SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of Earliest Event Reported): October 31, 1997
ETS INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
Virginia 00019678 54-1414643
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1401 Municipal Road, NW
Roanoke, Virginia 24012
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (540) 265-0004
Not Applicable
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(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
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ETS Analytical Services, Inc. ("ETSAS"), a Virginia corporation and
wholly owned subsidiary of ETS International, Inc. ("ETSI"), sold
substantially all of its assets on October 31, 1997, to Q Enterprises, Inc.,
a newly formed Virginia corporation, in consideration of a promissory note in
the principal amount of $1,380,000. The note is secured by a pledge of all
of the outstanding shares of Q Enterprises, Inc. and provides for monthly
payments of principal and interest (at the rate of 8.5% per annum). The note
payments are amortized over 30 years with a balloon payment after 10 years.
The purchase price was based upon the book value of ETSAS's assets sold
plus goodwill. Q Enterprises, Inc. has agreed to assume certain equipment
lease obligations of $180,000 and certain operating agreements of ETSAS.
Q Enterprises Inc. is owned by James B. Quarles, a former employee and
Senior Vice President of ETS International, Inc.
ETS International, Inc., a Virginia corporation, is a technology based
firm which provides environmental and infrastructure products and services.
ETSI specializes in toxic emission measurement and control, as well as
infrastructure design, construction and maintenance. Subsequent to this
sale, ETS operates through three affiliates: ETSI, ETS Water and Waste
Management, Inc. ("ETSW") and ETS Liner, Inc., a subsidiary of ETSW.
Item 7. Financial Statements, Pro Forma Financial Information and
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Exhibits
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(c) Exhibits
Exhibits 2 - Asset Purchase Agreement by and among ETS
Analytical Services, Inc. and Q Enterprises, Inc.
dated October 31, 1997.
<PAGE>
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.
ETS INTERNATIONAL, INC.
By s/John D. McKenna
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John D. McKenna
President
Date: November 4, 1997
<PAGE>
Exhibit 2
ASSET PURCHASE AGREEMENT
By and Among
ETS ANALYTICAL SERVICES, INC.
Seller,
and
Q ENTERPRISES, INC.,
Buyer.
October 31, 1997
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - SALE AND TRANSFER OF PROPERTY. . . . . . . . . . 2
Section 2.1 Transfer by Seller. . . . . . . . . . . . . 2
Section 2.2 Determination and Allocation of Purchase
Price . . . . . . . . . . . . . . . . . . . .2
Section 2.3 Payment . . . . . . . . . . . . . . . . . . 2
Section 2.4 Assumption of Operating Agreements and
Work-in-Progress. . . . . . . . . . . . . . 2
Section 2.5 Post Closing Adjustments to Purchase Price. .3
ARTICLE III - OTHER AGREEMENTS. . . . . . . . . . . . . . . . 3
Section 3.1 Performance by Buyer After Closing. . . . . 3
Section 3.2 Third Party Consents. . . . . . . . . . . . 3
Section 3.3 Personnel . . . . . . . . . . . . . . . . . 3
Section 3.4 Bulk Sales Laws . . . . . . . . . . . . . . 3
Section 3.5 Buyer's Other Commitments . . . . . . . . . .3
Section 3.6 Prohibited Solicitation . . . . . . . . . . 4
Section 3.7 Limitations on Buyer's Activities . . . . . .4
Section 3.8 Hazardous Waste Removal . . . . . . . . . . .5
Section 3.9 Accounts Receivable . . . . . . . . . . . . .5
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SELLER . . . . 6
Section 4.1 Corporate Status. . . . . . . . . . . . . . 6
Section 4.2 Authority . . . . . . . . . . . . . . . . . 6
Section 4.3 Title to Assets . . . . . . . . . . . . . . 6
