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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[_] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended June 30, 1997
[X] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from June 30, 1997 to December 31, 1997
Commission file number 0-20843
BOOTS & COOTS
INTERNATIONAL WELL CONTROL, INC.
(Name of Small Business Issuer in Its Charter)
DELAWARE 11-2908692
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
5151 SAN FELIPE, SUITE 450 77056
HOUSTON, TEXAS (Zip Code)
(Address of Principal Executive Offices)
713-621-7911
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Name of Each Exchange
Title of Each Class on Which Registered
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Common Stock, $.00001 par value American Stock Exchange
Securities registered under Section 12(g) of the Exchange Act: None
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X] No[_]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [X].
State issuer's revenues for its most recent fiscal year: $2,564,087
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days.
The aggregate market value of such stock on March 23, 1998, based on the
closing sales price on that date was $98,176,625.
The number of shares of the issuer's common stock outstanding on March 23,
1998 was 30,578,798.
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FORM 10-KSB
ANNUAL REPORT
FOR THE TRANSITION PERIOD FROM JULY 1, 1997 TO DECEMBER 31, 1997
TABLE OF CONTENTS
Page
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PART I .................................................................... 1
Item 1. Description of Business.......................................... 1
Item 2. Description of Property.......................................... 12
Item 3. Legal Proceedings................................................ 12
Item 4. Submission of Matters to a Vote of Security-Holders.............. 13
PART II .................................................................... 14
Item 5. Market for Common Equity and Related Stockholder Matters......... 14
Item 6. Management's Discussion and Analysis or Plan of Operation........ 15
Item 7. Financial Statements............................................. 16
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure......................................... 17
PART III ................................................................... 17
Item 13. Exhibits List and Reports on Form 8-K............................ 18
SIGNATURES.................................................................. 20
FINANCIAL STATEMENTS
Independent Auditor's Report.............................................. F-1
Consolidated Balance Sheets............................................... F-2
Consolidated Statement of Operations...................................... F-3
Consolidated Statements of Shareholder's Equity........................... F-4
Consolidated Statement of Cash Flows...................................... F-5
Notes to Consolidated Financial Statements................................ F-6
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On December 8, 1997, the Board of Directors of the registrant approved a
change in the registrant's fiscal year end from June 30 to December 31.
Consequently, the registrant is filing this transition report on Form 10-KSB for
the six month period commencing July 1, 1997, and ending December 31, 1997.
FORWARD-LOOKING STATEMENTS. This transition report on Form 10-KSB contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Actual results could differ from those projected in any forward-
looking statements for the reasons detailed below as well as in other sections
of this report on Form 10-KSB. The forward-looking statements contained herein
are made as of the date of this report and the Company assumes no obligation to
update such forward-looking statements, or to update the reasons why actual
results could differ from those projected in such forward-looking statements.
Investors should consult the information set forth from time to time in the
Company's reports on Forms 10-QSB, 8-K, 10-KSB and Annual Report to
Stockholders.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
HISTORY OF THE COMPANY
GENERAL. Boots & Coots International Well Control, Inc. (the "Company"),
formerly known as Havenwood Ventures, Inc. ("Havenwood"), was incorporated in
Delaware in April 1988. Havenwood was originally formed to serve as a blind
pool investment fund, and in July 1988 Havenwood raised $499,500 in an initial
public offering of its common stock, par value $.00001 per share ("Common
Stock"). After completing its initial public offering, Havenwood expended its
available resources in the development of a business enterprise which it
ultimately divested, thereafter remaining inactive, with no material assets or
liabilities, until it entered into a business combination with IWC Services,
Inc. a Texas corporation ("IWC Services") on July 29, 1997.
ACQUISITION OF IWC SERVICES, INC. The Company acquired IWC Services on
July 29, 1997, in a "reverse triangular merger" in which it issued shares of
Common Stock to the stockholders of IWC Services in exchange for all of the
issued and outstanding common stock of IWC Services and issued options and
warrants to purchase Common Stock of the Company in exchange for all of the
options and warrants to purchase common stock of IWC Services then outstanding.
As a result of the merger, IWC Services became a wholly-owned subsidiary of the
Company, the stockholders of IWC Services became the beneficial holders of
approximately 93% of the post-merger issued and outstanding shares of Common
Stock and the board of directors and management of IWC Services took over the
management of the Company.
IWC Services is a global-response oil and gas well control service company
that specializes in responding to and controlling oil and gas well emergencies,
including blowouts and well fires. In addition, IWC Services provides snubbing
and other non-critical well control services. IWC Services was organized in
June 1995 by six former key employees of the Red Adair Company who resigned
their positions after Mr. Adair retired and sold his business.
ACQUISITION OF THE ASSETS OF BOOTS & COOTS, L.P. On July 31, 1997, the
Company completed the acquisition of substantially all of the operating assets
of Boots & Coots, L.P., a Colorado limited partnership ("Boots & Coots") an oil
well firefighting, snubbing and blowout control services company. In connection
with the acquisition of Boots & Coots, the Company acquired all interests of
Boots & Coots in its subsidiary corporations, Boots & Coots Overseas, Ltd., and
Boots & Coots de Venezuela, S.A.
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(collectively referred to herein as "Boots & Coots"). The consideration paid
consisted of (i) $369,432 cash, (ii) $680,568 placed in escrow to pay certain
debts of Boots & Coots, (iii) the issuance of secured promissory notes of the
Company in the aggregate principal amount of $4,760,977 and (iv) 259,901 shares
of Common Stock of the Company. The Company also granted registration rights for
the shares of Common Stock issued to Boots & Coots in the transaction.
Boots & Coots was organized by Boots Hansen and Coots Mathews, two former
employees of the Red Adair Company who, like the founders of IWC Services, left
that firm to form an independent company, which was a primary competitor of
IWC Services. As a consequence of the acquisition of Boots & Coots, the Company
became a leader in the worldwide oil well firefighting and blowout control
industry, reuniting many of the former employees of the Red Adair Company.
ACQUISITION OF ABASCO, INC. On September 25, 1997, the Company completed
the acquisition of all of the capital stock of ABASCO, INC. ("ABASCO") which had
acquired the operating assets of American Boat and Skimmer Company, a recognized
leader in the design and manufacture of a comprehensive line of rapid-response
oil and chemical spill containment and reclamation equipment and products since
1975. ABASCO'S products and services include mechanical skimmers, containment
booms and boom reels, dispersant sprayers, agent absorbents, response vessels,
oil and chemical spill industrial products, spill response packages, oil and
chemical spill ancillary products and waste oil recovery and remediation
services. The Company acquired ABASCO for aggregate consideration consisting of
approximately $1,590,000 cash and 300,000 shares of Common Stock.
ACQUISITION OF ITS SUPPLY CORPORATION. On January 2, 1998, the Company
completed the funding of the acquisition, effective as of December 31, 1997, of
all of the capital stock of ITS Supply Corporation ("ITS") for aggregate
consideration of $6,000,000. Financing for the acquisition of ITS was provided
from working capital ($500,000); and proceeds from the issuance of 10% Senior
Secured Promissory Notes ($4,500,000) and short-term bridge financing from the
seller ($1,000,000).
ITS is an ISO 9002 certified materials and equipment procurement,
transportation and logistics company that serves the energy industry worldwide,
with offices in Houston, Venezuela, Peru, Dubai (UAE) and the United Kingdom.
ACQUISITION OF CODE 3, INC. On February 20, 1998, the Company completed the
acquisition of all of the capital stock of Code 3, Inc. ("Code 3").
Consideration for the acquisition of Code 3, with an effective date for audited
purchase price adjustments of December 31, 1997, was (i) $570,568 cash, (ii) the
repayment of corporate secured debt and interest thereon of approximately
$1,250,000 through closing, and (iii) the issuance of 488,136 shares of the
Company's Common Stock, of which 158,646 shares were delivered into escrow to
secure the indemnification obligations of the stockholders of Code 3 for claims
that may arise as a consequence of a breach by such stockholders or Code 3 of
the representations, warranties and covenants contained in the definitive
agreements.
Code 3, originally headquartered in Harlingen, Texas, provides containment
and remediation of hazardous material and oil spills for the railroad,
transportation and shipping industries, as well as various state and federal
governmental agencies. Code 3 also specializes in the transfer of hazardous
materials and high and low pressure liquids and industrial fire fighting and
provides in-plant remedial plan implementation, hazardous waste management,
petroleum tank management, industrial hygiene, environmental and occupational,
health and safety services. Through December 31, 1997, Code 3 operated out of
facilities in Harlingen, El Paso, Laredo, San Antonio and Houston, Texas.
Current expansion plans for additional emergency response facilities and
equipment include Ft. Worth, Texas, and Denver, Colorado.
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HALLIBURTON ALLIANCE. The Company also conducts business in a global
strategic alliance with the Halliburton Energy Services division of Halliburton
Company. The alliance operates under the name "WELLCALL (SM)" and draws on the
expertise and abilities of both companies to offer a total well control solution
for oil and gas producers worldwide. The Halliburton Alliance provides a
complete range of well control services including pre-event troubleshooting and
contingency planning, snubbing, pumping, blowout control, debris removal,
firefighting, relief and directional well planning, and other specialized
services. See "Business - Halliburton Alliance."
EXECUTIVE OFFICES. The Company's principal executive office is located at
5151 San Felipe, Suite 450, Houston, Texas, 77056, telephone (713) 621-7911.
BUSINESS
INDUSTRY OVERVIEW
The oil and gas industry has enjoyed a sustained resurgence over the last
several years due to improved market conditions. The fundamental supply and
demand balance for oil and gas products began to shift in late 1992 and has
continued to improve with increased global demand for petroleum products.
Historically, the oil and gas cycle has been characterized by alternating "boom"
and "bust" periods that typically last for 12 to 14 years. The last down cycle
began in 1981 and continued through 1992, when signs of recovery began, and by
1995, the current recovery cycle had been confirmed. Although oil and natural
gas prices have recently softened, management believes that the fundamental
market statistics and trends strongly suggest that the oil and gas business
cycle, though not likely to be at a historical "boom" level, will be favorable
over the next 10 years.
The three major segments on the production side of the oil and gas industry
have generally experienced the effects of the "boom" and "bust" cycle in
distinctly different time frames. The first group to experience the effects of
cycle changes consists of exploration and production companies who plan their
drilling and development activities on the basis of current and anticipated oil
and gas prices. The next group to experience the effects of cycle changes
consists of oil and gas service providers, including seismic companies, contract
drilling companies, and other companies that provide pipe and drill bits,
together with logging, cementing, and other services. The last group to
experience the effects of cycle changes consists of equipment manufacturers who
are usually the last to recover when oil and gas prices increase and the first
to decline when oil and gas prices decline. During the past two years, for the
first time since 1982, plans were announced for the construction of a meaningful
number of new offshore drilling rigs.
Drilling activity increased in 1996 and in 1997, which, combined with
increased drilling activities since 1993, equates to increased numbers of wells
coming on line. Although drilling technology has improved in recent years,
thereby reducing the likelihood of a major well control event, several industry
conditions tend to offset this factor. Relatively old drilling equipment
(although generally well maintained) continues to be used. There have been few
new land or offshore drilling rigs constructed since 1981 because rig rental
rates have been insufficient to justify the required capital investment. Current
worldwide utilization rates for offshore drilling rigs are at substantially full
capacity for marketable rigs and utilization for land drilling rigs is
increasing. Several contract drilling companies are experiencing problems hiring
experienced crews, prices for new drill pipe have increased significantly and
delivery schedules have been extended. These factors together with an increased
number of producing wells requiring workover operations, tend to increase the
likelihood of a major well control event. In addition, existing environmental
constraints in the U.S. and increasing awareness of environmental issues in
developing countries will require operators to emphasize training, safety and
contingency planning for potential blowout or other well control events.
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THE EMERGENCY RESPONSE SEGMENT OF THE OIL AND GAS SERVICE INDUSTRY
History. The emergency response segment of the oil and gas services
industry traces its roots to the late 1930's when Myron Kinley organized the
Kinley Company, the first oil and gas well firefighting specialty company.
Shortly after organizing the Kinley Company, Mr. Kinley took on an assistant
named Red Adair who learned the firefighting business under Mr. Kinley's
supervision and remained with the Kinley Company until Mr. Kinley's retirement.
When Mr. Kinley retired in the late 1950's, Mr. Adair organized the Red Adair
Company and subsequently hired Boots Hansen, Coots Mathews and Raymond Henry as
members of his professional firefighting staff. Mr. Adair added Richard
Hatteberg, Danny Clayton, Brian Krause, Mike Foreman and Juan Moran to his
professional firefighting staff and the international reputation of the Red
Adair Company grew to the point where it was a subject of popular films and the
dominant competitor in the industry. Boots Hansen and Coots Mathews remained
with the Red Adair Company until 1978 when they split off to organize Boots &
Coots, an independent firefighting, snubbing and blowout control company.
Historically, the well control emergency response segment of the oil and
gas services industry has been reactive, rather than proactive, and a small
number of Houston-based companies have dominated the market. As a result, if an
operator in Indonesia, for example, experienced a well blowout and fire, he
would likely call a well control emergency response company in Houston that
would take the following steps:
* Immediately dispatch a control team to the well location to supervise
debris removal, local equipment mobilization and site preparation;
* Gather and analyze the available data, including drilling history, geology,
availability of support equipment, personnel, water supplies and ancillary
firefighting resources;
* Develop or implement a detailed fire suppression and well-control plan;
* Mobilize additional well-control and firefighting equipment in Houston;
* Air freight equipment from Houston to the blowout location;
* Extinguish the fire and bring the well under control; and
* Transport the control team and equipment back to Houston.
On a typical blowout, debris removal, fire suppression and well control can
require several weeks of intense effort and consume millions of dollars,
including several hundred thousand dollars in air freight costs alone.
The 1990's have been a period of rapid change in the oil and gas well control
and firefighting business. The hundreds of oil well fires that were started by
Iraqi troops during their retreat from Kuwait spurred the development of new
firefighting techniques and tools that have become industry standards. Moreover,
after extinguishing the Kuwait fires, the entrepreneurs who created the oil and
gas well firefighting industry, including Red Adair, Boots Hansen and Coots
Mathews retired, leaving the Company's senior staff as the most experienced
active oil and gas well firefighters in the world. At present, the principal
competitors in the oil and gas well firefighting business are the Company, Wild
Well Control, Inc., and Cudd Pressure Control, Inc.
Emerging Trends. Corporate downsizing and outsourcing of services, when
coupled with increased recognition of the importance of training, environmental
protection and emergency preparedness, are
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having a profound impact on the emergency response segment of the oil and gas
services industry. Instead of waiting for a blowout, fire or other disaster to
occur, major oil producers are coming to the Company for proactive preparedness
and incident prevention programs, together with pre-event consultation on
matters relating to well control training, blowout contingency planning, on-site
safety inspections and formal fire drills.
In addition to seeking pre-event consulting services, a number of major oil
and gas producers have come to the realization that servicing the worldwide
firefighting and well control market from Houston is inefficient: the response
time is too long and the cost of transporting equipment by air freight is
prohibitive. As a result, the Company has recently entered into an agreement to
establish and maintain an industry supported "Fire Station" on the North Slope
of Alaska. Under the terms of the agreement, the Company has sold to a
consortium of producers the equipment required to respond to a blowout or oil or
gas well fire, and has agreed to maintain the equipment and conduct on-site
safety inspections and emergency response drills. Over the next five years, the
Company plans to establish a worldwide network of Company owned Fire Stations
and to use this global presence as the foundation to seek to establish a
preeminent position in the oil and gas well firefighting business.
VOLATILITY OF FIREFIGHTING REVENUES. The market for oil and gas well
firefighting and blowout control services is highly volatile due to factors
beyond the control of the Company. While the demand for firefighting and blowout
control services ordinarily follows predictable trends in the oil and gas
industry, extraordinary events such as the Bay Marchand and Piper Alpha
disasters have historically occurred only every four to six years. Wars, acts of
terrorism and other unpredictable factors may increase the need for oil and gas
well firefighting and blowout control services from time to time. As a result,
the Company can expect to experience large fluctuations in its revenues from oil
and gas well firefighting and blowout control services. While the Company
believes that its acquisitions of ABASCO, ITS and Code 3 and anticipated
revenues from the WELLSURE(SM) program and from the Company's consulting,
snubbing, training and industrial and marine firefighting services will help to
provide an expanded and predictable revenue and earnings base in the future,
there can be no assurance that the Company will be successful in further
developing these acquired businesses and added services. Accordingly, the
Company expects that its revenues and operating performance may vary
considerably from year to year for the foreseeable future.
SERVICES PROVIDED BY THE COMPANY
The Company is a global-response oil and gas service company that specializes
in responding to and controlling oil and gas well emergencies, including
blowouts and well fires. In connection with such services, the Company has the
capacity to supply the equipment, expertise and personnel necessary to contain
the oil and hazardous materials spills and discharges associated with such oil
and gas well emergencies, to remediate affected sites and to restore affected
oil and gas wells to production. In addition to providing emergency response
services, the Company provides snubbing, well plugging and abandonment and other
non-critical well control services, including pre-event planning, training and
consulting services. The Company also manufactures and markets oil and hazardous
materials spill containment and recovery equipment. The Company provides
environmental remediation services to the chemical manufacturing and
transportation industries, as well as to various state and federal agencies, and
also provides materials and equipment procurement, transportation and logistics
services to the energy industry. The Company's principal services lines include:
Well Control. This service line is divided into two distinct service levels:
(1) "Critical Event" response is ordinarily reserved for well control projects
where hydrocarbons are escaping from a well bore, regardless of whether a fire
has occurred. (2) "Non-critical Event" response, on the other hand, is intended
for the more common operating problems that do not involve escaping
hydrocarbons.
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Critical Events. Critical Events frequently result in explosive fires, the
loss of life, the destruction of drilling and production facilities,
substantial environmental damage and the loss of hundreds of thousands of
dollars per day in production revenue. Since Critical Events ordinarily
arise from equipment failures or human error, it is impossible to
accurately predict the timing or scope of the Company's Critical Event
work. Notwithstanding the foregoing, a Critical Event of catastrophic
proportions could result in revenues to the Company well in excess of
$5,000,000 in the year of the incident. The Company's professional
firefighting staff has more than 220 years of aggregate industry experience
in responding to Critical Events, oil and gas well fires and blowouts.
Non-critical Events. Non-critical Events frequently occur in connection
with the drilling of new wells into high pressure reservoirs. In most Non-
critical Events, the blowout preventers and other safety systems on the
drilling rig function according to design and the Company is then called
upon to supervise and assist in the well control effort so that drilling
operations can resume as promptly as safety permits. While Non-critical
Events do not ordinarily have the revenue impact of a Critical Event, they
are much more common and predictable.
Equipment Rentals. This service line includes the rental of specialty well
control and firefighting equipment by the Company primarily for use in
conjunction with Critical Events. Such equipment includes, but is not limited
to, firefighting pumps, pipe-racks, Athey Wagons, pipe cutters, crimping tools
and deluge safety systems. The Company charges this equipment out on a per diem
basis. Past experience indicates that rentals can be expected to average
approximately 40% of the revenues associated with a Critical Event.
Equipment Sales and Service. This service line involves the sale of
complete firefighting equipment packages, together with maintenance, monitoring,
updating of equipment and ongoing consulting services. A typical example of this
service line is the industry supported Fire Station that the Company has
established on the North Slope of Alaska. The establishment of this Fire
Station, completed during the six month period ended December 31, 1997, included
the sale of approximately $485,000 in equipment. The Company has also entered
into a long-term agreement to provide ongoing consulting services relating to
the Fire Station, including training, contingency planning, safety inspections
and emergency response drills. The Company believes that the follow-on revenue
from the North Slope Fire Station may approximate $100,000 per year.
Snubbing Operations. A snubbing unit is a high pressure workover rig that
permits an operator to repair or change-out damaged casing, production tubing
and down-hole production equipment in a high pressure environment. Using a
series of highly sophisticated blowout prevention devices, a snubbing unit makes
it possible to remove and replace down-hole equipment in a pressurized well.
Since snubbing is a very hazardous process that entails a high risk of flash
fire or explosion, the snubbing segment of the oil and gas services industry is
concentrated in a few competitors who have the experience and knowledge required
to safely and efficiently perform such services.
Industrial and Marine Firefighting. This service line is divided into two
distinct elements: pre-event consulting and Critical Event management. The pre-
event services offered in the industrial and marine firefighting business
include complete on-site inspection services, safety audits and pre-event
planning. Based on these pre-event services, the Company can recommend the
equipment, facilities and manpower resources that a client should have available
in order to effectively respond to a fire. The Company can also consult with
the client to insure that the equipment and services required by the client will
be available when needed. If a Critical Event subsequently occurs, the Company
is ready to respond at a client's facility with experienced firefighters and
auxiliary equipment.
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Oil and Chemical Spill Containment and Reclamation Equipment. The Company
is a leader in the design and manufacture of a comprehensive line of rapid
response oil and chemical spill containment and reclamation equipment and
products, including mechanical skimmers, containment booms and boom reels,
dispersant sprayers, dispersal agents, absorbents, response vessels, oil and
chemical spill industrial products, spill response packages, oil and chemical
spill ancillary products and waste oil recovery and reclamation products.
Oil and Chemical Spill Containment and Remediation Services. The Company's
ABASCO business unit provides containment and remediation of oil and chemical
spills for the oil and gas, petrochemical, railroad, transportation and shipping
industries, as well as various state and federal governmental agencies. Code 3
specializes in the transfer of high and low pressure liquids and hazardous
materials and industrial fire fighting. Code 3 also provides in-plant remedial
plan implementation, hazardous waste management, petroleum tank management,
industrial hygiene, environmental and occupational, health and safety services.
Supply, Transportation and Logistics. The Company's ITS business unit is
ISO 9002 certified and provides material and equipment procurement,
transportation and logistics services to the energy industry worldwide.
Consulting; Drilling Engineering. The Company has the ability to provide
through its highly-specialized in-house engineering staff, supplemented if
necessary by outside engineering consultants and the Halliburton Energy Services
division, engineering services for such areas as: (1) planning and design of
relief well drilling (trajectory planning, directional control and equipment
specifications, and on-site supervision of the drilling operations), (2)
planning and design of production facilities which are susceptible to well
capping or other control procedures, and (3) mechanical and computer aided
designs for well control equipment.
Consulting; Inspections. A cornerstone of the Company's strategy of
providing preventive well control services involves on-site inspection services
for drilling and workover rigs, drilling and production platforms, and field
production facilities. Since these inspection services will be offered as a
standard option in Halliburton's field service programs, the Company anticipates
that inspection services will become an important source of revenue.
Consulting; Training. The Company provides specialized training in well
control procedures for drilling, exploration and production personnel. To date
such training programs have been provided for both U.S. and international
operators. Since the Company's training services will be offered in conjunction
with ongoing educational programs sponsored by Halliburton, the Company believes
the training segment of its business offers considerable potential for growth.
Strategic Event Planning (S.T.E.P.). A key element of the services offered
by the Halliburton Alliance is a strategic and tactical planning process
addressing action steps, resources and equipment necessary for an operator to
control a blowout. This planning process incorporates organizational
structures, action plans, specifications, people and equipment mobilization
plans with engineering details for well firefighting, capping, relief well and
kill operations. It also addresses optimal recovery of well production status,
insurance recovery, public information and relations and safety/environmental
issues. While the S.T.E.P. program includes a standardized package of services,
it is easily modified to suit the particular needs of a specific client.
Regional Fire Stations. The Company, in conjunction with Halliburton, plans
to pre-position in selected geographic locations throughout the world complete
complements of specialty firefighting equipment and ancillary tools and
equipment ("Fire Stations"). The equipment for these proposed Fire Stations will
either be purchased by the Company for its own account, using cash flow, if any,
from operations, or purchased by a consortium of local producers who will then
contract with the Company for
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maintenance and consulting services. The Company currently has Fire Stations in
Houston, Texas, Duncan, Oklahoma, and Anaco, Venezuela, and maintains an
industry supported Fire Station on the North Slope of Alaska. The Company plans
to deploy at least one Fire Station per year over the next five years. It is
believed these Fire Stations, once established, will place the Company and its
Wellcall Alliance with Halliburton in an unique competitive position within the
industry and allow the alliance to gain market share by reducing the
mobilization time and costs traditionally involved in controlling major blowout
events.
WELLSURE (SM) Program. On February 6, 1998, the Company announced the
formation of an alliance with Global Special Risks, Inc., a managing general
insurance agent located in Houston, Texas, and New Orleans, Louisiana. The
alliance offers oil and gas exploration and production companies, through retail
insurance brokers, a new program known as "WELLSURE (SM)," which combines
traditional well control and blowout insurance with the Company's post-event
response services and well control preventative services including company-wide
and/or well specific contingency planning, personnel training, safety
inspections and engineering consultation. Insurance provided under WELLSURE
(SM) has been arranged with leading London insurance underwriters. WELLSURE
(SM) program participants will be provided with the full benefit of having the
Company as a safety and prevention partner. In the event of well blowouts, the
Company will serve as the integrated emergency response service provider, as
well as function as lead contractor and project manager for control and
restoration of wells covered under the program.
HALLIBURTON ALLIANCE
In response to ongoing changes in the emergency response segment of the oil
and gas service industry, the Company entered into a global strategic alliance
with Halliburton Energy Services. Halliburton is widely recognized as an
industry leader in the pumping, cementing, snubbing, production enhancement,
coiled tubing and related services segment of the oil field services industry.
This alliance, "WELLCALL (SM)", draws on the expertise and abilities of both
companies to offer a total well control solution for oil and gas producers
worldwide. The Halliburton Alliance provides a complete range of well control
services including pre-event troubleshooting and contingency planning, snubbing,
pumping, blowout control, debris removal, firefighting, relief and directional
well planning and other specialized services. The specific benefits that
WELLCALL (SM) provides to an operator include:
* Quick response with a global logistics system supported by an
international communications network that operates around the clock,
seven days a week;
* A full-time team of experienced well control specialists that are
dedicated to safety;
* Specialized equipment design, rental, and sales;
* Contingency planning consultation where WELLCALL (SM) specialists meet
with customers, identify potential problems, and help develop a
comprehensive contingency plan; and
* A single-point contact to activate a coordinated total response to
well control needs.
Operators contracting with WELLCALL (SM) receive a Strategic Event Plan, or
S.T.E.P., a comprehensive contingency plan for well control that is region-
specific, reservoir-specific, site-specific and well-specific. The S.T.E.P.
plan provides the operator with a written, comprehensive and coordinated action
plan that incorporates historical data, pre-planned call outs of Company and
Halliburton personnel, pre-planned call outs of necessary equipment and
logistical support to minimize response time and coordinate the entire well
control effort. Thereafter, in the event of a blowout, WELLCALL (SM) provides
8
<PAGE>
the worldwide engineering and well control equipment capabilities of Halliburton
and the firefighting expertise of the Company through an integrated contract
with the operator.
As a result of the Halliburton Alliance, the Company is directly involved
in Halliburton's well control projects that require firefighting expertise,
Halliburton is a primary service vendor to the Company and the Company has
exclusive rights to use certain firefighting technologies developed by
Halliburton. It is anticipated that most of the Company's Fire Stations will be
established at existing Halliburton facilities and that maintenance of the Fire
Station equipment will be performed by Halliburton employees. The Halliburton
Alliance also gives the Company access to Halliburton's global communications
and currency management systems, capabilities that could prove invaluable in
connection with the Company's international operations.
Consistent with the Halliburton Alliance, the Company's focus has evolved
to meet its clients' needs in a global theater of operations. With the increased
emphasis by operators on operating efficiencies and outsourcing many engineering
services, the Company has developed a proactive menu of services to meet their
needs. These services emphasize pre-event planning and training to minimize the
likelihood of a blowout and minimize damages in the event of an actual blowout.
The Company provides comprehensive advance training, readiness, preparation,
inspections and mobilization drills which allow client companies to pursue every
possible preventive measure and to react in the most cohesive manner possible
when an event occurs. The Halliburton Alliance stresses the importance of
safety, environmental protection and cost control, along with asset protection
and liability minimization.
The agreement documenting the alliance between the Company and Halliburton
(the "Alliance Agreement") provides that it will remain in effect for an
indefinite period of time and may be terminated prior to September 15, 2000,
only for cause, or by mutual agreement between the parties. Under the Alliance
Agreement, cause for termination is limited to (i) a fundamental breach of the
Alliance Agreement, (ii) a change in the business circumstances of either party,
(iii) the failure of the Alliance to generate economically viable business, or
(iv) the failure of either party to engage in good faith dealing. While the
Company considers its relationship with Halliburton to be good, there can be no
assurance that the Alliance Agreement will not be terminated by Halliburton.
The termination of the Alliance Agreement could have a material adverse effect
on the Company's future operating performance.
BUSINESS STRATEGY
Over the next few years, the Company intends to continue to expand its
operations and to build upon its demonstrated strengths while increasing
revenues from its consulting, equipment sales, environmental containment and
remediation services and Non-critical Event activities. Recognizing that the
well control services business is a finite market whose upside potential is
dependent upon the occurrence of blowouts which cannot be reasonably predicted,
the Company's business strategy is to market its pre-event services on a global
basis and expand its range of services to establish a diversified and expanded
revenue base. The Company intends to accomplish its objectives by promoting the
Halliburton Alliance and the WELLSURE (SM) program, continuing to integrate the
businesses of Boots & Coots, ABASCO, ITS and Code 3, increasing the geographical
scope of its training and consulting programs, and establishing additional
Company-owned Fire Stations at locations outside the United States. Like the
Company owned Fire Stations in Houston, Texas, and Duncan, Oklahoma, the
industry supported Fire Station on the North Slope of Alaska and the Fire
Station in Anaco, Venezuela, the proposed Company-owned Fire Stations would
include the equipment required to respond to a well blowout or fire. In
general, the Company plans to offer a broader range of services to oil and gas
producers worldwide, increasing both the scope of its target and its market
share.
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<PAGE>
The Company hopes to expand its service capabilities through a combination
of internal growth, additional acquisitions, joint ventures and strategic
alliances. Because of the fragmented nature of the oil and gas services
industry, the Company believes a number of attractive acquisition opportunities
exist in the pressure control, emergency response and environmental services
segments of the business. The oil and gas services business in general, and the
emergency response and environmental remediation segments in particular, are
characterized by a small number of dominant global competitors and a significant
number of locally oriented businesses, many of which tend to be viable
acquisition targets. The Company believes that the owners of locally oriented
companies may be willing to consider becoming part of a larger organization.
Management has recently commenced preliminary discussions with a number of
companies engaged in complementary businesses to explore the potential for
mutually beneficial business arrangements. While none of these discussions has
progressed to the point where the Company believes a particular transaction is
probable, management believes that additional acquisitions, joint ventures and
strategic alliances are likely.
RESEARCH AND DEVELOPMENT
The Company is not directly involved in activities that will require the
expenditure of substantial sums on research and development. The Company does,
however, as a result of the Halliburton Alliance, benefit from the ongoing
research and development activities of Halliburton to the extent that new
Halliburton technologies are or may be useful in connection with the Company's
business.
COMPETITION
The emergency response segment of the oil and gas services business is a
rapidly evolving field in which developments are expected to continue at a rapid
pace. The Company believes that the Halliburton Alliance, the WELLSURE (SM)
program, and its recent acquisitions of Boots & Coots, Abasco, ITS and Code 3
will strengthen its competitive position in the industry by expanding the scope
of services that the Company offers to its customers. However, the Company's
ability to compete depends upon, among other factors, increasing industry
awareness of the variety of services the Company offers, expanding the Company's
network of Fire Stations and further expanding the breadth of its available
services. Competition from other emergency response companies, some of which
may have greater financial resources than the Company, is intense and is
expected to increase as the industry undergoes additional anticipated change.
The Company's competitors may also succeed in developing new techniques,
products and services that are more effective than any that have been or are
being developed by the Company or that render the Company's techniques, products
and services obsolete or noncompetitive. The Company's competitors may also
succeed in obtaining patent protection or other intellectual property rights
that might hinder the Company's ability to develop, produce or sell competitive
products or the specialized equipment used in its business.
EMPLOYEES
As of March 23, 1998, the Company and its operating subsidiaries
collectively had 183 full-time employees. In addition, the Company has several
part-time consultants and also employs part-time contract personnel who remain
on-call for certain emergency response projects. The Company is not subject to
any collective bargaining agreements and it considers its relations with its
employees to be good.
10
<PAGE>
OPERATING HAZARDS; LIABILITY INSURANCE COVERAGE; LITIGATION
The Company's operations involve ultra-hazardous activities that involve an
extraordinarily high degree of risk. Such operations are subject to accidents
resulting in personal injury and the loss of life or property, environmental
mishaps and mechanical failures, and litigation arising from such events may
result in the Company being named a defendant in lawsuits asserting large
claims. The Company may be held liable in certain circumstances, including if
it fails to exercise reasonable care in connection with its activities, and it
may also be liable for injuries to its agents, employees and contractors who are
acting within the course and scope of their duties. The Company and its
subsidiaries presently maintain liability insurance coverage with aggregate
policy limits which are believed to be adequate for their respective operations.
However, it is generally considered economically unfeasible in the oil and gas
service industry to maintain insurance sufficient to cover large claims.
Accordingly, there can be no assurance that the Company's insurance will be
sufficient or effective under all circumstances or against all hazards to which
the Company may be subject. A successful claim for which the Company is not
fully insured could have a material adverse effect on the Company. No assurance
can be given that the Company will not be subject to future claims in excess of
the amount of insurance coverage which the Company deems appropriate and
feasible to maintain.
RELIANCE UPON OFFICERS, DIRECTORS AND KEY EMPLOYEES
The Company's emergency response services require highly specialized
skills. Due to the unique nature of the industry and the small number of persons
who possess the requisite skills and experience, the Company is highly dependent
upon the personal efforts and abilities of its officers, directors and key
employees. In seeking qualified personnel, the Company will be required to
compete with companies having greater financial and other resources than the
Company. Since the future success of the Company will be dependent upon its
ability to attract and retain qualified personnel, the inability to do so, or
the loss of personnel, could have a material adverse impact on the Company's
business.
CONTROL OF THE COMPANY BY SIGNIFICANT STOCKHOLDERS
The Company's current officers and directors own beneficially, on a
combined basis, 10,943,473 shares of Common Stock, including currently
exercisable options to purchase Common Stock. The shares of Common Stock owned
by the Company's current officers and directors represent, in the aggregate,
approximately 35.79% of the issued and outstanding Common Stock. As a
result, the current officers and directors of the Company collectively have
significant and perhaps controlling influence in the election of the Company's
Board of Directors and with respect to the determination and authorization of
corporate actions for an indefinite period of time. Further, in May 1995, Brian
Krause, the Company's President, Raymond Henry, the Company's Director of Well
Control Operations, Richard Hatteberg, the Company's Senior Vice President, Well
Control, and Danny Clayton, the President of IWC de Venezuela, entered into a
Voting Trust Agreement that gives Larry H. Ramming, the Company's Chairman and
Chief Executive Officer, and Mr. Henry, as co-trustees, the absolute right to
vote all shares of Common Stock now owned or hereafter acquired by Messrs.
Krause, Henry, Hatteberg and Clayton during the five-year period ending December
31, 2000 (the "Voting Trust Agreement"); provided, that twenty percent of the
shares subject to such agreement are eligible for release therefrom on each one
year anniversary date of the Voting Trust Agreement upon the written request of
the party owning such shares. In the event that Messrs. Ramming and Henry are
unable to reach an agreement respecting the voting of such shares, the Voting
Trust Agreement designates Charles T. Phillips, attorney at law, as the
tiebreaker.
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<PAGE>
CONTRACTUAL OBLIGATIONS TO CUSTOMERS; INDEMNIFICATION
The Company customarily enters into service contracts with its customers
which frequently contain provisions that hold the Company liable for various
losses or liabilities incurred by the customer in connection with the activities
of the Company, including, without limitation, losses and liabilities relating
to claims by third parties, damage to property, violation of governmental laws,
regulations or orders, injury or death to persons, and pollution or
contamination caused by substances in the Company's possession or control. The
Company may be responsible for any such losses or liabilities caused by
contractors retained by the Company in connection with the provision of its
services. In addition, such contracts generally require the Company, its
employees, agents and contractors to comply with all applicable laws, rules and
regulations (which may include the laws, rules and regulations of various
foreign jurisdictions) and to provide sufficient training and educational
programs to such persons in order to enable them to comply with applicable laws,
rules and regulations. Consequently, the Company may be exposed to substantial
liabilities in connection with its services. In the case of emergency response
services, the Company frequently enters into agreements with customers which
limit the Company's exposure to liability and/or require the customer to
indemnify the Company for losses or liabilities incurred by the Company in
connection with such services, except in the case of willful misconduct by the
Company. There can be no assurance, however, that such contractual provisions
limiting the liability of the Company will be enforceable in whole or in part
under applicable law.
ITEM 2. DESCRIPTION OF PROPERTY.
REAL PROPERTY
The Company leases a 7,000 square foot office in the Halliburton Center,
Houston, Texas. This space is rented from an unaffiliated landlord through May
2002 for an average monthly rental of $7,000. The Company leases an 11,000
square foot Fire Station facility in Anaco, Venezuela, which space is rented
through January 2000 for a monthly rental of $4,476. The Company owns a facility
in northwest Houston, Texas, that includes approximately 2 acres of land, a
4,000 square foot office building and a 12,000 square foot manufacturing and
warehouse building. The Company's ITS business unit leases approximately 10,000
square feet of office space in the Camac Plaza, Houston, Texas, through June 30,
1999, for an average monthly rental of $9,400. Additionally, ABASCO, ITS and
Code 3 have leased office and equipment storage facilities in various other
cities within the United States, Venezuela, the United Kingdom and Peru. The
future commitments on such leases are immaterial. The Company believes that
these facilities will be adequate for its anticipated needs.
EQUIPMENT
The Company is well-equipped for its current operations. In the fields of
oil and gas well blowout control and firefighting specifically, the Company owns
five complete sets of oil-well firefighting equipment, including Athey wagons,
pumps, water lines, monitors and nozzles. These equipment sets are presently
located at Company-owned Fire Stations in Houston, Texas, Duncan, Oklahoma and
Anaco, Venezuela, and are in good condition. In addition, the Company has the
in-house capacity to assemble additional firefighting and pump equipment
packages as needed.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any pending legal proceeding, nor is its
property the subject of a pending legal proceeding, which is not routine
litigation incidental to its business or in which the amount involved, exclusive
of interest and costs, exceeds ten percent of the current assets of the Company.
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<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
The annual meeting (the "Meeting") of the stockholders of the Company was
held on December 8, 1997. At the Meeting, the stockholders voted upon a number
of proposals, each of which is summarized below, along with the votes cast for
and against each such proposal and the withheld or abstaining therefrom.
ELECTION OF DIRECTORS. At the Meeting, the stockholders elected the
following persons to the board of directors of the Company until the date of the
annual stockholders meeting in the calendar year set forth opposite the name of
each such person:
Name Term Votes For Votes Against Abstaining
- ---- ---- --------- ------------- ----------
Larry Ramming 1998 16,807,720 0 0
Jerry Winchester 1999 16,807,720 0 0
Doug Johnson 1999 16,807,720 0 0
Brian Krause 2000 16,807,720 0 0
K. Kirk Krist 2000 16,807,720 0 0
On March 25, 1998, subsequent to the Meeting, the Board of Directors
elected Thomas L. Easley, the Chief Financial Officer and Secretary to the Board
of Directors for a term expiring on the date of the annual stockholders' meeting
to be held in calendar year 1998.
AMENDMENT OF CERTIFICATE OF INCORPORATION. At the Meeting, the stockholders
of the Company voted on and approved an amendment to clarify Article V,
Subsection (c) of the Certificate of Incorporation of the Company regarding the
timing of notice required of stockholders for the proposal of business to be
conducted at any annual or special meeting of stockholders. The stockholders
voted 16,804,757 shares for such amendment and 2,963 shares were voted against
or withheld, with 0 shares abstaining or not voting.
1997 INCENTIVE STOCK PLAN. At the Meeting, the stockholders of the Company
voted on and approved the 1997 Incentive Stock Plan of the Company, attached
hereto as Exhibit 10.14 and incorporated herein by reference (the "1997
Incentive Plan"). The 1997 Incentive Plan authorizes the board of directors to
grant, in the aggregate, up to 1,475,000 shares of common stock and to issue
options to purchase, in the aggregate, up to 920,000 shares of common stock of
the Company to full-time employees not eligible to receive awards under the
Company's Executive Compensation Plans or subsequently adopted incentive plans,
unless such plan expresses provides otherwise. The stockholders voted 16,537,091
shares for such proposal and 270,629 shares were voted against or withheld, with
0 shares abstaining or not voting.
EXECUTIVE COMPENSATION PLANS. At the Meeting, the stockholders of the
Company voted on and approved a resolution authorizing the Compensation
Committee of the board of directors to develop and implement one or more
executive compensation plans that will authorize such committee to equity awards
for a maximum of 1,475,000 shares of Common Stock without the necessity of
obtaining any further stockholder approval. The stockholders voted 16,305,850
shares for such proposal and 266,666 shares were voted against or withheld, with
230,000 shares abstaining or not voting.
OUTSIDE DIRECTORS' OPTION PLAN. At the Meeting, the stockholders of the
Company voted on and approved the Proposed Outside Directors' Option Plan of the
Company, attached hereto as Exhibit 10.15 and incorporated herein by reference
(the "Outside Directors' Plan"). The Outside Directors' Plan provides for the
issuance of an option to purchase 15,000 shares of Common Stock to each member
of the board of
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<PAGE>
directors who is not an employee of the Company for each year of service. The
aggregate shares available under the Outside Directors' Plan is 150,000 shares
of Common Stock. The stockholders voted 16,306,591 shares for such proposal and
271,129 shares were voted against or withheld, with 230,000 shares abstaining or
not voting.
RATIFICATION OF INDEPENDENT AUDITORS. At the Meeting, the stockholders of
the Company voted on and approved a resolution ratifying the selection of Hein +
Associates LLP, as the Company's auditors for the fiscal year ending December
31, 1997. The stockholders voted 16,374,387 shares for such proposal and 10,000
shares were voted against or withheld, with 333,333 shares abstaining or not
voting.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the AMEX under the symbol "WEL."
Prior to January 30, 1998, the Company's Common Stock was traded on the NASD's
OTC Electronic Bulletin Board under the symbol "BCWC". Significant trading in
the Company's Common Stock has occurred only since August 1997. The following
table sets forth the high and low bid and asked prices per share of the Common
Stock as reported for the periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
------------------------ ------------------------
BID ASKED BID ASKED
--- ----- --- -----
<S> <C> <C> <C> <C>
Quarter ended September 30, 1997: $5.50 $8.00 $1.50 $1.625
Quarter ended December 31, 1997: $5.625 $5.875 $3.625 $3.875
</TABLE>
On March 23, 1998, the last reported sale price of the Common Stock as
reported on AMEX was $5.00 per share.
The bid information has been provided by National Quotation Bureau, Inc.,
and reflects inter-dealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions. As of March 20, 1998 the
Company's Common Stock was held by approximately 255 holders of record. The
Company estimates that it has a significantly larger number of shareholders
because a substantial number of the Company's shares are held of record by
broker-dealers for their customers in street name.
The Company has not paid any cash dividends on its Common Stock to date.
The Company's current policy is to retain earnings to provide funds for the
operation and expansion of its business. Additionally, subsequently to December
31, 1997, the Company obtained short-term secured financing in the aggregate
amount of $7,250,000, which comes due between May 2, 1998 and June 15, 1998 (the
"Senior Notes"). The Company is prohibited from paying cash dividends as long as
the Senior Notes remain outstanding.
