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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
June 11, 1996
Date of Report
(Date of earliest event reported)
SMITH INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-8514 95-3822631
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
16740 Hardy Street
Houston, Texas
(Address of principal executive offices)
77032
(Zip Code)
(713) 443-3370
(Registrant's telephone number, including area code)
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ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS
On June 11, 1996, M-I Drilling Fluids L.L.C. ("M-I"), a 64% owned
affiliate of Smith International Inc. (the "Registrant"), purchased Anchor
Drilling Fluids A.S. ("Anchor") from Transocean A.S. ("Seller").
M-I purchased Anchor for the cash sum of 695.75 million Norwegian kroner.
The principal source of the funds was a loan made in the ordinary course of
business. The Company entered into a five year term loan for 320.00 million
Norwegian kroner with a bank group consisting of Texas Commerce Bank, ABN-Amro
Bank, Den Norske Bank, Bank of America, First Interstate Bank, the Bank of New
York, CORESTATES and Union Bank of California. The remainder of the funds came
from a private placement made in the ordinary course of business through
Principal Mutual and John Hancock. The terms of the purchase, including the
purchase price, were negotiated on an arms-length basis between M-I and
Seller.
Anchor's assets include plant, equipment and property used, and which
will continue to be used, in connection with manufacturing and marketing oil
field drilling fluids and drilling fluid systems.
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
The required financial statements are impracticable to
provide at the date of this filing. The required information
will be filed as soon as available, but not later than
August 23, 1996.
(b) Pro forma financial information.
The required pro forma financial information is impracticable
to provide at the date of this filing. The required
information will be filed as soon as available, but not later
than August 23, 1996.
(c) Exhibits.
2.1 Plan of Acquisition, Reorganization, Arrangement,
Liquidation, or Succession.
The exhibit filed with the Commission contains the material
sections of the Purchase and Sale Agreement between M-I and
the Seller as outlined in the Exhibit's Table of Contents.
The Registrant will provide any additional information to the
Commission upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SMITH INTERNATIONAL, INC.
/s/ Neal S. Sutton
-----------------------
By: Neal S. Sutton
Senior Vice President - Administration,
General Counsel and Secretary
Date: June 26, 1996
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INDEX TO EXHIBITS
2.1 -- Plan of Acquisition, Reorganization, Arrangement,
Liquidation, or Succession.
The exhibit filed with the Commission contains the material
sections of the Purchase and Sale Agreement between M-I and the
Seller as outlined in the Exhibit's Table of Contents. The
Registrant will provide any additional information to the
Commission upon request.
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==============================================================================
PURCHASE AND SALE AGREEMENT
By and Between
M-1 DRILLING FLUIDS L.L.C.
and
ANCHOR DRILLING FLUIDS AS
===============================================================================
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TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS ..................................................... 1
1.1 Definitions ...................................................... 1
ARTICLE 2
PURCHASE AND SALE ................................................ 7
2.1 Assets to be Conveyed ............................................ 7
2.2 Excluded Assets .................................................. 7
2.3 Liabilities, Completion of Certain Contracts ..................... 7
2.4 Purchase Price .................................................. 8
2.5 Adjustments to Purchase Price .................................... 8
2.6 Allocation of Purchase Price ..................................... 8
ARTICLE 3
THE CLOSING....................................................... 9
3.1 Closing .......................................................... 9
3.2 Proceedings at Closing ........................................... 9
3.3 Documents to be Delivered to Buyer Group ......................... 9
3.4 Documents to be Delivered to Seller Group ........................ 11
3.5 Termination ...................................................... 11
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER GROUP ................... 12
4.1 Organization and Good Standing ................................... 12
4.2 Authorizations and Binding Effect................................. 12
4.3 Litigation; Orders ............................................... 13
4.4 Consents ......................................................... 13
4.5 Financial Statements; Liabilities ................................ 13
4.6 Books and Records ................................................ 14
4.7 Title to and Condition of Purchased Assets ....................... 14
4.8 Intellectual Property ............................................ 15
4.9 Contracts and Commitments ........................................ 16
4.10 Licenses and Permits ............................................. 17
4.11 Compliance with Law .............................................. 17
4.12 Taxes ............................................................ 17
4.13 Employee Benefit Plans and Arrangements .......................... 18
4.14 Customers and Suppliers .......................................... 19
4.15 No Change in Condition ........................................... 19
4.16 Insurance ........................................................ 20
4.17 Labor Relations .................................................. 20
4.18 Audit Letters .................................................... 20
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER GROUP . . . . . . . . . . . . . 21
5.1 Organization and Good Standing of Buyer Group . . . . . . . . . . . . 21
5.2 Authorizations and Binding Effect . . . . . . . . . . . . . . . . . . 21
5.3 Litigation, Orders . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 6
COVENANTS OF SELLER GROUP . . . . . . . . . . . . . . . 21