Section 4.4 Condition of Assets . . . . . . . . . . . . 6
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . 6
Section 5.1 Status. . . . . . . . . . . . . . . . . . . 6
Section 5.2 Authorization of Agreement. . . . . . . . . 7
ARTICLE VI - CLOSING. . . . . . . . . . . . . . . . . . . . . 7
Section 6.1 Place and Date of Closing . . . . . . . . . .7
Section 6.2 Closing Costs . . . . . . . . . . . . . . . 7
Section 6.3 Delivery by Seller. . . . . . . . . . . . . 7
ARTICLE VII - INDEMNIFICATION . . . . . . . . . . . . . . . . 8
ARTICLE VIII - MISCELLANEOUS. . . . . . . . . . . . . . . . . .9
Section 8.1 Parties in Interest . . . . . . . . . . . . .9
Section 8.2 Governing Law . . . . . . . . . . . . . . . 9
Section 8.3 Entire Agreement. . . . . . . . . . . . . . .9
Section 8.4 Broker's Commission . . . . . . . . . . . . 9
Section 8.5 Notices . . . . . . . . . . . . . . . . . . .9
Section 8.6 Severability. . . . . . . . . . . . . . . . 10
Section 8.7 Counterparts. . . . . . . . . . . . . . . . 10
Section 8.8 Third Party Beneficiary . . . . . . . . . . 10
<PAGE>
ARTICLE IX - POST CLOSING COVENANTS . . . . . . . . . . . . . 11
Section 9.1 Affirmative Covenants of the Buyer. . . . 11
Section 9.1.1 Financial Reports and Other Data. . . . . 11
Section 9.1.2 Existence . . . . . . . . . . . . . . . . 11
Section 9.1.3 Insurance on Properties . . . . . . . . . 11
Section 9.1.4 Maintain Property . . . . . . . . . . . . 11
Section 9.1.5 Rights to Inspection. . . . . . . . . . . 12
SCHEDULES
Schedule A - List of Equipment
Schedule B - List of Shared Leases
EXHIBITS
Exhibit 1 - Promissory Note
Exhibit 2 - Pledge Agreement
Exhibit 3 - Assumption Agreement
Exhibit 4 - Opinion of Buyer's Counsel
<PAGE>
ASSET PURCHASE AGREEMENT
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THIS AGREEMENT, dated as of October 31, 1997, by and among ETS
ANALYTICAL SERVICES, INC., a Virginia corporation ("Seller"), and Q
ENTERPRISES, INC., a Virginia corporation ("Buyer"), relating to the sale by
Seller and purchase by Buyer of certain assets of Seller, provides:
ARTICLE I - DEFINITIONS
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As used in this Agreement, the following words and phrases have the
following meanings, respectively:
"Assets" shall mean all of the assets of Seller, tangible and
intangible, used in its laboratory testing business (the "Business"),
including, but not limited to, the equipment listed on Schedule A, accounts
receivable, Supplies, Operating Agreements, Work-in-Progress and Prepayments,
and except cash, corporate records, claims (if any) against employees or
former employees, claims and causes of action against third parties, notes
and accounts receivable due from employees or former employees.
"Assumed Liabilities" shall mean all of Seller's notes payable secured
by the Assets, financing leases and true leases of personal property,
excluding IRS liabilities, inter-company liabilities, trade accounts payable,
claims arising or accruing prior to Closing with regard to Seller's operation
of the Business and accrued expenses. It is expressly understood that the
financing leases and true leases listed on Schedule B relate in part to
equipment that is used by Buyer. Schedule B lists the monthly lease payment
that is to be made by the Buyer and the entity to which such payment is to be
made. The payments shall be made by the fifth day of each month beginning on
November 5, 1997 and ending when the respective lease terminates. Unless
specifically assumed herein, no liability of Seller shall be or become a
liability of Buyer.
"Closing" or "Closing Date" as defined in Section 6.1.
"Leased Real Property" shall mean the real property leased by Seller at
1401 Municipal Road, NW, Roanoke, Virginia 24012, 2975 Prosperity Avenue,
Fairfax, Virginia 22031-2208, and 809 Live Oak Drive, Suite 21, Chesapeake,
Virginia 23320.
