject to
coverage limits and certain policies exclude coverage for damages resulting
from environmental contamination. Although there are currently numerous
sources from which such coverage may be obtained, there can be no assurance
that insurance will continue to be available to Newpark on commercially
reasonable terms, that the possible types of liabilities that may be incurred
by Newpark will be covered by its insurance, that Newpark's insurance carriers
will be able to meet their obligations under the policies or that the dollar
amount of such liabilities will not exceed Newpark's policy limits. Even a
partially uninsured claim, if successful and of significant magnitude, could
have a material adverse effect on Newpark's results of operations and
financial condition.
FAILURE TO INTEGRATE ACQUIRED BUSINESS
The Acquisition is significantly larger than Newpark's previous acquisitions
and significantly increases the size of Newpark's operations. Campbell Wells'
net sales for 1995 from the Acquired Business were approximately $19 million,
and Newpark's net sales for 1995 were approximately $98 million. Successful
integration of the Acquired Business will depend primarily on Newpark's
ability to manage this additional business and eliminate redundancies and
excess costs. Material failure or substantial delay in accomplishing such
integration could have a material adverse effect on Newpark's results of
operations and financial condition.
RELIANCE ON KEY PERSONNEL
Newpark is dependent upon the efforts and talents of its executive officers
and certain key personnel. Loss of the services of one or more of these
persons could adversely affect the operations of Newpark.
9
<PAGE>
PREFERRED STOCK
The Board of Directors of Newpark is authorized to issue, without further
stockholder action, up to 1,000,000 shares of Preferred Stock with rights that
could adversely affect the rights of holders of Newpark Common Stock. No
shares of Preferred Stock are presently outstanding, and Newpark has no
present plans to issue any such shares. The issuance of shares of Preferred
Stock under certain circumstances could have the effect of delaying, deterring
or preventing a change in control of Newpark or other corporate action and of
discouraging bids for Newpark Common Stock at a premium.
THE ACQUISITION
On June 5, 1996, Newpark entered into the Acquisition Agreement with
Sanifill and Campbell Wells for the purchase and lease of certain marine
related assets of Campbell Wells' NOW service business, excluding its
landfarming facilities and associated equipment, for an aggregate purchase
price of $70.5 million. Upon consummation of the Acquisition, Newpark will
assume obligations under the Disposal Agreement with Sanifill and Campbell
Wells, providing for the delivery by Newpark for a period of 25 years of an
agreed annual quantity of NOW waste for disposal at certain of Campbell Wells'
landfarming facilities.
BUSINESS OF CAMPBELL WELLS
Campbell Wells, a wholly-owned subsidiary of Sanifill, provides NOW
processing and disposal at four landfarming facilities located in Louisiana
(the "Landfarms") and one facility in Zapata County, Texas (the "Zapata
Facility"). Landfarming is a method of remediating NOW in surface-level
treatment cells that generally consists of rinsing out salts, degrading
organic compounds and drying the resultant material to a soil-like form. Since
April 1994, Campbell Wells has operated a NORM processing facility in
Lacassine, Louisiana (the "Lacassine Facility"). As part of its disposal
service, Campbell Wells collects and arranges for the transportation of wastes
from its transfer facilities to its landfarming facilities. Campbell Wells
also disposes of nonhazardous oil and gas related wastes at the Zapata
Facility, and a portion of this facility is utilized to dewater and stabilize
sludges, drilling muds and other liquids into solid waste materials which are
disposed of in disposal cells located on the site. For the year ended December
31, 1995, Campbell Wells' revenue from its NOW and NORM operations was
approximately $31 million, of which approximately $19 million was generated by
the Acquired Business.
DESCRIPTION OF ACQUISITION AGREEMENT
Assets to be Purchased. Under the Acquisition Agreement, Newpark will (a)
assume leases (for their remaining useful life) associated with Campbell
Wells' eight marine docks, including docks at three of the Landfarms, and five
transfer stations in the State of Louisiana that are used in the collection,
transfer and treatment of NOW, (b) purchase and lease (for their remaining
useful life) all of Campbell Wells' or Sanifill's interest in (i) all barges
and marine facilities used to transport NOW to the acquired docks and transfer
stations, (ii) all equipment at the acquired docks and transfer stations and
(iii) all pit remediation equipment, computers and related software, licenses
or rights, office equipment, office furniture, goodwill and all other assets
used in the NOW business not specifically excluded under the Acquisition
Agreement. Newpark also will acquire all of the capital stock of a Sanifill
subsidiary that has entered into the Disposal Agreement.
Assets Excluded. Newpark will not be acquiring any interest in any of the
Landfarms or their associated operating equipment, the Lacassine Facility and
its associated assets or the Zapata Facility and its associated assets.
Newpark also will not be acquiring the name "Campbell Wells" or any other
names used by Campbell Wells or Sanifill in connection with the Landfarms, the
Lacassine Facility or the Zapata Facility, although it will be permitted to
purchase all or any such names for nominal consideration at such time as
Campbell Wells and Sanifill discontinue using them.
Purchase Price; Assumption of Liabilities. The aggregate purchase price
under the Acquisition Agreement is $70.5 million, to be paid at the closing of
this Offering. Other than obligations incident to the post-closing performance
under the contracts and agreements to be specifically assumed by Newpark under
the Acquisition
10
<PAGE>
Agreement, Newpark will not assume any liabilities of Campbell Wells or
Sanifill in the transaction, including any environmental liabilities arising
from the ownership and prior operation of any of the assets to be acquired or
the Landfarms. Sanifill and Campbell Wells have jointly and severally agreed
to fully indemnify Newpark from all liabilities resulting from any claims
based on events that occurred or circumstances that existed on or before the
closing with respect to Campbell Wells' NOW disposal business.
NOW Disposal Agreement. The Disposal Agreement has been executed by a
subsidiary of Sanifill and will be assumed by Newpark concurrently with the
closing of the Acquisition. The Disposal Agreement provides that for each of
the 25 years following the closing, Newpark will deliver to Campbell Wells for
disposal at the Landfarms the lesser of (i) one-third of the barrels of NOW
that Newpark receives for processing and disposal in the States of Louisiana,
Texas, Mississippi and Alabama and in the Gulf of Mexico (the "Territory") and
(ii) 1,850,000 barrels of NOW, in each case excluding saltwater. The number of
barrels of NOW waste that Newpark is required to deliver to the Landfarms in
any year is subject to reduction by a number of barrels determined by dividing
revenues that Sanifill and its affiliates receive from the collection and
disposal of oilfield wastes or site remediation in the Territory by the price
per barrel that Newpark pays for disposal under the Disposal Agreement. No
deduction is made for revenues received by Sanifill and its affiliates from
(i) disposal at any of the Landfarms of NOW that is generated and collected on
land and is delivered to the Landfarms from the generation site by on-land
transportation ("Excluded NOW"), (ii) disposal of NOW at the Zapata Facility
and collection of NOW within a 200-mile radius of the Zapata Facility, and
(iii) disposal of NOW under the Disposal Agreement. Under the Disposal
Agreement, Campbell Wells and Sanifill will jointly and severally fully
indemnify Newpark from any and all liabilities, including environmental
liabilities, in connection with Campbell Wells' and Sanifill's ownership and
operation of the Landfarms, except for liability resulting from the delivery
by Newpark or its customers of waste that does not conform to the
specifications of the Disposal Agreement, which generally permit Newpark and
such customers to deliver only waste that is legally classified as NOW.
Newpark believes that such specifications are consistent with the type of
waste that it is permitted to receive and that it will dispose of at the
Landfarms.
Non-Competition Covenants. Sanifill will agree at the closing of the
Acquisition that for a period of five years from such closing neither it nor
any of its affiliates will engage, directly or indirectly, in the collection
or disposal of NOW or the site remediation and closure business in the
Territory. Campbell Wells will execute a Joinder Agreement by which it will
agree to such restrictions. However, Sanifill and its affiliates will be able
to continue to market and conduct activities related to (i) disposal at any of
the Landfarms of Excluded NOW, (ii) disposal of NOW at the Zapata Facility and
collection of NOW within a 200-mile radius of the Zapata Facility, (iii)
collection and disposal of NOW or other waste at the Lacassine Facility and
(iv) disposal of NOW under the Disposal Agreement. Sanifill and its affiliates
also will be entitled, without violating the Noncompetition Agreement, to
collect or dispose of NORM, which is a type of NOW; however, at present, the
only facility that Sanifill operates that is legally authorized to dispose of
NORM is the Lacassine Facility.
Closing. The Acquisition Agreement provides that the Acquisition will close
concurrent with the completion of this Offering and following the satisfaction
of all conditions precedent. However, either Newpark or Sanifill and Campbell
Wells may terminate the Acquisition Agreement if the Acquisition does not
close by September 10, 1996.
Conditions to Closing. The obligations of Newpark, Sanifill and Campbell
Wells to consummate the Acquisition are conditioned upon the completion of
this Offering and the satisfaction or, where permitted, the waiver of certain
other customary terms and conditions, including (a) the receipt of all
necessary third party consents, including all necessary regulatory approvals;
(b) the accuracy (subject to certain materiality standards) of all
representations and warranties contained in the Acquisition Agreement; and (c)
that no action, suit or other proceeding shall be pending or threatened which,
if unfavorably determined, would prevent the Acquisition or adversely affect
the right of Newpark to acquire or operate the assets being purchased or
leased.
NEWPARK'S PLAN FOR COMBINED OPERATIONS
Newpark anticipates that the Acquisition will provide increased efficiencies
and economies of scale associated with handling a larger volume of waste
through its facilities. Newpark plans to combine the service
11
<PAGE>
capabilities of the Acquired Business with its existing operations to speed
the turnaround of barges and boats at its transfer stations, thus providing
better customer service. Economic efficiencies are expected to result from the
reduction in size of the combined barge fleet operated by Newpark to service
its transfer stations, and from the consolidation of operations at more
efficient transfer stations, permitting Newpark to receive a substantially
higher volume of waste without material additions to existing costs.
Furthermore, Newpark expects that as a result of the Acquisition, access to
Sanifill's disposal facilities under the Disposal Agreement will allow Newpark
to reduce its barge transportation costs and make more efficient use of its
barge fleet, further augmenting its processing capacity. Newpark believes that
its current processing and disposal capacity, combined with access provided to
the landfarm disposal facilities of Sanifill under the Disposal Agreement,
will be adequate to provide for expected future demand for its oilfield waste
disposal and other environmental services. Newpark will nevertheless continue
its strategy of adding injection disposal capacity throughout the U.S. Gulf
Coast region to more efficiently serve its customers. See "Pro Forma Financial
Information".
While Newpark is acquiring from Campbell Wells facilities and equipment used
in the collection, transfer and treatment of NOW, including docks, transfer
stations and barges, Newpark intends to consolidate these facilities and
equipment with Newpark's existing or newly expanded facilities, allowing
Newpark to enjoy significant on-going consolidation benefits. Such
consolidation is expected to result in a one-time restructuring charge against
Newpark's third quarter earnings, which charge Newpark currently estimates to
be approximately $4.2 million before taxes.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Newpark's Common Stock traded on The Nasdaq National Market under the symbol
"NPRS" through December 5, 1995 and commenced trading on the New York Stock
Exchange on December 6, 1995 under the symbol "NR". The following table sets
forth for the periods indicated the high and low sales prices for the Common
Stock:
<TABLE>
<CAPTION>
PERIOD HIGH LOW
------ ------ ------
<S> <C> <C>
1994:
First Quarter............................................. $14.50 $ 8.25
Second Quarter............................................ 16.75 13.50
Third Quarter............................................. 19.75 15.75
Fourth Quarter............................................ 25.00 18.25
1995:
First Quarter............................................. $26.00 $14.75
Second Quarter............................................ 24.25 20.25
Third Quarter............................................. 23.25 17.00
Fourth Quarter............................................ 22.86 15.50
1996:
First Quarter............................................. $29.75 $19.75
Second Quarter (through June 7, 1996)..................... 37.88 28.75
</TABLE>
On December 30, 1995, Newpark paid a 5% stock dividend on the Common Stock
to stockholders of record on November 30, 1995. Newpark has not paid cash
dividends on the Common Stock since March 15, 1983, and does not intend to pay
any cash dividends in the foreseeable future. The Board of Directors currently
intends to retain earnings for use in Newpark's business, including the
expansion of its mat rental business, both in domestic and foreign markets,
and the continued development of injection wells within its waste disposal
business.
12
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by Newpark from the sale of the Common Stock
offered hereby are estimated to be approximately $98.7 million ($113.6 million
if the over-allotment option is exercised in full), assuming a public offering
price of $35.00 per share and after deducting estimated underwriting discounts
and offering expenses. Newpark intends to utilize approximately $71.5 million
of the net proceeds to pay the purchase price of the Acquisition and certain
associated transaction costs. Newpark will use the remaining net proceeds,
estimated to be approximately $27.2 million, to repay outstanding indebtedness
under its bank credit agreement, including all of the $16 million outstanding
under its revolving line of credit and $11.2 million under its term loan.
Newpark anticipates that such payment will provide it increased flexibility to
facilitate further development of its injection disposal capacity, both in
oilfield and industrial waste markets, and expansion of its mat rental
business into international markets.
Borrowings under the bank credit agreement have been used to refinance
existing debt and for general working capital purposes and bear interest at
either a specified prime rate or the LIBOR rate, plus a spread which is
determined quarterly based upon the ratio of Newpark's funded debt to cash
flow. The effective interest rate under the bank credit agreement was 8.56% at
June 7, 1996. The revolving line of credit matures on December 31, 1998, and
the term loan is being amortized over a period of five years ending June 29,
2000.
Although Newpark intends to fully repay its outstanding borrowings under its
revolving line of credit and pay down its term loan, it may borrow amounts
under the revolving line of credit and other facilities from time to time in
the future to fund capital requirements. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources".
CAPITALIZATION
The following table sets forth the consolidated capitalization of Newpark as
of March 31, 1996 and on an as adjusted basis as of March 31, 1996 to reflect
the sale of the 3,000,000 shares of Common Stock offered in this Offering (at
an assumed public offering price of $35.00 per share and after deducting
underwriting discounts and offering expenses) and the application of the net
proceeds therefrom to complete the Acquisition and to repay outstanding
indebtedness. The following table should be read in conjunction with the
Consolidated Financial Statements of Newpark and the Notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Notes payable.......................................... $ 119 $ 119
Current maturities of long-term debt................... 9,994 9,994
-------- --------
Total short-term debt................................ 10,113 10,113
-------- --------
Long-term debt, excluding current portion:
Long-term debt......................................... 46,907 19,690
Other non-current liabilities.......................... 285 285
-------- --------
Total long-term debt................................. 47,192 19,975
-------- --------
Stockholders' equity:
Preferred Stock, $.01 par value, 1,000,000 shares
authorized, none issued............................... -- --
Common Stock, $.01 par value, 20,000,000 shares
authorized, 10,694,974 issued and outstanding,
13,694,974 as adjusted for this Offering(1)........... 106 136
Paid-in capital........................................ 145,162 243,849
Retained earnings (deficit)............................ (63,824) (63,824)
-------- --------
Total stockholders' equity........................... 81,444 180,161
-------- --------
Total capitalization................................. $138,749 $210,249
======== ========
</TABLE>
- --------
(1) Assumes no exercise of outstanding stock options, which, if fully
exercised, would result in the issuance of an additional 897,393 shares of
Common Stock.
13
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The unaudited consolidated statements of income set forth below present the
combined statements of income of Newpark and the Acquired Business, adjusted
to give effect to the Acquisition, including the completion of this Offering
and the repayment of indebtedness, as if the Acquisition and such repayment
had occurred on January 1, 1995. The unaudited pro forma combined balance
sheet set forth below combines the consolidated historical balance sheets of
Newpark and the Acquired Business as of March 31, 1996, giving effect to the
Acquisition, including the completion of this Offering and the repayment of
indebtedness, as if the Acquisition and such repayment had been consummated on
March 31, 1996. The Pro Forma Financial Information should be read in
conjunction with the accompanying notes and the historical financial
statements and notes thereto of Newpark and the Acquired Business appearing
elsewhere in this Prospectus.
The Acquisition will be accounted for under the purchase method of
accounting. The total purchase price for the Acquisition will be allocated to
tangible and identifiable intangible assets and liabilities based upon
Newpark's preliminary estimates of their fair value with the excess of cost
over net assets acquired allocated to goodwill. Such allocation is subject to
revision when additional information concerning asset and liability valuations
is obtained, in accordance with FAS No. 38, "Accounting for Preacquisition
Contingencies of Purchased Enterprises". In Newpark's opinion, the asset and
liability valuation for the Acquisition will not be materially different from
the pro forma information presented herein, and Newpark is not aware of any
contingencies which may affect the allocation of the purchase price other than
as set forth in the accompanying pro forma combined balance sheet.
For purposes of presenting pro forma results, no changes in revenues and
expenses have been made to reflect the results of any modifications to
operations that might have been made had the Acquisition been consummated on
the assumed effective date of the transaction. The pro forma expenses include
the recurring costs which are directly attributable to the Acquisition, such
as depreciation expense and amortization of goodwill. The Pro Forma Financial
Information does not purport to represent what Newpark's results of operations
or financial position would actually have been had the Acquisition actually
occurred on the dates specified or to project Newpark's results of operations
for any future period.
Management expects to implement net cost reductions which are not reflected
in the accompanying pro forma statements of income. These cost reductions are
related to the consolidation of certain duplicate administrative and personnel
costs. Such pretax savings for the year ended December 31, 1995 and three
months ended March 31, 1996 are estimated to be $3 million and $700,000,
respectively. The effect of these savings would have increased pro forma net
income per share by $.14 and $.03, respectively. These estimated cost savings
constitute a forward looking statement under the Securities Act. The Company's
actual future net income per share could be materially and adversely affected
by certain risks and uncertainties, including those set forth above under
"Risk Factors".
Further, the accompanying pro forma information does not include the full
benefit of potential cost savings related to efficiency of operation expected
by Newpark. However, no assurance can be given as to the ultimate amount, if
any, of net cost savings that will actually be realized.
14
<PAGE>
PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------- ------------------------------------
ADJUSTMENTS ADJUSTMENTS
ACQUIRED FOR FOR
NEWPARK BUSINESS ACQUISITION OFFERING COMBINED
------- -------- ----------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues................ $97,982 $18,837 $116,819
Operating costs and
expenses:
Cost of services
provided............. 64,467 12,007 76,474
Operating costs....... 9,414 $ 1,741 (a)
2,226 (b)
(3,253)(c) 10,128
------- ------- ------- ------ --------
73,881 12,007 714 -- 86,602
General and
administrative
expenses............... 2,658 1,946 4,604
Provision for
uncollectible accounts
and notes receivable... 463 463
------- ------- ------- ------ --------
Operating income........ 20,980 4,884 (714) -- 25,150
Interest income......... (183) (183)
Interest expense........ 3,740 (2,330)(d) 1,410
Non-recurring expense... 436 -- 436
------- ------- ------- ------ --------
Income from operations
before provision for
income taxes........... 16,987 4,884 (714) 2,330 23,487
Provision for income
taxes.................. 4,751 1,661 (260)(e) 850 (e) 7,002
------- ------- ------- ------ --------
Net income.............. $12,236 $ 3,223 $ (454)(f) $1,480 $ 16,485
======= ======= ======= ====== ========
Weighted average shares
outstanding............ 10,568 3,000 13,568
======= ====== ========
Net income per common
share:................. $ 1.16 $ 1.22
======= ========
</TABLE>
15
<PAGE>
PRO FORMA COMBINED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------- -----------------------------------
ADJUSTMENTS ADJUSTMENTS
ACQUIRED FOR FOR
NEWPARK BUSINESS ACQUISITION OFFERING COMBINED
------- -------- ----------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues................. $26,767 $5,592 $32,359
Operating costs and
expenses:
Cost of services
provided.............. 17,599 3,539 21,138
Operating costs........ 2,359 $ 1,227 (a)
555 (b)
(936)(c) 3,205
------- ------ ------- ----- -------
19,958 3,539 846 -- 24,343
General and
administrative expenses. 717 489 1,206
Provision for
uncollectible accounts
and notes receivable.... -- --
------- ------ ------- ----- -------
Operating income......... 6,092 1,564 (846) -- 6,810
Interest income.......... (30) (30)
Interest expense......... 907 (561)(d) 346
Non-recurring expense.... -- -- --
------- ------ ------- ----- -------
Income from operations
before provision for
income taxes............ 5,215 1,564 (846) 561 6,494
Provision for income
taxes................... 1,899 532 (309)(e) 205 (e) 2,327
------- ------ ------- ----- -------
Net income............... $ 3,316 $1,032 $ (537)(f) $ 356 $ 4,167
======= ====== ======= ===== =======
Weighed average shares
outstanding............. 10,650 3,000 13,650
======= ===== =======
Net income per common
share:.................. $ .31 $ .31
======= =======
</TABLE>
FOOTNOTES TO PRO FORMA COMBINED STATEMENTS OF INCOME
(a) Reflects adjustment to record the net cost to Newpark associated with the
disposal of NOW at Campbell Wells' facilities as required under the terms
of the Disposal Agreement.
(b) Reflects adjustment to record the amortization of intangible assets and
goodwill arising in connection with the Acquisition. The non-competition
covenants are amortized over the contractual life of the Disposal
Agreement, which is 25 years. Intangibles associated with the going
concern value of the business acquired, its customer list and other
intangibles are amortized over 35 years.
(c) The allocation of the purchase price includes a liability for the
estimated costs of immediately closing certain duplicative transfer
stations and barge operations of the Acquired Business. This adjustment
provides for a direct effect of this decision by eliminating certain of
the duplicate operating expenses related to the closed facilities and
barge operations. These estimated costs constitute forward looking
statements under the Securities Act. The Company's actual future operating
results could be materially and adversely affected by certain risks and
uncertainties, including those set forth above under "Risk Factors--
Failure to Integrate Acquired Business".
(d) Reflects adjustment to reduce interest expense related to repayment of
borrowings under Newpark's bank credit facility utilizing the portion of
the net proceeds of this Offering in excess of the purchase price in the
Acquisition.
(e) Adjustment to reflect the effect on income tax expense, calculated at
Newpark's marginal tax rate of 36.5%, on the adjustments reflected on the
pro forma financial statements.
(f) This pro forma net income amount constitutes a forward looking statement
under the Securities Act. The Company's actual future net income could be
materially and adversely affected by certain risks and uncertainties,
including those set forth above under "Risk Factors--Failure to Integrate
Acquired Business".
16
<PAGE>
PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------- -------------------------------------
ADJUSTMENTS ADJUSTMENTS
ACQUIRED FOR FOR
NEWPARK BUSINESS ACQUISITION OFFERING COMBINED
-------- -------- ----------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Assets:
Current assets........ $ 53,266 -- -- $ 1,000(a) $ 54,266
Property, plant and
equipment............ 90,996 $2,531 $ (208)(b) -- 93,319
Intangibles and other
assets............... 11,778 -- 74,233 (b) -- 86,011
-------- ------ ------- -------- --------
Total assets........ $156,040 $2,531 $74,025 $ 1,000 $233,596
======== ====== ======= ======== ========
Liabilities and
Stockholders' Equity:
Current Liabilities... $ 22,240 -- -- -- $ 22,240
Long-term debt........ 46,907 -- -- $(27,217)(a) 19,690
Other liabilities..... 5,449 $ 444 $ 5,612(b) -- 11,505
Total stockholders'
equity............... 81,444 -- -- 98,717 (a) 180,161
-------- ------ ------- -------- --------
Total liabilities
and stockholders'
equity............. $156,040 $ 444 $ 5,612 $ 71,500 $233,596
======== ====== ======= ======== ========
</TABLE>
FOOTNOTES TO PRO FORMA COMBINED BALANCE SHEET
(a) Reflects the use of proceeds from this Offering to finance the purchase
price of the Acquisition and to repay outstanding indebtedness under
Newpark's bank credit facility as described in "Use of Proceeds".
(b) The purchase cost of the Acquisition was allocated to the assets and
liabilities acquired based on their relative fair values, subject to final
determination based on independent valuations, as follows:
<TABLE>
<S> <C> <C>
Purchase Cost:
Cash..................................................... $70,500
Purchase accounting reserves*............................ 5,612
Less book value of net assets acquired................... (2,087)
-------
Excess of purchase cost over book value.................. $74,025
=======
Allocated as follows:
Property, plant and equipment, net....................... $ (208)
Intangibles and other assets:
Non-compete and other.................................. $8,500
Goodwill............................................... 65,733 74,233
------ -------
Total.................................................... $74,025
=======
</TABLE>
--------
* Purchase accounting reserves include the estimated costs to
close certain duplicate facilities and barge operations of
the Acquired Business.
17
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The selected consolidated historical financial data presented below for the
five years ended December 31, 1995 are derived from the audited consolidated
financial statements of Newpark. The selected historical financial information
for the three months ended March 31, 1995 and 1996 is derived from the
unaudited consolidated financial statements of Newpark, and, in the opinion of
Newpark, includes all adjustments (consisting only of normal recurring
adjustments) that are necessary for a fair presentation of the operating
results for such interim period. The results of operations for the three
months ended March 31, 1996 are not necessarily indicative of results for the
full year. The following data should be read in conjunction with the
Consolidated Financial Statements of Newpark and the Notes thereto included
elsewhere in this Prospectus and "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1995 1994 1993 1992 1991
-------- -------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues........................ $ 97,982 $ 79,632 $56,330 $49,457 $44,635
Cost of services provided....... 64,467 56,259 42,581 36,860 34,703
Operating costs................. 9,414 7,277 6,557 5,519 3,799
General and administrative
expenses....................... 2,658 3,231 2,129 1,963 1,305
Provision for uncollectible
accounts and notes receivable.. 463 974 671 154 94
-------- -------- ------- ------- -------
Operating income from continuing
operations..................... 20,980 11,891 4,392 4,961 4,734
Interest income................. (183) (78) -- (18) (47)
Interest expense................ 3,740 2,660 1,274 847 1,562
Non-recurring expense........... 436 -- -- -- --
Financial restructure costs..... -- -- -- -- 155
-------- -------- ------- ------- -------
Income from continuing
operations before provision for
income taxes................... 16,987 9,309 3,118 4,132 3,064
Provision (benefit) for income
taxes.......................... 4,751 (85) (1,670) 51 73
-------- -------- ------- ------- -------
Income from continuing
operations..................... 12,236 9,394 4,788 4,081 2,991
Income (loss) from discontinued
operations..................... -- -- (2,366) 1,205 877
-------- -------- ------- ------- -------
Income before extraordinary
items.......................... 12,236 9,394 2,422 5,286 3,868
Extraordinary items............. -- -- -- -- 1,365
-------- -------- ------- ------- -------
Net income...................... $ 12,236 $ 9,394 $ 2,422 $ 5,286 $ 2,503
======== ======== ======= ======= =======
Income (loss) per common share:
Continuing operations......... $ 1.16 $ .90 $ .49 $ .43 $ .46
Discontinued operations....... -- -- (.24) .12 .13
Extraordinary items........... -- -- -- -- (.21)
-------- -------- ------- ------- -------
Net income per common share..... $ 1.16 $ .90 $ .25 $ .55 $ .38
======== ======== ======= ======= =======
Weighted average shares
outstanding.................... 10,568 10,422 9,690 9,564 6,521
======== ======== ======= ======= =======
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------
1995 1994 1993 1993 1992
-------- -------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................. $ 32,108 $ 13,585 $ 5,361 $ 4,900 $12,121
Total assets.................... 152,747 110,756 90,316 75,478 53,454
Short-term debt................. 7,911 10,032 14,928 12,212 1,377
Long-term debt.................. 46,724 28,892 12,446 10,432 3,774
Total stockholders' equity...... 77,518 63,699 53,353 45,658 40,239
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
------------------
1996 1995
-------- --------
(UNAUDITED)
(IN THOUSANDS,
EXCEPT PER SHARE
DATA)
<S> <C> <C>
STATEMENT OF INCOME DATA:
Revenues................................................... $ 26,767 $ 22,209
Cost of services provided.................................. 17,599 15,532
Operating costs............................................ 2,359 2,288
General and administrative expenses........................ 717 648
Provision for uncollectible accounts and notes receivable.. -- 30
-------- --------
Operating income from operations........................... 6,092 3,711
Interest income............................................ (30) (91)
Interest expense........................................... 907 889
-------- --------
Income from continuing operations before provision for
income taxes.............................................. 5,215 2,913
Provision for income taxes................................. 1,899 423
-------- --------
Net income................................................. $ 3,316 $ 2,490
======== ========
Income per common share:
Net income per common share.............................. $ .31 $ .24
======== ========
Weighted average shares outstanding...................... 10,650 10,375
======== ========
<CAPTION>
AS OF MARCH 31,
------------------
1996 1995
-------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................ $ 31,026 $ 16,666
Total assets............................................... 156,040 114,386
Short-term debt............................................ 10,113 8,566
Long-term debt............................................. 46,907 30,110
Total stockholders' equity................................. 81,444 66,488
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of Newpark's financial condition, results of
operations, liquidity and capital resources should be read in conjunction with
the Consolidated Financial Statements and the Notes thereto included elsewhere
in this Prospectus.
OVERVIEW
The Baker Hughes Rotary Rig Count has historically been viewed as the most
significant single indicator of oil and gas drilling activity in the domestic
market. In 1993, the United States rig count averaged 754 rigs in operation,
and increased to 774 in 1994. In 1995, the rig count averaged 723, the second
lowest on record since the advent of the indicator in the early 1940's.
Newpark's operations principally occur in the following rig count
measurement areas: (i) South Louisiana Land, (ii) Texas Railroad Commission
Districts 2 and 3, (iii) Louisiana and Texas Inland Waters and (iv) the
Offshore Gulf of Mexico. The rig count trend in the areas that Newpark serves
has tracked these national trends as set forth in the table below:
<TABLE>
<CAPTION>
1993 1994 1995 1Q95 2Q95 3Q95 4Q95 1Q96
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. rig count................. 754 774 723 705 677 745 765 708
Newpark's service area......... 176 202 195 191 187 201 199 189
Newpark's service area to
total......................... 23.3% 26.1% 27.0% 27.1% 27.6% 27.0% 26.0% 26.7%
</TABLE>
- --------
Source: Baker Hughes Incorporated
Newpark believes that improved natural gas drilling activity, as evidenced by
the rig count in the area it serves, was an important factor which allowed a
trend of increasing prices in its site preparation and mat rental business to
continue through 1994. Newpark believes the decline in the rig count within
Newpark's service area during 1995, which continued in the first quarter of
1996, was primarily the result of low natural gas prices during most of 1995.
As of June 7, 1996, the U.S. rig count was 781, and 214 within Newpark's
service area, which Newpark believes is reflective of the continued increase in
natural gas prices that commenced in November 1995.
Despite this decline in rig activity, the volume of waste received by
Newpark increased at a compound rate of 44% from 1993 to 1995, primarily due
to the recovery of the remediation market following implementation of NORM
regulations and new, more stringent regulations governing the discharge of
drilling and production waste in the coastal and inland waters and in the
offshore Gulf of Mexico.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues by product line:
Offsite waste processing.. $31,126 31.8% $20,738 26.0% $11,354 20.2%
Mat rental service........ 30,775 31.4 23,048 28.9 21,042 37.4
General oilfield services. 14,511 14.8 13,452 16.9 11,358 20.1
Wood product sales........ 12,609 12.9 13,105 16.5 7,947 14.1
Onsite environmental
management............... 7,361 7.5 7,689 9.7 4,629 8.2
Other..................... 1,600 1.6 1,600 2.0 -- --
------- ----- ------- ----- ------- -----
Total revenues.......... $97,982 100.0% $79,632 100.0% $56,330 100.0%
======= ===== ======= ===== ======= =====
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
31,
----------------------------
1996 1995
------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues by product line:
Offsite waste processing........................ $ 7,833 29.3% $ 7,391 33.3%
Mat rental service.............................. 7,901 29.5 6,632 29.9
General oilfield services....................... 4,003 14.9 3,032 13.6
Wood product sales.............................. 3,956 14.8 2,624 11.8
Onsite environmental management................. 2,564 9.6 2,130 9.6
Other........................................... 510 1.9 400 1.8
------- ----- ------- -----
Total revenues................................ $26,767 100.0% $22,209 100.0%
======= ===== ======= =====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31,
1995
Revenues
Total revenues increased to $26.8 million in the three months ended March
31, 1996 from $22.2 million in the three months ended March 31, 1995, an
increase of $4.6 million, or 20.5%. The major components of the increase by
product line included: (i) $1.3 million of increased revenue from wood product
sales due to increased sales of wood chips produced by additional capacity
added during 1995; (ii) an increase of $1.3 million, or 19.1%, in mat rental
revenue due to a 17.7% increase in volume on pricing similar to the 1995
period; (iii) an increase of $971,000, or 32.0%, in general oilfield service
revenue, which resulted primarily from site preparation services related to
the increased volume of mat rental services provided during the period; (iv)
an increase of $442,000 in offsite waste processing revenues derived primarily
from NORM disposal operations; and (v) an increase of $434,000 in onsite
environmental management services related to the increased site remediation
activity in the 1996 period. NORM processing volume during the current period
increased to 37,200 barrels, compared to 12,600 barrels in the 1995 period.
The effect of the volume increase was offset, in part, by a decrease in the
average revenue per barrel, from $111.00 in the 1995 period to $48.00 in the
current quarter. The change in average price reflects the lower level of
radium contamination in waste received from site remediation projects, which
represent a majority of current volume. NOW disposal revenue increased
$57,000, to $6,048,000 in the current quarter, compared to $5,991,000 in the
1995 period. Total volume increased 8%, to 745,000 barrels, compared to
690,000 barrels in the year-ago quarter, but was partially offset by a decline
in the average revenue per barrel to $8.12 in the 1996 quarter, from $8.68 in
the prior period. The decline is due to changes in mix, with lower priced
remediation volume of 123,000 barrels in the 1996 quarter, representing 16.5%
of total volume, compared to 13.0% in the 1995 quarter.
Operating Income
Operating income increased by $2.4 million, or 64.2%, to $6.1 million in the
1996 period, compared to $3.7 million in the prior period. This represents an
improvement in operating margin to 22.8% in the 1996 period, compared to 16.7%
in the 1995 period. Primary components of the increase included $1.9 million
resulting from the increase in the volume of mats rented and approximately
$470,000 increased operating profit from wood product sales.
General and administrative expenses remained relatively unchanged,
decreasing as a proportion of revenue to 2.7%, from 2.9% in the 1995 period,
and increasing in absolute amount by $69,000.
Interest Expense
Interest expense was substantially unchanged at approximately $900,000 for
both periods, although average outstanding borrowings increased approximately
43.9% from the prior period. This resulted from decreased net interest cost
under the current credit agreement, which became effective as of June 29,
1995, and interest capitalization related to construction in progress in the
current quarter.
21
<PAGE>
Provision for Income Taxes
For the 1996 period, Newpark recorded an income tax provision of $1.9
million, or 36.4% of pre-tax income. The net provision for the 1995 period of
$423,000, equal to a 15% effective rate, was comprised of a provision for
federal income taxes net of the recognition of certain state income tax
carryforwards available to offset estimated future earnings.
Net Income
Net income increased by $826,000, or 33.2%, to $3.3 million in 1996,
compared to $2.5 million in the 1995 period.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenues
Total revenues increased to $98 million in 1995, from $79.6 million in 1994,
an increase of $18.4 million or 23.0%. The components of the increase by
product line are as follows: (i) offsite waste processing revenues increased
$10.4 million, as NOW revenue increased $5.5 million (due almost exclusively
to additional volume) and NORM processing revenue increased to $6 million on
approximately 70,000 barrels in 1995, from $1.2 million in revenue and 15,000
barrels in 1994; (ii) mat rental revenue increased $7.7 million, or 34%, due
to (a) increased volume installed at similar pricing compared to the prior
year and (b) an increase in revenues from extended rerentals of $3.6 million
resulting from the longer use of sites and the trend toward deeper drilling in
more remote locations, requiring larger sites to accommodate increased
equipment and supplies on the site and resulting in the size of the average
location growing 17% in 1995 as compared to the prior year; (iii) general
oilfield service revenue increased $1.1 million, or 7.9%, primarily as a
result of the increased level of site preparation work incident to the rental
of mats in the oilfield segment of that business; (iv) onsite environmental
management service revenue declined approximately $300,000, or 4%, with the
reduced level of current drilling-related projects more than offsetting
increased activity in the remediation of old sites; and (v) revenue from wood
product sales decreased approximately $500,000, due in part to production
inefficiencies during the start-up of a new processing line and the inclusion
of a large non-recurring order in prior year revenue.
Operating Income from Continuing Operations
Operating income from continuing operations increased by $9.1 million, or
76.4%, to $21 million in the 1995 period, compared to $11.9 million in the
prior year. This represents an improvement in operating margin to 21.4% in
1995, compared to 14.9% in 1994.
Primary components of the increase included: (i) approximately $2.9 million
related to the effect of volume increases in both NOW and NORM processing;
(ii) $3.6 million from increased mat rerentals; (iii) $1.3 million resulting
from the increase in the volume of mats rented, to approximately 200 million
board feet, compared to 157 million in 1994, at similar margins; and (iv) an
approximate $200,000 increase in operating profit on a better gross margin mix
from wood product sales.
The decline of $573,000 in general and administrative expenses primarily
reflects the impact of approximately $600,000 of prior year charges for legal
costs incurred in an appeal of an expropriation matter. Additionally, the
provision for uncollectible accounts was $511,000 less in the 1995 period as
compared to the 1994 period.
Interest Expense
Interest expense increased to $3.7 million in 1995, from $2.7 million in
1994. The increase was the result of an increase in borrowings, proceeds of
which were used to fund continued additions to productive capacity, including
Newpark's waste processing facilities, its prefabricated board road mats and
additions to inventory, primarily at the sawmill facility.
22
<PAGE>
Non-Recurring Expense
Results for the current period include $436,000 of non-recurring costs
associated with a proposed merger which was not completed.
Provision for Income Taxes
During 1995, Newpark recorded an income tax provision of $4.8 million, or
28% of pre-tax income. While Newpark's net operating loss carryforwards remain
to be used for income tax return purposes, for financial reporting purposes,
substantially all of the remaining net operating loss and tax credit
carryforwards applicable to federal taxes were recognized in the first half of
the year, which reduced the effective tax rate for that portion of the year.
During 1994, Newpark recorded a tax benefit of $85,000 as a result of the
availability of net operating loss carryforwards.
Net Income
Net income increased by $2.8 million, or 30%, to $12.2 million in 1995,
compared to $9.4 million in 1994.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Revenues
Total revenues increased from $56.3 million in 1993 to $79.6 million in
1994, an increase of $23.3 million, or 41.4%. Components of the increase by
product line included: (i) a $9.4 million increase in offsite waste
processing, composed of (a) an increase of $8.2 million, resulting from a
72.5% increase in the number of barrels of NOW waste received, which grew to
2.3 million in 1994 from 1.3 million in 1993, and (b) $1.2 million from NORM
processing which began in the fourth quarter of 1994; (ii) an increase of $5.2
million of wood product sales revenue due to an increase in the total tonnage
of products sold at similar pricing; (iii) a $3 million increase in onsite
environmental management revenue reflecting the recovery of this market during
1994 once definitive NORM regulations were effected in both Louisiana and
Texas, resulting in a total of 355,000 barrels of remediation waste being
handled in 1994, as compared to only 22,000 in 1993; (iv) a $2 million
increase in mat rental revenue, the net effect of a 29% increase in average
pricing to approximately $93 per thousand board feet installed and a 4%
decline in total volume to 157 million board feet in 1994, compared to 164
million board feet in 1993; and (v) an increase of approximately $2.1 million
in general oilfield service revenue, which primarily reflects the increased
site construction services related to the increased volume of mats installed
on customers' sites. Other revenue included $1.6 million in 1994 from the
lease of the facility formerly operated as a marine repair yard in Houston,
Texas.
Operating Income from Continuing Operations
Operating income from continuing operations increased $7.5 million, from
$4.4 million, or 7.8% of revenue, in 1993, to $11.9 million, or 14.9% of
revenue, in the current period. Factors contributing to the increase included:
(i) a $3.1 million increase in operating income from offsite waste processing,
of which approximately $600,000 relates to the receipt of 14,711 barrels of
NORM waste solely during the fourth quarter of 1994, with the remainder
attributable to increased volume and substantially unchanged profit
contribution per barrel of NOW processed; (ii) $2.7 million from increased mat
rental revenue; (iii) a $2.5 million increase resulting from the increase in
the volume of mats rented; and (iv) a profit of approximately $800,000 (before
related interest expense) from the lease of Newpark's former marine repair
facility. These increases were partially offset by the following: (a) a
$258,000 decrease in operating income from wood products sales due to higher
inventory costs relative to 1993; (b) a $1.1 million increase in general and
administrative expenses; and (c) a $300,000 increase in the provision for
uncollectible accounts and notes receivable.
General and administrative expenses as a proportion of revenue rose to 4.1%
in 1994, from 3.8% in 1993, while rising in total by $1.1 million, to $3.2
million in 1994, from $2.1 million in 1993. The principal items
23
<PAGE>
associated with the increase included a charge for legal costs of
approximately $600,000 incurred due to the appeal of an expropriation matter
and a $130,000 provision for additional franchise taxes, as a result of a
recently completed audit.
Interest Expense
Interest expense increased $1.4 million, to $2.7 million in 1994, compared
to $1.3 million in 1993, as Newpark added approximately $17.5 million in net
borrowings to finance new and existing facilities and equipment during 1994.
Provision for Income Taxes
During 1994, Newpark recorded a net deferred tax benefit of $200,000 as a
result of recognizing the future benefit of the income tax carryforwards
available to offset the estimated future earnings. See Note F in the Notes to
Consolidated Financial Statements. The net deferred tax benefit was partially
offset by current tax expense of $115,000.
Net Income
Net income increased to $9.4 million in 1994, from $2.4 million in 1993, an
increase of $7 million, or 288%, equal to 29.9% of incremental revenues.
LIQUIDITY AND CAPITAL RESOURCES
During 1995 and to date during 1996, Newpark's working capital needs were
met primarily from operating cash flow. Newpark's working capital position
decreased by $1.1 million during the three months ended March 31, 1996 and
increased by $18.5 million during the year ended December 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
MARCH 31,
1996 1995 1994
--------- ------- -------
<S> <C> <C> <C>
Working capital (in thousands).................... $31,026 $32,108 $13,585
Current ratio..................................... 2.4 2.3 1.8
</TABLE>
Throughout 1995, Newpark invested approximately $18 million to provide
future capacity within key product lines. These improvements included the
addition of two more injection wells and a grinding mill at the Big Hill
facility, construction of a new injection facility (which includes two
injection wells) at the Fannett site, construction of a bulk waste unloading
facility adjacent to Newpark's existing Port Arthur facility, additions to
Newpark's inventory of rental mats in the domestic market and an expansion of
Newpark's rental mat business into Venezuela. As a result of these asset
additions and expansion, long term debt increased to $46.7 million at year
end, representing 36.3% of total long-term capital. A total of $43.4 million
of the debt was funded through a credit facility with three banks, which was
completed during the second quarter of the year.