6.1 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.2 Access to Documents, Opportunity to Ask Questions . . . . . . . . . . 22
6.3 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . 22
6.4 Consents and Conditions, Assignment of Assets . . . . . . . . . . . . 22
6.5 Notice of Breach or Material Change . . . . . . . . . . . . . . . . 22
6.6 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 7
COVENANTS OF BUYER GROUP . . . . . . . . . . . . . . . 23
7.1 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.2 Consents and Conditions . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 8
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS . . . . . . . . . 23
8.1 Representations, Warranties and Covenants . . . . . . . . . . . . . 23
8.2 No Prohibition . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.3 Delivery of Documents . . . . . . . . . . . . . . . . . . . . . . . 24
8.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.5 Cooperative Agreement . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 9
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS . . . . . . . . . . . . 24
9.1 Representations, Warranties and Covenants . . . . . . . . . . . . . . 24
9.2 No Prohibition . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.3 Delivery of Documents . . . . . . . . . . . . . . . . . . . . . . . . 24
9.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 10
MUTUAL AND ADDITIONAL POST-CLOSING COVENANTS . . . . . . . . . . . . . 25
10.1 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.2 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . 25
10.3 Certain Employee Matters . . . . . . . . . . . . . . . . . . . . . . 25
10.4 Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.5 Assignment of Contracts . . . . . . . . . . . . . . . . . . . . . . . 27
10.6 Taxes and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.7 Access to Records and Premises After Closing Date . . . . . . . . . . 27
10.8 Actions of the Parties . . . . . . . . . . . . . . . . . . . . . . . 28
10.9 Payment Of Certain Amounts Due To Parent At 30 September 1995 . . . . 28
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10.10 Payment of 30 September 1995 through Closings Date Earnings To
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 11
INDEMNIFICATION; LIMITATION OF LIABILITY; SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . 29
11.1 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.2 Notice, Participation and Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.3 Indemnification Notwithstanding Investigation or Negligence . . . . . . . . . . . . . . . . . . 31
11.4 Survival of Indemnification and Representations and Warranties . . . . . . . . . . . . . . . . 31
11.5 Liability Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.6 Liability Limitation With Regard to Failure To Obtain Consents . . . . . . . . . . . . . . . . 32
ARTICLE 12
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.1 Waivers and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.3 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.4 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.9 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement"), made this 10th day
of April 1996, is by and between M-I DRILLING FLUIDS L.L.C., a Delaware, U.S.A.
limited liability corporation ("Buyer") and ANCHOR DRILLING FLUIDS AS, a
Norwegian corporation ("Seller").
RECITALS
WHEREAS, Seller is a wholly owned subsidiary of Transocean AS
("Parent");
WHEREAS, Seller Group is involved in the business of providing, to the
oil and gas industry in Norway and other markets throughout the world, drilling
fluids, drilling fluids engineering services, laboratory services and related
services including the supply of crude and ground barite, waterbased
transportation services, and custom grinding services (the "Business"); and
WHEREAS, Seller Group intends to sell and Buyer Group intends to
purchase the shares of stock or assets of Seller Group relating to the Business
and Buyer Group agrees to assume certain liabilities associated with the
Business as specifically set forth in the Protocol.
NOW, THEREFORE, in consideration of the premises, the mutual benefits to
be derived from this Agreement and the representations, warranties, covenants
and conditions herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. Unless otherwise defined herein or unless the
context otherwise requires, capitalized terms in this Agreement have the
following meanings:
"Affiliate" means any Person that, directly or indirectly, controls, or
is controlled by or under common control with, another Person. For purposes
of this definition, "control" (including the terms "controlled by" and "under
common control with"), as used with respect to any Person, means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities or
by contract or otherwise.
"Allocation Certificate" has the meaning ascribed thereto in
Section 2.6.
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"Assumed Contracts" means (i) those Contracts listed on Schedule
1.1(b)(i), (ii) the Assumed Personalty Leases which are listed on Schedule
1.1(b)(ii), (iii) the Assumed Real Property Leases which are listed on Schedule
1.1(b)(iii); (iv) other contracts, agreements, and arrangements listed on
Schedule 1.1(b)(iv), (v) those Intellectual Property agreements listed in the
Intellectual Property Agreement List on Schedule 1.1(d), and (vi) those
contracts, agreements, and arrangements entered into in the ordinary course of
business between the date of execution of this Agreement and the Closing Date
and listed in the Closing Memorandum.
"Assumed Liabilities" means all liabilities, including any guarantees
issued by the Parent with respect to the Business, other than Excluded
Liabilities.
"Assumed Personalty Leases" means those leases, whether operating or
capital, of Personalty to which Seller Group is a party, whether as lessor or
lessee, and that are specifically set forth on Schedule 1.1(b)(ii).
"Assumed Real Property Leases" means those leases of real property to
which Seller Group is a party, whether as lessor or lessee, and that are
specifically set forth on Schedule 1.1(b)(iii).
"Assumed Stock" means those shares of stock set forth on Schedule
1.1(b)(c) to be purchased by Buyer Group pursuant to a separate Stock Purchase
Agreement. Schedule 1.1(c) shall include the total number of authorized
shares, the par value per share and any voting, preference, or preemptive
rights or restrictions associated with the Assumed Stock.