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<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
RESULTS OF OPERATIONS
As discussed in Note B-- Significant Accounting Policies in Notes to
Consolidated Financial Statements, the Company elected to change its fiscal year
from June 30 to December 31. A summary of operating results is as follows:
<TABLE>
<CAPTION>
Years Ended June 30, Six Months Ended December 31,
-------------------------------- ---------------------------------
1996 1997 1996 1997
----------- ----------- ------------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues $1,662,121 $2,564,087 $ 743,040 $5,389,137
Costs and Expenses:
Operating Expenses 1,320,702 1,459,640 730,890 3,785,787
General and Administrative 772,626 1,061,259 370,694 1,535,890
Depreciation and Amortization 49,893 111,469 37,000 499,616
Operating Loss (481,100) (68,281) (395,544) (432,156)
Loss on Debt Extinguishment -- -- -- (193,333)
Other Income (Expenses) 4,216 (62,774) (1,104) (91,973)
Income Taxes (Benefit) (137,818) 24,569 12,662 41,370
Net Loss (339,066) (155,624) (409,310) (758,832)
</TABLE>
Comparison of Year Ended June 30, 1996 with Year Ended June 30, 1997
Revenues were $1,662,121 for the year ended June 30, 1996 ("fiscal 1996")
compared to $2,564,087 for the year ended June 30, 1997 ("fiscal 1997"). This
increase was the result of increased market share from diversification of IWC
Service's client base.
Operating expenses were $1,320,702 for fiscal 1996, compared to $1,459,640
for fiscal 1997. The increase was the result of expanded operations in the
fourth quarter of fiscal 1997 due to expanded business activity.
General and administrative expenses were $772,626 for fiscal 1996, compared
to $1,061,259 for fiscal 1997. The increase was primarily the result of
investments in expanded corporate infrastructure and expanded marketing and
advertising to increase market share and diversify the Company's client base.
Depreciation and amortization expense increased from $49,893 for fiscal
1996, compared to $111,469 for fiscal 1997, primarily as the result of a full
year of depreciation on equipment additions made in fiscal 1996.
Other income (expenses) was $4,216 for fiscal 1996, compared to a net
expense of ($62,774) for fiscal 1997, resulting primarily from higher interest
expense on financed equipment purchases made during the 1996 period and interest
expense on the 12% Senior Subordinated Notes sold through June 30, 1997.
Income taxes for fiscal 1996, includes a credit for the reversal of a
deferred federal income tax provision of $139,000 for the 1995 start-up period.
Substantially all of the balance of income taxes for both fiscal 1996 and fiscal
1997 represents foreign taxes withheld on various international projects.
IWC Services sustained a net loss of $339,066 for fiscal 1996, compared to
a net loss of $155,624 for the comparable period in 1997 as a result of the
revenue and expense variations discussed above.
Comparison of Six Months Ended December 31, 1996 with Six Months Ended
December 31, 1997
Revenues were $743,040 for the six months ended December 31,1996 ("1996
Interim Period") compared to $5,389,137 for the six months ended December 31,
1997 ("1997 Interim Period"). This increase principally resulted from: (1)
product sales from the ABASCO acquisition completed in September 1997
($971,538); (2) sales of two fire fighting equipment packages in the 1997
Interim Period ($907,933); and, (3) increased market share for the Company's
Well Control business unit.
Operating expenses were $730,890 for the 1996 Interim Period compared to
$3,785,787 for the 1997 Interim Period. This increase principally resulted from:
(1) cost of sales and operating expenses from the ABASCO acquisition completed
in September 1997; ($632,176); (2) costs associated with the sales of two fire
fighting equipment packages in the 1997 Interim Period ($685,837); (3) personnel
and equipment mobilizations costs incurred in connection with an international
well control incident in October 1997 ($540,000); and, (4) costs associated with
an increase in personnel and support facilities resulting from the July 31, 1997
acquisition of the Boots & Coots operating assets and growth in the Company's
Well Control business unit.
General and administrative expenses were $370,694 for the 1996 Interim
Period compared to $1,535,890 for the 1997 Interim Period. This increase
principally resulted from: (1) expenses associated from the ABASCO acquisition
completed in September 1997 ($246,040); and, (2) expenses associated with an
increase in personnel and other overhead to support the Company's increased
operational level in Well Control.
Depreciation and amortization expenses increased from $37,000 for the 1996
Interim Period compared to $499,616 for the 1997 Interim Period due to the
significant increase in property and equipment acquired with the July 31, 1997
acquisition of the Boots & Coots operating assets.
The loss of debt extinguishment of $193,333 resulted from the early
conversion to common stock of $2,900,000 in face amount of the Company's 12%
Senior Subordinated Notes during the 1997 Interim Period.
The increase in other expenses from $1,104 during the 1996 Interim Period
to $91,973 during the 1997 Interim Period is principally due to interest
expense on the Company's 12% Senior Subordinated Notes.
Income taxes of $12,662 during the 1996 Interim Period and $41,370 during
the 1997 Interim Period results from foreign taxes incurred on Well Control
projects.
OVERVIEW
Such financing alternatives include: (1) the sale, currently underway
through private placement on a best-effort basis, of $10,000,000 of 10% Junior
Redeemable Convertible Preferred Stock; (2) consideration for the offering
through private placement on a best-efforts basis of a Convertible Preferred
Stock Offering; (3) discussions with certain commercial banks for a secured debt
facility; and, (4) discussions regarding the possible private placement of
Subordinated Notes. Although these financing efforts are in process and not yet
completed, Management believes these actions, together with cash flows from
operations, will provide adequate funding to the Company. In the event that one
or more of these financing alternatives under consideration are not
accomplished, the Company could be required to restructure current indebtedness,
sell assets to repay indebtedness, curtail expansion plans and fund business
activities from only internally generated funds.
In the past seven months, the Company has completed the Boots & Coots,
ABASCO, ITS and Code 3 acquisitions. A primary component of the Company's
business strategy is to increase and diversify the size and scope of the
Company's business operations through acquisitions of complementary businesses.
The Company anticipates that acquisitions will continue to play an important
role in its growth for the foreseeable future. There can be no assurance,
however, that the Company will be able to identify and acquire additional
companies.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash expenditures in connection with the acquisitions of
Abasco, ITS and Code 3 required a substantial portion of the Company's cash
reserves. Further, the terms upon which Abasco, ITS and Code 3 were acquired
allowed the sellers to retain most or all of the working capital of such
companies. To date, the Company has funded its operations and acquisitions
from: equity capital contributed by its officers, directors and principal
stockholders; proceeds from the sale in July 1997 of $3,000,000 of the Company's
12% Senior Subordinated Notes due December 31, 2000 (the "Subordinated Notes")
(of which $2,900,000 has been converted into 3,866,653 shares of Common Stock);
$6,481,000 in net proceeds from the private placement, in September 1997, of
7,475,000 shares of Common Stock (the "September Private Placement"); $4,500,000
in net proceeds from the private placement, in January 1998, of the Company's
10% Senior Secured Notes due May 2, 1998 (the "Senior Notes"); $2,250,000 in net
proceeds from the private placement, in March 1998, of additional Senior Notes
due June 15, 1998 ("Additional Senior Notes"); and seller financing in the
aggregate principal amount of $5,760,977, of which approximately $1,500,000
remains outstanding as of the date hereof.
Accordingly, the Company currently needs additional working capital to fund
its existing operations and to repay indebtedness in the aggregate principal
amount of $8,750,000 which comes due between March 31 and June 15, 1998. The
Company is exploring various financing alternatives to enable it to retire all
of the outstanding Senior Notes, Additional Senior Notes, seller notes and to
finance future acquisitions by the Company. There can be no assurance, however,
that the Company will be successful in obtaining financing through alternative
means on acceptable terms. If the Company is unable to obtain additional
financing on or prior to the May 2, 1998, maturity date of the Senior Notes, it
may be forced to restructure its current indebtedness, sell assets to repay the
indebtedness, curtail its plans for expansion and finance its business
activities with only such internally generated funds as may then be available.
ITEM 7. FINANCIAL STATEMENTS.
Attached following the Signature Pages and Exhibits.
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<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Company has not had any disagreements with its independent accountants
and auditors.
PART III
Pursuant to Instruction E.3 to Form 10-KSB, the information in Items 9-12
is incorporated by reference from the Company's definitive proxy statement which
will be filed with the Commission pursuant to Regulation 14A on or about April
30, 1998; if such proxy statement is not filed by such date, this Form 10-KSB
will be amended to include Items 9-12 on or before April 30, 1998.
17
<PAGE>
ITEM 13. EXHIBITS LIST AND REPORTS ON FORM 8-K.
Exhibit No. Description Location
----------- ----------- --------
3.01 Amended and Restated Certificate Exhibit 3.2 of Form 8-K filed
of Incorporation August 13, 1997
3.02 Amendment to Certificate of Exhibit 3.3 of Form 8-K filed
Incorporation August 13, 1997
3.03 Amended Bylaws Exhibit 3.4 of Form 8-K filed
August 13, 1997
4.01 Specimen Certificate for the Exhibit 4.1 of Form 8-K filed
Registrant's Common Stock August 13, 1997
4.02 Form of 12% Senior Subordinated Exhibit 4.2 of Form 8-K filed
Notes due December 31, 2000 August 13, 1997
4.03 Form of Noteholders' Warrants to Exhibit 4.3 of Form 8-K filed
Purchase $3,000,000 of Common August 13, 1997
Stock
4.04 Form of Employees Options to Exhibit 4.4 of Form 8-K filed
Purchase 690,000 Shares of August 13, 1997
Common Stock
4.05 Form of Contractual Options to Exhibit 4.5 of Form 8-K filed
Purchase 1,265,000 Shares of August 13, 1997
Common Stock
4.06 Note Purchase Agreement with Filed herewith
Main Street/Geneva
4.07 First Amendment to Note Purchase Filed herewith
Agreement with Main Street/Geneva
9.01 Voting Trust Agreement between Filed herewith
Larry H. Ramming, Raymond Henry,
Richard Hatteberg, Danny Clayton
and Brian Krause (as amended)
10.01 Alliance Agreement between IWC Exhibit 10.1 of Form 8-K filed
Services, Inc. and Halliburton August 13, 1997
Energy Services, a division of
Halliburton Company
10.02 Executive Employment Agreement Exhibit 10.2 of Form 8-K filed
of Larry H. Ramming August 13, 1997
10.03 Executive Employment Agreement Exhibit 10.3 of Form 8-K filed
of Raymond Henry August 13, 1997
10.04 Executive Employment Agreement Exhibit 10.4 of Form 8-K filed
of Brain Krause August 13, 1997
10.05 Executive Employment Agreement Exhibit 10.5 of Form 8-K filed
of Richard Hatteberg August 13, 1997
10.06 Executive Employment Agreement Exhibit 10.6 of Form 8-K filed
of Danny Clayton August 13, 1997
18
<PAGE>
Exhibit No. Description Location
- ----------- ----------- --------
10.07 Security Agreement and Financing Filed herewith
Statement with Main Street/Geneva
10.08 First Amendment to Security Filed herewith
Agreement
10.09 Stock Pledge Agreement with Main Filed herewith
Street/Geneva
10.10 First Amendment to Stock Pledge Filed herewith
Agreement
10.11 Form of Warrant issued to Main Filed herewith
Street/Geneva
10.12 Form of Registration Rights Filed herewith
Agreement with Main Street/Geneva
10.13 Form of First Amendment to Filed herewith
Registration Rights Agreement
10.14 1997 Incentive Stock Plan Filed herewith
10.15 Proposed Outside Directors' Filed herewith
Option Plan
10.16 Proposed Executive Compensation Filed herewith
Plan
10.17 Halliburton Center Sublease Filed herewith
10.18 Camac Plaza Sublease Filed herewith
11.01 Computation of Per Share Filed herewith
Earnings
21.01 List of subsidiaries Exhibit 21.01 of Form 10-KSB/A
filed December 5, 1997
27.01 Financial Data Schedule Filed herewith
On December 23, 1997, the Company filed a report on Form 8-K reporting a change
in its fiscal year end from June 30, 1997 to December 31, 1997.
19
<PAGE>
SIGNATURES
IN ACCORDANCE WITH SECTION 13 OR 15(D) OF THE EXCHANGE ACT, THE REGISTRANT
CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY
AUTHORIZED.
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
By: /s/ Larry H. Ramming Date: March 31, 1998
----------------------------------------
LARRY H. RAMMING, CHIEF EXECUTIVE OFFICER
IN ACCORDANCE WITH THE EXCHANGE ACT, THIS REPORT HAS BEEN SIGNED BELOW BY
THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON
THE DATE INDICATED.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
By: /s/ Larry H. Ramming Chief Executive Officer and March 31, 1998
-------------------------------- Director
LARRY H. RAMMING
By: /s/ Thomas L. Easley Chief Financial Officer and March 31, 1998
-------------------------------- Director
THOMAS L. EASLEY
By: /s/ David G. Williams Controller March 31, 1998
--------------------------------
DAVID G. WILLIAMS
By: /s/ Brian Krause President and Director March 31, 1998
--------------------------------
BRIAN KRAUSE
By: /s/ Kirk Krist Director March 31, 1998
--------------------------------
KIRK KRIST
By: /s/ Doug Johnson Director March 31, 1998
--------------------------------
DOUG JOHNSON
By: /s/ Jerry Winchester Director March 31, 1998
--------------------------------
JERRY WINCHESTER
</TABLE>
20
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Boots & Coots International Well Control, Inc.
We have audited the accompanying consolidated balance sheets of Boots & Coots
International Well Control, Inc. and subsidiaries as of June 30, 1997 and
December 31, 1997, and the related consolidated statements of operations,
shareholders' equity and cash flows for the year ended June 30, 1997 and for the
six-month period ended December 31, 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Boots & Coots
International Well Control, Inc. and subsidiaries as of June 30, 1997 and
December 31, 1997, and the results of their operations and their cash flows for
the year ended June 30, 1997 and for the six-month period ended December 31,
1997, in conformity with generally accepted accounting principles.
/s/ Hein + Associates LLP
- --------------------------
Hein + Associates LLP
Houston, Texas
March 27, 1998
F-1
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1997 1997
---------- ------------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 701,321 $ 1,718,060
Receivables-net of allowance for doubtful accounts of $7,000 at
December 31, 1997 1,380,570 2,765,581
Inventories 288,265 1,131,011
Prepaid expenses and other current assets 49,754 427,160
---------- -----------
Total current assets 2,419,910 6,041,812
PROPERTY, PLANT AND EQUIPMENT, net 390,706 6,948,809
OTHER ASSETS:
Deferred financing costs and other assets - net of accumulated amortization
of $14,731 and $16,712 at June 30 and December 31, 1997,
respectively 443,448 87,128
Goodwill - net of accumulated amortization of $25,677 and $45,856 at
June 30 and December 31, 1997, respectively 170,272 983,624
---------- -----------
Total assets $3,424,336 $14,061,373
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 666,458 $ 1,679,242
Accrued liabilities and customer advances 496,175 486,450
Notes payable - current portion 22,211 1,564,928
---------- -----------
Total current liabilities 1,184,844 3,730,620
---------- -----------
NOTES PAYABLE - net of current portion 14,338 9,207
12% SENIOR SUBORDINATED NOTES 1,399,500 90,000
COMMITMENTS AND CONTINGENCIES (Note I)
SHAREHOLDERS' EQUITY:
Preferred stock ($.00001 par, 5,000,000 shares authorized,
no shares issued or outstanding) - -
Common stock ($.00001 par, 50,000,000 shares authorized, 14,187,368
and 29,998,662 shares issued and outstanding at June 30 and
December 31, 1997, respectively) 142 300
Additional paid-in capital 1,048,118 11,212,684
Accumulated deficit (222,606) (981,438)
---------- -----------
Total shareholders' equity 825,654 10,231,546
---------- -----------
Total liabilities and shareholders' equity $3,424,336 $14,061,373
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six-Month
Period Ended
Year Ended December 31,
June 30, 1997 1997
------------- -------------
<S> <C> <C>
REVENUES: $2,564,087 $ 5,389,137
COSTS AND EXPENSES:
Operating expenses 1,459,640 3,785,787
General and administrative 1,061,259 1,535,890
Depreciation and amortization 111,469 499,616
---------- -----------
2,632,368 5,821,293
---------- -----------
Operating Loss 68,281 (432,156)
Loss on Debt Extinguishment -- 193,333
Other Expenses, primarily interest 62,774 91,973
---------- -----------
Loss Before Income Taxes (131,055) (717,462)
Income Tax Expense 24,569 41,370
---------- -----------
Net Loss $ (155,624) $ (758,832)
========== ===========
Basic Earnings (Loss) Per Common Share ($0.01) $ (0.03)
========== ===========
Diluted Earnings (Loss) Per Common Share ($0.01) $ (0.03)
========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 12,191,171 23,864,069
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEAR ENDED JUNE 30, 1997 AND
SIX-MONTH PERIOD ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Total
Additional Share-
Common Stock Paid-in Accumulated holders'
Shares Amount Capital deficit Equity
-------- ------ ---------- ------------ --------
<S> <C> <C> <C> <C> <C>
BALANCES, July 1, 1996 11,500,000 $ 115 $ 800,645 $ (66,982) $ 733,778
Common stock options issued for services rendered - - 46,000 - 46,000
Common stock issued for services rendered 230,000 2 9,998 - 10,000
Common stock issued 2,457,368 25 (25) - -
Common stock issued as compensation 36,000 - 36,000
Sale of common stock warrants - - 155,500 - 155,500
Net loss - - - (155,624) (155,624)
---------- ------- ----------- ----------- -----------
BALANCES, June 30, 1997 14,187,368 142 1,048,118 (222,606) 825,654
Common stock issued 1,314,632 13 (13) - -
Exchange conversion with Havenwood reverse merger 1,173,168 12 (12) - -
Common stock issued to acquire Boots & Coots L.P. 259,901 3 999,997 - 1,000,000
Sale of common stock warrants - - 144,500 - 144,500
Common stock issued to extinguish debt 3,866,653 39 2,447,251 - 2,447,290
Sale of common stock, net of offering costs 7,475,000 75 6,238,025 - 6,238,100
Common stock issued to purchase ABASCO, Inc. 300,000 3 239,997 - 240,000
Common stock issued for services rendered 100,000 1 79,999 - 80,000
Common stock issued upon exercise of options 1,287,440 12 (12) - -
Common stock issued upon exercise of options 34,500 - 14,834 - 14,834
Net loss - - - (758,832) (758,832)
---------- ------- ----------- ----------- -----------
BALANCES, December 31, 1997 29,998,662 $ 300 $11,212,684 $ (981,438) $10,231,546
========== ======= =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWs
<TABLE>
<CAPTION>
Six-Month
period
Ended
Year Ended December 31,
June 30, 1997 1997
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (155,624) $ (758,832)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 74,480 451,139
Amortization 36,989 164,844
Common stock issued as compensation 36,000 -
Bad debt expense - 7,000
Loss on debt conversion - 193,333
Changes in operating assets and liabilities, net of assets acquired:
Receivables (1,075,542) (1,392,011)
Inventories and supplies (288,265) 337,846
Prepaid expenses (43,304) (496,451)
Deferred costs and other assets (not current) (33,950) -
Accounts payable 601,442 1,012,784
Accrued liabilities and customer advances 496,175 (9,727)
----------- -----------
Net cash used in operating activities (351,599) (490,075)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Boots & Coots, L.P. - $(1,221,130)
Acquisition of ABASCO, Inc. - (1,652,795)
Property and equipment additions (122,882) (188,154)
Disposition of assets 4,010 38,909
Acquisition of business and others (44,983) -
----------- -----------
Net cash used in investing activities (163,855) (3,023,170)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock options exercised - 14,835
Proceeds for issuance of debt and warrants 1,555,000 1,445,000
Deferred financing costs (321,132) (210,144)
Debt repayments (71,050) (3,222,607)
Proceeds from sales of common stock - 6,502,900
----------- -----------
Net cash provided by financing activities 1,162,818 4,529,984
----------- -----------
NET INCREASE (DECREASE) IN CASH 647,364 1,016,739
CASH, beginning of year 53,957 701,321
----------- -----------
CASH, end of year $ 701,321 $ 1,718,060
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest $ 53,427 $ 65,543
Cash paid for income taxes $ 22,996 $ 41,370
=========== ===========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock and options issued in exchange for property and equipment and
services rendered $ 56,000 $ 80,000
Conversion of subordinated debt and warrants to common stock - $ 3,000,000
Issuance of common stock in acquisitions - $ 1,240,000
Write-off of deferred placement and debt costs - $ 540,843
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. ORGANIZATION:
Boots & Coots International Well Control, Inc. (the "Company"), formerly
known as Havenwood Ventures, Inc. ("Havenwood"), was incorporated in Delaware
in April 1988. Havenwood was originally formed to serve as a blind pool
investment fund, and in July 1988 Havenwood raised $499,500 in an initial
public offering of its Common Stock. After completing its initial public
offering, Havenwood expended its available resources in the development of a
business enterprise which it ultimately divested, thereafter remaining
inactive, with no material assets or liabilities, until it entered into a
business combination with IWC Services Inc. on July 29, 1997.
The Company acquired IWC Services, Inc. ("IWC Services") on July 29, 1997, in
a "reverse triangular merger" in which it issued shares of Common Stock to
the stockholders of IWC Services in exchange for all of the issued and
outstanding common stock of IWC Services and issued options and warrants to
purchase Common Stock of the Company in exchange for all of the options and
warrants to purchase common stock of IWC Services then outstanding. As a
result of the merger, IWC Services became a wholly-owned subsidiary of the
Company, the stockholders of IWC Services became the beneficial holders of
approximately 93% of the post-merger issued and outstanding shares of Common
Stock and the board of directors and management of IWC Services took over the
management of the Company.
IWC Services, incorporated in Texas on June 27, 1995, was formed with the
issuance of 100,000 shares of no par common stock (increased to 5,000,000
pursuant to a 50-to-one stock split discussed in Note G) in exchange for cash
of $549,000, property and equipment valued at $108,925 assigned by Buckingham
Capital Corporation, and services performed by certain other shareholders.
IWC Services had no operations prior to its acquisition of Hell Fighters,
Inc. (Hell Fighters). The shareholders of Hell Fighters, a Texas corporation,
incorporated on May 4, 1995, contributed to IWC Services all of their
outstanding common shares of Hell Fighters, which then became a wholly-owned
subsidiary of IWC Services.
F-6
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. ORGANIZATION: (continued)
Under the plan of merger between Havenwood and IWC Services, (i) the
outstanding voting securities of the Company were reverse split in the ratio
of one post-split share for every 135 pre-split shares held by a shareholder,
provided, however, that no single shareholder's share ownership was reduced
to fewer than 100 post-split shares; (ii) certain principal shareholders of
the Company surrendered a total of 740,740 post-split shares to the Company
for cancellation, leaving a total of 1,173,074 shares of common stock issued
and outstanding on the closing date; (iii) each issued and outstanding share
of common stock of IWC Services was converted into 2.30 post-merger shares of
the Company's common stock, amounting to approximately 15,502,000 post-merger
shares in the aggregate (all share amounts herein have been adjusted to
reflect this 2.30 for 1 split; (iv) outstanding options and warrant to
purchase shares of the authorized and unissued common stock of IWC Services
were converted into substantially similar options and warrants to purchase
shares of the Company's authorized and unissued common stock, and (v) IWC
Services became a wholly-owned subsidiary of the Company with the former IWC
Services shareholders, as a group, acquiring shares representing
approximately 92% of the resulting capitalization of the Company. Following
the completion of the transactions, there were approximately 16,675,168
shares of the Company's common stock issued and outstanding, on a fully
diluted basis. Immediately after the merger, all the officers and directors
of the Company resigned and were replaced by representatives of IWC. The
business combination was accounted for as a merger. No goodwill arose from
this transaction. As IWC Services obtained a controlling interest in the
Company, the transaction was accounted for as a reverse merger. Therefore,
for financial statement purposes, IWC Services was considered the acquiror.
The consolidated financial statements reflect the historical operations and
cost basis of IWC Services since its inception.
On July 31, 1997, IWC acquired all of the operating assets, including stock
of its foreign services subsidiaries, of Boots & Coots, L.P. ("Boots &
Coots"), an oil and gas well control firefighting, snubbing and industrial
and marine firefighting company. The consideration paid consisted of (I)
$369,432 cash payable to Boots & Coots, (ii) $680,568 placed in escrow to pay
certain debts of Boots & Coots, (iii) the issuance of secured promissory
notes of the Company in the aggregate principal amount of $4,760,977 and (iv)
259,901 shares of Common Stock of the Company. The promissory notes are
secured by the acquired assets of Boots & Coots, and have been paid, with the
exception of approximately $1,544,000 outstanding at December 31, 1997
pending final determination of foreign tax obligations which is anticipated
to be resolved during the quarter end June 30, 1998. This transaction was
accounted for as a purchase and the acquired assets of Boots & Coots were
revalued at fair market value as of July 31, 1997 resulting in goodwill of
$50,000 which will be amortized over 15 years.
F-7
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. ORGANIZATION: (continued)
After completion of the merger and the Boots & Coots acquisition, the name of
Havenwood was changed to Boots & Coots International Well Control, Inc.
On September 25, 1997, the Company formed a wholly-owned subsidiary company,
ABASCO, Inc. ("ABASCO") to purchase the assets of ITS Environmental, a
manufacturer and distributor of rapid response oil and chemical spill
containment and reclamation equipment and products since 1975. The Company
paid $1,590,000 cash and issued 300,000 shares of common stock to acquire the
manufacturing equipment, inventory and customer lists. This transaction was
accounted for as a purchase and the acquired assets of ABASCO were revalued
at fair market value effective as of September 12, 1997 resulting in goodwill
of approximately $749,000 which will be amortized over 25 years.
The operations of the two acquired entities are included in the Company's
consolidated operations from the respective acquisition dates. The Company's
revenues, net loss applicable to common shareholders, and net loss per share
on an unaudited pro forma basis, assuming that Boots & Coots and ABASCO
acquisitions occurred on July 1, 1996 would be as follows:
Six-Month
Period
Year Ended
Ended December 31,
June 30, 1997 1997
------------- ------------
(unaudited) (unaudited)
Revenues $17,390,000 $6,627,000
Net Earnings (Loss) $ 1,011,000 $ (444,000)
Net Earnings (Loss)
per Share $ .08 $ (.02)
Through December 31, 1997 the Company's core business unit was in the oil
and natural gas well control segment of the oil and gas services industry,
providing services on a global basis in oil and gas well blowout control
and/or firefighting, specialized industrial firefighting and well control
equipment rental and sales, consulting engineering services, drilling rig
and production facilities inspection, safety training courses and blowout
contingency planning.
B. SIGNIFICANT ACCOUNTING POLICIES:
Consolidation - The accompanying consolidated financial statements include
the financial transactions and accounts of the Company and its
subsidiaries. All significant intercompany accounts and transactions are
eliminated in consolidation.
F-8
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B. SIGNIFICANT ACCOUNTING POLICIES: (continued)
Revenue Recognition - Revenue is recognized on the Company's service
contracts either as earned on the basis of day work completed or, for
turnkey contracts, on the percentage-of-completion method based upon costs
incurred to date and estimated total contract costs. Revenue and cost from
equipment sales is recognized upon contract completion.
Inventories - Inventories consist primarily of equipment, parts and supplies
in work-in-progress. Inventories are valued at the lower of cost or market
using the average cost method.
Property and Equipment - Property and equipment is stated at cost.
Depreciation is provided principally using the straight-line method over the
estimated useful lives of the respective assets as follows: buildings and
improvements (15 years), well control and fire -fighting equipment (8 years),
shop and other equipment (8 years), vehicles (5 years) and office equipment
and furnishings (5 years). Office leasehold improvements are amortized over
the remaining primary lease terms.
Goodwill - The Corporation amortizes costs in excess of fair value of net
assets of businesses acquired using the straight-line method over periods
ranging from 15 to 25 years. Recoverability is reviewed annually or sooner if
events or changes in circumstances indicate that the carrying amount may
exceed fair value. Recoverability is then determined by comparing the
undiscounted net cash flows of the assets to which the goodwill applies to
the net book value including goodwill of those assets. Goodwill shown in the
consolidated financial statements relates to the Company's acquisitions of
IWC, Boots & Coots LP, and ABASCO, and Hell Fighters.
Amortization expense was 13,063 in year ended June 30, 1997 and $20,179
six month for the period ended December 31, 1997.
Foreign Currency Translation - The functional currency of the Company's
foreign operations is the U.S. dollar. All customer invoices and vendor
payments are denominated in U.S. currency. Revenues and expenses from foreign
operations are remeasured into U.S. dollars on the respective transaction
dates and foreign currency transaction gains or losses are included in the
Consolidated Statements of Operations.
Income Taxes - The Company accounts for income taxes pursuant to the
liability method, which requires recognition of deferred income tax
liabilities and assets for the expected future tax consequences of events
that have been recognized in the Company's financial statements or tax
returns. Under this method, deferred income tax liabilities and assets are
determined based on the temporary differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities and
available tax carryforwards.
F-9
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B. SIGNIFICANT ACCOUNTING POLICIES: (continued)
Earnings Per Share - Basic and diluted earnings (loss) per share was
computed by dividing net income (loss) by the weighted average common
shares outstanding during the year ended June 30, 1997 and the six-month
period ended December 31, 1997. Options to purchase shares of common stock
were outstanding during the year ended June 30, 1997 and six-month period
ended December 31, 1997 but were not included in the computation of diluted
earnings (loss) per share, either because the option price was greater than
the average market price of the common stock or were anti-dilutive.
Recent Accounting Pronouncements - The Financial Accounting Standards
Board (FASB) issued SFAS No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of, which is
effective for fiscal years beginning after December 15, 1995. This
pronouncement specifies certain events and circumstances which indicate the
cost of an asset or assets may be impaired, the method by which the
evaluation should be performed, and the method by which writedowns, if any,
of the asset or assets are to be determined and recognized. The adoption of
this pronouncement did not have a material impact on the Company's
financial condition or operating results upon implementation.
The FASB issued SFAS No. 123, Accounting for Stock Based Compensation,
which is effective for fiscal years beginning after December 15, 1995. This
pronouncement allows companies to choose to adopt the statement's new rules
for accounting for employee stock-based compensation plans. For those
companies who choose not to adopt the new rules, the statement requires
disclosures as to what earnings would have been if the new rules had been
adopted. Management adopted the disclosure requirements of this statement
in the fiscal year ended June 30, 1997; see Note D - Capital Stock for
further discussion.
The FASB issued SFAS No. 128, Earnings Per Share, effective for financial
statements issued after December 31, 1997, including interim periods, that
establishes standards for computing and presenting earnings per share. The
new statement requires retroactive restatement of all prior-period per
share data presented. The Company adopted the disclosure requirements of
this statement and has restated, its 1997 amounts to reflect the adoption
retroactively.
F-10
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B. SIGNIFICANT ACCOUNTING POLICIES: (continued)
The FASB issued SFAS No. 130, Reporting Comprehensive Income, and SFAS No.
131, Disclosures About Segments of an Enterprise and Related Information.
SFAS No. 130 establishes standards for reporting and display of
comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in equity except
those resulting from investments by owners and distributions to owners.
Among other disclosures, SFAS No. 130 requires that all items that are
required to be recognized under current accounting standards as components
of comprehensive income be reported in a financial statement that displays
these items with the same prominence as other financial statements. SFAS
No. 131 supercedes SFAS No. 14, Financial Reporting for Segments of a
Business Enterprise. SFAS No. 131 establishes standards on the way that
public companies report financial information about operating segments in
annual financial statements and requires reporting of selected information
about operating segments in interim financial statements issued to the
public. It also establishes standards for disclosures regarding products
and services, geographic areas and major customers. SFAS No. 131 defines
operating segments as components of a company about which separate
financial information is available that is evaluated regularly by the
Company management in deciding how to allocate resources and in assessing
performance.
SFAS Nos. 130 and 131 are effective for financial statements presented for
periods beginning after December 15, 1997 and require comparative
information for earlier years to be restated. Because of the recent
issuance of these standards, management has been unable to fully evaluate
the impact, if any, the standards may have on the future financial
statement disclosures. Results of operations and financial position,
however, will be unaffected by implementation of these standards.
Use of Estimates - The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles
requires the Company's management to make estimates and assumptions that
affect the amounts reported in these financial statements and accompanying
notes. Actual results could differ from these estimates.
Cash Flow Information - The Company considers all unrestricted, highly
liquid investments with a maturity of three months or less at the time of
purchase to be cash equivalents.
Change in Fiscal Year - Effective December 8, 1997, the Company changed its
fiscal year from June 30 to December 31. The consolidated financial
statements include presentation of the transition period beginning on July
1, 1997 and ending December 31, 1997.
F-11
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
B. SIGNIFICANT ACCOUNTING POLICIES: (continued)
Unaudited pro forma data for the six-month period ended December 31, 1996
consisted of the following:
Revenues $743,040
Operating loss 396,648
Income tax expense 12,662
Net loss 409,310
Basic loss per share .04
Diluted loss per share .04
C. INVENTORIES:
Inventories consisted of the following as of:
June 30, December 31,
1997 1997
-------- ------------
Raw material and supplies $288,265 $ 239,172
Work in process - 34,502
Finished goods - 857,337
-------- ----------
$288,265 $1,131,011
======== ==========
F-12
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
D. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following as of:
June 30, December 31,
1997 1997
-------- ------------
Land $ -- $ 140,000
Buildings and improvements 68,853 561,350
Control and firefighting equipment 151,442 5,992,856
Shop and other equipment 157,014 380,191
Vehicles 27,697 134,263
Office equipment and furnishings 96,176 301,764
--------- ----------
Accumulated depreciation and amortization (110,476) (561,615)
--------- ----------
Net $ 390,706 $6,948,809
========= ==========
E. INCOME TAXES:
The Company and its wholly-owned domestic subsidiaries file a consolidated
federal income tax return. The provision for income taxes shown in the
Consolidated Statements of Operations differs from the amount that would be
computed if the loss before income taxes were multiplied by the federal
income tax rate (statutory rate) as follows:
Six-Month
Period
Ended
Year Ended December 31,
June 30, 1997 1997
------------- ------------
Tax benefit at statutory rate $ (44,559) $(258,003)
Foreign taxes 24,569 41,370
Unrecognized net operating assets 44,559 258,003
--------- --------
Provision (benefit) for income taxes $ 24,569 $ 41,370
========= ========
F-13
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
E. INCOME TAXES: (continued)
The approximate tax effect of significant temporary differences
representing deferred tax assets and liabilities are as follows as of:
June 30, December 31,
1997 1997
--------- ---------
Net operating loss carryforwards $ 74,000 332,000
Valuation allowance ( 74,000) (332,000)
--------- ---------
Net deferred tax asset, net $ - $ -
========= =========
The valuation allowance increased $44,000 and $258,000 in the year ended
June 30, 1997 and the six-month period ended December 31, 1997,
respectively, because of net operating loss carryforwards generated in
those years. There were no other significant temporary differences as of
June 30, 1997 and December 31, 1997.
As of December 31, 1997, the Company has net operating loss carryforwards
of approximately $980,000 expiring in various amounts beginning in 2011.
F. NOTES PAYABLE:
Notes payable consisted of the following:
June 30, December 31,
1997 1997
-------- ------------
Vehicle and equipment notes bearing
interest at rates from 9.25% to 12.25%,
payable in monthly installments,
through April 1999 and collateralized
by vehicles and equipment. $ 36,549 $ 30,215
Also see Note A regarding the note payable to Boots & Coots, L.P.
F-14
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F. NOTES PAYABLE: (continued)
In January 1997, the Company commenced an offering for up to $5,000,000 of
debt financing on a "best-efforts" basis through a Private Placement
Memorandum providing for the issuance of a minimum of 500 and a maximum of
5,000 Investment Units at a price of $1,000 per Unit with a minimum
investment of 25 Units. Each Unit consisted of a 12% Senior Subordinated
Note (the "Notes") of the Company in the principal amount of $1,000 with a
warrant to purchase under certain circumstances shares of the Company's
common stock at a discounted price. Management estimated the fair value of
the proceeds applicable to the warrants issued through June 30, 1997 to be
$155,000 and during July 1997 to be $145,000, which amounts have been
reflected as a discount on the Notes and an increase to additional paid-in
capital. Interest on the Notes at the rate of 12% per annum (13.3%
effective interest rate based on reduced note balances) is payable semi-
annually commencing July 1, 1997 with maturity date for the Notes on
December 31, 2000, subject to extension for up to two periods of six months
each with an increase in the interest rate to 14%. Net proceeds, after
sales commissions and offering expenses, (deferred and amortized over term
of notes) from this financing were utilized for working capital and
business expansion purposes. Through June 30, 1997 subscriptions for
$1,555,000 were received and funded. Subsequent to June 30, 1997 the
Company received additional subscription agreements of $1,445,000 though
termination of the offering in July 1997.
Effective September 12, 1997, holders of the Company's 12% Senior
Subordinated Notes were offered the election to exercise the warrants into
common stock of the Company at an exchange rate of $.75 per share
with payment accomplished through surrender and retirement of their notes.
An aggregate face amount of $2,900,000 of Notes were converted into an
aggregate of 3,866,653 shares of common stock with $193,000 recognized as a
charge to operations for early extinguishment of indebtedness. The carrying
amount, net of costs associated with debt offering, was transferred to
equity at time of conversion .
F-15
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
Notes to Consolidated Financial Statements
G. SHAREHOLDERS' EQUITY:
At June 30, 1996, the Company authorized 1,000,000 shares of no par common
stock of which 100,000 shares were issued and outstanding. Effective
December 17, 1996, the Company amended its Articles of Incorporation and
By-Laws increasing its authorized capital stock to 50,000,000 shares of
$0.01 par value common stock by effecting a 50-to-1 stock split and
5,000,000 shares of $0.00001 par value preferred stock, which may be issued
at the discretion of the Board of Directors. At June 30, 1997 and December
31, 1997, a total of 14,187,368 shares and 29,998,662 shares, respectively,
of common stock were issued and outstanding. As discussed in Note A, on
July 29, 1997 the Company completed a merger with Havenwood Ventures, Inc.
and the par value of the common stock became $.00001 per share. All
references herein have been restated to reflect the amended amounts.
On September 18, 1997, Boots & Coots/IWC closed a private placement
offering for the sale of 7,475,000 shares of common stock at $1 per share
for a total of $7,475,000. Proceeds to the Company after placement agents'
fees and expenses of the offering were approximately $6,323,000 and were
used for payment on the Boots & Coots, L.P. acquisition notes and for
working capital. Additionally, the placement agents were awarded 748,000
warrants at an exercise price of $1.20, which are exercisable for a period
of four years from grant date.
In November 1996, the Board of Directors approved the 1996 Incentive Stock
Plan which allowed the Board of Directors to grant up to 1,500,000
incentive stock options to eligible employees. These options are
exercisable by the holders thereof for a period of 10 years from the date
of grant.
In November 1997, the Board of Directors approved the 1997 Incentive Stock
Plan, which will allow the Company to grant an additional 1,475,000
incentive stock options to eligible employees. The terms of the 1997 plan
are substantially the same as the 1996 plan discussed above.
Also in November 1997, the Board of Directors adopted the Outside
Directors' Option Plan (the "Director's Plan"). The Directors' Plan
provides for the issuance an option to purchase 15,000 shares per year to
each member of the Board of Directors who is not an employee of the
Company. Options may be exercised over a five-year period with the initial
right to exercise, starting one year from the date of the grant, provided
the director has not resigned or been removed for cause by the Board of
Directors prior thereto. After one year from the date of the grant, options
outstandig under the Director' Plan may be exercised regardless of whether
the individual continues to serve as a director. Options granted under the
Directors' Plan are not transferable except by will or by operation of law.
45,000 options have been granted under the Directors Plan as of December
31, 1997.
The Board of Directors also approved an Executive Compensation Plan, which
will allow the Company to grant additional options covering 1,475,000
shares of the Company's common stock. The terms of this plan are
substantially the same as the two incentive plans.
Activity in these option plans for the year ended June 30, 1997 and
December 31, 1997 was as follows:
Weighted
Average
Number Exercise Price
of Shares Per Share
--------- --------------
Outstanding June 30, 1996 -- $ --
Granted 690,000 0.43
Exercised -- --
Expired -- --
--------- ------
Outstanding June 30, 1997 690,000 0.43
Granted 525,000 2.58
Exercised (161,000) 0.43
--------- ------
Outstanding December 31, 1997 1,054,000 1.41
=========
As of December 31, 1997, 349,000 ($.43) options are currently exercisable
and the remaining options vest over a period of five years from date of
grant.
In December 1996 and April 1997, the Company issued a total of 1,265,000
contractual stock options to five persons, including 460,000 options issued
to certain officers and directors and 350,000 options issued to two
attorneys. These contractual stock options have a two-year term beginning
on the original date of grant, are fully vested and are immediately
exercisable by the holders thereof at a price of $0.43 per share. During
the six-months ended December 31, 1997, the Company allowed the exercise of
these options through the redemption of common shares owned by the option
holders. These shares had been owned for a period adequate to place the
option holders at risk for market fluctutation; therefore, no compensation
expense has been recorded by the Company for the shares issued pursuant to
this option exercise.
F-16
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
G. SHAREHOLDERS' EQUITY: (continued)
In December 1997, the Company granted 50,000 options to a consultant at an
exercise price of $3.66 per share. These options are excercisable upon
grant and remain exercisable for a period of five years from the grant
date.
In September 1997, the Company granted 80,000 options to two consultants at
an exercise price of $2 per share. These options are exercisable upon grant
and remain excercisable for a period of four years from the grant date.
The Company applies APB Opinion 25, Accounting for Stock Issued to
Employees, and related interpretations in accounting for its plans.
Accordingly, no compensation cost has been recognized for its stock option
plans. Had compensation expense for the Company's stock-based compensation
plans been determined based on the fair value at the grant dates for awards
under those plans, consistent with the method of SFAS No. 123, the
Company's reported net loss and net loss per common share would have
changed to the pro forma amounts indicated below:
Six-Month
Period
Year Ended
Ended December 31,
June 30, 1997 1997
------------- ------------
Net loss As reported $(155,624) $ (758,832)
Pro forma $(219,724) $(1,028,832)
Net loss per
common share As reported $ (0.01) $ (0.03)
Pro forma $ (0.02) $ (0.04)
The fair value of each option grant was estimated on the date of grant
using Black-Scholes option pricing model with the following assumptions:
risk-free rate of 6%, volatility of 97%, no assumed dividend yield and
expected lives of one to three years.
H. RELATED PARTY TRANSACTIONS:
The Company shares certain administrative facilities and services including
corporate office space, administrative personnel and office support
equipment with Buckingham Capital Corporation, an affiliate of the
Company's controlling shareholder. For the year ended June 30, 1997 and
six-month period ended December 31, 1997, the Company paid approximately
$236,000 and $186,000, respectively, to Buckingham Capital Corporation for
such services. Management believes such charges are comparable to what
would have been paid to outside parties for such facilities and services.
During the year ended June 30, 1997 and the six-month period ended December
31, 1997, the Company incurred $155,500 and $144,500, respectively, in
financial consulting fees for services rendered by Buckingham Capital
Corporation in connection with the Company's private offering of $3,000,000
principal amount of 12% Senior Subordinated Notes. Such amounts were
included with deferred financing costs in the consolidated balance sheet
and amortized over the term of the Notes, $2,900,000 of which were
converted to equity in September 1997 (see Note F).
F-17
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
I. COMMITMENTS AND CONTINGENCIES:
The Company leases shop and equipment storage facilities under operating
leases with terms in excess of one year.
At December 31, 1997, future minimum lease payments under these
noncancellable operating leases are approximately:
Years Ending December 31: Amount
------------------------- ------
1998 $131,000
1999 128,000
2000 75,000
2001 75,000
2002 75,000
Thereafter 50,000
--------
$534,000
========
Rent expense for the year ended June 30, 1997 and the six-month period
ended December 31, 1997, was approximately $77,000 and $140,000,
respectively.
J. REVENUES FROM MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK:
During the periods presented below, the following customers represented
significant concentrations of consolidated revenues:
Six-Month
Period
Year Ended
Ended December 31,
June 30, 1997 1997
------------- ------------
Customer A $ 385,002 $ --
Customer B 757,375 --
Customer C 416,011 --
Customer D -- 1,453,655
Customer E -- 568,407
F-18
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
J. REVENUES FROM MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK: (continued)
The Company's revenues are generated geographically as follows:
Six-Month
Period
Year Ended
Ended December 31,
June 30, 1997 1997
------------- ------------
Domestic customers 71% 61%
Foreign customers 29% 39%
Four of the Company's customers (each in excess of 10%) collectively
accounted for 86% of outstanding accounts receivable at June 30, 1997.