Newpark's credit facility provides for a total of up to $50 million of term
financing consisting of a $25 million term loan to be amortized over five
years and a $25 million revolving line of credit. At Newpark's option, these
borrowings bear interest at either a specified prime rate or the LIBOR rate,
plus a spread which is determined quarterly based upon the ratio of Newpark's
funded debt to cash flow. The credit agreement requires that Newpark maintain
certain specified financial ratios and comply with other usual and customary
requirements. Newpark was in compliance with all of the covenants in the
credit agreement at March 31, 1996. The term loan was used to refinance
existing debt and is being amortized over a five year term ending June 29,
2000. In March 1996, the term loan was increased to $35 million, and the $10
million increase was used initially to reduce borrowings on the revolving line
of credit portion of the facility. The revolving line of credit matures
December 31, 1998. Availability of borrowings under the line of credit is tied
to the level of Newpark's accounts receivable and certain inventory. At March
31, 1996, $5.8 million of letters of credit were issued and outstanding under
the
24
<PAGE>
line and an additional $11.6 million had been borrowed and was outstanding
thereunder. Effective April 24, 1996, Newpark replaced $3.8 million of
outstanding letters of credit with a corporate guaranty, leaving $2 million of
letters of credit outstanding.
Net cash provided by operating activities was $4.2 million during the three
months ended March 31, 1996, compared to $1.9 million in the comparable period
of the prior year, an increase of $2.3 million. Approximately $2 million, or
87%, of the improvement was attributable to increased earnings adjusted for
non-cash tax expense and depreciation and amortization. The remainder of the
increase was the net effect of improved receivable turnover, net of reductions
in accounts payable. Net cash provided by operations was supplemented by $2.6
million in additional net borrowings to finance $6.8 million of incremental
capital investment.
Newpark anticipates capital expenditures of approximately $19 million during
the last three quarters of 1996, including: (i) approximately $7 million to
purchase additional mats for its Venezuela joint venture; (ii) approximately
$5 million for other international expansion in its mat business outside of
Venezuela; and (iii) approximately $4 million to acquire and develop
additional injection well sites and acquire associated equipment. Newpark also
is in discussions with its joint venture partners in Venezuela for the
purchase of their interests in such venture and anticipates that approximately
$3 million may be used to acquire such interests during 1996. For 1997,
Newpark anticipates capital expenditures of approximately $27 million,
consisting of: (i) approximately $15 million in its mat rental business,
including international expansion and mat purchases; (ii) approximately $8
million to acquire and develop additional injection well sites, including an
industrial waste injection facility; and (iii) approximately $4 million for
the upgrade and purchase of equipment. After taking into account the repayment
of outstanding indebtedness as described in "Use of Proceeds", Newpark
anticipates that all of its capital expenditure requirements will be satisfied
with borrowings under its credit facilities and with cash flow from
operations.
Newpark presently has no commitments beyond its bank lines of credit by
which it could obtain additional funds for current operations; however, it
regularly evaluates potential borrowing arrangements which may be utilized to
fund future expansion plans. Newpark believes that following the consummation
of the Acquisition (including the completion of this Offering and the
application of the net proceeds as described in "Use of Proceeds"), available
borrowings under its current credit facility and internally generated funds
will be sufficient to support its working capital, capital expenditure and
debt service requirements for the foreseeable future. Except as described in
the preceding paragraph, Newpark is not aware of any material capital
expenditures, significant balloon payments or other payments on long-term
obligations or any other demands or commitments, including off-balance sheet
items, to be incurred beyond the next 12 months.
Inflation has not materially impacted Newpark's revenues or income.
Deferred Tax Asset
Newpark accounts for income taxes in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". This
standard requires, among other things, recognition of future tax benefits
measured by enacted tax rates attributable to deductible temporary differences
between the financial statement and income tax basis of assets and liabilities
and to tax net operating loss and credit carryforwards to the extent that
realization of such benefits is more likely than not. Newpark has provided a
valuation allowance ($236,000 at December 31, 1995) for deferred tax assets
which cannot be realized through future reversals of existing taxable
temporary differences. Newpark believes that remaining deferred tax assets
($10,450,000 at December 31, 1995) are realizable through reversals of
existing taxable temporary differences. Newpark will continue to assess the
adequacy of the valuation allowance on a quarterly basis.
25
<PAGE>
BUSINESS
INTRODUCTION
Newpark is a leading provider of integrated environmental services to the
oil and gas exploration and production industry in the U.S. Gulf Coast area,
principally in Louisiana and Texas. These services are concentrated in three
key product lines: (i) processing and disposal of nonhazardous oilfield waste
("NOW"); (ii) processing and disposal of similar oilfield waste that is
contaminated with naturally occurring radioactive material ("NORM"); and (iii)
mat rental services in which patented prefabricated wooden mats are used as
temporary worksites in oilfield and other construction applications.
The following table sets forth, for the three months ended March 31, 1996
and 1995 and the years ended December 31, 1995, 1994, and 1993, the amount of
revenues for each class of similar products and services:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
--------------- -----------------------
1996 1995 1995 1994 1993
------- ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Offsite waste processing.............. $ 7,833 $ 7,391 $31,126 $20,738 $11,354
Mat rental............................ 7,901 6,632 30,775 23,048 21,042
General oilfield services............. 4,003 3,032 14,511 13,452 11,358
Wood products sales................... 3,956 2,624 12,609 13,105 7,947
Onsite environmental management....... 2,564 2,130 7,361 7,689 4,629
Other................................. 510 400 1,600 1,600 --
------- ------- ------- ------- -------
Total revenues...................... $26,767 $22,209 $97,982 $79,632 $56,330
======= ======= ======= ======= =======
</TABLE>
OILFIELD WASTE DISPOSAL AND OTHER ENVIRONMENTAL SERVICES
Newpark collects, processes and disposes of oilfield waste, primarily NOW
and NORM. Newpark also treats NOW at the well site, remediates waste pits and
provides general oilfield services. In its NOW processing and disposal
business, Newpark processes the majority of the NOW received at its facilities
for injection into environmentally secure geologic formations deep underground
and creates from the remainder a product which is used as intermediate daily
cover material or cell liner and construction material at municipal waste
landfills. Since the fourth quarter of 1994, Newpark has provided processing
and disposal of NOW waste that is contaminated with NORM by processing the
waste into NOW for injection disposal into wells owned by Newpark. On May 21,
1996, Newpark was issued a license from the State of Texas authorizing the
direct injection of NORM into disposal wells at Newpark's Big Hill, Texas,
facility. The direct injection of NORM permitted under the new license expands
Newpark's NORM disposal capacity and significantly reduces the amount of pre-
injection processing and chemicals required, thereby reducing Newpark's cost
of disposal. On June 10, 1996, Newpark amended an agreement with a major oil
company to provide for a NORM waste disposal project, which Newpark estimates
will require disposal of more than 200,000 barrels of NORM and related NOW and
generate revenues of approximately $10 million over the first 12 months of the
project.
Newpark also provides industrial waste management, laboratory and consulting
services for the customers of its NOW and NORM services. Newpark's offsite
waste processing operations utilize a combination of proprietary preparation
technology to blend the waste into an injectable slurry and specific
underground geology into which the slurry is injected.
NOW
Nonhazardous Oilfield Waste, or NOW, is waste generated in the exploration
for or production of oil and gas. These wastes typically contain levels of oil
and grease, salts or chlorides, and heavy metals in excess of concentration
limits defined by state regulators. NOW also includes soils which have become
contaminated by
26
<PAGE>
these materials. In the environment, oil and grease and chlorides disrupt the
food chain and have been determined by regulatory authorities to be harmful to
plant and animal life, and heavy metals can become concentrated in living
tissues.
NORM
Naturally Occurring Radioactive Material, or NORM, is present throughout the
earth's crust at very low levels. Among the radioactive elements, only Radium
226 and Radium 228 are slightly soluble in water. Because of their solubility,
which can carry them into living plant and animal tissues, these elements
present a hazard. Radium 226 and Radium 228 can be leached out of hydrocarbon
bearing strata deep underground by salt water which is produced with the
hydrocarbons. Radium generally precipitates out of the production stream as it
is drawn to the surface and encounters a pressure or temperature change in the
well tubing or production equipment, forming a rust-like scale. This scale
contains radioactive elements which, over many years, can become concentrated
on tank bottoms or at water discharge points at production facilities. Thus,
NORM waste is NOW that has become contaminated with these radioactive elements
at concentration levels in excess of limits established by state regulatory
authorities.
MAT RENTAL
Newpark uses a patented interlocking wooden mat system to provide temporary
worksites in unstable soil conditions typically found along the U.S. Gulf
Coast. Prior to 1994, Newpark's mat rental services were provided primarily to
the oil and gas exploration and production industry. In 1994, Newpark began
marketing these temporary worksites to other industries. Increasing
environmental regulation affecting the construction of pipelines, electrical
distribution systems and highways in and through wetlands environments has
provided a substantial new outlet for these services and has broadened the
geographic areas served by Newpark to include the coastal areas of the
Southeastern U.S., particularly Florida and Georgia, in addition to the U.S.
Gulf Coast. Mat rental revenue has increased from $11 million in 1990 to $31
million in 1995. In anticipation of increased demand for hardwood lumber used
in construction of its mats, Newpark purchased a sawmill in Batson, Texas, in
October 1992. Newpark has since doubled the capacity of the sawmill and
expects to fully utilize such capacity in serving its mat rental business.
The recent trend toward more strict environmental regulation of both
drilling and production operations conducted by Newpark's customers has
resulted in greater synergy between Newpark's mat rental and general oilfield
construction services and its other environmental services. Newpark offers its
services individually and as an integrated package and provides a
comprehensive combination of on-site waste management and construction
services for both the drilling of new sites and the remediation of existing
sites.
DEVELOPMENT OF THE BUSINESS
Since 1990, Newpark has concentrated on expanding and further integrating
its environmental service capabilities. Through acquisitions in 1990 and 1991,
Newpark extended its environmental services into the Texas Gulf Coast region.
In May 1991, Newpark expanded its processing capacity by constructing a new
NOW processing facility in Port Arthur, Texas, replacing a smaller facility.
Newpark has further increased capacity through subsequent equipment additions
and improvements in process technology and procedures. Beginning in 1992,
Newpark determined to develop a deep well injection program and, in March
1993, completed its first facility for underground disposal of NOW, at Big
Hill, Texas. During 1994, Newpark obtained a permit to process NORM waste for
disposal, and thus became a participant in the NORM disposal business. During
its first full year of operation, the NORM plant processed 70,000 barrels of
waste, generating revenue of $6 million.
Recent developments include:
. On June 10, 1996, Newpark amended an agreement with a major oil company
to provide for a NORM waste disposal project, which Newpark estimates
will require disposal of more than 200,000 barrels of NORM and related
NOW and generate revenues of approximately $10 million over the first 12
months of the project.
27
<PAGE>
. On May 21, 1996, Newpark was awarded a license from the State of Texas
authorizing the direct injection of NORM into disposal wells at its Big
Hill, Texas facility.
. The trend toward more stringent regulation of NOW and NORM waste
continued during 1995. NORM regulations were adopted in several states,
most importantly New Mexico and Texas. The NORM regulations were revised
in Louisiana and Mississippi, and draft regulations have been prepared,
but are not yet proposed, in Oklahoma.
. The volume of NOW processed by Newpark grew by 25% during 1995, to 2.9
million barrels, despite a slightly lower rig count. The effect on
Newpark's services of a small decline in the number of active drilling
rigs was substantially offset by deeper drilling by Newpark's customers.
In the three months ended March 31, 1996, the volume of NOW processed
increased by 8% compared to the same period in 1995.
. A NOW facility, located near Fannett, Texas, was opened in the third
quarter of 1995 in anticipation of the conversion of the Big Hill
facility into a NORM facility, and additional wells were drilled at the
Big Hill facility, providing a further increase in waste disposal
capacity.
. Newpark extended its mat rental services to non-oilfield uses in Florida
and Georgia.
. Newpark initiated a joint venture to provide its mat rental services to
the exploration and production market in Venezuela.
NORM Direct Injection License. On May 21, 1996, Newpark was awarded a new
license from the State of Texas permitting receipt of NORM waste and direct
injection disposal of NORM at its Big Hill facility, without the requirement
to process the waste until it attains NOW characteristics. The Big Hill
facility will become Newpark's principal NORM disposal facility. Under the new
license, the processing facility and the disposal wells will be located at the
same site, minimizing transportation costs. Additionally, since the new
license allows injection of more concentrated NORM into the wells, subject
only to Newpark's facility contamination limits, the volume of material
injected is substantially lower than for the prior process, significantly
expanding the capacity and extending the useful life of the site. Newpark
believes that the new license will allow it to reduce prices to customers and
encourage the use of the direct injection process for the disposal of large
volumes of NORM. The recent contract with a major oil company for a large NORM
disposal project is the first remediation project to take advantage of this
new direct injection license.
Developments related to NOW. Newpark processed and disposed of 745,000
barrels of NOW in the first quarter of 1996, of which 622,000 barrels were
generated from current drilling and production operations and 123,000 barrels
were generated from the remediation of old pits and production facilities,
compared with 690,000 barrels in the first quarter of 1995, of which 600,000
were from current drilling and production operations and 90,000 were from
remediation activities. Newpark processed and disposed of 2,905,000 barrels of
NOW in 1995, of which 2,364,000 barrels were generated from current drilling
and production operations and 541,000 barrels were generated from the
remediation of old pits and production facilities, compared with 2,329,000
barrels in 1994, of which 1,974,000 were from current drilling and production
operations and 355,000 were from remediation activities.
During 1995, Newpark further expanded its NOW injection facility, located at
Big Hill, Texas, drilling two additional injection wells and constructing a
grinding mill at the site to more efficiently handle the large quantities of
waste resulting from the growing remediation market. The mill is used to
reduce and make uniform the size of the particles in the waste stream to
maintain desired flow characteristics in Newpark's injection wells. In
September 1995, Newpark opened its second injection site, at Fannett, Texas,
drilling two wells at that facility, and in the fourth quarter, completed a
bulk barge unloading facility adjacent to the original Port Arthur processing
facility. Together with additions to personnel and equipment at its receiving
facilities, this increased Newpark's NOW processing capacity to approximately
500,000 barrels per month. Newpark intends to use the Big Hill facility
primarily for disposal of NORM, and the Fannett facility will become Newpark's
primary facility for the disposal of NOW.
28
<PAGE>
Services to wetlands construction projects. Many of the environmental
concerns that have affected drilling in the environmentally sensitive marshes
of the U.S. Gulf Coast are now beginning to affect other construction
activities in the U.S. Gulf Coast and other geographic areas. Federal and
state regulatory agencies have begun to require increased precautions to
prevent construction-related damage to the environment in wetlands areas
throughout the United States. Newpark believes that its prefabricated mat
technology is well-suited for use in construction projects in wetlands and
other areas characterized by unstable soil conditions. During 1995, Newpark
performed projects in connection with pipeline, electrical utility and highway
construction projects in Georgia, Florida, Texas and Louisiana. Newpark
anticipates that similar opportunities will allow it to continue to diversify
its geographic base by participating in construction related activities in
other states.
Venezuela joint venture. The Venezuelan government has recently enacted
legislation designed to speed the opening of its petroleum sector to foreign
investment, including international oil companies, in furtherance of a
national objective of increasing that country's production of oil to 5 million
barrels per day by the year 2005. Many of the international oil companies
investing in Venezuela are Newpark's customers in the United States. During
the first quarter of 1995, Newpark invested in a joint venture, in which
Newpark holds a 38.8% interest, providing mat rental services in Venezuela in
support of oil and gas exploration and production activities. A total of 7,000
mats were shipped to the market during the year and, by year end,
substantially all were under contract to a customer. As of May 31, 1996, there
were approximately 12,000 mats in inventory in Venezuela, with an additional
6,000 mats in transit. Newpark expects that activity in Venezuela will
continue to increase as further exploration concessions are granted.
Drilling activity. The level of drilling activity in Newpark's service areas
declined 4%, to an average of 195 rigs working in 1995, compared to 202 during
1994. This mirrored the decline in the U.S. rig count, which averaged 723 in
1995 compared to 774 in 1994. The 1995 activity level was the second lowest
since 1940, after an average of 717 recorded in 1992. In much of the coastal
marsh and inland waters, termed the "transition zone", the high cost
associated with access to the site and the lack of seismic data has been an
obstacle to development. As a result, the area has been less actively drilled
compared to offshore and land areas. High quality seismic data has become
available for sites in the transition zone only through recent improvements in
technology. The increased use of advanced seismic data and the computer-
enhanced interpretation of that data has enabled Newpark's customers to select
exploratory drilling sites with greater likelihood of success. This enables
them to undertake more expensive projects, such as drilling in the transition
zone along the U.S. Gulf Coast region.
Such projects rely heavily on services such as Newpark's integrated
environmental services. Deeper wells require the construction of larger
locations to accommodate the drilling equipment and the equipment for handling
drilling fluids and associated wastes; such locations generally are in service
for significantly longer periods and generate additional mat rental revenues.
Deeper wells also require more chemically complex drilling fluid programs.
Newpark believes that deeper drilling has contributed significantly to the
increased demand for Newpark's services.
REGULATORY BACKGROUND
The oilfield market for environmental services has increased as regulations
have increased. Louisiana, Texas and other states have enacted comprehensive
laws and regulations governing the proper handling of NOW and NORM. This also
has heightened the awareness of both the generators of waste and landowners of
the need for proper treatment and disposal of such waste in both the drilling
of new wells and the remediation of production facilities.
For many years, prior to current regulation, industry practice was to allow
NOW to remain in the environment. Onshore, surface pits were used for the
disposal of NOW; offshore, NOW was discharged directly into the water. As a
result of increasing public concern over the environment, NOW disposal has in
recent years
29
<PAGE>
become subject to public scrutiny and governmental regulation. Operators of
exploration and production facilities, including major and independent oil
companies, have found themselves subject to laws and regulations issued by
numerous jurisdictions and agencies. These laws and regulations have imposed
strict requirements for ongoing drilling and production activities in certain
geographic areas, as well as for the remediation of sites contaminated by past
disposal practices and, in many respects, have prohibited the prior disposal
practices. In addition, operators have become concerned about possible long-
term liability for remediation, and landowners have become more aggressive
about land restoration. For these reasons, operators are increasingly
retaining service companies, such as Newpark, to devise and implement
comprehensive waste management techniques to handle waste on an ongoing basis
and to remediate past contamination of oil and gas properties.
Late in 1992, the Louisiana Department of Environmental Quality ("DEQ")
began to promulgate and enforce new, stricter limits on the level of radium
concentration above which NOW became categorized as NORM. NORM regulations
require more stringent worker protection, handling and storage procedures than
those required of NOW under Louisiana Statewide Executive Order 29-B.
Uncertainty in measuring NORM concentration was created by apparent
inconsistencies in the results produced by alternative testing methodologies
allowed in then current regulations. Early in 1994, DEQ published draft NORM
regulations which, with minor modification, became effective January 20, 1995,
as LAC 33:XV.1401-1420, Chapter 14. In Texas, the Railroad Commission adopted
final rules ("Rule 94") effective February 1, 1995. Adoption of these
regulations has resolved the regulatory uncertainty associated with NORM in
Texas and Louisiana.
The primary laws that have helped to create the market for Newpark's
environmental services in the U.S. Gulf Coast region, and which apply to
Newpark in the conduct of its business, are the Resource Conservation and
Recovery Act of 1976, as amended in 1984 ("RCRA"), the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended in 1986
("CERCLA"), the laws and regulations promulgated by the states of Louisiana,
Texas and Alabama, the Federal Water Pollution Control Act, as amended (the
"Clean Water Act"), and the Federal Oil Pollution Act of 1990 ("OPA"). These
laws are discussed below under "Environmental Regulation".
DESCRIPTION OF BUSINESS
Oilfield Waste Disposal
NOW Waste Processing. Generally under state regulation, if NOW cannot be
treated for discharge or disposed of on the oil or gas lease location where it
is generated, it must be transported to a licensed NOW disposal or treatment
facility. There are several alternatives for offsite disposal of NOW available
to generators in the U.S. Gulf Coast, including: (i) land-farming, provided by
Newpark's competitors; (ii) processing and conversion of the NOW into a reuse
product; and (iii) underground injection. See "Injection Wells". Newpark
processes NOW waste at a facility located at Port Arthur, Texas, which was
opened in 1991. Newpark also operates six other receiving and transfer
facilities located along the U.S. Gulf Coast from Venice, Louisiana, to Corpus
Christi, Texas. Waste products are collected at the transfer facilities:
offshore exploration and production sites; land and inland waters exploration
and production sites; and remediation of existing or inactive well sites and
production facilities. These facilities are supported by a fleet of 42 double-
skinned barges certified by the U. S. Coast Guard to transport NOW. Waste
received is transported by barge through the Gulf Intracoastal Waterway to
Newpark's processing facility at Port Arthur, Texas, or trucked to facilities
at Fannett or Big Hill, Texas. Since November 1994, Newpark has disposed of a
majority of the waste received at its processing facility by injection of the
waste into disposal wells at its Big Hill facility and, since the third
quarter of 1995, at its Fannett facility, which is currently Newpark's primary
NOW facility.
Previously a large portion and currently a small portion of the waste is
converted into a commercial product that meets the specifications under
applicable federal and state regulations for reuse as a covering material or
cell liner material and other construction purposes at sanitary landfills.
Under these regulations,
30
<PAGE>
landfills must cover the solid waste deposited daily with earth or other inert
material. Newpark's product is deposited at either the City of Port Arthur
Municipal Landfill or the City of Beaumont Municipal Landfill for use as cover
or construction material pursuant to contracts with the respective cities.
This reuse is conducted under authorization from the Texas Natural Resources
Conservation Commission and is permitted by the Texas Railroad Commission,
under a permit that was renewed in January 1994, for a three year period.
Newpark also has developed alternative uses for the product as roadbase
material or construction fill material.
NORM Processing and Disposal. Newpark's entry into the onsite remediation
(1993) and disposal (1994) of NORM waste is discussed under "Business-
Development of the Business". Many alternatives are available to the generator
for the treatment and disposal of NORM. These include both chemical and
mechanical methods designed to achieve volume reduction, on-site burial of
encapsulated NORM within old well bores, and soil washing and other techniques
of dissolving and suspending the radium in solution for onsite injection of
NORM liquids. When the application of these techniques are insufficient to
bring the site into compliance with applicable regulations, the NORM must be
transported to a licensed storage or disposal facility. The growth in the NORM
disposal market also can be attributed to increased litigation on the part of
landowners who contend that their property has been damaged by past practices
of the oil and gas industry. In some cases, settlement of the litigation has
mandated the remediation of sites by offsite disposal of the NORM waste. In
addition, these lawsuits have caused other operators to dispose of NORM waste
offsite to avoid the threat of future litigation.
Newpark's initial NORM processing facility in Port Arthur, Texas was
licensed in September 1994 and began operations October 21, 1994. During 1995,
Newpark received 70,000 barrels of NORM contaminated waste at its Port Arthur
facility, generally by barge or truck, in drums or other containers, which was
then processed and transported by truck to Newpark's injection well facility.
On May 21, 1996, Newpark was awarded a new license permitting receipt of NORM
waste and direct injection disposal of NORM at its Big Hill, Texas facility,
without the requirement to process the waste until it attains NOW
characteristics, as was the case at the Port Arthur facility. Additionally,
since the processing facility and the disposal wells can now be located at the
same site, transportation costs are minimized. Although Newpark will continue
some processing of NORM as well as NOW at the Port Arthur facility, a
substantial portion of the processing equipment will be moved from Port Arthur
to the Big Hill facility. The new license also allows injection of more
concentrated NORM into the wells, subject only to Newpark's facility
contamination limits, without the introduction of viscosifiers and carrying
agents that often results in significant volume expansion. As a result, the
capacity and useful life of the site is extended. Newpark believes that the
new license will allow it to reduce prices to customers and encourage the use
of the direct injection process for the disposal of large volumes of NORM.
Injection Wells. In February 1993, upon receipt of a permit from the Texas
Railroad Commission, Newpark began development of a 50 acre injection well
facility in the Big Hill Field in Jefferson County, Texas. Newpark's injection
technology is distinguished from conventional methods in that it utilizes
environmentally secure geologic formations which are highly fractured,
allowing Newpark to utilize very low pressure, typically under 100 pounds per
square inch, to move the waste into the injection zone. Conventional wells
typically use pressures as high as 2,000 pounds per square inch. In the event
of a formation failure or blockage of the face of the injection zone, such
pressure can force waste material beyond the intended zone, posing a hazard to
the environment. The low pressure used by Newpark is inadequate to drive the
injected waste from its intended geologic injection zone.
Three wells were initially installed at the Big Hill facility and two
additional wells were successfully completed during 1995. Disposal operations
began at this site in November 1993. During 1995, Newpark licensed and
constructed a new injection well facility at a 400 acre site near Fannett,
Texas, which was placed in service in September 1995. Because of differences
between the geology and physical size of the two sites, the Fannett site is
expected to provide greater capacity than the Big Hill site. The injection
wells at Fannett receive NOW waste from Newpark's processing facilities at
Port Arthur, as well as from customers in the surrounding area.
31
<PAGE>
Newpark anticipates that it will open additional injection facilities for
both NOW and NORM waste in Louisiana and Texas over the next two to three
years. Newpark has identified a number of sites in the U.S. Gulf Coast region
as suitable for development of such disposal facilities, has received permits
for one additional site in Texas and plans to file for additional permit
authority in Louisiana. Newpark believes that its proprietary injection
technology has application to other markets and waste streams and has begun
preliminary work and analysis to enter the nonhazardous industrial waste
market in the future.
Newpark also operates an analytical laboratory in Lafayette, Louisiana,
which supports all phases of its environmental services and provides
independent laboratory services to the oil and gas industry. These services
include analytical laboratory and sampling services, permit application and
maintenance services and environmental site assessment and audit services.
Mat Rental
In 1988, Newpark acquired the right to use, in Louisiana and Texas, a
patented prefabricated interlocking mat system for the construction of
drilling and work sites, which has displaced use of individual hardwood
boards. This system is quicker to install and remove, substantially reducing
labor costs. It is also stronger, easier to repair and maintain and generates
less waste material during construction and removal than conventional board
roads. In 1994, Newpark acquired the exclusive right to use this system in the
continental U.S. for the life of the patent, which expires in 2003.
Oilfield Use. Newpark provides this patented interlocking mat system to the
oil and gas industry to ensure all-weather access to exploration and
production sites in the unstable soil conditions common along the onshore Gulf
of Mexico. The mats are generally rented to the customer for an initial period
of 60 days; after that time, additional rentals are earned on a monthly basis
until the mats are released by the customer.
Wetlands Use. Beginning in 1994, Newpark recognized the development of a
related use for its patented mat system in providing access roads and
temporary work sites to the pipeline, electrical utility and highway
construction industries. Demand for these services was spurred by Federal
Energy Regulatory Commission orders requiring compliance with environmental
protection rules under the Clean Water Act in the pipeline construction
business. In 1994, Newpark received approximately $2.4 million in revenue from
this source. During 1995, approximately $7 million in revenues was
attributable to wetlands applications.
Rerentals. Drilling and work sites are typically rented by the customer for
an initial period of 60 days. Often, the customer extends the rental term for
additional 30 day periods, resulting in additional revenues to Newpark. These
rerental revenues provide high margins because only minimal incremental
depreciation and maintenance costs accrue to each rerental period. Factors
which may increase rerental revenue include: (i) the trend toward increased
activity in the "transition zone" along the Gulf of Mexico, an area in which
Newpark's mat system provides the primary means of access; (ii) a trend toward
deeper drilling, taking a longer time to reach the desired depth; and, (iii)
the increased frequency of commercial success, requiring logging, testing and
completion (hook-up), extending the period during which access to the site is
required. In the opinion of industry analysts, application of advanced
technologies, particularly the use of three-dimensional seismic data, has
contributed to these trends.
New Products. All of the established mat patents utilize hardwood to
construct the mat. Beginning in 1994, Newpark began funding the development of
a patented synthetic molded mat fabricated from recycled post-consumer
plastic, rubber, fiberglass and resins. A limited number of pre-production
samples of a prototype mat were delivered to Newpark for testing in April
1996. Pending successful results in the testing program and construction by
the manufacturer of a production facility, Newpark expects to begin taking
delivery of commercial quantities of these new mats during 1998. No assurances
can be given, however, that these mats will be successfully produced or become
accepted in the mat rental market.
32
<PAGE>
Onsite Environmental Management
Promulgation and enforcement of increasingly stringent environmental
regulations affecting drilling and production sites has increased the scope of
services required by the oil companies. Often it is more efficient for the
site operator to contract with a single company that can provide all-weather
site access and provide the required onsite and offsite environmental services
on a fully integrated basis. Newpark provides a comprehensive range of
environmental services necessary for its customers' oil and gas exploration
and production activities.
Site Assessment. Site assessment work begins prior to installation of mats
on a drilling site, and generally begins with a study of the proposed well
site, which includes site photography, background soil sampling, laboratory
analysis and investigation of flood hazards and other native conditions. The
assessment determines whether the site has previously been contaminated and
provides a baseline for later restoration to pre-drilling condition.
Pit Design, Construction and Drilling Waste Management. Under its
Environmentally Managed Pit ("EMP") Program, Newpark constructs waste pits at
drilling sites and monitors the waste stream produced in drilling operations
and the contents and condition of the pits with the objective of minimizing
the amount of waste generated on the site. Where possible, Newpark disposes of
waste onsite by land-farming, through chemical and mechanical treatment of
liquid waste and by annular injection into a suitably permitted underground
formation. Waste water treated onsite may be reused in the drilling process
or, where permitted, discharged into adjacent surface waters.
Regulatory Compliance. Throughout the drilling process, Newpark assists the
operator in interfacing with the landowner and regulatory authorities. Newpark
also assists the operator in obtaining necessary permits and in complying with
record maintenance and reporting requirements.
Site Remediation.
NOW (Drilling). At the completion of the drilling process, under applicable
regulations, waste water on the site may be chemically or mechanically treated
and discharged into surface waters. Other waste that may not remain on the
surface of the site may be land-farmed on the site or injected under permit
into geologic formations to minimize the need for offsite disposal. Any waste
that does not remain onsite must be transported to an authorized facility for
processing and disposal at the direction of the generator or customer.
NOW (Production). Newpark also provides services to remediate production
pits and inactive waste pits including those from past oil and gas drilling
and production operations. Newpark provides the following remediation
services: (i) analysis of the contaminants present in the pit and a
determination of whether remediation is required by applicable state
regulation; (ii) treatment of waste onsite, and where permitted,
reintroduction of that material into the environment; and (iii) removal,
containerization and transportation to Newpark's processing facility of NOW
waste not treated onsite.
NORM. In January 1994, Newpark became a licensed NORM contractor, allowing
Newpark to perform site remediation work at NORM contaminated facilities in
Louisiana and Texas. Because of the need for increased worker-protective
equipment, extensive decontamination procedures and other regulatory
compliance issues at NORM facilities, the cost of providing such services is
materially greater than at NOW facilities and such services generate
proportionately higher revenues and operating margins than similar services at
NOW facilities.
Site Closure. The location is restored to its pre-drilling condition and
reseeded with native grasses. Closure also involves delivery of test results
indicating that closure has been completed in compliance with applicable
regulations. This information is important to the customer because the
operator is subject to future regulatory review and audits. In addition, the
information may be required on a current basis if the operator is subject to a
pending regulatory compliance order.
33
<PAGE>
Wood Product Sales
By the end of 1991, Newpark had become aware of increasing environmental
regulation affecting wetlands areas. These regulations have affected the oil
and gas drilling industry as well as pipeline, electrical distribution and
highway projects. In anticipation of increased demand for hardwood lumber used
in providing access to such wetlands sites, Newpark purchased a sawmill in
Batson, Texas, in October 1992. The mill's products include lumber, timber,
and wood chips, as well as bark and sawdust. Pulp and paper companies in the
area supply a large proportion of the hardwood logs processed at the sawmill
and, in turn, are the primary customers for wood chips created in the milling
process. During 1993, Newpark invested approximately $1 million in expansion
of the sawmill to increase its capacity for producing wood chips. During 1995,
Newpark invested an additional $750,000 to install a log watering system to
maintain the level of moisture in the wood chips produced, as desired by its
customers, and for expanded and improved sawing capacity, which improved both
production and efficiency. Newpark believes that the capacity of the sawmill
will be sufficient to meet its anticipated hardwood lumber needs for the
foreseeable future.
General Oilfield Services
Newpark performs general oilfield services throughout the U.S. Gulf Coast
area between Corpus Christi, Texas and Pensacola, Florida. General oilfield
services performed by Newpark include preparing work sites for the
installation of mats, connecting wells and placing them in production, laying
flow lines and infield pipelines, building permanent roads, grading, lease
maintenance (the maintenance and repair of producing well sites), cleanup and
general roustabout services. General oilfield services are typically performed
under short-term time and material contracts, which are obtained by direct
negotiation or bid.
INTERNATIONAL EXPANSION
During the first quarter of 1995, Newpark initiated participation in a
venture which provides mat rental services to the oil and gas industry in
Venezuela. Revenue from foreign operations has been immaterial in each of the
past three years. Newpark is currently in discussions with its joint venture
partners in Venezuela for the purchase of their interests in such venture, and
Newpark may acquire such interests during 1996. Newpark also is currently
reviewing expansion opportunities for its mat rental services in other foreign
markets, including Europe, Africa, Asia and South America.
SOURCES AND AVAILABILITY OF RAW MATERIALS AND EQUIPMENT
Newpark believes that its sources of supply for any materials or equipment
used in its businesses are adequate for its needs and that it is not dependent
upon any one supplier. No serious shortages or delays have been encountered in
obtaining any raw materials.
PATENTS AND LICENSES
Newpark seeks patents and licenses on new developments whenever feasible and
has recently applied for U.S. patents on its new NOW and NORM waste processing
and injection disposal system. Newpark has the exclusive license for the life
of the patent (which expires in 2003) to use, sell and lease the prefabricated
mats that it uses in connection with its site preparation business in the 48
contiguous states of the United States. The licensor has the right to sell
mats in states where Newpark is not engaged in business, but only after giving
Newpark the opportunity to take advantage of the opportunity itself. The
license is subject to a royalty which Newpark can satisfy by purchasing
specified quantities of mats annually from the licensor.
Newpark relies on a variety of unpatented proprietary technologies and know-
how in the processing of NOW and NORM. Although Newpark believes that this
technology and know-how are important factors in the environmental services
business, competitive products and services have been successfully developed
and marketed by others. Newpark believes that its reputation in its industry,
the range of services
34
<PAGE>
offered, ongoing technical development and know-how, responsiveness to
customers and understanding of regulatory requirements are of equal or greater
competitive significance than its existing proprietary rights.
DEPENDENCE UPON LIMITED NUMBER OF CUSTOMERS
Newpark's customers are principally major and independent oil and gas
exploration and production companies operating in the U.S. Gulf Coast area,
with the vast majority of Newpark's customers concentrated in Louisiana and
Texas.
During the year ended December 31, 1995, approximately 30% of Newpark's
revenues were derived from 14 major oil companies, and one other customer
accounted for approximately 16% of consolidated revenues. Given current market
conditions and the nature of the products involved, Newpark does not believe
that the loss of this customer would have a material adverse effect upon
Newpark.
Newpark performs services either pursuant to standard contracts or under
longer term negotiated agreements. As most of Newpark's agreements with its
customers are cancelable upon limited notice, Newpark's backlog is not
significant. For the year ended December 31, 1995, approximately half of the
revenues of the environmental services segment were obtained on a bid basis,
and half of its revenues were derived on a negotiated or contractual basis.
Newpark does not derive a significant portion of its revenues from
government contracts of any kind.
COMPETITION
Newpark operates in highly competitive industry segments. Newpark believes
that the principal competitive factors in its businesses are price,
reputation, technical proficiency, reliability, quality and breadth of
services offered, managerial experience. Newpark believes that it effectively
competes on the basis of these factors and that its competitive position
benefits from its proprietary position with respect to the patented mat system
used in its site preparation business, its proprietary treatment and disposal
methods for both NOW and NORM waste streams and its ability to provide its
customers with an integrated well site management program including
environmental and general oilfield services.
It is often more efficient for the site operator to contract with a single
company that can prepare the well site and provide the required onsite and
offsite environmental services. Newpark believes that its ability to provide a
number of services as part of a comprehensive program enables Newpark to price
its services competitively.
The NOW disposal market is very large. Only a small portion of the total
waste generated is taken to a commercial disposal facility and many other
methods exist for dealing with the waste stream. In the areas served by
Newpark, there are at least 250 permitted commercial facilities, including
landfarms, landfills and injection facilities authorized to dispose of NOW.
There also are thousands of infield injection wells owned and operated by oil
and gas producers.
ENVIRONMENTAL DISCLOSURES
Newpark has sought to comply with all applicable regulatory requirements
concerning environmental quality. Newpark has made, and expects to continue to
make, the capital expenditures necessary to maintain environmental compliance
at its facilities, but, under current laws and regulations, does not expect
that these will become material in the foreseeable future. No material capital
expenditures for environmental compliance were made during 1995.
Newpark derives a significant portion of its revenue from providing
environmental services to its customers. These services have become necessary
in order for these customers to comply with regulations governing the
discharge of materials into the environment. Substantially all of Newpark's
capital expenditures made during 1994 and 1995, and those planned for 1996,
are directly or indirectly the result of such regulation.
35
<PAGE>
EMPLOYEES
At May 31, 1996, Newpark employed approximately 535 full and part-time
personnel, none of which are represented by unions. Newpark considers its
relations with its employees to be satisfactory.
ENVIRONMENTAL REGULATION
Newpark's business is affected both directly and indirectly by governmental
regulations relating to the oil and gas industry in general, as well as
environmental, health and safety regulations that have specific application to
Newpark's business. Newpark, through the routine course of providing its
services, handles and profiles hazardous regulated material for its customers.
Newpark also handles, processes and disposes of nonhazardous regulated
materials. This section discusses various federal and state pollution control
and health and safety programs that are administered and enforced by
regulatory agencies, including, without limitation, the U.S. Environmental
Protection Agency ("EPA"), the U.S. Coast Guard, the U.S. Army Corps of
Engineers, the Texas Natural Resource Conservation Commission, the Texas
Department of Health, the Texas Railroad Commission, the Louisiana Department
of Environmental Quality and the Louisiana Department of Natural Resources.
These programs are applicable or potentially applicable to Newpark's current
operations. Although Newpark intends to make capital expenditures to expand
its environmental services capabilities, Newpark believes that it is not
presently required to make material capital expenditures to remain in
compliance with federal, state and local laws and regulations relating to the
protection of the environment.
RCRA. The Resource Conservation and Recovery Act of 1976, as amended in
1984, ("RCRA"), is the principal federal statute governing hazardous waste
generation, treatment, storage and disposal. RCRA and EPA-approved state
hazardous waste management programs govern the handling of "hazardous wastes".
Under RCRA, liability and stringent operating requirements are imposed on a
person who is either a "generator" or "transporter" of hazardous waste or an
"owner" or "operator" of a hazardous waste treatment, storage or disposal
facility. The EPA and the states have issued regulations pursuant to RCRA for
hazardous waste generators, transporters and owners and operators of hazardous
waste treatment, storage or disposal facilities. These regulations impose
detailed operating, inspection, training and emergency preparedness and
response standards and requirements for closure, continuing financial
responsibility, manifesting of waste, record-keeping and reporting, as well as
treatment standards for any hazardous waste intended for land disposal.
Newpark's primary operations involve NOW, which is exempt from
classification as a RCRA-regulated hazardous waste. However, extensive state
regulatory programs govern the management of such waste. In addition, in
performing other services for its customers, Newpark is subject to both
federal (RCRA) and state solid or hazardous waste management regulations as
contractor to the generator of such waste.
At various times in the past, proposals have been made to rescind the
exemption that excludes NOW from regulation as hazardous waste under RCRA.
Repeal or modification of this exemption by administrative, legislative or
judicial process could require Newpark to change significantly its method of
doing business. There is no assurance that Newpark would have the capital
resources available to do so, or that it would be able to adapt its
operations.
Newpark's operations also require it to comply with Subtitle I of RCRA,
which regulates underground storage tanks in which liquid petroleum or
hazardous substances are stored. States have similar regulations, many of
which are more stringent in some respects than federal programs. The
implementing regulations require that each owner or operator of an underground
tank notify a designated state agency of the existence of such underground
tank, specifying the age, size, type, location and use of each such tank. The
regulations also impose design, construction and installation requirements for
new tanks, tank testing and inspection requirements, leak detection,
prevention, reporting and cleanup requirements, as well as tank closure and
removal requirements.
Newpark has a number of underground storage tanks that are subject to the
requirements of RCRA and applicable state programs. Violators of any of the
federal or state regulations may be subject to enforcement orders or
significant penalties by the EPA or the applicable state agency. Newpark is
not aware of any instances
36
<PAGE>
in which it has incurred liability under RCRA for failure to comply with
regulations applicable to its underground storage tanks. However, cleanup
costs associated with releases from these underground storage tanks or costs
associated with changes in environmental laws or regulations could be
substantial and could have a material adverse effect on Newpark.
CERCLA. The Comprehensive Environmental Response, Compensation and Liability
Act, as amended in 1986, ("CERCLA"), provides for immediate response and
removal actions coordinated by the EPA for releases of hazardous substances
into the environment and authorizes the government, or private parties, to
respond to the release or threatened release of hazardous substances. The
government may also order persons responsible for the release to perform any
necessary cleanup. Liability extends to the present owners and operators of
waste disposal facilities from which a release occurs, persons who owned or
operated such facilities at the time the hazardous substances were released,
persons who arranged for disposal or treatment of hazardous substances and
waste transporters who selected such facilities for treatment or disposal of
hazardous substances. CERCLA has been interpreted to create strict, joint and
several liability for the costs of removal and remediation, other necessary
response costs and damages for injury to natural resources.
Among other things, CERCLA requires the EPA to establish a National
Priorities List ("NPL") of sites at which hazardous substances have been or
are threatened to be released and that require investigation or cleanup. The
NPL is constantly expanding. In addition, the states in which Newpark conducts
operations have enacted similar laws and keep similar lists of sites which may
be in need of remediation.