"Business" has the meaning ascribed thereto in the Recitals to this
Agreement and reflected through the Financial Statements.
"Buyer Group" means the Buyer and those of its Affiliates designated to
acquire the Purchased Assets pursuant to the Protocol.
"Buyer Group Indemnitees" has the meaning ascribed thereto in Section
1.1(a).
"Closing" means the consummation of the transactions between Buyer
Group and Seller Group contemplated hereby.
"Closing Date" has the meaning ascribed thereto in Section 3.1.
"Company" means the any company whose shares of stock are being assumed
by Buyer Group as reflected on Schedule 1.1(c).
"Contracts" means any contract, agreement, purchase order, indenture,
note, bond, loan, instrument, lease (excluding Assumed Personalty and Real
Property Leases), conditional sale contract, mortgage, license, franchise,
insurance policy, commitment or other arrangement (whether written or oral and
which constitutes a contract or gives inference to the existence of a contract,
except to the extent such is in violation with or unenforceable under
applicable law), including those contracts described on Schedule 1.1(b)(i).
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"Damages" means all judgments, good faith settlements, claims (whether
or not such claims are ultimately defeated), losses, penalties, fines,
liabilities (including strict liability), costs, and expenses, of whatever kind
or nature, contingent or otherwise, reasonable attorney's fees,costs and
expenses incurred in enforcing this Agreement or collecting any sums due
hereunder.
"Due Diligence Adjustments" means the value of those adjustments to the
30 September 1995 Financials accumulated by Buyer Group as part of the due
diligence process which are agreed upon by the parties prior to the Closing
Date.
"Environmental Costs" mean all costs and liabilities associated with
the non-compliance of Environmental Laws and associated with any environmental
investigation and/or remediation.
"Environmental Laws" means any and all laws, statutes, ordinances,
rules, regulations or orders of any Governmental Entity (including common law
duties established by courts or other Governmental Entities) pertaining to the
protection of human health and the environment in effect on the date of this
Agreement in any jurisdiction, federal, state, local or foreign, in which the
Business is operated.
"Excluded Assets if means any assets or properties of Seller Group
used or held for use in the Business to the extent they constitute, on the
Closing Date:
(a) the shares of stock of the following entities:
(i) Sun-Tek AS
(ii) Norbar Minerals AS
"Excluded Liabilities" has the meaning ascribed thereto in
Section 2.3(a).
"Financial Statements" has the meaning ascribed thereto in Section
4.5(a).
"Governmental Entity" means any court or any federal, state, local, or
foreign legislative body or governmental department, commission, board, bureau,
agency or authority.
"Improvements" means all warehouses, storage facilities, buildings,
works, structures, fixtures, landings, improvements, installations and
additions constructed, erected or located on or attached or affixed to the Real
Property.
"Indemnified Claim" has the meaning ascribed thereto in Section 11.2.
"Indemnitee" has the meaning ascribed thereto in Section 11.2.
"Indemnitor" has the meaning ascribed thereto in Section 11.2.
"Intangible Assets" means all manuals, catalogs, brochures, sales
literature, marketing techniques and materials, marketing and developing plans,
promotional or other selling materials, nonproprietary computer software,
microfilm records, drawings, specifications, nonproprietary technology,
customer lists, price lists, business acquisition and disposition plans and all
other
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nonproprietary rights of any kind or character and wherever located which are
owned by the Business and used or being developed by and in connection with the
Business.
"Intellectual Property" means all patents, patent applications,
inventions, disclosures, trademark and service mark license rights, copyrights
(including registrations and pending registrations therefor), trade secrets,
know how, processes, proprietary technology and computer software, slogans,
research and development projects, models, data, and all other proprietary
rights of any kind or character, wherever located, that are used or are being
developed in connection with the Business and the confidential information
owned by or licensed to and used by Seller Group in connection with such know
how or processes or the Purchased Assets or in the conduct of the Business,
including without limitation all that is listed (together with the name or
names of the owner or owners thereof) on Schedule 1.1(d).
"Intellectual Property Agreement List" has the meaning ascribed thereto
in Section 4.8(a)(iii).
Inventories" means all raw materials and work-in-process inventories of
the Business which were in existence on the date of and reflected in the 30
September 1995 Financials, plus all raw materials and work-in-process acquired
or initiated in the ordinary course of the Business during the period between
the 30 September 1995 Financials date and the Closing Date, less all raw
materials and work-in-process used or completed during said period, as listed
on Schedule 1.1(e).
"Inventory and Equipment In-Transit" means that inventory and equipment
which was purchased by Seller Group prior to the Closing Date but was not
received as of the Closing Date as listed on Schedule 1.1(f).
"Key Employee" means any employee of Seller Group listed on Schedule
10.3(c).
"Legal Proceeding" means any judicial, administrative or arbitral
action, suit, proceeding (public or private), written claim or governmental
proceeding.
"Liens" means all mortgages, deeds of trust, liens, security interests,
pledges, conditional sales contracts, claims, rights of first refusal, options,
charges, liabilities, obligations, easements, rights-of-way, limitations,
reservations, restrictions and other encumbrances of any kind.