Two of the Company's customers collectively accounted for 27% of
outstanding accounts receivable at December 31, 1997. The Company believes
that future accounts receivable with these companies will continue to be
collected under normal credit terms based on previous experience. The
Company performs ongoing evaluations of its customers and generally does
not require collateral. The Company assesses its credit risk and provides
an allowance for doubtful accounts for any accounts which it deems doubtful
of collection.
The Company maintains deposits in banks which may exceed the amount of
federal deposit insurance available. Management believes that any possible
deposit loss is minimal.
K. EVENTS SUBSEQUENT TO DECEMBER 31, 1997:
On January 2, 1998, the Company completed the funding of the acquisition,
effective as of December 31, 1997, of all of the capital stock of ITS
Supply Corporation ("ITS") for aggregate consideration of $6,000,000.
Financing for the acquisition of ITS was provided from working capital
($500,000); proceeds from the issuance of 10% Senior Secured Notes due May
21, 1998 ($4,500,000); and short-term bridge financing from the seller
($1,000,000).
In connection with the sale through private placement of the 10% Senior
Secured Notes on January 2, 1998, the Company entered into a financial
advisory arrangement pursuant to which the note holders are to provide a
certain level of financial, merger and acquisition advisory services over a
three-year period in consideration of an advance cash consulting fee of
$500,000, all of which was added to the principal balance of the Senior
Secured Notes. The commitment for the Senior Secured Notes by the note
holders also required the payment by the Company of a $50,000 commitment
fee. The note holders were also issued warrants exercisable over a six year
term to purchase an aggregate of 2,000,000 shares of the Company's Common
Stock at a price of $2.62 per share.
F-19
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
K. EVENTS SUBSEQUENT TO DECEMBER 31, 1997: (continued)
The ITS seller obligation of $1,000,000 bears interest at the rate of 10%
per annum is payable on March 31, 1998.
For its most recent fiscal year ended March 31, 1997, ITS contributed
revenues of approximately $41,000,000 and pre-tax operating income of
approximately $1,000,000 to the consolidated operating results of its
former parent company (unaudited). The above pre-tax operating income is
prior to allocations of a portion of the former parent company's corporate
overhead expenses to ITS. Such corporate overhead expense allocations are
not considered to be indicative of incremental costs, if any, to be
incurred by the Company as a result of its ownership of ITS.
On February 20, 1998, the Company completed the acquisition of all of the
stock of Code 3, Inc. ("Code 3"). Consideration for the acquisition of Code
3, with an effective date for audited purchase price adjustments of
December 31, 1997, was $570,568 cash; the repayment of corporate secured
debt and interest thereon of approximately $1,250,000; and the issuance of
488,136 shares of the Company's Common Stock, of which 158,646 shares were
delivered into escrow to secure the indemnification obligations of the
stockholders of Code 3. Code 3 reported unaudited revenues of approximately
$4,800,000 and pre-tax income of approximately $296,000 for its fiscal year
ended December 31, 1997.
On March 5, 1998, the Company sold through private placement to the
noteholders an additional $2,250,000 of 10% Senior Secured Notes due June
15, 1998. In addition, these note holders were issued warrants, exercisable
over a six year term, to purchase an additional 500,000 shares of the
Company's common stock at a price of $4.50 per share.
Management has undertaken steps to finance its working capital and
expansion plan. Such financing alternatives include: (1) the sale,
currently underway through private placement on a best-effort basis, of
$10,000,000 of 10% Junior Redeemable Convertible Preferred Stock; (2)
consideration for the offering through private placement on a best-efforts
basis of a Convertible Preferred Stock Offering; (3) discussions with
certain commercial banks for a secured debt facility; and, (4) discussions
regarding the possible private placement of Subordinated Notes. Although
these financing efforts are in process and not yet completed, Management
believes these actions, together with cash flows from operations, will
provide adequate funding to the Company.
F-20
<PAGE>
Exhibit 4.06
================================================================================
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
_______________________________
NOTE PURCHASE AGREEMENT
_______________________________
DATED AS OF JANUARY 2, 1998
$5,000,000
10.0% SENIOR SECURED NOTES DUE MAY 2, 1998
================================================================================
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
_______________________________
NOTE PURCHASE AGREEMENT
_______________________________
$5,000,000
10.0% Senior Secured Notes Due May 2, 1998
Main Street Merchant Partners II, L.P.
1360 Post Oak Blvd., Suite 800
Houston, Texas 77056
Geneva Associates, L.L.C.
300 North Greene Street
Greensboro, North Carolina 27401
Ladies and Gentlemen:
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC., a Delaware corporation
(together with its successors and assigns, the "Company"), hereby agrees with
you as follows:
1. PURCHASE AND SALE OF NOTES
1.1 Issuance of Notes. The Company will authorize the issuance of Five
Million Dollars ($5,000,000) in aggregate principal amount of its ten percent
(10.0%) Senior Secured Notes due May 2, 1998 (the "Notes"). The Notes shall be
in the form of Exhibit 1.1 hereto, and shall have the terms as herein and
therein provided, and the terms therein provided are incorporated hereby by
reference as if set forth herein in full.
1.2 The Closing.
(a) Purchase and Sale of Notes. The Company hereby agrees to sell
each of you and each of you hereby agree to purchase from the Company, in
accordance with the provisions hereof, the aggregate principal amount of Notes
set forth below your respective name on Annex 1 hereto at one hundred percent
(100%) of the principal amount thereof.
(b) The Closing. The Closing (the Closing") of the Company's sale of
Notes
1
<PAGE>
will be held on January 2, 1998 (the "Closing Date") at 10:00 a.m., local time,
at the office of Hutcheson & Grundy, L.L.P., your special counsel. At the
Closing, the Company will deliver to you one or more Notes (as set forth below
your name on Annex 1 hereto), in the denominations indicated on Annex 1 hereto,
in the aggregate principal amount of your purchase, dated the Closing Date and
payable to you or payable as indicated on Annex 1 hereto, against payment by
federal funds wire transfer in immediately available funds of the purchase price
thereof, as directed to you by the Company. The sales of the Notes to each of
you are separate sales.
1.3 Purchase for Investment; ERISA.
(a) Purchase for Investment. You represent to the Company that you
are purchasing the Notes listed on Annex 1 thereto below your name for your own
account for investment and with no present intention of distributing the Notes
or any part thereof, but without prejudice to your right at all times to: (i)
sell or otherwise dispose of all or any part of the Notes under a registration
statement filed under the Securities Act, or in a transaction exempt from the
registration requirements of the Securities Act; and (ii) have control over the
disposition of all of your assets to the fullest extent required by any
applicable law.
(b) ERISA. You represent that you are acquiring the Notes for your
own account with your general assets and that no part of such assets constitutes
assets of an "employee benefit plan" (as defined in ERISA) or a "plan" (as
defined in the Code).
1.4 Failure to Tender, Failure of Conditions. If at the Closing the
Company fails to tender to you the Notes to be purchased by you, or if the
conditions specified in Section 3 hereof to be fulfilled at the Closing have not
been fulfilled, you may thereupon elect to be relieved of all further
obligations hereunder. Nothing in this Section 1.4 shall operate to relieve the
Company from any of its obligations hereunder or to waive any of your rights
against the Company.
1.5 Expenses.
(a) Generally. Whether or not the Notes are sold, the Company will at
the Closing, or if the Closing does not occur, promptly pay all fees, expenses
and costs relating hereto, including, but not limited to:
(i) your reasonable out-of-pocket travel costs associated with
the transactions contemplated by this Agreement;
(ii) the reasonable fees and disbursement of your special counsel
incurred in connection herewith; and
2
<PAGE>
(iii) the reasonable fees, expenses and costs incurred in
complying with each of the conditions to closing set forth in Section 3
hereto.
(b) Counsel. Without limiting the generality of the foregoing, it is
agreed and understood that the Company will pay, at the Closing, the statement
for fees and disbursements of your special counsel presented at the Closing and
the Company will also pay upon receipt of any statement thereof, each additional
statement for fees and disbursements of your special counsel rendered after the
Closing in connection with the issuance of the Notes or the matters referred to
in Section 1.5(a) hereof.
(c) Survival. The obligations of the Company under this Sections 1.5,
5.4, 9.4(d) and 9.6 hereof shall survive the payment of the Notes and the
termination hereof.
2. WARRANTIES AND REPRESENTATIONS
To induce you to enter into this Agreement and to purchase the Notes listed
on Annex 1 hereto below your name, the Company warrants and represents, as of
the Closing Date, as follows:
2.1 Corporate Organization. (a) The Company and each of its Subsidiaries
(i) is a duly incorporated and existing corporation (or other Person) in good
standing under the laws of the jurisdiction of its organization, (ii) has all
necessary corporate power (or comparable power, in the case of a Subsidiary that
is not a corporation) to own the property and assets it uses in its business and
otherwise to carry on its business, and (iii) is duly licensed or qualified and
in good standing in each jurisdiction in which the nature of the business
transacted by it or the nature of the property owned or leased by it makes such
licensing or qualification necessary, except where the failure to be so licensed
or qualified could not reasonably be expected to have a Material Adverse Effect.
(b) As of the date hereof, the Company has no Subsidiaries and owns no
interest in any joint venture or other entity other than as listed in Schedule
2.1.
2.2 Sale of Notes is Legal and Authorized; Obligations are Enforceable.
(a) Sale of Notes is Legal and Authorized; Obligations are
Enforceable. Each of the issuance, sale and delivery of the Notes by the
Company, the execution and delivery hereof by the Company and compliance by the
Company with all of the provisions hereof and of the Notes;
(i) is within the corporate powers of the Company; and
3
<PAGE>
(ii) is legal and does not conflict with, result in any breach of
any of the provisions of, constitute a default under, or result in the
creation of any Lien upon any Property of the Company or any Subsidiary
under the provisions of any agreement, charter instrument, bylaw or other
instrument to which it is a party or by which it or any of its properties
may be bound except as set forth in Schedule 2.2.
(b) Obligations are Enforceable. Each of this Agreement, the Notes,
the Guaranties and the other Documents has been duly authorized by all necessary
action on the part of the Company or the applicable Guarantor, has been executed
and delivered by duly authorized officers of the Company or the applicable
Guarantor and constitutes a legal, valid and binding obligation of the Company
or the applicable Guarantor, enforceable in accordance with its terms, except
that the enforceability thereof: (i) limited by applicable bankruptcy,
reorganization, arrangement, insolvency, moratorium or other similar laws
affecting the enforceability of creditors' rights generally; and (ii) subject to
the availability of equitable remedies.
2.3 Private Offering of Notes. Neither the Company nor any other Person
has offered any of the Notes or any similar Security of the Company for sale to,
or solicited offers to buy any thereof from, or otherwise approached or
negotiated with respect thereto with, any prospective purchaser, other than the
Purchasers.
2.4 No Defaults; Transactions Prior to Closing Date.
(a) No event has occurred and no condition exists that, upon the
execution and delivery of this Agreement and the issuance of the Notes, would
constitute a Default or an Event of Default.
(b) The Company has not entered into any transaction since the date of
the most recent balance sheet delivered to you that would have been prohibited
by this Agreement had such Agreement been in effect since such date.
2.5 No Violation. Neither the execution, delivery nor performance by the
Company or any of the Guarantors of the Documents to which it is a party nor
compliance by any of such Persons with the terms and provisions thereof, nor the
consummation by it of the transactions contemplated herein or therein, will (i)
contravene any applicable provision of any law, statute, rule or regulation, or
any applicable order, writ, injunction or decree of any court or governmental
instrumentality, (ii) conflict with or result in any breach of any term,
covenant, condition or other provision of, or constitute a default under, or
result in the creation or imposition of (or the obligation to create or impose)
any Lien other than any Permitted Lien upon any of the property or assets of the
Company or any of its Subsidiaries under the terms of any contractual obligation
to which the Company or any of its Subsidiaries is a party or by which it or any
of its properties or assets are bound or to which it may be subject except as
are not
4
<PAGE>
reasonably expected to have a Material Adverse Effect, or (iii) violate or
conflict with any provision of the Certificate or Articles of Incorporation or
Bylaws of such Person.
2.6 Litigation. There are no lawsuits (including, without limitation,
derivative or injunctive actions), arbitration proceedings or governmental
proceedings pending or, to the best knowledge of the Company, threatened,
involving the Company or any of its Subsidiaries except for such lawsuits or
other proceedings which are not reasonably expected to have a Material Adverse
Effect.
2.7 Use of Proceeds; Margin Regulations. The proceeds of the Notes shall
only be used for the acquisition by IWC Services, Inc. of the common stock of
ITS Supply Corporation pursuant to the terms of that certain Stock Purchase
Agreement dated as of December 31, 1997, by and between IWC Services, Inc. and
LaSalle Cattle Company, Ltd. and for the payment of certain financial advisory
services as provided in the Note Purchase Agreements. Neither the Company nor
any of its Subsidiaries are engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock. No proceeds of any Note will be
used to purchase or carry any "margin stock" (as defined in Regulation U of the
Board of Governors of the Federal Reserve System), to extend credit for the
purpose of purchasing or carrying any "margin stock," or for a purpose which
violates Regulations G, T, U or X of the Board of Governors of the Federal
Reserve System.
2.8 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
2.9 Public Utility Holding Company Act. Neither the Company nor any of
its Subsidiaries is a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
2.10 True and Complete Disclosure. All factual information heretofore or
contemporaneously furnished by the Company or any of its Subsidiaries in writing
to the holder of any Note in connection with any Document or any transaction
contemplated therein is, and all other such factual information hereafter
furnished by any such Persons in writing to the holder of any Note in connection
herewith, any of the other Documents or the Notes will be, true and accurate in
all material respects, taken as a whole, on the date of such information and not
incomplete by omitting to state any material fact necessary to make the
information therein not misleading at such time in light of the circumstances
under which such information was provided.
2.11 Financial Statements. The financial statements heretofore delivered
to you for the Company's fiscal year ended June 30, 1997, and for the Company's
fiscal quarter ended
5
<PAGE>
September 30, 1997, have been prepared in accordance with GAAP, applied on a
basis consistent, except as otherwise noted therein, with the Company's
financial statements for the previous fiscal year. Each of such annual and
quarterly financial statements fairly presents on a consolidated basis the
financial position of the Company as of the dates thereof, and the results of
operations for the periods covered thereby, subject in the case of interim
financial statements, to normal year-end adjustments and omission of certain
footnotes as permitted by the SEC. As of the Effective Date, the Company and its
Subsidiaries, considered as a whole, have no material contingent liabilities or
material Indebtedness required under GAAP to be disclosed in a consolidated
balance sheet of the Company that were not disclosed in the financial statements
referred to in this Section 2.11 or in the notes thereto or disclosed in writing
to you.
2.12 No Material Adverse Change. There has occurred no event or effect
since September 30, 1997, that has had, or to the best knowledge of the Company
could reasonably be expected to have, a Material Adverse Effect.
2.13 Labor Controversies. There are no labor strikes, lock-outs, slow
downs, work stoppages or similar events pending or, to the best knowledge of the
Company, threatened against the Company or any of its Subsidiaries that could
reasonably be expected to have a Material Adverse Effect.
2.14 Taxes. The Company and its Subsidiaries have filed all federal tax
returns and all other material tax returns required to be filed, or obtained
extensions for such filings, and have paid all governmental taxes, rates,
assessments, fees, charges and levies (collectively, "Taxes") currently due
except such Taxes, if any, as are being contested in good faith and for which
reserves have been provided in accordance with GAAP. No tax liens have been
filed and no claims are being asserted for Taxes. The charges, accruals and
reserves on the books of the Company and its Subsidiaries for Taxes and other
governmental charges have been determined in accordance with GAAP.
2.15 ERISA. With respect to each Plan, the Company and its Subsidiaries
have fulfilled their obligations under the minimum funding standards of, and are
in compliance in all material respects with, ERISA and with the Code to the
extent applicable to it, and have not incurred any liability under Title IV of
ERISA to the PBGC or a Plan other than a liability to the PBGC for premiums
under Section 4007 of ERISA. Neither the Company nor any of its Subsidiaries
has any contingent liability with respect to any post-retirement benefits under
a welfare plan as defined in ERISA other than liability for continuation
coverage described in Part 6 of Title I of ERISA.
2.16 Consents. All consents and approvals of, and filings and
registrations with, and all other actions of, all governmental agencies,
authorities or instrumentalities required as a condition to the execution and
delivery of this Agreement or the offer, issuance, sale or delivery of the Notes
have been obtained or made and are in full force and effect.
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2.17 Ownership of Property. The Company and its Subsidiaries have good and
marketable title to or a valid leasehold interest in all of their respective
property except to the extent, in the aggregate, no Material Adverse Effect
could reasonably be expected to result from the failure to have such title or
interest, free and clear of any Liens except Permitted Liens. The Company and
its Subsidiaries own or hold valid licenses to use all the material patents,
trademarks, permits, service marks and trade names, free of any burdensome
restrictions, that are necessary to the operation of the business of the Company
and its Subsidiaries as presently conducted.
2.18 Compliance with Statutes. The Company and its Subsidiaries are in
compliance with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies and have all
necessary permits, licenses and other necessary authorizations with respect to
the conduct of their businesses and the ownership and operation of their
properties except where the failure to so comply or hold such permits, licenses
or other authorizations, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect.
2.19 Environmental Matters.
(a) The Company and its Subsidiaries are in compliance with all
applicable Environmental Laws and the requirements of any permits issued under
such Environmental Laws except as could not reasonably be expected to have a
Material Adverse Effect. To the best knowledge of the Company, there are no
pending, past or threatened Environmental Claims against the Company or any of
its Subsidiaries or any property owned or operated by the Company or any of its
Subsidiaries except as could not be expected to have a Material Adverse Effect.
To the best knowledge of the Company, there are no conditions or occurrences on
any property owned or operated by the Company or any of its Subsidiaries or on
any property adjoining or in the vicinity of any such property that could
reasonably be expected (i) to form the basis of an Environmental Claim against
the Company or any of its Subsidiaries or any property owned or operated by the
Company or any of its Subsidiaries, or (ii) to cause any property owned or
operated by the Company or any of its Subsidiaries to be subject to any material
restrictions on the ownership, occupancy, use or transferability of such
property by the Company or any of its Subsidiaries under any applicable
Environmental Law except for any such condition or occurrence described in
clauses (i) or (ii) which could not reasonably be expected to have a Material
Adverse Effect.
(b) To the best knowledge of the Company (i) Hazardous Materials have
not at any time been generated, used, treated or stored on, or transported to or
from, any property owned or operated by the Company or any of its Subsidiaries
in a manner that has violated or could reasonably be expected to violate any
Environmental Law, except for such violation which could not reasonably be
expected to have a Material Adverse Effect, and (ii) Hazardous Materials
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have not at any time been released on or from any property owned or operated by
the Company or any of its Subsidiaries in a matter that has violated or could
reasonably be expected to violate any Environmental Law, except for such
violation which could not reasonably be expected to have a Material Adverse
Effect.
2.20 Other Agreements. No monetary default or material non-monetary
default exists in connection with any instrument evidencing Indebtedness of the
Company or any of the Subsidiaries except for any default, individually or in
the aggregate which could not reasonably be expected to have a Material Adverse
Effect. Neither the Company nor any Subsidiary is in violation in any respect
of any term in any other agreement or other instrument to which it is a party or
by which it or any of its properties may be bound except for such failures that,
in the aggregate for all such failures, could not reasonably be expected to have
a Material Adverse Effect.
2.21 Restrictions on Company and Subsidiaries. Neither the Company nor any
Subsidiary:
(a) is a party to any contract or agreement, or subject to any charter
or other corporate restriction that, in the aggregate for all such contracts,
agreements, charters and corporate restrictions, could reasonably be expected to
have a Material Adverse Effect;
(b) is a party to any contract or agreement that restricts the right
or ability of such corporation to incur Indebtedness other than this Agreement
or that restricts the issuance and sale of the Notes or the performance of the
Company hereunder or under the Notes; and
(c) has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now owned
or hereinafter acquired, to be subject to a Lien not permitted by this
Agreement.
2.22 Senior Debt; Existing Indebtedness. The obligation of the Company to
the Purchasers under the Notes is senior in right of repayment to all other
Indebtedness except the IWC Note and is secured by all assets of the Company and
its domestic subsidiaries and 65% of the stock of the foreign subsidiaries of
IWC Services, Inc. Schedule 2.22 lists all Indebtedness of the type in clause
(a), (b) and (c) of the definition thereof of the Company and its Subsidiaries
as of the Closing Date, and provides the following information with respect to
each item of such Indebtedness: (i) the holder thereof and type thereof, (ii)
the outstanding amount, (iii) the current portion, and (iv) the collateral
securing such Indebtedness, if any.
3. CLOSING CONDITIONS
Your obligation to purchase and pay for the Notes to be delivered to you at
the Closing
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is subject to the following conditions precedent (unless waived by you and the
Other Purchaser in writing prior to the Closing):
3.1 Opinion of Counsel. You shall have received from Brown, Parker &
Leahy, L.L.P. a closing opinion, dated as of the Closing Date, substantially in
the form set forth in Exhibit 3.1 hereto and as to such other matters as you may
reasonably request. This Section 3.1 shall constitute direction by the Company
to such counsel to deliver such closing opinion to you.
3.2 Warranties and Representations True. The warranties and
representations contained in Section 2 hereof shall be true on the Closing Date
with the same effect as though made on or and as of that date.
3.3. Secretary's Certificates. You shall have received a duly executed
Secretary's Certificate dated the Closing Date from the Company and each
Guarantor in form and substance satisfactory to you.
3.4 Guaranties. You shall have received the duly executed Guaranties of
each of the Guarantors in substantially the form of Exhibit 3.4 hereto.
3.5 Stock Pledge Agreement. You shall have received a duly executed Stock
Pledge Agreement from each of the Company and IWC Services, Inc. in
substantially the form of Exhibit 3.5 hereto, together with the undated stock
certificates referenced therein and stock powers relating thereto.
3.6 Security Agreements. You shall have received a duly executed Security
Agreement in substantially the form of Exhibit 3.6 hereto from the Company and
each of the Guarantors, together with duly executed UCC-1 Financing Statements
relating thereto.
3.7 Warrant. Main Street shall have received a duly issued and authorized
Warrant for 1,200,000 shares and Geneva shall have received a duly issued and
authorized Warrant for 800,000 shares of common stock of the Company in
substantially the form of Exhibit 3.7 hereto.
3.8 Registration Rights Agreement. Each of you shall have received a duly
executed Registration Rights Agreement in substantially the form of Exhibit 3.8
hereto.
3.9 Expenses. All fees and disbursements required to be paid pursuant to
Section 1.5(b) hereof shall have been paid in full.
3.10 Intercreditor Agreement. Each of you shall execute and deliver the
Intercreditor Agreement.
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3.11 Financial Advisory Services. Main Street shall have received a fee of
$300,000 and Geneva shall have received a fee of $200,000 in partial
consideration for financial advisory services to be provided by you to the
Company over the thirty-six (36) month period from the Closing Date.
3.12 Compliance with this Agreement. Each of the Company and the
Subsidiaries shall have performed and complied with all agreements and
conditions contained herein that are required to be performed or complied with
by the Company and the Subsidiaries on or prior to the Closing Date, and such
performance and compliance shall remain in effect on the Closing Date.
3.13 Proceedings Satisfactory. All proceedings taken in connection with
the issuance and sale of the Notes and all documents and papers relating thereto
shall be satisfactory to you and your special counsel. You and your special
counsel shall have received copies of such documents and papers as you or they
may reasonably request in connection therewith or in connection with your
special counsel's closing opinion, all in form and substance satisfactory to you
and your special counsel.
3.14 Acquisition of ITS Supply Corporation.
(a) Acquisition Conditions. All conditions to the acquisition of the stock
of ITS Supply Corporation contained in the Stock Purchase Agreement dated as of
December 31, 1997, by and between LaSalle Cattle Company, Ltd., a Texas limited
partnership, and IWC Services, Inc. shall have been satisfied in full (without
amendment or waiver of, or other forbearance to exercise any rights with respect
to, any of the terms and provisions thereof), subject only to purchase of the
Notes under the Note Purchase Agreements;
(b) No Restraint. No judgment, order, injunction or other similar
restraint prohibiting or imposing adverse conditions upon the purchase of shares
of ITS Supply Corporation by IWC Services, Inc. shall be outstanding, and no
actions, suits or proceedings shall be pending or threatened with respect to the
Company, IWC Services, Inc. or ITS Supply Corporation or their respective
Subsidiaries which may have an adverse effect on such Acquisition;
(c) Shares of Stock. The shares of stock of ITS Supply Corporation, ITS
Venezuela S.A., ITS Peru S.A., and ITS Supply & Logistics UK Limited to be
purchased in such acquisition will be purchased free and clear of all
restrictions to purchase imposed by applicable laws or regulations and any
voting trusts, proxies or similar arrangements or applicable laws or regulations
that would restrict IWC Services, Inc.'s or ITS Supply Corporation's, as
applicable, right to exercise the voting rights attributable to such shares;
(d) Regulatory Filings. All actions and proceedings required by applicable
laws or
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regulations to have been taken prior to or on the date of such acquisition in
order for the Company to be able to lawfully consummate such acquisition shall
have been taken, all waiting periods thereunder and therefore shall have expired
or terminated without any action being taken by any competent authority which
restrains, prevents or imposes adverse conditions upon the consummation of such
acquisition, and all consents, waivers and approvals (including, without
limitation, those of any governmental authority or regulatory body) necessary to
have been given or obtained prior to or on the date of such acquisition in order
for the Borrower to be able to lawfully consummate such Acquisition shall have
been given or obtained and remain in full force and effect, including, without
limitation, compliance with the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended; and
(e) Additional Guaranty. ITS Supply Corporation shall execute and deliver
a Guaranty substantially in the form of Exhibit 3.4 hereto within one (1)
Business Date of the Closing Date.
4. PAYMENTS
4.1 Principal Payments. All of the principal of the Notes remaining
outstanding on May 2, 1998, together with interest accrued thereon, shall become
due and payable on May 2, 1998.
4.2 Interest Payments. The Notes will bear interest at the rate of 10.0%
per annum, such interest to be payable monthly in arrears commencing February 1,
1998, and on the first day of each month thereafter until May 2, 1998, when all
principal, together with accrued and unpaid interest shall be due and payable.
If an Event of Default shall have occurred, and for so long as such Event of
Default continues, or if any payment of principal, interest or fees is not paid
when due, interest shall accrue upon the principal of the Notes, together with
any accrued and unpaid interest and fees, at the Highest Lawful Rate. It is the
intention of the holder of the Notes to conform strictly to usury laws
applicable to them. Accordingly, if the transactions contemplated hereby or the
Notes would be usurious as to any of the holders of the Notes under laws
applicable to it (including the laws of the United States of America and the
State of Texas or any other jurisdiction whose laws may be mandatorily
applicable to such holder notwithstanding the other provisions of this
Agreement, the Notes or any other Document), then, in that event,
notwithstanding anything to the contrary in this Agreement, the Notes or any
other Document, it is agreed as follows: (i) the aggregate of all consideration
which constitutes interest under laws applicable to such holder that is
contracted for, taken, reserved, charged or received by such holder under this
Agreement, the Notes or any other Document or otherwise shall under no
circumstances exceed the Highest Lawful Rate, and any excess shall be credited
by such holder on the principal amount of the Notes (or, if the principal amount
of such Notes shall have been paid in full, refunded by such holder to the
Company); (ii) in the event that the maturity of the Notes is accelerated by
reason of an election of the holder or holders thereof resulting
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from any Event of Default hereunder or otherwise, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest under laws applicable to such holder may never include more than the
Highest Lawful Rate, and excess interest, if any, provided for in this
Agreement, the Notes, any other Document or otherwise shall be automatically
canceled by such holder as of the date of such acceleration or prepayment and,
if theretofore paid, shall be credited by such holder on the principal amount of
the Notes held by it (or if the principal amount of such Notes shall have been
paid in full, refunded by such holder to the Company); and (iii) if at any time
the interest provided under the Notes or the Agreement, together with any other
fees payable pursuant to the Notes, the Agreement or any other Document and
deemed interest under applicable law, exceeds the amount that would have accrued
at the Highest Lawful Rate, the amount of interest and any such fees to accrue
to such holder hereunder and thereunder shall be limited to the amount which
would have accrued at the Highest Lawful Rate, but any subsequent reductions
shall not reduce the interest to accrue to such holder hereunder and thereunder
below the Highest Lawful Rate until the total amount of interest accrued
pursuant hereto and thereto and such fees deemed to be interest equals the
amount of interest which would have accrued to such holder if a varying rate per
annum equal to the interest hereunder had at all times been in effect plus the
amount of fees which would have been received but for the effect hereof; and in
each case, to the extent permitted by applicable law, such holder shall not be
subject to any of the penalties provided by law for contracting for, taking,
reserving, charging or receiving interest in excess of the Highest Lawful Rate.
To the extent applicable, you hereby elect to determine the applicable rate
ceiling under Chapter 1D of Article 5069 of the Texas Credit Title Act, Title
79, Texas Revised Civil Statutes by the weekly rate ceiling from time to time in
effect, subject to your right, or any subsequent holder of the Notes right, to
change such method in accordance with applicable law.
4.3 Best Efforts. The Company shall use its best efforts from and after
the Closing Date to promptly refinance the Notes and to prepay the Notes in
full.
4.4 Optional Prepayments. The Company may, at any time, prepay the
principal amount of the Notes in part, in an aggregate principal amount of not
less than $100,000 at any time, or in whole, in each case together with interest
on such principal amount then being prepaid accrued to the prepayment date.
4.5 Partial Prepayment Pro Rata. The aggregate principal amount of each
partial prepayment of the Notes shall be allocated among the holders of the
Notes at the time outstanding in proportion, as nearly as practicable, to the
respective unpaid principal amounts of the Notes then outstanding.
4.6 Notation of Notes on Prepayment. Upon any partial prepayment of a
Note, such Note may (but shall not be required to be), at the option of the
holder thereof, be:
(a) surrendered to the Company pursuant to Section 5.2 hereof in
exchange
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for a new Note in a principal amount equal to the principal amount remaining
unpaid on the surrendered Note;
(b) made available to the Company for notation thereon of the portion
of the principal so prepaid; or
(c) marked by such holder with a notation thereon of the portion of
the principal so prepaid.
In case the entire principal amount of any Note is paid, such Note shall be
surrendered to the Company for cancellation and shall not be reissued, and no
Note shall be issued in lieu of the paid principal amount of any Note.
5. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
5.1 Registration of Notes. The Company will cause to be kept at its
principal place of business a register for the registration and transfer of
Notes. The name and address of each holder of one or more Notes, each transfer
thereof and the name and address of each transferee of one or more Notes shall
be registered in such register. The Person in whose name any Note shall be
registered shall be deemed and treated as the owner and holder thereof for all
purposes hereof and the Company shall not be affected by any notice or knowledge
to the contrary.
5.2 Exchange of Notes.
(a) Upon surrender of any Note at the office of the Company duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or such holder's attorney duly authorized in
writing, the Company will execute and deliver, at the Company's expense (except
as provided below), new Notes in exchange therefor, in denominations of at least
$100,000 (except as may be necessary to reflect any principal amount not evenly
divisible by $100,000, in an aggregate principal amount equal to the unpaid
principal amount of the surrendered Note. Each such new Note shall be payable
to such Person as such holder may request and shall be substantially in the form
of Exhibit 1.1 hereto. Each such new Note shall be dated and bear interest from
the date to which interest shall have been paid on the surrendered Note or dated
the date of the surrendered Note if no interest shall have been paid thereon.
The Company may require payment of a sum sufficient to cover any stamp tax or
governmental charge imposed in respect of any such transfer of Notes.
(b) The Company will pay the cost of delivering to or from such
holder's home office or custodian bank from or to the Company, insured to the
reasonable satisfaction of such holder, the surrendered Note and any Note issued
in substitution or replacement for the surrendered Note.
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(c) Each holder of Notes agrees that, in the event it shall sell or
transfer any Note without surrendering such Note to the Company as set forth in
Section 5.2(a) hereof, it shall:
(i) prior to the delivery of such Note, make a notation thereon
of all principal, if any, paid on such Note and shall also indicate thereon
the date to which interest shall have been paid on such Note; and
(ii) promptly notify (or cause the transferee of any such Note to
notify) the Company of the name and address of the transferee of any such
Note so transferred and the effective date of such transfer.
5.3 Replacement of Notes.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, an affidavit
from such Institutional Investor of such ownership (or of ownership by such
Institutional Investor's nominee) and such loss, theft, destruction or
mutilation); and
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to the Company (provided that if the holder of such Note is an
Institutional Investor or a nominee of such Institutional Investor, such
institutional investor's own unsecured agreement of indemnity shall be deemed to
be satisfactory for such purpose), or
(b) in the case of mutilation, upon surrender and cancellation
thereof, the Company at its own expense will execute and deliver, in lieu
thereof, a new Note, dated and bearing interest from the date to which interest
shall have been paid on such lost, stolen, destroyed or mutilated Note or dated
the date of such lost, stolen, destroyed or mutilated Note if no interest shall
have been paid thereon.
5.4 Issuance Taxes. The Company will pay all taxes (if any) due in
connection with and as the result of the initial issuance and sale of the Notes
and in connection with any modification of this agreement or the Notes and shall
save each holder of Notes harmless without limitation as to time against any and
all liabilities with respect to all such taxes.
6. COVENANTS
The Company covenants and agrees that on and after the Closing Date and so
long as any Note shall be outstanding:
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6.1 Corporate Existence. The Company and its Subsidiaries will preserve
and maintain their existence except for the dissolution of any Subsidiaries
whose assets are transferred to the Company or any of its Subsidiaries.
6.2 Maintenance. The Company and its Subsidiaries will maintain, preserve
and keep their material plants, properties and equipment necessary to the proper
conduct of their businesses in reasonably good repair, working order and
condition (normal wear and tear excepted) and will from time to time make all
reasonably necessary repairs, renewals, replacements, additions and betterments
thereto so that at all times such plants, properties and equipment are
reasonably preserved and maintained; provided, however, that nothing in this
Section 6.2 shall prevent the Company or any of its Subsidiaries from
discontinuing the operation or maintenance of any such plants, properties or
equipment if such discontinuance is, in the judgment of the Company or any such
Subsidiary, as applicable, desirable in the conduct of its business and not
materially disadvantageous to the holders of the Notes.
6.3 Taxes. The Company and its Subsidiaries will duly pay and discharge
all Taxes upon or against them or their properties before payment is delinquent
and before penalties accrue thereon, unless and to the extent that the same is
being contested in good faith and by appropriate proceedings and reserves have
been established in conformity with GAAP.
6.4 ERISA. Each of the Company and its Subsidiaries will promptly pay and
discharge all obligations and liabilities arising under ERISA or otherwise with
respect to each Plan of a character which if unpaid or unperformed might result
in the imposition of a material Lien against any properties or assets of the
Company and its Subsidiaries and will promptly notify the Agent of (i) the
occurrence of any reportable event (as defined in ERISA) relating to a Plan
(other than a multi-employer plan, as defined in ERISA, so long as the event
thereunder cannot reasonably be foreseen to have a Material Adverse Effect on
any of the Company or its Subsidiaries), other than any such event with respect
to which the PBGC has waived notice by regulation; (ii) receipt of any notice
from PBGC of its intention to seek termination of any Plan or appointment of a
trustee therefor; (iii) the Company's or any of its Subsidiaries' intention to
terminate or withdraw from any Plan; and (iv) the occurrence of any event that
could result in the incurrence of any material liability, fine or penalty, or
any material increase in the contingent liability of the Company or any
Subsidiary, in connection with any post-retirement benefit under a welfare plan
benefit (as defined in ERISA).
6.5 Burdensome Restrictions, Etc. Promptly upon the existence or
occurrence thereof, the Company shall give to the Agent written notice of the
existence or occurrence of (i) any contractual obligation or the adoption of any
new requirement of law which could reasonably be expected to have a Material
Adverse Effect, and (ii) the existence or occurrence of any strike, slow down or
work stoppage which could reasonably be expected to have a Material Adverse
Effect.
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6.6 Insurance. The Company and its Subsidiaries will maintain or cause to
be maintained with nationally recognized insurance companies, insurance against
any loss or damage to all material insurable property and assets owned by them,
such insurance to be of a character and in or in excess of such amounts as are
customarily maintained by well-insured companies similarly situated and
operating like property or assets. The Company and each of its Subsidiaries
will also insure employers' and public and product liability risks with
responsible insurance companies.
6.7 Financial Reports and Other Information.
(a) The Company and its Subsidiaries will maintain a system of
accounting in such manner as will enable preparation of financial statements in
accordance with GAAP and will furnish to you and your authorized representatives
such information about the business and financial condition of the Company and
its Subsidiaries as you may reasonably request; and, without any request, will
furnish to you:
(i) within sixty (60) days after the end of the last calendar
quarter of 1997, the consolidated and consolidating balance sheet of the
Company and its Subsidiaries as at the end of such calendar quarter and the
related consolidated and consolidating statements of income and retained
earnings and of cash flows for such calendar, all of which shall be in
reasonable detail or in the form filed with the SEC and certified by the
Chief Financial Officer of the Company that they fairly present the
financial condition of the Company and its Subsidiaries as of the dates
indicated and the results of their operations and changes in their cash
flows for the periods indicated and that they have been prepared in
accordance with GAAP, in each case, subject to normal year-end adjustments
and the omission of any footnotes as permitted by the SEC (delivery to the
Agent of a copy of the Company's Form 10-Q filed with the SEC (without
exhibits) in any event will satisfy the requirements of this subsection
with respect to the required consolidated financial statements only subject
to Section 6.7(b)); and
(ii) within ten (10) days after the sending or filing thereof,
copies of all financial statements, reports, notices and proxy statements
that the Company sends to its stockholders generally or files with the SEC
that are publicly available.
(b) Each financial statement furnished to you pursuant to subsection
(i) of Section 6.7(a) shall be accompanied by (i) a written certificate signed
by the Company's Chief Financial Officer to the effect that (x) no Default or
Event of Default has occurred during the period covered by such statements or,
if any such Default or Event of Default has occurred during such period, setting
forth a description of such Default or Event of Default and specifying the
action, if any, taken by the Company to remedy the same, and (y) the
representations and warranties contained herein are true and correct in all
material respects as though made on the
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date of such certificate, except to the extent that any such representation or
warranty relates solely to an earlier date, in which case it was true and
correct as of such earlier date and except as otherwise described therein.
(c) Promptly after obtaining knowledge of any of the following, the
Company will provide you with written notice in reasonable detail of: (i) any
pending or threatened Environmental Claim against the Company or any of its
Subsidiaries or any property owned or operated by the Company or any of its
Subsidiaries that if adversely determined could reasonably be expected to have a
Material Adverse Effect; (ii) any condition or occurrence on any property owned
or operated by the Company or any of its Subsidiaries that results in material
noncompliance by the Company or any of its Subsidiaries with any Environmental
Law; and (iii) the taking of any material removal or remedial action in response
to the actual or alleged presence of any Hazardous Material on any property
owned or operated by the Company or any of its Subsidiaries.
(d) The Company will promptly and in any event, within five (5) days
after an officer of the Company has knowledge thereof, give written notice to
you of: (i) any pending or threatened litigation or proceeding against the
Company or any of its Subsidiaries asserting any claim or claims against any of
same in excess of $100,000 in the aggregate or that could reasonably be expected
to have a Material Adverse Effect; (ii) the occurrence of any Default or Event
of Default; and (iii) any circumstance that could reasonably be expected to have
a Material Adverse Effect.
6.8 Inspection Rights. Upon reasonable notice from you, the Company will
permit you (and such Persons as you may designate), at the Company's expense and
during normal business hours following reasonable notice to visit and inspect
any of the properties of the Company or any of its Subsidiaries, to examine all
of their books and records, to make copies and extracts therefrom, and to
discuss their respective affairs, finances and accounts with their respective
officers, employees and independent public accountants (and by this provision,
the Company authorizes such accountants to discuss with you, and such Persons as
you may designate, the affairs, finances and accounts of the Company and its
Subsidiaries, all at such reasonable times and as often as may be reasonably
requested.
6.9 Conduct of Business. The Company and its Subsidiaries will not engage
in any line of business other than the design and manufacture of rapid response
oil and chemical spill containment and reclamation equipment and products and
services related to such business, including insurance products.
6.10 New Subsidiaries. The Company shall also cause any other direct or
indirect domestic Subsidiary which is formed or acquired after the Closing Date
to become (i) a Guarantor with respect to, and jointly and severally liable with
all other Guarantors for, all of the obligations of the Company under this
Agreement and the Notes pursuant to a Guaranty
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substantially in the form of Exhibit 3.4 hereto, and (ii) to execute and deliver
Security Documents substantially in the form of Exhibits 3.5 and 3.6 hereto, as
applicable, in each within five (5) days following such formation or
acquisition.
6.11 Restrictions on Redemption; Dividends.
(a) The Company may not redeem, purchase or otherwise acquire any
shares of its capital stock.
(b) Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, create or otherwise permit to exist or become effective any
restriction on the ability of any Subsidiary of the Company to (i) pay dividends
or make any other distributions on its capital stock or any other interest or
participation in its profits owed by the Company or to pay any Indebtedness owed
to the Company, or (ii) make loans or advances to the Company, except in either
case for restrictions existing under or by reason of applicable law, this
Agreement and the other Documents.
(c) The Company may not declare or pay any dividends on its capital
stock or make any distribution or payment to shareholders, or set aside funds
for any such purpose.
6.12 Restrictions on Fundamental Changes. Neither the Company nor any of
its Subsidiaries shall be a party to any merger into or consolidation with, make
an acquisition or otherwise purchase or acquire all or substantially all of the
assets or stock of, any other Person, or sell all or substantially all of its
assets or stock, except (i) the Company or any of its Subsidiaries may form new
Subsidiaries subject to the requirements of Section 6.10, and (ii) the Company
may issue additional capital stock so long as there is no scheduled mandatory
redemption or scheduled liquidating distribution of any such stock before May 2,
1998. The Company shall not sell or dispose of any capital stock of or its
ownership interest in any of its Subsidiaries.
6.13 Environmental Laws. The Company and its Subsidiaries shall comply
with all Environmental Laws (including, without limitation, obtaining and
maintaining all necessary permits, licenses and other necessary authorizations)
applicable to or affecting the properties or business operations of the Company
or any of its Subsidiaries.
6.14 Liens. The Company and its Subsidiaries shall not create, incur,
assume or suffer to exist any Lien of any kind on any of their properties or
assets of any kind except the following (collectively, the "Permitted Liens"):
(a) Liens arising in the ordinary course of business by operation of
law in connection with workers' compensation, unemployment insurance, old age
benefits, social
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security obligations, taxes, assessments, statutory obligations or other similar
charges, good faith deposits, pledges or other Liens in connection with (or to
obtain letters of credit in connection with) bids, performance bonds, contracts
or leases to which the Company or its Subsidiaries are a party or other deposits
required to be made in the ordinary course of business; provided that in each
case the obligation secured is not for Indebtedness and is not overdue or, if
overdue, is being contested in good faith by appropriate proceedings and
reserves in conformity with GAAP have been provided therefor;
(b) mechanics', workmen, materialmen, landlords', carriers' or other
similar Liens arising in the ordinary course of business (or deposits to obtain
the release of such Liens) related to obligations not due or, if due, that are
being contested in good faith by appropriate proceedings and reserves in
conformity with GAAP have been provided therefor;
(c) inchoate Liens under ERISA and Liens for Taxes not yet due or
which are being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP have been provided therefor;
(d) Liens arising out of judgments or awards against the Company or
any of its Subsidiaries, or in connection with surety or appeal bonds or the
like in connection with bonding such judgments or awards, the time for appeal
from which or petition for rehearing of which shall not have expired or for
which the Company or such Subsidiary shall be prosecuting on appeal or
proceeding for review and for which it shall have obtained a stay of execution
or the like pending such appeal or proceeding for review; provided that the
aggregate amount of uninsured or underinsured liabilities (including interest,
costs, fees and penalties, if any) of the Company and its Subsidiaries secured
by such Liens shall not exceed $100,000 at any one time outstanding and provided
further there is adequate assurance, in the reasonable opinion of the
Purchasers, that the insurance proceeds, if any, attributable thereto shall be
paid promptly upon the expiry of such time period or resolution of such
proceeding if necessary to remove such Liens;
(e) rights of a common owner of any interest in property held by a
Person and such common owner as tenants in common or through other common
ownership;
(f) encumbrances (other than to secure the payment of Indebtedness),
easements, restrictions, servitudes, permits, conditions, covenants, exceptions
or reservations in any property or rights-of-way of a Person for the purpose of
roads, pipelines, transmission lines, transportation lines, distribution lines,
removal of 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, irregularity and
deficiencies in title of any property or rights-of-way;
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(g) financing statements filed by lessors of property (but only with
respect to the property so leased) and Liens under any conditional sale or title
retention agreements entered into in the ordinary course of business;
(h) rights of lessees of equipment owned by the Company or any of its
Subsidiaries;
(i) liens under the Security Documents;
(j) any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any Lien referred to in the
foregoing subsections (a) through (h), provided that any Indebtedness secured
thereby does not exceed the principal amount secured at the time of such
extension, renewal or replacement, and that such extension, renewal or
replacement is limited to the property already subject to the Lien so extended,
renewed or replaced; and
(k) Liens granted to Boots & Coots, L.P., a Colorado limited
partnership, on the assets acquired by IWC Services, Inc. from Boots & Coots,
L.P. to secure the payment by IWC Services, Inc. of that certain promissory note
in the original principal amount of $2,066,597 dated July 31, 1997, (the "IWC
Note").