Although Newpark primarily handles oilfield waste classified as NOW under
relevant laws, this waste typically contains constituents designated by the
EPA as hazardous substances under RCRA, despite the current exemption of NOW
from hazardous substance classification, or under another environmental
statute referenced by CERCLA. Where Newpark's operations result in the release
of hazardous substances, including releases at sites owned by other entities
where Newpark performs its services, Newpark could incur CERCLA liability.
Previously owned businesses also may have disposed or arranged for disposal of
hazardous substances that could result in the imposition of CERCLA liability
on Newpark in the future. In particular, divisions and subsidiaries previously
owned by Newpark were involved in extensive mining operations at facilities in
Utah and Nevada. In addition, divisions and subsidiaries previously owned by
Newpark were involved in waste generation and management activities in
numerous states. These activities involved substances that may be classified
as CERCLA hazardous substances. Any of those sites or activities potentially
could be the subject of future CERCLA damage claims.
Newpark currently is, and in the past has been, named by the EPA as a
potentially responsible party in CERCLA actions based on its disposal of
oilfield wastes at such sites, but the liability associated with such actions
has not been material. Nonetheless, the identification of additional sites at
which clean-up action is required could subject Newpark to liabilities which
could have a material adverse effect on Newpark.
The Clean Water Act. The Clean Water Act regulates the discharge of
pollutants, including NOW, into waters. The Clean Water Act establishes a
system of standards, permits and enforcement procedures for the discharge of
pollutants from industrial and municipal waste water sources. The law sets
treatment standards for industries and waste water treatment plants and
provides federal grants to assist municipalities in complying with the new
standards. In addition to requiring permits for industrial and municipal
discharges directly into waters of the United States, the Clean Water Act also
requires pretreatment of industrial waste water before discharge into
municipal systems. The Clean Water Act gives the EPA the authority to set
pretreatment limits for direct and indirect industrial discharges.
In addition, the Clean Water Act prohibits certain discharges of oil or
hazardous substances and authorizes the federal government to remove or
arrange for removal of such oil or hazardous substances. The Clean Water Act
also requires the adoption of the National Contingency Plan to cover removal
of such materials. Under the Clean Water Act, the owner or operator of a
vessel or facility may be liable for penalties and costs incurred by the
federal government in responding to a discharge of oil or hazardous
substances.
Newpark treats and discharges waste waters at certain of its facilities.
These activities are subject to the requirements of the Clean Water Act and
federal and state enforcement of these regulations.
37
<PAGE>
The Clean Water Act also has a significant impact on the operations of
Newpark's customers. The EPA Region 6 Outer Continental Shelf ("OCS") permit
covering oil and gas operations in federal waters in the Gulf (seaward of the
Louisiana and Texas territorial seas) was reissued in November, 1992 and
modified in December, 1993. This permit includes stricter discharge limits for
oil and grease concentrations in produced waters to be discharged. These
limits are based on the Best Available Treatment ("BAT") requirements
contained in the Oil and Gas Offshore Subcategory national guidelines which
were published March 3, 1993. Additional requirements include toxicity testing
and bioaccumulation monitoring studies of proposed discharges.
EPA Region 6, which includes Newpark's market, continues to issue new and
amended National Pollution Discharge Elimination System ("NPDES") general
permits further limiting or restricting substantially all discharges of
produced water from the Oil and Gas Extraction Point Source Category into
waters of the United States. These permits include:
. Onshore subcategory permits for Texas, Louisiana, Oklahoma and New
Mexico issued in February, 1991 (56 Fed. Reg. 7698). These permits
completely prohibit the discharge of drilling fluids, drill cuttings,
produced water or sand, and various other oilfield wastes generated by
onshore operations into waters of the U.S. This provision has the effect
of requiring that most oilfield wastes follow established state disposal
programs.
. Permits for produced water and produced sand discharges into coastal
waters of Louisiana and Texas issued on January 9, 1995 (60 Fed. Reg.
2387). Coastal means "any water landward of the territorial seas... or
any wetlands adjacent to such waters". All such discharges must cease by
January 1, 1997.
. The Outer Continental Shelf (OCS) permit for the western Gulf of Mexico,
covering oil and gas operations in federal waters (seaward of the
Louisiana and Texas territorial seas) reissued in November 1992 and
modified in December 1993. It is expected to be combined with an OCS
general permit covering new sources at its next revision.
. Permits for the territorial seas of Louisiana and Texas which were
scheduled to be proposed in the spring of 1995. The most recent
information from the EPA indicated the permits would be proposed in the
spring of 1996. The territorial seas part of the Offshore Subcategory
begins at the line of ordinary low water along the part of the coast
which is in direct contact with the open sea, and extends out three
nautical miles. These permits will cover both existing sources and new
sources. All discharges in Louisiana state waters must comply with any
more stringent requirements contained in Louisiana Water Quality
Regulations, LAC 33.IX.7.708.
The combined effect of all these regulations will closely approach a "zero
discharge standard" affecting all waters except those of the OCS. Newpark and
many industry participants believe that these permits may ultimately lead to a
total prohibition of overboard discharge in the Gulf of Mexico.
The Clean Air Act. The Clean Air Act provides for federal, state and local
regulation of emissions of air pollutants into the atmosphere. Any
modification or construction of a facility with regulated air emissions must
be a permitted or authorized activity. The Clean Air Act provides for
administrative and judicial enforcement against owners and operators of
regulated facilities, including substantial penalties. In 1990, the Clean Air
Act was reauthorized and amended, substantially increasing the scope and
stringency of the Clean Air Act's regulations. The Clean Air Act has very
little impact on Newpark's operations.
Oil Pollution Act of 1990. The Oil Pollution Act of 1990 contains liability
provisions for cleanup costs, natural resource damages and property damages
resulting from discharges of oil into navigable waters, as well as substantial
penalty provisions. The OPA also requires double hulls on all new oil tankers
and barges operating in waters subject to the jurisdiction of the United
States. All marine vessels operated by Newpark already meet this requirement.
State Regulation. In 1986, the Louisiana Department of Natural Resources
promulgated Order 29-B. Order 29-B contains extensive rules governing pit
closure and the generation, treatment, storage, transportation and disposal of
NOW. Under Order 29-B, onsite disposal of NOW is limited and is subject to
stringent guidelines. If these guidelines cannot be met, NOW must be
transported and disposed of offsite in accordance with the
38
<PAGE>
provisions of Order 29-B. Moreover, under Order 29-B, most, if not all, active
waste pits must be closed or modified to meet regulatory standards; those pits
that continue to be allowed may be used only for a limited time. A material
number of these pits may contain sufficient concentrations of NORM to become
subject to regulation by the DEQ. Rule 8 of the Texas Railroad Commission also
contains detailed requirements for the management and disposal of NOW and Rule
94 governs the management and disposal of NORM. In addition, the Texas
Legislature recently enacted a law that has established an Oilfield Cleanup
Fund to be administered by the Texas Railroad Commission to plug abandoned
wells if the Commission deems it necessary to prevent pollution, and to
control or clean up certain oil and gas wastes that cause or are likely to
cause pollution of surface or subsurface water.
The Railroad Commission of Texas Rule 91 (16 TAC 3.91) became effective
November 1, 1993. This rule regulates the cleanup of spills of crude oil and
gas exploration and production activities including transportation by
pipeline. In general, contaminated soils must be remediated to oil and grease
content of less than 1%.
Many states maintain licensing and permitting procedures for the
construction and operation of facilities that emit pollutants into the air. In
Texas, the Texas Natural Resource Conservation Commission (the "TNRCC")
requires companies that emit pollutants into the air to apply for an air
permit or to satisfy the conditions for an exemption. Newpark has obtained
certain air permits and believes that it is exempt from obtaining other air
permits at its facilities including its Port Arthur, Texas, NOW processing
facility. Newpark met with the TNRCC and filed for an exemption in the fall of
1991. A subsequent renewal letter was filed in 1995. Based upon its feedback
from the TNRCC, Newpark expects that it will continue to remain exempt.
However, should it not remain exempt, Newpark believes that any remedial
actions that the TNRCC may require with regard to non-exempt air emissions
would not have a material adverse effect on the consolidated financial
statements of Newpark.
Other Environmental Laws. Newpark is subject to the Occupation Safety and
Health Act that imposes requirements for employee safety and health and
applicable state provisions adopting worker health and safety requirements.
Moreover, it is possible that other developments, such as increasingly
stricter environmental, safety and health laws, and regulations and
enforcement policies thereunder, could result in substantial additional
regulation of Newpark and could subject to further scrutiny Newpark's
handling, manufacture, use or disposal of substances or pollutants. Newpark
cannot predict the extent to which its operations may be affected by future
enforcement policies as applied to existing laws or by the enactment of new
statutes and regulations.
PROPERTIES
With few exceptions, Newpark leases its principal facilities and certain
equipment.
Newpark's corporate offices in Metairie, Louisiana, are occupied at an
annual rental of approximately $127,000 under a lease expiring in December
1997.
Its NOW processing facility in Port Arthur, Texas, is occupied at a current
annual rental of $168,000 under a lease which, as a result of Newpark's 1995
exercise of the first of three four-year renewal options, now expires in 1999.
The facility, which is located on 2.9 acres near the Intracoastal Waterway,
was constructed by the landowner to Newpark's specifications beginning late in
1990 and began operations in mid 1991.
Newpark's NORM processing facility is also located in Port Arthur, Texas on
3 acres of leased land adjacent to the NOW facility. Annual property rentals
are currently $37,000. The lease expires in July 1997 and has two five-year
renewal options available. Newpark constructed the processing facility during
1994.
Newpark owns two injection disposal sites in Jefferson County, Texas, one on
50 acres of land and the other on 400 acres. Seven wells are currently
operational at these sites.
Newpark maintains a fleet of 42 barges of which 21 are owned by Newpark,
fifteen are on daily rental agreements, six are under 10-year lease terms and
four are under 7-year lease terms. The barges are used to
39
<PAGE>
transport waste to processing stations and are certified for this purpose by
the U. S. Coast Guard. Annual rentals under the barge leases totaled
approximately $1,500,000 during 1995.
Additional facilities are held under short-term leases with annual rentals
aggregating approximately $800,000 during 1995. Newpark believes that its
facilities are suitable for their respective uses and adequate for current
needs.
Newpark owns property leased to others and used as a marine repair facility
occupying approximately 23 acres on an island in the Houston Ship Channel. In
December 1993, the property was leased to a third party that also obtained the
option to purchase the facility as part of the lease agreement. Early in 1994,
Newpark entered into a new financing of the property.
Newpark also owns 80 acres occupied as a sawmill facility near Batson,
Texas. Newpark believes this facility is adequate for current production
needs.
LEGAL PROCEEDINGS
Newpark and its subsidiaries are involved in litigation and other claims or
assessments on matters arising in the normal course of business. In the
opinion of Newpark, any recovery or liability in these matters should not have
a material effect on Newpark's consolidated financial statements.
40
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table provides certain information regarding Newpark's current
directors and executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James D. Cole(1) 55 Chairman of the Board, President,
and Chief Executive Officer
William Thomas Ballantine 51 Executive Vice President and
Director
Matthew W. Hardey 43 Vice President of Finance and
Chief Financial Officer
Philip S. Sassower(1)(2) 56 Chairman of the Executive
Committee and Director
Dibo Attar(3) 56 Director
William W. Goodson(2)(3) 81 Director
David P. Hunt 55 Director
Alan J. Kaufman(3) 58 Director
James H. Stone(1)(2)(3) 70 Director
</TABLE>
- --------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
James D. Cole joined Newpark in 1976, serving as Executive Vice President
until May 1977, when he was elected President and Chief Executive Officer. Mr.
Cole has served as a director since joining Newpark and was elected Chairman
of the Board of Directors in April 1996.
William Thomas Ballantine joined Newpark in December 1988, serving as Vice
President of Operations, and was elected Executive Vice President in 1992. He
was elected a Director of Newpark in October 1993.
Matthew W. Hardey joined Newpark in May 1988 as Treasurer and Assistant
Secretary and was elected Vice President of Finance and Chief Financial
Officer in April 1991. From 1985 until joining Newpark, Mr. Hardey was
employed in the commercial banking business.
Philip S. Sassower served as Chairman of the Board of Newpark from December
1987 to April 1996, and, in April 1996, was elected Chairman of the Executive
Committee of the Board of Directors. Mr. Sassower is also a general partner of
BP Restaurants, L.P., and CIC Standby Ventures, L.P, and a member, the manager
and the Chief Executive Officer of BP Acquisition L.L.C., the owner of a
restaurant chain in the Southwest. Mr. Sassower also is a director and
Chairman of the Finance Committee of Communication Intelligence Corporation, a
company engaged in pen-based computer technologies.
Dibo Attar is a business consultant to several domestic and international
companies and has been a private investor for more than ten years. Mr. Attar
also serves as Chairman of the Board of T.H. Lehman & Co., Inc., KTI, Inc. and
Renaissance Entertainment Corp.
William W. Goodson, who retired in 1983, served as Chairman of the Board of
Directors of a Newpark subsidiary from 1982 to 1987. For more than five years
prior thereto, he was President and Chief Operating Officer of the Newpark
subsidiary engaged in the oilfield and environmental construction business,
and other Newpark subsidiaries.
David P. Hunt joined Newpark's Board of Directors in November 1995. Prior to
joining Newpark and until his retirement in 1995, Mr. Hunt was employed by
Consolidated Natural Gas Company for 32 years, having most recently served as
President and Chief Executive Officer of New Orleans based CNG Producing
Company, an oil and gas exploration and production company.
41
<PAGE>
Alan J. Kaufman has been engaged in the private practice of medicine since
1969. Dr. Kaufman is a neurosurgeon. Dr. Kaufman also is a director of Tesoro
Petroleum Corporation.
James H. Stone is Chairman of the Board and Chief Executive Officer of Stone
Energy Corporation, which is engaged in oil and gas exploration. Mr. Stone
also serves as a Director of Hibernia Corporation.
Directors are elected annually to serve until the next annual meeting of
stockholders and until their successors are elected and qualified. Executive
officers are appointed by and serve at the discretion of the Board of
Directors. No family relationships exist between any of the directors or
officers of Newpark.
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of Newpark's outstanding Common Stock as of May 31, 1996, by (i)
each director of Newpark, (ii) the three executive officers of Newpark who
earned in excess of $100,000 in salary and bonus in 1995, and (iii) all
directors and executive officers as a group. Newpark is not aware of any
person who is the beneficial owner of more than five percent (5%) of its
outstanding Common Stock. Except as otherwise indicated below, each person
named in the table has sole voting and investment power with respect to all
shares of Common Stock beneficially owned by such person, except to the extent
that authority is shared by spouses under applicable law.
<TABLE>
<CAPTION>
PERCENT OF CLASS
SHARES -----------------
BENEFICIALLY PRIOR TO AFTER
NAME OF BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
------------------------ ------------ -------- --------
<S> <C> <C> <C>
Philip S. Sassower.............................. 341,250 3.15% 2.46%
James D. Cole(2)................................ 272,256 2.52% 1.97%
James H. Stone(3)............................... 252,225 2.33% 1.83%
Dibo Attar(4)................................... 95,552 * *
Alan Kaufman(5)................................. 89,250 * *
Matthew W. Hardey............................... 39,398 * *
Wm. Thomas Ballantine........................... 14,525 * *
William W. Goodson.............................. 5,250 * *
David P. Hunt................................... 2,050 * *
All directors and executive officers as a group
(9 persons)..................................... 1,111,756 10.17% 7.98%
</TABLE>
- --------
* Indicates ownership of less than one percent.
(1) Includes shares which may be purchased upon the exercise of options which
are exercisable as of May 31, 1996, or become exercisable within 60 days
thereafter, for the following: Mr. Sassower--52,500 shares; Mr. Stone--
15,750 shares; Mr. Attar--15,750 shares; Dr. Kaufman--15,750 shares; Mr.
Ballantine--14,525 shares; Mr. Hardey--21,000 shares; and all directors
and executive officers as a group--135,275 shares.
(2) Includes 73,584 shares held by four separate Trusts of which Mr. Cole is a
Trustee and of which the beneficiaries are children of Mr. Cole. Mr. Cole
disclaims ownership of the 73,584 shares held by the four Trusts.
(3) Includes 1,050 shares held in a trust of which the beneficiaries are
children of Mr. Stone and 8,675 shares owned by the Stone Foundation. Mr.
Stone disclaims beneficial ownership of such shares.
(4) Includes 63,000 shares owned by a Swiss corporation and 1,050 shares held
be a fund over which Mr. Attar has investment power.
(5) Includes (i) 13,649 shares held in an IRA account for the benefit of Dr.
Kaufman; (ii) 5,250 shares held in a Trust of which the beneficiaries are
children of Dr. Kaufman; and (iii) 3,150 shares held by his spouse. Dr.
Kaufman disclaims beneficial ownership of such shares.
42
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Newpark's authorized capital stock consists of (i) 20,000,000 shares of
Common Stock, $.01 par value per share; and (ii) 1,000,000 shares of Preferred
Stock, $.01 par value per share. All outstanding shares of Common Stock are
fully paid and nonassessable.
The following summaries of certain provisions of the capital stock of
Newpark do not purport to be complete and are subject to, and qualified in
their entirety by, the provisions of Newpark's Certificate of Incorporation
and Bylaws.
COMMON STOCK
As of May 31, 1996, there were 10,795,973 outstanding shares of Common Stock
held by 4,125 holders of record. Each share of Common Stock has an equal and
ratable right to receive dividends when, as and if declared by the Board of
Directors out of assets legally available therefor and subject to the dividend
obligations of Newpark to the holders of any preferred stock then outstanding.
See "Dividend Policy".
In the event of a liquidation, dissolution or winding up of Newpark, the
holders of Common Stock are entitled to share equally and ratably in the
assets available for distribution after the payment of all liabilities and
subject to any prior rights of any holders of preferred stock that at the time
may be outstanding.
The holders of Common Stock have no pre-emptive rights, conversion rights,
redemption provisions or sinking fund provisions. Each share of Common Stock
is entitled to one vote in the election of directors and on all matters
submitted to a vote of stockholders. Stockholders are not entitled to cumulate
votes in the election of directors and, therefore, holders of a majority of
the outstanding shares of Common Stock can elect all the directors.
The Common Stock offered hereby, when issued and sold as contemplated by
this Prospectus, will be validly issued, fully paid and nonassessable.
PREFERRED STOCK
Preferred stock may be issued from time to time in one or more series, and
the Board of Directors, without further approval of the stockholders, is
authorized to fix the dividend rates and terms, conversion rights, voting
rights, redemption rights and terms (including sinking fund provisions),
liquidation preferences and any other rights, preferences, privileges and
restrictions applicable to each series of preferred stock. The purpose of
authorizing the Board of Directors to determine such rights and preferences is
to eliminate delays associated with a stockholder vote on specific issuances.
The issuance of preferred stock, while providing flexibility in connection
with possible acquisitions and other corporate purposes, could, among other
things, adversely affect the voting power of the holders of Common Stock and,
under certain circumstances, make it more difficult for a third party to gain
control of Newpark.
CERTAIN CHARTER PROVISIONS
Newpark's Certificate of Incorporation provides that Newpark shall indemnify
its officers and directors to the fullest extent permitted by Delaware law
against claims arising out of their actions as officers or directors of
Newpark. The Certificate of Incorporation also provides that, to the fullest
extent permitted by law, Newpark's directors shall not be personally liable
for monetary damages for breach of the director's fiduciary duty of care to
Newpark or its stockholders. This provision does not eliminate the director's
duty of care or eliminate a stockholder's right to seek equitable remedies
such as an injunction or other forms of non-monetary relief. Each director
will continue to be subject to liability for (i) breach of the director's duty
of loyalty to Newpark or its stockholders; (ii) acts or omissions not in good
faith or which involve intentional misconduct or knowing violation of law;
(iii) improper declarations of dividends; and (iv) transactions from which the
director derived
43
<PAGE>
an improper personal benefit. The provision also does not affect a director's
responsibilities under any other law, such as the Federal securities laws or
Federal or state environmental laws.
Newpark also is authorized by its Certificate of Incorporation to purchase
and maintain insurance for its officers and directors against claims arising
out of their actions as officers or directors of Newpark, whether or not
Newpark would have the power to indemnify such officers or directors for the
claim under applicable law. Newpark currently does not maintain such
insurance.
Pursuant to the Certificate of Incorporation, Newpark has elected not to be
governed by Section 203 of the Delaware General Corporation Law. Section 203
generally prevents a corporation from entering into certain business
combinations with an interested stockholder (defined as any person or entity
that is the beneficial owner of at least 15% of a corporation's voting stock)
or its affiliates, unless (i) the transaction is approved by the board of
directors of the corporation prior to such business combination; or (ii) the
interested stockholder acquires 85% or the corporation's voting stock in the
same transaction in which the stockholder exceeds 15%; or (iii) the business
combination is approved by the board of directors and by a vote of two-thirds
of the outstanding voting stock not owned by the interested stockholder.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company of New York.
44
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated , 1996 (the "U.S. Underwriting Agreement"), the
underwriters named below (the "U.S. Underwriters"), for whom CS First Boston
Corporation, Deutsche Morgan Grenfell/C. J. Lawrence Inc., The Robinson-
Humphrey Company, Inc., and Jefferies & Company, Inc. are acting as
representatives (the "Representatives"), have severally but not jointly agreed
to purchase from Newpark the following respective numbers of U.S. Shares:
<TABLE>
<CAPTION>
NUMBER OF
U.S.
UNDERWRITER SHARES
----------- ---------
<S> <C>
CS First Boston Corporation.....................................
Deutsche Morgan Grenfell/C. J. Lawrence Inc.....................
The Robinson-Humphrey Company, Inc..............................
Jeffries & Company, Inc.........................................
---------
Total......................................................... 2,550,000
=========
</TABLE>
The U.S. Underwriting Agreement provides that the obligations of the U.S.
Underwriters are subject to certain conditions precedent and the U.S.
Underwriters will be obligated to purchase all of the U.S. Shares offered
hereby (other than those shares covered by the over-allotment option described
below) if any are purchased. The U.S. Underwriting Agreement provides that in
the event of a default by a U.S. Underwriter, in certain circumstances the
purchase commitments of non-defaulting U.S. Underwriters may be increased or
the U.S. Underwriting Agreement may be terminated.
Newpark has entered into a Subscription Agreement (the "Subscription
Agreement") with the Managers of the International Offering (the "Managers")
providing for the concurrent offer and sale of the International Shares
outside the United States and Canada. The closing of the U.S. Offering is a
condition to the closing of the International Offering and vice versa.
Newpark has granted to the U.S. Underwriters an option, exercisable by CS
First Boston Corporation and expiring at the close of business on the 30th day
after the date of this Prospectus, to purchase up to 450,000 additional shares
from Newpark at the initial public offering price, less the underwriting
discounts and commissions, all as set forth on the cover page of this
Prospectus. Such option may be exercised only to cover over-allotments in the
sale of the shares of Common Stock offered hereby. To the extent that this
option to purchase is exercised, each U.S. Underwriter and each Manager will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of additional shares being sold to the U.S. Underwriters and
the Managers as the number of U.S. Shares set forth next to such U.S.
Underwriter's name in the preceding table and as the number set forth next to
such Manager's name in the corresponding table in the prospectus relating to
the International Offering bears to the sum of the total number of shares of
Common Stock in such tables.
Newpark has been advised by the Representatives that the U.S. Underwriters
propose to offer the U.S. Shares in the United States and Canada to the public
initially at the public offering price set forth on the cover page of this
Prospectus and, through the Representatives, to certain dealers at such price
less a concession of $ per share, and the U.S. Underwriters and such
dealers may allow a discount of $ per share on sales to certain other
dealers. After the initial public offering, the public offering price and
concession and discount to dealers may be changed by the Representatives.
The public offering price, the aggregate underwriting discounts and
commissions per share and per share concession and discount to dealers for the
U.S. Offering and the concurrent International Offering will be identical.
Pursuant to an Agreement between the U.S. Underwriters and Managers (the
"Intersyndicate Agreement") relating to the Offering, changes in the public
offering price, concession and discount to dealers
45
<PAGE>
will be made only upon the mutual agreement of CS First Boston Corporation, as
representative of the U.S. Underwriters, and CS First Boston Limited
("CSFBL"), on behalf of the Managers.
Pursuant to the Intersyndicate Agreement, each of the U.S. Underwriters has
agreed that, as part of the distribution of the U.S. Shares and subject to
certain exceptions, it has not offered or sold, and will not offer or sell,
directly or indirectly, any shares of Common Stock or distribute any
prospectus relating to the Common Stock to any person outside the United
States or Canada or to any other dealer who does not so agree. Each of the
Managers has agreed or will agree that, as part of the distribution of the
International Shares and subject to certain exceptions, it has not offered or
sold, and will not offer or sell, directly or indirectly, any shares of Common
Stock or distribute any prospectus relating to the Common Stock in the United
States or Canada or to any other dealer who does not so agree. The foregoing
limitations do not apply to stabilization transactions or to transactions
between the U.S. Underwriters and the Managers pursuant to the Intersyndicate
Agreement. As used herein, "United States" means the United States of America
(including the States and the District of Columbia), its territories,
possessions and other areas subject to its jurisdiction. "Canada" means
Canada, its provinces, territories, possessions and other areas subject to its
jurisdiction, and an offer or sale shall be in the United States or Canada if
it is made to (i) any individual resident in the United States or Canada or
(ii) any corporation, partnership, pension, profit-sharing or other trust or
other entity (including any such entity acting as an investment adviser with
discretionary authority) whose office most directly involved with purchase is
located in the United States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the U.S.
Underwriters and the Managers of such number of shares of Common Stock as may
be mutually agreed upon. the price of any shares so sold will be the public
offering price, less such amount as may be mutually agreed upon by CS First
Boston Corporation, as representative of the U.S. Underwriters, and CSFBL, on
behalf of the Managers, but not exceeding the selling concession applicable to
such shares. To the extent there are sales between the U.S. Underwriters and
the Managers pursuant to the Intersyndicate Agreement, the number of shares of
Common Stock initially available for sale by the U.S. Underwriters or by the
Managers may be more or less than the amount appearing on the cover page of
the Prospectus. Neither the U.S. Underwriters nor the Managers are obligated
to purchase from the other any unsold shares of Common Stock.
Newpark has agreed that it will not offer, sell, announce its intention to
sell, pledge or otherwise dispose of, directly or indirectly, or file with the
Securities and Exchange Commission a registration statement under the
Securities Act relating to, any additional shares of its Common Stock or
securities convertible into or exchangeable for any shares of its Common Stock
without the prior written consent of CS First Boston Corporation for a period
of 90 days after the date of this Prospectus, except issuances of shares
pursuant to employee benefit plans (including stock option plans) existing on
the date hereof. In addition, directors and executive officers of Newpark have
agreed for a period of 90 days after the date of this Prospectus, that they
will not offer, sell or otherwise dispose of shares of Common Stock without
the prior written consent of CS First Boston Corporation.
Newpark has agreed to indemnify the U.S. Underwriters and the Managers
against certain liabilities, including civil liabilities under the Securities
Act, or contribute to payments that the U.S. Underwriters and the Managers may
be required to make in respect thereof.
Jefferies & Company, Inc. has acted as financial advisor to the Company in
connection with the Acquisition and has been paid a fee of $75,000 for such
financial advisory services. Jefferies & Company, Inc. will be paid an
additional fee of $175,000 upon the consummation of the Acquisition.
46
<PAGE>
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the U.S. Shares in Canada is being made only on a
private placement basis exempt from the requirement that Newpark prepare and
file a prospectus with the securities regulatory authorities in each province
where trades of U.S. Shares are effected. Accordingly, any resale of the U.S.
Shares in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the U.S. Shares.
REPRESENTATIONS OF PURCHASERS
Each purchaser of U.S. Shares in Canada who receives a purchase confirmation
will be deemed to represent to Newpark and the dealer from whom such purchase
confirmation is received that (i) such purchaser is entitled under applicable
provincial securities laws to purchase such U.S. Shares without the benefit of
a prospectus qualified under such securities laws, (ii) where required by law,
that such purchaser is purchasing as principal and not as agent, and (iii)
such purchaser has reviewed the text above under "Resale Restrictions".
RIGHTS OF ACTION AND ENFORCEMENT
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available,
including common law rights of action for damages or rescission or rights of
action under the civil liability provisions of the U.S. federal securities
laws.
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Ontario purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such
persons in Canada or to enforce a judgment obtained in Canadian courts against
such issuer or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of U.S. Shares to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
U.S. Shares acquired by such purchaser pursuant to this Offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17 a copy of which may be obtained from Newpark. Only one such
report must be filed in respect of U.S. Shares acquired on the same date and
under the same prospectus exemption.
LEGAL MATTERS
Certain matters with respect to the validity of the shares of Common Stock
offered hereby are being passed upon for Newpark by Ervin, Cohen & Jessup,
Beverly Hills, California. Fulbright & Jaworski L.L.P., Houston, Texas, has
acted as counsel to the Underwriters in connection with certain legal matters
relating to this Offering. Fulbright & Jaworski L.L.P. acts as counsel to
Newpark from time to time in various matters.
47
<PAGE>
EXPERTS
The consolidated financial statements of Newpark as of December 31, 1995 and
1994 and for each of the three years in the period ended December 31, 1995
included in this Prospectus and incorporated by reference from Newpark's
Annual Report on Form 10-K for the year ended December 31, 1995, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and incorporated herein by reference, and have been
so included and incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing. The Statements of
Net Assets of Campbell Wells' Marine NOW Service Business as of December 31,
1995 and 1994 and the related statements of operations for each of the three
years in the period ended December 31, 1995 included in this Prospectus have
been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing herein, and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
48
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NEWPARK RESOURCES, INC.
Independent Auditor's Report.............................................. F-2
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 1995 and 1994 and March 31,
1996................................................................... F-3
Consolidated Statements of Income for each of the three years in the
period ended December 31, 1995 and the three months ended March 31,
1996 and 1995.......................................................... F-4
Consolidated Statements of Stockholders' Equity for each of the three
years in the period ended December 31, 1995 and the three months ended
March 31, 1996......................................................... F-5
Consolidated Statements of Cash Flows for each of the three years in the
period ended
December 31, 1995 and the three months ended March 31, 1996 and 1995... F-6
Notes to Consolidated Financial Statements.............................. F-7
CAMPBELL WELLS, LTD.--MARINE NOW SERVICE BUSINESS
Independent Auditor's Report.............................................. F-18
Financial Statements:
Statement of Net Assets at December 31, 1995 and 1994 and March 31,
1996................................................................... F-19
Statements of Operations for each of the three years in the period ended
December 31, 1995 and the three months ended March 31, 1996 and 1995... F-20
Notes to Financial Statements........................................... F-21
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Newpark Resources, Inc.
We have audited the accompanying consolidated balance sheets of Newpark
Resources, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Newpark Resources, Inc. and
subsidiaries at December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
March 1, 1996
F-2
<PAGE>
NEWPARK RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------ ----------
1995 1994 1996
-------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ 1,018 $ 1,404 $ 1,063
Accounts and notes receivable, less allowance
of $768 in 1995, $455 in 1994 and $762 in
1996......................................... 39,208 21,450 39,091
Inventories................................... 11,996 7,099 8,923
Other current assets.......................... 4,088 1,544 4,189
-------- -------- --------
Total current assets......................... 56,310 31,497 53,266
Property, plant and equipment, at cost, net of
accumulated depreciation...................... 85,461 67,630 90,996
Cost in excess of net assets of purchased
businesses, net of accumulated amortization... 4,340 4,403 4,325
Deferred tax assets............................ -- 2,271 --
Investment in joint venture.................... 1,094 -- 1,609
Other assets................................... 5,542 4,955 5,844
-------- -------- --------
$152,747 $110,756 $156,040
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable................................. $ 169 $ 1,796 $ 119
Current maturities of long-term debt.......... 7,742 8,236 9,994
Accounts payable.............................. 11,664 5,022 7,828
Accrued liabilities........................... 3,462 2,858 3,599
Current taxes payable......................... 1,165 -- 700
-------- -------- --------
Total current liabilities.................... 24,202 17,912 22,240
Long-term debt................................. 46,724 28,892 46,907
Other non-current liabilities.................. 285 253 285
Deferred taxes payable......................... 4,018 -- 5,164
Commitments and contingencies (Note J)......... -- -- --
Stockholders' equity:
Preferred Stock, $.01 par value, 1,000,000
shares authorized, no shares outstanding..... -- -- --
Common Stock, $.01 par value, 20,000,000
shares authorized, 10,634,177 shares
outstanding in 1995, 10,485,074 in 1994 and
10,694,974 in 1996........................... 105 99 106
Paid-in capital............................... 144,553 134,252 145,162
Retained earnings (deficit)................... (67,140) (70,652) (63,824)
-------- -------- --------
Total stockholders' equity................... 77,518 63,699 81,444
-------- -------- --------
$152,747 $110,756 $156,040
======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE>
NEWPARK RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER THREE MONTHS
31, ENDED MARCH 31,
------------------------- ----------------
1995 1994 1993 1996 1995
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues.......................... $97,982 $79,632 $56,330 $26,767 $22,209
Operating costs and expenses:
Costs of services provided....... 64,467 56,259 42,581 17,599 15,532
Operating costs.................. 9,414 7,277 6,557 2,359 2,288
------- ------- ------- ------- -------
73,881 63,536 49,138 19,958 17,820
General and administrative
expenses......................... 2,658 3,231 2,129 717 648
Provision for uncollectible
accounts and notes receivable.... 463 974 671 -- 30
------- ------- ------- ------- -------
Operating income from continuing
operations....................... 20,980 11,891 4,392 6,092 3,711
Interest income................... (183) (78) -- (30) (91)
Interest expense.................. 3,740 2,660 1,274 907 889
Non-recurring expense............. 436 -- -- -- --
------- ------- ------- ------- -------
Income from continuing operations
before provision for income
taxes............................ 16,987 9,309 3,118 5,215 2,913
Provision (benefit) for income
taxes............................ 4,751 (85) (1,670) 1,899 423
------- ------- ------- ------- -------
Income from continuing operations. 12,236 9,394 4,788 3,316 2,490
Loss from discontinued operations. -- -- (2,366) -- --
------- ------- ------- ------- -------
Net income..................... $12,236 $ 9,394 $ 2,422 $ 3,316 $ 2,490
======= ======= ======= ======= =======
Weighted average shares
outstanding...................... 10,568 10,422 9,690 10,650 10,375
======= ======= ======= ======= =======
Income (loss) per common share:
Continuing operations............ $ 1.16 $ .90 $ .49 $ .31 $ .24
Discontinued operations.......... -- -- (.24) -- --
------- ------- ------- ------- -------
Net income..................... $ 1.16 $ .90 $ .25 $ .31 $ .24
======= ======= ======= ======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE>
NEWPARK RESOURCES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 IS UNAUDITED)
<TABLE>
<CAPTION>
RETAINED
COMMON PAID-IN EARNINGS
STOCK CAPITAL (DEFICIT) TOTAL
------ -------- --------- -------
<S> <C> <C> <C> <C>
Balance, January 1, 1993.................... $ 91 $128,035 $(82,468) $45,658
Employee stock options..................... -- 136 -- 136
Stock sale................................. 7 5,130 -- 5,137
Net income................................. -- -- 2,422 2,422
---- -------- -------- -------
Balance, December 31, 1993.................. 98 133,301 (80,046) 53,353
Employee stock options..................... 1 950 -- 951
Other...................................... -- 1 -- 1
Net income................................. -- -- 9,394 9,394
---- -------- -------- -------
Balance, December 31, 1994.................. 99 134,252 (70,652) 63,699
Employee stock options..................... 1 1,582 -- 1,583
Stock dividend............................. 5 8,719 (8,724) --
Net income................................. -- -- 12,236 12,236
---- -------- -------- -------
Balance, December 31, 1995.................. 105 144,553 (67,140) 77,518
---- -------- -------- -------
Employee stock options..................... 1 609 -- 610
Net income................................. -- -- 3,316 3,316
---- -------- -------- -------
Balance, March 31, 1996..................... $106 $145,162 $(63,824) $81,444
==== ======== ======== =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE>
NEWPARK RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------- --------------------
1995 1994 1993 1996 1995
-------- ------- ------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income................... $ 12,236 $ 9,394 $ 2,422 $ 3,316 $ 2,490
Adjustments to reconcile net
income to net cash provided
by continuing operations:
Depreciation and
amortization............... 9,967 7,370 5,929 2,818 2,335
Provision for doubtful
accounts................... 463 974 671 -- 30
Provision (benefit) from
deferred income taxes...... 3,217 (200) (1,700) 1,146 423
Loss (gain) on sales of
assets..................... 80 (9) (237) (41) (2)
Change in assets and
liabilities net of effects
of acquisitions:
(Increase) decrease in
accounts and notes
receivable................. (17,129) (3,723) (2,513) 42 (4,137)
(Increase) decrease in
inventories................ (4,897) 739 (3,418) 2,575 907
(Increase) decrease in other
assets..................... (1,536) (1,839) (211) (403) (1,068)
Increase (decrease) in
accounts payable........... 2,577 (677) 282 (4,807) 1,222
Increase (decrease) in
accrued liabilities and
other...................... 2,096 (937) 1,413 (397) (298)
-------- ------- ------- --------- ---------
Net cash provided by
operating activities...... 7,074 11,092 2,638 4,249 1,902
-------- ------- ------- --------- ---------
Cash flows from investing
activities:
Capital expenditures........ (23,989) (23,149) (9,690) (7,544) (2,597)
Disposal of property, plant
and equipment.............. 564 97 124 1,136 11
Investment in joint
ventures................... (1,094) -- -- (515) --
Payments received on notes
receivable................. 249 30 144 75 --
Advances on notes
receivable................. (227) (1,000) -- -- --
Proceeds from sale of net
assets of discontinued
operations................. -- 661 -- -- --
Other....................... -- -- (79) -- --
Decrease in net assets of
discontinued operations.... -- -- 722 -- --
-------- ------- ------- --------- ---------
Net cash used in investing
activities................ (24,497) (23,361) (8,779) (6,848) (2,586)
-------- ------- ------- --------- ---------
Cash flows from financing
activities:
Net borrowings on lines of
credit..................... 20,796 492 1,720 3,201 2,866
Principal payments on notes
payable, capital lease
obligations and long-term
debt....................... (20,170) (10,109) (4,825) (2,525) (3,337)
Proceeds from issuance of
debt....................... 14,828 21,167 9,728 1,358 223
Proceeds from conversion of
stock options.............. 1,266 897 136 610 299
Other....................... 317 55 -- -- --
-------- ------- ------- --------- ---------
Net cash provided by
financing activities...... 17,037 12,502 6,759 2,644 51
-------- ------- ------- --------- ---------
Net (decrease) increase in
cash and cash equivalents... (386) 233 618 45 (633)
Cash and cash equivalents at
beginning of year........... 1,404 1,171 553 1,018 1,404
-------- ------- ------- --------- ---------
Cash and cash equivalents at
end of year................. $ 1,018 $ 1,404 $ 1,171 $ 1,063 $ 771
======== ======= ======= ========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-6
<PAGE>
NEWPARK RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Principles of Consolidation. Newpark Resources, Inc.
("Newpark" or the "Company") provides comprehensive environmental management
and oilfield construction services to the oil and gas industry in the Gulf
Coast region, principally Louisiana and Texas. The consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All material intercompany transactions are eliminated in
consolidation.
Basis of Presentation. Newpark's interim financial statements as of March
31, 1995 and 1996 include all adjustments which, in the opinion of management,
are necessary in order to make a fair presentation of such financial
statements. All such adjustments are of a normal recurring nature. Operating
results for the three months ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the entire year ending
December 31, 1996.
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,
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Cash Equivalents. All highly liquid investments with a remaining maturity of
three months or less at the date of acquisition are classified as cash
equivalents.
Fair Value Disclosures. Statement of Financial Accounting Standards ("SFAS")
No. 107, "Disclosures about Fair Value of Financial Instruments", requires the
disclosure of the fair value of all significant financial instruments. The
estimated fair value amounts have been developed based on available market
information and appropriate valuation methodologies. However, considerable
judgment is required in developing the estimates of fair value. Therefore,
such estimates are not necessarily indicative of the amounts that could be
realized in a current market exchange. After such analysis, management
believes the carrying values of the Company's significant financial
instruments (consisting of cash and cash equivalents, receivables, payables
and long-term debt) approximate fair values at March 31, 1996.
Inventories. Inventories are stated at the lower of cost (principally
average and first-in, first-out) or market. The cost of lumber and related
supplies for board roads is amortized on the straight-line method over their
estimated useful life of approximately one year.
Depreciation and Amortization. Depreciation of property, plant and
equipment, including interlocking board road mats, is provided for financial
reporting purposes on the straight-line method over the estimated useful lives
of the individual assets which range from three to thirty years. For income
tax purposes, accelerated methods of depreciation are used.
During the year ended December 31, 1993, the Company made a change in the
estimated service lives of its board road mats from five years to seven years.
The new lives were adopted to recognize the longer service life provided by
the mats. The effect of the change for the year ended December 31, 1993 was to
increase income from continuing operations $1,175,000 ($0.12 per share).
The cost in excess of net assets of purchased businesses ("excess cost") is
being amortized on a straight-line basis over forty years, except for
$2,211,000 relating to acquisitions prior to 1971 that is not being amortized.
Management of Newpark periodically reviews the carrying value of the excess
cost in relation to the current and expected operating results of the
businesses which benefit therefrom in order to assess whether there
F-7
<PAGE>
has been a permanent impairment of the excess cost of the net purchased
assets. Accumulated amortization on excess cost was $437,000 and $374,000 at
December 31, 1995 and December 31, 1994, respectively.
Revenue Recognition. Revenues from certain contracts, which are typically of
short duration, are reported as income on a percentage-of-completion method.
Contract revenues are recognized in the proportion that costs incurred bear to
the estimated total costs of the contract. When an ultimate loss is
anticipated on a contract, the entire estimated loss is recorded. Included in
accounts receivable are unbilled revenues in the amounts of $8,600,000 and
$2,674,000 at December 31, 1995 and December 31, 1994, respectively, all of
which are due within a one year period.
Income Taxes. Income taxes are provided using the liability method in
accordance with SFAS No. 109, "Accounting for Income Taxes". Under this
method, deferred income taxes are recorded based upon differences between the
financial reporting and income tax basis of assets and liabilities and are
measured using the enacted income tax rates and laws that will be in effect
when the differences are expected to reverse.
Non-Recurring Expense. Results for the year ended December 31, 1995 include
$436,000 of non-recurring costs associated with a proposed merger which was
not completed.
Interest Capitalization. For the years ended December 31, 1995, 1994 and
1993, the Company incurred interest cost of $4,198,000, $2,805,000 and
$1,359,000, respectively, of which $458,000, $145,000 and $85,000,
respectively, was capitalized on qualifying construction projects. For the
three months ended March 31, 1996 and 1995 (unaudited), the Company incurred
interest cost of $2,125,000 and $945,000, respectively, of which $218,000 and
$56,000, respectively, was capitalized.