"Material Adverse Effect' means (a) any change in the business, results
of operations, financial condition, obligations (whether or not the result
thereof would be covered by insurance) thereof that (individually or in the
aggregate) is, or may be reasonably expected to be, material and adverse to the
Business, taken as a whole, or (b) a change in the value, condition or use
thereof that (individually or in the aggregate) is, or may be reasonably
expected to be, material and adverse to the Purchased Assets, taken as a whole.
"Material Contracts" means Seller's contracts and agreements that
provide for payments or receipts by the Business of in excess of NOK 300,000 or
more annually.
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"Net Asset Value" has the meaning ascribed thereto in Section 10.10.
"Patent List" has the meaning ascribed thereto in Section 4.8(a)(i).
"Permits" means all permits, licenses, franchises and authorizations,
including Permits required by Environmental Laws, that are material to and that
relate to the operation of the Business and the ownership and operation of the
Purchased Assets all as the same may exist on the Closing Date.
"Permitted Encumbrances' means Liens for current taxes and assessments
not yet due and payable, including without limitation Liens for nondelinquent
ad valorem taxes, nondelinquent statutory Liens, inchoate liens, deposits for
workman's compensation, unemployment and surety bonds arising other than by
reason of any default on the part of Seller Group.
"Person" means an individual, partnership, joint venture, corporation,
bank, trust, unincorporated organization or a Governmental Entity.
"Personalty" means all tools, equipment (including without limitation
all computer equipment and hardware), rental equipment, machinery, vessels,
vehicles and other transportation equipment, furniture, spare parts, supplies
and all other tangible personal property of every kind and description (other
than Improvements and the Inventories), insofar as any of the foregoing is
owned by the Business, including without limitation those listed or described
on Schedule 1.1(g), but excluding Excluded Assets.
"Plan" has the meaning ascribed thereto in Section 4.13.
"Protocol" means that plan describing the seller and the buyer of the
Purchased Assets on a country-by-country basis as set forth in Schedule 1.1(a)
"Purchase Price" has the meaning ascribed thereto in Section 2.4.
"Purchased Assets" means:
(a) all cash, bank accounts, negotiable instruments or other cash
equivalents existing on the Closing Date;
(b) the Receivables;
(c) the Inventories;
(d) the Inventory and Equipment In-Transit which were purchased by
Seller Group in the ordinary course of business;
(e) all prepaid rentals, other prepaid expenses, bonds, deposits and
financial assurance requirements, and those other current assets not otherwise
enumerated in Excluded Assets relating to the Business, including without
limitation all prepaid expenses
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of the nature (but not the amount) described in the 30 September 1995
Financials, all as the same may exist on the Closing Date; and
(f) the Assumed Stock;
(g) the Improvements;
(h) the Personalty;
(i) the Permits, to the extent transferable;
(j) the Intellectual Property;
(k) the Intangible Assets;
(l) the Assumed Contracts;
(m) the trade associated with the Purchased Assets;
(n) the goodwill and going concern value of the Business; and
(o) all correspondence, production records, customer lists,
employment records with respect to Seller Group employees and any other
information pertaining to the Business that is reasonably necessary for Buyer
Group to conduct the Business from and after the Closing Date in the manner in
which it is presently being conducted;
provided, however, that the Purchased Assets shall not include the
Excluded Assets.
"Real Property" means the parcels of real property described on
Schedule 1.1(h).
"Receivables" means all accounts and notes receivables which were in
existence on the date of and reflected in 30 September 1995 Financials, plus
all credit sales made in the ordinary course of the Business during the period
between the 30 September 1995 Financials date and the Closing Date, less all
accounts collected and all sales returns or allowances, as listed on Schedule
1.1(i).
"Seller Group" means the Seller and those of its Affiliates designated
to sell the Purchased Assets pursuant to the Protocol.
"Seller Group Indemnitees " has the meaning ascribed thereto. in
Section 11.1(b).
"Seller Group's Knowledge" means information (i) which is actually
known by the individuals listed on Schedule 1.1(i) hereto and (ii) which such
individual should reasonably be expected to have obtained as the result of
undertaking an investigation of such scope and extent as a reasonably prudent
person would undertake concerning the particular subject matter.
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"Taxes" means any federal, state, local or foreign income, profit,
franchise (including without limitation those that are based on net worth,
capitalization, income or total assets), sales, use, transfer, real property
transfer, recording, value added, real or personal property or other taxes,
assessments, fees, levies, duties (including without limitations customs duties
and similar charges), deductions or other charges of any nature whatsoever
(including without limitation interest and penalties) imposed by any law, rule
or regulation.
"30 September 1995 Financials' means the 30 September 1995 unaudited
financial statements provided to Buyer Group by Seller Group pursuant to that
certain Confidentiality Agreement dated 24 October 1995.
"Trademark/Copyright List" has the meaning ascribed thereto in Section
4.8(a)(ii).