6.15 Indebtedness. The Company and its Subsidiaries shall not contract,
assume or suffer to exist any Indebtedness (including, without limitation, any
Contingent Obligations), except:
(a) Indebtedness under the Notes;
(b) unsecured intercompany loans and advances from the Company to any
of its Subsidiaries and unsecured intercompany loans and advances from any of
such Subsidiaries to the Company or any other Subsidiaries of the Company, in
each case which are subordinated to the obligations of the Company and the
Guarantors to you in form and substance satisfactory to you; and
(c) existing Indebtedness listed on Schedule 2.22 hereto.
6.16 Loans, Advances and Investments. The Company and its Subsidiaries
shall not purchase or acquire any stock, indebtedness, obligations or securities
of, or any other interest in, or make any capital contribution to, any Person
(any of the foregoing, an "Investment") or lend money or make advances to any
Person except:
(a) Investments outstanding as of the Closing Date and listed on
Schedule 6.16
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hereto;
(b) loans to employees of the Company or any of its Subsidiaries for
(i) short-term loans in an aggregate amount of no greater than $100,000 at any
one time outstanding and in an amount no greater than $20,000 for any Person,
and (ii) moving and travel expenses and other similar expenses, in each case
incurred in the ordinary course of business;
(c) receivables owing to the Company or its Subsidiaries created or
acquired in the ordinary course of business and payable on customary trade terms
of the Company or such Subsidiary and in compliance with the arms-length
requirements of Section 6.18; and
(d) Investments in Cash Equivalents.
6.17 Transfer of Assets. The Company and its Subsidiaries shall not permit
any Transfer of any asset of the Company or any of its Subsidiaries except:
(a) Transfers of inventory, equipment and other assets in the ordinary
course of business;
(b) the retirement or replacement of assets (with assets of equal or
greater value) in the ordinary course of business or the Transfer of assets that
are obsolete, worn out or no longer useful in the business of the Company and
its Subsidiaries; and
(c) Transfers of any assets among the Borrower and any of its
Subsidiaries, provided that the Borrower and any domestic Subsidiary may not
transfer any assets to a foreign Subsidiary except for assets to be used in the
ordinary course of its business and as advisable to perform a contract or
services in a particular geographical area.
6.18 Transactions with Affiliates. Except as otherwise specifically
permitted herein, the Company and its Subsidiaries shall not enter into or be a
party to any material transaction or arrangement or series of related
transactions or arrangements which in the aggregate would be material with any
Affiliate of such Person, including without limitation, the purchase from, sale
to or exchange of property with or the rendering of any service by or for, any
Affiliate, except pursuant to the reasonable requirements of such entity's
business and upon fair and reasonable terms no less favorable to such entity
than would be able to be obtained in a comparable arm's-length transaction with
a Person other than an Affiliate.
6.19 Compliance with Laws. The Company and its Subsidiaries shall conduct
their businesses and otherwise be in compliance in all material respects with
all applicable laws, regulations, ordinances and orders of all governmental,
judicial and arbitral authorities applicable to them and shall obtain and
maintain all necessary permits, licenses and other authorizations
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necessary to conduct their businesses and own and operate their properties
except where the failure to comply or have such permits, licenses or other
authorizations could not reasonably be expected to have a Material Adverse
Effect.
6.20 Negative Pledges. Neither the Company nor any of its Subsidiaries
shall enter into any agreement creating or assuming any Lien upon its
properties, revenues or assets, whether now owned or hereafter acquired other
than as permitted hereunder. Neither the Company nor any of its Subsidiaries
shall enter into any agreement other than this Agreement and the Documents
prohibiting the creation or assumption of any Lien upon its properties, revenues
or assets, whether now owned or hereafter acquired, or prohibiting or
restricting the ability of the Company or any of its Subsidiaries to amend or
otherwise modify this Agreement or any Document.
6.21 Additional Financial Advisory Services. The Company shall pay to you,
in addition to the fee described in Section 3.11, such additional fees as are
customary in connection with any future advisory services which are provided by
you to the Company.
6.22 IWC Note. The Company shall, by January 31, 1998, either pay in full
the IWC Note and obtain a release of the Liens securing payment of the IWC Note
or place and maintain in escrow in a segregated escrow account sufficient funds
to pay the IWC Note in full.
6.23 Capital Expenditures. Neither the Company nor any of its Subsidiaries
shall not make any Capital Expenditures outside the ordinary course of business
at levels consistent under historical Capital Expenditures.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES.
7.1 Events of Default. Any one or more of the following shall constitute
an Event of Default under this Agreement:
(a) default by the Company in the payment of the principal amount of
any Note, any interest thereon or any fees payable hereunder on the date such
payment is due;
(b) default by the Company in the observance or performance of any
covenant set forth in Sections 6.7(d), 6.11, 6.12, 6.17 or 6.22;
(c) default or event of default by the Company in the observance or
performance of any provision hereof or of any other Document not mentioned in
(a) or (b) above which is not remedied within thirty (30) days after the earlier
of (i) such default or event of default first becoming known to any officer of
the Company, or (ii) notice to the Company by you of the occurrence of such
default or event of default;
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(d) any representation or warranty or other written statement made or
deemed made herein, in any other Document or in any financial or other report or
document furnished in compliance herewith or therewith by the Company or any of
its Subsidiaries proves untrue in any material respect as of the date of the
issuance or making, or deemed issuance or making thereof;
(e) default occurs in the payment when due (after any applicable grace
period) of any Indebtedness of the Company or any of its Subsidiaries, or the
occurrence of any other default, which with the passage of time or notice, would
permit the holder or beneficiary of such Indebtedness, or a trustee therefor, to
cause the acceleration of the maturity of any such Indebtedness or any mandatory
unscheduled prepayment, purchase, or other early funding thereof;
(f) the Company or any of its Subsidiaries (i) has entered
involuntarily against it an order for relief under the United States Bankruptcy
Code or a comparable action is taken under any bankruptcy or insolvency law of
another country or political subdivision of such country, (ii) generally does
not pay, or admits its inability generally to pay, its debts as they become due,
(iii) makes a general assignment for the benefit of creditors, (iv) applies for,
seeks, consents to, or acquiesces in, the appointment of a receiver, custodian,
trustee, examiner, liquidator or similar official for it or any substantial part
of its property, (v) institutes any proceeding seeking to have entered against
it an order for relief under the United States Bankruptcy Code or any comparable
law, to adjudicate it insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fails to file an answer or other pleading denying the
material allegations of any such proceeding filed against it, (vi) makes any
board of directors resolution in direct furtherance of any matter described in
clauses (i)-(v) above, or (vii) fails to contest in good faith any appointment
or proceeding described in this Section 7.1(f);
(g) a custodian, receiver, trustee, examiner, liquidator or similar
official is appointed for the Company or any of its Subsidiaries or any
substantial part of its property, or a proceeding described in Section 7.1(f)(v)
is instituted against the Company or any of its Subsidiaries, and such
appointment continues undischarged or such proceeding continues undismissed or
unstayed for a period of sixty (60) days;
(h) the Company or any of its Subsidiaries fails within thirty (30)
days (or such earlier date as any steps to execute on such judgment or order
take place) to pay, bond or otherwise discharge, or to obtain an indemnity
against on terms and conditions satisfactory to the Purchasers in their sole
discretion, any judgment or order for the payment of money in excess of $100,000
which is uninsured or underinsured by at least such amount (provided that there
is adequate assurance, in the sole discretion of the Purchasers, that the
insurance proceeds
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attributable thereto shall be paid promptly upon the expiration of such time
period or resolution of such proceeding), which is not stayed on appeal or
otherwise being appropriately contested in good faith in a manner that stays
execution;
(i) the Company or any of its Subsidiaries fails to pay when due an
amount aggregating in excess of $100,000 that it is liable to pay to the PBGC or
to a Plan under Title IV of ERISA; or a notice of intent to terminate a Plan
having Unfunded Vested Liabilities of any of the Company or any of its
Subsidiaries in excess of $100,000 (a "Material Plan") is filed under Title IV
of ERISA in a distress termination pursuant to Section 4041(c) of ERISA; or the
PBGC institutes proceedings under Title IV of ERISA to terminate or to cause a
trustee to be appointed to administer any Material Plan; or a proceeding is
instituted by a fiduciary of any Material Plan against the Company or any of its
Subsidiaries to collect any liability under Section 515 or 4219(c)(5) of ERISA
and such proceeding is not dismissed within thirty (30) days thereafter; or a
condition exists by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be terminated;
(j) the Company, any Guarantor, any Person acting on behalf of the
Company or any Guarantor or any governmental, judicial or arbitral authority
challenges the validity of any Note or any other Document or the Company's or
any Guarantor's obligations thereunder, or any Note or other Document ceases to
be in full force and effect in all material respects or ceases to give to the
holder of any Note the rights and powers purported to be granted in their favor
thereby in all material respects;
(k) any Control Event or Change of Control shall occur; or
(l) the Company or any of its Subsidiaries shall fail to cooperate
fully with the Noteholders to ensure the Documents comply with the business
intent of the parties.
7.2 Default Remedies.
(a) Additional Warrant. Upon any Event of Default occurring, the
Company agrees to immediately issue to each of Main Street and Geneva you an
additional Warrant in substantially the form of Exhibit 3.7 hereto to purchase
300,000 shares and 200,000 shares respectively of common stock of the Company at
an exercise price of $2.00 per share. The Company shall at all times have
authorized and reserved, and keep available free from preemptive rights, a
sufficient number of shares of common stock to provide for the exercise of such
additional Warrant.
(b) Acceleration on Event of Default.
(i) If an Event of Default specified in clause (f) or (g) or
clause (i) of
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Section 7.1 hereof shall exist, all of the Notes at the time outstanding
shall automatically become immediately due and payable together with
interest accrued thereon, in each case without presentment, demand, protest
or notice of any kind, all of which are hereby expressly waived.
(ii) If an Event of Default other than those specified in clause
(f) or clause (g) of Section 7.1 hereof shall exist, the Majority
Noteholders (exclusive of Notes then owned by any one or more of the
Company or any Affiliate) may exercise any right, power or remedy permitted
to such holder or holders by law and in accordance with the Intercreditor
Agreement and shall have, in particular, without limiting the generality of
the foregoing, the right to declare the entire principal of, and all
interest accrued on, all the Notes then outstanding to be, and such Notes
shall thereupon become, forthwith due and payable, without any presentment,
demand, protest or other notice of any kind, all of which are hereby
expressly waived, and the Company shall forthwith pay to the holder or
holders of all the Notes then outstanding the entire principal of, and
interest accrued on, the Notes.
(c) Acceleration on Payment Default. During the existing of an Event
of Default described in Section 7.1(a) hereof, and irrespective of whether the
Notes then outstanding shall have been declared to be due and payable pursuant
to Section 7.2(b)(ii) hereof, any holder of Notes that shall have not consented
to any waiver with respect to such Event of Default may, at such holder's
option, by notice in writing to the Company, declare the Notes then held by such
holder to be, and such Notes shall thereupon become, forthwith due and payable
together with all interest accrued thereon, without any presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived,
and the Company shall forthwith pay to such holder the entire principal of and
interest accrued on such Notes.
(d) Nonwaiver and Expenses. No course of dealing on the part of any
holder of Notes nor any delay or failure on the part of any holder of Notes to
exercise any right shall operate as a waiver of such right or otherwise
prejudice such holder's rights, power and remedies. If the Company shall fail
to pay when due any principal of, or interest on, any Note, or shall fail to
comply with any other provision hereof, the Company shall pay to each holder of
Notes, to the extent permitted by law, such further amounts as shall be
sufficient to cover the costs and expenses (including, but not limited to,
reasonable attorneys' fees) incurred by such holder in collecting any sums due
on such Notes or in otherwise assessing, analyzing or enforcing any rights or
remedies that are or may be available to it.
8. INTERPRETATION OF THIS AGREEMENT
8.1 Terms Defined, As used herein, the following terms have the
respective meanings set forth below or set forth in the Section hereof following
such term:
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"Affiliate" means, for any Person, (i) any other Person that directly
or indirectly through one or more intermediaries controls, or is under common
control with, or is controlled by, such Person, and (ii) any other Person owning
beneficially or controlling five percent (5%) or more of the equity interests in
such Person. As used in this definition, "control" means the power, directly or
indirectly, to direct or cause the direction of management or policies of a
Person (through ownership of voting securities or other equity interests, by
contract or otherwise).
"Agreement" means this Agreement, as amended, restated or supplemented
from time to time.
"Business Day" means any day other than a Saturday, Sunday or other
day on which banks in Houston, Texas are authorized or required by law to be
closed.
"Capital Expenditures" means, for any period, the sum, without
duplication, of (i) all expenditures of the Company and its Subsidiaries for
fixed or capital assets made during such period which, in accordance with GAAP,
would be classified as capital expenditures, and (ii) all Capitalized Lease
Obligations incurred during such period.
"Capitalized Lease Obligations" means, for any period, the amount of
the Company's and its Subsidiaries' liabilities under all leases (or similar
arrangements) of real or personal property (or any interest therein) which in
accordance with GAAP would be classified as capitalized leases on the balance
sheet of the Company and its Subsidiaries.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof having maturities of not more than twelve (12) months
from the date of acquisition; (ii) U.S. Dollar denominated time deposits and
certificates of deposit maturing within one (1) year from the date of
acquisition thereof with any financial institution whose short-term senior
unsecured debt rating is at least A-1 from S&P or P-1 from Moody's; (iii) LIBOR
denominated time deposits and certificates of deposit maturing within six (6)
months from the date of acquisition thereof with any financial institution whose
short-term senior unsecured debt rating is at least A-1 from S&P or P-1 from
Moody's; (iv) commercial paper or Eurocommercial paper with a rating of at least
A-1 from S&P or P-1 from Moody's, with maturities of not more than twelve (12)
months from the date of acquisition; (v) repurchase obligations entered into
with any financial institution whose short-term senior unsecured debt rating is
at least A-1 from S&P or P-1 from Moody's, which are secured by a fully
perfected security interest in any obligation of the type described in (i) above
and has a market value of the time such repurchase is entered into of not less
than 100% of the repurchase obligation of such Purchaser or such other Person
thereunder; (vi) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof maturing within twelve (12) months from the date of
acquisition thereof or providing for the resetting of the interest rate
applicable thereto
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not less often than annually and, at the time of acquisition, having one of the
two highest ratings obtainable from either S&P or Moody's; and (vii) money
market funds which have at least $1,000,000,000 in assets and which invest
primarily in securities of the types described in clauses (i) through (vi)
above.
"Change in Control" means, at any time, a merger, consolidation, sale
of all or substantially all assets, tender offer or exchange offer in respect of
the Voting Stock of the Company, contested election of the Board of Directors,
or any other similar event or condition (herein referred to as a "Corporate
Change"):
(a) that results in the acquisition, holding or control (whether
directly or indirectly) by
(i) any "person" (as such term is used in section 13(d) and
section 14(d)(2) of the Exchange Act as in effect on
the Closing Date), or
(ii) related Persons constituting a "group" (as such term is
used in Rule 13d-5 under the Exchange Act as in effect
on the Closing Date),
of beneficial ownership of at least fifty percent (50%) (by number of
votes) of the Voting Stock of the Company outstanding at such time
(excluding for such purpose Persons who own shares through any employee
benefit plan of the Company or any trust established in connection
therewith) or of beneficial ownership of at least fifty percent (50%) of
the assets of the Company at such time; or
(b) in connection with which more than fifty percent (50%) of the
Persons who were members of the Board of Directors immediately prior to
such Corporate Change shall cease to be members of the Board of Directors
(or members of the board of directors of the Surviving Corporation) as a
result of such Corporate Change.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "primary obligations") of
another Person (the "primary obligor"), in any manner, whether direct or
indirect, including, without limitation, any obligations of such Person, whether
or not contingent, (a) to purchase, repurchase or otherwise acquire such primary
obligations or any property constituting direct or indirect security therefor,
or (b) to advance or provide funds (i) for the purchase, payment or discharge of
any such primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth
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or solvency or any balance sheet item, level of income or financial condition of
the primary obligor or (c) to lease property or to purchase property, securities
or services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (d) otherwise to assure or hold harmless the owner of any such
primary obligation against loss in respect thereof.
"Control Event" means:
(a) the execution by the Company or any Affiliate of any letter of
intent or similar agreement with respect to any proposed transaction or
event or series of transactions or events that, individually or in the
aggregate, could reasonably be expected to result in a Change in Control;
(b) the execution of any written agreement that, when fully performed
by the parties thereto, would result in a Change in Control; or
(c) the making of any written offer by any "person" (as such term is
used in section 13(d) and section 14(d)(2) of the Exchange Act as in effect
on the Closing Date) or related persons constituting a "group" (as such
term is used in Rule 13d-5 under the Exchange Act as in effect on the
Closing Date) to the holders of the Voting Stock of the Company which
offer, if accepted by the requisite number of such holders, would result in
a Change in Control.
"Default" means any event or condition the occurrence of which would,
with the passage of time or the giving of notice, or both, constitute an Event
of Default.
"Dollar" and "U.S. Dollar" and the sign "$" means lawful money of the
United States of America.
"Documents" means this Agreement, the Note Purchase Agreement of the
Other Purchaser, the Notes, the Guaranties, the Security Documents, the
Warrants, the Registration Rights Agreements and any other documents or
instruments executed by the Company or any of the Guarantors in connection with
this Agreement.
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of non-
compliance or violations, investigations or proceedings relating to any
Environmental Law ("Claims") or any permit issued under any Environmental Law,
including, without limitation, (i) any and all Claims by governmental or
regulatory authorities for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law, and (ii)
any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery,
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compensation or injunctive relief resulting from Hazardous Materials or arising
from alleged injury or threat of injury to health or safety in relation to the
environment.
"Environmental Law" means any federal, state or local statute, law,
rule, regulation, ordinance, code, written policy or rule of common law now or
hereafter in effect, including any judicial or administrative order, consent,
decree or judgment relating to (i) the environment, (ii) health or safety in
relation to the environment or (iii) Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Event of Default" means any of the events or circumstances specified
in Section 7.1.
"GAAP" means generally accepted accounting principles from time to
time in effect as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the statements and pronouncements of the Financial Accounting Standards Board or
in such other statements, opinions and pronouncements by such other entity as
may be approved by a significant segment of the U.S. accounting profession.
"Guaranties" means each Guaranty of the Guarantors in substantially
the form of Exhibit 3.4 hereto.
"Guarantor" means each of IWC Services, Inc., a Texas corporation,
Hell Fighters, Inc., a Texas corporation, IWC Engineering, Inc., a Texas
corporation, Abasco, Inc., a Texas corporation, and ITS Supply Corporation, a
Delaware corporation.
"Hazardous Material" shall have the meaning assigned to that term in
the Comprehensive Environmental Response Compensation and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Acts of 1986, and
shall include any substance defined as "hazardous" or "toxic" or words used in
place thereof under any Environmental Law applicable to the Company or any of
its Subsidiaries.
"Highest Lawful Rate" means the maximum nonusurious interest rate, if
any, that any time or from time to time may be contracted for, taken, reserved,
charged or received on the Notes, or under laws applicable to the holders of the
Notes, as applicable, which are presently in effect or, to the extent allowed by
applicable law, under such laws which may hereafter be in effect and which allow
a higher maximum nonusurious interest rate than applicable laws now allow.
Determination of the rate of interest for the purpose of determining
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whether the Notes are usurious under all applicable laws shall be made by
amortizing, prorating, allocating, and spreading, in equal parts during the
period of the full stated term of the Notes, all interest at any time contracted
for, taken, reserved, charged or received from the Company or any other Person
in connection with the Notes.
"Indebtedness" means, for any Person, the following obligations of
such person, without duplication: (i) obligations of such Person for borrowed
money; (ii) obligations of such person representing the deferred purchase price
of property or services other than accounts payable arising in the ordinary
course of business and other than amounts which are being contested in good
faith and for which reserves in conformity with GAAP have been provided; (iii)
obligations of such Person evidenced by bonds, notes, bankers acceptances,
debentures or other similar instruments of such Person or reimbursement
obligations or other obligations with respect to letters of credit issued for
such Person's account or letters of credit issued pursuant to such Person's
application therefor; (iv) obligations of other Persons, whether or not assumed,
secured by Liens upon property or payable out of the proceeds or production from
property now or hereafter owned or acquired by such Person, but only to the
extent of such property's fair market value; (v) Capitalized Lease Obligations
of such Person; (vi) obligations under hedge, swap, exchange, forward, future,
collar or cap arrangements, fixed price agreements and all other agreements or
arrangements designed to protect against fluctuations in interest rates,
commodity prices or currency exchange rates; and (vii) obligations of such
Person pursuant to any Contingent Obligation of any of the foregoing of another
Person. For purposes of this Agreement, the Indebtedness of any Person shall
include the Indebtedness of any partnership or joint venture to the extent such
Indebtedness has recourse to such Person.
"Institutional Investor" means the Purchasers, any affiliate of any of
the Purchasers and any holder or beneficial owner of Notes that is an
"accredited investor" as defined in Section 2(15) of the Securities Act.
"Intercreditor Agreement" means that certain Intercreditor Agreement
dated as of January 2, 1998, by and among the Purchasers, as amended,
supplemented or otherwise modified from time to time.
"IWC Note" means the promissory note of IWC Services, Inc. described
in Section 6.14(k).
"Lien" means any interest in any property or asset in favor of a
Person other than the owner of the property or asset and securing an obligation
owed to such Person, whether such interest is based on the common law, statute
or contract, including, but not limited to, the security interest lien arising
from a mortgage, encumbrance, pledge, conditional sale, security agreement or
trust receipt, or a lease, consignment or bailment for security purposes.
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"Majority Noteholders" means, at any time, Noteholders then holding in
the aggregate at least forty (40%) of the outstanding obligations due and owing
under the Notes.
"Material Adverse Effect" means an effect that results in a material
adverse change (i) since September 30, 1997, in the business, properties,
assets, financial condition or prospects of the Company and its Subsidiaries
taken as a whole, (ii) the ability of the Company or any of the Guarantors to
perform its Obligations under the Credit Documents to which it is a party, or
(iii) the rights and remedies of the Noteholders or the Collateral Agent in any
material adverse respect under the Documents.
"Moody's" means Moody's Investors Service, Inc. or any successor
thereto.
"Note Purchase Agreements" is defined in Section 1.2 hereof.
"Notes" is defined in Section 1.1 hereof.
"Other Purchaser" is defined in Section 1.2 hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Permitted Liens" means the Liens described in Section 6.14.
"Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization or any other
entity or organization, including a government or any agency or political
subdivision thereof.
"Plan" means an employee pension benefit plan covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the Code
that is either (i) maintained by the Company or any of its Subsidiaries, or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
the Company or any of its Subsidiaries is then making or accruing an obligation
to make contributions or has within the preceding five (5) plan years made or
had an obligation to make contributions.
"Purchasers" means you and the Other Purchaser.
"SEC" means the Securities and Exchange Commission.
"S&P" means Standard & Poor's Ratings Group or any successor thereto.
"Security Agreement" means the Security Agreement and Financing
Statement in
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substantially the form of Exhibit 3.6 hereto executed and delivered by the
Company and the Guarantors, as any of same may be amended, supplemented or
otherwise modified from time to time.
"Security Documents" means the Stock Pledge Agreements, the Security
Agreements, the Guaranties, and all other security agreements and like
agreements or instruments delivered by the Company or any Guarantor granting a
Lien in any of such Person's property to secure the Notes, as any of the same
may be amended, supplemented or otherwise modified from time to time.
"Securities Act" means the Securities Act of 1933, as amended.
"Security" means "security" as defined in section 2(1) of the
Securities Act.
"Stock Pledge Agreements" means the Stock Pledge Agreements in
substantially the form of Exhibit 3.5 hereto executed and delivered by the
Company and certain of the Guarantors, as any of same may be amended,
supplemented or otherwise modified from time to time.
"Subsidiary" means, for any Person, any corporation or other entity of
which more than fifty percent (50%) of the outstanding stock or comparable
equity interests having ordinary voting power for the election of the board of
directors of such corporation, any managers of such limited liability company or
similar governing body (irrespective of whether or not, at the time, stock or
other equity interests of any other class or classes of such corporation or
other entity shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned by such Person, as
applicable, or by one or more of its Subsidiaries. For purposes of this
definition, ITS Supply Corporation, ITS Venezuela S.A., ITS Peru S.A. and ITS
Logestics UK Limited shall be deemed to be Subsidiaries as if the acquisition of
the stock of ITS Supply Corporation had occurred immediately prior to the
Closing Date.
"Transfer" means a sale, transfer, conveyance, assignment or other
disposition (or a series of related dispositions), including, without
limitation, any transfer pursuant to an option to purchase, any sale or
assignment (with or without recourse) of any accounts receivable and any sale
and leaseback of assets, of an asset having a net book value as established in
accordance with GAAP in excess of $50,000, but excluding any involuntary
transfer by operation of law and any transfers of an asset pursuant to any
casualty or theft with respect to such asset.
"Unfunded Vested Liabilities" means, for any Plan at any time, the
amount by which the present value of all vested nonforfeitable accrued benefits
under such Plan exceeds the fair market value of all Plan assets allocable to
such benefits, determined as of the then most recent valuation date for such
Plan, but only to the extent that such excess represents a potential
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liability of the Company or any of its Subsidiaries to the PBGC or such Plan.
"Voting Stock" means capital stock of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect corporate directors (or Persons performing
similar functions).
8.2 Interpretation. The foregoing definitions shall be equally applicable
to the singular and plural forms of the terms defined. All references to times
of day in this Agreement shall be references to Houston, Texas time unless
otherwise specifically provided.
9. MISCELLANEOUS
9.1 Communications.
(a) Method; Address. All communications hereunder or under the Notes
shall be in writing, shall be hand delivered, deposited into the United States
mail (registered or certified mail), postage prepaid, sent by overnight courier
or sent by confirmed facsimile transmission and shall be addressed,
(i) if to the Company,
Boots & Coots International Well Control, Inc.
5151 San Felipe, Suite 450
Houston, Texas 77056
Telephone: (713) 621-7911
Facsimile: (713) 621-7988
or at such other address as the Company shall have furnished in writing to all
holders of the Notes at the time outstanding, and
(ii) if to any of the holders of the Notes,
(A) if such holders are the Purchasers, at their respective
addresses set forth on Annex 1 hereto, and further including any
parties referred to on such Annex 1 that are required to receive
notices in addition to such holders of the Notes, and
(B) if such holders are not the Purchasers, at their
respective addresses set forth in the register for the
registration and transfer of Notes maintained pursuant to this
Agreement,
or to any such party at such other address as such party may designate by notice
duly given in accordance with this Section 9.1 to the Company (which other
address shall be entered in such
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register).
(b) When Given. Any communication so addressed and deposited in the
United States mail, postage prepaid, by registered or certified mail (in each
case, with return receipt requested) shall be deemed to be received on the third
(3rd) succeeding Business Day after the day of such deposit (not including the
date of such deposit). Any notice so addressed and otherwise delivered shall be
deemed to be received when actually received at the address of the addressee.
9.2 Survival. All warranties, representations, certifications and
covenants made by the Company herein or in any certificate or other instrument
delivered by it or on its behalf hereunder shall be considered to have been
relied upon by you and shall survive the delivery to you of the Notes regardless
of any investigation made by you or on your behalf. All statements in any such
certificate or other instrument shall constitute warranties and representations
by the Company hereunder.
9.3 Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties hereto.
The provisions hereof are intended to be for the benefit of all holders, from
time to time, of Notes, and shall be enforceable by any such holder, whether or
not an express assignment to such holder of rights hereunder shall have been
made by you or your successor or assign.
9.4. Amendment and Waiver.
(a) Requirements. This Agreement may be amended, and the observance
of any term hereof may be waived, with (and only with) the written consent of
the Company and you and the Majority Noteholders (exclusive of Notes held by the
Company or any Affiliate at the time outstanding).
(b) Solicitation of Noteholders.
(i) Solicitation. The Company shall not solicit, request or
negotiate for or with respect to any proposed waiver or amendment of
any of the provisions hereof or the Notes unless each holder of the
Notes (irrespective of the amount of Notes then owned by it) shall be
provided by the Company with sufficient information to enable it to
make an informed decision with respect thereto. Executed or true and
correct copies of any waiver or consent effected pursuant to the
provisions of this Section 9.4 shall be delivered by the Company to
each holder of outstanding Notes forthwith following the date on which
the same shall have been executed and delivered by all holders of
outstanding Notes required to consent or agree to such waiver or
consent.
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<PAGE>
(ii) Payment. The Company shall not, directly or indirectly, pay
or cause to be paid any remuneration, whether by way of supplemental
or additional interest, fee or otherwise, or grant any security, to
any holder of Notes as consideration for or as an inducement to the
entering into by any holder of Notes of any waiver or amendment of any
of the terms and provisions hereof unless such remuneration is
concurrently paid, or security is concurrently granted, on the same
terms, ratably to the holders of all Notes then outstanding.
(iii) Scope of Consent. Any consent made pursuant to this
Section 9.4 by a holder of Notes that has transferred or has agreed to
transfer its Notes to the Company or any Affiliate and has provided or
has agreed to provide such written consent as a condition to such
transfer shall be void and of no force and effect except solely as to
such holder, and any amendments effected or waivers granted or to be
effected or granted that would not have been or would not be so
effected or granted but for such consent (and the consents of all
other holders of Notes that were acquired under the same or similar
conditions) shall be void and of no force and effect, retroactive to
the date such amendment or waiver initially took or takes effect,
except solely as to such holder.
(c) Binding Effect. Except as otherwise provided in Section 9.4
hereof, any amendment or waiver consented to as provided in this Section 9.4
shall apply equally to all holders of Notes and shall be binding upon them and
upon each future holder of any Note and upon the Company whether or not such
Note shall have been marked to indicate such amendment or waiver. No such
amendment or waiver shall extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or waived or impair
any right consequent thereon.
(d) Expenses. The Company shall promptly pay when billed the
reasonable expenses relating to the consideration, negotiation, preparation or
execution of any amendments, waivers or consents pursuant to the provisions
hereof, whether or not any such amendments, waivers or consents are executed and
the exercise of any remedies to collect the Notes or the Guaranties or enforce
the Security Documents.
9.5 Payment on Notes.
(a) Manner of Payment. The Company shall pay all amounts payable with
respect to each Note (without any presentment of such Notes and without any
notation of such payment being made thereon) by crediting, by federal funds bank
wire transfer, the account of the holder thereof in any bank in the United
States of America as may be designated in writing by such holder, or in such
other manner as may be reasonably directed or to such other address in the
United States of America as may be reasonably designated in writing by such
holder.
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Annex 1 hereto shall be deemed to constitute notice, direction or designation
(as appropriate) to the Company with respect to payments as aforesaid. In the
absence of such written direction, all amounts payable with respect to each Note
shall be paid by check mailed and addressed to the registered holder of such
Note at the address shown in the register maintained by the Company pursuant to
this Agreement.
(b) Payments Due on Holidays. If any payment due on, or with respect
to, any Note shall fall on a day other than a Business Day, then such payment
shall be made on the first Business Day following the day on which such payment
shall have so fallen due, provided that if all or any portion of such payment
shall consist of a payment of interest, for purposes of calculating such
interest, such payment shall be deemed to have been originally due on such first
following Business Day, such interest shall accrue and be payable to (but not
including) the actual date of payment and the amount of the next succeeding
interest payment shall be adjusted accordingly.
(c) Payments, When Received. Any payment to be made to the holders of
Notes hereunder or under the Notes shall be deemed to have been made on the
Business Day such payment actually becomes available to such holder at such
holder's bank prior to 12:00 noon (local time of such bank).
9.6 Indemnification. The Company agrees to indemnify each holder of the
Notes and their respective shareholders, directors, officers, partners,
employees and attorneys (collectively, the "Indemnified Parties"), against all
losses, claims, damages, penalties, judgments, liabilities and expenses
(including, without limitation, all reasonable attorneys' fees and other
reasonable expenses of investigating, defending against claims, litigation or
preparation therefor, whether or not such Indemnified Party is a party thereto)
which any of them may pay or incur arising out of or relating to (i) any action,
suit or proceeding by any third party or governmental authority against such
Indemnified Party and relating to any Document or the application or proposed
application by the Company of the proceeds of any Note, REGARDLESS OF WHETHER
SUCH CLAIMS OR ACTIONS ARE FOUNDED IN WHOLE OR IN PART UPON THE ALLEGED SIMPLE
OR CONTRIBUTORY NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES AND/OR ANY OF THEIR
RESPECTIVE SHAREHOLDERS, DIRECTORS, OFFICERS, PARTNERS, EMPLOYEES OR ATTORNEYS,
(ii) any investigation of any third party or any governmental authority
involving any Indemnified Party and related to any use made or proposed to be
made by the Company of the proceeds of the Notes, or any transaction financed or
to be financed in whole or in part, directly or indirectly with the proceeds of
any Note, and (iii) any investigation of any third party or any governmental
authority, litigation or proceeding involving any Indemnified Party by virtue of
the Documents and related to any environmental cleanup, audit, compliance or
other matter relating to any Environmental Law or the presence of any Hazardous
Material (including, without limitation, any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising under any
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<PAGE>
Environmental Law) with respect to the Company or any of its Subsidiaries,
regardless of whether caused by, or within the control of, the Company or any of
its Subsidiaries; provided, however, that the Company shall not be obligated to
indemnify any Indemnified Party for any of the foregoing arising out of such
Indemnified Party's gross negligence or willful misconduct.
9.7 Entire Agreement. The Documents constitute the entire understanding
among the Company, the Guarantors and the Purchasers and supersede all earlier
or contemporaneous agreements, whether written or oral, concerning the subject
matter of the Documents. THIS WRITTEN AGREEMENT TOGETHER WITH THE OTHER
DOCUMENTS REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
9.8 Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY NOTE, ANY OTHER DOCUMENT OR
THE TRANSACTIONS CONTEMPLATED THEREBY.
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9.9 Duplicate Originals, Execution in Counterpart. Two (2) or more
duplicate originals hereof may be signed by the parties, each of which shall be
an original but all of which together shall constitute one and the same
instrument. This Agreement may be executed in one or more counterparts and
shall be effective when at least one counterpart shall have been executed by
each party hereto, and each set of counterparts that, collectively, show
execution by each party hereto shall constitute one duplicate original.
[REMAINDER OF PAGE INTENTIONALLY BLANK; NEXT PAGE IS SIGNATURE PAGE.]
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If this Agreement is satisfactory to you, please so indicate by signing the
acceptance of the foot of a counterpart hereof and returning such counterpart to
the Company, whereupon this Agreement shall become binding between us in
accordance with its terms.
Very truly yours,
BOOTS & COOTS INTERNATIONAL
WELL CONTROL, INC.
By:____________________________
Name:__________________________
Title:_________________________
Accepted:
MAIN STREET MERCHANT PARTNERS II, L.P.
By: _______________________________
Vince D. Foster, Managing Director
GENEVA ASSOCIATES, L.L.C.
By: _______________________________
Tracy Scott Turner, Principal
[Signature page for NOTE PURCHASE AGREEMENT dated as of January 2, 1998, of
Boots & Coots International Well Control, Inc. in connection with the issuance
of its 10.0% Senior Secured Notes due May 2, 1998]
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Exhibit 4.07
================================================================================
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
_______________________________
FIRST AMENDMENT TO
NOTE PURCHASE AGREEMENT
_______________________________
DATED AS OF MARCH ___, 1998
$7,250,000
10.0% SENIOR SECURED NOTES DUE MAY 2, 1998 AND JUNE 15, 1998
================================================================================
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
_______________________________
FIRST AMENDMENT TO
NOTE PURCHASE AGREEMENT
_______________________________
$7,250,000
10.0% Senior Secured Notes Due may 2, 1998 and June 15, 1998
Main Street Merchant Partners II, L.P.
1360 Post Oak Blvd., Suite 800
Houston, Texas 77056
Geneva Associates, L.L.C.
300 North Greene Street
Greensboro, North Carolina 27401
Ladies and Gentlemen:
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC., a Delaware corporation
(together with its successors and assigns, the "Company"), hereby agrees with
you to amend the terms and provisions of the Note Purchase Agreement dated as of
January 2, 1998 (the "Agreement") among us as follows:
1. PURCHASE AND SALE OF NOTES
1.1 Issuance of Notes. The Company has previously authorized the
issuance of Five Million Dollars ($5,000,000) in aggregate principal amount of
its ten percent (10.0%) Senior Secured Notes due May 2, 1998 (the "Prior
Notes"). The Company has authorized the issuance of an additional Two Million
Two Hundred Fifty Thousand Dollars ($2,250,000) in aggregate principal amount of
its ten percent (10.0%) Senior Secured Notes due June 15, 1998, and Geneva
Associates, L.L.C. ("Geneva") has agreed to purchase $1,200,000 in principal of
such notes and Main Street Merchant Partners II, L.P. ("Main Street") agreed to
purchase $750,000 in principal of such notes. The indebtedness to each of you
under the Prior Notes shall be renewed in, and the additional sale by the
Company to each of you will be evidenced by, the Notes issued to each of you
dated March ___, 1998, and the Notes shall have the terms as provided in the
Agreement, as amended by this First Amendment to Note Purchase Agreement (this
"Amendment"), and as therein provided, and the terms therein provided are
incorporated herein by reference as if set
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forth herein in full (the "Notes").
1.2 The Closing.
(a) Purchase and Sale of Notes. The Company hereby agrees to sell
each of you and each of you hereby agrees to purchase from the Company, in
accordance with the provisions hereof and to the extent not previously funded by
you, the aggregate principal amount of your Note set forth therein.
(b) The Closing. The Closing (the "Closing") of the Company's sale of
Notes will be held on March ___, 1998 (the "Amendment Closing Date") at 10:00
a.m., local time, at the office of Gardere Wynne Sewell & Riggs, L.L.P., your
special counsel. At the Closing, the Company will deliver to you your Note, in
the aggregate principal amount referenced in your Note, dated the Amendment
Closing Date and payable to you, against payment from each of you by federal
funds wire transfer in immediately available funds of the additional purchase
price of $1,500,000 from Geneva and $750,000 from Main Street, as directed to
you by the Company. The sales of the Notes to each of you are separate sales.
1.3 Purchase for Investment; ERISA.
(a) Purchase for Investment. You represent to the Company that you
are purchasing the Notes for your own account for investment and with no present
intention of distributing the Notes or any part thereof, but without prejudice
to your right at all times to: (i)sell or otherwise dispose of all or any part
of the Notes under a registration statement filed under the Securities Act, or
in a transaction exempt from the registration requirements of the Securities
Act; and (ii) have control over the disposition of all of your assets to the
fullest extent required by any applicable law.
(b) ERISA. You represent that you are acquiring the Notes for your
own account with your general assets and that no part of such assets constitutes
assets of an "employee benefit plan" (as defined in ERISA) or a "plan" (as
defined in the Code).
1.4 Expenses. The Company will at the Closing pay all fees, expenses and
costs relating hereto, including, but not limited to:
(i) your reasonable out-of-pocket travel costs associated with
the transactions contemplated by this Amendment;
(ii) the reasonable fees and disbursements of your special
counsel incurred in connection herewith; and
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(iii) the reasonable fees, expenses and costs incurred in
complying with each of the conditions to closing set forth herein.
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<PAGE>
2. REPRESENTATIONS AND WARRANTIES
To induce you to enter into this Amendment and to purchase your Note, the
Company hereby reaffirms its representations and warranties contained in the
Agreement except to the extent such representations and warranties relate solely
to an earlier date, in which case such representations and warranties were true
and correct as of such date, and it additionally represents and warrants as
follows, in each case as of the Amendment Closing Date:
2.1 No Defaults; Transactions Prior to Amendment Closing Date.
(a) No event has occurred and no condition exists that, upon the
execution and delivery of this Amendment and the issuance of the Notes, would
constitute a Default or an Event of Default, except for the violation of Section
6.22 (IWC Note) of the Agreement which each of you has not waived and which the
Company hereby agrees to cure on or before March 31, 1998.
(b) The Company has not entered into any transaction since the date of
the most recent balance sheet delivered to you that would have been prohibited
by the Agreement, as amended by this Amendment, had such Agreement, as amended
by this Amendment, been in effect since such date.
2.2 Authorization. The execution and delivery by the Company of this
Amendment and the performance by the Company of its obligations under this
Amendment and the Agreement, as amended hereby, are within the Company's
corporate powers, have been duly authorized by all necessary corporate action of
the Company and the execution and delivery by the Company of this Amendment have
received all necessary governmental approvals or other consents (if any shall be
required).
2.3 Binding Nature. This Amendment and the Agreement, as amended hereby,
are legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, subject as to enforcement only to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and equitable
principles.
2.4 No Violation. Neither the execution, delivery nor performance by the
Company or any of the Guarantors of the Documents (including this Amendment) to
which it is a party, nor compliance by any of such Persons with the terms and
provisions thereof, nor the consummation by it of the transactions contemplated
herein or therein, will (i) contravene any applicable provision of any law,
statute, rule or regulation, or any applicable order, writ, injunction or decree
of any court or governmental instrumentality, (ii) conflict with or result in
any breach of any term, covenant, condition or other provision of, or constitute
a default under,
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or result in the creation or imposition of (or the obligation to create or
impose) any Lien other than any Permitted Lien upon any of the property or
assets of the Company or any of its Subsidiaries under the terms of any
contractual obligation to which the Company or any of its Subsidiaries is a
party or by which it or any of its properties or assets are bound or to which it
may be subject except as are not reasonably expected to have a Material Adverse
Effect, or (iii) violate or conflict with any provision of the Certificate,
Articles of Incorporation or Bylaws or other governance documents of such
Person.
2.5 Litigation. There are no lawsuits (including, without limitation,
derivative or injunctive actions), arbitration proceedings or governmental
proceedings pending or, to the best knowledge of the Company, threatened,
involving the Company or any of its Subsidiaries except for such lawsuits or
other proceedings which could not reasonably be expected to have a Material
Adverse Effect.
2.6 Use of Proceeds; Margin Regulations. The proceeds of the Prior Notes
were used solely for the acquisition by IWC Services, Inc. of the common stock
of ITS Supply Corporation pursuant to the terms of that certain Stock Purchase
Agreement dated as of December 31, 1997, by and between IWC Services, Inc. and
LaSalle Cattle Company, Ltd. and for the payment of certain financial advisory
services as provided in the Agreement. The additional proceeds of the Notes
shall only be used for(i) the repayment of existing Indebtedness for borrowed
money of Code 3, Inc., and (ii) working capital, including the recoupment of
$570,573 in working capital used by the Company to fund the acquisition by the
Company of the common stock of Code 3, Inc., a Texas corporation, pursuant to
the terms of that certain Agreement and Plan of Merger and Reorganization dated
as of February 19, 1998, by and among the Company, B&C/ITS, Inc., Code 3, Inc.
and T. Lee Thompson, individually and as trustee for the stockholders (the
"Stockholders") of Code 3, Inc. (the "Acquisition Agreement").