Income Per Share. Income per share amounts are based on the weighted average
number of shares outstanding during the respective period and exclude the
negligible dilutive effect of shares issuable in connection with all stock
plans. All per share and weighted average share amounts have been restated to
give retroactive effect to a 5% stock dividend declared and paid during 1995.
New Accounting Standards. During 1995, SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
was issued. SFAS No. 121 establishes accounting standards for recording the
impairment of long-lived assets, certain identifiable intangibles, goodwill
and assets to be disposed of. The Company's adoption of SFAS No. 121 effective
for 1996 did not have a material impact on the Company's consolidated
financial statements.
In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation",
was issued and effective for the Company beginning January 1, 1996. SFAS No.
123 requires expanded disclosures of stock-based compensation arrangements
with employees and encourages (but does not require) compensation cost to be
measured based on the fair value of the equity instrument awarded. Companies
are permitted, however, to continue to apply APB Opinion No. 25, which
recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. The Company will continue to apply APB Opinion No. 25 to
its stock based compensation awards to employees and will disclose the
required pro forma effect on net income and earnings per share.
Reclassifications. Certain reclassifications of prior year amounts have been
made to conform to the current year presentation.
B. DISCONTINUED OPERATIONS
On December 30, 1993, the operations of the Company's marine service
subsidiary were sold to an unrelated third party for their estimated net book
value of $1,135,000, of which $661,000 was received in cash during 1994 and a
short term note was issued for the remainder. The Company leased the facility
and certain
F-8
<PAGE>
equipment to the new operator through June 30, 1996, with an option to
purchase these assets at specified times during the lease term. The new
operator has notified Newpark of its intent to exercise the purchase option
before the expiration of the lease term. Newpark also agreed to make available
certain short-term financing of up to $1.6 million through June 30, 1996, with
annual interest at 7%, secured by, among other items, certain assets of the
third party and the personal guarantee of one of its principals. Advances
related to this financing arrangement amounted to $1.6 million at March 31,
1996 (unaudited), $1.6 million at December 31, 1995 and $1.4 million at
December 31, 1994. Revenue of the marine repair business was $16,251,000 for
the year ended December 31, 1993.
C. INVENTORIES
The Company's inventories at December 31, 1995 and 1994 are summarized as
follows (in thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1994
------- ------
<S> <C> <C>
Raw materials and supplies (including logs and board road
lumber)................................................. $11,641 $6,752
Finished goods........................................... 355 347
------- ------
$11,996 $7,099
======= ======
</TABLE>
D. PROPERTY, PLANT AND EQUIPMENT
The Company's investment in property, plant and equipment at December 31,
1995 and 1994 is summarized as follows (in thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1994
-------- --------
<S> <C> <C>
Land.................................................. $ 5,072 $ 4,273
Buildings and improvements............................ 30,172 19,554
Machinery and equipment............................... 90,448 77,353
Other................................................. 2,537 2,208
-------- --------
128,229 103,388
Less accumulated depreciation......................... (42,768) (35,758)
-------- --------
$ 85,461 $ 67,630
======== ========
</TABLE>
As further discussed in Note B., the former marine repair facility is
currently held for lease and included in the above table. The cost of this
facility totaled $19.9 million at December 31, 1995 and December 31, 1994,
with related accumulated depreciation at $6.3 million and $5.6 million,
respectively. The principal components of the cost of this facility include
land of $3.1 million, buildings and improvements of $9.8 million and machinery
and equipment of $6.4 million. Rentals received were $1.6 million in each of
1995 and 1994.
F-9
<PAGE>
E. CREDIT ARRANGEMENTS AND LONG-TERM DEBT
Credit arrangements and long-term debt consisted of the following (in
thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1994
------- -------
<S> <C> <C>
Bank-line of credit......................................... $18,378 $ 8,767
Bank-term note.............................................. 25,000 --
Assets subject to lease, financed through 2001 with an
interest rate of 10.1%..................................... 8,075 8,558
Interim construction credit agreement....................... 482 --
Acquisition financing due in 1996 with an interest rate of
8%......................................................... 327 743
Bank-inventory line of credit............................... -- 1,796
Term financing of board road mats........................... -- 8,730
Term financing of barges.................................... -- 2,814
Other, principally installment notes secured by machinery
and equipment payable through 2000 with interest at 3.3% to
13.5%...................................................... 2,373 7,516
------- -------
54,635 38,924
Less: current maturities of long-term debt.................. (7,911) (8,236)
current maturities of lines of credit..................... -- (1,796)
------- -------
Long-term portion........................................... $46,724 $28,892
======= =======
</TABLE>
The Company maintains a $60.0 million bank credit facility with $25.0
million in the form of a revolving line of credit commitment and the remaining
$35.0 million in a term note. The line of credit is secured by a pledge of
accounts receivable and certain inventory. It bears interest at either a
specified prime rate (8.5% at December 31, 1995 and 8.25% at March 31, 1996)
or the LIBOR rate (5.63% at December 31, 1995 and 5.44% at March 31, 1996)
plus a spread which is determined quarterly based upon the ratio of the
Company's funded debt to cash flow. The average interest rate for the year
ended December 31, 1995 was 8.56%. The line of credit requires monthly
interest payments and matures on December 31, 1998. At December 31, 1995, $6.3
million of letters of credit were issued and outstanding and $18.4 million had
been borrowed. At March 31, 1996 (unaudited), $5.8 million of letters of
credit were issued and outstanding and $11.6 million had been borrowed,
leaving $19.2 million available for cash advances under the line of credit.
The term note was used to refinance existing debt and requires monthly
interest installments and seventeen equal quarterly principal payments which
commenced March 31, 1996. The term note bears interest at the Company's option
of either a specified prime rate or the LIBOR rate, plus a spread which is
determined quarterly based upon the ratio of the Company's funded debt to cash
flow. The average interest rate for the year ended December 31, 1995 was
8.40%. The credit facility requires that the Company maintain certain
specified financial ratios and comply with other usual and customary
requirements. The Company was in compliance with the agreement at December 31,
1995 and at March 31, 1996.
On December 1, 1995, the Company entered into an interim construction credit
agreement in an aggregate amount not to exceed $1,840,000 for the construction
of an office building for two of its subsidiaries. The outstanding balance of
this credit agreement was $482,000 at December 31, 1995 and $1.8 million at
March 31, 1996 (unaudited). The agreement provides for an interest rate of
8.75% during construction. At the completion of construction, the interim
construction credit agreement will be converted to a term loan. The term loan
will require monthly principal and interest payments to fully amortize the
amount over 10 years. The term note will bear a fixed interest rate of 2.25%
per annum in excess of the treasury rate in effect on the date the term loan
is signed.
Maturities of Long-Term Debt are $7,911,000 in 1996, $7,438,000 in 1997,
$26,067,000 in 1998, $7,638,000 in 1999, $4,941,000 in 2000 and $640,000
thereafter.
F-10
<PAGE>
F. INCOME TAXES
The provision for income taxes charged to continuing operations (income
taxes related to discontinued operations for 1993 were not segregated as the
amounts were immaterial) is almost exclusively U. S. Federal tax as follows
(dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1994 1993
------ ----- -------
<S> <C> <C> <C>
Current tax expense............................ $1,534 $ 115 $ 30
Deferred tax expense (benefit)................. 3,217 (200) (1,700)
------ ----- -------
Total provision (benefit)...................... $4,751 $ (85) $(1,670)
====== ===== =======
</TABLE>
The deferred tax expense (benefit) includes a decrease in the valuation
allowance for deferred tax assets of $1,700,000, $3,129,000, and $2,407,000
for 1995, 1994 and 1993, respectively.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Income tax expense at statutory rate............... 34.0 % 34.0 % 34.0 %
Non-deductible portion of business expense......... 1.4 (2.5) 1.6
Tax benefit of NOL utilization..................... (10.0) (33.6) (90.1)
Other.............................................. 2.6 1.2 0.9
----- ----- -----
Total income tax expense (benefit)................. 28.0 % (0.9)% (53.6)%
===== ===== =====
</TABLE>
For federal income tax return purposes, the Company has net operating loss
carryforwards ("NOLs") of $22,835,000 (net of amounts disallowed pursuant to
IRC Section 382) that, if not used, will expire in 1998 through 2009. The
Company also has $1,592,000 of alternative minimum tax credit carryforwards
available to offset future regular income taxes subject to certain
limitations. Substantially all of these carryforwards have been recognized for
financial reporting purposes.
Temporary differences and carryforwards which give rise to a significant
portion of deferred tax assets and liabilities are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1994
-------- -------
<S> <C> <C>
Deferred tax assets:
Net operating losses................................. $ 8,696 $ 9,893
Alternative minimum tax credits...................... 1,592 295
All other............................................ 398 444
-------- -------
Total deferred tax assets.......................... 10,686 10,632
Valuation allowance.................................. (236) (967)
-------- -------
Net deferred tax assets............................ $ 10,450 $ 9,665
-------- -------
Deferred tax liabilities:
Depreciation......................................... $ 8,767 $ 6,244
Amortization......................................... 1,823 1,074
All other............................................ 1,177 447
-------- -------
Total deferred tax liabilities..................... 11,767 7,765
-------- -------
Total net deferred tax (liabilities) assets........ $(1,317) $ 1,900
======== =======
</TABLE>
Under SFAS No. 109, a valuation allowance must be established to offset a
deferred tax asset if, based on the weight of available evidence, it is more
likely than not that some portion or all of the deferred tax asset will
F-11
<PAGE>
not be realized. At December 31, 1994, the Company evaluated the available
evidence and believed that it was more likely than not that a portion of the
deferred tax asset would not be realized. A valuation allowance was recorded
in the financial statements to offset NOLs which the Company believed would
not be utilized. At December 31, 1994, the Company recorded a net deferred tax
asset of $1,900,000, of which $2,271,000 was recorded in non-current assets
and $371,000 was recorded in current accrued liabilities, the realization of
which was dependent on the Company's ability to generate taxable income in
future periods. The Company believed that its estimate of future earnings
based on contracts in place, the overall improved gas market and its prior
earnings trend supported the recorded net deferred tax asset.
At December 31, 1995, the deferred tax liabilities of the consolidated group
exceeded the deferred tax assets, therefore a deferred tax benefit was
recorded for the full amount of the remaining federal NOLs. The valuation
allowance recorded at December 31, 1995 relates to certain state NOLs which
have not to date been recognized for financial reporting purposes. At December
31, 1995, the Company has recorded a net deferred tax liability of $1,317,000,
of which $2,701,000 has been recorded in other current assets and $4,018,000
has been recorded as long-term deferred taxes payable.
G. PREFERRED STOCK
The Company has been authorized to issue up to 1,000,000 shares of Preferred
Stock, $.01 par value, none of which are issued or outstanding at March 31,
1996.
H. COMMON STOCK AND STOCK OPTIONS
Changes in outstanding Common Stock for the three years ended December 31,
1995, 1994, and 1993 were as follows (in thousands of shares):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1995 1994 1993
-------- ----------------
<S> <C> <C> <C>
Outstanding, beginning of year......................... 9,986 9,858 9,130
Shares issued in exchange for extinguishment of debt... -- -- 700
Dividend shares issued................................. 505 -- --
Shares issued upon exercise of options................. 143 128 28
-------- ------- -------
Outstanding, end of year............................... 10,634 9,986 9,858
======== ======= =======
</TABLE>
The Amended and Restated Newpark Resources, Inc. 1988 Incentive Stock Option
Plan (the "1988 Plan") was adopted by the Board of Directors on June 22, 1988
and thereafter was approved by the stockholders. The 1988 Plan was amended at
various times by the Board of Directors and stockholders to increase the
number of shares of Common Stock issuable thereunder to the current level of
1,050,000 shares. An option may not be granted for an exercise price less than
the fair market value on the date of grant and may have a term of up to ten
years.
F-12
<PAGE>
Stock option transactions for the 1988 Plan for the three years ended
December 31, 1995, 1994 and 1993 are summarized below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
Outstanding, beginning of year......... 374,981 303,149 215,191
Options granted........................ 387,000 191,000 117,500
Dividend options granted............... 32,610 -- --
Options exercised...................... (87,667) (119,168) (27,542)
Options canceled....................... (22,166) -- (2,000)
------------ ------------ -----------
Outstanding, end of year............... 684,758 374,981 303,149
============ ============ ===========
Option price per share:
Outstanding, end-of-year............... $3.80-$18.88 $3.00-$18.75 $3.00-$9.25
</TABLE>
At December 31, 1995 and December 31, 1994, the total number of outstanding
exercisable options were 145,979 and 54,144, respectively.
The 1992 Directors' Stock Option Plan (the "1992 Directors' Plan") was
adopted on October 21, 1992 by the Compensation Committee and was approved by
the stockholders in 1993.
The purpose of the 1992 Directors' Plan was to provide two directors
("Optionees") additional compensation for their services to Newpark and to
promote an increased incentive and personal interest in the welfare of Newpark
by such directors. The Optionees were each granted a stock option to purchase
52,500 shares of Common Stock at an exercise price of $8.33 per share, the
fair market value of the Common Stock on the date of grant, for a term of ten
years. No additional options may be granted under the Directors' Plan. At
December 31, 1995, 52,500 options had been exercised under this plan.
The 1993 Non-Employee Directors' Stock Option Plan (the "1993 Non-Employee
Directors' Plan") was adopted on September 1, 1993 by the Board of Directors
and was approved by the stockholders in 1994.
The 1993 Non-Employee Directors' Plan is intended to allow each non-employee
director of Newpark to purchase 15,750 shares of Common Stock. Non-employee
directors are not eligible to participate in any other stock option or similar
plan currently maintained by Newpark. The purpose of the 1993 Non-Employee
Directors' Plan is to promote an increased incentive and personal interest in
the welfare of Newpark by those individuals who are primarily responsible for
shaping the long-range plans of Newpark, to assist Newpark in attracting and
retaining on the Board persons of exceptional competence and to provide
additional incentives to serve as a director of Newpark.
Upon the adoption of the 1993 Non-Employee Directors' Plan, the five non-
employee directors then serving were each granted a stock option to purchase
15,750 shares of Common Stock at an exercise price of $8.57 per share, the
fair market value of the Common Stock on the date of grant. In addition, each
new Non-Employee Director, on the date of his or her election to the Board of
Directors, automatically will be granted a stock option to purchase 15,750
shares of Common Stock at an exercise price equal to the fair market value of
the Common Stock on the date of grant. The determination of fair market value
of the Common Stock is based on market quotations. On November 2, 1995, the
Board of Directors adopted, subject to stockholder approval, amendments to the
Non-Employee Directors' Plan to increase the maximum number of shares issuable
thereunder from 157,500 to 210,000 and to provide for the automatic grant at
five year intervals of additional stock options to purchase 10,500 shares of
Common Stock to each non-employee director who continues to serve on the
Board. At December 31, 1995, 15,750 options had been exercised under the 1993
Non-Employee Directors' Plan.
On November 2, 1995, the Board of Directors adopted, subject to stockholder
approval, the Newpark Resources, Inc. 1995 Incentive Stock Option Plan (the
"1995 Plan"), pursuant to which the Compensation
F-13
<PAGE>
Committee may grant incentive stock options and nonstatutory stock options to
designated employees of Newpark. Initially, a maximum of 525,000 shares of
Common Stock may be issued under the 1995 Plan, with such maximum number
increasing on the last business day of each fiscal year of Newpark, commencing
with the last business day of the fiscal year ending December 31, 1996, by a
number equal to 1.25% of the number of shares of Common Stock issued and
outstanding on the close of business on such date, with a maximum number of
shares of Common Stock that may be issued upon exercise of options granted
under the 1995 Plan being limited to 1,312,500.
I. SUPPLEMENTAL CASH FLOW INFORMATION
During 1994, the Company's noncash transactions included the consummation of
the sale of the operations of the Company's marine repair business for
$661,000 in cash and a $400,000 note receivable.
During 1993, the Company's noncash transactions included the issuance of
735,000 shares of the Company's common stock for extinguishment of certain
notes payable issued in connection with the assets purchased from Quality
Mill, Inc. and accrued liabilities incurred with the purchase of other fixed
assets. Additionally, the Company sold property with a book value of $250,000
in exchange for $100,000 in cash and a $400,000 note receivable.
Included in accounts payable and accrued liabilities at December 31, 1995,
1994 and 1993 were equipment purchases of $4,141,000, $774,000 and $933,000,
respectively. Also included are notes payable for equipment purchases in the
amount of $257,000 and $635,000 for 1995 and 1993, respectively. Included in
accounts payable and accrued liabilities at March 31, 1996 and 1995
(unaudited) were equipment purchases of $1,040,000 and $419,000, respectively.
Also included are notes payable for equipment purchases in the amount of
$351,000 at March 31, 1996 (unaudited).
Interest of $4,235,000, $2,713,000 and $1,912,000 was paid in 1995, 1994 and
1993, respectively, and interest of $986,000 and $892,000 was paid during the
three months ended March 31, 1996 and 1995 (unaudited), respectively. Income
taxes of $51,000, $90,200 and $82,000 were paid in 1995, 1994 and 1993,
respectively, and income taxes of $1,218,000 were paid during the three months
ended March 31, 1996 (unaudited). No income taxes were paid during the three
months ended March 31, 1995.
J. COMMITMENTS AND CONTINGENCIES
Newpark and its subsidiaries are involved in litigation and other claims or
assessments on matters arising in the normal course of business. In the
opinion of management, any recovery or liability in these matters will not
have a material adverse effect on Newpark's consolidated financial statements.
During 1992, the State of Texas assessed additional sales taxes for the
years 1988-1991. The Company has filed a petition for redetermination with the
Comptroller of Public Accounts. The Company believes that the ultimate
resolution of this matter will not have a material adverse effect on the
consolidated financial statements.
In the normal course of business, in conjunction with its insurance
programs, the Company has established letters of credit in favor of certain
insurance companies in the amount of $2,000,000 at March 31, 1996 (unaudited),
and $2,825,000 at December 31, 1995 and December 31, 1994. At December 31,
1995 and March 31, 1996 (unaudited), the Company had outstanding guaranty
obligations totaling $469,000 and $453,000, respectively, in connection with
facility closure bonds issued by an insurance company.
Since May 1988, the Company has held the exclusive right to use a patented
prefabricated mat system with respect to the oil and gas exploration and
production industry within the State of Louisiana. On June 20, 1994, the
Company entered into a new license agreement by which it obtained the
exclusive right to use the same patented prefabricated mat system, without
industry restriction, throughout the continental United States. The license
agreement requires, among other things, that the company purchase a minimum of
20,000 mats annually
F-14
<PAGE>
through 2003. The Company has met this annual mat purchase requirement since
the inception of the agreement. Any purchases in excess of that level may be
applied to future annual requirements. The Company's annual commitment to
maintain the agreement in force is currently estimated to be $4,600,000.
At December 31, 1995 and March 31, 1996 (unaudited), the Company had
outstanding a letter of credit in the amount of $3,816,000 issued to a state
regulatory agency to assure funding for future site closure obligations at its
NORM processing facility.
The Company leases various manufacturing facilities, warehouses, office
space, machinery and equipment and transportation equipment under operating
leases with remaining terms ranging from one to ten years with various renewal
options. Substantially all leases require payment of taxes, insurance and
maintenance costs in addition to rental payments. Total rental expenses of
continuing operations for all operating leases were $5,210,000, $4,049,000 and
$4,226,000, in 1995, 1994 and 1993, respectively.
Future minimum payments under noncancelable operating leases, with initial
or remaining terms in excess of one year are: $1,683,000 in 1996; $1,192,000
in 1997; $924,000 in 1998; $859,000 in 1999; $781,000 in 2000; and $562,000
thereafter.
Capital lease commitments are not significant.
K. BUSINESS AND CREDIT CONCENTRATION
During 1995, one customer accounted for approximately 16% of total revenue
($15,890,000). In 1993 and 1994, the Company did not derive ten percent or
more of its revenues from sales to any single customer.
Export sales are not significant.
L. CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
trade accounts and notes receivable.
The Company maintains cash and cash equivalents with various financial
institutions. These financial institutions are located throughout the
Company's trade area and company policy is designed to limit exposure to any
one institution. The Company performs periodic evaluations of the relative
credit standing of these financial institutions which are considered in the
Company's investment strategy.
Concentrations of credit risk with respect to trade accounts and notes
receivable are limited due to the large number of entities comprising the
Company's customer base and, for notes receivable, the required collateral.
The Company maintains an allowance for losses based upon the expected
collectibility of accounts and notes receivable.
F-15
<PAGE>
M. SUPPLEMENTAL SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1996:
Revenues.............................. $26,767
Operating income...................... 6,092
Net income............................ 3,316
Net income per share.................. .31
1995:
Revenues.............................. $22,209 $22,454 $24,793 $28,526
Operating income...................... 3,711 4,789 5,529 6,951
Net income............................ 2,490 3,206 2,700 3,840
Net income per share.................. .24 .30 .26 .36
1994:
Revenues.............................. $17,146 $19,396 $21,169 $21,921
Operating income...................... 2,288 2,843 3,165 3,595
Net income............................ 1,740 2,273 2,436 2,945
Net income per share.................. .17 .22 .23 .28
</TABLE>
F-16
<PAGE>
INDEPENDENT AUDITORS REPORT
To the Board of Directors
Sanifill, Inc.
We have audited the accompanying statements of net assets of the marine NOW
service business of Campbell Wells, Ltd. (the "Acquired Business") as of
December 31, 1995 and 1994, and the related statements of operations for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the management of Campbell Wells, Ltd.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the statements of net assets of the Acquired Business, as of
December 31, 1995 and 1994, and the results of operations of the Acquired
Business for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
June 6, 1996
F-17
<PAGE>
CAMPBELL WELLS, LTD.--MARINE NOW SERVICE BUSINESS
STATEMENTS OF NET ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1995 1994 1996
---------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
PROPERTY AND EQUIPMENT
Buildings and facilities.................... $ 300,029 $ 105,258 $ 327,949
Equipment................................... 2,260,588 556,428 2,331,666
Furniture and fixtures...................... 289,997 241,155 358,948
Vehicles.................................... 539,130 74,799 626,850
Leasehold improvements...................... 226,867 194,699 289,152
---------- --------- ----------
3,616,611 1,172,339 3,934,565
Less accumulated depreciation and
amortization................................. 1,383,535 503,992 1,403,219
---------- --------- ----------
2,233,076 668,347 2,531,346
CAPITAL LEASE OBLIGATION...................... 468,311 -- 444,439
---------- --------- ----------
NET ASSETS.................................... $1,764,765 $ 668,347 $2,086,907
========== ========= ==========
</TABLE>
See accompanying notes to financial statements
F-18
<PAGE>
CAMPBELL WELLS, LTD.--MARINE NOW SERVICE BUSINESS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31 ENDED MARCH 31,
----------------------------------- ----------------------
1995 1994 1993 1996 1995
----------- ----------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................ $18,837,073 $15,368,935 $10,966,968 $ 5,591,672 $3,609,391
Costs of operations..... 12,007,350 9,745,841 7,371,250 3,539,372 2,636,321
----------- ----------- ----------- ----------- ----------
Gross profit............ 6,829,723 5,623,094 3,595,718 2,052,300 973,070
Selling, general and
administrative......... 1,945,619 1,627,348 1,393,359 488,806 412,618
----------- ----------- ----------- ----------- ----------
Operating income........ 4,884,104 3,995,746 2,202,359 1,563,494 560,452
Income taxes............ 1,660,595 1,358,553 748,802 531,588 190,554
----------- ----------- ----------- ----------- ----------
Net income.............. $ 3,223,509 $ 2,637,193 $ 1,453,557 $ 1,031,906 $ 369,898
=========== =========== =========== =========== ==========
</TABLE>
See accompanying notes to financial statements
F-19
<PAGE>
CAMPBELL WELLS, LTD.--MARINE NOW SERVICE BUSINESS
NOTES TO FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
On June 5, 1996, Newpark Resources, Inc. ("Newpark") entered into an Asset
Purchase and Lease Agreement with Sanifill, Inc. ("Sanifill") and Campbell
Wells Ltd. ("Campbell Wells"), a wholly owned subsidiary of Sanifill, for the
purchase and lease of certain marine related assets of the nonhazardous
oilfield waste ("NOW") service business of Campbell Wells (the "Acquired
Business"). If the transaction is consummated, Newpark will purchase
substantially all of Campbell Wells non-landfarm assets and will assume leases
associated with five transfer stations located along the Gulf Coast and three
receiving docks at the landfarm facilities operated by Campbell Wells. The
accompanying financial statements have been prepared from the historical books
and records of Campbell Wells and present (1) the assets of the Acquired
Business as of December 31, 1995 and 1994 and (2) the results of operations of
the Acquired Business for the years ended December 31, 1995, 1994, and 1993.
Since only certain net assets are being acquired, statements of financial
position and cash flows of the marine related NOW service business are not
applicable.
The statements of operations may not necessarily be indicative of the
results of operations that would have been realized had the Acquired Business
been operated as a stand-alone entity or as an unaffiliated entity. The
statements of operations include an allocation of selling, general and
administrative expense based on a percentage of revenues. Campbell Wells
believes this allocation is reasonable.
As a wholly owned subsidiary of Sanifill, Campbell Wells maintained a
noninterest-bearing intercompany account with Sanifill for recording the
parent company's investment, intercompany charges for costs and expenses, and
intercompany transfers of cash, among other transactions. It is not feasible
to ascertain the portion of the intercompany account related solely to the
Acquired Business, and, consequently, the amount of related interest expense
or interest income which would have been recorded in the accompanying
statements of operations had the intercompany account been interest-bearing.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Property and Equipment--Property and equipment are stated at cost, less
accumulated depreciation. Expenditures for property and equipment and items
which substantially increase the useful lives of existing assets are
capitalized at cost and depreciated. Depreciation is provided using the
straight-line method in amounts considered sufficient to amortize the cost of
the depreciable assets to operations over their estimated services lives.
Leasehold improvements are amortized over the lives of the respective leases
or their estimated service lives, whichever is shorter. Equipment leased under
capital leases is amortized over the normal depreciation policy for owned
assets. Depreciation expense for each of the three years in the period ended
December 31, 1995 was approximately $194,000, $150,000 and $116,000,
respectively. The periods used in determining depreciation and amortization
follow:
<TABLE>
<CAPTION>
PERIOD
-----------
<S> <C>
Buildings and leasehold improvements 10-30 years
Vehicles and equipment 3-7 years
Furniture and fixtures 3-7 years
</TABLE>
Differences in useful lives are due to differences in lease terms or
estimated lives for the different locations.
F-20
<PAGE>
Revenue Recognition--Revenues in the Acquired Business are primarily
comprised of disposal and barge cleaning fees. Disposal revenue is recognized
once the waste is unloaded at the disposal or transfer facility.
Income Taxes--The operations of Campbell Wells and the Acquired Business
were included in the consolidated U.S. federal income tax return of Sanifill,
Inc. Campbell Wells, Ltd. assumed a federal tax rate of 34% of taxable income.
The allocation did not distinguish between current and deferred income taxes.
State income taxes were not material.
C. LEASE COMMITMENTS
In the operation of the Acquired Business, Campbell Wells leases various
barges and tug boats, machinery and equipment, and transfer facilities under
operating leases with remaining terms ranging from one to five years with
various renewal options. Substantially all leases require payment of taxes,
insurance and maintenance costs in addition to rental payments. Total rental
expenses for all operating leases were approximately $1,862,000, $2,245,000
and $2,011,000 for the years ended December 31, 1995, 1994 and 1993,
respectively.
Future minimum payments under noncancelable operating leases with initial or
remaining terms in excess of one year are $895,000 in 1996, $419,000 in 1994,
$346,000 in 1998, $347,000 in 1999 and $237,000 in 2000.
Property plant and equipment at December 31 includes the following amounts
related to capital leases:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1994
-------- --------
<S> <C> <C>
Equipment leased under capital leases....................... $545,730 $118,658
Less accumulated depreciation............................... (89,658) (3,956)
-------- --------
$456,072 $114,702
======== ========
</TABLE>
Depreciation expense provided on these assets was $85,702 and $3,956 during
1995 and 1994, respectively.
The following is a schedule by years of future minimum lease payments under
these capital leases together with the present value of the net minimum lease
payments.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31:
- ------------------------
<S> <C>
1996............................................................... $133,451
1997............................................................... 133,451
1998............................................................... 133,451
1999............................................................... 128,604
2000............................................................... 28,104
--------
Total minimum lease payments....................................... 557,061
Less interest portion.............................................. (88,750)
--------
Present value of net minimum lease payments........................ $468,311
========
</TABLE>
The carrying value of the capital lease obligation approximates the fair
value.
D. CONTINGENCIES
Campbell Wells is involved in certain claims and litigation arising in the
normal course of Acquired Business. In the opinion of Campbell Wells, the
ultimate resolution of these matters will not have a material adverse effect
on the financial statements of the Acquired Business.
F-21
<PAGE>
E. MAJOR CUSTOMERS
Revenue from various customers of the Acquired Business for the years ended
December 31, 1995, 1994 and 1993, which amounted to 10% or more of total
revenues were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------------- -------------- --------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Customer A......................... $3,384 18.0% -- -- -- --
Customer B......................... 2,170 11.5% $1,625 10.5% -- --
Customer C......................... 1,345 7.0% 1,618 10.5% $1,731 15.0%
</TABLE>
F-22
<PAGE>
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY NEWPARK OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSE-
QUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
NEWPARK SINCE SUCH DATE.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 8
The Acquisition........................................................... 10
Price Range of Common Stock and Dividends................................. 12
Use of Proceeds........................................................... 13
Capitalization............................................................ 13
Pro Forma Financial Information........................................... 14
Selected Historical Financial Data........................................ 18
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 20
Business.................................................................. 26
Management................................................................ 41
Principal Stockholders.................................................... 42
Description of Capital Stock.............................................. 43
Underwriting.............................................................. 45
Notice to Canadian Residents.............................................. 47
Legal Matters............................................................. 47
Experts................................................................... 48
Index to Consolidated Financial Statements................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Newpark Resources, Inc.
3,000,000 Shares
Common Stock
($.01 par value)
PROSPECTUS
CS First Boston
Deutsche Morgan Grenfell
The Robinson-Humphrey
Company, Inc.
Jefferies & Company, Inc.
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES +
+LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION, DATED JUNE , 1996
3,000,000 Shares
Newpark Resources, Inc.
Common Stock
($.01 par value)
--------
All the shares of Common Stock, $.01 par value ("Common Stock"), of Newpark
Resources, Inc. ("Newpark" or the "Company") offered hereby are being sold by
Newpark. Of the 3,000,000 shares of Common Stock being offered, 450,000
shares are initially being offered outside the United States and Canada
(the "International Shares") by the Managers (the "International
Offering") and 2,550,000 shares are initially being concurrently
offered in the United States and Canada (the "U.S. Shares") by the
U.S. Underwriters (the "U.S. Offering" and, together with the
International Offering, the "Offering"). The offering price and
underwriting discounts and commissions of the International
Offering and the U.S. Offering are identical.
A substantial portion of the net proceeds of the Offering will be used to
fund the acquisition of certain assets of Campbell Wells, Ltd. (the
"Acquisition"). The closing of the Offering will, occur concurrently
with, and is conditioned upon, the closing of the Acquisition.
See "The Acquisition".
Newpark's Common Stock is listed on the New York Stock Exchange under
the symbol "NR". On June 11, 1996, the reported last sale price
of the Common Stock on The New York Stock Exchange
Composite Tape was $36.875 per share.
--------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS"
BEGINNING ON PAGE 8.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Newpark(1)
------------ --------------- -------------
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total(2)................................... $ $ $
</TABLE>
(1) Before deduction of expenses payable by Newpark estimated at $ .
(2) Newpark has granted the Managers and the U.S. Underwriters an option,
exercisable by CS First Boston Corporation for 30 days from the date of
this Prospectus, to purchase a maximum of 450,000 additional shares to
cover over-allotments of shares. If the option is exercised in full, the
total Price to Public will be $ , Underwriting Discounts and
Commissions will be $ , and Proceeds to Newpark will be $ .
--------
The International Shares are offered by the several Managers when, as and if
issued by Newpark, delivered to and accepted by the Managers and subject to
their right to reject orders in whole or in part. It is expected that the
International Shares will be ready for delivery on or about , 1996.
CS First Boston Deutsche Morgan Grenfell
The Robinson-Humphrey Company, Inc. Jefferies & Company, Inc.
The date of this Prospectus is , 1996.
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY NEWPARK OR ANY MANAGER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF NEWPARK SINCE SUCH DATE.
In this Prospectus, references to "dollars" and "$" are to United States
dollars.
IN CONNECTION WITH THIS OFFERING, CS FIRST BOSTON CORPORATION, ON BEHALF OF
THE U.S. UNDERWRITERS AND THE MANAGERS, MAY OVER-ALLOT OR EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT A LEVEL
ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS
MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 8
The Acquisition....................... 10
Price Range of Common Stock and
Dividends............................ 12
Use of Proceeds....................... 13
Capitalization........................ 13
Pro Forma Financial Information....... 14
Selected Historical Financial Data.... 18
Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................... 20
Business.............................. 26
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management......................... 41
Principal Stockholders............. 42
Description of Capital Stock....... 43
Certain United States Tax
Consequences to Non-United States
Holders........................... 45
Subscription and Sale.............. 48
Legal Matters...................... 50
Experts............................ 50
Available Information.............. 50
Incorporation of Certain Documents
by Reference...................... 51
Index to Consolidated Financial
Statements........................ F-1
</TABLE>
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a holder of such stock that, for United States federal income tax
purposes, is not a "United States person" (a "Non-United States Holder"). This
discussion is not intended to be exhaustive and is based on statutes,
regulations, rulings and court decisions as currently in effect all of which
may be changed either retroactively or prospectively. This discussion does not
consider any specific facts or circumstances that may apply to a particular
Non-United States Holder (including, for example, the fact that, in the case
of a Non-United States Holder that is a partnership, the U.S. tax consequences
of purchasing, holding and disposing of Common Stock may be affected by
determinations made both at the partnership and the partner level) and applies
only to Non-United States Holders that hold Common Stock as a capital asset.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE
UNITED STATES TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF COMMON
STOCK (INCLUDING SUCH INVESTOR'S STATUS AS A UNITED STATES PERSON OR NON-
UNITED STATES HOLDER) AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE
LAWS OF ANY STATE, MUNICIPALITY OR OTHER TAXING JURISDICTION.
For purposes of this discussion, "United States person" means a citizen or
resident of the United States, a corporation or partnership created or
organized in the United States or under the laws of the United States or of
any political subdivision thereof, or an estate or trust whose income is
includable in gross income for United States federal income tax purposes
regardless of its source. An alien individual generally is treated as a United
States person for any calendar year if either (i) the individual is present in
the United States 183 days or more during such calendar year or (ii) the
individual is present in the United States at least 31 days during such
calendar year and the sum of the number of days present during such calendar
year, one-third the number of days present during the first preceding year and
one-sixth the number of days present during the second preceding year is 183
or more.
DIVIDENDS
Except as provided below with respect to the payment of dividends to certain
partnerships, dividends paid to a Non-United States Holder generally will be
subject to withholding of United States federal income tax at the rate of 30%,
unless the withholding rate is reduced under an applicable income tax treaty
between the United States and the country of tax residence of the Non-United
States Holder. No U.S. withholding will apply if the dividend is effectively
connected with a trade or business conducted within the United States by the
Non-United States Holder (or, alternatively, where an income tax treaty
applies, if the dividend is effectively connected with a permanent
establishment maintained within the United States by the Non-United States
Holder), but, instead, the dividend will be subject to the United States
federal income tax on net income that applies to United States persons (and,
with respect to corporate holders, may also be subject to the branch profits
tax at a 30% rate or such lower rate as may be specified by an applicable
income tax treaty). A Non-United States Holder may be required to satisfy
certain certification requirements in order to claim treaty benefits or to
otherwise claim a reduction in or exemption from withholding under the
foregoing rules. A Non-United States Holder that is eligible for a reduced
rate of U.S. withholding tax pursuant to a tax treaty may apply for a refund
of any excess amounts currently withheld by filing an appropriate claim for
refund with the United States Internal Revenue Service (the "Service").
If the holder of Common Stock is a domestic or foreign partnership engaged
in a United States trade or business, the partnership generally will be
required to withhold tax on any effectively connected dividend includible in
the distributive share of partnership income (the "Distributive Share") of a
partner who is a non-United States Holder, whether or not distributed, at the
highest applicable rate of United States taxation (currently, 39.6% for a non-
corporate partner and 35% for a corporate partner). A domestic partnership
will be
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
required to withhold tax at the 30% withholding tax rate (or applicable treaty
rate) on any dividend includible in the Distributive Share of a partner that
is a non-United States Holder that is not an effectively connected dividend,
whether or not distributed. Different withholding requirements may apply to
partnerships, the interests of which are publicly traded, and those
partnerships are accordingly advised to consult their tax advisors.
GAIN ON DISPOSITION
Subject to special rules described below, a Non-United States Holder
generally will not be subject to United States federal income tax on gain
recognized on a sale or other disposition of Common Stock unless the gain is
effectively connected with a trade or business conducted within the United
States by the Non-United States Holder (or, alternatively, where an income tax
treaty applies, unless the gain is effectively connected with a permanent
establishment maintained within the United States by the Non-United States
Holder). Any such effectively connected gain would be subject to the United
States federal income tax on net income that applies to United States persons
(and, with respect to corporate holders, may also be subject to the branch
profits tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty). Such tax is not collected by withholding.
In addition, an individual Non-United States Holder who holds Common Stock
would generally be subject to tax at a 30% rate on any gain recognized on the
disposition of such Common Stock if such individual is present in the United
States for 183 days or more in the taxable year of disposition and either (i)
has a "tax home" in the United States (as specifically defined for purposes of
the United States federal income tax) or (ii) maintains an office or other
fixed place of business in the United States and the income from the sale of
the stock is attributable to such office or other fixed place of business.
Individual Non-United States Holders may also be subject to tax pursuant to
provisions of United States federal income tax law applicable to certain
United States expatriates.
Also, special rules apply to Non-United States Holders if the Company is or
becomes a "United States real property holding corporation" for United States
federal income tax purposes. The Company believes that it has not been, is not
currently, and is not likely to become, a United States real property holding
corporation. If the Company were a United States real property holding
corporation, gain or loss on a sale of the Common Stock by any Non-United
States Holder (other than, in most cases, a Non-United States Holder that owns
or owned (directly or constructively) 5% or less of the Common Stock during
the five-year period ending on the date of such sale) would be treated as
income effectively connected with the conduct of a trade or business within
the United States by the holder and subject to the net income tax described
above.
UNITED STATES FEDERAL ESTATE TAXES
Common Stock owned or treated as owned by an individual who is not a citizen
or resident (as specially defined for United States federal estate tax
purposes) of the United States at the date of death, or Common Stock subject
to certain lifetime transfers made by such an individual, will be included in
such individual's estate for United States federal estate tax purposes and may
be subject to United States federal estate tax, unless an applicable estate
tax treaty provides otherwise. Estates of nonresident aliens are generally
allowed a credit that is equivalent to an exclusion of $60,000 of assets from
the estate for United States federal estate tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the Service and to each Non-United
States Holder the amount of dividends paid to, and the tax withheld with
respect to, such holder, regardless of whether any tax was actually withheld.
That information may also be made available to the tax authorities of the
country in which a Non-United States Holder resides.
United States federal backup withholding tax (which, generally, is imposed
at the rate of 31% on certain payments to persons not otherwise exempt who
fail to furnish information required under United States information reporting
requirements) generally will not apply to dividends paid to a Non-United
States Holder either at an address outside the United States (provided that
the payor does not have actual knowledge that the
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
payee is a United States person) or if the dividends are subject to
withholding at the 30% rate (or lower treaty rate). As a general matter,
information reporting and backup withholding also will not apply to a payment
of the proceeds of a sale of Common Stock by a foreign office of a foreign
broker. However, information reporting requirements (but not backup
withholding) will apply to a payment of the proceeds of a sale of Common Stock
by a foreign office of a broker that is a United States person, or by a
foreign office of a foreign broker that derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in the
United States, or that is a "controlled foreign corporation" as to the United
States, unless the broker has documentary evidence in its records that the
holder is a Non-United States Holder and certain conditions are met, or the
holder otherwise establishes an exemption. Payment by a United States office
of a broker of the proceeds of a sale of Common Stock is subject to both
backup withholding and information reporting unless the holder certifies as to
its non-United States status under penalties of perjury or otherwise
establishes an exemption (and the broker has no actual knowledge to the
contrary.) The backup withholding tax is not an additional tax and may be
credited against the Non-United States Holder's United States federal income
tax liability or refunded to the extent excess amounts are withheld, provided
that the required information or appropriate claim for refund is filed with
the Service.
NEW PROPOSED REGULATIONS
The United States Treasury recently proposed new regulations regarding the
withholding and information reporting rules discussed above. Among other
changes, the proposed regulations would unify certification forms and
procedures, require certification of residence to claim treaty benefits,
clarify reliance standards, impose special withholding rules on payments made
to foreign partnerships and make other changes affecting withholding agents
and intermediaries. If finalized in their current form, the proposed
regulations would generally be effective for payments made after December 31,
1997, subject to certain transition rules.
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBSCRIPTION AND SALE
The institutions named below (the "Managers") have, pursuant to a
Subscription Agreement dated , 1996 (the "Subscription Agreement"),
severally and not jointly, agreed with Newpark to subscribe and pay for the
following respective numbers of International Shares as set forth opposite
their names:
<TABLE>
<CAPTION>
NUMBER OF
MANAGER INTERNATIONAL SHARES
------- --------------------
<S> <C>
CS First Boston Limited..............................
Morgan Grenfell & Co., Limited.......................
The Robinson-Humphrey Company, Inc. .................
Jefferies & Company, Inc.............................
-------
Total............................................. 450,000
=======
</TABLE>
The Subscription Agreement provides that the obligations of the Managers are
subject to certain conditions precedent and the Managers will be obligated to
purchase all of the International Shares offered hereby (other than those
shares covered by the over-allotment option described below) if any are
purchased. The Subscription Agreement provides that, in the event of a default
by a Manager, in certain circumstances the purchase commitments of the non-
defaulting managers may be increased or the Subscription Agreement may be
terminated.
Newpark has entered into an Underwriting Agreement (the "Underwriting
Agreement") with the U.S. Underwriters of the U.S. Offering (the "U.S.
Underwriters") providing for the concurrent offer and sale of the U.S. Shares
in the United States and Canada. The closing of the U.S. Offering is a
condition to the closing of the International Offering and vice versa.
Newpark has granted to the Managers and the U.S. Underwriters an option,
exercisable by CS First Boston Corporation the representative of the U.S.