"Transfer Taxes" means all sales, use, transfer, real property
transfer, recording, value added, investment, customs duties and similar taxes
or charges that become due and payable prior to, on or after the Closing Date
as the result of (a) the conveyance to Buyer Group of the Purchased Assets by
Seller Group or (b) the expiration of any time period on or prior to the
Closing Date that results in customs duties or similar charges, or an increase
in customs duties or similar charges, on or with respect to any of the
Purchased Assets.
ARTICLE 2
PURCHASE AND SALE
2.1 Assets to be Conveyed. Subject to the terms and conditions of
this Agreement, at the Closing, Seller Group shall sell, convey, transfer,
assign and deliver to Buyer Group, free and clear of all Liens other than
Permitted Encumbrances, and Buyer Group shall purchase, acquire and accept from
Seller Group the Purchased Assets in accordance with the Protocol and pursuant
to the terms of the supplemental agreements set forth as Exhibit A.
2.2 Excluded Assets. Seller Group shall be obligated hereunder to
sell only the Purchased Assets, and Buyer Group shall be obligated hereunder
and thereunder to purchase only the Purchased Assets. Notwithstanding anything
to the contrary contained herein, Buyer Group shall not be obligated to
purchase, and Seller Group shall not be obligated hereunder to sell any other
assets or properties of Seller Group, including without limitation, the
Excluded Assets.
2.3 Liabilities; Completion of Certain Contracts.
(a) Buyer Group is not assuming and will not assume either hereunder or
otherwise the Excluded Liabilities. Excluded Liabilities means the
following liabilities and obligations of Seller Group; (i) unaccrued Taxes;
(ii) any Norwegian Taxes imposed in connection with the transactions
contemplated by this Agreement; (iii) any revenue adjustments or credit notes
relating to sales and services rendered prior to the Closing Date in excess of
NOK 30,000; (iv) any invoices received after the Closing Date for services
rendered to Seller Group or goods purchased by Seller Group prior to the
Closing Date which Buyer determines is not in the ordinary course of business;
(v) any Inventory and
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Equipment In-Transit not purchased in the ordinary course of business; and (vi)
all other liabilities not reflected in the Financial Statements. Excluded
Liabilities do not include liabilities and obligations associated with
Inventory and Equipment In-Transit purchased in the ordinary course of
business.
(b) Subject to the terms and conditions contained herein, Buyer
Group agrees to assume the Assumed Liabilities and the Assumed Contracts on the
Closing Date and, thereafter, to pay, perform and discharge when due the
Assumed Liabilities and the liabilities and obligations under the Assumed
Contracts to the extent they accrue after the Closing Date, and none other.
2.4 Purchase Price. Subject to the terms and conditions of this
Agreement, including Section 2.5 below, Buyer shall pay to Seller at Closing an
aggregate purchase price (the "Purchase Price") equal to NOK 695.750.000.
The Purchase Price shall be payable by wire transfer in immediately available
funds to the account specified by Seller, which account shall be specified not
less than two business days before the Closing Date.
2.5 Adjustments to Purchase Price. For purposes of determining the
Purchase Price as contemplated by Section 2.4, the Purchase Price shall be
adjusted as follows:
(a) The Due Diligence Adjustments which exceed NOK 7.000.000.
(b) The Purchase Price allocated under Section 2.6 below to any
interest in a joint venture, the conveyance of which cannot be effected due to
(i) lack of approval by a government authority, (ii) lack of consent of the
other joint venture party or (iii) the exercise of a right of first refusal by
the other joint venture party.
(c) By the amount of NOK 6.958.000 which is a compromise and
settlement between Buyer Group and Seller Group with respect to Seller Group's
unaccrued liabilities for Environmental Costs associated with the Business.
The parties agree this amount of NOK 6.958.000 will not be recorded on Seller
Group's books and records.
The aggregate of any Due Diligence Adjustments not reducing the
Purchase Price under this Section 2.5 (i.e. those not exceeding NOK 7.000.000),
will be credited against the threshold set forth in Section 11.5, provided,
however, that the adjustment for Environmental Costs described in Section
2.5(c) above, is not a Due Diligence Adjustment for the purposes of the NOK
7.000.000 threshold described in Section 2.5(a) or for the purposes of the
threshold set forth in Section 11.5.
2.6 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Purchased Assets as soon as is practicable after the
Closing Date, but in no event later than 31 October 1996 using a method agreed
to by both Buyer and Seller and such allocation shall be set forth on a
certificate to be signed by Buyer and Seller (the "Allocation Certificate").
However, the parties agree that the Purchase Price allocated to Seller's
interest in Anchor Drilling Fluids - Vietnam J/V Company shall be NOK
7.255.000, which shall not be increased or decreased via the processes
discussed in this Section 2.6. In the event that the Buyer and Seller are
unable to
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agree to an allocation within the above time period, an independent
international accounting firm (excluding Arthur Andersen & Co. and Coopers &
Lybrand) shall be engaged to allocate the Purchase Price using generally
acceptable methods and such binding allocation shall be complete no later than
31 December 1996; provided, however, either party can submit this allocation to
arbitration under the provisions of Section 12.8. Subject to the requirements
of any applicable law, all tax returns and reports filed by Buyer Group and
Seller Group shall be prepared consistently with such allocation.