"Operating Agreements" shall mean the (i) outstanding purchase orders,
(ii) all other oral or written contracts listed of Seller entered into in the
ordinary course of business, including but not limited to the Leased Real
Property.
"Supplies" shall mean inventories of chemicals, liquids and other
materials used by Seller in the ordinary course of business.
"Prepayments" shall mean deposits and prepayments received by Seller
prior to Closing that have not been earned by Seller or that otherwise
represent payments for services or materials that are to be provided after
Closing and other prepaid expenses.
"Work-in-Progress" or "Percentage of Completion" shall mean orders and
work in process but uncompleted as of Closing.
<PAGE>
ARTICLE II - SALE AND TRANSFER OF PROPERTY
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Section 2.1 Transfer by Seller. At Closing, Buyer agrees to
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purchase from the Seller, and the Seller agrees to sell to Buyer, all of the
Assets. The Assets shall be transferred as of Closing.
Section 2.2 Determination and Allocation of Purchase Price. The
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purchase price shall be $1,380,000.00 plus the Buyer's assumption of the
Assumed Liabilities. The purchase price shall be allocated in accordance
with Section 1060 of the Internal Revenue Code and comparable provisions of
state and local laws and regulations, and the parties agree to cooperate in
the timely filing of all returns (including Form 8594), schedules and forms
as may be required by such laws and regulations.
Section 2.3 Payment. The aggregate purchase price will be paid at
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Closing as follows:
(a) Promissory Note. Buyer shall deliver a promissory note
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to Seller in the principal amount of $1,380,000.00. The promissory note
shall be in the form of Exhibit 1 attached hereto and shall be secured by a
pledge of all of Buyer's stock in the form of Exhibit 2.
(b) Assumption of Liabilities. Buyer agrees to assume and
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discharge the Assumed Liabilities by execution and delivery of the Assumption
Agreement attached hereto as Exhibit 3.
Section 2.4 Assumption of Operating Agreements and Work-in-Progress.
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At Closing, Buyer will assume and agree to perform the Operating Agreements
and Work-in-Progress by execution and delivery of the Assumption Agreement
attached hereto as Exhibit 3.
Section 2.5 Post-Closing Adjustments to Purchase Price. The
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following items shall be adjusted as of the Closing Date and shall be added
to or deducted from the Purchase Price as the case may be: (i) accounts
receivable of $314,000(net of reserve); (ii) Percentage of Completion of
$236,000; and (iii) Prepayments of $60,000. The adjustments shall take place
as soon as the amount of all items are determined and the parties agree to
execute all necessary documentation to reflect the adjustments. Adjustments
will be made to the Note.
ARTICLE III - OTHER AGREEMENTS
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Section 3.1 Performance by Buyer After Closing. If requested by
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Seller, Buyer agrees to assist Seller with retesting of any samples or other
work performed by Seller prior to Closing. Seller agrees to pay Buyer for
such work at market rates.
<PAGE>
Section 3.2 Third Party Consents. Buyer shall be responsible for
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obtaining, where necessary, consents of third parties to the assignment of
Operating Agreements by Seller to Buyer. Seller agrees to cooperate with
Buyer in obtaining the consents. To the extent consent to an Operating
Agreement is subject to the personal guaranty of James B. Quarles, then the
parties agree to seek a mutually agreeable resolution and if none is reached,
Buyer shall have the right not to assume that Operating Agreement.
Section 3.3 Personnel. Buyer may make offers of employment to all
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or some of the existing employees of Seller who meet Buyer's employment
standards. Seller shall be responsible for payment to employees for wages
and other benefits (including, but not limited to, hospitalization,
retirement, health insurance and disability) due them for periods prior to
Closing.
Section 3.4 Bulk Sales Laws. Buyer waives compliance by Seller of
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the applicable provisions of the Bulk Sales Laws. Seller agrees to indemnify
and hold Buyer harmless from any liability or damages arising out of such
waiver, provided, however, that such indemnification shall be limited to the
amount then due under the Note and taken as an offset against the Note.