Underwriters, expiring at the close of business on the 30th day after the date
of this Prospectus to purchase up to 67,500 additional shares at the initial
public offering price, less the underwriting discounts and commissions, all as
set forth on the cover page of this Prospectus. Such option may be exercised
only to cover over-allotments in the sale of the shares of Common Stock
offered hereby. To the extent that this option to purchase is exercised, each
Manager and each U.S. Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of additional shares
being sold to the Managers and the U.S. Underwriters as the number of
International Shares set forth next to such Manager's name in the preceding
table and as the number set forth next to such U.S. Underwriter's name in the
corresponding table in the Prospectus relating to the U.S. Offering bears to
the sum of the total number of shares of Common Stock in such tables.
Newpark has been advised by CS First Boston Limited, on behalf of the
Managers, that the Managers propose to offer the International Shares outside
the United States and Canada initially at the public offering price set forth
on the cover page of this Prospectus and, through the Managers, to certain
dealers at such price less a commission of $ per share and that the Managers
and such dealers may reallow a commission of $ per share on sales to certain
other dealers. After the initial public offering, the public offering price
and commission and reallowance may be changed by the Managers.
The offering price and the aggregate underwriting discounts and commissions
per share and per share commission and re-allowance to dealers for the
International Offering and the concurrent U.S. Offering will be identical.
Pursuant to an Agreement between the U.S. Underwriters and Managers (the
"Intersyndicate Agreement") relating to the Offering, changes in the offering
price, the aggregate underwriting discounts and
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
commissions per share and per share commission and reallowance to dealers will
be made only upon the mutual agreement of CS First Boston Limited, on behalf
of the Managers, and CS First Boston Corporation, on behalf of the U.S.
Underwriters.
Pursuant to the Intersyndicate Agreement, each of the Managers has agreed
that, as part of the distribution of International Shares and subject to
certain exceptions, it has not offered or sold, and will not offer or sell,
directly or indirectly, any shares of Common Stock or distribute any
prospectus relating to the Common Stock in the United States or Canada or to
any other dealer who does not so agree. Each of the U.S. Underwriters has
agreed that, as part of the distribution of the U.S. Shares and subject to
certain exceptions, it has not offered or sold and will not offer or sell,
directly or indirectly, any shares of Common Stock or distribute any
prospectus relating to the Common Stock to any person outside the United
States and Canada or to any other dealer who does not so agree. The foregoing
limitations do not apply to stabilization transactions or to transactions
between the Managers and the U.S. Underwriters pursuant to the Intersyndicate
Agreement. As used herein, "United States" means the United States of America
including the States and the District of Columbia), its territories,
possessions and other areas subject to its jurisdiction. "Canada" means
Canada, its provinces, territories, possessions and other areas subject to its
jurisdiction, and an offer or sale shall be in the United States or Canada if
it is made to (i) any individual resident in the United States or Canada or
(ii) any corporation, partnership, pension, profit-sharing or other trust or
other entity (including any such entity acting as an investment adviser with
discretionary authority) whose office most directly involved with the purchase
is located in the United States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the
Managers and the U.S. Underwriters of such number of shares of Common Stock as
may be mutually agreed upon. The price of any shares so sold will be the
public offering price less such amount agreed upon by CS First Boston Limited,
on behalf of the Managers, and CS First Boston Corporation, as representative
of the U.S. Underwriters, but not exceeding the selling concession applicable
to such shares. To the extent there are sales between the Managers and the
U.S. Underwriters pursuant to the Intersyndicate Agreement, the number of
shares of Common Stock initially available for sale by the Managers or by the
U.S. Underwriters may be more or less than the amount appearing on the cover
page of this Prospectus. Neither the Managers nor the U.S. Underwriters are
obligated to purchase from the other any unsold shares of Common Stock.
Each of the Managers and the U.S. Underwriters severally represents and
agrees that: (i) it has not offered or sold and prior to the date six months
after the date of issue of the Common Stock will not offer or sell any Common
Stock to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (ii) it has complied and will comply
with all applicable provisions of the Financial Services Act 1986 with respect
to anything done by it in relation to the Common Stock in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and
will only issue or pass on in the United Kingdom any document received by it
in connection with the issue of the Common Stock to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom such document
may otherwise lawfully be issued or passed on.
Newpark has agreed that it will not offer, sell, contract to sell, announce
its intention to sell, pledge or otherwise dispose of, directly or indirectly,
or file with the Securities and Exchange Commission a registration statement
under the Securities Act relating to, any additional shares of its Common
Stock or securities convertible into or exchangeable or exercisable for any
shares of its Common Stock without the prior written consent of CS First
Boston Corporation for a period of 90 days after the date of this Prospectus,
except issuances of shares pursuant to employee benefit plans (including stock
option plans) existing on the date hereof. In addition, directors and officers
of Newpark have agreed for a period of 90 days after the date of this
Prospectus, that they will not offer, sell or otherwise dispose of shares of
Common Stock without the prior written consent of CS First Boston Corporation.
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
Newpark has agreed to indemnify the Managers and the U.S. Underwriters
against certain liabilities, including civil liabilities under the Securities
Act, or to contribute to payments that the Managers and the U.S. Underwriters
may be required to make in respect thereof.
Jefferies & Company, Inc. has acted as financial advisor to the Company in
connection with the Acquisition and has been paid a fee of $75,000 for such
financial advisory services. Jefferies & Company, Inc. will be paid an
additional fee of $175,000 upon the consummation of the Acquisition.
LEGAL MATTERS
Certain matters with respect to the validity of the shares of Common Stock
offered hereby are being passed upon for Newpark by Ervin, Cohen & Jessup,
Beverly Hills, California. Fulbright & Jaworski L.L.P., Houston, Texas, has
acted as counsel to the Underwriters in connection with certain legal matters
relating to this Offering. Fulbright & Jaworski L.L.P. acts as counsel to
Newpark from time to time in various matters.
EXPERTS
The consolidated financial statements of Newpark as of December 31, 1995 and
1994 and for each of the three years in the period ended December 31, 1995
included in this Prospectus and incorporated by reference from Newpark's
Annual Report on Form 10-K for the year ended December 31, 1995, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and incorporated herein by reference, and have been
so included and incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing. The Statements of
Net Assets of Campbell Wells' Marine NOW Service Business as of December 31,
1995 and 1994 and the related statements of operations for each of the three
years in the period ended December 31, 1995 included in this Prospectus have
been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing herein, and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
AVAILABLE INFORMATION
Newpark is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
regional offices at 7 World Trade Center, 13th Floor, New York, NY 10048 and
500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies of such
material can be obtained from the Public Reference section of the Commission
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates, and on the World Wide Web at "http://www.sec.gov". Newpark's
Common Stock is traded on the New York Stock Exchange, and such reports and
other information also can be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, NY 10005.
Newpark has filed with the Commission a registration statement under the
Securities Act with respect to the securities offered hereby. This Prospectus
does not contain all the information set forth in the registration statement
and the exhibits thereto, to which reference is hereby made. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the registration statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement is qualified in its
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
entirety by such reference. Any interested parties may inspect the
registration statement, without charge, at the public reference facilities of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and any
interested parties may obtain copies of all or any part of the registration
statement from the Commission at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Newpark's Annual Report on Form 10-K for the year ended December 31, 1995
filed by Newpark with the Commission is incorporated by reference into this
Prospectus.
All documents filed by Newpark pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering made hereby shall be deemed to be incorporated by
reference into this Prospectus and made a part hereof from the date of filing
of such documents. Any statement contained in a document incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified, to constitute a part of
this Prospectus.
Newpark will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon written or oral request, a copy of any and all
documents incorporated by reference in this Prospectus, other than exhibits to
such documents, unless such exhibits are specifically incorporated by
reference in such documents. Requests should be directed to Ms. Edah Keating,
Corporate Secretary, Newpark Resources, Inc., 3850 North Causeway, Suite 1770,
Metairie, Louisiana 70002, or by telephone at (504) 838-8222.
<PAGE>
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses payable by the
registrant in connection with the filing of this Form S-3 Registration
Statement:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................. $ 43,125
NASD filing fee..................................................... 13,006
New York Stock Exchange fee......................................... 1,500
Blue Sky fees and expenses (including legal fees)................... *
Printing costs...................................................... 150,000
Legal fees.......................................................... 400,000
Accounting fees and expenses........................................ 100,000
Miscellaneous expenses.............................................. *
--------
Total........................................................... $ *
========
</TABLE>
--------
* To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"GCL") permits a corporation to, and the registrant's bylaws require that it,
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in the right of the corporation), by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
As permitted under Section 145 of the GCL, the registrant's bylaws also
provide that it shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation. However, in such an action by or on
behalf of a corporation, no indemnification may be made in respect of any
claim, issue or matter as to which the person is adjudged liable for
negligence or misconduct in the performance of his duty to the corporation
unless, and only to the extent that the court determines that, despite the
adjudication of liability but in view of all the circumstances, the person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
In addition, the indemnification provided by section 145 shall not be deemed
exclusive of any other rights to which a person seeking indemnification may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.
The registrant's Certificate of Incorporation (the "Certificate") provides
that the registrant shall indemnify, to the fullest extent permitted by law,
each of its officers, directors, employees and agents who was or is a party
II-1
<PAGE>
to, or is threatened to be made a party to, any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that such person is or was a director,
officer, employee or agent of the registrant. The Certificate also provides
that, to the fullest extent permitted by law, no director of the registrant
shall be liable to the registrant or its stockholders for monetary damages for
breach of his fiduciary duty as a director.
The Certificate also provides that the registrant may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the registrant, or is serving at the request of the registrant as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against any
liability incurred by such person in any such capacity, or arising out of his
status as such, regardless of whether the registrant is empowered to indemnify
such person under the provisions of law. Newpark does not currently maintain
any such insurance.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<C> <S>
1.1 Underwriting Agreement.*
2.1 Asset Purchase and Lease Agreement, dated June 5, 1996, among the
registrant, Campbell Wells, Ltd. and Sanifill, Inc.
2.2 Now Disposal Agreement, dated June 4, 1996, among Sanifill, Inc., Now
Disposal Operating Co. and Campbell Wells, Ltd.
4.1 Form of certificate representing shares of the registrant's Common
Stock.(1)
5.1 Opinion of Ervin, Cohen & Jessup.*
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Ervin, Cohen & Jessup (included in Exhibit 5.1).*
24.1 Powers of Attorney (set forth on Page II-4).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment
(1) Incorporated by reference from the registrant's Registration Statement on
Form S-1 (File No. 33-40716).
ITEM 17. UNDERTAKINGS
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more that a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
provided, however, that paragraphs (A)(1)(i) and (A)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at the time shall be deemed to be the initial bona fide offering
thereof.
C. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Metairie, State of Louisiana on June 12 , 1996.
NEWPARK RESOURCES, INC.
By /s/ James D. Cole
James D. Cole, Chairman of the
Board, President and Chief
Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James D. Cole and Matthew W. Hardey, and
each of them, as his true and lawful attorneys-in-fact and agents with full
power of substitution and resubstitution, for such person and in such person's
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and all documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or either of them, or his or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ James D. Cole Chairman of the Board, June 12, 1996
- ------------------------------------ President and Chief
James D. Cole Executive Officer
/s/ Matthew W. Hardey Vice President of Finance June 12, 1996
- ------------------------------------ and Chief Financial Officer
Matthew W. Hardey
/s/ Wm. Thomas Balantine Executive Vice President and June 12, 1996
- ------------------------------------ Director
Wm. Thomas Balantine
/s/ Philip S. Sassower Director June 12, 1996
- ------------------------------------
Philip S. Sassower
/s/ Dibo Attar Director June 12, 1996
- ------------------------------------
Dibo Attar
/s/ W.W. Goodson Director June 12, 1996
- ------------------------------------
W. W. Goodson
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ David P. Hunt Director June 12, 1996
- ------------------------------------
David P. Hunt
/s/ Dr. Alan J. Kaufman Director June 12, 1996
- ------------------------------------
Dr. Alan J. Kaufman
/s/ James H. Stone Director June 12, 1996
- ------------------------------------
James H. Stone
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
1.1 Underwriting Agreement*
2.1 Asset Purchase and Lease Agreement, dated June 5, 1996,
among the registrant, Campbell Wells, Ltd. and
Sanifill, Inc.
2.2 Now Disposal Agreement, dated June 4, 1996, among
Sanifill, Inc., Now Disposal Operating Co. and
Campbell Wells, Ltd.
4.1 Form of certificate representing shares of the
registrant's Common Stock(1)
5.1 Opinion of Ervin, Cohen & Jessup*
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Ervin, Cohen & Jessup (included in Exhibit
5.1)*
24.1 Powers of Attorney (set forth on Page II-4)
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
(1) Incorporated by reference from the registrant's Registration Statement on
Form S-1 (File No. 33-40716).
<PAGE>
EXHIBIT 2.1
-----------
ASSET PURCHASE AND LEASE AGREEMENT
THIS ASSET PURCHASE AND LEASE AGREEMENT ("Agreement") is made and
entered into this 5th day of June, 1996, by and between (a) SANIFILL, INC., a
Delaware corporation ("Parent"), CAMPBELL WELLS, LTD., a Delaware limited
partnership (the "Company"), and NOW DISPOSAL HOLDING CO., a Delaware
corporation ("Holdco") (Parent, the Company and Holdco being sometimes
collectively referred to herein as "Sellers"), and (b) NEWPARK RESOURCES, INC.,
a Delaware corporation ("Buyer" or "Newpark"), with reference to the following
facts:
A. The Company engages in the remediation and closure of oilfield waste
pits, including related loading and hauling, and the collection, transfer,
transportation, treatment and disposal of nonhazardous oilfield waste associated
with the exploration and production of oil, gas and geothermal energy("NOW")
(such activities being referred to herein as the "Business"). Those portions of
the Business that relate to (i) remediation and closure of oilfield waste pits,
including related loading and hauling, and (ii) the collection, transfer and
transportation of NOW (other than Excluded NOW, as defined below) are referred
to herein as the "Acquired Business." Those portions of the Business that
relate to (iii) the collection, transfer and transportation of "Excluded NOW",
i.e., NOW generated and collected on land and delivered to the Company's
Landfarms (as defined below) from the site where it was generated entirely by
on-land transportation and (iv) the treatment and disposal of NOW are referred
to herein as the "Excluded NOW Business." The Company does not engage in any
business other than the Acquired Business and the Excluded NOW Business.
B. The parties agree (i) Buyer shall purchase from Holdco and Holdco
shall sell to Buyer 100% of the outstanding shares (the "Equity Interests") in
NOW DISPOSAL OPERATING CO., a Delaware corporation ("Disposeco"), and (ii) that
Buyer shall purchase or lease from the Company, and the Company shall sell or
lease to Buyer substantially all of the operating assets of the Company that are
primarily used or useful in the Acquired Business, and that Sellers shall remain
liable for the liabilities and obligations related to the Business, including
the Acquired Business, except for certain obligations that Buyer will expressly
assume, all as hereinafter set forth. Buyer may assign its rights and delegate
its duties hereunder to Subsidiary (as defined below), provided that no such
assignment of rights or delegation of duties shall relieve Buyer of its
obligations under this Agreement. If such assignment is made, references to
Buyer in this Agreement shall be deemed to refer to Subsidiary, or to Buyer and
Subsidiary, as appropriate.
NOW, THEREFORE, for and in consideration of the mutual promises,
agreements and warranties contained herein, Sellers and Buyer agree as follows:
1. Transfer of Acquired Business and Assets.
----------------------------------------
1.1 Included Assets. For the consideration hereinafter provided,
the Company shall sell or lease, transfer and assign to Buyer on the Closing
Date (as defined below), all of the business, properties and assets of the
Company related to the Acquired Business, other than the "Excluded Assets"
specified in Paragraph 1.2, and Holdco will sell to Buyer the Equity Interests.
Unless otherwise stated in Paragraph 1.2, the business, properties and assets to
be sold or leased to Buyer hereunder other than the Equity Interests (the
"Included Assets"), together with the
<PAGE>
Equity Interests, shall include all assets of the Company and Holdco related to
the Acquired Business, including but not limited to the following:
(a) Assets to be Sold.
(i) All interests in goodwill related to the Acquired Business;
(ii) the right, on a nonexclusive basis, to use all patents, patent
applications, copyrights, trademark registrations and applications therefor,
inventions, trade secrets, technical know-how, special processes, and similar
intangibles, parts lists, designs, specifications, drawings, bills of material,
maintenance manuals, warranty service data and sales literature (collectively
"Intangible Assets") related to the Acquired Business;
(iii) all books and records of account, employment records, customer
lists, supplier lists, and any other information relating to or arising out of
the Acquired Business prior to the Closing Date which has been reduced to
writing, or copies thereof where it is appropriate for the Company to retain the
originals;
(iv) all of Sellers' interest in the transfer stations ("Transfer
Stations") and the docks associated with the Transfer Stations ("Transfer
Station Docks") located in the State of Louisiana that are used in connection
with the Acquired Business, including all buildings, structures, improvements
and fixtures thereon (together the "Transfer Stations and Transfer Station
Docks"), a complete listing of which is attached to this Agreement as Exhibit
1.1.C; Transfer Stations and Transfer Station Docks will be leased (if owned by
the Company or an Affiliate, as defined below) or subleased (if held by the
Company under lease or sublease other than from an Affiliate) to Buyer for their
remaining useful lives, all in accordance with subparagraph 1.1(b);
(v) all barges and marine facilities (the "Marine Facilities") used in
the Acquired Business in connection with the transfer of NOW to the Transfer
Stations and Transfer Station Docks; a complete listing of the Marine Facilities
is attached hereto as Exhibit 1.1.D; the Marine Facilities will be sold to Buyer
for part of the Purchase Price, as defined below (if owned by the Company or an
Affiliate), or leased to Buyer for their remaining useful lives at the same
rental as paid by the Company, without any premium (if held by the Company or an
Affiliate under lease or sublease) ;
(vi) all vehicles, machinery, pit remediation equipment and other
equipment, furniture, tools, tooling, spare parts and other fixed assets (the
"Fixed Assets"), including but not limited to the Fixed Assets listed on Exhibit
1.1.E attached hereto, except as disposed of in the ordinary course of business
before the Closing Date;
(vii) all of the Company's rights as of the Closing Date under all
contracts relating exclusively to the Acquired Business, to the extent assumed
by Buyer;
(viii) all of the Company's right, title and interest in and to all
names previously used by the Company or any predecessor in connection with the
Acquired Business the use of which use has been permanently discontinued by the
Company and the right to purchase for $1.00 at any time after the Closing Date
any and all names that are Excluded
2
<PAGE>
Assets, when, as and if Parent and the Company permanently discontinue such use
or announce the intention to permanently discontinue such use; and
(ix) all other assets, whether tangible or intangible, definite
or contingent, and of every kind and description and wherever situated, that are
used or useful primarily in connection with the Acquired Business.
(b) Assets to be Leased. All of the assets listed on Schedule
1.1(b) within the Disclosure Memorandum (as defined below), will be leased to
Buyer in accordance with the terms of one or more leases to be mutually approved
by the parties and entered into on the Closing Date. Such leases will be
consistent with Paragraph 13.1 of this Agreement.
1.2 Excluded Assets. All of the assets and property of the Company,
Parent and Holdco other than the Equity Interests and the assets and property
included within the Included Assets shall be "Excluded Assets," including but
not limited to the following:
(a) Parent's, the Company's and Holdco's rights under this
Agreement, including the consideration to be received hereunder;
(b) all interests in cash, accounts receivable and other components
of working capital of the Company;
(c) all property and assets relating exclusively to the Excluded NOW
Business;
(d) the NOW disposal facilities owned and operated by the Company
designated as Elm Grove, LA (DNR Permit # OWD 89-1), Bourg, LA (DNR Permit #90-
10 OWD), Bateman Island, LA (DNR Permit # 91-10 OWD), and Mermentau, LA (DNR
Permit # SWD 83-6)(collectively the "Landfarms") and associated operating
equipment;
(e) The Company's facility at Zapata, Texas, and all assets
associated with such facility (the "Zapata Facility");
(f) The Company's landfarming facility designated as Lacassine, LA,
and all assets associated with such facility (DNR Permit # 93-05 OWD) (the
"Lacassine Facility"); and
(g) The name "Campbell Wells, Ltd.," and all other names that are
used by Parent or the Company or both in connection with the operation of the
Landfarms, the Zapata Facility or the Lacassine Facility.
2. Purchase and Lease Price and Payment.
------------------------------------
2.1 Aggregate Consideration. The aggregate consideration to be paid by
Buyer (the "Purchase Price") for the Equity Interests, Included Assets and
Noncompetition Agreement (as defined below) shall be $70,500,000. In addition to
the Purchase Price, if any excise, sales, use or similar taxes are imposed on
the sale, lease and transfer of the Equity Interests and Included Assets to
Buyer, Buyer shall pay such taxes up to an aggregate of $30,000, and Sellers
shall pay the balance, if any, of such taxes.
3
<PAGE>
2.2 Payment. The Purchase Price shall be paid on the Closing Date in cash
in the form of a wire transfer of immediately available funds.
3. Ancillary Agreements.
--------------------
On the Closing Date, as a necessary incident of the sale and purchase of
the Equity Interests and the sale and purchase or lease of the Included Assets,
the following agreements will be executed by the parties indicated below:
3.1 Noncompetition Agreement. Buyer and Parent will execute and deliver a
noncompetition agreement (the "Noncompetition Agreement") in form and substance
as set forth in Exhibit 3.1 attached to this Agreement, and the Company will
execute and deliver a Joinder Agreement (the "Joinder Agreement") in form and
substance as set forth in Exhibit 3.1A attached to this Agreement.
3.2 Guaranty. Buyer will execute and deliver an Assumption and Guaranty
Agreement (the "Guaranty") in form and substance as set forth in Exhibit 3.2
attached to this Agreement with respect to Disposeco's obligations arising after
the Closing under the NOW Disposal Agreement dated as of June 4, 1996, among
Parent, the Company and Disposeco (the "Disposal Agreement").
4. Assumption of Liabilities.
-------------------------
Except as expressly set forth in this Agreement, Buyer is not assuming
any of the obligations or liabilities of Parent, the Company or Holdco. The
foregoing notwithstanding, Buyer shall assume and discharge in due course the
Assumed Obligations (as defined below).
5. Acquired Business Employees.
----------------------------
The Disclosure Memorandum includes a list of all employees and
independent contractors of the Company engaged in the Acquired Business as of
the date of this Agreement ("Acquired Business Employees"). Buyer shall be
given the opportunity to offer employment to any such Acquired Business
Employees (other than the "Excluded Employees," i.e., those who are listed in
the Disclosure Memorandum as engaged primarily in the operation of the
Landfarms, the Zapata Facility or the Lacassine Facility and certain other
administrative personnel designated by mutual agreement of Buyer and Sellers) in
Buyer's sole discretion but shall be under no obligation to offer employment to
any Acquired Business Employee. Sellers will be responsible for all of the
obligations owed to the Acquired Business Employees and the Excluded Employees
to and including the Closing Date, including but not limited to salary, bonus,
vacation, severance and sick pay, retirement benefits and amounts owed under
employee benefit plans, and shall defend, indemnify and hold harmless Buyer from
all liability with respect thereto, except that Buyer will be responsible for
severance pay of the Acquired Business Employees other than the Excluded
Employees, whether or not they become employees of Buyer. No severance pay will
be payable by Buyer with respect to Acquired Business Employees who become
employees of Buyer, except upon termination of their employment with Buyer. For
a period of five years after the Closing Date, none of the Company and its
Affiliates will induce or influence (or attempt to induce or influence) any of
the Acquired Business Employees that have entered into the employ of Buyer or
Disposeco (or remained in the employ of Disposeco) to terminate such employment.
4
<PAGE>
6. Representations and Warranties of Sellers.
-----------------------------------------
Except as otherwise specifically disclosed by Sellers to Buyer in a
written memorandum (the "Disclosure Memorandum") making reference to this
Agreement, Sellers hereby jointly and severally warrant and represent the
following:
6.1 Organization and Good Standing.
------------------------------
(a) Parent. Parent is a corporation duly organized and in good
standing under the laws of the State of Delaware. It has corporate power and
authority to enter into this Agreement and the Related Agreements (as defined
below) and the transactions contemplated hereby. Parent owns, directly or
indirectly, the Equity Interests and all of the outstanding equity interests in
the Company.
(b) The Company. The Company is a limited partnership duly formed
and validly existing under the laws of the State of Delaware and has partnership
power and authority to conduct its business as it is now being conducted. The
Company is duly registered to transact business in each jurisdiction where the
character or location of the assets owned by it or the nature of the business
transacted by it require such registration except where failure to be so
registered would not have a Material Adverse Effect (as defined below), and such
registrations are in full force and effect. The Disclosure Memorandum includes a
list of the jurisdictions in which the Company is registered to transact
business.
(c) Holdco. Holdco is a corporation duly organized and in good
standing under the laws of the State of Delaware. It has corporate power and
authority to enter into this Agreement and to sell the Equity Interests to
Buyer. Holdco is not required to be qualified as a foreign corporation in any
jurisdiction.
(d) Disposeco. Disposeco is a corporation duly organized and in good
standing under the laws of the State of Delaware. It has corporate power and
authority to conduct its business as it is now being conducted. Disposeco is
duly qualified to transact business in each jurisdiction where the character or
location of the assets owned by it or the nature of the business transacted by
it require such qualification except where failure to be so registered would not
have a Material Adverse Effect, and such qualifications are in full force and
effect. The Disclosure Memorandum includes a list of the jurisdictions in which
Disposeco is qualified to transact business.
6.2 Authority.
---------
(a) Parent. The execution by Parent of this Agreement and each of the
Related Agreements to which Parent is a party, the delivery of each such
agreement to Buyer and the performance thereof by Parent have been duly
authorized by the Board of Directors of Parent. All necessary stockholder and
corporate action has been taken, and this Agreement and each of the Related
Agreements to which Parent is a party are valid and binding upon Parent and
enforceable in accordance with their terms, subject to the Bankruptcy Exception,
as defined below. The execution, delivery and performance by Parent of this
Agreement and each of the Related Agreements to which Parent is a party are not
contrary to the Certificate of Incorporation or By-Laws of Parent and will not
result in a violation or breach of any term or provision or constitute a default
or give any party a right to accelerate the due date of any indebtedness underv
5
<PAGE>
any indenture, mortgage, deed of trust or other contract or agreement to which
Sellers, or any of them, are parties or by which Sellers, or any of them, are
bound, which relate to or affect the Acquired Business, the Equity Interests or
the Included Assets.
(b) The Company. The Company has the requisite power under its
agreement and certificate of limited partnership and the Delaware Revised
Uniform Limited Partnership Act to enter into this Agreement and each of the
Related Agreements to which it is a party and to perform its obligations under
each such agreement. The execution, delivery and performance of this Agreement
and each of the Related Agreements to which the Company is a party and the
consummation of the transactions contemplated by this Agreement and such Related
Agreements have been duly authorized by all necessary partnership action on the
part of the Company, and no other partnership proceedings on the part of the
Company are necessary to authorize this Agreement or any of such Related
Agreements and the transactions contemplated hereby and thereby. This Agreement
and each of the Related Agreements to which the Company is a party are valid and
binding upon the Company and enforceable in accordance with their terms, subject
to the Bankruptcy Exception. The execution, delivery and performance of this
Agreement and the Related Agreements to which the Company is a party are not
contrary to the partnership agreement of the Company and will not result in a
violation or breach of any term or provision or constitute a default or give any
party a right to accelerate the due date of any indebtedness under any
indenture, mortgage, deed of trust or other contract or agreement to which
Sellers, or any of them, are parties or by which Sellers, or any of them, are
bound, which relate to or affect the Acquired Business, the Equity Interests or
the Included Assets.
(c) Holdco. The execution by Holdco of this Agreement, the delivery
of this Agreement to Buyer and the performance thereof by Holdco have been duly
authorized by the Board of Directors of Holdco. No other corporate action is
required, and this Agreement is valid and binding upon Holdco and enforceable in
accordance with its terms, subject to the Bankruptcy Exception, as defined
below. The execution, delivery and performance of this Agreement by Holdco are
not contrary to the Certificate of Incorporation or By-Laws of Holdco and will
not result in a violation or breach of any term or provision or constitute a
default or give any party a right to accelerate the due date of any indebtedness
under any indenture, mortgage, deed of trust or other contract or agreement to
which Sellers, or any of them, are parties or by which Sellers, or any of them,
are bound, which relate to or affect the Acquired Business, the Equity Interests
or the Included Assets.
6.3 Financial Statements. All of the information provided by the
Company or Parent to Deloitte & Touche, Buyer's independent accountants, in
connection with such firm's examination of the balance sheets of the Company
with respect to the activities constituting the Acquired Business as of December
31, 1993, December 31, 1994, and December 31, 1995, and the related statements
of income, equity and cash flows for the years ended December 31, 1993, December
31, 1994, and December 31, 1995, was prepared from the books and records of the
Company and was true and correct in all material respects when so provided to
such firm. The balance sheet of the Company with respect to such activities as
of March 31, 1996, and the related statements of income, equity and cash flows
for the three months then ended were prepared from the books and records of the
Company, which books and records were true and correct in all material respects
as of such date, and such financial statements (including the notes thereto)
present fairly, as of the date or for the period presented, the financial
position, results of operations and changes in cash flows attributable to such
activities, in each case subject to year-end audit adjustments.
6
<PAGE>
6.4 Holdco's and Parent's Interests. Holdco is the sole stockholder of
Disposeco and has good title to the Equity Interests, free and clear of all
Liens. The Equity Interests constitute 100% of the outstanding capital stock of
Disposeco. Parent has no interest in the Business other than (a) its indirect
ownership of the Equity Interests, (b) its equity interests, direct and
indirect, in the Company and the subsidiaries and Affiliates of the Company, and
(c) its interest in the Zapata Facility. Holdco has no interest in the Business
other than its ownership of the Equity Interests.
6.5 Title to and Condition of Properties. Holdco has good title to the
Equity Interests, and the Company has good title to the Included Assets. The
Company has the legal right to transfer and assign or lease the Included Assets
to Buyer without obtaining any consent, permit or approval of or from any other
Person, other than approval under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), except where failure to obtain any such
consent, permit or approval would not have a Material Adverse Effect. The
tangible assets within the Included Assets are in good operating condition and
repair, subject to ordinary wear and tear, taking into account the respective
ages of the assets involved.
6.6 Contracts. Sellers have furnished to Buyer copies of or access to all
master service agreements (without related addenda containing price information,
which shall be made available to Buyer at the Closing) and all other contracts
to be assumed by Buyer hereunder, except for provisions of such contracts that
relate primarily to the Excluded NOW Business. The Disclosure Memorandum
contains a list of all Material Contracts (as defined below). To the knowledge
of Sellers, all of the Material Contracts are valid and binding obligations of
the parties thereto in accordance with their respective terms, subject to the
Bankruptcy Exception; there have been no material amendments to or modifications
to any Material Contract (except as set forth in the copies furnished to Buyer);
no event has occurred which is, or, following any grace period or required
notice, would become a material default under the terms of any Material
Contract; and the Company has not waived any material rights under any Material
Contract.
6.7 No Litigation. There is no suit or action (equitable, legal or
administrative), arbitration or other proceeding pending or, to the knowledge of
Sellers, threatened against Parent or the Company or any of their Affiliates,
which materially relates to the Equity Interests or the Included Assets or which
would materially adversely affect Buyer's conduct of the Acquired Business after
the Closing Date. There is no suit or action (equitable, legal or
administrative), arbitration or other proceeding pending or, to the knowledge of
Sellers, threatened by Parent, the Company or any of their Affiliates which
relates to or affects the Equity Interests, the Included Assets or Buyer's
conduct of the Acquired Business after the Closing Date.
6.8 Compliance With Laws. Parent and the Company are in compliance with
all applicable laws, statutes, ordinances, regulations, decrees and other legal
requirements, including but not limited to laws requiring the filing of tax
returns and reports and the payment of taxes, except where the failure to comply
would not have a Material Adverse Effect. Assuming satisfaction of the
condition set forth in Paragraph 11.3, the execution and performance of this
Agreement and the Related Agreements and the consummation of the transactions
contemplated hereby will not violate any provision of or constitute a default
under any law, rule or regulation, order, writ, injunction or decree of any
court or other governmental agency or instrumentality applicable to Parent or
the Company with respect to the Acquired Business, except where such violation
or default would not have a Material Adverse Effect.
7
<PAGE>
6.9 Insurance. The Disclosure Memorandum includes a complete list of all
policies of fire, liability and other forms of insurance maintained by the
Company which cover the Acquired Business and the Included Assets, indicating
risks insured against, carrier, policy number, amount of coverage, premiums and
expiration date.
6.10 Letters of Credit and Performance Bonds. The Disclosure Memorandum
includes a list of all outstanding letters of credit and performance bonds that
have been issued in connection with the Acquired Business, including a summary
of the terms thereof and the obligations to which they relate.
6.11 Employee Benefit Plans. Buyer will not be subjected to any liability
under any employee benefit plan maintained by Parent or the Company.
6.12 Permits, Licenses and Authorizations. The Company has all licenses,
franchises, permits and other governmental authorizations that are legally
required to enable it to conduct the Acquired Business in all material respects
as conducted on the date hereof, except where failure to have any such license,
franchise, permit or authorization would not have a Material Adverse Effect. All
such licenses, franchises, permits and other governmental authorizations related
to the Acquired Business are freely transferable to Buyer and will be included
within the Included Assets. Except as otherwise provided in this Agreement, no
authorizations, approvals or consents of any governmental department,
commission, bureau, agency or other public body or authority are required for
consummation of the transactions contemplated by this Agreement, except where
failure to obtain any such authorizations, approvals or consents would not have
a Material Adverse Effect.
6.13 Environmental Matters.
---------------------
(a) To the knowledge of Parent and the Company, no underground storage
tanks the existence of which would have a Material Adverse Effect exist on,
under or in any real property or buildings and improvements thereon constituting
part of the Included Assets (collectively, the "Property").
(b) To the knowledge of Parent and the Company, during the time that any
Property was owned or leased by the Company or any predecessor with respect to
the Acquired Business, it did not violate to an extent that would have a
Material Adverse Effect any applicable federal, state and local laws, ordinances
or regulations, now or previously in effect, relating to environmental
conditions, industrial hygiene or Hazardous Materials (as defined below) on,
under, in or about such Property (including without limitation the Hazardous
Materials Laws, as defined below).
(c) As of the date hereof, to the best of the knowledge of Parent and
the Company, there are no (i) enforcement, clean-up, removal, mitigation or
other governmental or regulatory actions instituted, contemplated or threatened
pursuant to any Hazardous Materials Laws against the Company or any predecessor
with respect to the Acquired Business, or any Property included within the
Included Assets, (ii) claims made or threatened by any person or governmental
body against the Company or any predecessor relating to any Property or (iii)
any occurrence or condition known to Parent or the Company on any Property that
can reasonably be expected to subject Buyer or such Property to any material
restrictions on occupancy, transferability or use of any Property under any
Hazardous Materials Laws. The Disclosure
8
<PAGE>
Memorandum includes a list of all complaints, notices of violation and claims
relating to Hazardous Materials Laws which, to the knowledge of Sellers have
been received by or asserted against the Company or any predecessor with respect
to the Acquired Business or any Property which could reasonably be expected to
have a Material Adverse Effect.
6.14 Absence of Certain Changes. Since December 31, 1995, there has not
been:
(a) any material adverse change in the financial condition, assets,
liabilities or net worth of the Company related to the Acquired Business;
(b) any damage, destruction, or loss, whether or not covered by
insurance, materially and adversely affecting the Acquired Business or the
Included Assets;
(c) any material increase in the compensation payable or to become
payable to any employees of the Company engaged in the Acquired Business, other
than the Excluded Employees, or any bonus payment or arrangement made to or with
any of such employees;
(d) to the knowledge of Sellers, any mortgage, pledge or subjection to
lien, charge, or encumbrance of any kind of any of tangible assets or Intangible
Assets of the Company related to the Acquired Business;
(e) any sale, transfer or assignment of any assets, including any
interest in any Intangible Assets, of the Company related to the Acquired
Business, except sales for fair value in the ordinary course of business, or any
cancellation for less than fair value of any debts or claims due the Company,
except for any sales, transfers or assignments of assets that would not have a
Material Adverse Effect ; or
(f) to the knowledge of Sellers, any amendment or termination of any
Material Contract except (i) in the ordinary course of business, (ii) as
included in copies of such contracts furnished to Buyer, or (iii) any amendments
or terminations that would not have a Material Adverse Effect.
6.15 No Labor Problems. The Company is not a party to any contract or
agreement with a labor union or any local or subdivision thereof and has not
been charged with any unresolved unfair labor practices with respect to the
Acquired Business; Sellers have no knowledge of any present organizing activity
among employees of the Company involved in the Acquired Business, other than the
Excluded Employees, by any union. To the knowledge of Sellers, there are no
material controversies pending or threatened between the Company and any of its
employees engaged in the Acquired Business, other than the Excluded Employees,
and the Company has substantially complied in connection with the Acquired
Business with all laws relating to the employment of labor, including provisions
relating to wages, hours, benefits, collective bargaining, and the payment of
social security and similar taxes, and is not liable for any arrears in wages or
any taxes or penalties for failure to comply with any of the foregoing, except
where such failure to comply would not have a Material Adverse Effect.
6.16 Interest in Competitors, Suppliers, etc. Neither Parent nor any of
its Affiliates, and no officer or director of the Company or Family Member, as
defined below, of
9
<PAGE>
any such person, owns, directly or indirectly, individually or
collectively, any interest in any Person which has a material contractual
relationship with the Company related to the Acquired Business, including but
not limited to lessors of real or personal property leased to the Company and
entities against whom rights or options are exercisable by the Company with
respect to the Acquired Business.
6.17 Purchases and Sales. Since December 31, 1995, the Company has not
placed any orders for materials, merchandise or supplies in exceptional or
unusual quantities based upon past operating practices.
6.18 Employees and Suppliers. To the best knowledge of Sellers, the
Company has satisfactory relationships with its employees (other than Excluded
Employees), suppliers and independent contractors relating to the Acquired
Business, except where failure to have such satisfactory relationships would not
have a Material Adverse Effect.
6.19 Intangible Assets. The Company is not obligated to pay any royalties
or other fee to any licensor or other third party with respect to any Intangible
Assets the right to use of which is included within the Included Assets. None of
Sellers has received any claim alleging any conflict between any aspect of the
Acquired Business and any Intangible Assets claimed to be owned by others.
7. Additional Obligations and Covenants of Sellers.
------------------------------------------------
Sellers hereby jointly and severally covenant and agree as follows:
7.1 Conduct of Acquired Business. Except as otherwise provided in this
Agreement, between the date hereof and the Closing Date:
(a) The Acquired Business will be conducted in the ordinary course,
and Sellers will use commercially reasonable efforts to preserve the
organization of the Company intact and will not take any action intended to
interfere with the Company's relationships with its employees (other than
Excluded Employees), suppliers and customers, except where the failure to comply
with this subparagraph would not have a Material Adverse Effect.
(b) The Company will not, without Buyer's prior written approval,
enter into any material transaction affecting the Acquired Business other than
in the ordinary course of business.
(c) The Company will not, without Buyer's prior written approval,
enter into or cancel any Material Contracts, except that the Company may,
without Buyer's prior approval, terminate any Material Contract for any material
default thereunder by any party other than the Company or an Affiliate of the
Company.
(d) The Company will use commercially reasonable efforts to maintain
the Included Assets in their condition as of the date of this Agreement,
ordinary wear and tear excepted.
(e) The Company will perform all repairs and maintenance required by
any leases or charters of barges and other leased assets within the Included
Assets, so that, on
10
<PAGE>
the Closing Date, such assets are in the condition that would be required by
such leases and charters if they were to terminate on the Closing Date.
7.2 Access and Information. (a) Except as set forth in subparagraph (b)
below, Sellers will afford to Buyer and Buyer's counsel, accountants and other
representatives reasonable access, throughout the period from the date hereof to
the Closing Date, to all of their properties, books, contracts and records
related to the Acquired Business and will furnish Buyer during such period with
all information that Buyer reasonably may request, including copies and/or
extracts of pertinent records, documents and contracts. The Confidentiality
Agreement between Parent and Buyer shall remain in force and effect and apply to
the information received by Buyer and its representatives hereunder.
(b) Buyer hereby acknowledges that it will have no right to receive,
and Sellers shall have no obligation to deliver, any documents in any way
relating to bids or proposals or other marketing efforts of the Company prior to
the Closing Date.
7.3 HSR Act Notification. Sellers have previously filed a notification
form in compliance with the HSR Act, and will respond promptly to any reasonable
inquiry or request for additional information that they receive with respect to
such notification form. Sellers will furnish to Buyer copies of (a) the
notification form, (b) any request for additional information that they receive
promptly after receiving it and (c) the additional information to be furnished
in response to any such request before it is filed, provided, however, that
Sellers' obligation to provide such documents or information which, in the
reasonable judgment of Sellers' counsel, should not be provided to Buyer because
of antitrust considerations shall be satisfied by delivery of such documents or
information to Buyer's counsel pursuant to a confidentiality agreement
satisfactory to Sellers.
7.4 Continuation of Insurance, Letters of Credit and Bonds. From and
after the date hereof and until the Closing Date, the Company will continue to
carry its existing insurance coverage (so long as coverage is available on
commercially reasonable terms), letters of credit and bonds posted to ensure
performance in connection with the Acquired Business, subject only to varia tion
in amounts required by the ordinary operations of the Acquired Business.
7.5 Efforts to Satisfy Conditions. Sellers agree to use commercially
reasonable efforts to satisfy or cause to be satisfied all of the conditions
precedent to their or Buyer's obligations under this Agreement, to the extent
that their action or inaction can control or influence the satisfaction of such
conditions, provided, however, that Sellers will not be required under this
Paragraph 7.5 to take any action or refrain from taking any action to satisfy
any objections that the Federal Trade Commission may raise with respect to the
transactions contemplated by this Agreement and the Related Agreements.
7.6 Title at Closing. At the Closing, Holdco will transfer to Buyer good
title to the Equity Interests, free and clear of all Liens (as defined below).
At the Closing the Company will transfer to Buyer good title to the Included
Assets, free and clear of all Liens other than Permitted Liens (as defined
below) related thereto and the Liens set forth on Schedule 7.6 hereto, provided,
however, that Buyer's acceptance of any of the Included Assets subject as of the
Closing Date to any Liens or Permitted Liens shall not excuse or limit the
obligations of Parent and the Company to defend, indemnify and hold harmless
Buyer as provided
11
<PAGE>
in this Agreement with respect to Seller Obligations evidenced or secured by
such Liens and Permitted Liens
7.7 Consents of Others. As soon as reasonably practicable after the date
hereof, and in any event prior to the Closing, Sellers will use commercially
reasonable efforts to obtain all consents, authorization and permits that are
required for the assignment and transfer to Buyer of all of leases, properties,
assets, contracts, agreements and permits ("Entitlements") herein provided to be
assigned and transferred, leased or subleased to Buyer. If any such consent is
not obtained, the Company agrees to cooperate with Buyer in any reasonable
arrangements designed to provide for Buyer the benefits under each such
Entitlement, including enforcement of any and all rights of the Company (and
Buyer as successor in interest) against all other parties thereto.