ARTICLE 3
THE CLOSING
3.1 Closing. The Closing shall take place at the offices of Seller
at the later of (a) 10:00 a.m., local time, on 30 April 1996, (b) at such
other place and at such other time and date as may be mutually agreed upon by
Buyer and Seller or (c) if Buyer is unable to obtain the consents required
under Section 7.2 (including without limitation the consent of the U.S.
Department of Justice to modify that certain Final Judgement between United
States of America v. Baroid Corporation, et. al., dated 23 December 1993,
hereinafter the "Final Judgement") by 30 April 1996 or the date of the Closing
otherwise agreed upon by Buyer and Seller, within five (5) business days after
such consents are obtained. The date of the Closing is referred to in this
Agreement as the 'Closing Date."
3.2 Proceedings at Closing. All proceedings to be taken, all
payments to be made and all documents to be executed and delivered by all
parties at the Closing shall be deemed to have been taken, paid, executed and
delivered simultaneously, and no proceedings shall be deemed taken, no payments
shall be deemed made nor any documents executed or delivered until all have
been taken, paid, executed and delivered.
3.3 Documents to be Delivered to Buyer Group. At the Closing, Seller
Group shall execute (where necessary) and deliver, or shall cause to be
executed (where necessary) and delivered, to Buyer Group the following:
(a) bill of sale with respect to all the Purchased Assets, the form
and substance of which shall be acceptable to Buyer;
(b) certificates evidencing the shares of the Assumed Stock duly
endorsed in blank for transfer and executed copies of the various Stock
Purchase Agreements;
(c) certificates of title or other title documents in recordable
form conveying good title to all vehicles and other transportation equipment
included in the Purchased Assets;
(d) deeds or other title documents in recordable form conveying good
title to all real property included in the Purchased Assets;
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9.4 Consents. The consents and approvals for those Assumed Contracts
listed in Section 3.3(e) shall have been duly given.
ARTICLE 10
MUTUAL-AND ADDITIONAL POST-CLOSING COVENANTS
10.1 Further Assurances. From time to time after the Closing Date,
and for no further consideration, Seller Group shall perform all acts and
execute, acknowledge and deliver such assignments, transfers, consents and
other documents and instruments as Buyer Group or its counsel may reasonably
request, in each case, to vest in Buyer Group title to the Purchased Assets.
10.2 Public Announcements. Seller and Buyer shall not make any public
statement, including, without limitation, any press release, with respect to
this Agreement and the transactions contemplated hereby, without the prior
written consent of the other party (which consent may not be unreasonably
withheld), except as may be required by law, or by stock exchange rules and/or
regulations.
10.3 Certain Employee Matters.
(a) No Obligations Under Plans. Buyer Group is not assuming and
will not assume, either hereunder or otherwise, any obligations to Seller
Group's former or existing employees with respect to or arising out of any
Plan or with respect to any employee benefit which Seller Group's former or
existing employees may receive from Seller Group, including, but not limited
to, any benefits that Seller Group's employees may be entitled to pursuant to
any employment agreement, except as provided in Section 10.3(b).
(b) Employees. Buyer Group agrees to offer employment to all
eligible employees of Seller Group and Seller Group will use reasonable
efforts to cause such employees to make available their employment services
to Buyer Group. Employment offered to Seller Group's employees shall be offered
on similar terms (in the aggregate) to those under which Seller Group employed
such employees as of the Closing; provided that, Buyer Group is making no
assurances as to the length of such employment. The employees' calendar year
1996 vacation entitlement will be determined using Buyer Group's vacation
policy in effect at 1 January 1996.
(c) No Solicitation. Seller Group covenants and agrees that,
commencing on the Closing Date and continuing for a period of two (2) years
thereafter, Seller Group will not directly or indirectly (a) attempt to solicit
employment from any Key Employee as set forth in Schedule 10.3(c) or (b)
attempt to induce any Key Employee to terminate employment with Buyer Group.
However, the preceding sentence shall not apply to those Key Employees who are
terminated by Buyer Group or independently respond to a general publication
solicitation for employment by Seller Group.
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10.4 Non-Competition.
(a) Seller and Buyer acknowledge that (i) the Business is national
and international in scope, (ii) the agreements and covenants in this Section
10.4 are essential to protect the Business and the Purchased Assets (including
specifically the goodwill) purchased by Buyer Group, and (iii) Buyer would not
enter into this Agreement but for the covenants and agreements contained in
this Section 10.4. Accordingly, Seller Group, covenant and agree that,
commencing on the Closing Date and continuing for a period of three (3) years
thereafter, except as provided in Section 10.4(b), Seller Group will not own,
manage, operate, join, control or participate in, directly or indirectly, or
be a partner or stockholder of, any business engaged in any activity that is
in competition in any manner whatsoever with the Business as currently
conducted by Seller Group and has been conducted by Seller Group in the three
(3) years prior to the date of this Agreement, and Seller Group shall not
render assistance or advice to any Person that is so engaged.