2.7 Acquisition of Code 3, Inc. The Company acquired all of the shares of
stock of Code 3, Inc. pursuant to the Acquisition Agreement (without amendment
or waiver of, or other forbearance to exercise any rights with respect to, any
of the terms and provisions thereof), and such stock was purchased free and
clear of all restrictions to purchase imposed by applicable laws or regulations
and any voting trusts, proxies or similar arrangements or applicable laws or
regulations that would restrict the Company's right to exercise the voting
rights attributable to such shares. All actions and proceedings required by
applicable laws or regulations to have been taken prior to or on the date of the
acquisition of such stock in order for the Company to be able to lawfully
consummate such acquisition were taken, all waiting periods thereunder and
therefore expired or terminated without any action being taken by any competent
authority which restrained, prevented or imposed adverse conditions upon the
consummation of such acquisition, and all consents, waivers and approvals
(including, without limitation, those of any governmental authority or
regulatory body) necessary to have been given or obtained prior to or on the
date of such acquisition in order for the Company to be able to lawfully
consummate such acquisition
5
<PAGE>
were given or obtained and remain in full force and effect, including, without
limitation, compliance with the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended. At the time of such acquisition, no judgment, order,
injunction or other similar restraint prohibiting or imposing adverse conditions
upon the purchase of shares of Code 3, Inc. by the Company was is outstanding,
and no actions, suits or proceedings were pending or threatened with respect to
the Company, B&C/ITS, Inc., or Code 3, Inc. or their respective Subsidiaries or
any of the Stockholders.
3. CLOSING CONDITIONS
Your obligation under this Amendment is subject to the following conditions
precedent, all in form and substance satisfactory to you (unless waived by each
of you in writing prior to the Amendment Closing Date):
3.1 Opinion of Counsel. You shall have received from Brown, Parker &
Leahy, L.L.P. a closing opinion dated as of the Amendment Closing Date. This
Section 3.1 shall constitute direction by the Company to such counsel to deliver
such closing opinion to you.
3.2 Notes. You each shall have received your duly executed Notes from the
Company.
3.4 Guaranties. You shall have received the duly executed Amended and
Restated Guaranties of each of the Guarantors and a duly executed Guaranty of
Code 3, Inc., each in substantially the form of Exhibit 3.4 to the Agreement.
3.5 Stock Pledge Agreement. You shall have received a duly executed First
Amendment to Stock Pledge Agreement from the Company, together with the stock
certificate of Code 3, Inc. and an undated stock power relating thereto.
3.6 Security Agreement. You shall have received a duly executed Security
Agreement in substantially the form of Exhibit 3.6 to the Agreement from Code 3,
Inc., together with a duly executed UCC-1 Financing Statement relating thereto.
3.7 Warrants. Main Street shall have received a duly issued and
authorized Warrant for an additional 200,000 shares of common stock of the
Company and Geneva shall have received a duly issued and authorized Warrant for
an additional 300,000 shares of common stock of the Company in substantially the
form of Exhibit 3.7 to the Agreement at the strike price of $4.50 per share,
exercisable for a period of six (6) years from the date of issuance thereof.
3.8 Registration Rights Agreement. Each of you shall have received a duly
executed First Amendment to Registration Rights Agreement.
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3.9 Intercreditor Agreement. Each of you shall have executed and
delivered the First Amendment to Intercreditor Agreement.
3.10 Secretary's Certificates. You shall have received a duly executed
Secretary's Certificate dated the Closing Date from the Company and each
Guarantor.
3.11 Expenses. All fees and disbursements required to be paid pursuant
hereto shall have been paid in full.
3.12 Repayment of Code 3, Inc. Indebtedness. You shall received evidence
that all existing Indebtedness for borrowed money of Code 3, Inc. shall be
immediately paid with the additional purchase price of the Notes and that all
existing Liens upon the assets of Code 3, Inc. will be promptly released.
3.13 Proceedings Satisfactory. All proceedings taken in connection with
the issuance and sale of the Notes and all documents and papers relating thereto
shall be satisfactory to you and your special counsel. You and your special
counsel shall have received copies of such documents and papers as you or they
may reasonably request in connection therewith or in connection with your
special counsel's closing opinion, all in form and substance satisfactory to you
and your special counsel.
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4. AMENDMENTS TO AGREEMENT
4.1 Section 4.1 (Principal Payments) of the Agreement is hereby amended
and restated in its entirety as follows:
"The $3,750,000 principal amount payable to Main Street under its Note
shall be due and payable as follows: the principal amount of $3,000,000,
together with interest accrued thereon, shall be due and payable on May 2, 1998,
and the principal amount of $750,000, together with interest accrued thereon,
shall be due and payable on June 15, 1998. The $3,500,000 principal amount
payable to Geneva under its Note shall be due and payable as follows: the
principal amount of $2,000,000, together with interest accrued thereon, shall be
due and payable on May 2, 1998, and the principal amount of $1,500,000, together
with accrued interest thereon, shall be due and payable on June 15, 1998."
4.2 Section 4.2 (Interest Payments) shall be amended by deleting the date
"May 2, 1998" in the third line thereof and inserting in its place the date
"June 15, 1998" and by adding the phrase "provided that the payment of interest
scheduled to be made on May 1, 1998, shall instead be payable on May 2, 1998,
when a principal payment is required hereunder" after the word "thereafter" in
the third line thereof.
4.3 Section 4.4 (Optional Prepayments) of the Agreement is hereby amended
by adding the phrase ", any such prepayment to be applied in inverse order of
maturity" at the end of such Section.
4.4 Section 6.12 (Restrictions on Fundamental Changes) of the Agreement is
hereby amended by deleting the date "May 2, 1998" in the seventh line thereof
and inserting in its place "June 16, 1998".
4.5 Section 6.15 (Indebtedness) of the Agreement is hereby amended by
deleting the word "and" at the end of subsection (b) thereof, deleting the
period at the end of subsection (c) thereof and inserting in its place a
semicolon and adding the following new subsection (d):
"(d) other unsecured Indebtedness subordinated to the obligations of
the Company and the Guarantors to you, providing no payments thereunder shall be
made thereunder until the Notes have been paid in full and containing standstill
provisions, all if approved in advance by you and in form and substance
satisfactory to you, all in your sole discretion."
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4.6 Section 6.16 (Loans, Advances and Investments) is hereby amended by
deleting the word "and" at the end of subsection (c) thereof, deleting the
period at the end of subsection (d) thereof and inserting in its place the
clause "; and" and adding the following new subsection (e):
"(e) the advance of approximately $315,000 by the Company to Code 3,
Inc. prior to the date such entity was acquired by the Company."
5. MISCELLANEOUS
5.1 Entire Agreement. The Documents (including this Amendment) constitute
the entire understanding among the Company, the Guarantors and you and supersede
all earlier or contemporaneous agreements, whether written or oral, concerning
the subject matter of the Documents. THIS WRITTEN AGREEMENT TOGETHER WITH THE
OTHER DOCUMENTS REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
5.2 Waiver of Jury Trial. EACH PARTY TO THIS AMENDMENT HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AMENDMENT, THE AGREEMENT, ANY NOTE, ANY OTHER
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.
5.3 Duplicate Originals, Execution in Counterpart. Two (2) or more
duplicate originals hereof may be signed by the parties, each of which shall be
an original but all of which together shall constitute one and the same
instrument. This Amendment may be executed in one or more counterparts and
shall be effective when at least one counterpart shall have been executed by
each party hereto, and each set of counterparts that, collectively, show
execution by each party hereto shall constitute one duplicate original.
5.4 Successors and Assigns. This Amendment shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties hereto.
The provisions hereof are intended to be for the benefit of all holders, from
time to time, of Notes, and shall be enforceable by any such holder, whether or
not an express assignment to such holder of rights hereunder shall have been
made by you or your successor or assign.
5.5 Severability. Any provision of this Amendment that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
5.6 Headings. Section headings used in this Amendment are for reference
only and
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shall not affect the construction of this Amendment.
5.7 Reaffirmation of Agreement. This Amendment shall be deemed to be an
amendment to the Agreement, and the Agreement, as amended hereby, is hereby
ratified, approved and confirmed in each and every respect. All references to
the Agreement in the Agreement and the other Documents (excluding this
Amendment) shall hereafter be deemed to refer to the Agreement, as amended
hereby.
5.8 Defined Terms. Terms used but not defined herein when defined in the
Agreement shall have the same meanings herein unless the context otherwise
requires.
If this Amendment is satisfactory to you, please so indicate by signing the
acceptance of the foot of a counterpart hereof and returning such counterpart to
the Company, whereupon this Agreement shall become binding between us in
accordance with its terms.
Very truly yours,
BOOTS & COOTS INTERNATIONAL
WELL CONTROL, INC.
By:__________________________
Name: Larry H. Ramming
Title: Chairman of the Board and Chief
Executive Officer
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Accepted:
MAIN STREET MERCHANT PARTNERS II, L.P.
By: _______________________________
Vince D. Foster, Managing Director
[Signature page for FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT dated as of
March ___, 1998, of Boots & Coots International Well Control, Inc. in connection
with the issuance of its 10.0% Senior Secured Notes due June 15, 1998.]
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Accepted:
GENEVA ASSOCIATES, L.L.C.
By: _______________________________
Tracy Scott Turner, Principal
[Signature page for FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT dated as of
March ___, 1998, of Boots & Coots International Well Control, Inc. in connection
with the issuance of its 10.0% Senior Secured Notes due June 15, 1998.]
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EXHIBIT 9.1
VOTING TRUST AGREEMENT
This Agreement is made on May 1, 1995, by and among the undersigned
shareholders of IWC Services, Inc. ("Company") and Larry Ramming, Charles T.
Phillips and Raymond Henry, ("Trustees"), for the purpose of creating a Voting
Trust of certain of the shares of Company.
ARTICLE I
CONSIDERATION AND PURPOSE OF TRUST
1.01. Consideration. The parties named below enter into this Voting Trust
Agreement in consideration of their mutual promises.
1.02. Purpose of Trust. The parties enter into this Voting Trust
Agreement for the purpose of concentrating the vote of the shares represented
under this Agreement into a clear and definite policy of management under the
direction of the Trustees.
ARTICLE II
PARTIES AND EFFECTIVE DATE
2.01. Parties. The parties to this Agreement are:
(A) The "Shareholders" and the "Voting Trust Certificate Holders"
who subscribe their names to this Agreement or who become registered holders or
bearers of Voting Trust Certificates pursuant to the terms of this Agreement.
The term "Shareholders" as used in this Agreement refers to the shareholders of
Company who are parties to this Agreement and who have not yet had Voting Trust
Certificates issued to them. The term "Voting Trust Certificate Holders" as used
in this Agreement refers to the shareholders of Company who are parties to this
Agreement and who have had Voting Trust Certificates issued to them, and to
those who become registered holders or bearers of Voting Trust Certificates
pursuant to the terms of this Agreement.
(B) Larry Ramming, Charles T. Phillips, and Raymond Henry, referred
to in this Agreement as the Trustees.
2.02. Effective Date. This Agreement will become effective when signed by
all of the persons owning shares of the Company made subject to this agreement
and set forth below and by the Trustees.
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ARTICLE III
TRUSTEES
3.01. Number and Term of Trustees. There will be three Trustees of this
voting trust. The first Trustees are the individuals name above. Their
successors will be appointed as provided below. The Trustees will serve for the
entire term of the Trust in the absence of their removal, resignation, or death.
3.02. Death of Trustees. The rights and duties of a Trustee shall
terminate on his death, and no interest in any property owned or held by the
trust nor any of the rights or duties of the Trustee may be transferred by will,
devise, succession, or in any manner except as provided in this Agreement. The
heirs, administrators, and executors of the Trustees shall, however, have the
right and duty to convey any property held by the Trustees to the remaining
successor Trustees.
3.03. Resignation. Any Trustee may resign by giving notice of his
resignation to the remaining Trustees.
3.04. Removal. Any Trustee may be removed at any time by a majority of
the Trustees or by seventy-five percent (75%) of the Voting Trust Certificate
Holders.
3.05. Successor Trustees. In the event of the death, resignation,
removal, or incapacity to act of any Trustee, a successor or successors may be
elected by a majority vote of the Voting Trust Certificate Holders.
ARTICLE IV
DEPOSIT AND TRANSFER OF SHARES
ISSUANCE AND TRANSFER OF
VOTING TRUST CERTIFICATES
4.01. Deposit of Shares. On the execution of this Agreement, the
Shareholders shall deposit with the Trustees share certificates for all shares
of the Company owned by them. All of these share certificates shall be endorsed
in blank or to the Trustees and be accompanied by instruments of transfer that
will enable the Trustees to cause the share certificates to be transferred to
the name of the Trustees.
4.02. Transfer of Shares to Trustees. All share certificates of the
Company delivered to the
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Trustees shall be surrendered by the Trustees to the Company and canceled. New
share certificates shall be issued in the name of the Trustees. The new share
certificates shall state that they are issued pursuant to this Agreement. That
fact shall also be noted in the Company's stock transfer records in the entry of
the Trustee's ownership of the shares.
4.03. Transfer of Shares to Successor Trustees. Notwithstanding any
changes in the identity of the Trustees, the certificates for shares standing in
the name of the Trustees may be endorsed and transferred by any successor
Trustee or Trustees with the same effect as if endorsed and transferred by the
Trustees who have ceased to act. The Trustees are authorized and empowered to
cause any further transfer of the shares that may be necessary because of any
change in persons holding the office of Trustee.
4.04. No Sale of Shares. Despite the provisions herein, the Trustees have
no authority to sell or otherwise dispose of, or encumber, any of the shares
deposited pursuant to this Agreement.
4.05. Voting Trust Certificate. When the Company receives the share
certificates and transfers them to the name of the Trustees, the Trustees shall
hold the share certificates subject to the terms of this Agreement, and the
Trustees shall issue and deliver Voting Trust Certificates to the surrendering
shareholders, in the form of Exhibit A to this Agreement.
4.06. Transfer of Voting Trust Certificates. The Voting Trust
Certificates shall be transferable only as provided in the Certificates and in
this Agreement, and on payment of any charges payable at the time of transfer.
All transfers shall be recorded in the Certificate Book. Any transfer made of
any Voting Trust Certificate shall vest in the transferee all rights of the
transferor and shall subject the transferee to the same limitations as those
imposed upon the transferor by the terms of the voting Trust Certificate and by
this Agreement. The Trustees shall deliver Voting Trust Certificates to the
transferee for the number of shares represented by the Voting Trust Certificate
so transferred.
4.07. Proof of Ownership. The Trustees shall not be required to recognize
any transfer of a Voting Trust Certificate not made in accordance with the
provisions of this Agreement. The Trustees may treat the Voting Trust
Certificate Holders as the absolute owners and holders of the Voting Trust
Certificate and as having all of the rights and interests represented by them
for all purposes, and the Trustees shall not be bound or affected by any notice
to the contrary.
4.08. Replacement of Certificates. If a Voting Trust Certificate becomes
mutilated, destroyed, stolen or lost, the Trustees, in their discretion, may
issue a new \Voting Trust Certificate of like tenor and denomination in exchange
and substitution for and on cancellation of the prior Certificate. The
applicant for a substituted Voting Trust Certificate shall furnish to the
Trustees evidence of the destruction, theft, or loss of the Certificate
satisfactory to them, in their discretion. The applicant shall also furnish
indemnity satisfactory to the Trustees or their agents.
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ARTICLE V
VOTING AND ACTIONS BY TRUSTEES
5.01. Voting of Shares. While the Trustees hold shares deposited
pursuant to the provisions of this Agreement, they shall possess and in their
unrestricted discretion shall be entitled to exercise in person or by their
nominees, agents, attorneys-in-fact, or proxies all rights and powers or
absolute owners and to vote, assent or consent with respect to those rights and
powers and to take part in and consent to any corporate or shareholders'
actions, except those specified below. The Trustees shall not vote in favor of
the sale of all or substantially all of the assets of the Company or for any
merger, consolidation, reorganization or dissolution, except with the consent of
the owners of two-thirds or more, in interest, of the Voting Trust Certificates.
No other person shall have any voting rights in respect to the shares so long as
this Agreement is in effect and the shares are registered in the names of the
Trustees. The Trustees shall receive any dividends or distributions made in
connection with the stock.
5.02. Voting Interest of Company. In voting shares of stock or in
doing any act regarding the control or management of the Company or its affairs,
as holder of the stock deposited pursuant to this Agreement, the Trustees shall
exercise their best judgment in the interest of the Company to the end that its
affairs shall be properly managed, but they assume no responsibility regarding
management or any action taken by management in pursuance of their consent to
the action as shareholders or in pursuance of their vote.
5.03. Majority Action of Trustees. All actions to be taken on any
question arising between the Trustees, except as otherwise expressly provided in
this Agreement, shall from time to time be determined by the vote or agreement
of the majority of the Trustees then in office, either at a meeting of the
Trustees, or, with or without a meeting, by a writing signed by the majority.
The Trustees may provide for the authentification of evidence of any action
taken by them. Any Trustee may vote in person or by proxy given to any other
Trustee.
5.04. Meeting With Certificate Holders. If any question arises on
which the Trustees desire the opinion of the Voting Trust Certificate Holders,
the Trustees may call a meeting for this purpose. At the meeting, the owners of
two-thirds or more, in interest, of the Voting Trust Certificates may determine
the manner in which they desire the Trustees to act, and the Trustees shall be
bound to act in the manner designated. The Trustees shall not be called upon or
expected to take any action as a result of this meeting unless and until they
have been fully indemnified against all lost, damage, claim, or injury to which
they might be subjected, either by reason of their action or by reason of their
position as Trustees under this Agreement.
5.05. Trustees' Relationship With Company. Any Trustee, his family,
employees or agents, and any firm, corporation, trust or association of which
the Trustee may be a trustee, stockholder,
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director, officer, member, agent, or employee, may contract with or be or become
pecuniarily interested, directly or indirectly, in any matter or transaction to
which the Company may be a party or in which it may be concerned, as fully and
freely as though the Trustee was not a Trustee pursuant to this Agreement. The
Trustees, their family, employees, or agents may act as directors or officers of
the Company or of any subsidiary or controlled or affiliated corporation.
5.06. Compensation of Trustees. The Trustees shall serve without
compensation.
5.07. Expenses. The Trustees are expressly authorized to incur and
pay those reasonable charges and expenses that they may deem necessary and
proper for administering this Agreement. The Voting Trust Certificate Holders
agree to reimburse and indemnify the Trustees for all claims, expenses and
liabilities incurred by them in connection with the discharge of their duties
under this Agreement. Any such claims, expenses, or liabilities shall be
charged to the Voting Trust Certificate Holders pro rata, and may be deducted
from dividends or other distributions to them, or may be made a charge payable
as a condition to the delivery of shares in exchange for Voting Trust
Certificates, and the Trustees shall be entitled to a lien for this charge on
the shares, funds, or other property in their possession or in the possession of
the Company.
5.08. Trustees' Liability. No Trustee shall be liable for acts or
defaults of any other Trustee or for acts or defaults of any agent or other
Trustee. The Trustees shall be free from liability in acting upon any paper,
document or signature believed by them to be genuine and to have been signed by
the proper party. The Trustees shall not be liable for any error of judgment
nor for any act done or omitted, nor for any mistake of fact or law, nor for
anything that they may do or refrain from doing in good faith, nor generally
shall the Trustees have any accountability pursuant to this Agreement, except
that each Trustee shall be liable for his or her own willful default or gross
negligence. The Trustees may be advised by legal counsel, and any action under
this Agreement taken or suffered in good faith by them in accordance with the
opinion of counsel shall be conclusive on the parties to this Agreement, and the
Trustees shall be fully protected and be subject to no liability in respect to
any action taken or suffered under this Agreement.
ARTICLE VI
DIVIDEND AND DISTRIBUTION RIGHTS
OF CERTIFICATE HOLDERS
6.01. Cash Dividends. Each Voting Trust Certificate Holder shall be
entitled to receive from time to time payments equal to the amount of cash
dividends, if any, collected or received by the Trustees on the shares in regard
to which Voting Trust Certificates were issued, less the deductions set forth
herein. These payments shall be made, as soon as practicable after the receipt
of the dividends, to the Voting Trust Certificate Holders at the close of
business on the record date determined pursuant to the provisions herein.
Instead of receiving cash dividends, the Trustees may
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instruct the Company in writing to pay the dividends directly to the Holders.
When these instructions are given to the Company, all liability of the Trustees
with regard to the dividends shall cease, until the instructions are revoked.
The Trustees may at any time revoke the instructions and by written notice to
the company direct it to make dividend payments to the Trustees.
6.02. Share Dividends. If the Trustees receive as a dividend or
other distribution on any shares of stock held by them under this Agreement, any
additional shares of the Company, the Trustees shall hold the additional shares
subject to this Agreement for the benefit of the Voting Trust Certificate
Holders in proportion to their respective interests, and the shares shall become
subject to all of the terms and conditions of this Agreement to the same extent
as if they were originally deposited under it. The Trustees may, in their
discretion, issue Voting Trust Certificates in respect of those shares to the
Voting Trust Certificate Holders on the record date as determined herein.
6.03. Distributions on Liquidation. In the event of the dissolution
or total or partial liquidation of the Company, the Trustees shall receive the
money, securities, rights, or property to which Shareholders of the Company are
entitled, and shall distribute it among the Voting Trust Certificate Holders in
proportion to their interests.
6.04. Other Distributions to Shareholders. If at any time during the
continuation of this Agreement the Trustees shall receive or collect any money
(other than in payment of cash dividends) through a distribution by the Company
to its shareholders or shall receive any property (other than shares of stock of
the Company) through a distribution by the Company to is shareholders, the
Trustees shall distribute it to the Voting Trust Certificate Holders in
proportion to their interests on the record date as determined herein.
6.05. Deductions from Distributions. There shall be deducted and
withheld from every distribution of every kind under this Agreement any taxes,
assessments, or other charges that may be required by law to be deducted or
withheld, as well as expenses and charges incurred as set forth herein, to the
extent such remain unreimbursed.
6.06. Record Date For Distributions. The Trustees may, if they deem
it advisable, fix a date not exceeding twenty (20) days preceding any date for
the payment or distribution of dividends or for the distribution of assets or
rights as a record date for the determination of the Voting Trust Certificate
Holders entitled to receive the payment or distribution, and the Voting Trust
Certificate Holders of record on that date shall be exclusively entitled to
participate in the payments or distributions. If the Trustees fail to fix a
record date, the date of payment or distribution of dividends or the
distribution of assets or rights shall constitute the record date for the
determination of the Voting Trust Certificate Holders entitled to receive the
payment or distribution.
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ARTICLE VII
BOOKS AND RECORDS
7.01. Records of Shares. The Trustees shall maintain a record of all
share certificates of the Company that are transferred to the Trustees,
indicating the name in which the stock was held, the date of issuance of the
stock, the class and series of the stock, the number of shares, and the number
of the certificates representing those shares. They shall also maintain a
record of the date on which he or she received any share certificates and the
date on which they were delivered to the corporation for transfer to the
Trustees. The Trustees shall receive and hold the new share certificates issued
by the Company in the name of the Trustees.
7.02. Records of Trust Certificates. The Trustees shall maintain a
record showing the names and addresses of the Voting Trust Certificate Holders.
The record shall show the number of Certificates held by each person. The
record shall show the dates on which the Voting Trust Certificates were issued,
canceled, transferred, or replaced. The record shall be open to inspection by
any of the parties to this Agreement or their successors at any reasonable time.
7.03. Books of Accounts. The Trustees shall maintain a Book of
Accounts showing all sums of money received by the Trustees, all disbursements
made by the Trustees, and all obligations incurred by the Trustees that are
unpaid.
7.04. Other Records. The Trustees shall maintain such other books
and records as are necessary or desirable in the performance of their duties
herein.
7.05. Inspection of Records. The Trustees shall deposit a
counterpart of this Agreement with the Company at its registered office, and the
Agreement shall be subject to the same right of examination by a Shareholder of
the Company, in person or by agent or attorney, as are the books and records of
the Company.
ARTICLE VIII
TERMS OF TRUST
8.01 Irrevocability of Trust. The Trust created by this Agreement is
expressly declared to be irrevocable, except as otherwise provided in this
Agreement.
8.02. Termination. This Agreement may be terminated by instruments
in writing executed by a majority of the Trustees, or upon one year prior
written notice by instruments in writing executed by two-thirds of the
beneficial interests in the Trust.
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8.03. Release of Shares From this Agreement. Within thirty (30) days
after each anniversary date of the Effective Date hereof, the Trustees shall, at
the request of Voting Trust Certificate Holders, deliver documents necessary to
release up to twenty percent (20%) of the number of shares held pursuant to each
such Voting Trust Certificate to the holder thereof. Upon such release, the
certificate representing the released Shares shall be issued in the name of the
holder of the Voting Trust Certificate and shall no longer be subject to the
terms of this Agreement.
8.04. Return of Share Certificates After Termination. Within thirty
(30) days after the termination of this Agreement, the Trustees shall deliver to
the Voting Trust Certificate Holders share certificates representing the number
of shares in respect of which the Voting Trust Certificates were issued in
exchange for the Voting Trust Certificates properly endorsed, and upon payment
by the persons entitled to receive the share certificates of any money due
hereunder.
8.05. Final Accounting. Within sixty (60) days after termination of
the Trust, the Trustees shall render a final accounting to the Voting Trust
Certificate Holders and to the Company, and shall distribute any funds or other
assets held by them to the parties entitled to them.
ARTICLE IX
MISCELLANEOUS
9.01. Place of Performance. This Agreement is made, executed, and
entered into at Harris County, Texas, and it is mutually agreed that the
performance of all parts of this contract shall be made in Harris County, Texas.
9.02. Governing Law. This Agreement is intended by the parties to be
governed by and construed in accordance with the laws of the State of Texas.
9.03. Severability of Provisions. If any provision hereof should be
determined to be invalid, the invalidity shall not affect the validity of the
remainder of the Agreement.
9.04. Construction by Trustees. The Trustees are authorized and
empowered to construe this Agreement. Their reasonable construction made in
good faith shall be conclusive and binding on the Voting Trust Certificate
Holders and on all parties to this Agreement.
9.05. Notice to Voting Trust Certificate Holders. Any notice to be
given to a Voting Trust Certificate Holder shall be sufficiently given if
mailed, postage prepaid, to the Holder at the address appearing in the books and
records of the Trust with respect to the Holder. Every notice so given shall be
effective whether or not received, and notice shall for all purposes be deemed
to have been given on the date of its mailing.
9.06. Meetings of Voting Trust Certificate Holders. A meeting of the
Voting Trust Certificate Holders may be called at any time by the Trustees upon
three (3) days notice. The notice shall contain a statement of the matters to be
considered at the meeting. At any meeting, a quorum consisting of at least
fifty percent (50%) in interest of the Voting Trust Certificate Holders must be
present before a vote shall be taken on any matter before the meeting. Each
Voting Trust Certificate Holder may vote at any meeting in person or by proxy.
Each Voting Trust Certificate Holder shall
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have one vote for each share represented by his or her Certificate. Action may
be taken on any of the matters covered in this Agreement by the written consent
of a sufficient number of the Voting Trust Certificate Holders to take such
action.
9.07. Execution of Counterparts. This Agreement shall be prepared in
multiple counterparts. All signatures may be affixed to one copy or to separate
copies, and when all copies are received, signed by all of the parties, they
shall constitute one agreement that is not otherwise separable or divisible.
The Trustees shall keep all signed copies and shall conform one copy to show
all signatures.
9.08. Amendment of Agreement. If the Trustees deem it advisable at
any time to amend this Agreement, they shall call a special meeting of Voting
Trust Certificate Holders for that purpose. At the meeting, the Trustees must
submit the amendment to the Voting Trust Certificate Holders of the then
outstanding Voting Trust Certificates for their approval. Notice of the time
and place of the meeting shall be given in the manner set forth above, and shall
contain a copy of the proposed amendment. If, at the meeting or any adjournment
of the meeting, the proposed amendment is approved by the affirmative vote of
the Voting Trust Certificate Holders representing a majority of the shares held
by the Trust, the proposed amendment so approved shall become a part of this
Agreement as if originally incorporated in it.
9.09. Advise of Counsel. Each of the parties agrees and represents
that he has been represented by his own counsel with regard to the execution of
this Agreement or, if acting without counsel, that he has had adequate
opportunity and has been encouraged to seek the advise of his own counsel prior
to the execution of this Agreement.
9.10. Share Certificates. Each share certificate representing shares
held by the parties to this Agreement shall contain a statement that the shares
represented by the certificate are subject to the provisions of a Voting Trust
Agreement and shall contain a statement that a counterpart of the Voting Trust
Agreement has been deposited with the Company at is registered office.
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TRUSTEES SHAREHOLDERS
_____________________________________ _____________________________________
Larry Ramming
_____________________________________ _____________________________________
Charles T. Phillips
_____________________________________ _____________________________________
Raymond Henry
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
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VOTING TRUST CERTIFICATE
IWC SERVICES, INC.
CERTIFICATE NO._________________ NUMBER OF SHARES_________________
This Certificate certifies that the undersigned Trustees have received
stock certificates representing the above stated number of shares of common
stock of IWC Services, Inc. (The Company) from ______________________________,
referred to in this Certificate as the Certificate Holder, duly endorsed to the
undersigned Trustees, to be held by the Trustees pursuant to the terms and
conditions of the Voting Trust Agreement (The Agreement) dated _______________,
1995. A copy of the Voting Trust Agreement has been delivered to the Certificate
Holder, and an additional copy of the Agreement has been delivered to the
Certificate Holder, and an additional copy of the Agreement is on file at the
registered office of the Company. The Certificate Holder is entitled to receive
payments or distributions as specified in the Agreement, and to the delivery of
a certificate for the number of shares stated above on the termination of the
Voting Trust Agreement, in accordance with its provisions.
The Certificate Holder, by his acceptance of this certificate, agrees to be
bound by all of the provisions of the Voting Trust Agreement as fully as if the
terms of the Agreement were set forth in full in this Certificate.
Issued on ______________________________________, 1995.
TRUSTEES
_____________________________________
Larry Ramming
_____________________________________
Charles T. Phillips
_____________________________________
Raymond Henry
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Exhibit 10.7
SECURITY AGREEMENT AND FINANCING STATEMENT
THIS SECURITY AGREEMENT AND FINANCING STATEMENT (this "Agreement") dated as
of January 2, 1998, is by and between Boots & Coots International Well Control,
Inc., a Delaware corporation (the "Debtor"), and Geneva Associates, L.L.C.
("Geneva"), as Collateral Agent for the Noteholders (as hereinafter defined)
(the "Secured Party").
R E C I T A L S:
A. The Debtor and Geneva have entered into that certain Note Purchase
Agreement dated as of January 2, 1998, and the Debtor and Main Street Merchant
Partners ("Main Street") have entered into that certain Note Purchase Agreement
dated as of January 2, 1998 (herein, as the same may be amended, modified,
supplemented, extended, rearranged, and/or restated from time to time,
collectively called the "Note Purchase Agreements"), pursuant to which, upon the
terms and conditions therein set forth, the Debtor has issued its 10.0% Senior
Secured Notes due May 2, 1998, in the aggregate principal amount of $5,000,000
(herein, as the same may be amended, modified, supplemented, extended,
rearranged, and/or restated from time to time, together with any notes given by
the Debtor in extension, replacement, rearrangement, modification and/or
substitution thereof or therefor, collectively called the "Notes" and any
holders of the Notes, collectively called the "Noteholders").
B. Under the terms of the Note Purchase Agreements, the Debtor is required
by each of Geneva and Main Street to provide certain security in respect of the
liabilities of the Debtor under the Note Purchase Agreements, and each of Geneva
and Main Street requires that this Agreement be entered into by the Debtor as a
condition precedent to the purchase by it of its respective Notes.
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Defined Terms.
(a) Unless otherwise defined herein, capitalized terms have the same
meaning assigned to such terms in the Note Purchase Agreements.
(b) "UCC" means the Uniform Commercial Code as in effect on the date
hereof in the State of Texas; provided that if by mandatory provisions of
law the perfection or the effect of perfection or non-perfection of the
security interests granted pursuant to Section 2, as well as all other
security interests created or assigned as additional security for the
Obligations (defined hereinafter) pursuant to the provisions of this
Agreement in any Collateral (defined hereinafter) is governed by the
Uniform
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Commercial Code as in effect in a jurisdiction other than the State
of Texas, "UCC" means the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
2. Grant of Security Interest. To secure all obligations now or
hereafter owing by the Debtor to the holders of the Notes under the Note
Purchase Agreements, the Notes and the other Documents, together with all
amendments, supplements or restatements of any of the foregoing obligations (all
of the foregoing obligations, collectively, the "Obligations"), the Debtor
hereby conveys, grants, transfers and assigns to the Secured Party and grants to
the Secured Party a first priority security interest in all of Debtor's right,
title and interest in, to and under, the following (but excluding any Excluded
Items as hereinafter defined):
(a) All equipment, goods and inventory (each term as defined in the
UCC), and (whether or not included in such definitions) all tangible
personal property, now owned or hereafter acquired by the Debtor,
including, without limitation (to the extent now owned or hereafter
acquired by the Debtor), (i) all fire fighting and blowout equipment, (ii)
all research, storage or office equipment, computer hardware and software
machinery, chattels, tools, parts, machine tools, furniture, furnishings,
fixtures and supplies, of every nature, wherever located, and (iii) all
additions, accessories and improvements to any equipment and all
substitutions therefor and all accessories, parts and equipment which may
be attached to or which are necessary for the operation and use of any
equipment, personal property or fixtures, together with all accessions
thereto;
(b) All accounts (as defined in the UCC) and accounts receivable now
owned or hereafter acquired by the Debtor;
(c) All rights of the Debtor under or arising out of present or future
leases or contracts relating to any equipment;
(d) All rights of the Debtor in, to and under all patents, trademarks,
tradenames, copyrights, techniques, processes, formulas, know-how or other
intellectual property, and licenses thereof, including, without limitation,
the trade name "Boots & Coots";
(e) All rights of the Debtor in, to and under all permits,
authorizations, approvals, registrations, licenses, approvals, certificates
of convenience or necessity franchises, immunities, easements, consents,
grants, ordinances or other rights granted by any governmental authority;
(f) All rights of the Debtor in and to all books, records, writings,
databases (electronic or otherwise), information and other property
relating to, used or useful in connection with, or evidencing, embodying,
incorporating or referring to, any of the
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foregoing;
(g) All rights of the Debtor in, to or under (i) all sales orders,
sales contracts, purchase orders, purchase contracts, operating agreements,
management agreements, service agreements, development agreements,
consulting agreements and leases and (ii) all other contract rights,
general intangibles (as defined in the UCC) and, to the extent they can
lawfully be conveyed or assigned, under express or implied warranties from
providers of goods or services;
(h) All rights of the Debtor in, to and under all products,
accessions, rents, issues, profits, returns, income and proceeds of any and
all Collateral and, to the extent not otherwise included, all rights of the
Debtor in, to and under all payments under insurance or any indemnity,
warranty or guaranty payable by reason of any loss or damage to any
Collateral or otherwise with respect to any of the Collateral; and
(i) All rights of the Debtor in, to and under all moneys and
securities deposited with the Secured Party pursuant to any term of this
Agreement or any other Document to be held by the Secured Party hereunder
or thereunder (collectively "Cash Collateral").
All of the foregoing property, whether now owned or hereafter acquired, other
than the Excluded Items, is hereinafter collectively referred to as the
"Collateral"; Collateral described in clauses (g) and (h) may be referred to
herein as "Collateral Proceeds"). To have and to hold all and singular the
Collateral by the Secured Party, its successors and assigns, in trust for the
benefit and security of the Secured Party and for the uses and purposes, and
subject to the terms and provisions, set forth in this Agreement and in the Note
Purchase Agreements. Any term of this Agreement to the contrary
notwithstanding, the Collateral does not include any of the Excluded Items. The
term "Excluded Items" means and includes all properties or assets described
above, whether now owned or hereafter acquired by the Debtor, which by their
terms or by reason of applicable law would become void or voidable if a security
interest therein were granted hereunder by the Debtor or which cannot be
granted, conveyed, mortgaged, transferred or assigned by this Agreement or in
which a security interest cannot effectively be granted hereunder.
3. Rights of Debtor; Debtor Remains Liable.
(a) Any term of this Agreement to the contrary notwithstanding, until
written notice shall be given to the Debtor in accordance with Section 10
that the Secured Party is exercising its rights under Section 10, the
Debtor shall have the right, subject to the prohibitions contained in the
Note Purchase Agreements to possess, retain, enjoy and use the Collateral,
to give consents, waivers or notifications with respect to the Collateral,
to exercise its rights, powers and privileges under the Collateral, to
agree to any modification of any of the terms of the Collateral, to dispose
of any of the Collateral (it being agreed that the Lien of this Agreement
shall attach to the proceeds thereof), and
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otherwise to act with respect to the Collateral in the ordinary course of
business, in each case other than with respect to any Cash Collateral held
by the Secured Party. The Secured Party shall from time to time execute
such instruments and take such other action, in each instance, at the
Debtor's sole expense, as may reasonably be requested of it to give effect
to, or to confirm any action taken by the Debtor in accordance with this
Section 3(a).
(b) Any term of this Agreement to the contrary notwithstanding, until
written notice shall be given to the Debtor in accordance with Section 10
that the Secured Party is exercising its rights under Section 10, the
Debtor shall be entitled, from time to time, except as may otherwise be
provided in the Note Purchase Agreements, to collect and receive for its
own use all Collateral Proceeds. Any Collateral Proceeds collected or
received by or paid over to the Debtor pursuant to this Section 3(b) may be
used, distributed or otherwise disposed of by the Debtor as it determines
except as may otherwise be provided in the Note Purchase Agreements.
(c) Anything herein to the contrary notwithstanding, (i) the Debtor
shall remain liable under the contracts and agreements included in the
Collateral to the extent set forth therein (and subject to any defenses
thereto), to perform all of its duties and obligations thereunder to the
same extent as if this Agreement had not been executed, (ii) the exercise
by the Secured Party of any of the rights hereunder shall not release any
Debtor from any of its duties or obligations under the contracts and
agreements included in the Collateral, and (iii) the Secured Party shall
not have any obligation or liability under the contracts and agreements
included in the Collateral solely by reason of this Agreement, nor shall
the Secured Party be obligated to perform any of the obligations or duties
of the Debtor thereunder or to take any action to collect or enforce any
claim for payment assigned hereunder, in each case, solely by reason of
this Agreement.
4. Representations and Warranties. The Debtor represents and warrants as
follows:
(a) The Debtor owns the Collateral presently owned by it free and
clear of any Lien, except for Permitted Liens. No effective financing
statement, mortgage, or other instrument similar in effect covering all or
any part of the Collateral is on file in any recording office, except for
(i) protective filings under true leases, (ii) filings filed in favor of
the Secured Party for the benefit of the Secured Party relating to this
Agreement, and (iii) filings, if any, with respect to Permitted Liens.
(b) This Agreement has been duly executed and delivered by the Debtor.
Upon the filing of financing statements in the locations requested by the
Secured Party, the security interests granted herein shall constitute valid
and perfected security interests in the Collateral, subject only to
Permitted Liens, to the extent such security interests can be perfected by
such filings pursuant to the UCC.
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(c) As of the date hereof, no consent of, or notice to, any other
Person and no authorization, approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required
for the grant by the Debtor of the Liens granted hereby or for the
execution, delivery or performance of this Agreement by the Debtor, other
than the filing of financing statements as provided in (b) above and except
for such other consents, notices or filings that have been obtained or made
or that as of the date hereof are not required to have been obtained or
made and may be obtained or made, as the case may be, when necessary.
5. Further Assurances.
(a) The Debtor agrees that from time to time, at the expense of the
Debtor, that it will promptly execute and deliver all further instruments
and documents, and take all further action, that the Secured Party may
reasonably request as being necessary or desirable in order to perfect and
protect any security interest granted or purported to be granted hereby or
to enable the Secured Party to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the generality
of the foregoing, the Debtor will execute and file such financing or
continuation statements, or amendments thereto, and such other instruments
or notices, as the Secured Party may request as being necessary or
desirable in order to perfect and preserve the security interests granted
or purported to be granted hereby.
(b) The Debtor hereby authorizes the Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to
all or any part of the Collateral without the signature of the Debtor, in
each case where permitted by law. A carbon, photographic or other
reproduction of any financing statement executed by the Debtor covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
(c) The Debtor will furnish to the Secured Party from time to time
such statements and schedules further identifying and describing the
Collateral, and such other reports in connection with the Collateral, as
the Secured Party may reasonably request at reasonable intervals, all in
reasonable detail.
(d) The Debtor will promptly notify the Secured Party of any change of
its name, corporate structure, federal employer identification number or
the address of its principal place of business or chief executive office
where its books and records are maintained.
(e) The Debtor shall keep its principal place of business and chief
executive office and the office where it keeps its records concerning the
Collateral, at the address beside its signature hereto or, upon thirty (30)
days' prior written notice (or such other notice acceptable to the Secured
Party) to the Secured Party, at such other locations in
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a jurisdiction where all action required by this Section 5 shall have been
taken with respect to the Collateral. The Debtor will hold and preserve
such records and will upon reasonable notice permit representatives of the
Secured Party at any time during normal business hours to inspect and make
abstracts from such records.
6. Insurance. The Debtor shall, at its own expense, maintain insurance
with respect to the Collateral as required by the Note Purchase Agreements.
7. Transfers and Other Liens. The Debtor shall not (i) Transfer any of
the Collateral except as permitted by the Note Purchase Agreements, or (ii)
create or suffer to exist any Lien upon or with respect to any of the
Collateral, except for Permitted Liens.
8. Secured Party's Duties. The powers conferred on the Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for reasonable care
in the custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Secured Party shall have no duty as to
any Collateral or as to the taking of any necessary steps to preserve rights
against other parties or any other rights pertaining to any Collateral. The
Secured Party shall be deemed to have exercised reasonable care in the custody
and preservation of any Collateral in its possession if such Collateral is
accorded treatment substantially equal to that which the Secured Party accords
its own property, it being understood that the Secured Party shall not have any
responsibility for taking any necessary steps to preserve rights against other
parties or any other rights with respect to any Collateral.
9. Events of Default. The Debtor shall be in default under this
Agreement upon the occurrence of and during the continuation of any of the
events or conditions defined as Events of Default in any of the Note Purchase
Agreements (an "Event of Default").
10. Remedies. If any Event of Default shall have occurred and be
continuing, to the extent not prohibited by applicable law:
(a) The Secured Party may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or under the Note
Purchase Agreements, the other Documents or otherwise available to it, all
the rights and remedies of a secured party on default under the UCC
(whether or not the UCC applies to the affected Collateral), and the
Secured Party may also (i) require the Debtor to, and the Debtor hereby
agrees that it will, at its expense and upon request of the Secured Party,
forthwith (but in no event sooner than can be effectuated in compliance
with all applicable laws) assemble all or part of the Collateral as
directed by the Secured Party and make it available to the Secured Party at
a place to be designated by the Secured Party which is reasonably
convenient to both parties, and (ii) without notice except as specified
below, sell, assign or otherwise convey (as applicable) the Collateral or
any part thereof in one or more parcels at public or private sale, for cash
or on credit, and upon such other terms as may be commercially reasonable.
The Debtor agrees, to the fullest extent that it may
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effectively do so under applicable law, that, to the extent notice of sale
shall be required by law, at least ten (10) days' prior notice to the
Debtor of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification thereof
within the meaning of Section 9.504(c) of the UCC. The Secured Party shall
not be obligated to make any sale of Collateral regardless of notice of
sale having been given. The Secured Party may adjourn any public or private
sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(b) Any proceeds of the Collateral received by the Secured Party may,
and if direct by the Debtor shall, be applied to the Notes pursuant to the
terms of the Note Purchase Agreements and the Intercreditor Agreement.
(c) All rights of marshalling of assets of the Debtor, including any
such right with respect to the Collateral, are hereby waived by the Debtor,
to the fullest extent that it may effectively do so under applicable law.