7.8 Information for Registration Statement. Sellers acknowledge that the
financial statements referred to in Paragraph 6.3 will be included in a
Registration Statement to be filed by Buyer with the Securities Exchange
Commission in connection with the public offering contemplated by Paragraph
10.8. Sellers will furnish to Buyer such additional information concerning the
Acquired Business as Buyer may reasonably request in order to comply with the
requirements of the Securities Act of 1933, subject to Paragraph 7.2(b) and the
limitations contained in Paragraph 7.3. Any other information hereafter
furnished by Sellers to Buyer in writing specifically for inclusion in such
Registration Statement will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein in the light of the circumstances under
which they were made not misleading at the time such Registration Statement
becomes effective or at the effective time of any post-effective amendment or
supplement thereto.
8. Representations and Warranties of Buyer.
---------------------------------------
Except as otherwise specifically disclosed by Buyer to Sellers in writing,
Buyer hereby represents and warrants the following:
8.1 Organization and Good Standing. Buyer is a corporation duly organized
and validly existing under the laws of the State of Delaware. Buyer has
corporate power to conduct its business as it is now being conducted, to own the
Equity Interests, to carry on the Acquired Business and to own or lease, as
applicable, and operate the Included Assets being purchased or leased hereunder.
8.2 Authority of Buyer. The execution, delivery and performance of this
Agreement and the Related Agreements by Buyer have been duly authorized by the
Board of Directors of Buyer. No further corporate action is necessary on the
part of Buyer to make this Agreement and the Related Agreements valid and
binding upon Buyer in accordance with their terms, subject to the Bankruptcy
Exception. The execution, delivery and performance of this Agreement and the
Related Agreements by Buyer will not result in a violation or breach of (a) the
Certificate of Incorporation or Bylaws of Buyer or (b) any term or provision or
constitute a default or give any party a right to accelerate the due date of any
indebtedness under any indenture, mortgage, deed of trust or other contract or
agreement to which Buyer is a party.
8.3 Newpark's Capitalization. The authorized capital stock of Newpark
consists of 20,000,000 shares of Common Stock, $.01 par value, of which
10,795,442 shares were issued
12
<PAGE>
and outstanding on May 31, 1996, and 1,000,000 shares of Preferred Stock, $.01
par value, of which no shares are issued and outstanding.
8.4 Newpark Reports. Newpark has delivered to Sellers copies of (i)
Newpark's Annual Reports on Form 10-K for the years ended December 31, 1993,
1994 and 1995 and (ii) all of Newpark's Quarterly Reports on Form 10-Q, all
Current Reports on Form 8-K and all proxy statements and other reports filed by
Newpark with the Securities and Exchange Commission (the "Commission") since
December 31, 1992 (the "Newpark Reports" herein). The Newpark Reports have been
duly and timely filed with the Commission and are in compliance with the Rules
and Regulations (as defined below). As of their respective dates, none of the
Newpark Reports contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Since the filing with the Commission of the most recent
report on Form 10-Q included in the Newpark Reports, there has been no material
adverse change in the financial condition, assets, liabilities or net worth of
Newpark and its subsidiaries, taken as a whole.
8.5 Newpark Financial Statements. The financial statements contained in
the Newpark Reports (the "Newpark Financial Statements") have been prepared in
accordance with the books and records of Newpark and its subsidiaries and in
accordance with generally accepted accounting principles consistently applied
during the periods indicated, all as more particularly set forth in such
financial statements and the Notes thereto. Each of the balance sheets included
in the Newpark Financial Statements presents fairly as of its date the
consolidated financial condition and assets and liabilities of Newpark and its
subsidiaries. Except as and to the extent reflected or reserved against in such
balance sheets (including the Notes thereto), Newpark (including its
subsidiaries) did not have, as of the dates of such balance sheets, any material
liabilities or obligations (absolute or contingent) of a nature customarily
reflected in a balance sheet or the notes thereto prepared in accordance with
generally accepted accounting principles. The consolidated statements of
earnings and stockholders' equity and consolidated statements of changes in
financial position included in the Newpark Financial Statements present fairly
the results of operations and changes in financial position of Newpark and its
subsidiaries for the periods indicated.
8.6 Knowledge and Experience of Buyer. Buyer is in the NOW collection,
transfer, treatment and disposal business, including the marine NOW collection,
transfer, treatment and disposal business, and is familiar with such industry
and the risks associated therewith. Buyer has been provided access to all
information considered by Buyer to be necessary for a full and complete
evaluation of the Acquired Business and the Included Assets. Buyer has the
knowledge, skill and experience in business, financial and investment matters to
evaluate the merits, risks and consequences of the purchase of the Equity
Interests and the purchase or lease of the Included Assets and consummation of
the other transactions contemplated by this Agreement.
9. Additional Obligations and Covenants of Buyer.
---------------------------------------------
9.1 Efforts to Satisfy Conditions. Buyer hereby covenants and agrees to
use commercially reasonable efforts to satisfy or cause to be satisfied all of
the conditions precedent to its or Sellers' obligations under this Agreement, to
the extent that Buyer's action or inaction can control or influence the
satisfaction of such conditions, provided, however, that Buyer will
13
<PAGE>
not be required under this Paragraph 9.1 to take any action or refrain from
taking any action to satisfy any objections that the Federal Trade Commission
may raise with respect to the transactions contemplated by this Agreement and
the Related Agreements, and further provided that Buyer shall not voluntarily
fail to obtain the financing referred to in Paragraph 10.8 unless, in Buyer's
reasonable judgment, such financing can be obtained only on terms that would
have a Material Adverse Effect on Buyer.
9.2 HSR Act Notification. Buyer has previously filed a notification form
in compliance with the HSR Act, and will respond promptly to any reasonable
inquiry or request for additional information that it receives with respect to
such notification form. Buyer will furnish to Sellers copies of (a) the
notification form, (b) any request for additional information that it receives
promptly after receiving it and (c) the additional information to be furnished
in response to any such request before it is filed, provided, however, that
Buyer's obligation to provide such documents or information which, in the
reasonable judgment of Buyer's counsel, should not be provided to Sellers
because of antitrust considerations shall be satisfied by delivery of such
documents or information to Sellers' counsel pursuant to a confidentiality
agreement satisfactory to Buyer.
10. Conditions Precedent to Obligations of Buyer.
---------------------------------------------
The obligations of Buyer under this Agreement are subject to the
satisfaction of each of the additional following conditions at or prior to the
Closing, unless waived in writing by Buyer:
10.1 Accuracy of Warranties and Representations. The representations and
warranties of Sellers herein shall be true and correct on and as of the Closing
Date, with the same force and effect, except as to transactions permitted herein
or to which Buyer may have consented in writing and changes occurring in the
ordinary course of business after the date of this Agreement and not materially
adversely affecting the Company, or its properties, prospects, or financial
condition related to the Acquired Business, as though such representations and
warranties had been made on and as of the Closing Date, and Sellers shall have
performed all covenants required by this Agreement to be performed by them at or
prior to the Closing.
10.2 No Material Adverse Change. There shall have been no changes after
the date of this Agreement in the results of operations, assets, liabilities,
financial condition or affairs of the Company with respect to the Acquired
Business which in their total effect have or could reasonably be expected to
have a Materially Adverse Effect.
10.3 HSR Act. Early termination shall have been granted or applicable
waiting periods shall have expired under the HSR Act.
10.4 Injunction. On the Closing Date there shall be no effective
injunction, writ or preliminary restraining order or any order of any nature
issued by a court or governmental agency of competent jurisdiction to the effect
that the transactions contemplated by this Agreement and the exhibits hereto may
not be consummated as herein provided, no proceeding or lawsuit shall have been
commenced by any governmental or regulatory agency for the purpose of obtaining
any such injunction, writ or preliminary restraining order and no written notice
shall have been received from any such agency indicating an intent to restrain,
prevent, materially delay or restructure the transactions contemplated by this
Agreement.
14
<PAGE>
10.5 Sellers' Certificate. Sellers shall have furnished to Buyer a
certificate dated the Closing Date and signed by the chief executive officer and
the chief financial officer of each of Sellers stating that to the best of the
knowledge of each, after reasonable inquiry, the conditions set forth in
Paragraphs 10.1 and 10.2 above have been satisfied.
10.6 Opinion of Sellers' Counsel. A favorable opinion of H. Steven Walton,
Vice President-Governmental Affairs and General Counsel of Parent, in form and
substance as set forth in Exhibit 10.6 attached hereto, shall have been
delivered to Buyer, dated the Closing Date.
10.7 Consents Obtained. All third party consents, authorization and
permits that are required for the assignment and transfer to Buyer of all of the
Entitlements shall have been obtained, except where, after giving effect to
Paragraph 7.7, failure to obtain any such consents, authorizations and permits
would not have a Material Adverse Effect.
10.8 Public Offering. Buyer shall consummated a public offering of its
common stock providing net proceeds to Buyer of at least $60.0 Million.
11. Conditions Precedent to Obligations of Sellers.
----------------------------------------------
The obligations of Sellers under this Agreement are subject to the
satisfaction of each of the following additional conditions at or prior to the
Closing, unless waived in writing by Sellers:
11.1 Accuracy of Warranties and Representations. The representations and
warranties of Buyer contained in this Agreement shall be true and correct on and
as of the Closing Date, with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date, and
Buyer shall have performed all of the covenants required by this Agreement to be
performed by it on or before the Closing.
11.2 No Material Adverse Change. There shall have been no changes after
the date of this Agreement in (a) the results of operations, assets,
liabilities, financial condition or affairs of Buyer and its subsidiaries, taken
as a whole, or (b) any of the Newpark Reports or Newpark Financial Statements,
which in their total effect have or could reasonably be expected to have a
Material Adverse Effect.
11.3 HSR Act. Early termination shall have been granted or applicable
waiting periods shall have expired under the HSR Act.
11.4 Injunction. On the Closing Date there shall be no effective
injunction, writ or preliminary restraining order or any order of any nature
issued by a court or governmental agency of competent jurisdiction to the effect
that the transactions contemplated by this Agreement and the exhibits hereto,
may not be consummated as herein provided, no proceeding or lawsuit shall have
been commenced by any governmental or regulatory agency for the purpose of
obtaining any such injunction, writ or preliminary restraining order and no
written notice shall have been received from any such agency indicating an
intent to restrain, prevent, materially delay or restructure the transactions
contemplated by this Agreement.
15
<PAGE>
11.5 Officers' Certificate of Buyer. Buyer shall have delivered to the
Company a certificate dated the Closing, signed by the chief executive officer
and the chief financial officer of Buyer and stating that, to the best of the
knowledge of each, after reasonable inquiry, the conditions set forth in
Paragraphs 11.1 and 11.2 have been satisfied.
11.6 Opinion of Buyer's Counsel. A favorable opinion of Ervin, Cohen &
Jessup, counsel for Buyer, in form and substance as set forth in Exhibit 11.6,
shall have been delivered to Sellers, dated the Closing Date.
12. Closing.
-------
The closing ("Closing") of the transactions contemplated by this Agreement
shall take place on the business day following the satisfaction of the condition
set forth in Paragraph 10.8 or, if later, on the business day following the
satisfaction or waiver of all of the other conditions precedent to the parties'
obligations hereunder. The Closing shall take place at a location to be
determined by mutual agreement. The term "Closing Date" herein shall mean the
date of the Closing.
13. Additional Post-Closing Obligations and Covenants.
--------------------------------------------------
Following the Closing, Sellers and Buyer shall perform all post-Closing
actions provided for herein, including those in Exhibits hereto, and the
following covenants and agreements:
13.1 Lease Terms.
(a) The Purchase Price includes payment in full for all rentals and
other amounts payable under the leases from Sellers of the Landfarm Docks listed
under Item I., numbers 1 - 3 of Schedule 1.1(b) attached to the Disclosure
Memorandum. Sellers, at their expense, will pay all costs of operation of such
Landfarm Docks after the Closing Date, including all required services and
maintenance. Sellers, at their expense, will maintain all permits that are
required in connection with the operation of such Landfarm Docks and will carry
property, casualty and liability insurance in such amounts and with respect to
such perils as Buyer may reasonably request.
(b) Buyer will pay rent with respect to any other Included Assets
that are leased by the Company in the same amount and under the same terms as
were applicable to the Company before the Closing Date, and Buyer will pay all
costs of operation of the Transfer Stations.
13.2 Bonds and Licenses. For a period of 90 days after the Closing
Date, the Company will keep in force all of its performance bonds, permits,
licenses and authorizations relating to the Acquired Business to provide time
for Buyer to replace such items.
13.3 Further Documents. From time to time, as reasonably requested by
Buyer, whether at or after the Closing and without further consideration,
Sellers shall execute and deliver any further instruments of conveyance and
transfer and take any other action required to more effectively convey and
transfer the Equity Interests and the Included Assets to Buyer, provided
16
<PAGE>
that such additional instruments and actions do not create any rights or
obligations that are not contemplated by this Agreement.
13.4 Pending and Subsequent Actions. To the extent commercially
reasonable, Sellers will cooperate, and will use their best efforts to have
their officers, directors and employees cooperate, with Buyer (at Buyer's
request and expense) on and after the Closing (a) in furnishing information,
testimony and other assistance in connection with any actions, proceedings,
arrangements, or disputes involving the Equity Interests, the Included Assets or
the Acquired Business based upon contracts, arrangements or acts of the Company
which were in effect or occurred on or prior to the Closing, and (b) by
providing Buyer reasonable access and information regarding the Acquired
Business on any matters in the possession or knowledge of Sellers for a period
of two years following the Closing Date. In addition, Sellers shall, from time
to time, upon the reasonable request of Buyer, consult with Buyer regarding the
history of the Acquired Business and the Included Assets, including, without
limitation, the contracts assumed by Buyer (to the extent such contracts do not
relate to the Excluded NOW Business). Notwithstanding any other provision of
this Agreement, the parties hereto acknowledge and agree that the consulting
services to be provided by Sellers under this Paragraph shall not include
providing any information or assistance with respect to the Excluded NOW
Business or any other area of operations now or hereafter engaged in by Sellers,
other than the Acquired Business. The parties agree that $1.0 Million of the
Purchase Price is allocable to Sellers' agreement to provide the consulting
services contemplated by this Paragraph.
13.5 Tax Matters. Sellers shall be solely responsible for all Taxes
incurred or payable with respect to the Acquired Business for periods which end
or ended on or before the Closing Date. Buyer shall be solely responsible for
all Taxes incurred or payable with respect to the Acquired Business for all
periods commencing on or after the Closing Date. All Tax refunds (and related
interest) relating to the Acquired Business for taxable periods ending on or
prior to the Closing Date shall be paid and inure to the benefit of Sellers.
All Tax refunds (and related interest) relating to the Company for taxable
periods commencing after the Closing Date shall be paid and inure to the benefit
of Buyer. Sellers agree that, at Buyer's election, Sellers will consent to the
treatment of the transactions contemplated by this Agreement in accordance with
Section 338(h)(10) of the Internal Revenue Code of 1986, as amended.
14. Survival of Representations.
---------------------------
All representations and warranties made by the parties under or in
connection with this Agreement (including any representations and warranties set
forth in the certificates delivered pursuant to Paragraphs 10.5 and 11.5) shall
survive the Closing for a period of one year, except for the representations and
warranties set forth in Paragraphs 6.2, 6.4, 6.5, 6.11 and 6.13, which shall
survive until the expiration of the applicable statute of limitations. The
foregoing notwithstanding, if Buyer consummates the acquisition of the Equity
Interests and Included Assets with Actual Knowledge (as defined below) of a
material breach of warranty or representation of Sellers contained in this
Agreement and nevertheless consummates the purchase of the Equity Interests and
Included Assets, such consummation shall be deemed a waiver of such material
breach to the extent of Buyer's Actual Knowledge thereof; such waiver shall not
extend to or in any way affect Sellers' obligations under subparagraph 15.1(b)
below. All covenants and agreements made by the parties under or in connection
with this Agreement, including but not limited to the covenants set forth in
subparagraphs 15.1(b) and 15.1(c), shall survive until the expiration of the
applicable statute of limitations.
17
<PAGE>
15. Indemnifications.
----------------
15.1 General Indemnification.
-----------------------
(a) Sellers (jointly and severally) and Buyer each hereby agree
to defend, indemnify and hold harmless the other party against all Damages
resulting from any breach of any warranty or representation made by such party
contained herein.
(b) Sellers hereby jointly and severally agree to defend, fully
indemnify and hold Buyer harmless against all Damages (as defined below) arising
out of the Seller Obligations (as defined below), whether or not the existence
of such Seller Obligations was disclosed to Buyer hereunder or constitutes a
breach of representation or warranty.
(c) Buyer agrees to defend, fully indemnify and hold Sellers
harmless from all Damages arising out of the Assumed Obligations (as defined
below).
15.2 Indemnification Procedures and Limitations. The following
provisions shall apply to all indemnification and hold harmless provisions of
this Agreement:
(a) The party seeking indemnification (the "Indemnitee") shall,
with reasonable promptness, provide the other party (the "Indemnitor") with
copies of any claims or other documents received and shall otherwise make
available to the Indemnitor all material relevant information. The Indemnitor
shall have the right to defend any such claim at its expense, with counsel of
its choosing, and the Indemnitee shall have the right, at its expense, using
counsel of its choosing, to join in the defense of any such claim. The
Indemnitee's failure to give prompt notice or to provide copies of documents or
to furnish relevant data shall not constitute a defense in whole or in part to
any claim by the Indemnitee against the Indemnitor except to the extent that
such failure by the Indemnitee shall result in a material prejudice to the
Indemnitor.
(b) The foregoing notwithstanding, if suit shall have been
instituted against the Indemnitee and the Indemnitor shall have failed, after
the lapse of a reasonable time after written notice to it of such suit, to take
action to defend the same, the Indemnitee shall have the sole right to defend
the claim and shall be entitled to charge the Indemnitor with the reasonable
cost of any such defense, including reasonable attorneys' fees. Neither party
shall settle or compromise any such claim unless it shall first obtain the
written consent of the other, which shall not be unreasonably withheld.
(c) Neither Buyer nor Sellers shall have any obligation to
indemnify the other with respect to Damages arising as a result of breach of
warranty or representation hereunder except to the extent that the amount of all
valid claims against such party for indemnification for breach of warranty or
representation hereunder exceeds an aggregate of $200,000. This provision shall
not apply to the express covenants and agreements contained herein, including
but not limited to the covenants set forth in subparagraphs 15.1(b) and 15.1(c).
(d) In determining the amount of Damages which gives rise to
liability hereunder, there shall be taken into account the amount of any Tax
benefits and insurance recoveries actually realized by the damaged party and its
Affiliates attributable to such Damages
18
<PAGE>
or derived therefrom, also taking into account the Tax treatment of the receipt
of any payment hereunder.
16. Amendment of Disclosure Memorandum.
----------------------------------
By written notice to Buyer from time to time prior to the Closing,
Sellers may supplement or amend the Disclosure Memorandum to correct any matter
that would constitute a breach of any warranty or representation of Sellers
contained in this Agreement; provided, however, that, except as provided in the
following sentence, no such supplement or amendment will affect the rights or
obligations of the parties to this Agreement until after the Closing Date.
Notwithstanding any other provision hereof, if the Closing occurs, any such
supplement or amendment of the Disclosure Memorandum will be effective for
indemnification purposes to cure and correct any breach of any warranty or
representation that would have existed if Sellers had not made such supplement
or amendment.
17. Destruction of Assets.
---------------------
Possession of the Included Assets shall pass to Buyer at the Closing.
Accordingly, all risk of loss with respect to the Included Assets shall be borne
by Sellers until the Closing. If on the Closing Date any Included Assets shall
have suffered loss or damage on account of fire, flood, accident, act of war,
civil commotion, or any other cause or event beyond the reasonable power and
control of Sellers (whether or not similar to the foregoing) to an extent which
materially affects the value to Buyer of the Included Assets, Buyer shall have
the right at its election to complete the acquisition (in which event all claims
of Sellers with respect to such loss or damage and all insurance proceeds
arising therefrom shall be included within the Included Assets) or, if it does
not so elect, it shall have the right, which shall be in lieu of any other right
or remedy whatsoever, to terminate this Agreement. In the latter event, all
parties shall be released from liability hereunder.
18. Termination.
-----------
Either Buyer or Sellers may forthwith terminate this Agreement by
written notice to the other: (a) subject to clause (b) below, without liability
to the other of them, if the Closing has not occurred on or before September 10,
1996, unless the failure of the Closing to occur on or before said date is due
to the failure of the party seeking to terminate this Agreement to perform in
all respects each of its obligations under this Agreement required to be
performed by it on or before said date pursuant to the terms hereof; or (b)
without prejudice to other rights and remedies which either party may have, if
default shall be made by the other of them in the observance or in the due and
timely performance of any of its covenants and agreements herein contained, or
if there shall have been a breach material to any of the warranties and
representations herein contained, or if any condition precedent to its
obligations has not been satisfied. Paragraphs 21 through 32 shall survive any
termination of this Agreement.
19. Notices.
-------
Any and all notices, demands, requests or other communications
hereunder shall be in writing and shall be deemed duly given when personally
delivered to or transmitted by overnight express delivery or by facsimile to and
received by the party to whom such notice is intended, or in lieu of such
personal delivery or overnight express delivery or facsimile
19
<PAGE>
transmission, 48 hours after deposit in the United States mail, first-class,
certified or registered, postage prepaid, return receipt requested, addressed to
the applicable party at the address provided below. The parties may change their
respective addresses for the purpose of this Paragraph 19 by giving notice of
such change to the other party in the manner which is provided in this
Paragraph 19.
Sellers or any Sanifill, Inc.
of them: 2777 Allen Parkway, Suite 700
Houston, TX 77019-2155
Attention: H. Steven Walton, Esq., Vice President
Facsimile No.: (713) 942-6299
With a copy to:
Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana
Houston, TX 77002-4995
Attention: Louise Shearer, Esq.
Facsimile No.: (713) 229-1522
Buyer: Newpark Resources, Inc.
3850 North Causeway, Suite 1770
Metairie, LA 70002
Attention: James D. Cole, President
Facsimile No.: (504) 833-9506
With a copy to:
Ervin, Cohen & Jessup
9401 Wilshire Boulevard
Beverly Hills, CA 90212
Attention: Bertram K. Massing, Esq.
Facsimile No.: (310) 859-2325
20. Certain Definitions.
-------------------
As used herein, the following terms have the following meanings:
"Actual Knowledge" of Buyer with respect to a material breach of a
warranty or representation of Sellers contained herein means the actual personal
knowledge of James D. Cole, Wm. T. Ballantine or Matthew W. Hardey of the
existence of the facts that constitute such material breach, proven by Sellers
by a preponderance of the evidence.
"Affiliate" or "affiliate" means a Person that directly or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with the Person specified. For purposes of this definition,
"control" (including the terms "controlling," "controlled by" and "under common
control with") of a Person means the possession, directly or indirectly,
20
<PAGE>
of the power (a) to vote 50% or more of the voting interests in such Person or
(b) direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise.
"Assumed Obligations" means (a) the performance after the Closing Date
of all obligations arising after the Closing Date under all contracts, leases
and other agreements transferred to Buyer pursuant to the terms of this
Agreement, provided that each such contract, lease or other agreement has been
specifically disclosed in the Disclosure Memorandum and assumed by Buyer and (b)
all of the obligations of the Acquired Business that come into existence after
the Closing.
"Bankruptcy Exception" means the limitation on enforceability imposed
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
of general application relating to or affecting the enforcement of the rights of
creditors or by equitable principles, whether enforcement is sought in equity or
at law.
"Damages" means damages, losses, liabilities, costs and expenses
(including reasonable attorneys' fees).
"Family Member" means, in the case of a Person who is an individual,
any parent, spouse or lineal descendant (including legally adopted descendants)
of such Person, or the spouse of any such descendant.
"Hazardous Materials Laws" means any and all federal, state and local
laws in effect that relate to or impose liability or standards of conduct
concerning the environment, as now in effect and as have been amended or
reauthorized, including without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. (S) 9601, et seq.), the
Hazardous Materials Transportation Act (42 U.S.C. (S) 1802, et seq.), the
Resource Conservation and Recovery Act (49 U.S.C. (S) 5101, et seq.), the
Federal Water Pollution Control Act (33 U.S.C. (S) 1251, et seq.), the Toxic
Substances Control Act (15 U.S.C. (S) 2601, et seq.), the Clean Air Act (42
U.S.C., (S) 7401 et seq.), the National Environmental Policy Act (42 U.S.C. (S)
4321, et seq.), the Refuse Act (33 U.S.C. (S) 407, et seq.), the Safe Drinking
Water Act (42 U.S.C. (S) 300(f), et seq.), and all rules, regulations, codes and
ordinances promulgated or published thereunder, and the provisions of any
licenses, permits, orders and decrees issued pursuant to any of the foregoing.
"Hazardous Materials" means any substances defined as or included in
the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," or "toxic substances" under the Hazardous Materials Laws.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien (including but not limited to any tax lien) or charge of any kind,
covenant, condition or restriction, including any agreement to grant any of the
foregoing, any conditional sale or other title retention agreement, any lease in
the nature of a lien, and the filing of or agreement to file any financing
statement under the Uniform Commercial Code of any jurisdiction in connection
with any of the foregoing.
"Material Adverse Effect" means a material adverse effect on the
financial condition, results of operations or business of the entity referred
to.
21
<PAGE>
"Material Contracts" means all contracts or agreements affecting the
Included Assets or the Acquired Business that involve (a) the ownership or use
of real property included within the Included Assets, (b) the ownership or use
of personal property included within the Included Assets having a value in
excess of $100,000, (c) payments or receipts greater than $100,000 during any
fiscal year and which by their terms do not terminate or may not be terminated
by the Company within one year after the Closing Date without penalty or premium
in excess of $50,000, or which involve payments or receipts greater than
$200,000 in any year, (d) collective bargaining or labor unions involving
employees engaged in the Acquired Business, other than the Excluded Employees,
(e) the employment or engagement as an independent contractor of any person
involved in the Acquired Business, other than the Excluded Employees, on a full-
time, part-time, consulting or other basis, in each case involving greater than
$75,000 in any year, (f) bonuses, incentive compensation, or stock option plans
involving employees engaged in the Acquired Business, other than the Excluded
Employees, (g) performance of any obligation of the Company related to the
Acquired Business that is guaranteed by Parent or any other third party,
including performance bonding arrangements, (h) payments based in any manner
upon the revenues, purchases or profits of the Company involving the Acquired
Business, (i) any restriction on the Company's engaging in any activity, (j)
ownership or use of Intangible Assets related to the Acquired Business, or (k)
transactions outside the ordinary course of the Acquired Business.
"Permitted Lien" means any of the following Liens: (a) carriers',
warehousemen's, mechanics', landlords', materialmen's, suppliers', tax
assessment and other governmental charges and other similar Liens arising in the
ordinary course of business and securing obligations which do not relate to
obligations for borrowed money and which are either not overdue or the amount,
validity or applicability of which is being contested in good faith by
appropriate proceedings; (b) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money); (c)
easements, rights of way, restrictions or other similar charges, covenants or
encumbrances which do not materially interfere with the continued use of the
Included Assets; (d) Liens arising as a result of the institution of litigation
and attachment or judgment Liens in existence less than 60 days after the entry
thereof or with respect to which execution has been effectively stayed or the
payment of which is covered in full by insurance or a bond; (e) negative pledge
or other agreements to refrain from giving Liens; (f) rights reserved to or
vested in any municipality or governmental, statutory or public authority by the
terms of any right, power, franchise, grant, license or permit, or by any
provision of law, to terminate such right, power, franchise, grant, license or
permit; (g) rights reserved to or vested in any municipality or governmental,
statutory or public authority to control or regulate any property within the
Included Assets, or to use such property in a manner which does not materially
impair the use of such property; (h) any obligations or duties affecting any
property within the Included Assets to any municipality or governmental,
statutory or public authority with respect to any franchise, grant, license or
permit; (i) zoning, planning and environmental laws and ordinances and municipal
regulations; (j) encumbrances (other than to secure the payment of money),
easements, restrictions, servitudes, permits, conditions, covenants, exceptions
or reservations in any property or rights of way related to the use of the
Included Assets for the purpose of roads, pipelines, transmission lines,
transportation liens, distribution liens, removal of gypsum, gas, oil, coal,
metals, steam, minerals, timber or other natural resources, and other like
purposes, or for the joint or common use of real property, rights of way,
facilities or equipment, or defects, irregularities and deficiencies in title of
any property
22
<PAGE>
or rights of way, none of which materially interfere with the continued use of
the Included Assets; and (k) any other Liens (other than to secure the payment
of money) that are not of the same character as the Permitted Liens described in
clauses (a), (b) and (d) above, the existence of which would not have a
Material Adverse Effect on the use of the Included Assets.
"Person" or "person" means an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or any agency or instrumentality
thereof.
"Related Agreements" means the Disposal Agreement, the Noncompetition
Agreement, the Guaranty and the Joinder Agreement.
"Rules and Regulations" means the rules and regulations adopted by the
Commission under the Securities Act and the Securities Exchange Act of 1934.
"Seller Obligations" means all obligations of the Business other than
the Assumed Obligations, and includes, without limitation, all liabilities
arising under the laws and regulations for the protection of the environment
with respect to the Landfarms and all liabilities secured by any Liens to which
the Included Assets are subject at Closing, other than Permitted Liens of the
types described in one or more of clauses (c) and (e) through (k) of the
definition of Permitted Liens.
"Tax" (including with correlative meaning, the terms "Taxes" and
"Taxable") means any income, gross receipts, ad valorem, premium, excise, value-
added, sales, use, transfer, franchise, license, severance, stamp, occupation,
service, lease, withholding, employment, payroll, premium, property or windfall
profits tax, alternative or add-on-minimum tax, or other tax, fee or assessment,
together with any interest and any penalty, addition to tax or additional amount
imposed by any governmental authority responsible for the imposition of any such
tax.
21. Assignment.
----------
Rights hereunder shall not be assignable and duties hereunder shall
not be delegable by either Sellers or Buyer without the prior written consent of
the other. Sellers hereby consent to Buyer's transferring and assigning its
rights and obligations hereunder to Newpark Disposal Service, L.L.C.
("Subsidiary"), a limited liability company and a wholly-owned subsidiary of
Buyer, provided that any such transfer or assignment shall not relieve Buyer of
its obligations hereunder. Nothing contained in or implied from this Agreement
is intended to confer any rights or remedies upon any person or entity, other
than the parties hereto and their successors in interest and permitted
assignees, unless expressly stated herein to the contrary.
22. Applicable Law; Jurisdiction.
----------------------------
The provisions of this Agreement and all rights and obligations
hereunder and under all documents, instruments and agreements executed under or
in connection with this Agreement shall be governed and construed in accordance
with the internal laws of the State of Texas applicable to contracts made and to
be wholly performed within said State.
23
<PAGE>
23. Remedies Not Exclusive.
----------------------
No remedy conferred by any of the specific provisions of this
Agreement is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law, in equity, or otherwise. The
election of any one or more remedies by either party hereto shall not constitute
a waiver of the right to pursue other available remedies.
24. Attorneys' Fees.
---------------
In any litigation relating to this Agreement, including litigation
with respect to any instrument, document or agreement made under or in
connection with this Agreement, the prevailing party shall be entitled to
recover its costs and reasonable attorneys' fees.
25. Successors and Assigns.
----------------------
All covenants, representations, warranties and agreements of the
parties contained herein shall be binding upon and inure to the benefit of the
parties, their respective heirs, personal representatives and permitted
successors and assigns.
26. 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.
27. Headings.
--------
Captions and paragraph headings used herein are for convenience only
and are not a part of this Agreement and shall not be used in construing it.
28. Amendments; Waivers.
-------------------
No provision or term of this Agreement or any agreement contemplated
herein between the parties hereto may be supplemented, amended, modified, waived
or terminated except in a writing duly executed by the party to be charged. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided. Failure of a party to insist on strict compliance with any of the
terms and conditions of this Agreement shall not be deemed a waiver of any such
terms and conditions.
29. Entire Agreement.
----------------
All schedules, exhibits and financial statements provided for herein
are a part of this Agreement. This Agreement and the other agreements and
documents provided for in this Agreement comprise the entire agreement of the
parties and supersede all earlier understandings of the parties with respect to
the subject matter hereof.
30. Publicity.
---------
24
<PAGE>
Except as otherwise required by law, any press release, announcement
or other public communication with respect to this Agreement or the sale and
purchase of the Included Assets shall be subject to advance approval by both
parties; each party agrees that it will not unreasonably withhold its approval
of any such release, announcement or communication.
31. Expenses.
--------
Except as otherwise expressly set forth herein or in the other
agreements and documents provided for herein, Buyer, on the one hand, and
Sellers, on the other hand, shall each be responsible for its own expenses with
respect to this Agreement and the transactions contemplated hereby, including,
without limitation, any broker's, finder's or similar fee or commission based on
arrangements made by or on behalf of the responsible party.
32. Severability.
------------
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall continue in full force and effect unless the enforcement of this
Agreement on that basis would materially alter the rights and privileges of any
party hereto or materially alter the terms of the transaction contemplated
hereby.
25
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
SANIFILL, INC. ("Parent")
By__________________________________
CAMPBELL WELLS, LTD. (the "Company")
By SANIFILL GP HOLDING CO., INC., its
General Partner
By___________________________________
NOW DISPOSAL HOLDING CO. ("Holdco")
By___________________________________
NEWPARK RESOURCES, INC. ("Buyer")
By___________________________________
James D. Cole, President
26
<PAGE>
LIST OF EXHIBITS
Disclosure Memorandum
Exhibit 1.1.C - List of Transfer Stations and Transfer Station Docks,
indicating whether owned or leased and by which entity
Exhibit 1.1.D - List of Marine Facilities, indicating whether owned or
leased and by which entity
Exhibit 1.1.E - List of Fixed Assets
Exhibit 3.1 - Noncompetition Agreement
Exhibit 3.1A - Joinder Agreement
Exhibit 3.2 - Assumption and Guaranty Agreement
Exhibit 10.6 - Form of opinion of Sellers' counsel
Exhibit 11.6 - Form of opinion of Buyers' counsel
27
<PAGE>
EXHIBIT 3.1
-----------
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (the "Agreement"), dated as of
_______________, 1996, is made and entered into by and between SANIFILL, INC., a
Delaware corporation ("Parent" or "Covenantor" herein), and NEWPARK RESOURCES,
INC., a Delaware corporation ("Newpark" or "Buyer" herein), with reference to
the following facts:
A. Ancillary to and concurrently with the execution and delivery of this
Agreement, Covenantor, Campbell Wells, Ltd., a Delaware limited partnership and
an indirect wholly-owned subsidiary of Parent ("Campbell Wells"), NOW Disposal
Holding Co., a Delaware corporation and an indirect wholly-owned subsidiary of
Parent ("Holdco"), and Newpark have closed under an Asset Purchase and Lease
Agreement (the "Purchase Agreement") pursuant to which Newpark has purchased all
of the equity interests in NOW Disposal Operating Co., a Delaware corporation
and an indirect wholly-owned subsidiary of Parent ("Disposeco"), from Holdco and
has purchased or leased from Campbell Wells the "Included Assets" (as defined in
the Purchase Agreement) used in the "Acquired Business" (as defined in the
Purchase Agreement). Newpark may assign its rights and delegate its duties
under the Purchase Agreement and hereunder to a wholly-owned subsidiary
("Subsidiary"), provided that no such assignment of rights or delegation of
duties shall relieve Buyer of its obligations under this Agreement. If such
assignment is made, references to Buyer in this Agreement shall be deemed to
refer to Subsidiary, or to Buyer and Subsidiary, as appropriate.
B. The execution and delivery of this Agreement are required under the
Purchase Agreement.
In consideration of the foregoing, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Covenantor and Buyer hereby agree and covenant as follows.
1. Certain Definitions. The following terms used herein shall have the
following meanings:
Affiliate or affiliate - a Person that directly or indirectly through
one or more intermediaries, controls, is controlled by or is under common
control with the Person specified. For purposes of this definition, "control"
(including the terms "controlling," "controlled by" and "under common control
with") of a Person means the possession, directly or indirectly, of the power to
(a) vote 50% or more of the voting interests in such Person or (b) direct or
cause the direction of the management and policies of such Person, whether by
contract or otherwise. In addition, at all times during the term of this
Agreement, Campbell Wells shall be deemed to be an Affiliate of Parent, and
Persons controlled by Campbell Wells and its controlled Affiliates, or jointly
controlled by Campbell Wells and its controlled Affiliates and Parent and its
Affiliates, shall be deemed
-1-
<PAGE>
to be Affiliates of Parent. Notwithstanding the foregoing, a Person who controls
Parent or Campbell Wells shall not be deemed to be an Affiliate of Parent or
Campbell Wells solely by reason of such control.
Business - Any one or more of the following activities: the Collection or
Disposal of NOW; the remediation and closure of oilfield waste pits, including
related loading and hauling; and marketing, dealing in or soliciting orders for
any of the products, services or support activities included within the
Business.
Collection - The collection, transfer or transportation of NOW.
Competitor - Any Person that, directly or indirectly, engages in any aspect
of the Business within any portion of the Territory.
Disposal - The treatment or disposal of NOW.
Excluded NOW - NOW that is generated and collected on land and is delivered
to the Landfarms from the site where it was generated entirely by on-land
transportation.
Landfarms - The NOW disposal facilities owned and operated by Campbell
Wells designated as Elm Grove, LA (DNR Permit # OWD 89-1), Bourg, LA (DNR Permit
#90-10 OWD), Bateman Island, LA (DNR Permit # 91-10 OWD), and Mermentau, LA (DNR
Permit # SWD 83-6).
NOW - Nonhazardous oilfield waste associated with the exploration and
production of oil, gas and geothermal energy, that contains less than 30
picocuries per gram of Radium 226 or 228.
Person or person - Any individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or any agency or instrumentality thereof.
The Territory - All or any part of the following: the States of Louisiana,
Texas, Mississippi and Alabama and the Gulf of Mexico.
2. Noncompetition. Covenantor hereby agrees, for itself and on behalf of
its Affiliates, that, during the term of this Agreement, except as otherwise
permitted under this Agreement, neither it nor any of its Affiliates will,
within any part of the Territory, directly or indirectly, do any one or more of
the following: (a) engage in any aspect of the Business; (b) own any interest in
any Competitor; (c) operate, join, control or otherwise participate in any
Competitor; or (d) lend credit or money for the purpose of assisting another to
establish or operate any Competitor.
-2-
<PAGE>
3. Term. The term of this Agreement commences on the date hereof and
shall continue for sixty months thereafter.
4. Maintenance of Confidentiality. For the term of this Agreement,
Covenantor and its Affiliates shall keep secret and retain in strictest
confidence, except for disclosure to any of their Affiliates, and will not
permit any Person other than their Affiliates to use any of the "Intangible
Assets" (as defined in the Purchase Agreement) which Buyer has been granted the
right to use, along with Covenantor and its Affiliates, under the Purchase
Agreement.
5. Permitted Activities. Section 2 of this Agreement notwithstanding:
(a) Covenantor and its Affiliates, as passive investors, may own up to
5% (including ownership by Covenantor and all of its Affiliates) of the equity
securities of any Person (other than Newpark) whose equity securities are
publicly traded. In addition, in connection with their business described in
subparagraph (b) below, Covenantor and its Affiliates shall be permitted from
time to time to acquire interests representing more than 5% of the equity
securities of Persons that derive less than 10% of their revenues from
activities that cause such Persons to be Competitors, provided that Covenantor
or its Affiliates or the Persons who engage in such competitive activities
immediately formulate plans to dispose of those aspects of such businesses that
cause such Persons to be Competitors and actually complete such dispositions
within 90 days after such interests are acquired by Covenantor or one or more of
its Affiliates.
(b) Buyer recognizes and acknowledges that Parent and its Affiliates
are in the business of the collection, treatment and disposal of numerous
varieties of wastes, including without limitation municipal solid wastes,
construction and demolition debris, industrial nonhazardous wastes and special
wastes, such as contaminated soil and sludges. Buyer agrees that this Agreement
relates only to the Collection and Disposal of NOW and the remediation and
closure of oilfield waste pits, including related loading and hauling, in the
Territory and that this Agreement is not intended to limit or otherwise affect
the business of Parent except as expressly set forth herein.
(c) Buyer further recognizes and acknowledges that Parent and its
Affiliates from time to time enter into joint venture arrangements with
independent (i.e., non-Affiliate) third parties ("Joint Venture Partners") and
that some of such Joint Venture Partners may engage in aspects of the Business
in the Territory. Without limiting the applicability of this Agreement to
Covenantor and its Affiliates and such joint ventures, Buyer agrees that the
terms of this Agreement shall not apply to Joint Venture Partners solely as a
result of their entering into joint venture arrangements with Covenantor and its
Affiliates.
(d) Parent and its Affiliates may continue to market, deal in, solicit
orders for and conduct other activity related to: (i) Disposal and Collection at
any of the Landfarms of Excluded NOW; (ii) Collection of NOW within a 200-mile
radius of Campbell Wells' Zapata, Texas, facility and Disposal of NOW so
Collected at such facility; (iii) Disposal and Collection of NOW contemplated
under the NOW Disposal Agreement dated as of June 4, 1996, by and
-3-
<PAGE>
among Parent, Campbell Wells and Disposeco; and (iv) Disposal and Collection of
NOW at Campbell Wells' Lacassine, LA, facility.
6. Injunctive Relief. Covenantor hereby stipulates and agrees that any
breach by it or by any of its Affiliates of this Agreement cannot be reasonably
or adequately compensated by damages in an action at law and that, in the event
of such breach, Buyer shall be entitled to injunctive relief, which may include
but shall not be limited to restraining Covenantor and its Affiliates from
engaging in any activity that would constitute a breach of this Agreement.
7. Severability. Covenantor acknowledges that it has carefully read and
considered the provisions of this Agreement and, having done so, agrees that the
restrictions set forth herein (including but not limited to the time periods of
restriction and the geographical areas of restriction) are fair and reasonable
and are reasonably required to protect the interests of Buyer and its
stockholders. In the event that, notwithstanding the foregoing, any of the
provisions of this Agreement shall be held to be invalid or unenforceable, the
remaining provisions hereof shall nevertheless continue to be valid and
enforceable, as though the invalid or unenforceable parts had not been included
herein. In the event that any provision of this Agreement relating to time
periods or areas of restriction or both shall be declared by a court of
competent jurisdiction to exceed the maximum time periods or areas (or both)
that such court deems reasonable and enforceable, said time periods or areas of
restriction or both shall be deemed to become and thereafter shall be the
maximum time periods and areas which such court deems reasonable and
enforceable.