(b) Buyer Group and Seller Group agree to the following exceptions
from the provisions of Section 10.4(a):
(i) Seller Group may acquire a Passive Financial Investment in a
business engaged in any activity that is in competition in any manner
whatsoever with the Business as currently conducted by Seller Group and has
been conducted by Seller Group in the three (3) years prior to the date of
this Agreement. "Passive Financial Investment" shall mean any acquisition of
less than 20% of a business, which is not a controlling interest or which does
not provide effective control, and in which Seller Group does not (A) elect to
provide a member to the Board of Directors or management or (B) engage in any
marketing, sales or financing activity on behalf of the business in which the
interest is acquired.
(ii) Seller Group may acquire a controlling interest in a business
engaged in any activity that is in competition in any manner whatsoever with
the Business as currently conducted by Seller Group and has been conducted by
Seller Group in the three (3) years prior to the date of this Agreement if
such competitive activity is equal to or less than ten percent (1 0 %) of the
revenues of the acquired business. In the event that the revenues of the
competitive activity are greater than ten percent (10%) of the revenues of the
acquired business, Seller Group shall promptly notify Buyer Group, and, at
Buyer Group's sole option, shall divest all such competitive activity within
twelve (12) months from the date of acquisition of any such business. For
purposes of this Section 10.4(b)(ii), "revenues of the acquired business"
shall not include the sales of any third party competitive services contracted
or offered by or through the acquired business as part of an integrated
products or services proposal.
(iii) Section 10.4(a) shall not apply to a merger of Seller Group or
Parent with any third party or the acquisition of Seller Group or Parent by any
third party where, after the merger or acquisition, Seller Group or Parent is
not in actual or effective control of the combined entities.
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(c) If Buyer Group cannot show that any breach of the provisions of
this Section 10.4 by Seller Group results in damages being suffered by Buyer
Group, then Seller Group agrees that Buyer Group's only remedy may be
injunctive relief.
10.5 Assignment of Contracts. Seller Group agrees to use its best
efforts in each case to obtain consent to the assignment to Buyer of Assumed
Contracts, Assumed Personalty Leases, Assumed Real Property Leases, Permits,
commitments and sales orders to be assigned to Buyer Group as provided herein,
to the extent such agreements or instruments required the consent of any other
Person and the consent so required was not provided at Closing. Until such
time as Seller Group obtains the consents required in the foregoing sentence,
Seller Group agrees to maintain any and all Assumed Contracts, Assumed
Personalty Leases, Assumed Real Property Leases and Permits, as set forth on
Schedule 10.5, which are necessary for the operation of the Business for the
benefit of Buyer Group and at Buyer Group's cost and expense, provided that
Buyer Group undertakes to perform its obligation under such Assumed Contracts,
Assumed Personalty Leases, Assumed Real Property Leases and Permits consistent
with the terms set forth therein and provides Seller Group and Parent with
written summaries of such performance as reasonably requested by Parent. It is
agreed that no contract containing a non-assignment clause shall be deemed to
have been assigned unless and until the necessary consent for assignment has
been obtained.
10.6 Taxes and Expenses.
(a) All Taxes, including real estate taxes, personal property
taxes, charges and assessments but excluding income or profit taxes, with
respect to the Business and the Purchased Assets shall be prorated on a per
them basis through the Closing Date. If, as of the Closing Date, any of the
same have not been finally assessed for the current fiscal year of the taxing
authority, then the same shall be adjusted at Closing based upon the most
recently issued bills therefor, and shall be readjusted when and if final
bills are issued. Charges for water, electricity, sewer, gas, telephone and
all other utilities shall be prorated on a per them basis of the fiscal year
or billing period of the authority, utility or other person levying or
charging for the same.
(b) Buyer Group shall be liable and shall pay all Transfer Taxes, if
any, resulting from the sale of the Purchased Assets.
(c) Except as may otherwise be specifically provided herein, each
party shall be responsible for its own expenses, including without limitation
the fees of accountants and attorneys, which are incurred in connection with
the negotiation and execution of this Agreement and the consummation of the
transactions herein contemplated.
10.7 Access to Records and Premises After Closing Date.
(a) Seller Group and Buyer Group agree that, so long as the books
and records retained by Seller Group relating to the Business or the Purchased
Assets or the books and records delivered to Buyer Group hereunder remain in
existence and available, each party shall have the right to inspect and, at its
expense, to make copies of the same at any time
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during business hours for any proper purpose. For seven (7) years following
the Closing Date, Buyer Group and Seller Group will not, without first having
offered to deliver the same to the other party, destroy or permit the
destruction of any of such books and records in its possession. For purposes
of this Section 10.7(b), books and records shall include consolidated
workpapers and schedules used to prepare the Financial Statements and prior
year financial statements. Buyer Group and Seller Group agree that it will
make available to the other party and to any accountants or attorneys or tax
agents authorized by such other party, at the expense of the party requesting
the same, any such records or information needed in connection with any Tax or
Transfer Tax matters, litigation or similar matters.