11. Attorney-in-Fact. The Debtor further agrees, at its expense, to do,
make, procure, assign, endorse, and deliver all acts, things, writings
(including, without limitation, any check, endorsement, certificate or any other
instrument required by the Secured Party), and assurances as the Secured Party
may at any time reasonably require to protect, assure, or enforce its interest
and remedies created by this Agreement. The Debtor further agrees that while
any Event of Default is continuing, the Secured Party may receive any and all
proceeds or income from the Collateral, and the Secured Party may execute,
assign, and endorse appropriate receipts, releases and satisfaction, or
negotiable or non-negotiable instruments, or any other instruments or documents
in the name of and as agent for the Debtor, or in its own name, which the Debtor
has agreed to execute, sign, or endorse herein or any assigned agreements or
contracts, and the Secured Party is hereby constituted and appointed the agent
and attorney-in-fact of the Debtor to do all acts with respect to any of the
Collateral necessary or desirable to accomplish the purposes of this Agreement,
and to execute and endorse all such instruments, in each case while any Event of
Default shall be continuing. The Debtor agrees that this power of attorney is
coupled with an interest and may not be revoked until this Agreement is no
longer in full force and effect as provided in Section 22. At such time
thereafter or after such Event of Default shall cease to be continuing, any
amounts then held by Secured Party pursuant to this Section 11 shall be paid
over to the Debtor.
12. No Waiver; Cumulative Remedies. No failure on the part of the Secured
Party to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power, or privilege under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power,
or privilege under this Agreement preclude any other or further exercise thereof
or the exercise of any other right, power, or privilege. To the fullest extent
permitted by applicable laws, the rights and remedies provided for in this
Agreement are cumulative and not exclusive of any rights and remedies provided
by law.
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13. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Debtor and the Secured Party and their respective
successors and assigns. The Debtor may not assign any of its rights or
obligations under this Agreement.
14. Amendment; Entire Agreement. This Agreement embodies the final,
entire agreement among the parties hereto with respect to the subject matter
hereof and supersedes any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof. The provisions of this Agreement may be amended or
waived only by a document in writing signed by the parties hereto.
15. Notices. Any notice, consent, or other communication required or
permitted to be given under this Agreement to the Secured Party or the Debtor
must be in writing and delivered in person or by facsimile or by registered or
certified mail, return receipt requested, postage prepaid, as follows:
To Secured Party: Geneva Associates, L.L.C., as Collateral Agent
Attn: Mr. Tracy Turner
First Union Tower
P.O. Box 21962
Greensboro, North Carolina 27420
Telephone: (910) 275-7002
Facsimile: (910) 274-4984
Copy to: Hutcheson & Grundy, L.L.P.
Attn: Ms. Lisa J. Mellencamp
1200 Smith Street, Suite 3300
Houston, Texas 77002-4579
Telephone: (713) 951-2800
Facsimile: (713) 951-2925
To Debtor: Boots & Coots International Well Control, Inc.
Attn: Mr. Larry Ramming
5151 San Felipe, Suite 450
Houston, Texas 77056
Telephone: (713) 621-7911
Facsimile: (713) 621-7988
Copy to: Brown, Parker & Leahy, L.L.P.
Attn: Mr. William T. Heller
1200 Smith Street, Suite 3600
Houston, Texas 77002
Telephone: (713) 654-8111
Facsimile: (713) 621-7988
Securities Agreement and Financing Statement
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Any such notice, consent, or other communication shall be deemed given when
delivered in person, when received by confirmed facsimile or, if given by U.S.
Mail, five (5) days after such communication is deposited in the mail, certified
or registered with return receipt requested.
16. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. This
Agreement, and the rights and duties of the parties hereto, shall be construed
in accordance with and governed by the internal laws of the State of Texas;
provided, however that any enforcement of the Secured Party's rights and
remedies in any other jurisdiction shall, to the extent required by applicable
laws, be governed by the laws of the jurisdiction of enforcement. Each party
hereto hereby submits to the nonexclusive jurisdiction of the United States
District Court for the Southern District of Texas and of any Texas State court
sitting in Houston, Texas for purposes of all legal proceedings arising out of
or relating to this Agreement or the transactions contemplated hereby. Each
party hereto irrevocably waives, to the fullest extent permitted by law, any
objection it may now or hereafter have to the laying of the venue of any such
proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. EACH PARTY
TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ASSIGNOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS,
BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT
THE STATE OF TEXAS.
17. Headings. The headings and captions used in this Agreement are for
convenience only and shall not affect the interpretation of this Agreement.
18. Survival of Representations and Warranties. All representations and
warranties made in this Agreement or in any certificate delivered pursuant
hereto shall survive the execution and delivery of this Agreement, and no
investigation by the Secured Party shall affect the representations and
warranties or the rights of the Secured Party to rely upon them.
19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
21. Construction. The Debtor and the Secured Party acknowledge that each
of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to
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review this Agreement with its legal counsel and that this Agreement shall be
construed as if jointly drafted by the Debtor and the Secured Party.
22. Termination; Release. On the Collateral Termination Date, the Liens
created hereby (and all rights of the Secured Party hereunder) shall terminate,
and the Secured Party, at the request and expense of the Debtor, forthwith will
execute and deliver to the Debtor a proper instrument or instruments
acknowledging the satisfaction and termination of the Liens created hereby and
will duly assign, transfer and deliver to the Debtor (without recourse and
without any representation or warranty) such of the Collateral as may be in the
possession of the Lender and as has not theretofore been sold or otherwise
applied pursuant to this Agreement or the Note Purchase Agreements. Upon such
release and redelivery of all of the Collateral, this Agreement shall terminate.
The term "Collateral Termination Date" shall mean the first date on which no
Note is outstanding under the Note Purchase Agreements and no other obligation
is due and payable thereunder or under any other Document.
IN WITNESS WHEREOF, the Debtor and the Secured Party have caused this
Agreement to be duly executed as of the day and year first above written.
DEBTOR:
BOOTS & COOTS INTERNATIONAL WELL
CONTROL, INC., a Delaware corporation
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
SECURED PARTY:
GENEVA ASSOCIATES, L.L.C., as
Collateral Agent
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
Securities Agreement and Financing Statement
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Exhibit 10.8
FIRST AMENDMENT TO SECURITY AGREEMENT
THIS FIRST AMENDMENT TO SECURITY AGREEMENT (this "Amendment") dated as of
March ___1998, is by and between Boots & Coots International Well Control, Inc.,
a Delaware corporation (the "Debtor"), and Geneva Associates, L.L.C. ("Geneva"),
as Collateral Agent for the Noteholders (as hereinafter defined) (the "Secured
Party").
RECITALS:
A. The Debtor, Geneva and Main Street Merchant Partners II, L.P. ("Main
Street") have entered into that certain Note Purchase Agreement dated as of
January 2, 1998, as amended by that certain First Amendment to Note Purchase
Agreement dated as of March ___, 1998 (the "Note Purchase Agreement Amendment")
(herein, as the same may be further amended, modified, supplemented, extended,
rearranged, and/or restated from time to time, called the "Note Purchase
Agreement"), pursuant to which, upon the terms and conditions therein set forth,
the Debtor has issued its 10.0% Senior Secured Notes due June 15, 1998, in the
aggregate principal amount of $7,250,000 (herein, as the same may be amended,
modified, supplemented, extended, rearranged, and/or restated from time to time,
together with any notes given by the Debtor in extension, replacement,
rearrangement, modification and/or substitution thereof or therefor,
collectively called the "Notes" and any holders of the Notes, collectively
called the "Noteholders").
B. Each of Geneva and Main Street requires that this Amendment be entered
into by the Debtor as a condition precedent to the effectiveness of the Note
Purchase Agreement Amendment.
C. The Debtor and the Secured Party have entered into that certain
Security Agreement and Financing Statement dated as of January 2, 1998 (the
"Agreement"), and they now desire to amend the Agreement as hereinafter
provided.
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Amendment to Agreement. The definitions of each of the terms "Notes"
and "Noteholders" in the Agreement are hereby amended to include the Notes and
the Noteholders as defined herein.
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2. Reaffirmation of Agreement. This Amendment shall be deemed to be an
amendment to the Agreement, and the Agreement, as amended hereby, is hereby
ratified, approved and confirmed in each and every respect. All references to
the Agreement in the Agreement and the other Documents (excluding this
Amendment) shall hereafter be deemed to refer to the Agreement, as amended
hereby.
3. Successors and Assigns. This Amendment shall be binding upon and inure
to the benefit of the Debtor and Secured Party and their respective heirs,
successors, and assigns, except that the Debtor may not assign any of its rights
or obligations under the Agreement, as amended by this Amendment, without the
prior written consent of Secured Party except to the extent permitted by the
Note Purchase Agreement.
4. Amendment; Entire Agreement. The Agreement, as amended by this
Amendment, together with any applicable pledge or other agreement required by
applicable laws, embodies the final, entire agreement among the parties hereto
and supersedes any and all prior commitments, agreements, representations, and
understandings, whether written or oral, relating to the subject matter hereof.
The provisions of the Agreement, as amended by this Amendment, may be amended or
waived only by an instrument in writing signed by the parties hereto with the
requisite consent of Secured Party as provided in the Note Purchase Agreement.
5. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. This
Amendment, and the rights and duties of the parties hereto, shall be construed
in accordance with and governed by the internal laws of the State of Texas;
provided, however that any enforcement of Secured Party's rights and remedies in
any other jurisdiction shall, to the extent required by applicable laws, be
governed by the laws of the jurisdiction of enforcement. Each party hereto
hereby submits to the nonexclusive jurisdiction of the United States District
Court for the Southern District of Texas and of any Texas State court sitting in
Houston, Texas for purposes of all legal proceedings arising out of or relating
to this Amendment or the transactions contemplated hereby. Each party hereto
irrevocably waives, to the fullest extent permitted by law, any objection it may
now or hereafter have to the laying of the venue of any such proceeding brought
in such a court and any claim that any such proceeding brought in such a court
has been brought in an inconvenient forum. EACH PARTY TO THIS AMENDMENT HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THE AGREEMENT, AS AMENDED BY THIS
AMENDMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
6. Headings. The headings, captions, and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
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7. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8. Severability. Any provision of this Amendment which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Amendment, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as
of the day and year first written above.
DEBTOR:
BOOTS & COOTS INTERNATIONAL WELL
CONTROL, INC., a Delaware corporation
By:
--------------------------------------------
Name: Larry H. Ramming
Title: Chairman of the Board and Chief
Executive Officer
SECURED PARTY:
GENEVA ASSOCIATES, L.L.C., as
Collateral Agent
By:
--------------------------------------------
Name: Tracy Scott Turner
Title: Principal
First Amendment to Security Agreement
Page 3
<PAGE>
Exhibit 10.9
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Agreement") dated as of January 2, 1998,
is by and between Boots & Coots International Well Control, Inc., a Delaware
corporation ("Pledgor"), and Geneva Associates, L.L.C. ("Geneva"), as Collateral
Agent for the Noteholders (as hereinafter defined) (the "Secured Party").
RECITALS:
A. Pledgor, Geneva and Main Street Merchant Partners II, L.P. ("Main
Street") have entered into that certain Note Purchase Agreement dated as of
January 2, 1998 (herein, as the same may be amended, modified, supplemented,
extended, rearranged, and/or restated from time to time, collectively called the
"Note Purchase Agreement"), pursuant to which, upon the terms and conditions
therein set forth, Pledgor has issued its 10.0% Senior Secured Notes due May 2,
1998, in the aggregate principal amount of $5,000,000 (herein, as the same may
be amended, modified, supplemented, extended, rearranged, and/or restated from
time to time, together with any notes given by Pledgor in extension,
replacement, rearrangement, modification and/or substitution thereof or
therefor, collectively called the "Notes" and any holders of the Notes,
collectively called the "Noteholders").
B. Under the terms of the Note Purchase Agreement, Pledgor is required by
each of Geneva and Main Street to provide certain security in respect of the
liabilities of Pledgor under the Note Purchase Agreement, and each of Geneva and
Main Street requires that this Agreement be entered into by Pledgor as a
condition precedent to the purchase by it of its respective Notes.
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
Security Interest and Pledge
1.01. Security Interest and Pledge. Subject to the terms of this
Agreement, Pledgor hereby pledges and grants to Secured Party a first priority
security interest in the following property (such property being hereinafter
called the "Collateral"):
(a) all shares of capital stock of IWC Services, Inc. (the "Company");
(b) any other shares of capital stock hereafter pledged to Secured Party
pursuant to Sections 3.03 and 3.08; and
(c) subject to Section 4.03 hereof, all products and proceeds of the
foregoing capital stock, including, without limitation, all
distributions, dividends, stock dividends,
Stock Pledge Agreement
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securities, and other property, rights, and interests that Pledgor is
at any time entitled to receive on account of the same (all of the
foregoing described in this clause (c), the "Collateral Proceeds").
1.02. Obligations. The Collateral shall secure the following obligations,
indebtedness and liabilities (all such obligations, indebtedness and liabilities
being hereinafter sometimes called the "Obligations"):
(a) the payment of the indebtedness evidenced by the Notes;
(b) the payment of the indebtedness evidenced by the Guaranties;
(c) the performance and payment of the obligations of Pledgor under any of
the Documents, including, without limitation, the payment and
performance of Pledgor's obligations hereunder; and
(d) all extensions, renewals, rearrangements and modifications of any of
the foregoing.
ARTICLE II
Representations and Warranties
Pledgor represents and warrants to Secured Party that:
2.01. Title. Pledgor owns or, with respect to Collateral acquired after
the date hereof, Pledgor will own, legally and beneficially, the Collateral free
and clear of any lien, security interest, pledge, claim, or other encumbrance or
any right or option on the part of any third person to purchase or otherwise
acquire the Collateral or any part thereof, except for the security interest
granted hereunder and Permitted Liens. Pledgor has the unrestricted right to
pledge the Collateral as contemplated hereby. All of the Collateral consisting
of shares of capital stock has been duly and validly issued and is fully paid
and nonassessable.
2.02. Organization and Authority. Neither the execution, delivery or
performance by Pledgor of this Agreement nor compliance by them with the terms
and provisions hereof, nor the consummation of the transactions contemplated
herein, will (i) contravene in any material respect any applicable provision of
any law, statute, rule or regulation, or any order, writ, injunction or decree
of any court or governmental instrumentality, (ii) conflict with or result in
any breach of any term, covenant, condition or other provision of, or constitute
a default under, or (other than pursuant to the Security Documents) result in
the creation or imposition of (or the obligation to create or impose) any Lien
other than any Permitted Lien upon any of the property or assets of Pledgor
under, the terms of any contractual obligation to which Pledgor is a party or by
which it or any of its properties or assets are bound or to which it may be
subject.
2.03. Residence Address. As of the date hereof, the principal office of
Pledgor, and the place where Pledgor keeps its books and records, is located at
5151 San Felipe, Suite 450,
Stock Pledge Agreement
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<PAGE>
Houston, Texas 77056.
2.04. Percentage of Stock. The Collateral constitutes not less than one
hundred percent (100%) of the issued and outstanding shares of common capital
stock of the Company.
2.05. First Priority Perfected Security Interest. This Agreement creates
in favor of Secured Party a first priority security interest in the Collateral
currently in existence, which will be perfected upon delivery of the certificate
evidencing the Collateral together with an undated stock power endorsed in
blank.
ARTICLE III
Covenants
Pledgor covenants and agrees with Secured Party that:
3.01. Encumbrances. Except as permitted by the Credit Agreement, Pledgor
shall not create, permit, or suffer to exist, and shall defend the Collateral
against, any Lien on the Collateral except the pledge and security interest of
Secured Party hereunder and except for Permitted Liens, and shall defend
Pledgor's rights in the Collateral and Secured Party's security interest in the
Collateral against the claims of all persons and entities (other than any person
or entity claiming by, through or under Secured Party or any obligee of the
Obligations).
3.02. Sale of Collateral. Pledgor shall not sell, assign, or otherwise
dispose of the Collateral or any part thereof.
3.03. Distributions. If Pledgor shall become entitled to receive or shall
receive any stock certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase, or reduction of capital or issued in connection with
any reorganization), option or rights constituting Collateral, whether as an
addition to, in substitution of, or in exchange for any Collateral or otherwise,
Pledgor agrees to accept the same as Secured Party's agent and to hold the same
in trust for Secured Party and to deliver the same (to the extent in form
capable of delivery) promptly to Secured Party in the exact form received, with
the appropriate endorsement of Pledgor when necessary and/or appropriate undated
stock powers duly executed in blank, to be held by Secured Party, as additional
Collateral for the Obligations, subject to the terms hereof. Any sums paid upon
or in respect of the Collateral upon the liquidation or dissolution of the
issuer thereof in violation of the Note Purchase Agreement shall be paid over to
Secured Party to be held by it as additional Collateral for the Obligations
subject to the terms hereof except as otherwise provided in the Note Purchase
Agreement; and in case any distribution of capital shall be made on or in
respect of the Collateral while a Default or an Event of Default shall be
continuing or any property shall be distributed while a Default or an Event of
Default shall be continuing upon or with respect to the Collateral pursuant to
any recapitalization or reclassification of the capital of the issuer thereof or
pursuant to any reorganization of the issuer thereof, the property so
distributed shall be delivered to the Secured Party to be held by it, as
additional Collateral for the Obligations, subject to the terms hereof. All
sums of money and property so paid or distributed in respect of the Collateral
that are received by Pledgor shall, until paid or delivered to Secured Party, be
Stock Pledge Agreement
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<PAGE>
held by Pledgor in trust as additional security for the Obligations, provided
that except to the extent that such sums of money or property have theretofore
been applied against the Obligations in accordance with the Note Purchase
Agreement, such sums of money or property shall forthwith be delivered to
Pledgor at such time as no Default or Event of Default shall be continuing under
the Note Purchase Agreement.
3.04. Further Assurances. Pledgor has delivered the certificate
representing the stock referred to in Section 1.01 (a) to Secured Party, with an
undated stock power duly executed in blank to be held by Secured Party as
Collateral for the Obligations, subject to the terms hereof. At any time and
from time to time, upon the request of Secured Party, and at the sole expense of
Pledgor, Pledgor shall promptly execute and deliver all such further instruments
and documents and take such further action as Secured Party may deem reasonably
necessary or desirable to preserve and perfect its security interest in the
Collateral and carry out the provisions and purposes of this Agreement,
including, without limitation, the execution and filing of such financing
statements as Secured Party may require. A carbon, photographic, or other
reproduction of this Agreement or of any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement and
may be filed as a financing statement to the extent provided by applicable law.
3.05. Inspection Rights. Upon reasonable notice from Secured Party,
Pledgor shall permit Secured Party and its representatives to examine, inspect,
and copy Pledgor's books and records concerning ownership of the Collateral at
any reasonable time during normal business hours and as often as Secured Party
may desire.
3.06. Notification. Pledgor shall promptly after either Person has
knowledge thereof, notify Secured Party of (i) any lien, security interest,
encumbrance, or claim made or threatened against the Collateral other than
Permitted Liens, and (ii) the occurrence or existence of any Default or Event of
Default.
3.07. Books and Records. Pledgor shall mark its books and records to
reflect the security interest of Secured Party under this Agreement.
3.08. Additional Securities. Pledgor shall not consent to or approve the
issuance of any additional shares of any class of capital stock of the Company
or any securities convertible into, or exchangeable for, any such shares or any
warrants, options, rights, or other commitments entitling any person or entity
to purchase or otherwise acquire any such shares.
ARTICLE IV
Rights of Secured Party and Pledgor
Stock Pledge Agreement
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4.01. Power of Attorney. Pledgor hereby irrevocably constitutes and
appoints Secured Party and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead and in the name of Pledgor or in its
own name, from time to time in Secured Party's discretion during the continuance
of an Event of Default and prior to the Collateral Termination Date, to take any
and all action and to execute any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this Agreement and, without
limiting the generality of the foregoing, hereby gives Secured Party the power
and right on behalf of Pledgor and in its own name to do any of the following
after the occurrence and during the continuance of an Event of Default and to
the extent permitted by applicable laws, without notice to or the consent of
Pledgor:
(a) to demand, sue for, collect, or receive in the name of Pledgor or in
its own name, any money or property at any time payable or receivable
on account of or in exchange for any of the Collateral and, in
connection therewith, endorse checks, notes, drafts, acceptances,
money orders, or any other instruments for the payment of money under
the Collateral;
(b) to pay or discharge taxes, liens, security interests, or other
encumbrances (other than Permitted Liens) levied or placed on or
threatened against the Collateral;
(c) (i) to direct account debtors and any other parties liable for any
payment under any of the Collateral to make payment of any and all
monies due and to become due thereunder directly to Secured Party or
as Secured Party shall direct; (ii) to receive payment of and receipt
for any and all monies, claims, and other amounts due and to become
due at any time in respect of or arising out of any Collateral; (iii)
to sign and endorse any drafts, assignments, proxies, stock powers,
verifications, notices, and other documents relating to the
Collateral; (iv) to commence and prosecute any suit, actions or
proceedings at law or in equity in any court of competent jurisdiction
to collect the Collateral or any part thereof and to enforce any other
right in respect of any Collateral; (v) to defend any suit, action, or
proceeding brought against Pledgor with respect to any Collateral;
(vi) to settle, compromise, or adjust any suit, action, or proceeding
described in clause (v) above and, in connection therewith, to give
such discharges or releases as Secured Party may deem appropriate;
(vii) to exchange any of the Collateral for other property upon any
merger, consolidation, reorganization, recapitalization, or other
readjustment of the issuer thereof and, in connection therewith,
deposit any of the Collateral with any committee, depositary, transfer
agent, registrar, or other designated agency upon such terms as
Secured Party may determine; (viii) to add or release any guarantor,
endorser, surety, or other party to any of the Collateral or the
Obligations; and (ix) to sell, transfer, pledge, make any agreement
with respect to or otherwise deal with any of the Collateral as fully
and completely as though Secured Party were the absolute owner thereof
for all purposes, and to do, at Secured Party's option and Pledgor's
expense, at any time, or from time to time, all acts and things which
Secured Party deems necessary to protect, preserve, or realize upon
the Collateral and Secured Party's security
Stock Pledge Agreement
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<PAGE>
interest.
This power of attorney is a power coupled with an interest and shall be
irrevocable. Secured Party shall be under no duty to exercise or withhold the
exercise of any of the rights, powers, privileges, and options expressly or
implicitly granted to Secured Party in this Agreement, and shall not be liable
for any failure to do so or any delay in doing so. Secured Party shall not be
liable for any act or omission or for any error of judgment or any mistake of
fact or law in its individual capacity or in its capacity as attorney-in-fact
except acts or omissions constituting or resulting from its willful misconduct
or gross negligence. This power of attorney is conferred on Secured Party
solely to protect, preserve, and realize upon its security interest in the
Collateral.
4.02. Voting Rights. Until written notice shall be given to Pledgor in
accordance with Section 5.02(d) that Secured Party has exercised its rights
under Section 5.02(d) to vote the Collateral (provided, however, if Secured
Party is prevented from providing such notice as a result of Section 362 of the
United States Bankruptcy Code or similar law Pledgor shall be entitled to
exercise such rights so long as no Event of Default shall have occurred and be
continuing), Pledgor shall be entitled to exercise any and all voting and other
rights relating or pertaining to the Collateral or any part thereof (and the
Secured Party shall execute and deliver (or cause to be executed and delivered)
to Pledgor all such proxies and other instruments as Pledgor may reasonably
request for the purpose of enabling Pledgor to exercise the voting and other
rights which it is entitled to exercise pursuant to this sentence).
4.03. Dividends. Until written notice shall be given to Pledgor in
accordance with Section 5.02(d) that Secured Party has exercised its rights
under Section 5.02(d) to vote the Collateral, Pledgor shall be entitled to
receive and collect for its own use all Collateral Proceeds.
4.04. Performance by Secured Party of Pledgor's Obligations. If an Event
of Default has occurred and is continuing or if Pledgor fails to perform or
comply with any of its agreements contained herein and Secured Party itself
shall cause performance of or compliance with such agreement, the reasonable
expenses of Secured Party, together with interest thereon at the rate of
interest provided in the Note Purchase Agreement, shall be payable by Pledgor to
Secured Party on demand and shall constitute Obligations secured by this
Agreement.
4.05. Secured Party's Duty of Care. Other than the exercise of reasonable
care in the physical custody of the Collateral while held by Secured Party
hereunder, Secured Party shall have no responsibility for or obligation or duty
with respect to all or any part of the Collateral or any matter or proceeding
arising out of or relating thereto, including, without limitation, any
obligation or duty to collect any sums due in respect thereof or to protect or
preserve any rights against prior parties or any other rights pertaining
thereto, it being understood and agreed that Pledgor shall be responsible for
preservation of all rights in the Collateral. Without limiting the generality
of the foregoing, Secured Party shall be conclusively deemed to have exercised
reasonable care in the custody of the Collateral if Secured Party takes such
action, for purposes of preserving rights in the Collateral, as Pledgor may
reasonably request in writing, but no failure or omission or delay by Secured
Party in complying with any such request by Pledgor,
Stock Pledge Agreement
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and no refusal by Secured Party to comply with any such request by Pledgor,
shall of itself be deemed to be a failure to exercise reasonable care.
ARTICLE V
Default
5.01. Events of Default. Each of the following shall be deemed an "Event
of Default":
(a) The failure of the Collateral pledged to Secured Party hereunder to
constitute at least one hundred percent (100%) of the issued and
outstanding stock of the Company;
(b) An Event of Default under any Note Purchase Agreement shall have
occurred;
(c) Failure by Pledgor to perform any agreement contained herein and
continuance of such non-compliance or failure for thirty (30) days
after notice thereof to Pledgor from Secured Party; or
(d) Any representation, statement or warranty of Pledgor contained herein
shall be untrue in any material respect as of the date made.
5.02. Rights and Remedies. Prior to the Collateral Termination Date, upon
the occurrence of an Event of Default and so long as the same shall be
continuing, Secured Party shall have the following rights and remedies to the
extent not prohibited by applicable laws:
(a) In addition to all other rights and remedies granted to Secured Party
in this Agreement and in any other instrument or agreement securing,
evidencing, or relating to the Obligations, Secured Party shall have
all of the rights and remedies of a secured party under the Uniform
Commercial Code as adopted by the State of Texas. Without limiting
the generality of the foregoing, Secured Party may (A) without demand
or notice to Pledgor, collect, receive, or take possession of the
Collateral or any part thereof, (B) sell or otherwise dispose of the
Collateral, or any part thereof, in one or more parcels at public or
private sale or sales, at Secured Party's offices or elsewhere, for
cash, on credit, or for future delivery without assumption of any
credit risk, and/or (C) bid and become a purchaser at any such sale
free of any right or equity of redemption in Pledgor, which right or
equity is hereby expressly waived and released by Pledgor. Upon the
request of Secured Party, Pledgor shall assemble the Collateral and
make it available to Secured Party at any place designated by Secured
Party that is reasonably convenient to Pledgor and Secured Party.
Pledgor agrees that Secured Party shall not be obligated to give more
than ten (10) days' prior written notice of the time and place of any
public sale or of the time after which any private sale may take place
and that such notice shall constitute reasonable notice of such
matters. Pledgor shall be liable for all reasonable expenses of
retaking, holding, preparing for sale, or the like, and all reasonable
attorneys' fees and other reasonable
Stock Pledge Agreement
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expenses incurred by Secured Party in connection with the collection
of the Obligations and the enforcement of Secured Party's rights under
this Agreement, in each case during the continuance of an Event of
Default, all of which expenses and fees shall constitute additional
Obligations secured by this Agreement. Secured Party may apply the
Collateral against the Obligations then due and payable in such order
and manner as provided in Section 6.15. Pledgor shall remain liable
for any deficiency if the proceeds of any sale or disposition of the
Collateral are insufficient to pay the Obligations. Pledgor waives all
rights of marshalling in respect of the Collateral.
(b) Secured Party may cause any or all of the Collateral held by it to be
transferred into the name of Secured Party or the name or names of
Secured Party's nominee or nominees (in each case as pledgee
hereunder).
(c) Secured Party shall be entitled to receive all cash dividends payable
in respect of the Collateral.
(d) Secured Party shall have the right, but shall not be obligated to,
exercise or cause to be exercised all voting rights and corporate
powers in respect of the Collateral, and Pledgor shall deliver to
Secured Party, if requested by Secured Party, irrevocable proxies with
respect to the Collateral in form satisfactory to Secured Party.
Because of applicable securities laws, including without limitation, the
Securities Act of 1933, as amended, the securities laws of Texas and other
applicable state securities laws, there may be legal restrictions or limitations
affecting attempts of Secured Party to dispose of the Collateral in the
enforcement of its rights and remedies hereunder. Secured Party is hereby
authorized by Pledgor, but not obligated, upon the occurrence and during the
continuance of an Event of Default, to the extent permitted by applicable law,
to sell all or any part of the Collateral at private sale, subject to investment
letters or in any other manner which will not require the Collateral or any part
thereof, to be registered in accordance with the Securities Act of 1933, as
amended, or the rules and regulations promulgated thereunder, or any other
applicable securities law or regulation. Pledgor specifically agrees that under
these circumstances, such a sale is a commercially reasonable method of
disposition of the Collateral. Secured Party is also hereby authorized by
Pledgor, but not obligated, to take such actions, give such notices, obtain such
rulings and consents, and do such other things as Secured Party may deem
appropriate in the event of such a sale or disposition of any of the Collateral.
Pledgor acknowledges that Secured Party may, in its reasonable discretion,
approach a restricted number of potential purchasers and that a sale under such
circumstances may yield a lower price for the Collateral or any part or parts
thereof than would otherwise be obtainable if the same were registered and sold
in the open market. Pledgor agrees that such private sale shall constitute a
commercially reasonable method of disposing of the Collateral in view of the
time, expense, and potential liability to the parties of such transactions of
registration of the Collateral in accordance with applicable securities laws.
Stock Pledge Agreement
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ARTICLE VI
Miscellaneous
6.01. No Waiver; Cumulative Remedies. No failure on the part of Secured
Party to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power, or privilege under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power,
or privilege under this Agreement preclude any other or further exercise thereof
or the exercise of any other right, power, or privilege. To the fullest extent
permitted by applicable laws, the rights and remedies provided for in this
Agreement are cumulative and not exclusive of any rights and remedies provided
by law.
6.02. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Pledgor and Secured Party and their respective heirs,
successors, and assigns, except that Pledgor may not assign any of its rights or
obligations under this Agreement without the prior written consent of Secured
Party except to the extent permitted by the Note Purchase Agreement.
6.03. Amendment; Entire Agreement. This Agreement, together with any
applicable pledge or other agreement required by applicable laws, embodies the
final, entire agreement among the parties hereto and supersedes any and all
prior commitments, agreements, representations, and understandings, whether
written or oral, relating to the subject matter hereof. The provisions of this
Agreement may be amended or waived only by an instrument in writing signed by
the parties hereto with the requisite consent of Secured Party as provided in
the Note Purchase Agreement.
6.04. Notices. Any notice, consent, or other communication required or
permitted to be given under this Agreement to Secured Party or Pledgor must be
in writing and delivered in person or by facsimile or by registered or certified
mail, return receipt requested, postage prepaid, as follows:
To Secured Party: Geneva Associates, L.L.C., as Collateral Agent
Attn: Mr. Tracy Turner
First Union Tower
P.O. Box 21962
Greensboro, North Carolina 27420
Telephone: (910) 275-7002
Facsimile: (910) 274-4984
Copy to: Hutcheson & Grundy, L.L.P.
Attn: Ms. Lisa J. Mellencamp
1200 Smith Street, Suite 3300
Houston, Texas 77002-4579
Telephone: (713) 951-2800
Facsimile: (713) 951-2925
Stock Pledge Agreement
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To Pledgor: Boots & Coots International Well Control, Inc.
Attn: Mr. Larry Ramming
5151 San Felipe, Suite 450
Houston, Texas 77056
Telephone: (713) 621-7911
Facsimile: (713) 621-7988
Stock Pledge Agreement
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Copy to: Brown, Parker & Leahy, L.L.P.
Attn: Mr. William T. Heller
1200 Smith Street, Suite 3600
Houston, Texas 77002
Telephone: (713) 654-8111
Facsimile: (713) 621-7988
Any such notice, consent, or other communication shall be deemed given when
delivered in person or, if given by mail, five (5) days after such communication
is deposited in the mail, certified or registered with return receipt requested.
6.05. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
This Agreement, and the rights and duties of the parties hereto, shall be
construed in accordance with and governed by the internal laws of the State of
Texas; provided, however that any enforcement of Secured Party's rights and
remedies in any other jurisdiction shall, to the extent required by applicable
laws, be governed by the laws of the jurisdiction of enforcement. Each party
hereto hereby submits to the nonexclusive jurisdiction of the United States
District Court for the Southern District of Texas and of any Texas State court
sitting in Houston, Texas for purposes of all legal proceedings arising out of
or relating to this Agreement or the transactions contemplated hereby. Each
party hereto irrevocably waives, to the fullest extent permitted by law, any
objection it may now or hereafter have to the laying of the venue of any such
proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. EACH PARTY
TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY.
6.06. Headings. The headings, captions, and arrangements used in this
Agreement are for convenience only and shall not affect the interpretation of
this Agreement.
6.07. Survival of Representations and Warranties. All representations and
warranties made in this Agreement or in any certificate delivered pursuant
hereto shall survive the execution and delivery of this Agreement, and no
investigation by Secured Party shall affect the representations and warranties
or the right of Secured Party to rely upon them.
6.08. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.09. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Stock Pledge Agreement
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6.10. Construction. Pledgor and Secured Party acknowledge that each of
them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement with its legal counsel and that
this Agreement shall be construed as if jointly drafted by Pledgor and Secured
Party.
6.11. Obligations Absolute. The obligations of Pledgor under this
Agreement shall be absolute and unconditional and shall not be released,
discharged, reduced, or in any way impaired by any circumstance whatsoever,
including, without limitation, any amendment, modification, extension, or
renewal of this Agreement, the Obligations, or any document or instrument
evidencing, securing, or otherwise relating to the Obligations, or any release,
subordination, or impairment of collateral, or any waiver, consent, extension,
indulgence, compromise, settlement, or other action or inaction in respect of
this Agreement, the Obligations, or any document or instrument evidencing,
securing, or otherwise relating to the Obligations, or any exercise or failure
to exercise any right, remedy, power, or privilege in respect of the
Obligations.
6.12. Termination. On the Collateral Termination Date, the Liens created
hereby shall terminate, and Secured Party, at the request and expense of
Pledgor, forthwith will execute and deliver to Pledgor a proper instrument or
instruments acknowledging the satisfaction and termination of the Liens created
hereby and will duly assign, transfer and deliver to Pledgor (without recourse
and without any representation or warranty, such of the Collateral as may be in
the possession of the Lender and as has not theretofore been sold or otherwise
applied pursuant to this Agreement or the Note Purchase Agreement. Upon such
release and redelivery, this Agreement shall terminate. The term "Collateral
Termination Date" shall mean the first date on which no Note is outstanding
under the Note Purchase Agreement and no other obligation is due and payable
thereunder or under any other Document.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first written above.
PLEDGOR:
BOOTS & COOTS INTERNATIONAL WELL
CONTROL, INC., a Delaware corporation
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
SECURED PARTY:
GENEVA ASSOCIATES, L.L.C., as
Collateral Agent
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
Stock Pledge Agreement
Page 12
<PAGE>
Exhibit 10.10
FIRST AMENDMENT TO STOCK PLEDGE AGREEMENT
THIS FIRST AMENDMENT TO STOCK PLEDGE AGREEMENT (this "Amendment") dated as
of March ___, 1998, is by and between Boots & Coots International Well Control,
Inc., a Delaware corporation ("Pledgor"), and Geneva Associates, L.L.C.
("Geneva"), as Collateral Agent for the Noteholders (as hereinafter defined)
(the "Secured Party").
RECITALS:
A. Pledgor, Geneva and Main Street Merchant Partners II, L.P. ("Main
Street") have entered into that certain Note Purchase Agreement dated as of
January 2, 1998, as amended by that certain First Amendment to Note Purchase
Agreement dated as of March ___, 1998 (the "Note Purchase Agreement Amendment")
(herein, as the same may be further amended, modified, supplemented, extended,
rearranged, and/or restated from time to time, called the "Note Purchase
Agreement"), pursuant to which, upon the terms and conditions therein set forth,
Pledgor has issued its 10.0% Senior Secured Notes due June 15, 1998, in the
aggregate principal amount of $7,250,000 (herein, as the same may be amended,
modified, supplemented, extended, rearranged, and/or restated from time to time,
together with any notes given by Pledgor in extension, replacement,
rearrangement, modification and/or substitution thereof or therefor,
collectively called the "Notes" and any holders of the Notes, collectively
called the "Noteholders").
B. Each of Geneva and Main Street requires that this Amendment be entered
into by Pledgor as a condition precedent to the effectiveness of the Note
Purchase Agreement Amendment.
C. Pledgor and the Secured Party have entered into that certain Stock
Pledge Agreement dated as of January 2, 1998 (the "Agreement") and they now
desire to amend the Agreement as hereinafter provided.
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
Amendments to Agreement
1.01. Subsection 1.01(a) of the Agreement is hereby amended and restated
in its entirety as follows:
"(a) all shares of capital stock of IWC Services, Inc. and Code 3,
Inc. (the "Companies");"
1.02. Section 2.04 and Subsection 5.01(a) of the Agreement are hereby
amended by
Stock Pledge Agreement
Page 1
<PAGE>
deleting the word "Company" in the last line of each thereof and inserting in
its place the word "Companies".
1.03. Section 3.03 of the Agreement is hereby amended by adding the phrase
"(i) hereafter own the capital stock of any other entity or (ii)" after the word
"shall" in the first line thereof.
ARTICLE II
Miscellaneous
2.01. Successors and Assigns. This Amendment shall be binding upon and
inure to the benefit of Pledgor and Secured Party and their respective heirs,
successors, and assigns, except that Pledgor may not assign any of its rights or
obligations under the Agreement, as amended by this Amendment, without the prior
written consent of Secured Party except to the extent permitted by the Note
Purchase Agreement.
2.02. Amendment; Entire Agreement. The Agreement, as amended by this
Amendment, together with any applicable pledge or other agreement required by
applicable laws, embodies the final, entire agreement among the parties hereto
and supersedes any and all prior commitments, agreements, representations, and
understandings, whether written or oral, relating to the subject matter hereof.
The provisions of the Agreement, as amended by this Amendment, may be amended or
waived only by an instrument in writing signed by the parties hereto with the
requisite consent of Secured Party as provided in the Note Purchase Agreement.
2.03. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
This Amendment, and the rights and duties of the parties hereto, shall be
construed in accordance with and governed by the internal laws of the State of
Texas; provided, however that any enforcement of Secured Party's rights and
remedies in any other jurisdiction shall, to the extent required by applicable
laws, be governed by the laws of the jurisdiction of enforcement. Each party
hereto hereby submits to the nonexclusive jurisdiction of the United States
District Court for the Southern District of Texas and of any Texas State court
sitting in Houston, Texas for purposes of all legal proceedings arising out of
or relating to this Amendment or the transactions contemplated hereby. Each
party hereto irrevocably waives, to the fullest extent permitted by law, any
objection it may now or hereafter have to the laying of the venue of any such
proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. EACH PARTY
TO THIS AMENDMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THE AGREEMENT,
AS AMENDED BY THIS AMENDMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
2.04. Headings. The headings, captions, and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
2.05. Reaffirmation of Agreement. This Amendment shall be deemed to be an
amendment to the Agreement, and the Agreement, as amended hereby, is hereby
ratified,
Stock Pledge Agreement
Page 2
<PAGE>
approved and confirmed in each and every respect. All references to the
Agreement in the Agreement and the other Documents (excluding this Amendment)
shall hereafter be deemed to refer to the Agreement, as amended hereby.
2.06. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.07. Severability. Any provision of this Amendment which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Amendment, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as
of the day and year first written above.
PLEDGOR:
BOOTS & COOTS INTERNATIONAL WELL
CONTROL, INC., a Delaware corporation
By:
-------------------------------------------
Name: Larry H. Ramming
Title: Chairman of the Board and Chief Executive
Officer
SECURED PARTY:
GENEVA ASSOCIATES, L.L.C., as
Collateral Agent
By:
-------------------------------------------
Name: Tracy Scott Turner
Title:Principal
Stock Pledge Agreement
Page 3
<PAGE>
Exhibit 10.11
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER EITHER
THE SECURITIES ACT OF 1933, AS AMENDED, [THE "1933 ACT"], OR APPLICABLE STATE
SECURITIES LAW [THE "STATE ACTS"], AND SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED,
DONATED OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR CONSIDERATION) BY THE
HOLDER EXCEPT BY REGISTRATION OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UPON
THE ISSUANCE TO COMPANY OF A FAVORABLE OPINION OF COUNSEL OR OTHER EVIDENCE
REASONABLY SATISFACTORY TO COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL
NOT BE IN VIOLATION OF THE 1933 ACT AND THE STATE ACTS.
1,200,000 Shares of Common Stock Warrant No. ____
*********************************************************
WARRANT
to
PURCHASE COMMON STOCK
of
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
*******************************************************
This certifies that, for good and valuable consideration, Boots & Coots
International Well Control, Inc., a Delaware corporation (the "Company"), grants
to Main Street Merchant Partners II, L.P. or its registered assigns (the
"Warrantholder"), the right to subscribe for and purchase from the Company
1,200,000 shares (the "Warrant Shares") of common stock, par value $0.00001 per
share (the "Common Stock"), of the Company at the Exercise Price (as defined
herein). The exercise price shall initially be $2.62 per share of Common Stock,
subject to adjustment as provided in Section 5 (the "Exercise Price"). This
Warrant shall be exercisable from and after 9:00 A.M., Central Standard Time on
January 3, 1998 (the "Initial Exercise Date") to and including 5:00 P.M.,
Central Standard Time on January 3, 2004 (the "Expiration Date"). The Exercise
Price and the number of Warrant Shares are subject to adjustment from time to
time as provided in Section 5.
SECTION 1. DURATION AND EXERCISE OF WARRANT; LIMITATION ON EXERCISE; TAXES;
TRANSFER; DIVISIBILITY.
1.1 DURATION AND EXERCISE OF WARRANT. This Warrant is immediately
exercisable on
<PAGE>
the Initial Exercise Date and may be exercised, in whole or in part, at any time
from the Initial Exercise Date to the Expiration Date. The rights represented by
this Warrant may be exercised by the Warrantholder of record, in whole or in
part, from time to time, by (a) surrender of this Warrant, accompanied by the
Exercise Form annexed hereto (the "Exercise Form") duly executed by the
Warrantholder of record and specifying the number of Warrant Shares to be
purchased to the Company at the office of the Company located at 5151 San
Felipe, Suite 450, Houston, TX 77056 (or such other office or agency of the
Company as it may designate by notice to the Warrantholder at the address of
such Warrantholder appearing on the books of the Company) during normal business
hours on any day (a "Business Day") other than a Saturday, Sunday or a day on
which the New York Stock Exchange is authorized to close or on which the Company
is otherwise closed for business (a "Nonbusiness Day") on or after 9:00 A.M.
Central Standard Time on the Initial Exercise Date but not later than 5:00 P.M.
on the Expiration Date (or 5:00 P.M. on the next succeeding Business Day, if the
Expiration Date is a Nonbusiness Day), (b) delivery of payment to the Company in
cash or by certified or official bank check in New York Clearing House Funds, of
the Exercise Price for the number of Warrant Shares specified in the Exercise
Form or notice that all or a portion of the next due principal or interest
payment to be paid by the Company to the Warrantholder pursuant to the Note
Purchase Agreement dated as of January 2, 1998, as may be amended from time to
time, on any Note held by Warrantholder is to be applied towards such exercise
(to the extent the Warrantholder is also the holder of such Note), and (c) such
documentation as to the identity and authority of the Warrantholder as the
Company may reasonably request. Such Warrant Shares shall be deemed by the
Company to be issued to the Warrantholder as the record holder of such Warrant
Shares as of the close of business on the date on which this Warrant shall have
been surrendered and payment made for the Warrant Shares as aforesaid.
Certificates for the Warrant Shares specified in the Exercise Form shall be
delivered to the Warrantholder as promptly as practicable, and in any event
within ten (10) Business Days, thereafter. The stock certificates so delivered
shall be in denominations as may be specified by the Warrantholder and agreed
upon by the Company, and shall be issued in the name of the Warrantholder or, if
permitted by subsection 1.4 and in accordance with the provisions thereof, such
other name as shall be designated in the Exercise Form. If this Warrant shall
have been exercised only in part, the Company shall, at the time of delivery of
the certificates for the Warrant Shares, deliver to the Warrantholder a new
Warrant evidencing the rights to purchase the remaining Warrant Shares, which
new Warrant shall in all other respects be identical with this Warrant. No
adjustments or payments shall be made on or in respect of Warrant Shares
issuable on the exercise of this Warrant for any cash dividends paid or payable
to holders of record of Common Stock prior to the date as of which the
Warrantholder shall be deemed to be the record holder of such Warrant Shares.