8. Entire Agreement. This Agreement, together with the Purchase Agreement
and the other agreements specifically mentioned therein, constitutes the entire
agreement of Covenantor and Buyer with respect to the subject matter hereof and
supersedes all prior and contemporaneous oral agreements, understandings,
negotiations and discussions of the parties. No supplement, modification or
waiver of this Agreement shall be 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 or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided. Any failure to insist on strict compliance
with any of the terms and conditions of this Agreement shall not be deemed a
waiver of any such terms or conditions.
9. Nature of Obligations. All covenants and obligations of Covenantor
hereunder shall be binding on Covenantor, its Affiliates and the assigns,
successors and legal representatives of each of them and shall inure to the
benefit of Buyer and all of its Affiliates that engage in any aspect of the
Business in any part of the Territory.
10. Notices. Any and all notices, demands, requests or other
communications hereunder shall be in writing and shall be deemed duly given when
personally delivered to or transmitted by overnight express delivery or by
facsimile to and received by the party to whom such notice is intended, or in
lieu of such personal delivery or overnight express delivery or facsimile
transmission, 48 hours after deposit in the United States mail, first-class,
certified or
-4-
<PAGE>
registered, postage prepaid, return receipt requested, addressed to the
applicable party at the address provided below. The parties may change their
respective addresses for the purpose of this Paragraph 10 by giving notice of
such change to the other party in the manner which is provided in this
Paragraph 10.
Covenantor: Sanifill, Inc.
2777 Allen Parkway, Suite 700
Houston, TX 77019-2155
Attention: H. Steven Walton, Esq., Vice President
Facsimile No.: (713) 942-6299
With a copy to:
Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana
Houston, TX 77002-4995
Attention: Louise Shearer, Esq.
Facsimile No.: (713) 229-1522
Buyer: Newpark Resources, Inc.
3850 North Causeway, Suite 1770
Metairie, LA 70002
Attention: James D. Cole, President
Facsimile No.: (504) 833-9506
With a copy to:
Ervin, Cohen & Jessup
9401 Wilshire Boulevard
Beverly Hills, CA 90212
Attention: Bertram K. Massing, Esq.
Facsimile No.: (310) 859-2325
11. Attorneys' Fees. In any litigation relating to this Agreement,
including litigation with respect to any supplement, modification or waiver of
this Agreement or any of its provisions, the prevailing party shall be entitled
to recover its costs and reasonable attorneys' fees.
12. Law Governing. The provisions of this Agreement and all rights and
obligations hereunder shall be governed by and construed in accordance with the
internal laws of the State of Texas applicable to contracts made and to be
wholly performed within the State of Texas.
-5-
<PAGE>
13. Captions. The captions in this Agreement are included for convenience
of reference only, do not constitute a part hereof and shall be disregarded in
the interpretation or construction hereof.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
SANIFILL, INC.
By: ___________________
Name:
Title:
NEWPARK RESOURCES, INC.
By: ___________________
Name:
Title:
-7-
<PAGE>
EXHIBIT 3.1A
------------
JOINDER AGREEMENT
This Joinder Agreement (the "Joinder"), dated as of _____________,
1996, is made and entered into by Campbell Wells, Ltd., a Delaware limited
partnership ("Campbell Wells"), with reference to the following facts:
A. Concurrently with the execution of this Joinder, Sanifill, Inc.,
a Delaware corporation ("Parent"), of which Campbell Wells is an indirect
wholly-owned subsidiary, has entered into a Noncompetition Agreement (the
"Agreement") with Newpark Resources, Inc., a Delaware corporation ("Newpark"),
under which Parent agreed, on behalf of itself and its Affiliates, not to
compete with Newpark and its Affiliates with respect to the Business in the
Territory. Capitalized terms used but not defined herein shall have the meanings
ascribed to such terms as set forth in the Agreement, unless otherwise provided
herein.
B. Campbell Wells is an Affiliate of Parent that has heretofore
engaged in the Business. This Joinder sets forth Campbell Wells' agreement to be
bound by the obligations of Parent under the Agreement.
NOW, THEREFORE, for good consideration, the receipt and sufficiency of
which are hereby acknowledged, Campbell Wells hereby agrees as follows, for the
benefit of Newpark and its Affiliates.
1. Campbell Wells hereby agrees that, with the exceptions contained
in the Agreement, it and its Affiliates will perform all of the obligations
imposed on Parent with respect to Campbell Wells and its Affiliates under the
Agreement, with the same force and effect as if Campbell Wells were a party
thereto having directly undertaken such obligations.
2. This Joinder and the Agreement shall be binding on Campbell Wells
even if, at some future date, it ceases to be an Affiliate of Parent.
<PAGE>
IN WITNESS WHEREOF, Campbell Wells has executed and delivered this
Joinder as of the first date written above.
CAMPBELL WELLS, LTD.
By: SANIFILL GP HOLDING CO., INC.,
its General Partner
By:______________________________
ACCEPTED:
NEWPARK RESOURCES, INC.
By:_______________________________
Name:
Title:
<PAGE>
EXHIBIT 3.2
-----------
ASSUMPTION AND GUARANTEE AGREEMENT
This Assumption and Guarantee Agreement (the "Agreement"), dated as of
_____________, 1996, is entered into by and among Newpark Resources, Inc., a
Delaware corporation ("Newpark"), Sanifill, Inc., a Delaware corporation
("Sanifill"), and Campbell Wells, Ltd., a Delaware limited partnership, the
equity interests of which are owned directly or indirectly by Sanifill
("Campbell Wells" and, collectively with Sanifill, the "Sellers").
WHEREAS, Newpark and Campbell Wells are each engaged in the collection
and disposal of nonhazardous oilfield waste; and
WHEREAS, the Sellers, NOW Disposal Holding Co. ("Holdco") and Newpark
have entered into that certain Asset Purchase and Lease Agreement (the "Purchase
Agreement") pursuant to which Newpark is, simultaneously with the execution of
this Agreement, (i) purchasing all of the equity interests (the "Equity
Interests") in NOW Disposal Operating Co., a Delaware corporation and a wholly-
owned subsidiary of Holdco ("Disposeco"), and (ii) purchasing or leasing from
Campbell Wells the "Included Assets" (as defined in the Purchase Agreement) used
in the "Acquired Business" (as defined in the Purchase Agreement); and
WHEREAS, simultaneously with the execution of this Agreement, the
Sellers and Newpark are also entering into that certain Noncompetition Agreement
pursuant to which, with exceptions stated therein, the Sellers are agreeing not
to engage in the collection or disposal of nonhazardous oilfield waste generated
in the States of Louisiana, Texas, Mississippi and Alabama and in the Gulf of
Mexico; and
WHEREAS, after giving effect to the transactions described above,
Campbell Wells will continue to operate and own certain landfarms and a landfill
at which nonhazardous oilfield wastes are disposed of; and
WHEREAS, the Sellers and Disposeco have previously entered into that
certain NOW Disposal Agreement (the "Disposal Agreement") pursuant to which
Disposeco has agreed to deliver and Campbell Wells has agreed to accept certain
quantities of nonhazardous oilfield wastes at its landfarms in Louisiana each
year for a period of 25 years; and
WHEREAS, in connection with the transactions referenced above,
including without limitation the transfer of the Equity Interests pursuant to
the Purchase Agreement, Newpark has agreed to guarantee the obligations of
Disposeco under the Disposal Agreement and to take, or refrain from taking,
certain other actions in connection with the Disposal Agreement; and
WHEREAS, the parties desire to enter into this Agreement to more fully
set forth the terms and conditions of their understanding.
NOW, THEREFORE, in consideration of the above premises and the mutual
covenants and promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Unless otherwise specifically defined herein, all capitalized terms
used herein shall have the respective meanings ascribed to such terms in the
Disposal Agreement.
ARTICLE II
PERFORMANCE OF DISPOSAL AGREEMENT
Newpark hereby covenants and agrees that it shall cause Disposeco to
fully perform all of its obligations under the Disposal Agreement in a timely
manner. Newpark further covenants and agrees that it shall take all action,
including without limitation supplying information necessary for the
determination of quantities of NOW to be delivered pursuant to the Disposal
Agreement, or shall refrain from taking any action, as is necessary or
appropriate to permit Disposeco to fully perform all of its obligations under
the Disposal Agreement in a timely manner.
ARTICLE
GUARANTEE OF DISPOSAL AGREEMENT
3.1 Unconditional Guarantee. Newpark hereby unconditionally and
irrevocably guarantees the performance in full of all obligations of Disposeco
under the Disposal Agreement (such obligations of Disposeco being collectively
referred to herein as the "Guaranteed Obligation"), with the same force and
effect and to the same extent as if Newpark were a party to the Disposal
Agreement having the same rights and obligations thereunder as Disposeco.
3.2 No Set-Off; Guaranty of Performance or Payment Upon Demand. Newpark
shall perform any obligations or pay any amounts due in respect of the
Guaranteed Obligation promptly upon demand by the Sellers, without any set-off,
defense or deduction for any claims or counterclaims of any kind, except for any
such set-offs, defenses, deductions that Newpark could assert if it were a party
to the Disposal Agreement having the same rights and obligations thereunder as
Disposeco.
3.3 Waiver of Diligence, Etc. Newpark hereby waives diligence,
presentment, demand, protest and notice of any kind with respect to this
Agreement, as well as any requirement that Sellers exhaust any rights or take
any action against Disposeco.
3.4 Waiver of Suretyship Defenses. To the extent permitted by applicable
law, Newpark hereby waives any and all legal and equitable defenses that arise
by reason of Newpark's status as a surety for Disposeco, which defenses would
not be available to Newpark if it were a party to the Disposal Agreement having
the same rights and obligations thereunder as Disposeco.
-2-
<PAGE>
ARTICLE IV
COVENANTS, REPRESENTATIONS AND WARRANTIES OF NEWPARK
Newpark hereby covenants, represents and warrants to Sellers as of the
date of this Agreement that:
4.1 Organization and Qualification. Newpark (a) is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (b) has all requisite power and authority to own, lease and
operate its properties and to carry on its business as it is now being conducted
and is proposed to be conducted and (c) is duly qualified or licensed and in
good standing to do business in each jurisdiction in which the properties owned,
leased or operated by it or the nature of the business conducted or proposed to
be conducted by it makes such qualification or license necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed or in good
standing would not have, either individually or in the aggregate, a material
adverse effect on the transactions contemplated hereby.
4.2 Authorization and Validity of Agreement. Newpark has all requisite
power and authority to enter into this Agreement and to perform its obligations
hereunder and consummate the transactions contemplated hereby. The execution,
delivery and performance by Newpark of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
action on the part of Newpark. No action or approval of the equity owners of
Newpark is necessary to authorize Newpark's execution or delivery of, or the
performance of its obligations under, this Agreement. This Agreement has been
duly executed and delivered by Newpark and is a valid and binding obligation of
Newpark, enforceable in accordance with its terms.
4.3 No Conflict. The execution and delivery by Newpark of this Agreement
do not, and exercise by Newpark of its rights hereunder and the consummation of
the transactions contemplated hereby will not (a) require any consent, approval,
order or authorization of or other action by any governmental entity on the part
of or with respect to Newpark; (b) require on the part of Newpark any consent by
or approval of or notice to any other Person; or (c) result in a violation of
any law, rule, regulation, order, judgment or decree applicable to Newpark,
except in any case covered by (a), (b) or (c) where failure to obtain such
consent or such violation would not, either individually or in the aggregate,
have a material adverse effect on the transactions contemplated hereby.
4.4 Transfer of Affiliates of Newpark. The parties recognize and agree
that due to the method of calculating Annual Volume as set forth in Section
[2.2] of the Disposal Agreement, the purpose and intent of the Disposal
Agreement and of this Agreement would be frustrated in the event Newpark sold or
otherwise transferred (an "Affiliate Transfer") its interest in, or
substantially all of the assets of, any of its Affiliates which are engaged in
processing or disposal of NOW in the Covered Region where such transfer resulted
in such Persons no longer being, or such assets no longer being owned by,
Affiliates of Newpark under the terms of the Disposal Agreement. Newpark agrees
that it shall notify Campbell Wells of any such proposed Affiliate
-3-
<PAGE>
Transfer prior to the consummation of such transaction and that no such
Affiliate Transfer shall take place unless the transferee agrees (a) to report
to Campbell Wells all quantities of NOW received by such former Affiliate of
Newpark in the Covered Region during the remaining term of the Disposal
Agreement and (b) that any subsequent retransfer of such interests or assets by
such transferee shall be subject to this Article IV as if such transferee were
Newpark. Newpark further agrees that it shall not enter into any Affiliate
Transfer unless the agreement with the transferee expressly names Campbell Wells
as a third party beneficiary of the obligation of the transferee to make such
reports and to subject subsequent retransfers to this Article IV.
ARTICLE V
DISPUTE RESOLUTION
All disputes arising under this Agreement shall be resolved in
accordance with the arbitration procedures set forth in Article X of the
Disposal Agreement. In the event a set of facts gives rise to related disputes
under this Agreement and the Disposal Agreement, such disputes shall be
consolidated into a single arbitration proceeding, the result of which shall be
binding on all parties under both Agreements, unless the arbitrator or
arbitrators determine that it would be manifestly unfair to honor this provision
and determine that separate arbitration procedures are required.
ARTICLE VI
MISCELLANEOUS
6.1 Status of the Parties. Each party hereto is and shall perform this
Agreement as an independent contractor, and as such, shall have and maintain
complete control over all of its employees, agents, and operations. Except as
expressly otherwise provided in this Agreement, neither party nor anyone
employed by it shall be, represent, act, purport to act or be deemed to be the
agent, representative, employee or servant of the other party.
6.2 No Set-Off Rights. The parties hereby agree that neither party shall
have any right to set-off or apply against any sums due under this Agreement any
sums due or amounts otherwise owing pursuant to any other provision of this
Agreement or any other agreement or arrangement between the parties.
6.3 Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. Campbell Wells and Newpark may assign their rights, obligations and
duties under this Agreement with the written consent of the other parties to the
Agreement, which consent shall not be unreasonably withheld; provided that the
assigning party shall remain primarily liable for all obligations and duties
arising hereunder.
6.4 Notices. Notices and other communications provided for herein shall
be in writing and shall be deemed to have been validly given (a) 3 days after
deposit in the United States
-4-
<PAGE>
mails, registered or certified mail with proper postage prepaid and return
receipt requested, (b) upon transmission thereof and receipt of the appropriate
confirmation if sent via telecopier or telefax, (c) the business day after the
same shall have been deposited with a reputable overnight courier, shipping
prepaid and (d) if delivered in person, upon delivery, in each case addressed as
follows:
<TABLE>
<CAPTION>
<S> <C>
If to Newpark, to: with a copy to:
James D. Cole Bertram K. Massing
President Ervin, Cohen & Jessup
Newpark Resources, Inc. 9401 Wilshire Boulevard
3850 N. Causeway, Ste. 1770 Ninth Floor
Metairie, Louisiana 70002 Beverly Hills, California 90212-2974
ph: 504-838-8222 ph: 310-273-6333
fax: 504-833-9506 fax: 310-859-2325
<S> <C>
If to Campbell Wells, to: with a copy to:
W. Gregory Orr Louise A. Shearer
President Baker & Botts. L.L.P.
Campbell Wells, Ltd. One Shell Plaza
2014 West Pinhook Road, Ste. 900 910 Louisiana
Lafayette, Louisiana 70508 Houston, Texas 77002-4995
ph: 318-266-7976 ph: 713-229-1286
fax: 318-266-7922 fax: 713-229-1522
If to Sanifill, to: with a copy to:
H. Steven Walton Louise A. Shearer
Secretary Baker & Botts. L.L.P.
Sanifill, Inc. One Shell Plaza
2777 Allen Parkway, Ste. 700 910 Louisiana
Houston, Texas 77019-2155 Houston, Texas 77002-4995
ph: 713-942-6200 ph: 713-229-1286
fax: 713-942-6299 fax: 713-229-1522
</TABLE>
or such other address as any party shall specify by written notice so given.
6.5 Non-Waiver. The failure of any party to enforce its rights under any
provision of this Agreement shall not be construed to be a waiver of such
provision. No waiver of any breach of this Agreement shall be held to be a
waiver of any other breach.
6.6 Entire Agreement; Amendment. This Agreement constitutes the entire
agreement between the parties concerning the subject matter hereof and
supersedes any and all other communications, representations, proposals,
understandings or agreements, either written or oral,
-5-
<PAGE>
between the parties hereto with respect to such subject matter. This Agreement
may not be modified or amended, in whole or in part, except by a writing signed
by both parties hereto.
6.7 Severability. If any provision of this Agreement is declared invalid
or unenforceable, then such portion shall be deemed to be severable from this
Agreement and shall not affect the remainder hereof.
6.8 Headings. The Article and Section headings contained herein are for
reference purposes only and shall not in any way affect the meaning and
interpretation of this Agreement.
6.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one instrument.
6.10 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
-6-
<PAGE>
EXECUTED as of the day and year first above written.
NEWPARK RESOURCES, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
SANIFILL, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
CAMPBELL WELLS, LTD.
By:___________________________________
Name:_________________________________
Title:________________________________
<PAGE>
EXHIBIT 2.2
-----------
NOW DISPOSAL AGREEMENT
This NOW Disposal Agreement (the "Agreement"), dated as of June 4,
1996, but effective as of the Effective Date (as defined below), is entered into
by and among Sanifill, Inc., a Delaware corporation ("Sanifill"), NOW Disposal
Operating Co., a Delaware corporation and an indirect wholly-owned subsidiary of
Sanifill ("Disposeco"), and Campbell Wells, Ltd., a Delaware limited
partnership, the equity interests of which are owned directly or indirectly by
Sanifill ("Campbell Wells").
WHEREAS, Campbell Wells is engaged, and Disposeco proposes to engage,
in the collection and disposal of nonhazardous oilfield waste; and
WHEREAS, the parties desire that Disposeco agree to deliver, and
Campbell Wells agree to accept at its Louisiana landfarms, certain quantities of
nonhazardous oilfield waste each year for the next 25 years; and
WHEREAS, the parties further desire to set forth the basis on which
the quantities of waste to be delivered by Disposeco and accepted by Campbell
Wells shall be calculated, the price to be paid by Disposeco to Campbell Wells
for such disposal and related activities, the procedures to be followed by the
parties in determining the locations to which waste is to be taken and the
procedures to be followed in effecting the transfer and receipt of such waste at
Campbell Wells' facilities;
NOW, THEREFORE, in consideration of the above premises and the mutual
covenants and promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings (unless indicated otherwise, all Article and Section
references are to Articles and Sections in this Agreement):
Actual Volume: For any Contract Year, the aggregate amount of NOW
actually delivered by or on behalf of Disposeco and accepted for disposal by
Campbell Wells in accordance with the provisions of this Agreement.
Adjustment Dates: June 30, 1998 and each subsequent December 31 and
June 30 during the term of this Agreement.
Affiliate: A Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with the
Person specified. For purposes of this definition, the term "control"
(including the terms "controlling," "controlled by" and "under common control
with") of a Person means the possession, direct or indirect, of the power
<PAGE>
to (i) vote 50% or more of the voting interests in such Person or (ii)
direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise.
Annual Volume: For each Contract Year, the annual volume of NOW,
before consideration of Prior Years Adjustments, required to be delivered by
Disposeco to Campbell Wells for disposal at the Landfarms, which volume shall be
determined in accordance with Section 2.2.1.
Collection. The collection, transfer or transportation of NOW.
Contract Year: Twelve-month period commencing each July 1 during the
term of this Agreement; provided, however, that the first Contract Year shall be
the period commencing on the Effective Date and ending on June 30, 1997.
Covered Region: The States of Louisiana, Texas, Mississippi and
Alabama and the Gulf of Mexico.
Current Test Period: For any Adjustment Date, the six-month period
commencing six months prior to such Adjustment Date and concluding on such
Adjustment Date.
Disposal: The treatment or disposal of NOW.
Effective Date: The date Campbell Wells gives written notice to
Disposeco of the effectiveness of the Agreement.
Excluded NOW: NOW generated and collected on land and delivered to
the Landfarms from the site where it was generated entirely by on-land
transportation.
Force Majeure: Substantial changes to laws, regulations or taxes
directly and materially affecting the rights, obligations, consideration or
ability to perform of the parties under this Agreement, including without
limitation, regulatory changes, the loss of environmental or other permits
directly and materially affecting the rights, obligations, consideration or the
ability to perform of the parties under this Agreement, acts of God, landslides,
lightning, forest fires, storms, hurricanes, floods, freezing, earthquakes,
civil disturbances, strikes, lockouts, other industrial disturbances, acts of
the public enemy, wars, blockades, public riots, breakage, explosions, accidents
to machinery, pipelines or materials or other cause, whether of the kind
enumerated or otherwise, which is not reasonably within the control of the party
claiming the existence of a Force Majeure.
Landfarm Average Volume: For any Landfarm during each Contract Year,
the product of (a) the Annual Volume for such Contract Year less the Prior Years
Adjustment, if any, for such Contract Year multiplied by (b) the Median Range
for such Landfarm as set forth in Section 2.4.
Landfarms: The NOW disposal facilities owned and operated by Campbell
Wells designated as Elm Grove, LA (DNR Permit #OWD 89-1); Bourg, LA (DNR Permit
#90-10 OWD); Bateman Island, LA (DNR Permit #91-10 OWD); and Mermentau, LA (DNR
Permit #SWD 83-6).
2
<PAGE>
NOW: Nonhazardous oilfield waste associated with the exploration and
production of oil, gas and geothermal energy that contains less than 30
picocuries per gram of Radium 226 or 228. Without limiting the generality of
the foregoing, for waste disposed of in Louisiana, the term NOW shall include
all wastes containing less than 30 picocuries per gram of Radium 226 or 228
classified as NOW under Louisiana Statewide Order 29-B as currently in effect.
Preceding Test Period: For any Adjustment Date, the six month period
commencing 12 months prior to such Adjustment Date and concluding six months
prior to such Adjustment Date.
Prevailing Rate: At any given time, the price Disposeco shall be
obligated to pay per barrel of NOW delivered to Campbell Wells and disposed at a
Landfarm in accordance with this Agreement as determined in accordance with
Section 3.1.
Person: Any individual, corporation, association, partnership, joint
venture, trust, estate or other entity or organization or government or any
agency or political subdivision thereof.
Prior Years Adjustment: Optional adjustments to Annual Volume
pursuant to Section 2.1 for any Contract Year as determined in accordance with
Section 2.3. The Prior Years Adjustment may be a negative number.
Quarter: Calendar quarters commencing each January 1, April 1, July 1
and October 1; provided, however, that the first Quarter shall commence on the
Effective Date and end on September 30, 1996.
Zapata Facility: A NOW disposal facility owned and operated by
Campbell Wells located near Zapata, Texas.
ARTICLE II
DISPOSAL
2.1 Delivery and Acceptance. In accordance with the terms and provisions
of this Agreement, during each Contract Year, Disposeco shall deliver to
Campbell Wells for disposal at the Landfarms a minimum amount of NOW equal to
(i) the Annual Volume of NOW for such Contract Year (ii) minus the Prior Years
Adjustment, if any, for such Contract Year as set forth in Section 2.3 (iii)
minus 92,500 barrels of NOW. Subject to the terms and conditions and the
limitations set forth in this Agreement, Campbell Wells shall accept for
disposal at the Landfarms all NOW delivered by or on behalf of Disposeco;
provided that in no event shall Campbell Wells be obligated to accept from or on
behalf of Disposeco for disposal at the Landfarms more than 2.22 million barrels
of NOW in any Contract Year. In the event Campbell Wells elects not to accept
NOW delivered by Disposeco in excess of 2.22 million barrels during any Contract
Year, Campbell Wells shall reject such waste in accordance with Section 5.6 of
this Agreement.
3
<PAGE>
2.2 Annual Volume.
2.2.1 Annual Volume. The Annual Volume of NOW during any Contract
Year shall be equal to the Preliminary Annual Volume (as defined in Section
2.2.2 below) (a) minus the Volume Adjustment (as defined in Section 2.2.3
below), if any, exercised by Disposeco in accordance with Section 2.2.4 during
such Contract Year, (b) minus the amount of NOW, if any, rejected by Campbell
Wells pursuant to Section 7.5(ii).
2.2.2 Preliminary Annual Volume. For each Contract Year, the
Preliminary Annual Volume of NOW shall be the lesser of (i) 33.33% of the total
barrels of NOW that Newpark Resources, Inc., a Delaware corporation ("Newpark"),
and its Affiliates accept, acquire, take possession of, procure, direct, control
or otherwise receive for processing and disposal during the Contract Year in the
Covered Region (with the exception of any NOW produced by third-party generators
which Newpark or its Affiliates treat and dispose of on the site at which the
NOW was generated) and (ii) 1,850,000 barrels of NOW, in each case excluding
injectable saltwater.
2.2.3 Volume Adjustment. Within 25 days after the end of each
Quarter, Campbell Wells shall determine the aggregate revenues actually received
by Sanifill, Campbell Wells and their Affiliates during such preceding Quarter
from the Collection or Disposal of NOW and other oilfield wastes, the
remediation and closure of oilfield waste pits, including related loading and
hauling, or onshore cleaning operations in the Covered Region, with the
exception of revenues attributable to extraordinary levies as described in
Section 3.5 and revenues from (i) the Disposal of Excluded NOW, (ii) the
Disposal at the Zapata Facility of NOW Collected within a 200-mile radius of the
Zapata Facility, including charges for such Collection or (iii) the Disposal of
NOW pursuant to this Agreement (the "Sanifill NOW Revenues"). The Volume
Adjustment for each Quarter shall be calculated by dividing the aggregate
Sanifill NOW Revenues for such Quarter by the Prevailing Rate for such Quarter.
Campbell Wells shall notify Disposeco (the "Volume Adjustment Notice") of the
Volume Adjustment within 25 days after the end of each Quarter. Notwithstanding
the foregoing, any Person who acquires any of the Landfarms, directly or
indirectly, shall become subject to this Section 2.2.3 as if it were Campbell
Wells; provided, however, that no revenues from operations of such Person or its
Affiliates that existed at the time of such acquisition shall be included in
calculations under this Section 2.2.3.
2.2.4 Exercise of the Volume Adjustment. Disposeco shall have the
option to decrease the Annual Volume for the current Contract Year (or, if
applicable, the subsequent Contract Year) by all or part of the Volume
Adjustment for any Quarter by notifying Campbell Wells in writing of its
intention to do so before the expiration of the fourth complete Quarter after
the end of the Quarter in which the Volume Adjustment Notice for such Volume
Adjustment is received. Volume Adjustments shall be exercised in the order in
which they are accrued. Any portion of the Volume Adjustment for any Quarter as
to which Disposeco fails to timely exercise such option shall expire.
2.3. Carryforward Account; Prior Years Adjustment.
2.3.1 Determination of Carryforward Amount. Within 30 days after the
end of each Contract Year during the term of this Agreement, Disposeco shall
determine and notify
4
<PAGE>
Campbell Wells of the amount equal to the difference between (i) the Actual
Volume for such Contract Year and (ii) the Annual Volume for such Contract Year.
For any Contract Year in which the Annual Volume is more than the Actual Volume,
the difference shall be referred to as a "Negative Carryforward." For any
Contract Year in which the Actual Volume is more than the Annual Volume, the
difference shall be referred to as a "Positive Carryforward."
2.3.2 Carryforward Account; Initial Balance. The parties shall
maintain a Carryforward Account. The initial balance of the Carryforward Account
shall be zero. The balance of the Carryforward Account shall be increased by the
amount of any Positive Carryforward; provided that the balance of the
Carryforward Account may not exceed 185,000 barrels. Any portion of a Positive
Carryforward which would cause the current balance of the Carryforward Account
to exceed 185,000 barrels shall be disregarded. The balance of the Carryforward
Amount shall be reduced by the amount of any Negative Carryforward. The balance
of the Carryforward Account may be negative.
2.3.3 Reduction in Balance from Unused Positive Carryforwards. In the
event that a Positive Carryforward accruing in any Contract Year is not fully
offset against Negative Carryforwards accruing prior to such Positive
Carryforward or within the two Contract Years immediately following the Contract
Year in which such Positive Carryforward accrued, the portion of such Positive
Carryforward not so offset shall be deducted from the positive balance of the
Carryforward Account as of the end of the second Contract Year after the
Contract Year in which such Positive Carryforward accrued. No such reduction
shall cause the balance in the Carryforward Account to be negative.
2.3.4 Deliveries following a Negative Carryforward Account Balance.
Following any Contract Year in which a Negative Carryforward (the "Triggering
Carryforward") accrues causing the balance of the Carryforward Account to become
negative in any Contract Year, Disposeco shall be obligated to deliver to
Campbell Wells, over the two Contract Years immediately following the Contract
Year in which such Negative Carryforward accrued, amounts of NOW in excess of
the Annual Volumes for such Contract Years equal to the negative Carryforward
Account balance. In the event Disposeco fails to deliver such amounts over the
next two Contract Years, at the end of the second Contract Year, Campbell Wells
will invoice Disposeco, and Disposeco shall be obligated to pay, an amount equal
to the Prevailing Rate at the time multiplied by the quantity of the remaining
portion of the Triggering Carryforward. Upon receipt of payment, the
Carryforward Account balance shall be adjusted to reflect such amounts as if
they had been actually delivered during the preceding Contract Year.
2.3.5 Prior Years Adjustment. In any Contract Year with a positive
Carryforward Account balance, the amount of the positive Carryforward Account
balance shall be applied as a Prior Years Adjustment pursuant to Section 2.1.
Such amount so applied shall be subtracted from the Annual Volume for such
Contract Year in accordance with Section 2.1.
2.4 Allocation of NOW among Landfarms. Unless otherwise provided in this
Agreement or agreed by the parties, on a Quarterly basis, deliveries of NOW by
Disposeco to all Landfarms shall be allocated to the individual Landfarms such
that the amount of NOW delivered to an individual Landfarm as a percentage of
NOW delivered to all Landfarms shall fall within the Permissible Range for such
Landfarm as set forth below. Upon request of any party, the parties agree to
meet at least annually to review the Permissible Ranges and to
5
<PAGE>
negotiate in good faith to modify the Permissible Ranges as the parties deem
appropriate. In the event Disposeco delivers NOW to any Landfarm in excess of
the Permissible Range for such Landfarm, Campbell Wells shall have the right,
but not the obligation, to reject such NOW in accordance with Section 5.6.
Rejection of NOW by Campbell Wells pursuant to this Section 2.4 shall not reduce
the Annual Volume of NOW to be delivered by Disposeco for such Contract Year or
otherwise affect Disposeco's obligation to deliver NOW in such quantities as are
permissible or required under the terms of this Agreement. Subject to Section
2.8, Disposeco shall use commercially reasonable efforts to cause substantially
all materials delivered by Disposeco or its Affiliates to the Landfarm near
Mermentau to be delivered by truck.
<TABLE>
<CAPTION>
Landfarm Median Range Permissible Range
- -------------------- ------------- ------------------
<S> <C> <C>
Bourg, LA 40% 35% - 45%
Bateman Island, LA 50% 45% - 55%
Mermentau, LA 10% 5% - 15%
Elm Grove, LA N/A N/A
</TABLE>
2.5 Radium Concentration. Notwithstanding anything contained in this
Agreement to the contrary, Campbell Wells shall not be obligated to accept NOW
from Disposeco at any Landfarm where such NOW (i) when combined with other NOW
in an individual treatment cell, would cause the weighted average concentration
of Radium 226 or 228 to exceed 5 pCi/gm, excluding background or (ii) would
require the loading of two or more treatment cells simultaneously to prevent the
weighted average concentration of Radium 226 or 228 from exceeding 5 pCi/gm,
excluding background. In the event Disposeco delivers NOW contravening the
foregoing sentence, Campbell Wells shall have the right, but not the obligation,
to reject such NOW in accordance with Section 5.6. Rejection of NOW by Campbell
Wells pursuant to this Section 2.5 shall not reduce the Annual Volume of NOW to
be delivered by Disposeco for such Contract Year or otherwise affect Disposeco's
obligation to deliver NOW in such quantities as are permissible or required
under the terms of this Agreement.
2.6 Variance as to All Landfarms.
2.6.1 Conflict of Provisions. In the event of any irreconcilable
conflict between the provisions of Section 2.6 and the provisions of Sections
2.1 and 2.3, the provisions of Sections 2.1 and 2.3 shall control.
2.6.2 Quarterly Variance. Subject to the other terms and conditions
of this Agreement and unless otherwise agreed in advance by the parties, in
every Quarter during the term of this Agreement, (a) Disposeco shall be
obligated to deliver to Campbell Wells for disposal at the Landfarms a minimum
of 20% of the Annual Volume of NOW for such Contract Year and (b) Campbell Wells
shall be obligated to accept from Disposeco for disposal at all Landfarms a
maximum of 555,000 barrels of NOW.
2.6.3 Monthly Variance. Subject to the other terms and conditions
of this Agreement and unless otherwise agreed in advance by the parties,
Campbell Wells shall be
6
<PAGE>
obligated to accept from Disposeco for disposal at the Landfarms a maximum of
250,000 barrels of NOW during any one month. The parties agree to cooperate to
minimize monthly variances in NOW delivered for disposal at the Landfarms.
2.7 Variance as to Individual Landfarms. Subject to the other terms
and conditions of this Agreement and unless otherwise agreed in advance by the
parties, in each Quarter, Disposeco shall be obligated to deliver to each
Landfarm a minimum of 20% of the Landfarm Average Volume for such Landfarm for
such Contract Year and (b) Campbell Wells shall be obligated to accept from
Disposeco for disposal at such Landfarm a maximum of 33% of the Landfarm Average
Volume for such Landfarm for such Contract Year.
2.8 Limitation on Deliveries to Landfarms by Truck. Notwithstanding
anything contained herein to the contrary, unless otherwise agreed by the
parties, Campbell Wells shall not be obligated to accept from Disposeco or its
Affiliates for disposal in any Contract Year more than 185,000 barrels of NOW
delivered by truck to the Landfarm near Mermentau or more than 75,000 barrels of
NOW delivered by truck to the Landfarm near Bourg.
2.9 Adjustments for the First Contract Year and the First Quarter.
For the first Contract Year, the fixed numerical volume amounts specified in
Section 2.1, Section 2.2.2(ii), Section 2.3 and Section 2.6.1 shall be adjusted
by multiplying such amounts by a fraction, the numerator of which shall be the
number of days in the first Contact Year and the denominator of which shall be
365. For the first Quarter, the fixed numerical volume amount specified in
Section 2.6.2 shall be adjusted by multiplying such amount by a fraction, the
numerator of which shall be the number of days in the first Quarter and the
denominator of which shall be 91.
2.10 Schedules Attached. Attached to this Agreement are three
Schedules (Nos. 1, 2 and 3) that illustrate the operation of Sections 2.1 and
2.3. Such Schedules are hereby incorporated into this Agreement by reference and
constitute an integral and material part of the parties' understanding.
ARTICLE III
PAYMENT
3.1 Prevailing Rate. The initial Prevailing Rate shall be equal to
$5.50 per barrel of NOW delivered to Campbell Wells and disposed of at a
Landfarm, net of all currently applicable taxes. The Prevailing Rate may be
adjusted in accordance with Section 3.2, provided that the Prevailing Rate shall
never be less than $5.50 per barrel.
3.2 Adjustments to the Prevailing Rate. On each Adjustment Date, the
Prevailing Rate shall be subject to an adjustment equal to the sum of the
following (the "Rate Adjustment"):
(i) 30% of the difference between the average waste disposal
price received by Disposeco and its Affiliates for NOW
Disposal (not including taxes and exclusive of charges to
customers for services, such as cleaning, off-loading, waste
processing and related operations) during the Current Test
Period and such average price during the Preceding Test
Period; and
7
<PAGE>
(ii) 15% of the difference between the average price per barrel
(not including taxes) charged to customers received by
Disposeco and its Affiliates for NOW services (such as
cleaning, off-loading, waste processing and related
operations) during the Current Test Period and such average
price during the Preceding Test Period.
Within 30 days after each Adjustment Date, Disposeco will determine the Rate
Adjustment and the adjusted Prevailing Rate (the "Current Rate") and will apply
the Current Rate retroactively to all invoices received from Campbell Wells for
the previous six-month period to determine the difference between (i) the
amounts which would have been invoiced if the Current Rate had been charged and
(ii) amounts actually invoiced under the previous Prevailing Rate (the "Invoice
Adjustment Amount"). Campbell Wells shall have 15 days to review Disposeco's
determination of the Rate Adjustment, the Current Rate and the calculation of
the Invoice Adjustment Amount. In the event the parties are not able to agree
on the proper calculation of such amounts after 15 days, the parties shall
submit the matter to Fast-Track Arbitration as set forth in Section 10.2. If
the Invoice Adjustment Amount is positive, Disposeco shall pay Campbell Wells
the Invoice Adjustment Amount within 15 days. If the Invoice Adjustment Amount
is negative, Disposeco shall be entitled to a credit for such amount against
future invoices from Campbell Wells. Disposeco hereby covenants and agrees that
it shall not during the term of this Agreement adjust fees for services covered
by clause (ii) of this Section 3.2 or fees for Disposal covered by clause (i) of
this Section 3.2 in a manner which is inconsistent with prevailing market
practice and is intended to deprive or has the effect of depriving Campbell
Wells of the full benefits of the adjustment to the Prevailing Rate provided for
herein.
3.3 Additional Services; Disposal of Injectable Saltwater. Pursuant
to this Agreement, Campbell Wells will perform standard off-loading and
customary handling services associated with disposal of NOW at no additional
charge. Campbell Wells will perform additional services, including, without
limitation, cleaning, upon request of Disposeco at the posted rates of Campbell
Wells for such services, or at such other rates as the parties may mutually
agree upon. All charges for such additional services shall be in addition to and
independent of the Prevailing Rate. Campbell Wells will accept injectable
saltwater at the Landfarms for disposal upon request of Disposeco at the posted
rates of Campbell Wells for disposal of injectable saltwater, or at such other
rates as the parties may mutually agree upon. All charges for disposal of
injectable saltwater shall be in addition to and independent of the Prevailing
Rate.
3.4 Billing. Campbell Wells shall invoice Disposeco on a monthly
basis for disposal fees, additional service fees and all other sums, including
inspection fees as set forth in Section 5.4 and Section 5.7, incurred pursuant
to this Agreement during the preceding calendar month. Disposeco agrees to pay
such charges due and owing hereunder to Campbell Wells on or before the 30th day
following the date of receipt of the invoice. In the event of a dispute as to
services rendered or payment owed, Disposeco shall pay the undisputed portion of
each invoice, and the parties shall resolve the dispute as provided in Section
10.2. Without limitation, amounts validly due and invoiced in accordance with
this Section 3.4 and all other amounts owed from one party to the other pursuant
to this Agreement, shall be payable within 30 days after invoice or notice and
thereafter shall accrue interest at a rate equal to the lower of 18% per annum
or the highest lawful rate, commencing with the date of receipt of the original
invoice or notice.
8
<PAGE>
3.5 Extraordinary Levies.
3.5.1 Taxes. Notwithstanding anything to the contrary contained
herein, if during the term of this Agreement there is levied upon Campbell Wells
or any of its Affiliates or upon the operations of Campbell Wells any tax,
assessment or charge (other than income taxes applicable generally) by any
governmental authority which tax, assessment or charge increases Campbell Wells'
costs to operate the Landfarms, Campbell Wells shall notify Disposeco of the
cause and the per barrel amount of the cost increase. Following the
effectiveness of the tax, assessment or charge giving rise to such fee,
Disposeco shall be obligated to pay such additional fee with regard to each
barrel of NOW delivered to a Landfarm by or on behalf of Disposeco or any of its
Affiliates, which fee shall appear on all invoices issued to Disposeco by
Campbell Wells.
3.5.2 Landfarm Environmental Regulations. Notwithstanding
anything to the contrary contained herein, if during the term of this Agreement
there is a substantial change in regulatory requirements related to the waste
disposal business having general applicability to the handling, treatment or
disposal of NOW, which change increases in a material manner Campbell Wells'
costs to operate the Landfarms, (i) Campbell Wells shall notify Disposeco of the
cause and the per barrel amount of the cost increase, (ii) Disposeco shall use
commercially reasonable efforts to increase its waste disposal prices so as to
pass as much of such increased cost as is commercially possible on to its
customers and (iii) Disposeco shall pay to Campbell Wells 100% of all revenues
attributable to such increase in waste disposal prices up to a maximum amount
equal to the per barrel cost increase multiplied by the barrels of NOW delivered
to the Landfarms for disposal by or on behalf of Disposeco or any of its
Affiliates after the effectiveness of such increase. If, after the application
of this Section 3.5.2, the difference between the increased costs of Campbell
Wells resulting from such regulatory change and the amount of the increased
revenues received by Campbell Wells pursuant to clause (iii) above is large
enough to have a material adverse effect on Campbell Wells, such change in
regulation shall be considered a Force Majeure event.
3.5.3 Right of Inspection. In the event Campbell Wells notifies
Disposeco of a cost increase pursuant to this Section 3.5, Disposeco shall have
the right to conduct a reasonable review of the calculations, working papers and
the books and records related to the determination of such fee increase. All
costs of such review shall be borne exclusively by Disposeco.
ARTICLE IV
TERM
The term of this Agreement shall be for a period of approximately
twenty-five years commencing on the Effective Date and ending on June 30, 2021,
unless extended by mutual consent of the parties.
9
<PAGE>
ARTICLE V
OPERATING PROCEDURES
5.1. Compliance with Operating Procedures. Disposeco and its Affiliates
shall comply in all material respects with and abide by, and shall require their
employees, servants, agents, representatives, contractors, subcontractors,
haulers and transporters to comply in all material respects with and abide by,
all applicable federal, state and local laws, ordinances, permits, regulations,
directives, codes, standards and requirements relating to the subject matter of
this Agreement or the performance of services hereunder, as well as all of
Campbell Wells' rules, regulations, procedures and guidelines, written or oral,
as the same may be reasonably adopted and modified from time to time, including,
without limitation, all safety and/or security regulations, practices and
procedures and all procedures reasonably adopted by Campbell Wells in compliance
with its permits or utilized by Campbell Wells in the inspection, sampling and
testing of material delivered to the Landfarms for disposal.