Section 3.5 Buyer's Other Commitments. Buyer agrees to pay all of
-------------------------
the Assumed Liabilities in a timely manner when due and complete all Work-in-
Progress in a timely manner and perform and discharge all of the obligations
under the Operating Agreements and indemnify and save Seller and ETS
International, Inc. harmless from and against any and all claims, losses,
expenses (including reasonable attorney's fees) and damages resulting from
Buyer's failure to timely discharge and satisfy the Assumed Liabilities,
Work-in-Progress or Operating Agreements.
Section 3.6 Prohibited Solicitation and Competition. The Buyer and
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Seller agree, in consideration for the sale hereunder, they will not, without
the prior written consent of the other:
(a) Provided Seller is not in breach of this Agreement,
Buyer will not, for a period of five years from the Closing Date, either
individually or on behalf of or through any third party, solicit, divert or
appropriate or attempt to solicit, divert or appropriate, for the purpose of
competing with the businesses of ETS International, Inc. as of the Closing
Date or any of its subsidiaries, any customers of such entities; and/or
(b) Provided Seller is not in breach of this Agreement,
Buyer will not for a period of two years from the Closing Date, knowingly
solicit, entice or persuade any employees of ETS International, Inc. or its
subsidiaries to leave the services of such entities for any reason;
(c) Provided Buyer is not in breach of this Agreement,
Seller will not, for a period of five years from the Closing Date, either
individually or on behalf of or through any third party, solicit, divert or
appropriate or attempt to solicit, divert or appropriate, for the purpose of
competing with the laboratory business of Buyer, any customers of such
entities; and/or
<PAGE>
(d) Provided Buyer is not in breach of this Agreement,
Seller will not for a period of two years from the Closing Date, knowingly
solicit, entice or persuade any employees of Buyer or its subsidiaries to
leave the services of such entities for any reason;
Section 3.7 Limitations on Buyer's Activities. Without prior
---------------------------------
written consent of Seller, which consent shall not be unreasonably withheld,
Buyer agrees that (i) no dividend will be declared on its shares of capital
stock whether in cash, stock or property of any kind unless and until all
installment payments then due on the Note shall have been made; (ii) no
unreasonable increase in compensation or bonuses of any kind shall be voted,
promised or paid to any employee of the Buyer unless and until all
installment payments then due on the Note shall have been made; (iii) no
assets (including the Assets) of Buyer shall be sold, assigned, pledged,
hypothecated, transferred or otherwise used as security until the Note has
been paid in full, except to secure a working line of credit; and (iv) Buyer
shall not enter into any agreement, whether oral or written, with any person,
individual, corporation, partnership or other legal stock entity calling for
a merger, sale, acquisition of assets or stock or other transaction calling
for the sale of all or any part of an interest in the capital stock or assets
(except in ordinary course of business) of Buyer unless and until the Note
shall have been paid in full or such transaction is conditioned on payment of
the Note in full at closing.
Section 3.8 Hazardous Waste Removal. Seller agrees to properly
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dispose of the barrels of hazardous waste generated by Seller's operations
prior to Closing.
Section 3.9 Accounts Receivable.
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(a) At Closing Seller shall deliver to Buyer an accurate
list of all its receivables. Buyer agrees to use its best efforts consistent
with good business practice to collect such receivables, but it shall not be
required to institute suit or incur any out-of-pocket expenses.
(b) If on that date which is six months after the Closing
Date the amount collected by Buyer through such date in respect of the
receivables (excluding installments not then due and not in default) shown on
the list of receivables is less than the adjusted value of accounts
receivable as of the Closing Date in accordance with Section 2.5 hereof, then
Seller agrees to apply toward the balloon payment due on the Note an amount
equal to such deficiency. Buyer shall permit Seller and its employees,
agents or representatives to have full access, on reasonable notice and
during normal business hours, to its books and records for the purpose of
verifying any amount claimed as a deficiency by Buyer, and Buyer shall
furnish Seller such additional information regarding amounts actually
collected by Buyer, as Seller may reasonably request.