1.2 LIMITATION ON EXERCISE. If this Warrant is not exercised prior to
5:00 P.M. on the Expiration Date (or the next succeeding Business Day, if the
Expiration Date is a Nonbusiness Day), this Warrant, or any new Warrant issued
pursuant to Section 1.1, shall cease to be exercisable and shall become void,
and all rights of the Warrantholder hereunder shall cease.
2.3 PAYMENT OF TAXES. The issuance of certificates for Warrant Shares
shall be made
-2-
<PAGE>
without charge to the Warrantholder for any stock transfer or other issuance tax
in respect thereto; provided, however, that the Warrantholder shall be required
to pay any and all taxes which may be payable in respect to any transfer
involved in the issuance and delivery of any certificates for Warrant Shares in
a name other than that of the then Warrantholder as reflected upon the books of
the Company.
1.4 RESTRICTIONS ON TRANSFER. Neither this Warrant nor any of the Warrant
Shares may be transferred or sold except in compliance with applicable United
States federal and state securities laws.
1.5 DIVISIBILITY OF WARRANT. This Warrant may be divided into multiple
warrants upon surrender at the principal office of the Company on any Business
Day, without charge to any Warrantholder.
1.6 CASHLESS EXERCISE. At the option of the Warrantholder, the
Warrantholder may exercise this Warrant, without a cash payment of the Exercise
Price through (i) application of all or a portion of the next due principal or
interest payment to be paid by Borrower on the Note, or (ii) a reduction in the
number of Warrant Shares issued upon the exercise of the Warrant. Such
reduction may be effected by designating that the number of the shares of Common
Stock issuable to the Warrantholder upon such exercise shall be reduced by the
number of shares having a fair market value equal to the amount of the total
Exercise Price for such exercise. In such instance, no cash or other
consideration will be paid by the Warrantholder in connection with such exercise
other than then surrender of the Warrant itself, and no commission or other
remuneration will be paid or given by the Warrantholder or the Company in
connection with such exercise.
SECTION 2. RESERVATION AND LISTING OF SHARES.
All Warrant Shares which are issued upon the exercise of the rights
represented by this Warrant shall, upon issuance and payment of the Exercise
Price, be validly issued, fully paid and nonassessable and free from all taxes,
liens, security interests, charges and other encumbrances with respect to the
issue thereof other than taxes in respect of any transfer occurring
contemporaneously with such issue. During the period within which this Warrant
may be exercised, the Company shall at all times have authorized and reserved,
and keep available free from preemptive rights, a sufficient number of shares of
Common Stock to provide for the exercise of this Warrant, and shall at its
expense use its best efforts to procure such listing thereof as then may be
required on all stock exchanges or automated quotation systems on which the
Common Stock may be listed.
SECTION 3. EXCHANGE, LOSS OR DESTRUCTION OF WARRANT.
-3-
<PAGE>
If permitted by subsection 1.4 or 1.5, upon surrender of this Warrant to
the Company with a duly executed instrument of assignment and funds sufficient
to pay any transfer tax, the Company shall, without charge, execute and deliver
a new Warrant of like tenor in the name of the assignee named in such instrument
of assignment and this Warrant shall promptly be canceled. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, the Company will execute and deliver
a new Warrant of like tenor.
SECTION 4. OWNERSHIP OF WARRANT.
The Company may deem and treat the person or entity in whose name this
Warrant is registered as the holder and owner hereof (notwithstanding any
notations of ownership or writing hereon made by anyone other than the Company)
for all purposes and shall not be affected by any notice to the contrary, until
presentation of this Warrant for registration of transfer as provided in
subsections 1.1 and 1.5 or in Section 3.
SECTION 5. CERTAIN ADJUSTMENTS.
The Exercise Price at which Warrant Shares may be purchased hereunder and
the number of Warrant Shares to be purchased upon exercise hereof are subject to
change or adjustments as follows:
5.1 NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares or the
Exercise Price of such Warrant Shares is adjusted, as herein provided, the
Company shall promptly mail first class, postage prepaid, to all Warrantholders,
notice of such adjustment.
5.2 PRESERVATION OF PURCHASE RIGHTS UPON MERGER, CONSOLIDATION. In case
of any consolidation of the Company with or merger of the Company into another
corporation or in case of any sale, transfer or lease to another corporation of
all or substantially all of the assets or stock of the Company, the Company or
such successor or purchasing corporation, as the case may be, shall execute with
the Warrantholder an agreement providing that the Warrantholder shall have the
right thereafter upon payment of the Exercise Price in effect immediately prior
to such action to receive upon exercise of this Warrant the kind and amount of
shares and other securities and property which such holder would have been
entitled to receive after the happening of such consolidation, merger, sale,
transfer or lease had this Warrant been exercised immediately prior to such
action. Such agreement shall provide for adjustments, which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 5.
The provisions of this subsection 5.2 shall apply similarly to successive
consolidations, mergers, sales, transfers or leases.
-4-
<PAGE>
SECTION 5.3 ADJUSTMENTS TO EXERCISE PRICE.
(a) Stock Dividends, Distributions or Subdivisions. In the event the
Company shall issue additional shares of Common Stock pursuant to a stock
dividend, stock distribution, subdivision, share split or reclassification,
the Exercise Price in effect immediately prior to such event shall,
concurrently with the effectiveness of such event, be proportionately
decreased.
(b) Combinations or Consolidations. In the event the outstanding
shares of Common Stock shall be combined or consolidated, by
reclassification, reverse split or otherwise, into a lesser number of
shares of Common Stock, the Exercise Price in effect immediately prior to
such event shall, concurrently with the effectiveness of such event, be
proportionately increased.
(c) Issuance of Additional Shares of Common Stock.
(i) In the event the Company shall issue Additional Shares
(defined below) without consideration or for a consideration per
share less than the Exercise Price in effect immediately prior to
the issuance, then the Exercise Price shall be reduced to the
price at which such Additional Shares are issued.
(ii) If the Company issues Common Stock for a consideration in
whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined
by mutual agreement of the Warrantholder and the Company
irrespective of any accounting treatment.
(iii) If the Company issues options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible
into or exchangeable for Common Stock or options to purchase or
rights to subscribe for such convertible or exchangeable
securities, the following provisions shall apply for all purposes
of this subsection:
(A) The aggregate maximum number of shares of Common Stock
deliverable upon exercise (assuming the satisfaction of any
conditions to exercisability including, without limitation,
the passage of time, but without taking into account
potential antidilution adjustments) of such options to
purchase or rights to subscribe for Common Stock shall be
deemed to have been issued at the time such options or
rights were issued and for a
-5-
<PAGE>
consideration equal to the consideration, if any, received
by the Company upon the issuance of such options or rights
plus the exercise price provided in such options or rights
(without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
(B) The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange (assuming the
satisfaction of any conditions to convertibility or
exchangeability, including, without limitation, the passage
of time, but without taking into account potential
antidilution adjustments) for any such conversion or
exchange thereof shall be deemed to have been issued at the
time such securities were issued or such options or rights
were issued and for consideration equal to the
consideration, if any, received by the Company for any such
securities and related option or rights (excluding any cash
received on account of accrued interest or accrued
dividends), plus the additional consideration, if any, to be
received by the Company (without taking into account
potential antidilution adjustments) upon the conversion or
exchange of such securities or the exercise of any related
options or rights.
(C) In the event of any change in the number of shares of
Common Stock deliverable or in the consideration payable to
the Company upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or
exchangeable securities, including, but not limited to, a
change resulting from the antidilution provisions thereof,
the Exercise Price, to the extent it is in any way affected
by the issuance of such options, rights or securities, shall
be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common
Stock or any payment of such consideration upon the exercise
of any such options or rights or the conversion or exchange
of such securities.
(D) Upon the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the
expiration of any options or rights related to such
convertible or exchangeable securities, the Exercise Price,
to the extent it is in any way affected by the issuance of
such options, rights or securities or options or rights
related to such securities, shall be recomputed to reflect
the issuance of only the number of shares of
-6-
<PAGE>
Common Stock (and convertible or exchangeable securities
which remain in effect) actually issued upon the exercise of
such options or rights, upon the conversion or exchange of
such securities or upon the exercise of the options or
rights related to such securities.
(E) The number of shares of Common Stock deemed issued and
the consideration deemed paid therefor pursuant to
subsections 5.3(c)(iii)(A) and (B) shall be appropriately
adjusted to reflect any change, termination or expiration of
the type described in either subsection 5.3(c)(iii)(C) or
(D).
(iv) "Additional Shares" shall mean any shares of Common Stock
issued (or deemed to have been issued) pursuant to subsection
5.3(c)(iii) by the Company on or after the Initial Exercise Date
other than the Common Stock issued upon exercise of the Warrant.
SECTION 6. MISCELLANEOUS.
6.1 ENTIRE AGREEMENT. This Warrant, the Registration Rights Agreement,
the Note Purchase Agreement and the other Documents referenced therein, all of
even date herewith between the Company and the Warrantholder constitute the
entire agreement between the Company and the Warrantholder with respect to this
Warrant and the Warrant Shares.
6.2 BINDING EFFECTS; BENEFITS. This Warrant shall inure to the benefit of
and shall be binding upon the Company, the Warrantholder and holders of Warrant
Shares and their respective heirs, legal representatives, successors and
assigns. Nothing in this Warrant, expressed or implied, is intended to or shall
confer on any person or entity other than the Company, the Warrantholder and
holders of Warrant Shares, or their respective heirs, legal representatives,
successors or assigns, any rights, remedies, obligations or liabilities under or
by reason of this Warrant of the Warrant Shares.
6.3 AMENDMENTS. This Warrant may not be modified or amended except by a
written instrument signed by the Company and the Warrantholder.
6.4 SECTION AND OTHER HEADINGS. The section and other headings contained
in this Warrant are for reference purposes only and shall not be deemed to be a
part of this Warrant or to affect the meaning or interpretation of this Warrant.
6.5 FURTHER ASSURANCES. Each of the Company, the Warrantholder and
holders of Warrant Shares shall do and perform all such further acts and things
and execute and deliver all such other certificates, instruments and/or
documents as any party hereto may reasonably request
-7-
<PAGE>
in connection with the performance of the provisions of this Warrant.
6.6 NOTICES. All demands, requests, notices and other communications
required or permitted to be given under this Warrant shall be in writing and
shall be deemed to have been duly given if delivered personally, sent by
confirmed facsimile or sent by United States certified or registered first class
mail, postage prepaid, to the parties hereto at the following addresses or at
such other address as any party hereto shall hereafter specify by notice to the
other party hereto:
(a) if to the Company, addressed to:
Boots & Coots International Well Control, Inc.
5151 San Felipe, Suite 450
Houston, TX 77056
Attention: Mr. Larry Ramming
Telephone No.: (713) 621-7911
Facsimile No.: (713) 621-7988
(b) If to any Warrantholder or holder of Warrant Shares, addressed to the
address of such person appearing on the books of the Company.
Except as otherwise provided herein, all such demands, requests, notices and
other communications shall be deemed to have been received on the date of
personal delivery thereof, the sending of confirmed facsimile thereof or on the
third Business Day after the mailing thereof.
6.8 SEPARABILITY. Any term or provision of this Warrant which is invalid
or unenforceable in any jurisdiction shall be ineffective in such jurisdiction
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable any other term or provision of this Warrant or affecting the
validity or enforceability of any of the terms of provisions of this Warrant in
any other jurisdiction.
6.9 FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Warrantholder an amount in cash equal to such fraction
multiplied by the current market price (as determined as of the date of
exercise, and with reference to the applicable trading market) of a share of
such stock as of the date of such exercise.
6.10 GOVERNING LAW. This Warrant shall be deemed to be a contract made
under the laws of the State of Delaware and shall be governed by and construed
in accordance with the laws of such State applicable to contracts made and
performed in Delaware.
-8-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
BOOTS & COOTS INTERNATIONAL
WELL CONTROL, INC.
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
Dated: January 2, 1998
-9-
<PAGE>
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
WARRANT EXERCISE FORM
(To be executed upon exercise of this Warrant)
The undersigned, the record holder of this Warrant, hereby irrevocably elects
to exercise the right, represented by this Warrant, to purchase [ ] of
the Warrant Shares and herewith tenders payment for such Warrant Shares to the
order of BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC., in the amount of $[
] in accordance with the terms of this Warrant. The undersigned requests that a
certificate for such Warrant Shares be registered in the name of________________
__________________________ and that such certificate be delivered to
______________________________________.
Date__________________________ Signature __________________________
-10-
<PAGE>
Exhibit 10.12
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of January 2,
1998, is by and between Main Street Merchant Partners II, L.P., a Delaware
limited partnership ("Investor"), and Boots & Coots International Well Control,
Inc., a Delaware corporation (the "Company").
R E C I T A L S:
WHEREAS, the Company has requested that Investor purchase certain Notes of
the Company in connection with the purchase by IWC Services, Inc. of the issued
and outstanding stock of ITS Supply Corporation.
WHEREAS, Investor is willing to purchase certain Notes upon the terms and
conditions of that certain Note Purchase Agreement dated of even date herewith
(the "Note Purchase Agreement"), by and between the Company and Investor, and
subject to the representations, warranties, covenants and agreements set forth
herein and therein:
WHEREAS, it is a material inducement and a precondition to the entering
into of the Note Purchase Agreement by Investor that the Company enter into this
Agreement;
NOW, THEREFORE, in consideration of the terms and conditions contained
herein and of the purchase of Notes by Investor, the parties hereto, intending
to be legally bound hereby, agree as follows:
ARTICLE I
REGISTRATION RIGHTS
Section 1.1 Requested Registration.
(a) If, at any time, the Company shall receive from Investor a written
request that the Company effect a registration under the Securities Act for the
sale of at least 25% of the Registrable Securities (as defined below) held or
obtainable by all of the Holders, the Company shall:
(i) within ten (10) days after receipt of such written request, give
written notice of the proposed registration to all other Holders (if any); and
(ii) as soon as practicable use its best efforts to register (including,
without limitation, the execution of an undertaking to file post-effective
amendments and any other governmental requirements) all Registrable Securities
which a Holder requests to be registered and all Registrable Securities which
any other Holder requests to be registered within twenty (20) days after receipt
of such written notice from the Company; provided, that the Company shall
<PAGE>
not be obligated to file any additional registration statement pursuant to this
Section 1.1 after the Company has effected two such registrations at the request
of Investor and such registrations have been declared or ordered effective.
Subject to the foregoing, the Company shall file a registration statement
covering the Registrable Securities so requested to be registered as soon as
practicable, but in any event within sixty (60) days after receipt of the
request or requests of a Holder and shall use its best efforts to have such
registration statement promptly declared effective by the Securities Exchange
Commission whether or not all Registrable Securities requested to be registered
can be included. If, however, the Company shall furnish to such Holders a
certificate signed by the President of the Company stating that in the good-
faith judgment of the Board of Directors it would be materially detrimental to
the Company and its shareholders for such registration statement to be filed
within such sixty-day (60-day) period and it is therefore deferring the filing
of such registration statement, the Company shall have an additional period of
not more than sixty (60) days after the expiration of the initial sixty-day (60-
day) period within which to file such registration statement; provided, that
during such time the Company may not file a registration statement for
securities to be issued and sold for its own account or the account of an other
of its shareholders.
(b) If a Holder intends to distribute the Registrable Securities covered
by its request by means of an underwriting, such Holder shall so advise the
Company as part of its request and the Company shall include such information in
the written notice referred to in subsection 1.1(a)(i). The underwriter may be
selected by the Holders electing to sell their Registrable Securities, subject
to the reasonable approval of the Company. The right of any Holder to
registration pursuant to this Section 1.1 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. The
Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting. Notwithstanding any other provisions of this Section 1.1, if the
representative of the underwriter advises the Company and the Holder(s) in
writing that marketing factors require a limitation on the number of shares to
be underwritten (a "Cutback"), the number of shares to be included in the
underwriting or registration shall be allocated first to the Holders, without
limitation, and thereafter shall be allocated among the Company and the other
holders requesting inclusion in the registration pro rata on the basis of the
number of shares each requesting other holder (or the Company, as the case may
be) requests to be included bears to the total number of shares of all
requesting other holders (and the Company) that have been requested to be
included in such registration. If a person who has requested inclusion in such
registration as provided above does not agree to the terms of any such
underwriting, such person shall be excluded therefrom by written notice from the
Company, the underwriter or the Holder(s). The securities so excluded shall
also be withdrawn from registration.
(c) If, at the time any written request for registration is received by the
Company pursuant to this Section, the Company has determined to proceed with the
actual preparation and filing of a registration statement under the Securities
Act in connection with the proposed offer
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and sale for cash of any of its securities by it or any of its security holders,
or in the event that Section 1.3 hereof is applicable, then such written request
shall be deemed to have been given pursuant to Section 1.2 and Section 1.3
hereof, as the case may be, rather than this Section 1.1, and the rights of the
Holders covered by such written request shall be governed by Section 1.2 or
Section 1.3, as the case may be.
Section 1.2 Piggyback Registration. If at any time or from time to time,
the Company shall determine to register the sale of any of its securities, for
its own account or the account of any of its shareholders, other than a
registration relating solely to an employee benefit plan or a registration
relating solely to a transaction under Rule 145 of the Securities Act, the
Company will:
(i) give to each Holder written notice thereof as soon as
practicable prior to filing the registration statement; and
(ii) on behalf of all entities requesting inclusion in such
registration, include such securities in the offering and may
condition such offer on their acceptance of any other reasonable
conditions (including, without limitation, if such offering is
underwritten, that such requesting holders agree in writing to enter
into an underwriting agreement with usual and customary terms). If
the representative of the underwriter advises the Company in writing
that marketing factors require a Cutback, the number of shares to be
included in the underwriting or registration shall be allocated first
to the Company, and thereafter shall be allocated among the other
holders requesting inclusion in the registration pro rata on the basis
of the number of shares each requesting other holder requests to be
included bears to the total number of shares of all requesting other
holders that have been requested to be included in such registration.
If a person who has requested inclusion in such registration as
provided above does not agree to the terms of any such underwriting,
such person shall be excluded therefrom by written notice from the
Company or the underwriter. The securities so excluded shall also be
withdrawn from registration.
Section 1.3 Form S-2 or Form S-3.
(a) Each Holder will have the right to request and have effected
unlimited registrations of shares of its Registrable Securities on Form S-2
or Form S-3.
(b) Upon written request of a Holder delivered to the Company, the
Company will notify each other Holder of such request within three (3) days
after the receipt of such request. Each of such other Holders shall have
three (3) days after receipt of such notice from the Company to request
that all or any portion of its Registrable Securities be included in such
registration. After the expiration of all such request and notice periods
under this Section, the Company will use all reasonable efforts to cause
the registration of all Registrable Securities on Form S-2 or such
successor form or Form S-3
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or such successor form to the extent requested by such Holders.
(c) Any registration statement filed pursuant to this Section may
include other securities of the Company, with respect to which "piggyback"
registration rights have been granted, and may include securities of the
Company being sold for the account of the Company; provided, however, that
any Cutback shall be dealt with in the same manner as provided in Section
1.1.
Section 1.4 Registrable Securities. For the purposes of this Section 1,
the term "Registrable Securities" shall mean any shares of voting Common Stock
issuable to a Holder upon exercise of the Warrant, any shares of Common Stock
issued to a Holder as a dividend on the Warrant Shares, and any other shares of
Common Stock distributable on, with respect to, or in substitution for such
Registrable Securities, including those which have been transferred as permitted
under this Agreement, except for those that have been sold or transferred
pursuant to an effective registration statement or pursuant to Rule 144 under
the Securities Act.
Section 1.5 Procedure for Registration. Whenever the Company is required
under this Agreement to register Common Stock, it agrees do the following:
(a) Use all reasonable efforts to prepare, as soon as is feasible, for
filing with the Securities and Exchange Commission a registration statement
and such amendments and supplements to said registration statement and the
prospectus as may be necessary to keep the registration statement effective
and to comply with the provisions of the Securities Act for the period
necessary to complete the proposed public offering;
(b) Furnish to each selling Holder such copies of each preliminary and
final prospectus and such other documents as such holder may reasonably
request to facilitate the public offering of its Registrable Securities;
(c) Enter into any underwriting agreement with provisions reasonably
required by the proposed underwriter for the selling holders, if any; and
(d) Use all reasonable efforts to register or qualify the Registrable
Securities covered by the registration statement under the securities or
"blue-sky" laws of such jurisdictions as any selling Holder may reasonably
request, although the Company will not have to register in any states that
require it to qualify to do business or subject itself to general service
of process, and for a registration under Section 1.2. The Company will not
be required to register in more states than are necessary to permit the
sale of the securities.
Section 1.6. Indemnification.
(a) Subject to applicable law, the Company will indemnify each Holder
and each person controlling such Holder against all claims, losses, damages and
liabilities, including legal
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and other expenses reasonably incurred, arising out of any untrue or allegedly
untrue statement of a material fact contained in the registration statement, or
any omission or alleged omission to state a material fact required to be stated
in the registration statement or necessary to make the statements not
misleading, or arising out of any violation by the Company of the Securities
Act, any state securities or "blue-sky" laws or any applicable rule or
regulation.
(b) Subject to applicable law, each Holder will indemnify the
Company, and each person controlling the Company, against all claims, losses,
damages and liabilities, including legal and other expenses reasonably incurred,
arising out of any untrue or allegedly untrue statement of a material fact
contained in the registration statement, or required to be stated in the
registration statement or necessary to make the statements contained therein not
misleading, to the extent, but only to the extent, that such untrue statement or
omission is contained in any information or affidavit furnished in writing by
such Holder to the Company specifically for inclusion in such registration
statement. In no event shall the liability of such Holder under this paragraph
be greater in amount than the dollar amount of the proceeds received by such
Holder upon the sale of the Common Stock pursuant to the registration statement
giving rise to such indemnification obligation.
Section 1.7 Transfer of Registration Rights. The registration rights of a
Holder under Section 1 may be transferred to any transferee of Registrable
Securities. Any such transferee will be deemed to be a Holder for purposes of
this Agreement, and as a condition precedent to transfer, such transferee must
agree to be bound by the terms of this Agreement.
Section 1.8 Obligations of a Holder and Others in a Registration. Each
Holder agrees to timely furnish such information regarding such person and the
securities sought to be registered and to take such other action as the Company
may reasonably request, including the entering into of agreements and the
providing of documents, in connection with the registration or qualification of
such securities and/or the compliance of such registration statement with all
applicable laws. Each Holder severally agrees that, in connection with any
offering undertaken pursuant to Section 1.2 or Section 1.3, the Company shall
have the right to, if it deems an underwriter or underwriters necessary or
appropriate, designate such underwriter(s); provided, however, that if the
Company does not within sixty (60) days from the date of the last written notice
of the Holder(s) delivered pursuant to Section 1.2 or Section 1.3, as the case
may be, designate such underwriter(s) in writing to the Holder(s), the Holder(s)
shall have the right to designate their own underwriter(s). If the registration
involves an underwriter, each Holder agrees, upon the request of such
underwriter, not to sell any unregistered securities of the Company for a period
of one hundred eighty (180) days following the effective date of the
registration statement for such offering and to enter into an underwriting
agreement with such underwriters containing usual and customary terms and
provisions.
Section 1.9 Limitations on Subsequent Registration Rights. The Company
will not, without the prior written consent of Investor, enter into any
agreement with any holder or prospective holder of any securities of the Company
which would allow such holder or prospective holder to make a demand
registration which could result in such registration
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statement being declared effective prior to the 180th day subsequent to the
effective date of any registration effective pursuant to Section 1.2 or Section
1.3. If the Company grants any subsequent registration rights more favorable
than the registration rights granted to Investor in this Section, the Company
will also grant the more favorable registration rights to Investor.
Section 1.10 Expenses of Registration. All expenses incurred in
connection with registrations pursuant to this Agreement, including, without
limitation, all registration, federal and state filing and qualification fees,
printing expenses, fees and disbursements of counsel for the Company and one
counsel for the Holders and expenses of any special audits of the Company's
financial statements incidental to or required by such registration, shall be
borne by the Company, except that the Company shall not be required to pay
underwriters' fees, discounts or commissions relating to Registrable Securities
being sold by any Holders.
ARTICLE II
BOARD OF DIRECTOR REPRESENTATIVE
At the election of Investor or Geneva Associates, L.L.C. ("Geneva"), for a
period of six (6) years from the date hereof, the Company shall elect a
representative of Investor or Geneva Associates, L.L.C. ("Geneva"), to the
Company's Board of Directors as soon as possible after the date hereof. Until
such time, Investor and Geneva shall have Board of Director visitation rights
which will entitle it to participation in (and receive copies of all materials
distributed at) all meetings of the Board of Directors and any committees
thereof.
ARTICLE III
MISCELLANEOUS
Section 3.1 Modification of Agreement, Sale of Interest.
(a) This Agreement may not be modified, altered or amended, except by an
agreement in writing signed by Investor and the Company. The Company may not
sell, assign or transfer this Agreement, or the Warrant, or any portion thereof,
including, without limitation, any of the Company's rights, titles, interests,
remedies, powers, obligations and/or duties hereunder or thereunder. Investor
may, subject to the provisions of the Section 3.1(b) below, assign, transfer or
otherwise dispose of, at any time or times hereafter, this Agreement or the
Warrant, or any portion hereof or thereof, including, without limitation, such
party's rights, title, interest, remedies, powers, and/or duties hereunder or
thereunder, and such transferee or assignee must agree to be bound by the terms
and conditions of this Agreement. This Agreement and Warrant shall be binding
upon and inure to the benefit of the successors and permitted assigns of
Investor.
(b) Anything to the contrary in this Agreement notwithstanding, if Investor
has assigned any of its rights as permitted hereunder, the rights of Investor,
including the right to
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grant any consent or waiver or to enter into any amendment to this Agreement may
be exercised only by the holders of the majority in interest of the Warrant
Shares issued or issuable under the Warrant and such action taken by such
majority shall be binding on all others, including Investor and its successors
and permitted assigns. Investor will give notice to Borrower of any such
assignment within a reasonable period thereafter.
Section 3.2 Expenses and Attorney's Fees. If, at any time or times,
whether prior or subsequent to the date hereof, Investor employs counsel for
advice or other representation or incurs reasonable legal and/or other costs and
expenses in connection with:
(a) the negotiation, preparation or execution of this Agreement or any
amendment of or modification of this Agreement;
(b) any litigation, contest, dispute, suit, proceeding or action (whether
instituted by Investor, the Company or any other person) in any way relating to
this Agreement or the Warrant, unless a court of competent jurisdiction finds in
favor of the Company as the prevailing party, and awards court costs and
attorneys' fees to the such prevailing party; or
(c) any attempt to enforce any rights of Investor or any participant
against the Company or any other person that may be obligated to Investor by
virtue of this Agreement or the Warrant in accordance with the terms of this
Agreement;
then, in any such event, the reasonable attorneys' fees arising from such
services and all reasonable expenses, costs, charges, and fees of counsel or of
Investor in any way or respect arising in connection with or relating to any of
the events or actions described in this subsection shall be payable on demand by
the Company, to Investor.
Section 3.3 Waiver by Investor. Investor's failure, at any time or times
hereafter, to require strict performance by the Company of any provision of this
Agreement or the Warrant shall not waive, affect or diminish any right of
Investor thereafter to demand strict compliance and performance therewith. None
of the undertakings, agreements, warranties, covenants and representations of
the Company or any of its Subsidiaries contained in this Agreement, the Warrant,
or the other Documents shall be deemed to have been suspended or waived by
Investor, unless such suspension or waiver is by an instrument in writing signed
by an officer of Investor and specifying such suspension or waiver.
Section 3.4 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
Section 3.5 Parties. This Agreement, the Warrant and the Other Agreements
shall be binding upon and inure to the benefit of the successors and permitted
assigns of Borrower, each of its Subsidiaries, the Company and Investor.
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Section 3.6 Entire Agreement; Conflict of Terms. This Agreement, the
Warrant and the other Documents constitute the entire agreement of the parties
with respect to the Warrant and may not be modified or supplemented by any prior
or contemporaneous oral understanding.
Section 3.7 Equitable Relief. The Company recognized that, in the event
the Company fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy of law may prove to be inadequate
relief to Investor, therefore, the Company agrees that Investor, if Investor so
requests, shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages.
Section 3.8 Governing Law; Jurisdiction; Venue; Waiver of Jury Trial and
Service of Process. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE AT TEXAS
AND SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO
DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES APPLICABLE THERETO
AND THE INTERNAL LAWS OF THE STATE OF TEXAS, APPLICABLE TO AGREEMENTS EXECUTED,
DELIVERED AND PERFORMED WITHIN SUCH STATE, AND THE COMPANY HEREBY WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO SUCH PARTY AT ITS
ADDRESS SET FORTH IN SECTION 3.9 BELOW. THE COMPANY WAIVES TRIAL BY JURY, ANY
OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION
3.8 SHALL AFFECT THE RIGHT OF INVESTOR TO SERVE LEGAL PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF INVESTOR TO BRING ANY ACTION OR
PROCEEDING AGAINST BORROWER, ANY OF ITS SUBSIDIARIES AND/OR THEIR RESPECTIVE
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHERE SUCH PARTY MAINTAINS
OFFICES OR HAS PROPERTY.
Section 3.9 Notices. All notices, requests, consents, approvals or
demands to or upon the respective parties hereto shall be given or made as
follows:
If to Investor, at: Main Street Merchant Partners II, L.P.
Post Oak Blvd., Suite 800
Houston, Texas 77056
Telephone: 713-350-6000
Facsimile: 713-350-6001
with a copy to: Hutcheson & Grundy
1200 Smith Street, Suite 3300
Houston, Texas 77002
Attn: Ms. Lisa Mellencamp
Telephone: 713-951-2800
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Facsimile: 713-951-2925
If to the Company: Boots & Coots International Well Control, Inc.
with a copy to:
Unless otherwise specified herein, all such notices, requests, consents,
approvals and demands given or made in connection with the terms and provisions
of this Agreement shall be deemed to have been given or made when personally
delivered, or, if mailed, upon the earlier of actual receipt by the addressee or
three (3) days after sent by registered or certified mail, postage prepaid, or,
in the case of overnight courier service (which may be utilized hereunder), when
delivered by the overnight courier company to the respective address specified
above, or, in the case of telecopy or facsimile transmission (which may be
utilized hereunder), within the first business hour (9:00 a.m. to 5:00 p.m.,
local time for the recipient, on any Business Day) after receipt by the
respective addressee. Any party may change the address or transmission number
to which notices shall be directed hereunder by giving ten (10) days written
notice of such change to the other parties.
Section 3.10 Section Titles. The section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
Section 3.11 Defined Terms. Capitalized terms, when used herein, shall
have the meanings set forth in the Note Purchase Agreement.
Section 3.12 Indemnification. The Company hereby agrees to pay, indemnify
and hold Investor and its partners, directors, officers, agents, employees and
attorneys harmless from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, performance or administration of this Agreement, including all
expenses of litigation, court costs and attorneys' fees reasonably incurred, for
any and all claims, losses, damages, causes of action, suits and liability of
any kind arising out of or in connection with this Agreement, regardless of
whether such claims, losses damages, causes of action, suits or liability of any
other kind are caused in whole or in part by the negligence of Investor, but
excluding any and all obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements directly or indirectly,
arising out of, or arising out of the failure by Investor to properly comply
with any law, regulation or rule imposed on Investor by any state or federal
regulatory agency or department. It is the express intention of the parties
hereto that the
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indemnity provided for in this paragraph is an indemnity by the Company to
indemnify and protect Investor from the consequences of Investor's own
negligence, whether that negligence is the sole or concurring cause of any
claim, loss, damage, cause of action, suit or liability of any other kind,
except for any claim, loss, damage, cause of action, suit or liability of any
other kind arising out of, or directly or indirectly caused by, the gross
negligence or wilful misconduct of Investor.
Section 3.13 Counterparts. This Agreement may be executed in a number of
identical counterparts, each of which, for all purposes, is to be deemed an
original, and all of which collectively constitute one agreement, but in making
proof of this Agreement, it shall not be necessary to produce or account for
more than one such counterpart. A facsimile or photocopy of an executed
counterpart of this Agreement shall be sufficient to bind the party or parties
whose signature(s) appear thereon.
Section 3.14 Legal Compliance. The parties acknowledge that this
Agreement and the Warrant are being given as part of a "Qualified Commercial
Loan" pursuant to Vernon's Texas Civil Statutes, Article 5069 - Chapter 1.H, and
as such the Warrant and rights under this Agreement will not constitute
"interest" for any purpose, including under the Note Purchase Agreement.
IN WITNESS WHEREOF, this Registration Rights Agreement has been duly
executed and delivered as of the day and year specified at the beginning hereof.
MAIN STREET MERCHANT PARTNERS II, L.P.
By: _____________________________________
Name: Vince D. Foster
Title: Managing Director
BOOTS & COOTS INTERNATIONAL WELL
CONTROL, INC.
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
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Exhibit 10.13
FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
THIS FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (the "Amendment")
dated as of March ___, 1998, is by and between Main Street Merchant Partners II,
L.P., a Delaware limited partnership ("Investor"), and Boots & Coots
International Well Control, Inc., a Delaware corporation (the "Company").
R E C I T A L S:
WHEREAS, Investor purchased certain Notes of the Company in connection with
the purchase by IWC Services, Inc. of the issued and outstanding stock of ITS
Supply Corporation pursuant to that certain Note Purchase Agreement dated as of
January 2, 1998 (the "Note Purchase Agreement"), by and between the Company,
Investor and Geneva Associates, L.L.C.;
WHEREAS, Investor is willing to invest certain additional funds in the
Company pursuant to the terms and conditions of that certain First Amendment to
Note Purchase Agreement dated as of March ___, 1998 (the "Note Purchase
Agreement Amendment");
WHEREAS, it is a material inducement and a precondition to the entering
into of the Note Purchase Agreement Amendment that the Company enter into this
amendment of that certain Registration Rights Agreement dated as of January 2,
1998, by and between Investor and the Company (the "Registration Rights
Agreement") entered into in connection with the Note Purchase Agreement;
NOW, THEREFORE, in consideration of the terms and conditions contained
herein, the parties hereto, intending to be legally bound hereby, agree as
follows:
Section 1.1 Amendments to Registration Rights Agreement.
(a) Section 1.4 of the Registration Rights Agreement (Registrable
Securities) is hereby amended and restated in its entirety as follows:
" For the purposes of this Section 1, the term "Registrable
Securities" shall mean any shares of voting Common Stock issuable to a Holder
upon exercise of any of its Warrants (issued pursuant to the terms of the Note
Purchase Agreement as amended from time to time), any shares of Common Stock
issued to a Holder as a dividend on any of its Warrant Shares (as defined in the
Warrants), and any other shares of Common Stock distributable on, with respect
to, or in substitution for such Registrable Securities, including those which
have been transferred as permitted under this Agreement, except for those that
have been sold or transferred pursuant to an effective registration statement or
pursuant to Rule 144 under the Securities Act."
<PAGE>
(b) Subsection 1.6(b) of the Registration Rights Agreement
(Indemnification) is hereby amended by adding the phrase ", severally and not
jointly," after the word "Holder" in the first line thereof.
(c) Article II of the Registration Rights Agreement is hereby amended by
adding the following sentence at the end thereof: "This obligation of the
Company shall survive any registration of the Registrable Securities pursuant to
the terms hereof."
Section 1.2 Parties. This Amendment shall be binding upon and inure to
the benefit of the successors and permitted assigns of the Company and Investor.
Section 1.3 Entire Agreement; Conflict of Terms. The Agreement, as
amended by this Amendment, constitutes the entire agreement of the parties with
respect to the subject matter hereof and may not be modified or supplemented by
any prior or contemporaneous oral understanding.
Section 1.4 Governing Law; Jurisdiction; Venue; Waiver of Jury Trial and
Service of Process. THIS AMENDMENT SHALL BE DEEMED TO HAVE BEEN MADE IN THE
STATE OF TEXAS AND SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE
PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES
APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF TEXAS, APPLICABLE TO
AGREEMENTS EXECUTED, DELIVERED AND PERFORMED WITHIN SUCH STATE, AND THE COMPANY
HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT
ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO SUCH PARTY AT
ITS ADDRESS SET FORTH IN THE AGREEMENT. THE COMPANY WAIVES TRIAL BY JURY, ANY
OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION
SHALL AFFECT THE RIGHT OF INVESTOR TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECT THE RIGHT OF INVESTOR TO BRING ANY ACTION OR
PROCEEDING AGAINST COMPANY, ANY OF ITS SUBSIDIARIES AND/OR THEIR RESPECTIVE
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHERE SUCH PARTY MAINTAINS
OFFICES OR HAS PROPERTY.
Section 1.5 Section Titles. The section titles contained in this
Amendment are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
Section 1.6 Counterparts. This Amendment may be executed in a number of
identical counterparts, each of which, for all purposes, is to be deemed an
original, and all of which collectively constitute one agreement, but in making
proof of this Amendment, it shall not be necessary to produce or account for
more than one such counterpart. A facsimile or photocopy
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of an executed counterpart of this Amendment shall be sufficient to bind the
party or parties whose signature(s) appear thereon.
Section 1.74 Legal Compliance. The parties acknowledge that the
Registration Rights Agreement, as amended by this Amendment, and the Warrants
issued to Investor are being given as part of a "Qualified Commercial Loan"
pursuant to Vernon's Texas Civil Statutes, Article 5069 - Chapter 1.H, and as
such the Warrants and rights under the Registration Rights Agreement will not
constitute "interest" for any purpose, including under the Note Purchase
Agreement, as amended by the Note Purchase Agreement Amendment.
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IN WITNESS WHEREOF, this First Amendment to Registration Rights Agreement
has been duly executed and delivered as of the day and year specified at the
beginning hereof.
MAIN STREET MERCHANT PARTNERS II, L.P.
By: ____________________________________
Name: Vince D. Foster
Title: Managing Director
BOOTS & COOTS INTERNATIONAL WELL
CONTROL, INC.
By:____________________________________
Name: Larry H. Ramming
Title: Chairman of the Board and Chief Executive
Officer
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EXHIBIT 10.14
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
1997 INCENTIVE STOCK PLAN
1. PURPOSE OF THE PLAN
This 1997 Incentive Stock Plan is intended to promote the interests of Boots
& Coots International Well Control, Inc., a Delaware corporation (the
"Company"), by providing the employees of the Company, who are largely
responsible for the management, growth and protection of the business of the
Company, with a proprietary interest in the Company.
2. DEFINITIONS
As used in the Plan, the following definitions apply to the terms indicated
below:
(a) "Board of Directors" shall mean the Board of Directors of Boots & Coots
International Well Control, Inc., a Delaware corporation.
(b) "Cause," when used in connection with the termination of a Participant's
employment with the Company, shall mean the termination of the
Participant's employment by the Company by reason of (i) the conviction
of the Participant by a court of competent jurisdiction as to which no
further appeal can be taken of a crime involving moral turpitude; (ii)
the proven commission by the Participant of an act of fraud upon the
Company; (iii) the willful and proven misappropriation of any funds or
property of the Company by the Participant; (iv) the willful, continued
and unreasonable failure by the Participant to perform duties assigned to
him and agreed to by him; (v) the knowing engagement by the Participant
in any direct, material conflict of interest with the Company without
compliance with the Company's conflict of interest policy, if any, then
in effect; (vi) the knowing engagement by the Participant, without the
written approval of the Board of Directors of the Company, in any
activity which competes with the business of the Company or which would
result in a material injury to the Company; or (vii) the knowing
engagement in any activity which would constitute a material violation of
the provisions of the Company's Policies and Procedures Manual, if any,
then in effect.
(c) "Cash Bonus" shall mean an award of a bonus payable in cash pursuant to
Section 10 hereof.
(d) "Change in Control" shall mean:
(1) a "change in control" of the Company, as that term is contemplated
in the federal securities laws; or
(2) the occurrence of any of the following events:
(A) any Person becomes, after the effective date of this Plan, the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the
Company's then outstanding securities; provided, that the acquisition
of additional voting securities, after the effective date of this
Plan, by any Person who is, as of the effective date of this Plan,
the beneficial owner, directly or indirectly, of 20% or more of the
combined voting power of the Company's then outstanding securities,
shall not constitute a "Change in Control" of the Company for
purposes of this Section 2(d).
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(B) a majority of individuals who are nominated by the Board of
Directors for election to the Board of Directors on any date, fail to
be elected to the Board of Directors as a direct or indirect result
of any proxy fight or contested election for positions on the Board
of Directors, or
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(f) "Committee" shall mean the Compensation Committee of the Board of
Directors or such other committee as the Board of Directors shall
appoint from time to time to administer the Plan.
(g) "Common Stock" shall mean the Company's Common Stock, par value $.01
per share.
(h) "Company" shall mean IWC Services, Inc., a Texas corporation, and each
of its Subsidiaries, and its successors.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(j) the "Fair Market Value" of a share of Common Stock on any date shall
be (i) the closing sale price on the immediately preceding business
day of a share of Common Stock as reported on the principal securities
exchange on which shares of Common Stock are then listed or admitted
to trading or (ii) if not so reported, the average of the closing bid
and asked prices for a share of Common Stock on the immediately
preceding business day as quoted on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or (iii) if
not quoted on NASDAQ, the average of the closing bid and asked prices
for a share of Common Stock as quoted by the National Quotation
Bureau's "Pink Sheets" or the National Association of Securities
Dealers' OTC Bulletin Board System. If the price of a share of Common
Stock shall not be so reported, the Fair Market Value of a share of
Common Stock shall be determined by the Committee in its absolute
discretion.
(k) "Incentive Award" shall mean an Option, a share of Restricted Stock, a
share of Phantom Stock, a Stock Bonus or Cash Bonus granted pursuant
to the terms of the Plan.
(l) "Incentive Stock Option" shall mean an Option which is an "incentive
stock option" within the meaning of Section 422 of the Code and which
is identified as an Incentive Stock Option in the agreement by which
it is evidenced.
(m) "Issue Date" shall mean the date established by the Committee on which
certificates representing shares of Restricted Stock shall be issued
by the Company pursuant to the terms of Section 7(d) hereof.
(n) "Non-Qualified Stock Option" shall mean an Option which is not an
Incentive Stock Option and which is identified as a Non-Qualified
Stock Option in the agreement by which it is evidenced.
(o) "Option" shall mean an option to purchase shares of Common Stock of
the Company granted pursuant to Section 6 hereof. Each Option shall be
identified as either an Incentive Stock Option or a Non-Qualified
Stock Option in the agreement by which it is evidenced.
(p) "Participant" shall mean a full-time employee of the Company who is
eligible to participate in the Plan and to whom an Incentive Award is
granted pursuant to the Plan, and, upon his death, his successors,
heirs, executors and administrators, as the
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case may be, to the extent permitted hereby.
(q) "Person" shall mean a "person," as such term is used in Sections 13(d)
and 14(d) of the Exchange Act, and the rules and regulations in effect
from time to time thereunder.
(r) a share of "Phantom Stock" shall represent the right to receive in cash
the Fair Market Value of a share of Common Stock of the Company, which
right is granted pursuant to Section 8 hereof and subject to the terms
and conditions contained therein.
(s) "Plan" shall mean the IWC Services, Inc. 1996 Incentive Stock Plan, as
it may be amended from time to time.
(t) "Qualified Domestic Relations Order" shall mean a qualified domestic
relations order as defined in the Code, in Title I of the Employee
Retirement Income Security Act, or in the rules and regulations as may
be in effect from time to time thereunder.
(u) a share of "Restricted Stock" shall mean a share of Common Stock which
is granted pursuant to the terms of Section 7 hereof and which is
subject to the restrictions set forth in Section 7(c) hereof for so
long as such restrictions continue to apply to such share.
(v) "Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
(w) "Stock Bonus" shall mean a grant of a bonus payable in shares of Common
Stock pursuant to Section 9 hereof.
(x) "Subsidiary" or "Subsidiaries" shall mean any and all corporations in
which at the pertinent time the Company owns, directly or indirectly,
stock vested with 50% or more of the total combined voting power of all
classes of stock of such corporations within the meaning of Section
424(f) of the Code.