(b) Buyer Group shall afford Seller Group's officers, employees and
agents access at all reasonable times and upon reasonable notice from the date
hereof until ninety (90) days after the Closing, to the Real Property and the
real property the lease of which Buyer Group has assumed pursuant to this
Agreement for the purpose of removing Excluded Assets from such real property;
provided that, Seller Group shall be liable for any Damages resulting from such
removal of Excluded Assets. Seller Group shall afford, or cause to be
afforded, Buyer Group's officers, employees and agents access at all reasonable
times and upon reasonable notice from the date hereof until ninety (90) days
after the Closing, to the real property upon which any of the Purchased Assets
is located for the purpose of removing such Purchased Assets from such real
property; provided that, Buyer Group shall be liable for any Damages resulting
from such removal of Purchased Assets.
10.8 Actions of the Parties. Buyer Group and Seller Group agree to
cooperate fully by taking all reasonable actions necessary to obtain all
Permits from Governmental Entities, to obtain all consents, approvals and
authorizations from other Persons and to effect all filings, applications,
registrations and notifications that the parties hereto deem necessary or
desirable to consummate the transactions contemplated hereby.
10.9 Payment Of Certain Amounts Due To Parent At 30 September 1995.
Any time prior to the Closing Date, Seller shall be allowed to pay to Parent
the sum of NOK 14.449.000, which represents the NOK 2.933.000 liability
recorded in the Group Contribution Payable account on Seller's 30 September
1995 Financials plus the NOK 11.516.000 liability recorded as part of the Taxes
Payable account on Seller's 30 September 1995 Financials (calculated as 28% of
the taxable income of the Norwegian entities for the period 1 January through
30 September 1995).
10.10 Payment of 30 September 1995 through Closing Date Earnings
To Parent.
(a) Any time after 31 March 1996 and prior to the Closing Date,
Seller shall pay to Parent any increase in the Net Asset Value or shall
collect from Parent any decrease in the Net Asset Value. The Net Asset Value
at 30 September 1995 is NOK 224.504.000 and is calculated per Schedule 10. 10.
The increase or decrease in the Net Asset Value for each succeeding month-end
shall be calculated using the formula set forth on Schedule 10.10. Seller
shall calculate the increase or decrease in the Net Asset Value and shall
forward the calculation to Buyer. If the Buyer does not object to the
calculation in writing
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within ten (10) days of receipt, the calculation becomes final. The parties
shall meet to amicably resolve any objections raised by Buyer.
(b) After the Closing Date, Buyer shall pay to Seller any final
increase in the Net Asset Value or Seller shall pay to Buyer any final decrease
in the Net Asset Value. The final increase or decrease in the Net Asset Value
shall be calculated using the formula set forth in Schedule 1 0. 1 0. Buyer
shall calculate the final increase or decrease in the Net Asset Value at the
Closing Date and shall forward the calculation to Seller within thirty (30)
days after the Closing Date. If the Seller does not object to the calculation
in writing within ten (10) days of receipt, the calculation becomes final. The
parties shall meet to amicably resolve any objections raised by Seller.
ARTICLE 11
INDEMNIFICATION; LIMITATION OF LIABILITY; SURVIVAL
11.1 Indemnity.
(a) Subject to the provisions of this Article 1 1, Seller Group shall
indemnify and hold Buyer Group and the officers, directors, stockholders,
employees and agents of Buyer Group ("Buyer Group Indemnitees") harmless from
and against Damages of the Buyer Group Indemnitees to the extent arising out of
or based upon:
(i) the ownership, management, operation or use by Seller Group of
the Purchased Assets or the conduct of the Business by Seller Group on or
prior to the Closing Date;
(ii) any actual or threatened violation or noncompliance by Seller
Group of or with any statute, ordinance or other law, federal, state, local or
foreign, or any rule or regulation of any Governmental Entity in connection
with the ownership, management, operation or use of the Purchased Assets or
the conduct of the Business on or prior to the Closing Date;
(iii) any misrepresentation, breach of warranty or breach or
nonfulfillment of any covenant of Seller Group in this Agreement, including
the Schedules hereto;
(iv) the application of any Plan of Seller Group to any employee of
Seller Group;
except to the extent such claims are paid by insurance maintained by Buyer
Group.
(b) Subject to the provisions of this Article 1 1, Buyer Group shall
indemnify and hold Seller Group and the officers, directors, stockholders,
employees and agents of Seller Group ("Seller Group Indemnitees") harmless from
and against any Damages of the Seller Group Indemnitees to the extent arising
out of or based upon:
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
M-I DRILLING FLUIDS L.L.C.
By: /s/ LOREN K. CARROLL
--------------------
Name: Loren K. Carroll
Title: President and C.E.O.
ANCHOR DRILLING FLUIDS AS
By: /s/ Reidar Lund
---------------------
Name: Reidar Lund
Title: Chairman
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LIST OF EXHIBITS
----------------
Exhibit A - Stock Transfer Agreement
Exhibit B - Parent Company Guarantee and Non-Compete Agreement