(c) With respect to any such receivable not collected by
Buyer within six months after Closing, Buyer may elect to compromise or
settle such receivable at less than the face amount thereof, in which event
the uncollected portion shall not be taken into account in determining any
deficiency payable by Seller unless Seller consented to such settlement. If
Buyer elects to claim any deficiency hereunder, it shall assign without
recourse to Seller all such receivables that were taken into account in
determining the deficiency, in which case Seller may take such measures as it
<PAGE>
deems reasonable to collect such receivables. Buyer shall execute and
deliver to Seller any instrument or document, and take any other steps, as
may be reasonably requested by Seller in order to effect or further evidence
any assignment of receivables pursuant to this subsection. Any amounts
collected by Seller under this subsection shall be for Seller's sole benefit,
and any amounts received by Buyer in respect of any such assigned accounts
shall be immediately paid over to Seller.
(d) Any amount received from a customer after Closing shall be
applied first to reduce the amount of such customer's receivable generated
theretofore unless the customer in writing specifies otherwise.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SELLER
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The Seller represents, warrants and agrees as follows, which
representations and warranties are true as of the date hereof, shall be true
at Closing and shall survive Closing:
Section 4.1 Corporate Status. Seller is a corporation duly
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organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia and has full corporate power and authority to enter
into this Agreement.
Section 4.2 Authority. The execution, delivery and performance of
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this Agreement by Seller and Shareholder, and the performance by them of all
actions contemplated hereby, have been duly and validly authorized by
Seller's directors and the Shareholder; and this Agreement has been duly
executed and delivered by Seller and Shareholder, constitutes their legal,
valid and binding obligation and is enforceable against each of them in
accordance with its terms.
Section 4.3 Title to Assets. The Assets are in existence. Seller
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has good and valid fee simple title to the Assets, free and clear of all
liens and encumbrances except the Assumed Liabilities and related liens and
the lien of Tom Mammon. The liens of Tom Marmon will be released at Closing
or shortly thereafter.
Section 4.4 Condition of Assets. Seller and Shareholder make no
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warranty whatsoever regarding the condition of the Assets. Seller expressly
disclaims any implied warranty of merchantability or fitness for a particular
purpose. Buyer accepts the Assets "AS IS, WHERE IS."
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF BUYER
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Buyer represents, warrants and agrees as follows:
Section 5.1 Status. Buyer is a corporation duly organized, validly
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existing and in good standing under the laws of the Commonwealth of Virginia.
<PAGE>
Section 5.2 Authorization of Agreement. Buyer has power and
--------------------------
authority to make, execute, deliver and perform this Agreement and the
transactions contemplated hereby and this Agreement has been duly authorized
and approved by all required action. This Agreement constitutes a valid and
binding agreement enforceable against Buyer in accordance with its terms,
except to the extent limited by bankruptcy, insolvency or moratorium laws or
equitable remedies.
ARTICLE VI - CLOSING
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Section 6.1 Place and Date of Closing. Consummation of the sale and
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purchase provided for herein ("Closing") shall take place at the offices of
Woods, Rogers & Hazlegrove, P.L.C., at 1:30 p.m. on October 31, 1997 (the
"Closing Date"), or at such other time and place as the parties shall agree.
Section 6.2 Closing Costs. All transfer, recordation, titling taxes
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and fees, if any, shall be borne by Buyer. Buyer shall be responsible for,
and shall indemnify and save harmless Seller from and against, sales taxes
(excluding any penalties or interest), if any, arising out of the purchase
and sale of Assets hereunder.
Section 6.3 Delivery by Seller. At the Closing, the Seller shall
------------------
deliver:
1. Bills of sale, deeds, assignments, and other good and
sufficient instruments of conveyance and transfer as shall be effective to
vest good title to the Assets, all as provided in this Agreement;
2. Titles to all motor vehicles and trucks, including
trailers; and
3. Any other document reasonably requested by Buyer or
necessary for the consummation of the transactions contemplated by this
Agreement.