5.2 Inspection and Testing by Disposeco; Notification. Disposeco agrees
that it shall inspect and test all materials accepted, acquired, taken
possession of, procured, directed, controlled or otherwise received by it from
third party generators or other parties for disposal (with the exception of any
NOW produced by third-party generators which Disposeco or its Affiliates treat
and dispose of on the site at which the NOW was generated) to the extent
required by applicable federal, state and local laws, ordinances, permits,
regulations, directives, codes, standards and requirements. Disposeco shall
promptly notify Campbell Wells if it becomes aware of any unusual or special
characteristics of any materials being delivered to the Landfarms which cause
such materials to require special treatment, handling or care. Upon request by
Campbell Wells, Disposeco shall provide copies of all inspection and test
results relating to material to be disposed of at the Landfarms under the terms
of this Agreement to Campbell Wells upon delivery.
5.3 Shipment and Delivery of NOW. Disposeco, its Affiliates and/or its
contractors and subcontractors shall be responsible for proper containerization,
preparation and labeling for shipment, shipment, transportation and delivery to
the Landfarms and shall comply fully with all applicable federal, state and
local laws, ordinances, permits, regulations, directives, codes, standards and
requirements in making such delivery to the Landfarms. Sanifill, Campbell Wells
and their Affiliates undertake no responsibility whatsoever for the preparation,
handling or transportation of any material prior to acceptance of delivery as
hereinafter provided.
5.4 Inspections.
5.4.1 Barges. Upon arrival of any barge transporting material to a
Landfarm at the direction of Disposeco or any of its Affiliates, Campbell Wells
shall have the right to have an independent third party inspector selected by
Campbell Wells undertake an inspection of the barge transporting material to the
Landfarm for the purpose of determining (a) the volume of materials delivered
and (b) the condition of the barge on arrival at the Landfarm. The costs of such
inspector shall be split evenly between Disposeco and Campbell Wells, and
Disposeco's portion of such expense shall be included on the monthly invoices
prepared by Campbell Wells in accordance with Section 3.4. Before any materials
are off-loaded from the barge or any inspection or testing is undertaken by
Campbell Wells, the independent inspector will provide
10
<PAGE>
the authorized representatives of Disposeco and Campbell Wells with an
inspector's report indicating the time and date, the barge identification number
and volume of waste materials in the barge. The authorized representatives of
the parties will indicate their acceptance of the inspector's report by signing
the report. In the event either authorized representative disagrees with the
volume determination, either authorized representative may request that an
additional independent third party inspector prepare an inspector's report, the
cost of which shall be borne by the party requesting the same. If the parties
are unable to agree on the actual volume of waste after the preparation of the
second inspector's report, the two independent inspectors shall select a third
independent inspector to prepare an inspector's report, the cost of which will
be borne half by Disposeco and half by Campbell Wells. The final volume
determination shall be that volume agreed upon by the majority of the
independent inspectors that have inspected the barge. If the barge appears to be
damaged in any significant respect, the inspector shall summarize the apparent
damage and take photographs as appropriate to evidence the scope of the damage.
The authorized representative of Disposeco shall approve such damage summary by
executing the same prior to the time any material is off-loaded from the barge.
With regard to barges owned and operated by Disposeco, Campbell Wells agrees
that it shall not exercise its right to implement the procedures set forth in
this Section 5.4.1 unless the parties have previously had a dispute or
disagreement relating to the quantity of materials delivered to a Landfarm by
Disposeco or the condition of a barge owned and operated by Disposeco and such
dispute or disagreement was not amicably resolved within 30 days.
5.4.2 Trucks. Upon arrival of a truck transporting material to a
Landfarm on behalf of Disposeco or any of its Affiliates, Campbell Wells
personnel shall undertake an inspection to determine the volume of materials
delivered. Before any materials are off-loaded from the truck or any inspection
or testing is undertaken by Campbell Wells, Campbell Wells shall prepare a
receipt indicating the time and date and the volume of materials in the truck.
The driver of the truck shall indicate his or her acceptance of the receipt by
signing the receipt. In the event the driver disagrees with the volume
determination, Campbell Wells shall have the option of (i) accepting the volume
stated by the driver and preparing a receipt evidencing such volume to be signed
by the driver or (ii) rejecting such materials in accordance with Section 5.6.
Rejection of materials by Campbell Wells pursuant to this Section 5.4.2 shall
not reduce the Annual Volume of NOW to be delivered by Disposeco for such
Contract Year or otherwise affect Disposeco's obligation to deliver NOW in such
quantities as are required under the terms of this Agreement.
5.5 Inspection and Testing of Material. After all inspections, if any,
pursuant to Section 5.4 have been concluded, Campbell Wells shall conduct
inspections, testing and sampling using such equipment and procedures as are
required by or consistent with its permits. Campbell Wells may rely exclusively
on the results of its inspection in determining whether materials delivered may
be disposed at the Landfarm in accordance with its permits and this Agreement.
Disposeco authorizes Campbell Wells to retain samples and all data relating
thereto, including test results, for so long as required by federal, state or
local law, ordinance, permit, regulation, directive, code, standard or
requirement and additionally for so long as Campbell Wells in its sole
discretion shall determine.
11
<PAGE>
5.6 Acceptance or Rejection of Material.
5.6.1 Acceptance. Campbell Wells shall only be obligated to accept
waste materials at any Landfarm which are permissible under the permit
requirements of such Landfarm at the time of delivery. For a period of ten days
after the date of delivery, Campbell Wells shall have the right to reject (or
revoke any prior acceptance) all or any part of a shipment of material delivered
by or on behalf of Disposeco to a Landfarm if (i) such material is not in
accordance with the terms of this Agreement or (ii) Campbell Wells concludes
that such material exceeds the parameters of the permits applicable to the
Landfarm. Campbell Wells shall notify Disposeco of any rejection in writing and
shall state the reason therefor. The expiration of such ten-day period without a
rejection or a revocation of a prior acceptance of material shall constitute
"Final Acceptance" of such material.
5.6.2 Rejected Material. Rejected material shall remain at
Disposeco's risk and expense and shall not be deemed to be incorporated into the
Landfarm or come under the possession, custody, control or ownership of Campbell
Wells. Notwithstanding the foregoing, to the extent required by federal, state
or local law, ordinance, permit, regulation, directive, code, standard or
requirement, or by Campbell Wells' safety and/or security rules, practices or
procedures, Campbell Wells may detain any rejected materials, including the
vehicle and/or containers in which such rejected materials arrived, and shall
notify regulatory or other authorities wherever necessary or appropriate to do
so.
5.6.3 Removal. In the event Campbell Wells rejects all or any part of
a shipment of material from Disposeco, after compliance in all material respects
with all regulatory and any other requirements involving detention of such
shipment, upon written request of Campbell Wells, Disposeco, unless otherwise
directed by a regulatory agency or other lawful authority, shall promptly remove
or cause to be removed from the Landfarm all of the rejected material at
Disposeco's risk and expense in a manner consistent with all applicable federal,
state and local laws, ordinances, permits, regulations, directives, codes,
standards and requirements. In the event Disposeco fails to complete such
removal by the fifth business day after the date of the request by Campbell
Wells, Campbell Wells, unless otherwise required by law or regulation, may
remove or cause to be removed from the Landfarm any and all of the rejected
material, and may containerize and transport it or cause it to be containerized
and transported to an authorized storage site or returned to Disposeco at its
nearest location. Disposeco hereby authorizes Campbell Wells in such event to
contract for such storage for Disposeco's account. For its services, Campbell
Wells shall charge and Disposeco shall pay Campbell Wells' cost plus 15%. Any
and all material that Campbell Wells rejects shall remain property and the
responsibility of Disposeco at Disposeco's risk and expense.
5.6 Third-Party Deliveries. Campbell Wells may follow the procedures set
forth in this Article V with respect to any third-party generator's vessels or
vehicles containing materials that are delivered to any Landfarm at the
direction of Disposeco or its Affiliates. In addition, Campbell Wells may
establish and enforce other policies and procedures relating to the independent
inspection of any such third-party generator's vessels or vehicles before the
material contained in such vessels or vehicles shall be accepted for disposal.
12
<PAGE>
ARTICLE VI
COVENANTS, REPRESENTATIONS AND WARRANTIES OF DISPOSECO
Disposeco hereby covenants, represents and warrants to Sanifill
and Campbell Wells as follows:
6.1 Organization and Qualification. Disposeco (a) is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (b) has all requisite power and authority to own, lease and
operate its properties and to carry on its business as it is now being conducted
and is proposed to be conducted and (c) is duly qualified or licensed and in
good standing to do business in each jurisdiction in which the properties owned,
leased or operated by it or the nature of the business conducted or proposed to
be conducted by it makes such qualification or license necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed or in good
standing would not have, either individually or in the aggregate, a material
adverse effect on the transactions contemplated hereby.
6.2 Authorization and Validity of Agreement. Disposeco has all
requisite power and authority to enter into this Agreement and to perform its
obligations hereunder and consummate the transactions contemplated hereby. The
execution, delivery and performance by Disposeco of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action on the part of Disposeco. No action or approval of the
equity owners of Disposeco is necessary to authorize Disposeco's execution or
delivery of, or the performance of its obligations under, this Agreement. This
Agreement has been duly executed and delivered by Disposeco and is a valid and
binding obligation of Disposeco, enforceable in accordance with its terms.
6.3 No Conflict. The execution and delivery by Disposeco of this
Agreement does not, and exercise by Disposeco of its rights hereunder and the
consummation of the transactions contemplated hereby will not (a) require any
consent, approval, order or authorization of or other action by any governmental
entity on the part of or with respect to Disposeco; (b) require on the part of
Disposeco any consent by or approval of or notice to any other Person; or (c)
result in a violation of any law, rule, regulation, order, judgment or decree
applicable to Disposeco, except in any case covered by (a), (b) or (c) where
failure to obtain such consent or such violation would not, either individually
or in the aggregate, have a material adverse effect on the transactions
contemplated hereby.
6.4 Licensed Carriers. Any carrier with which Disposeco contracts to
transport NOW and all of Disposeco's driver personnel shall at all times
relevant to the performance of services under this Agreement remain properly
licensed and otherwise fully qualified to perform the services required
hereunder.
ARTICLE VII
COVENANTS, REPRESENTATIONS AND WARRANTIES OF CAMPBELL WELLS
Campbell Wells hereby covenants, represents and warrants
to Disposeco as follows:
13
<PAGE>
7.1 Organization and Qualification. Each of Campbell Wells and
Sanifill (a) is duly organized and validly existing under the laws of the
jurisdiction of its organization (and Sanifill is in good standing under such
laws), (b) has all requisite power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted and (c) is
duly qualified or licensed and in good standing to do business in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or license
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed or in good standing would not have, either individually or
in the aggregate, a material adverse effect on the transactions contemplated
hereby.
7.2 Authorization and Validity of Agreement. Campbell Wells has all
requisite power and authority to enter into this Agreement and to perform its
obligations hereunder and consummate the transactions contemplated hereby. The
execution, delivery and performance by Campbell Wells of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action on the part of Campbell Wells. No action or approval of
the equity owners of Campbell Wells is necessary to authorize Campbell Wells'
execution or delivery of, or the performance of its obligations under, this
Agreement. This Agreement has been duly executed and delivered by Campbell Wells
and is a valid and binding obligation of Campbell Wells, enforceable in
accordance with its terms.
7.3 No Conflict. The execution and delivery by Campbell Wells of this
Agreement does not, and exercise by Campbell Wells of its rights hereunder and
the consummation of the transactions contemplated hereby will not (a) require
any consent, approval, order or authorization of or other action by any
governmental entity on the part of or with respect to Campbell Wells or any of
its Affiliates; (b) require on the part of Campbell Wells or any of its
Affiliates any consent by or approval of or notice to any other Person; or (c)
result in a violation of any law, rule, regulation, order, judgment or decree
applicable to Campbell Wells or any of its Affiliates, except in any case
covered by (a), (b) or (c) where failure to obtain such consent or such
violation would not, either individually or in the aggregate, have a material
adverse effect on the transactions contemplated hereby.
7.4 Services and Equipment. Campbell Wells possesses the business,
professional and technical expertise to handle, treat and dispose of NOW and
possesses the equipment, plant and employee resources required to perform this
Agreement. Campbell Wells shall use its commercially reasonable efforts to turn
all barges delivering materials to the Landfarms in a timely manner consistent
with the number of Disposeco and third-party generator barges on site at such
moment and with its general practice of giving priority to third-party
generators' barges. The equipment shall, at all times relevant to the
performance of services hereunder, be maintained in good and safe condition and
fit for use.
7.5 Licenses and Permits. As of the Effective Date, Campbell Wells
shall be duly licensed, permitted and authorized pursuant to all applicable
federal, state and local laws to handle, treat and dispose of NOW, and the
Landfarms will have been issued all licenses, permits and authorizations
required by all applicable federal, state and local laws. At any time during the
term of this Agreement, upon Disposeco's reasonable request, Campbell Wells
shall provide to Disposeco, at Disposeco's expense, a complete copy of the
current permits applicable to the operation of the Landfarms. During the term of
this Agreement, Campbell Wells shall use its best efforts to keep all such
licenses, permits and authorizations in effect and shall promptly
14
<PAGE>
notify Disposeco if any such license, permit or authorization is to expire and
not be renewed or becomes the subject of any administrative or judicial action
seeking revocation or suspension; provided, however, that in the event any
Landfarm has not been issued all licenses, permits and authorizations required
to dispose of NOW as of the Effective Date of this Agreement or should lose any
such license, permit or authorization or for any other reason terminate
operation during the term of this Agreement, Campbell Wells shall, subject to
Article XI, have the option to (i) subject to Disposeco's reasonable approval,
direct the disposal of NOW delivered by Disposeco to any of the other Landfarms,
provided that Campbell Wells shall bear all actual additional out-of-pocket
costs arising therefrom, (ii) reject NOW delivered by Disposeco in accordance
with Section 5.6 without further obligation hereunder, provided that the volume
of such NOW shall be deducted from the Annual Volume for the current Contract
Year, or (iii) subject to Disposeco's reasonable approval, transport NOW
delivered by Disposeco and dispose of it at any alternative disposal facility
that is approved by Disposeco (which approval shall not be unreasonably
withheld) and licensed and permitted to receive NOW, pursuant to all the same
terms and provisions of this Agreement, including the payment of the Prevailing
Rate established under Section 3.1.
7.6 Workers' Compensation. Campbell Wells shall comply in all
material respects with all applicable workers' compensation laws during the term
of this Agreement. In the event any work is performed by Campbell Wells' agent
or subcontractor, Campbell Wells shall obtain certification from such agent or
subcontractor that it too is in compliance in all material respects with such
laws or does not fall within the scope of such laws.
ARTICLE VIII
INSURANCE
8.1 Insurance Coverage. Campbell Wells and Disposeco, at their own
expense, shall procure and maintain in full force and effect during the term of
this Agreement the following kinds of insurance with limits of coverage equal to
or exceeding those limits specified therefor:
8.1.1 Workers' Compensation; Employer's Liability. Workers'
Compensation Insurance shall be obtained in accordance with the provisions of
the applicable Workers' Compensation Law or similar laws of a state having
jurisdiction over any employee. Employer's Liability Insurance shall be obtained
with a minimum limit of liability of $1,000,000. To the extent exposures fall,
or may fall, within Federal jurisdictions, including the U.S. Longshore and
Harbor Workers' Compensation Act, the Defense Bases Act and the Federal
Employers Liability Act, extensions of coverage shall be obtained in accordance
with the requirements of such laws. Should operations occur where maritime
liability law, the Jones Act, or General Admiralty Law apply, applicable
coverages shall be required at limits of not less than $1,000,000.
8.1.2 General Liability. Comprehensive or Commercial General
Liability Insurance, including Products/Completed Operations and Contractual
Liability, which shall cover the indemnity provisions contained in this
Agreement, shall be obtained with a combined single limit of not less than
$1,000,000 per occurrence for bodily injury and property damage.
15
<PAGE>
8.1.3 Automobile Liability. Business or Commercial Automobile
Liability Insurance covering all owned, non-owned, and hired vehicles, shall be
obtained with a combined single limit of $1,000,000 per occurrence or accident.
8.1.4 Umbrella Liability. Umbrella Liability Insurance over the
foregoing coverages shall be obtained as applicable at limits of $10,000,000 per
occurrence.
8.2 Terms. All coverages shall be written through insurers authorized
to transact business in the states of operation and reasonably satisfactory and
acceptable to both parties. Each party shall be added as an additional insured,
and subrogation as to the policies of the other party shall be waived as
applicable. All policies will be endorsed to provide not less than 30 days
written notice of cancellation, termination, non-renewal or material change in
the policy. Each party will furnish the other party certificates of insurance
evidencing compliance with the requires of Section 8.1.
8.3 Site Financial Assurance and Environmental Impairment Liability.
To the extent available on commercially reasonable terms and subject to the
other terms of this Agreement, Campbell Wells shall (i) maintain policies of
environmental impairment liability insurance covering the ownership and
operation of the Landfarms in substantially such amounts and on such terms as
shall be in place on the Effective Date and (ii) comply with all applicable
federal or state governmental financial assurance requirements imposed in
connection with its operation of the Landfarms.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by Sanifill and Campbell Wells. Sanifill and
Campbell Wells shall jointly and severally defend, indemnify and hold harmless
Disposeco and its Affiliates and their employees, officers, owners, directors
and agents, from and against any and all liabilities, penalties, fines,
forfeitures, demands, claims, causes of action, suits, judgments and costs and
expenses incidental thereto, including reasonable attorneys' fees, which any or
all of them may hereafter suffer, incur, be responsible for or pay out as a
result of personal injuries, property damage, or contamination of or adverse
effects on the environment, to the extent directly or indirectly caused by, or
arising from or in connection with (i) the negligence, gross negligence or
willful act or omission or willful misconduct of Sanifill or Campbell Wells or
any of their employees, officers, owners, directors, agents or subcontractors in
the performance of this Agreement; (ii) the violation of any environmental rule,
law or regulation by Sanifill or Campbell Wells or any of their employees,
officers, owners, directors, agents or subcontractors; (iii) operations of the
Landfarms, including, without limitation, the receipt and disposal of waste
delivered to the Landfarms by Disposeco and others; or (iv) the breach of,
misrepresentation in, untruth in or inaccuracy in any representation, warranty
or covenant of Sanifill or Campbell Wells set forth in this Agreement.
9.2 Indemnification by Disposeco. Disposeco shall defend, indemnify
and hold harmless Sanifill and Campbell Wells and their Affiliates and their
employees, officers, owners, directors, agents and subcontractors, from and
against any and all liabilities, penalties, fines, forfeitures, demands, claims,
causes of action, suits, judgments and costs and expenses incidental
16
<PAGE>
thereto, including reasonable attorneys' fees, which any or all of them may
hereafter suffer, incur, be responsible for or pay out with respect to claims by
third parties for personal injuries, property damage or other loss to the extent
directly or indirectly caused by, or arising from or in connection with (i) the
negligence, gross negligence or willful act or omission of Disposeco, any of its
employees, officers, owners, directors, agents or subcontractors or any third-
party generator acting at Disposeco's direction in the performance of this
Agreement, (ii) the violation of any environmental rule, law or regulation by
Disposeco, any of its employees, officers, owners, directors, agents or
subcontractors or any third-party generator acting at Disposeco's direction;
(iii) material delivered to any of the Landfarms by Disposeco or any third-party
generator acting at Disposeco's direction which is not in accordance with the
terms of this Agreement or otherwise not permitted to be disposed at such
Landfarm; or (iv) the breach of, misrepresentation in, untruth in or inaccuracy
in any representation, warranty or covenant of Disposeco set forth in this
Agreement.
9.3 Indemnification Procedures.
9.3.1 Promptly after receipt by an indemnified party under this
Article IX of notice of the commencement of any action or proceeding evidenced
by service of process or other legal pleading, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify in writing the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party (i) will not relieve it from any
liability that it may have to any indemnified party under this Article IX unless
and to the extent that the indemnifying party has been prejudiced in any
material respect by such omission and (ii) will not relieve the indemnifying
party from any liability that it may have to any indemnified party other than
under this Article IX. If any such action or proceeding shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under this Article IX for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless the named parties to such action or proceeding
(including any impleaded parties) shall include both an indemnifying party and
an indemnified party and the indemnified party shall have been advised by
counsel that there may be one or more defenses available to such indemnified
party that are different from or additional to those available to the
indemnifying party (in which case, if the indemnified party notifies the
indemnifying party that it wishes to employ separate counsel at the expense of
the indemnifying party (who shall promptly pay all such expenses as incurred),
the indemnifying party shall not have the right to assume the defense of such
action or proceeding on behalf of such indemnified party).
9.3.2 If an indemnifying party, within a reasonable period of time
after notice by the indemnified party of the commencement of any action or
proceeding with respect to which the indemnified party is to make a claim
hereunder, fails to assume the defense thereof, the indemnified party shall have
the right (upon further notice to the indemnifying party) to undertake the
defense, compromise or settlement of such action or proceeding for the account
of the indemnifying party, subject to the right of the indemnifying party to
assume the defense
17
<PAGE>
of such action or proceeding at any time prior to settlement, compromise or
final determination thereof. The cost and expense of any such defense and any
judgment in any such action or proceeding shall be borne by the indem nifying
party, and, if paid by the indemnified party, shall be reimbursed by the
indemnifying party within thirty days after receipt of invoice therefor.
9.3.3 Except as otherwise provided in Section 9.3.2, an indemnifying
party shall not be liable for any settlement of any litigation or proceeding
effected without its written consent. An indemnifying party shall not, without
the indemnified party's written consent, settle or com promise any action or
proceeding or consent to entry of any judgment that would impose an injunction
or other equitable relief upon the indemnified party or that does not include as
an unconditional term thereof the release by the claimant or the plaintiff of
such indemnified party from all liability in respect of such action or
proceeding.
ARTICLE X
DISPUTE RESOLUTION
10.1 Negotiation of Disputes. In the event of any dispute or
disagreement arising out of or relating to the implementation and performance of
this Agreement, the parties agree to attempt to resolve such dispute in good
faith. Should a resolution of such dispute not be obtained within 15 days after
the origination of the dispute, either party may submit the dispute to
arbitration in accordance with the provisions of this Article X by written
notice to the other party.
10.2 Fast-Track Arbitration for Payment Disputes. Within 60 days
after the Effective Date of this Agreement, Campbell Wells and Disposeco shall
select an independent third party mutually acceptable to both parties (the
"Financial Arbitrator") and an alternate third party (the "Alternate") to decide
disputes to be referred to the Financial Arbitrator as provided in Sections 3.2
and 3.4. The Financial Arbitrator and the Alternate shall have experience in
accounting and finance and the waste disposal business. Disposeco or Campbell
Wells may refer disputes arising under Sections 3.2 or 3.4 after the expiration
of the negotiation period set forth in Section 10.1 by providing written notice
to the Financial Arbitrator and the other party. In the event the Financial
Arbitrator is unavailable to resolve the dispute within the time period stated
in this Section 10.2, the dispute shall be referred to the Alternate. The
Financial Arbitrator or the Alternate, as appropriate (the "Arbitrator"), shall
be directed to resolve the dispute in 15 days after the referral. The parties
shall cooperate in good faith in providing the Arbitrator any information
reasonably needed to resolve the dispute. If the dispute relates to the accuracy
of an invoice or a series of invoices or to the accuracy of any calculations
made by any party, the costs and expenses of the arbitration shall be borne by
the party referring the dispute to arbitration unless the Arbitrator determines
that the invoiced amounts or calculations were in error by greater than 10% or
$50,000, in which case the costs and expenses shall be borne by the other party.
If the dispute relates to any other type of disagreement arising under Sections
3.2 and 3.4, the costs and expenses of the arbitration shall be borne by the
losing party, unless the Arbitrator finds that it would be manifestly unfair to
honor this provision and determines a different allocation of costs.
10.3 General Arbitration. Any claim, dispute or controversy arising
out of or relating to this Agreement or the breach thereof not settled in
accordance with the provisions of Sections 10.1 or 10.2 shall be submitted to
binding arbitration by the American Arbitration Association
18
<PAGE>
(the "AAA") for arbitration in Houston, Texas, in accordance with the Commercial
Arbitration Rules of the AAA then in effect. There shall be three arbitrators,
with each party selecting one. The third arbitrator shall be selected by the two
party-selected arbitrators and shall be the chairperson of the panel. The party
requesting arbitration shall name its arbitrator in the demand for arbitration
and the other party shall name its arbitrator within 30 days after receipt of
the arbitration demand. The third arbitrator shall be named within 30 days after
the appointment of the second arbitrator. The AAA shall be empowered to appoint
any arbitrator not named in accordance with the procedure set forth herein. The
decision of the arbitrators shall be final and binding upon the parties without
the right to appeal to the courts. The award rendered in arbitration shall be
final and judgment thereon may be entered by any court having jurisdiction
thereof. The costs and expenses of the arbitrations (including reasonable
attorney's fees) will be borne by the losing party, unless the arbitrators
determine that it would be manifestly unfair to honor this provision and
determine a different allocation of costs.
10.4 Applicable Law and Arbitration Act. This agreement to arbitrate
shall be enforceable in either federal or state court. The enforcement of this
agreement to arbitrate and all procedural aspects of this agreement to
arbitrate, including, without limitation, the construction and interpretation of
this agreement to arbitrate, the scope of the arbitrable issues, allegations of
waiver, delay or defenses as to arbitrability, and the rules governing the
conduct of the arbitrations, shall be governed by and construed pursuant to the
United States Arbitration Act. In deciding the substance of any such claim,
dispute or disagreement, the arbitrators shall apply the substantive laws of the
State of Texas; provided, however, that the arbitrators shall have no authority
to award punitive damages under any circumstances regardless of whether such
damages may be available under Texas law, the parties hereby waiving their
right, if any, to recover punitive or consequential damages in connection with
any such claims, disputes or disagreements.
10.5 Continuation of Performance. In the event of a dispute arising
under this Agreement, the parties shall continue performance of their respective
obligations hereunder.
ARTICLE XI
FORCE MAJEURE
11.1 Suspension of Performance. If, as a result of a Force Majeure
event, either Campbell Wells or Disposeco is wholly or partially unable to meet
its obligations under this Agreement, the affected party shall give the other
party or parties notice of such situation, describing it in reasonable detail.
The obligations under this Agreement of the party giving notice, other than the
payment of monies due, shall be suspended to the extent and for the duration of
the Force Majeure event. The party affected by the Force Majeure event shall use
good faith efforts to attempt to rectify the conditions brought about by the
Force Majeure event in a commercially reasonable manner. Notwithstanding
anything to the contrary expressed herein, the parties agree that the settlement
of strikes, lockouts or other industrial disturbances, and, subject to Article
IX, litigation, including appeals, shall be entirely within the discretion of
the party involved therein, and such party may make settlement thereof at such
time, and on such terms and conditions as it may deem to be advisable, and no
delay in making such settlement shall deprive such party of the benefit of this
provision. In the event a Force Majeure event is based on a change of law or
regulations, the parties agree to negotiate in good faith to modify
19
<PAGE>
or amend this Agreement, if possible, to continue the intent and purposes of the
Agreement. Following the end of a Force Majeure event giving rise to a
suspension by Campbell Wells pursuant to this Section 11.1, the suspension of
the parties' obligation to perform shall continue for such time as is
commercially reasonable to permit Disposeco to resume deliveries to the
Landfarms, provided that such continuation period shall not exceed 21 days. In
the event of a suspension of performance, the rights and obligations of the
parties for the Contract Year or Contract Years and the Quarter or Quarters
during which such suspension is in effect shall be proportionately reduced.
11.2 Termination Because of Force Majeure. If performance by one party
under this Agreement is suspended as a result of any event of Force Majeure and
either Disposeco or Campbell Wells determines that such suspension is likely to
continue for a period of at least six consecutive months, such party may notify
the other of its desire to meet to negotiate a modification or amendment to this
Agreement (the "Negotiation Notice"); provided that if neither Campbell Wells
nor Disposeco issues a Negotiation Notice following an event of Force Majeure, a
Negotiation Notice shall be deemed to have been given on the date that
performance by one party has been suspended as a result of such event of Force
Majeure for a period of six consecutive months. For a period of 60 days after
the date of the Negotiation Notice or, if longer, until such suspension has
continued for six consecutive months (the "Negotiation Period"), the parties
agree to negotiate in good faith to modify or amend this Agreement, if possible,
to continue the intent and purposes of the Agreement. If no agreement is reached
during the Negotiation Period, either party may terminate this Agreement on 30
days' written notice; provided that such termination shall only become effective
if (i) the event of Force Majeure is continuing at the end of such 30-day
period, (ii) the performance by one party under this Agreement has been
suspended as a result of the event of Force Majeure for at least six consecutive
months and (iii) the party electing to terminate will suffer a continuing
material adverse effect as a result of such event of Force Majeure after giving
pro forma effect to the final offer made by other party during the Negotiation
Period (taking into account all aspects of such offer, including without
limitation the ameliorative effects of such offer on the consequences of such
Force Majeure event and any negative effects of such offer on the party electing
to terminate). Any party with a right to terminate pursuant to this Section 11.2
must give written notice of its election to do so to the other parties within 60
days after the end of the Negotiation Period. If such a party does not elect to
terminate the Agreement within such 60-day period, such party's termination
right with respect to such event of Force Majeure shall expire; provided that
the expiration of the former right to terminate shall not preclude or estop such
party from issuing a subsequent Negotiation Notice under this Section 11.2 if
the event of Force Majeure is continuing.
ARTICLE XII
MISCELLANEOUS
Status of the Parties. Each party hereto is and shall perform this
Agreement as an independent contractor, and as such, shall have and maintain
complete control over all of its employees, agents, and operations. Except as
expressly otherwise provided in this Agreement, neither party nor anyone
employed by it shall be, represent, act, purport to act or be deemed to be the
agent, representative, employee or servant of the other party.
20
<PAGE>
12.2 No Set-Off Rights. The parties hereby agree that neither party
shall have any right to set-off or apply against any sums due under this
Agreement any sums due or amounts otherwise owing pursuant to any other
provision of this Agreement or any other agreement or arrangement between the
parties.
12.3 Subrogation; Assignment of Rights. In the event Disposeco
delivers and Campbell Wells accepts a delivery of materials (the "Nonconforming
Materials") containing hazardous or dangerous substances in violation of this
Agreement and in violation of Disposeco's agreement with the third party
generator producing such materials, Disposeco agrees that, upon the request of
Campbell Wells, Campbell Wells shall become fully subrogated to the rights of
Disposeco against such generator related to the Nonconforming Materials, and
Disposeco shall (i) assign or take such further action as is necessary or
desirable to transfer to Campbell Wells any and all rights of action of
Disposeco against such generator relating to such Nonconforming Materials
arising at law under Disposeco's agreement with such generator or in equity and
(ii) use its good faith best efforts to assist in the prosecution of any claim
brought by Campbell Wells against such third party generator relating to the
Nonconforming Materials.
12.4 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. Campbell Wells and Disposeco may assign their rights, obligations
and duties under this Agreement with the written consent of the other parties to
the Agreement, which consent shall not be unreasonably withheld; provided that
the assigning party shall remain primarily liable for all obligations and duties
arising hereunder.
12.5 Notices. Notices and other communications provided for herein
shall be in writing and shall be deemed to have been validly given (a) 3 days
after deposit in the United States mails, registered or certified mail with
proper postage prepaid and return receipt requested, (b) upon transmission
thereof and receipt of the appropriate confirmation if sent via telecopier or
telefax, (c) the business day after the same shall have been deposited with a
reputable overnight courier, shipping prepaid and (d) if delivered in person,
upon delivery, in each case addressed as follows:
If to Disposeco, to: with a copy to:
<TABLE>
<CAPTION>
<S> <C>
W. Gregory Orr Louise A. Shearer
President Baker & Botts. L.L.P.
Campbell Wells, Ltd. One Shell Plaza
2014 West Pinhook Road, Ste. 900 910 Louisiana
Lafayette, Louisiana 70508 Houston, Texas 77002-4995
ph: 318-266-7976 ph: 713-229-1286
fax: 318-266-7922 fax: 713-229-1522
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
If to Campbell Wells, to: with a copy to:
W. Gregory Orr Louise A. Shearer
President Baker & Botts. L.L.P.
Campbell Wells, Ltd. One Shell Plaza
2014 West Pinhook Road, Ste. 900 910 Louisiana
Lafayette, Louisiana 70508 Houston, Texas 77002-4995
ph: 318-266-7976 ph: 713-229-1286
fax: 318-266-7922 fax: 713-229-1522
If to Sanifill, to: with a copy to:
H. Steven Walton Louise A. Shearer
Secretary Baker & Botts. L.L.P.
Sanifill, Inc. One Shell Plaza
2777 Allen Parkway, Ste. 700 910 Louisiana
Houston, Texas 77019-2155 Houston, Texas 77002-4995
ph: 713-942-6200 ph: 713-229-1286
fax: 713-942-6299 fax: 713-229-1522
</TABLE>
or such other address as any party shall specify by written notice so given.
12.6 Non-Waiver. The failure of any party to enforce its rights under
any provision of this Agreement shall not be construed to be a waiver of such
provision. No waiver of any breach of this Agreement shall be held to be a
waiver of any other breach.
12.7 Entire Agreement; Amendment. This Agreement constitutes the
entire agreement between the parties concerning the subject matter hereof and
supersedes any and all other communications, representations, proposals,
understandings or agreements, either written or oral, between the parties hereto
with respect to such subject matter. This Agreement may not be modified or
amended, in whole or in part, except by a writing signed by both parties hereto.
12.8 Severability. If any provision of this Agreement is declared
invalid or unenforceable, then such portion shall be deemed to be severable from
this Agreement and shall not affect the remainder hereof.
12.9 Headings. The Article and Section headings contained herein are
for reference purposes only and shall not in any way affect the meaning and
interpretation of this Agreement.
12.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one instrument.
12.11 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
22
<PAGE>
EXECUTED as of the day and year first above written.
NOW DISPOSAL OPERATING CO.
By:______________________________
Name:____________________________
Title:___________________________
SANIFILL, INC.
By:______________________________
Name:____________________________
Title:___________________________
CAMPBELL WELLS, LTD.
By:_______________________________
Name:_____________________________
Title:____________________________
<PAGE>
SCHEDULE 1: DECREASING ACTUAL VOLUME OVER 10 YEAR PERIOD.
<TABLE>
<CAPTION>
Prior Years Carryforward
Adjustment Amount
(= to Annual Volume (=Actual Carryforward
positive (Assumed to Actual Volume - Account -
Contract Carryforward be Volume Annual Year End
Year Acct. Bal.) 1,850/year) Minimum Volume (assumed) Volume) Balance
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 NA 1,850 1,757.5 2,000 150 150
(=1,850-92.5) (=0+150)
- ------------------------------------------------------------------------------------------------------------------------------------
2 150 1,850 1,607.5 2,000 150 185
(=1,850-150-92.5) (=150 + 150
subject to
maximum)
- ------------------------------------------------------------------------------------------------------------------------------------
3 185 1,850 1,572.5 1,900 50 185
(=1,850-185-92.5) (=185 + 50-
150*
subject to
maximum)
- ------------------------------------------------------------------------------------------------------------------------------------
4 185 1,850 1,572.5 1,900 50 85
(=1,850-185-92.5) (=185+50-
150*)
- ------------------------------------------------------------------------------------------------------------------------------------
5 100 1,850 1,657.5 1,850 0 35
(=1,850-100-92.5) (=85+0-50)*
- ------------------------------------------------------------------------------------------------------------------------------------
6 50 1,850 1,707.5 1,850 0 0
(=1,850-50-92.5) (=35+0-35**)
- ------------------------------------------------------------------------------------------------------------------------------------
7 NA 1,850 1,757.5 1,800 -50 -50
(=1,850-92.5) (0+-50)
- ------------------------------------------------------------------------------------------------------------------------------------
8 NA 1,850 1,757.5 1,800 -50 -100
(=1,850-92.5) (-50+-50)
- ------------------------------------------------------------------------------------------------------------------------------------
9 NA 1,850 1,757.5 1,775 -75 -125
(=1,850-92.5) (=50
credit***
-50-75)
- ------------------------------------------------------------------------------------------------------------------------------------
10 NA 1,850 1,757.5 1,975 125 0
(=1,850-92.5) (-125+125)
- ------------------------------------------------------------------------------------------------------------------------------------
* Pursuant to Section 2.3.3, the Positive Carryforward accruing in the Contract Year two years earlier expires.
** Under the last sentence in Section 2.3.3, the reduction in account balance resulting from the expiration of an earlier Positive
Carryforward shall not cause the balance of the Carryforward Account to become negative.
</TABLE>
** Pursuant to Section 2.3.4, Disposeco would be obligated in Contract Year 9
to pay an amount equal to 50,000 barrels multiplied by the Prevailing Rate based
on the Triggering Carryforward accruing in Contract Year 7.
<PAGE>
SCHEDULE 2: INCREASING ACTUAL VOLUME OVER 10 YEAR PERIOD.
<TABLE>
<CAPTION>
Prior Years Carryforward
Adjustment Amount
(= to Annual Volume (=Actual Carryforward
positive (Assumed to Actual Volume - Account -
Contract Carryforward be Volume Annual Year End
Year Acct. Bal.) 1,850/year) Minimum Volume (assumed) Volume) Balance
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 NA 1,850 1,757.5 1,775 -75 -75
(=1,850-92.5) (=0+-75)
- -----------------------------------------------------------------------------------------------------------------------------------
2 NA 1,850 1,757.5 1,775 -75 -150
(=1,850-92.5) (=-75+-75)
- ------------------------------------------------------------------------------------------------------------------------------------
3 NA 1,850 1,757.5 1,800 -50 -125
(=1,850-92.5) (=75 credit*+
-75 + -50)
- ------------------------------------------------------------------------------------------------------------------------------------
4 NA 1,850 1,757.5 1,800 -50 -50
(=1,850-92.5) (=75 credit*+
-50 + -50)
- -----------------------------------------------------------------------------------------------------------------------------------
5 NA 1,850 1,757.5 1,850 0 0
(=1,850-92.5) (=50 credit* +
0)
- -----------------------------------------------------------------------------------------------------------------------------------
6 NA 1,850 1,757.5 1,850 0 0
(=1,850-92.5) (=0+0)
- -----------------------------------------------------------------------------------------------------------------------------------
7 NA 1,850 1,757.5 1,900 50 50
(=1,850-92.5) (0+50)
- -----------------------------------------------------------------------------------------------------------------------------------
8 50 1,850 1,707.5 1,900 50 100
(=1,850-50-92.5) (=50+50)
- ------------------------------------------------------------------------------------------------------------------------------------
9 100 1,850 1,657.5 1,950 100 150
(=1,850-100-92.5) (=100+100-50**)
- -----------------------------------------------------------------------------------------------------------------------------------
10 150 1,850 1,607.5 1,700 -150 0
(=1,850-150-92.5)
- ------------------------------------------------------------------------------------------------------------------------------------
* Pursuant to Section 2.3.2, Disposeco would be obligated in each of the marked Contract Years to pay an amount equal the then
Prevailing Rate multiplied by the volume of the Triggering Carryforward accruing in two years earlier.
** Pursuant to Section 2.3.3, the Positive Carryforward accruing in Contract Year 7 expires.
</TABLE>
<PAGE>
SCHEDULE 3: VARIABLE ACTUAL VOLUME OVER 10 YEAR PERIOD.
<TABLE>
<CAPTION>
Prior Years Carryforward
Adjustment Amount
(= to Annual Volume (=Actual Carryforward
positive (Assumed to Actual Volume - Account -
Contract Carryforward be Volume Annual Year End
Year Acct. Bal.) 1,850/year) Minimum Volume (assumed) Volume) Balance
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
1 NA 1,850 1,757.5 2,000 150 150
(=1,850-92.5) (=0+150)
- -----------------------------------------------------------------------------------------------------------------------------------
2 150 1,850 1,607.5 1,750 -100 50
(=1,850-150-92.5) (=150+-100)
- -----------------------------------------------------------------------------------------------------------------------------------
3 50 1,850 1,707.5 1,850 0 0
(=1,850-50-92.5) (=50-unused
50 from yr 1)
- -----------------------------------------------------------------------------------------------------------------------------------
4 NA 1,850 1,757.5 1,800 -50 -50
(=1,850-92.5) (=0-50)
- -----------------------------------------------------------------------------------------------------------------------------------
5 NA 1,850 1,757.5 2,000 150* 100
(=1,850-92.5) (=-50+150)
- -----------------------------------------------------------------------------------------------------------------------------------
6 100 1,850 1,657.5 1,750 -100 0
(=1,850-100-92.5) (=100+-100)
- -----------------------------------------------------------------------------------------------------------------------------------
7 NA 1,850 1,757.5 1,850 0 0
(=1,850-92.5) (=0+0)
- -----------------------------------------------------------------------------------------------------------------------------------
8 NA 1,850 1,757.5 1,900 50 50
(=1,850-92.5) (=0+50)
- -----------------------------------------------------------------------------------------------------------------------------------
9 50 1,850 1,757.5 1,775 -75 -25
(=1,850-92.5) (=50+-75)
- -----------------------------------------------------------------------------------------------------------------------------------
10 NA 1,850 1,757.5 1,875 25 0
(=1,850-92.5)
- -----------------------------------------------------------------------------------------------------------------------------------
* Note that Contract Year 5 above is an example of a Positive Carryforward which is partially offset prior to the Contract year
in which it is accrued with the remainder being offset after the Contract Year in which it is accrued.
</TABLE>
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Newpark Resources,
Inc. on Form S-3 of our report dated March 1, 1996, included in the Annual
Report on Form 10-K of Newpark Resources, Inc. for the year ended December 31,
1995, and to the use of our report dated March 1, 1996, appearing in the
Prospectus, which is part of this Registration Statement. We also consent to
the use in this Registration Statement of our report dated June 6, 1996,
related to the financial statements of the Marine NOW Service Business of
Campbell Wells, Ltd., appearing in the Prospectus, which is a part of this
Registration Statement, and to the reference to us under the headings "Summary
Historical and Pro Forma Financial Information" and "Experts" in such
Prospectus.
DELOITTE & TOUCHE llp
New Orleans, Louisiana
June 11, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3,617
<DEPRECIATION> (1,384)
<TOTAL-ASSETS> 2,233
<CURRENT-LIABILITIES> (468)
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 18,837
<TOTAL-REVENUES> 18,837
<CGS> 12,007
<TOTAL-COSTS> 12,007
<OTHER-EXPENSES> 1,946
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,884
<INCOME-TAX> 1,661
<INCOME-CONTINUING> 3,223
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,223
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3,935
<DEPRECIATION> (1,403)
<TOTAL-ASSETS> 2,531
<CURRENT-LIABILITIES> (444)
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 5,592
<TOTAL-REVENUES> 5,592
<CGS> 3,539
<TOTAL-COSTS> 3,539
<OTHER-EXPENSES> 489
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,564
<INCOME-TAX> 532
<INCOME-CONTINUING> 1,032
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,032
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