Section 6.4 Delivery by Buyer. At the Closing, Buyer shall deliver:
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(a) the Promissory Note in the form of Exhibit 1;
(b) the Assumption Agreement in the form of Exhibit 3;
(c) the opinion of Buyer's counsel in the form of Exhibit 4;
(d) the Pledge Agreement in the form of Exhibit 2; and
(e) any other documents reasonably requested by Seller or
necessary for the consummation of the transactions contemplated by this
Agreement.
<PAGE>
ARTICLE VII - INDEMNIFICATION
-----------------------------
Seller agrees to indemnify and hold Buyer, its officers, directors,
employees and agents, harmless from damages, losses or expenses suffered or
paid, directly or indirectly, as a result of any and all claims, demands,
suits, causes of action, proceedings, judgments and liabilities, including
reasonable legal fees, consulting fees and other professional fees incurred
in litigation or otherwise, assessed, incurred or sustained by or against any
of them with respect to or arising out of the failure or breach of any
representation, warranty or agreement made by Seller in this Agreement or any
agreement executed in connection with this Agreement or the removal of the
hazardous waste as set forth in Section 3.8, or Seller's employment
relationships with its employees. Seller's obligation to indemnify Buyer
shall be limited to the outstanding amount then due on the Note and shall be
offset against amounts due on the Note in the following order: first to the
balloon payment and then to the installment payments in reverse chronological
order.
Buyer agrees to indemnify and hold Seller and ETS International, Inc.,
their respective officers, directors, employees and agents harmless from
damages, losses or expenses suffered or paid, directly or indirectly, as a
result of any and all claims, demands, suits, causes of action, proceedings,
judgments and liabilities, including reasonable legal fees, consulting fees
and other professional fees incurred in litigation or otherwise, assessed,
incurred or sustained by or against Seller or Shareholder with respect to or
arising out of the failure or breach of any representation, warranty or
agreement made by Buyer in this Agreement or any agreement executed in
connection with this Agreement.
ARTICLE VIII - MISCELLANEOUS
----------------------------
Section 8.1 Parties in Interest. This Agreement shall be binding
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upon and shall inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors and assigns.
Section 8.2 Governing Law. The validity and construction of this
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Agreement shall be governed by the laws of the Commonwealth of Virginia.
Section 8.3 Entire Agreement. This Agreement, including the other
----------------
documents referred to herein and supplementing documents delivered herewith
which form a part hereof, contains the entire understanding of the parties
hereto with respect to the subject matter contained herein and supersedes all
prior agreements and understandings between the parties with respect thereto.
This Agreement may not be changed orally but only by agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought. The representations and warranties set
forth in this Agreement shall survive Closing. No provision of this
Agreement shall be interpreted for or against either party hereto on the
basis that such party was the draftsman of such provision and no presumption
or burden of proof shall arise favoring or disfavoring any party by virtue of
the authorship of any of the provisions of this Agreement.
<PAGE>
Section 8.4 Broker's Commission. Each party hereto will indemnify
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and hold harmless each other party from any commission, fee or claim of any
person, firm or corporation employed or retained or claiming to be employed
or retained by the indemnifying party to bring about, or to represent it in,
the transactions contemplated hereby.
Section 8.5 Notices. Any notice, request, information or other
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document to be given hereunder to any of the parties by any other party shall
be in writing and shall be given by hand delivery, telecopier, certified or
registered U.S. mail or a private courier service which provides evidence of
receipt as part of its service, as follows:
(a) If to the Seller addressed to:
ETS International, Inc.
1401 Municipal Road, NW
Roanoke, Virginia 24012
Attention: John D. McKenna
Copy to:
R. Neal Keesee, Jr., Esq.
Woods, Rogers & Hazlegrove, P.L.C.
First Union Tower, Suite 1400
10 South Jefferson Street
P. O. Box 14125
Roanoke, Virginia 24011
Facsimile No. (540) 983-7711
(b) If to the Buyer addressed to:
Q Enterprises, Inc.
P. O. Box 19345
Roanoke, Virginia 24019
Attention: James B. Quarles
Copy to:
Clark H. Worthy, Esq.
Johnson, Ayers and Matthews
302 Second Street
Roanoke, Virginia 24011
Any party may change the address or telecopier number to which notices
hereunder are to be sent to it by giving written notice of such change as
herein provided. Any notice given hereunder shall be deemed given on the
date of hand delivery, transmission by telecopier, deposit with the U.S.
Postal Service or delivery to a courier service, as appropriate.
Section 8.6 Severability. If any provision of this Agreement is
------------
determined to be illegal or unenforceable, such provision will be deemed
amended to the extent necessary to conform to applicable law or, if it cannot
be so amended without materially altering the intention of the parties, it
will be deemed stricken and the remainder of the Agreement will remain in
full force and effect.
<PAGE>
Section 8.7 Counterparts. This Agreement may be executed in two or
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more counterparts, all of which taken together shall constitute one document.
Section 8.8 Third Party Beneficiary. It is expressly agreed by the
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parties that ETS International, Inc. Is a third party beneficiary of certain
provisions of this Agreement.
ARTICLE IX - POST CLOSING COVENANTS
-----------------------------------
Section 9.1 Affirmative Covenants of the Buyer. Until the Note and
----------------------------------
all other obligations for the payment of money contained herein are paid in
full, unless the Seller (or holder of the Note) consents otherwise in
writing, the Buyer covenants and agrees that it will:
Section 9.1.1 Financial Reports and Other Data. As soon as
--------------------------------
practicable after the end of each calendar month, quarter, and year and,
except for circumstances beyond its control, not later than 45 days
thereafter (or, where applicable, at such other time as provided herein) the
Buyer shall deliver to the Seller (or holder of the Note):
(a) Within 45 days after the end of its fiscal year, a
balance sheet of the Buyer, and related statements of earnings, retained
earnings and changes in financial condition for such year, including for the
fiscal year end notes to such financial statements and any supplementary
data, all in reasonable detail. All such statements and information shall be
prepared in accordance with GAAP consistently applied.
(b) A current list of equipment and real estate owned by the
Corporation in reasonable detail so as to adequately describe and identify
each item of equipment and parcel of real estate;
(c) A work-in-progress report as of the end of such year and
a summary of jobs completed during such year;
(d) Copies of the income tax returns of the Buyer for such
year (to be provided within 10 days of filing);
(e) With reasonable promptness, such additional financial or
other data as the Seller (or holder of the Note) may reasonably request from
time to time and at any time to allow it to comply with its reporting and
disclosure requirements as a publicly-held company.
Section 9.1.2 Existence. Do or cause to be done all things
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necessary to preserve and to keep in full force and effect its corporate
existence and its qualification to do business in each jurisdiction in which
the transaction of its business makes such qualification necessary.
<PAGE>
Section 9.1.3 Insurance on Properties. Keep its business and
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properties insured at all times with responsible insurance companies and
carry such types and amounts of insurance as is usually carried by
corporations engaged in the same or a similar business similarly situated;
provided, however, that the Buyer shall not be required to maintain property
and casualty insurance on its business and equipment to the extent it has not
historically done so.
Section 9.1.4 Maintain Property. Maintain its properties in good
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order and repair, normal wear and tear excepted. Notwithstanding the
foregoing, Buyer shall not be required to replace or repair any of its
properties or equipment that Buyer, in its reasonable discretion, determines
is not necessary for the normal and customary operation of the business.
Section 9.1.5 Rights to Inspection. Permit any person designated
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by the Seller (or holder of the Note) to visit and inspect any of the
properties, corporate books and financial reports of the Buyer and to discuss
its affairs, finances and accounts with its principal officers and employees
and accountants, all at such reasonable times and as often as the Seller (or
holder of the Note) may reasonably request so as not to interfere with the
normal operations of the Buyer and so as to allow Seller to comply with all
of its reporting and disclosure requirements as a publicly held company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ETS ANALYTICAL SERVICES, INC.
By s/John D. McKenna
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Its CEO
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Q ENTERPRISES, INC.
By s/James Quarles
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Its President
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