(y) "Vesting Date" shall mean the date established by the Committee on
which a share of Restricted Stock or Phantom Stock may vest.
3. STOCK SUBJECT TO THE PLAN
Under the Plan, the Committee may grant to Participants (i) Options, (ii)
shares of Restricted Stock, (iii) shares of Phantom Stock, (iv) Stock Bonuses
and (v) Cash Bonuses.
The Committee may grant Options, shares of Restricted Stock, shares of
Phantom Stock and Stock Bonuses under the Plan with respect to a number of
shares of Common Stock that in the aggregate at any time does not exceed
1,475,000 shares of Common Stock. The grant of a Cash Bonus shall not reduce the
number of shares of Common Stock with respect to which Options, shares of
Restricted Stock, shares of Phantom Stock or Stock Bonuses may be granted
pursuant to the Plan.
If any outstanding Option expires, terminates or is canceled for any reason,
the shares of Common Stock subject to the unexercised portion of such Option
shall again be available for grant under the Plan. If any shares of Restricted
Stock or Phantom Stock, or any shares of Common Stock granted in a Stock Bonus
are forfeited or canceled for any reason, such shares shall again be available
for grant under the Plan.
Shares of Common Stock issued under the Plan may be either newly issued or
treasury shares, at the discretion of the Committee.
4. ADMINISTRATION OF THE PLAN
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The Plan shall be administered by a Committee of the Board of Directors
consisting of two or more persons, each of whom shall be a "disinterested
person" within the meaning of Rule 16b-3(c)(2)(i) promulgated under Section 16
of the Exchange Act. The Committee shall from time to time designate the
employees of the Company who shall be granted Incentive Awards and the amount
and type of such Incentive Awards.
The Committee shall have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan and the terms of
any Incentive Award issued under it and to adopt such rules and regulations for
administering the Plan as it may deem necessary. Decisions of the Committee
shall be final and binding on all parties.
The Committee may, in its absolute discretion (i) accelerate the date on
which any Option granted under the Plan becomes exercisable, (ii) extend the
date on which any Option granted under the Plan ceases to be exercisable, (iii)
accelerate the Vesting Date or Issue Date, or waive any condition imposed
pursuant to Section 7(b) hereof, with respect to any share of Restricted Stock
granted under the Plan and (iv) accelerate the Vesting Date or waive any
condition imposed pursuant to Section 8 hereof, with respect to any share of
Phantom Stock granted under the Plan.
In addition, the Committee may, in its absolute discretion, grant Incentive
Awards to Participants on the condition that such Participants surrender to the
Committee for cancellation such other Incentive Awards (including, without
limitation, Incentive Awards with higher exercise prices) as the Committee
specifies. Notwithstanding Section 3 hereof, Incentive Awards granted on the
condition of surrender of outstanding Incentive Awards shall not count against
the limits set forth in such Section 3 until such time as such Incentive Awards
are surrendered.
Whether an authorized leave of absence, or absence in military or government
service, shall constitute termination of employment shall be determined by the
Committee in its absolute discretion.
No member of the Committee shall be liable for any action, omission, or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated from and against any cost or
expense (including attorneys' fees) or liability (including any sum paid in
settlement of a claim with the approval of the Committee) arising out of any
action, omission or determination relating to the Plan, unless, in either case,
such action, omission or determination was taken or made by such member,
director or employee in bad faith and without reasonable belief that it was in
the best interests of the Company.
5. ELIGIBILITY
The persons who shall be eligible to receive Incentive Awards pursuant to the
Plan shall be such full-time employees of the Company as the Committee, in its
absolute discretion, shall select from time to time. Notwithstanding the
generality of the foregoing, no employee of the Company shall be eligible to
receive Incentive Awards pursuant to this Plan if the employee is also entitled
to receive an Incentive Award under the terms of his employment agreement with
the Company, or any specialty Incentive Stock Plan adopted after the date
hereof, unless such employment agreement or specialty plan expressly provides
otherwise.
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6. OPTIONS
The Committee may grant Options pursuant to the Plan, which Options shall be
evidenced by agreements in such form as the Committee shall from time to time
approve. Options shall comply with and be subject to the following terms and
conditions:
(a) Identification of Options
All Options granted under the Plan shall be clearly identified in the
agreement evidencing such Options as either Incentive Stock Options or as
Non-Qualified Stock Options.
(b) Exercise Price
The exercise price of any Non-Qualified Stock Option granted under the Plan
shall be such price as the Committee shall determine on the date on which
such Non-Qualified Stock Option is granted; provided, that such price may not
be less than the minimum price required by law. Except as provided in Section
6(d) hereof, the exercise price of any Incentive Stock Option granted under
the Plan shall be not less than 100% of the Fair Market Value of a share of
Common Stock on the date on which such Incentive Stock Option is granted.
(c) Term and Exercise of Options
(1) Each Option shall be exercisable on such date or dates, during such
period and for such number of shares of Common Stock as shall be
determined by the Committee on the day on which such Option is granted
and set forth in the agreement evidencing the Option; provided, however,
that no Option shall be exercisable after the expiration of ten years
from the date such Option was granted; and, provided, further, that each
Option shall be subject to earlier termination, expiration or
cancellation as provided in the Plan.
(2) Each Option shall be exercisable in whole or in part with respect to
whole shares of Common Stock. The partial exercise of an Option shall not
cause the expiration, termination or cancellation of the remaining
portion thereof. Upon the partial exercise of an Option, the agreement
evidencing such Option shall be returned to the Participant exercising
such Option together with the delivery of the certificates described in
Section 6(c)(5) hereof.
(3) An Option shall be exercised by delivering notice to the Company's
principal office, to the attention of its Secretary, no fewer than five
business days in advance of the effective date of the proposed exercise.
Such notice shall be accompanied by the agreement evidencing the Option,
shall specify the number of shares of Common Stock with respect to which
the Option is being exercised and the effective date of the proposed
exercise, and shall be signed by the Participant. The Participant may
withdraw such notice at any time prior to the close of business on the
business day immediately preceding the effective date of the proposed
exercise, in which case such agreement shall be returned to the
Participant. Payment for shares of Common Stock purchased upon the
exercise of an Option shall be made on the effective date of such
exercise either (i) in cash, by certified check, bank cashier's check or
wire transfer or (ii) subject to the approval of the Committee, in shares
of Common Stock owned by the Participant and valued at their Fair Market
Value on the effective date of such exercise, or (iii) partly in shares
of Common Stock with the balance in cash, by certified check, bank
cashier's check or wire transfer. Any
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payment in shares of Common Stock shall be effected by the delivery of
such shares to the Secretary of the Company, duly endorsed in blank or
accompanied by stock powers duly executed in blank, together with any
other documents and evidences as the Secretary of the Company shall
require from time to time.
(4) Any Option granted under the Plan may be exercised by a broker-dealer
acting on behalf of a Participant if (i) the broker-dealer has received
from the Participant or the Company a duly endorsed agreement evidencing
such Option and instructions signed by the Participant requesting the
Company to deliver the shares of Common Stock subject to such Option to
the broker-dealer on behalf of the Participant and specifying the account
into which such shares should be deposited, (ii) adequate provision has
been made with respect to the payment of any withholding taxes due upon
such exercise and (iii) the broker-dealer and the Participant have
otherwise complied with Section 220.3(e)(4) of Regulation T, 12 CFR Part
220.
(5) Certificates for shares of Common Stock purchased upon the exercise
of an Option shall be issued in the name of the Participant and delivered
to the Participant as soon as practicable following the effective date on
which the Option is exercised; provided, however, that such delivery
shall be effected for all purposes when a stock transfer agent of the
Company shall have deposited such certificates in the United States mail,
addressed to the Participant.
(6) During the lifetime of a Participant each Option granted to him shall
be exercisable only by him. No Option shall be assignable or transferable
otherwise than by will or by the laws of descent and distribution.
(d) Limitations on Grant of Incentive Stock Options
(1) The aggregate Fair Market Value of shares of Common Stock with
respect to which "incentive stock options" (within the meaning of Section
422, without regard to Section 422(d) of the Code) are exercisable for
the first time by a Participant during any calendar year under the Plan
(and any other stock option plan of the Company, or any subsidiary of the
Company shall not exceed $100,000. Such Fair Market Value shall be
determined as of the date on which each such Incentive Stock Option is
granted. If such aggregate Fair Market Value of shares of Common Stock
underlying such Incentive Stock Options exceeds $100,000, then Incentive
Stock Options granted hereunder to such Participant shall, to the extent
and in the order required by Regulations promulgated under the Code (or
any other authority having the force of Regulations), automatically be
deemed to be Non-Qualified Stock Options, but all other terms and
provisions of such Incentive Stock Options shall remain unchanged. In the
absence of such Regulations (and authority), or if such Regulations (or
authority) require or permit a designation of the options which shall
cease to constitute Incentive Stock Options, Incentive Stock Options
shall, to the extent of such excess and in the order in which they were
granted, automatically be deemed to be Non-Qualified Stock Options, but
all other terms and provisions of such Incentive Stock Options shall
remain unchanged.
(2) No Incentive Stock Option may be granted to an individual if, at the
time of the proposed grant, such individual owns, directly or indirectly
(based on the attribution rules in Section 424(d) of the Code) stock
possessing more than ten
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percent of the total combined voting power of all classes of stock of the
Company or any of its subsidiaries, unless (i) the exercise price of such
Incentive Stock Option is at least 110% of the Fair Market Value of a
share of Common Stock at the time such Incentive Stock Option is granted
and (ii) such Incentive Stock Option is not exercisable after the
expiration of five years from the date such Incentive Stock Option is
granted.
(e) Effect of Termination of Employment
(1) If the employment of a Participant with the Company shall terminate
for any reason other than Cause, "permanent and total disability (within
the meaning of Section 22(e)(3) of the Code) or the death of the
Participant (i) Options granted to such Participant, to the extent that
they were exercisable at the time of such termination, shall remain
exercisable until the expiration of one month after such termination, on
which date they shall expire, and (ii) Options granted to such
Participant, to the extent that they were not exercisable at the time of
such termination, shall expire at the close of business on the date of
such termination; provided, however, that no Option shall be exercisable
after the expiration of its term.
(2) If the employment of a Participant with the Company shall terminate
as a result of the "permanent and total disability (within the meaning of
Section 22(e)(3) of the Code) of the Participant, the voluntary
retirement of the Participant in accordance with the Company's retirement
policy as then in effect or the death of the Participant (i) Options
granted to such Participant, to the extent that they were exercisable at
the time of such termination, shall remain exercisable until the
expiration of one year after such termination, on which date they shall
expire, and (ii) Options granted to such Participant, to the extent that
they were not exercisable at the time of such termination, shall expire
at the close of business on the date of such termination; provided,
however, that no Option shall be exercisable after the expiration of its
term.
(3) In the event of the termination of a Participant's employment for
Cause, all outstanding Options granted to such Participant shall expire
at the commencement of business on the date of such termination.
(f) Acceleration of Exercise Date Upon Change in Control
Upon the occurrence of a Change in Control, each Option granted under the
Plan and outstanding at such time shall become fully and immediately
exercisable and shall remain exercisable until its expiration, termination or
cancellation pursuant to the terms of the Plan.
7. RESTRICTED STOCK
The Committee may grant shares of Restricted Stock pursuant to the Plan. Each
grant of shares of Restricted Stock shall be evidenced by an agreement in such
form as the Committee shall from time to time approve. Each grant of shares of
Restricted Stock shall comply with and be subject to the following terms and
conditions:
(a) Issue Date and Vesting Date
At the time of the grant of shares of Restricted Stock, the Committee shall
establish an Issue Date or Issue Dates and a Vesting Date or Vesting Dates
with respect to such shares. The Committee may divide such shares into
classes and assign a different
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Issue Date and/or Vesting Date for each class. Except as provided in Sections
7(c) and 7(f) hereof, upon the occurrence of the Issue Date with respect to a
share of Restricted Stock, a share of Restricted Stock shall be issued in
accordance with the provisions of Section 7(d) hereof. Provided that all
conditions to the vesting of a share of Restricted Stock imposed pursuant to
Section 7(b) hereof are satisfied, and except as provided in Sections 7(c)
and 7(f) hereof, upon the occurrence of the Vesting Date with respect to a
share of Restricted Stock, such share shall vest and the restrictions of
Section 7(c) hereof shall cease to apply to such share.
(b) Conditions to Vesting
At the time of the grant of shares of Restricted Stock, the Committee may
impose such restrictions or conditions, not inconsistent with the provisions
hereof, to the vesting of such shares as it in its absolute discretion deems
appropriate. By way of example and not by way of limitation, the Committee
may require, as a condition to the vesting of any class or classes of shares
of Restricted Stock, that the Participant or the Company achieve certain
performance criteria, such criteria to be specified by the Committee at the
time of the grant of such shares.
(c) Restrictions on Transfer Prior to Vesting
Prior to the vesting of a share of Restricted Stock, no transfer of a
Participant's rights with respect to such share, whether voluntary or
involuntary, by operation of law or otherwise, shall vest the transferee with
any interest or right in or with respect to such share, but immediately upon
any attempt to transfer such fights, such share, and all of the rights
related thereto, shall be forfeited by the Participant and the transfer shall
be of no force or effect.
(d) Issuance of Certificates
(1) Except as provided in Sections 7(c) or 7(f) hereof, reasonably
promptly after the Issue Date with respect to shares of Restricted Stock,
the Company shall cause to be issued a stock certificate, registered in
the name of the Participant to whom such shares were granted, evidencing
such shares: provided, that the Company shall not cause to be issued such
a stock certificates unless it has received a stock power duly endorsed
in blank with respect to such shares. Each such stock certificate shall
bear the following legend:
The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions (including forfeiture and restrictions against transfer)
contained in the IWC Services, Inc.--1996 Incentive Stock Plan and an
Agreement entered into between the registered owner of such shares and
IWC Services, Inc. A copy of the Plan and Agreement is on file in the
office of the Secretary of IWC Services, Inc., 2800 Post Oak Boulevard,
Suite 6300, Houston, Texas 77056.
Such legend shall not be removed from the certificate evidencing such
shares until such shares vest pursuant to the terms hereof.
(2) Each certificate issued pursuant to Paragraph 7 (d)(1) hereof,
together with the stock powers relating to the shares of Restricted Stock
evidenced by such certificate, shall be held by the Company. The Company
shall issue to the Participant a receipt evidencing the certificates held
by it which are registered in the name of the
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Participant.
(e) Consequences Upon Vesting
Upon the vesting of a share of Restricted Stock pursuant to the terms hereof,
the restrictions of Section 7(c) hereof shall cease to apply to such share.
Reasonably promptly after a share of Restricted Stock vests pursuant to the
terms hereof, the Company shall cause to be issued and delivered to the
Participant to whom such shares were granted, a certificate evidencing such
share, free of the legend set forth in Paragraph 7 (d)(1) hereof, together
with any other property of the Participant held by Company pursuant to
Section 7(d) hereof, provided, however, that such delivery shall be effected
for all purposes when the Company shall have deposited such certificate and
other property in the United States mail, addressed to the Participant.
(f) Effect of Termination of Employment
(1) If the employment of a Participant with the Company shall terminate
for any reason other than Cause prior to the vesting of shares of
Restricted Stock granted to such Participant, a portion of such shares,
to the extent not forfeited or canceled on or prior to such termination
pursuant to any provision hereof, shall vest on the date of such
termination. The portion referred to in the preceding sentence shall be
determined by the Committee at the time of the grant of such shares of
Restricted Stock and may be based on the achievement of any conditions
imposed by the Committee with respect to such shares pursuant to Section
7(b). Such portion may equal zero.
(2) In the event of the termination of a Participant's employment for
Cause, all shares of Restricted Stock granted to such Participant which
have not vested as of the date of such termination shall immediately be
forfeited.
(g) Effect of Change in Control
Upon the occurrence of a Change in Control, all shares of Restricted Stock
which have not theretofore vested (including those with respect to which the
Issue Date has not yet occurred) shall immediately vest.
8. PHANTOM STOCK
The Committee may grant shares of Phantom Stock pursuant to the Plan. Each
grant of shares of Phantom Stock shall be evidenced by an agreement in such form
as the Committee shall from time to time approve. Each grant of shares of
Phantom Stock shall comply with and be subject to the following terms and
conditions:
(a) Vesting Date
At the time of the grant of shares of Phantom Stock, the Committee shall
establish a Vesting Date or Vesting Dates with respect to such shares. The
Committee may divide such shares into classes and assign a different Vesting
Date for each class. Provided that all conditions to the vesting of a share
of Phantom Stock imposed pursuant to Section 8(c) hereof are satisfied, and
except as provided in Section 8(d) hereof, upon the occurrence of the Vesting
Date with respect to a share of Phantom Stock, such share shall vest.
(b) Benefit Upon Vesting
Upon the vesting of a share of Phantom Stock, a Participant shall be entitled
to receive in cash, within 90 days of the date on which such share vests, an
amount in cash in a lump sum equal to the sum of (i) the Fair Market Value of
a share of Common Stock
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of the Company on the date on which such share of Phantom Stock vests and
(ii) the aggregate amount of cash dividends paid with respect to a share of
Common Stock of the Company during the period commencing on the date on which
the share of Phantom Stock was granted and terminating on the date on which
such share vests.
(c) Conditions to Vesting
At the time of the grant of shares of Phantom Stock, the Committee may impose
such restrictions or conditions, not inconsistent with the provisions hereof,
to the vesting of such shares as it, in its absolute discretion deems
appropriate. By way of example and not by way of limitation, the Committee
may require, as a condition to the vesting of any class or classes of shares
of Phantom Stock, that the Participant or the Company achieve certain
performance criteria, such criteria to be specified by the Committee at the
time of the grant of such shares.
(d) Effect of Termination of Employment
(1) If the employment of a Participant with the Company shall terminate
for any reason other than Cause prior to the vesting of shares of Phantom
Stock granted to such Participant a portion of such shares, to the extent
not forfeited or canceled on or prior to such termination pursuant to any
provision hereof, shall vest on the date of such termination. The portion
referred to in the preceding sentence shall be determined by the
Committee at the time of the grant of such shares of Phantom Stock and
may be based on the achievement of any conditions imposed by the
Committee with respect to such shares pursuant to Section 8(c). Such
portion may equal zero.
(2) In the event of the termination of a Participant's employment for
Cause, all shares of Phantom Stock granted to such Participant which have
not vested as of the date of such termination shall immediately be
forfeited.
(e) Effect of Change in Control
Upon the occurrence of a Change in Control, all shares of Phantom Stock which
have not theretofore vested shall immediately vest.
9. STOCK BONUSES
The Committee may, in its absolute discretion, grant Stock Bonuses in such
amounts as it shall determine from time to time. A Stock Bonus shall be paid at
such time and subject to such conditions as the Committee shall determine at the
time of the grant of such Stock Bonus. Certificates for shares of Common Stock
granted as a Stock Bonus shall be issued in the name of the Participant to whom
such grant was made and delivered to such Participant as soon as practicable
after the date on which such Stock Bonus is required to be paid.
10. CASH BONUSES
The Committee may, in its absolute discretion, grant in connection with any
grant of Restricted Stock or Stock Bonus or at any time thereafter, a cash
bonus, payable promptly after the date on which the Participant is required to
recognize income for federal income tax purposes in connection with such
Restricted Stock or Stock Bonus, in such amounts as the Committee shall
determine from time to time; provided, however, that in no event shall the
amount of a Cash Bonus exceed the Fair Market Value of the related shares of
Restricted Stock or Stock Bonus on such date. A Cash Bonus shall be subject to
such conditions as the Committee shall determine at the time of the grant of
such Cash Bonus.
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11. ADJUSTMENT UPON CHANGES IN COMMON STOCK
(a) Outstanding Restricted Stock and Phantom Stock
Unless the Committee in its absolute discretion otherwise determines, if a
Participant receives any securities or other property (including dividends
paid in cash) with respect to a share of Restricted Stock, the Issue Date
with respect to which occurs prior to such event, but which has not vested
as of the date of such event, as a result of any dividend, stock split
recapitalization, merger, consolidation, combination, exchange of shares or
otherwise, such securities or other property will not vest until such share
of Restricted Stock vests, and shall be held by the Company pursuant to
Paragraph 7 (d) (2) hereof. The Committee may, in its absolute discretion,
adjust any grant of shares of Restricted Stock, the Issue Date with respect
to which has not occurred as of the date of the occurrence of any of the
following events, or any grant of shares of Phantom Stock, to reflect any
dividend, stock split, recapitalization, merger, consolidation,
combination, exchange of shares or similar corporate change as the
Committee may deem appropriate to prevent the enlargement or dilution of
rights of Participants under the grant.
(b) Outstanding Options, Increase or Decrease in Issued Shares Without
Consideration.
Subject to any required action by the shareholders of the Company, in the
event of any increase or decrease in the number of issued shares of Common
Stock resulting from a subdivision or consolidation of shares of Common
Stock or the payment of a stock dividend (but only on the shares of Common
Stock), or any other increase or decrease in the number of such shares
effected without receipt of consideration by the Company, the Committee
shall proportionally adjust the number of shares and the exercise price per
share of Common Stock subject to each outstanding Option.
(c) Outstanding Options, Certain Mergers
Subject to any required action by the shareholders of the Company, if the
Company shall be the surviving corporation in any merger or consolidation
(except a merger of consolidation as a result of which the holders of
shares of Common Stock receive securities of another corporation), each
Option outstanding on the date of such merger or consolidation shall
entitle the Participant to acquire upon exercise the securities which a
holder of the number of shares of Common Stock subject to such Option would
have received in such merger or consolidation.
(d) Outstanding Options, Certain Other Transactions
In the event of a dissolution or liquidation of the Company, a sale of all
or substantially all of the Company's assets, a merger or consolidation
involving the Company in which the Company is not the surviving corporation
or a merger or consolidation involving the Company in which the Company is
the surviving corporation but the holders of shares of Common Stock receive
securities of another corporation and/or other property, including cash,
the Committee shall, in its absolute discretion, have the power to:
(1) cancel, effective immediately prior to the occurrence of such
event, each
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Option outstanding immediately prior to such event (whether or not then
exercisable), and, in full consideration of such cancellation, pay to
the Participant to whom such Option was granted an amount in cash, for
each share of Common Stock subject to such Option equal to the excess
of (A) the value, as determined by the Committee in its absolute
discretion, of the property (including cash) received by the holder of
a share of Common Stock as a result of such event over (B) the exercise
price of such Option; or
(2) provide for the exchange of each Option outstanding immediately
prior to such event (whether or not then exercisable) for an option on
some or all of the property for which such Option is exchanged and,
incident thereto, make an equitable adjustment as determined by the
Committee in its absolute discretion in the exercise price of the
option, or the number of shares or amount of property subject to the
option or, if appropriate, provide for a cash payment to the
Participant to whom such Option was granted in partial consideration
for the exchange of the Option.
(e) Outstanding Options. Other Changes
In the event of any change in the capitalization of the Company or
corporate change other than those specifically referred to in Sections
11(b), (c) or (d) hereof, the Committee may, in its absolute discretion,
make such adjustments in the number and class of shares subject to Options
outstanding on the date on which such change occurs and in the per share
exercise price of each such Option as the Committee may consider
appropriate to prevent dilution or enlargement of rights.
(f) No Other Rights
Except as expressly provided in the Plan, no Participant shall have any
rights by reason of any subdivision or consolidation of shares of stock of
any class, the payment of any dividend, any increase or decrease in the
number of shares of stock of any class or any dissolution, liquidation,
merger or consolidation of the Company or any other corporation. Except as
expressly provided in the Plan, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number of shares of Common Stock subject to an Incentive
Award or the exercise price of any Option.
12. RIGHTS AS A SHAREHOLDER
No person shall have any rights as a shareholder with respect to any shares
of Common Stock covered by or relating to any Incentive Award granted pursuant
to this Plan until the date of the issuance of a stock certificate with respect
to such shares. Except as otherwise expressly provided in Section 11 hereof, no
adjustment to any Incentive Award shall be made for dividends or other rights
for which the record date occurs prior to the date such stock certificate is
issued.
13. NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHT TO INCENTIVE AWARD
Nothing contained in the Plan or any Incentive Award shall confer upon any
Participant any right with respect to the continuation of his employment by the
Company or interfere in any way with the right of the Company, subject to the
terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
Participant from the rate in existence at the time of the grant of an Incentive
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Award.
No person shall have any claim or right to receive an Incentive Award
hereunder. The Committee's granting of an Incentive Award to a Participant at
any time shall neither require the Committee to grant an Incentive Award to such
Participant or any other Participant or other person at any time nor preclude
the Committee from making subsequent grants to such Participant or any other
Participant or other person.
14. SECURITIES MATTERS
(a) The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of any shares of Common Stock to be issued
hereunder or to effect similar compliance under any state laws.
Notwithstanding anything herein to the contrary, the Company shall not be
obligated to cause to be issued or delivered any certificates evidencing
shares of Common Stock pursuant to the Plan unless and until the Company is
advised by its counsel that the issuance and delivery of such certificates is
in compliance with all applicable laws, regulations of governmental authority
and the requirements of any securities exchange on which shares of Common
Stock are traded. The Committee may require, as a condition of the issuance
and delivery of certificates evidencing shares of Common Stock pursuant to
the terms hereof, that the recipient of such shares make such covenants,
agreements and representations, and that such certificates bear such legends,
as the Committee, in its sole discretion, deems necessary or desirable.
(b) The exercise of any Option granted hereunder shall only be effective at
such time as counsel to the Company shall have determined that the issuance
and delivery of shares of Common Stock pursuant to such exercise is in
compliance with all applicable laws, regulations of governmental authorities
and the requirements of any securities exchange on which shares of Common
Stock are traded. The Company may, in its sole discretion, defer the
effectiveness of any exercise of an Option granted hereunder in order to
allow the issuance of shares of Common Stock pursuant thereto to be made
pursuant to registration or an exemption from registration or other methods
for compliance available under federal or state securities laws. The Company
shall inform the Participant in writing of its decision to defer the
effectiveness of the exercise of an Option granted hereunder. During the
period that the effectiveness of the exercise of an Option has been deferred,
the Participant may, by written notice, withdraw such exercise and obtain the
refund of any amount paid with respect thereto.
15. WITHHOLDING TAXES
Whenever shares of Common Stock are to be issued upon the exercise of an
Option, the occurrence of the Issue Date or Vesting Date with respect to a share
of Restricted Stock or the payment of a Stock Bonus, the Company shall have the
right to require the Participant to remit to the Company in cash an amount
sufficient to satisfy federal, state and local withholding tax requirements, if
any, attributable to such exercise, occurrence or payment prior to the delivery
of any certificate or certificates for such shares. In addition, upon the grant
of a Cash Bonus or the making of a payment with respect to a share of Phantom
Stock, the Company shall have the right to withhold from any cash payment
required to be made pursuant thereto an amount sufficient to satisfy the
federal, state and local withholding tax requirements, if any, attributable to
such exercise or grant.
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16. AMENDMENT OF THE PLAN
The Board of Directors may at any time suspend or discontinue the Plan or
revise or amend it in any respect whatsoever, provided, however, that without
approval of the shareholders no revision or amendment shall (i) except as
provided in Section 11 hereof, increase the number of shares of Common Stock
that may be issued under the Plan, (ii) materially increase the benefits
accruing to individuals holding Incentive Awards granted pursuant to the Plan or
(iii) materially modify the requirements as to eligibility for participation in
the Plan.
17. NO OBLIGATION TO EXERCISE
The grant to a Participant of an Option shall impose no obligation upon such
Participant to exercise such Option.
18. TRANSFERS UPON DEATH
Upon the death of a Participant, outstanding Incentive Awards granted to such
Participant may be exercised only by the executors or administrators of the
Participant's estate or by any person or persons who shall have acquired such
right to exercise by will or by the laws of descent and distribution. No
transfer by will or the laws of descent and distribution of any Incentive Award,
or the right to exercise any Incentive Award, shall be effective to bind the
Company unless the Committee shall have been furnished with (a) written notice
thereof and with a copy of the will and/or such evidence as the Committee may
deem necessary to establish the validity of the transfer and (b) an agreement by
the transferee to comply with all the terms and conditions of the Incentive
Award that are or would have been applicable to the Participant and to be bound
by the acknowledgments made by the Participant in connection with the grant of
the Incentive Award.
19. EXPENSES AND RECEIPTS
The expenses of the Plan shall be paid by the Company. Any proceeds received
by the Company in connection with any Incentive Award will be used for general
corporate purposes.
20. FAILURE TO COMPLY
In addition to the remedies of the Company elsewhere provided for herein,
failure by a Participant to comply with any of the terms and conditions of the
Plan or the agreement executed by such Participant evidencing an Incentive
Award, unless such failure is remedied by such Participant within ten days after
having been notified of such failure by the Committee, shall be grounds for the
cancellation and forfeiture of such Incentive Award, in whole or in part as the
Committee, in its absolute discretion, may determine.
21. EFFECTIVE DATE AND TERM OF PLAN
The Plan was adopted by the Board of Directors effective November 12, 1997,
subject to approval by the shareholders of the Company in accordance with
applicable law, the requirements of Section 422 of the Code and the requirements
of Rule 16b-3 under Section 16(b) of the Exchange Act. No Incentive Award may be
granted under the Plan after November 11, 2007. Incentive Awards may be granted
under the Plan at any time prior to the receipt of such shareholder approval;
provided, however, that each such grant shall be subject to such approval.
Without limitation on the foregoing, no Option may be exercised prior to the
receipt of such approval, no share certificate shall be issued pursuant to a
grant of Restricted Stock or Stock Bonus prior to the receipt of such approval
and no
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Cash Bonus or payment with respect to a share of Phantom Stock shall be paid
prior to the receipt of such approval. If the Plan is not approved by the
Company's shareholders, then the Plan and all Incentive Awards then outstanding
hereunder shall forthwith automatically terminate and be of no force and effect.
IN WITNESS WHEREOF, this 1997 Incentive Stock Plan has been executed in
Houston, Texas this 12th day of November, 1997.
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L. H. Ramming, Chairman
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EXHIBIT 10.15
PROPOSED OUTSIDE DIRECTORS' OPTION PLAN
On November 12, 1997, the Board adopted the Outside Directors' Option Plan
(the "Directors' Plan") and proposed the Directors' Plan for the approval of the
Company's stockholders.
The proposed Directors' Plan provides for the issuance an option to
purchase 15,000 shares per year to each member of the Board of Directors who is
not an employee of the Company. The purpose of the Directors Plan is to
encourage the continued service of outside directors and to provide them with
additional incentive to assist the Company in achieving its growth objectives.
Options may be exercised over a five-year period with the initial right to
exercise, starting one year from the date of the grant, provided the director
has not resigned or been removed for cause by the Board of Directors prior
thereto. After one year from the date of the grant, options outstanding under
the proposed Directors' Plan may be exercised regardless of whether the
individual continues to serve as a director. Options granted under the proposed
Directors' Plan are not transferable except by will or by operation of law. No
options have been granted under the proposed Directors Plan at the date of this
Proxy Statement. If the proposed Directors' Plan is approved by the
stockholders, the total number of shares available for future grant under the
Directors' Plan will be 150,000.
CONTRACTUAL LIMITATIONS ON OPTION GRANTS. The placement agreement between
the Company, Arizona Securities, Inc. and Paradise Valley Securities, Inc.
limits the total number of options that may be granted during the two years
beginning August 14, 1997 and 1998 to 3% of the total number of shares
outstanding on such dates. Therefore, the maximum number of options that may be
granted under all of the Company's existing and proposed option plans during the
period ended August 15, 1998 will be limited to 854,211 shares, subject to
reduction for any other options that the Board may elect to grant during such
period.
STOCKHOLDERS ENTITLED TO VOTE AND VOTE REQUIRED FOR APPROVAL. The
affirmative vote of the holders of a majority of all shares of Common Stock
represented and voting at the Meeting, in person or by proxy, will be required
to approve the proposed 1997 Directors' Option Plan. For purposes of determining
the number of votes cast with respect to this proposal, only those cast "for" or
"against" will be included. Abstentions and broker non-votes are counted only
for purposes of determining whether a quorum is present at the meeting.
<PAGE>
EXHIBIT 10.16
EXECUTIVE COMPENSATION PLANS
The Company has not yet adopted any formal executive compensation plans and
the Board is of the opinion that final decisions respecting the adoption and
implementation of the Company's executive compensation plans should be deferred
pending the appointment of a formal Compensation Committee consisting of two or
more members of the Board, each of whom is a "non-employee director" within the
meaning of SEC Rule 16b-3(b)(3). The Board's decision to defer the adoption and
implementation of executive compensation plans pending the appointment of a
Compensation Committee, however, creates an inherent conflict since Article IV,
Subsection (a) of the Company's Certificate of Incorporation provides in part
that:
"Notwithstanding the foregoing, and with the sole exception of shares issued
pursuant to those of the Corporation's stock option and other employee benefit
plans which have been approved by the stockholders entitled or required by law
to vote thereon, no shares of Common Stock shall be issued or sold to any
officer or director of the Corporation, or any stockholder who directly or
indirectly owns more than 10% of the issued and outstanding voting stock of the
Corporation, or any affiliate of such a person, without the affirmative vote of
a majority in interest of the disinterested stockholders of the Corporation."
Since a Compensation Committee cannot be appointed until after the Meeting,
and the Board believes that the prompt adoption and implementation of
appropriate executive compensation plans are essential because achievement of
the Company's long-term business objectives will be dependent in large part upon
the continued efforts, expertise and abilities of the Company's executive
officers, the Board believes that the Stockholders should vote to authorize the
Compensation Committee to develop and implement discretionary executive
compensation plans that may include equity-based incentive awards. If the
Executive Compensation Plan proposal is approved by the stockholders, the
executive officers of the Company will be ineligible to participate in the
proposed 1997 Incentive Stock Plan discussed above and all of the shares
eligible for grant under the 1997 Incentive Stock Plan will be reserved for
issuance to non-executive employees. If the Executive Compensation Plan proposal
is rejected by the stockholders, the executive officers of the Company will be
eligible to participate in the proposed 1997 Incentive Stock Plan and the number
of shares eligible for grant to non-executive employees will be reduced
proportionally.
If the Executive Compensation Plan proposal is approved by the
stockholders, the Compensation Committee will be granted full power and
authority, without additional stockholder approval, to develop and implement one
or more Executive Compensation Plans that will authorize the Compensation
Committee to grant of incentive equity awards covering a maximum of 1,475,000
shares of Common Stock. It is anticipated that these Executive Compensation
Plans will be similar in most substantive respects to the proposed 1997
Incentive Stock Plan discussed above and that the types of incentive awards
permitted under the Executive Compensation Plans will include (i) non-qualified
stock options, (ii) incentive stock options, (iii) shares of restricted stock,
(iv) shares of phantom stock and (v) stock bonuses. Notwithstanding the
generality of the foregoing, and subject to the requirements of the rules and
regulations of the SEC and applicable Internal Revenue Service Regulations, the
ultimate authority to determine the terms of the Executive Compensation Plans
and the conditions applicable to incentive awards thereunder will be vested
exclusively in the Compensation Committee.
In addition, if the Executive Compensation Plan proposal is approved by the
stockholders, the Compensation Committee will be granted full power and
authority, without additional stockholder approval, to develop and implement one
or more Acquisition Bonus Plans that will permit the grant of equity awards
covering an indeterminate number of shares of Common Stock in connection with
future acquisitions made by the Company. Subject to the requirements of the
rules and regulations of the SEC and applicable Internal Revenue Service
Regulations, the ultimate authority to determine the terms of such Acquisition
Bonus Plans and the conditions applicable thereto will be vested exclusively in
the Compensation Committee, provided, that the total value of future equity
grants under the Acquisition Bonus Plans may not exceed 5% of the value of
future acquisitions made by the Company.
CONTRACTUAL LIMITATIONS ON OPTION GRANTS. The placement agreement between
the Company, Arizona Securities, Inc. and Paradise Valley Securities, Inc.
limits the total number of options that may be granted during the two years
beginning August 14, 1997 and 1998 to 3% of the total number of shares
outstanding on such dates. Therefore, the maximum number of options that may be
granted under all of the Company's existing and proposed option plans during the
period ended August 15, 1998 will be limited to 854,211 shares, subject to
reduction for any other options that the Board may elect to grant during such
period.
STOCKHOLDERS ENTITLED TO VOTE AND VOTE REQUIRED FOR APPROVAL. The
affirmative vote of the holders of a majority of all shares of Common Stock
represented and voting at the Meeting, in person or by proxy, will be required
to authorize the Compensation Committee to develop and implement discretionary
executive compensation plans that may include the issuance of equity-based
incentive awards. For purposes of determining the number of votes cast with
respect to this proposal, only those cast "for" or "against" will be included.
Abstentions and broker non-votes are counted only for purposes of determining
whether a quorum is present at the meeting.
<PAGE>
EXHIBIT 10.17
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT ("SUBLEASE") is made and entered into
effective as of March 1, 1997, between APACHE CORPORATION, a Delaware
corporation ("SUBLESSOR"), and IWC SERVICES, INC., a Texas corporation
("SUBLESSEE"):
RECITALS:
A. Sublessor, as tenant, and Barnhart Interests, Inc., as Agent for
Sage Plaza One Ltd. ("PRIME LESSOR"), as landlord, made and entered into that
certain Lease Agreement (the "PRIME LEASE"), dated as of September 28, 1995,
covering approximately 18,051 square feet of office space (the "PRIME LEASED
PREMISES") in the building located at 5151 San Felipe Road, Houston, Texas,
commonly known as Halliburton Center (the "BUILDING").
B. Sublessor, as subtenant, and Halliburton Company ("PRIME LESSOR"),
as sublandlord, made and entered into that certain Agreement to Sublease (as
amended, the "PRIME SUBLEASE") dated as of March 15, 1995, and that certain
First Amendment to Agreement to Sublease, covering approximately 64,024 square
feet of office space (the "PRIME SUBLEASED PREMISES") in the Building.
C. Sublessor has agreed to sublease to Sublessee, and Sublessee has
agreed to sublease and take from Sublessor, a portion of the Prime Leased
Premises and a portion of the Prime Subleased Premises, all located on floor 4
of the Building (the "SUBLEASED PREMISES") and consisting of approximately
6,696 square feet of Net Rentable Area in the aggregate, as depicted by cross-
hatching on the floor plan attached hereto as EXHIBIT A and made a part hereof
for all purposes, on the terms and conditions hereinafter specified.
1. DEMISE OF SUBLEASED PREMISES.
(a) Subject to and upon the terms and conditions set forth
herein, Sublessor hereby subleases to Sublessee, and Sublessee hereby
subleases from Sublessor the Subleased Premises. Sublessee acknowledges and
agrees that it has inspected the subleased Premises and agrees to accept same
in its present condition, "AS IS" and "WITH ALL FAULTS".
(b) SUBLESSEE ACKNOWLEDGES THAT SUBLESSOR HAS NOT MADE AND
WILL NOT MAKE ANY WARRANTIES TO SUBLESSEE WITH RESPECT TO THE QUALITY OF
CONSTRUCTION OF ANY LEASEHOLD IMPROVEMENTS OR TENANT FINISH WITHIN THE
SUBLEASED PREMISES OR AS TO THE CONDITION OF THE SUBLEASED PREMISES, EITHER
EXPRESS OR IMPLIED, AND THAT SUBLESSOR EXPRESSLY DISCLAIMS ANY IMPLIED
WARRANTY THAT THE SUBLEASED PREMISES ARE OR WILL BE SUITABLE FOR SUBLESSEE'S
INTENDED COMMERCIAL PURPOSES.
<PAGE>
(c) Any construction of improvements within the Subleased
Premises desired by Sublessee will be conducted in strict compliance with the
applicable provisions of the Prime Lease, including, without limitation,
Article 3 thereof. Upon Sublessee's request received by Sublessor not later
than June 1, 1997, Sublessor agrees to provide Sublessee an allowance (the
"CONSTRUCTION ALLOWANCE") in an amount up to $7.00 per square foot of Net
Rentable Area in the Subleased Premises ($46,872.00) to reimburse Sublessee
for the costs and expenses of labor and materials incurred from the
construction and installment of permanent leasehold improvements in the
Subleased Premises. The Construction Allowance will be funded to Sublessee
within thirty (30) days following Sublessor's receipt of Sublessee's written
request therefor, which request will include Sublessee's certification that
the total costs and expenses paid by Sublessee for the construction and
installation of permanent leasehold improvements in the Subleased Premises
were not less than the amount of the Construction Allowance requested by
Sublessee. If the total costs of the permanent leasehold improvements in the
Subleased Premises exceed the Construction Allowance, the excess shall be at
Sublessee's sole cost and expense.
2. PREMISE LEASE AND PRIME SUBLEASE.
(a) This Sublease is subject and subordinate to the Prime
Lease and the Prime Sublease, true and correct copies of which have been
provided to Sublessee. Capitalized terms not otherwise defined in this
Sublease are used with the meaning assigned to them in the Prime Lease.
(b) With the exception of the obligation to pay rentals,
Sublessee hereby covenants and agrees to comply with and perform all
obligations of Sublessor under the Prime Lease and the Prime Sublease, insofar
as same pertain and apply to the Subleased Premises, including, without
limitation, all repair obligations, all insurance obligations, all obligations
to pay utility charges and taxes, and all indemnification obligations of
Sublessor thereunder, and any liability accruing from failure to pay same when
due thereunder. Sublessee agrees that whenever the consent of Prime Lessor is
required under the terms of the Prime Lease (or the consent of the Prime
Sublessor is required under the Prime Sublease) with respect to any action,
Sublessee shall obtain the consent of Prime Lessor (or Prime Sublessor, as
applicable) and Sublessor prior to taking such action. Sublessee hereby
covenants and agrees to promptly deliver to Sublessor copies of any and all
notices or other correspondence received by Sublessee from Prime Lessor or
Prime Sublessor that might affect Sublessor in any manner and further agrees,
notwithstanding Section 13 hereof to the contrary, to so deliver same in the
manner most appropriate to insure that Sublessor will be able to respond to
any of such notices or other correspondence from the Prime Lessor or Prime
Sublessor within any time periods set forth in the Prime Lease or the Prime
Sublease, as applicable.
(c) Sublessor covenants and agrees that except for the
obligations assumed by Sublessee under Section 1(b) above, Sublessor will duly
and faithfully perform each of its obligations, duties and liabilities under
the Prime Lease and the Prime Sublease. Sublessor covenants and agrees that it
will not enter into any amendment to the Prime Lease or the Prime Sublease that
would adversely effect Sublessee's use and enjoyment of the Subleased
Premises.
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(d) Sublessee acknowledges and agrees that the only
services, amenities and rights to which Sublessee is entitled under this
Sublease are those to which Sublessor is entitled under the Prime Lease or the
Prime Sublease, as applicable (subject to all the provisions, restrictions and
conditions imposed of the Prime Lease or the Prime sublease, as applicable,
and only to the extent that same apply directly to Subleased Premises).
Sublessor shall in no event be liable to Sublessee for Prime Lessor's or Prime
Sublessor's failure to provide any such services, amenities and rights.
Sublessee agrees that no such failure by Prime Lessor or Prime Sublessor shall
be construed as a breach hereof by Sublessor or an eviction of Sublessee or
entitle Sublessee to an abatement of any of the rentals under this Sublease,
except and only to the extent that Sublessor receives an abatement under the
Prime Lease or Prime Sublease, as applicable, with respect thereto.
(e) Sublessee shall not have the right to exercise any of
Sublessor's options or elections permitted or authorized under the Prime Lease
of the Prime Sublease, or to institute any action or proceeding against Prime
Lessor or Prime Sublessor for the enforcement of the Prime Lease or the Prime
Sublease. If Prime Lessor or Prime Sublessor shall default in the performance
of any of its obligations under the Prime Lease or the Prime Sublease, as
applicable, Sublessor shall, upon the written request of Sublessee and at
Sublessee's sole cost and expense, use its diligent good faith efforts to
enforce its remedies under the Prime Lease or the Prime Sublease, as
applicable, to cause Prime Lessor or Prime Sublessor to comply with its
obligations thereunder.
3. TERM
(a) Unless the Prime Lease or Prime Sublease is
terminated sooner pursuant to the terms thereof, the term of this Sublease
("TERM") shall be for the period commencing on March 22, 1997 (the
"COMMENCEMENT DATE") and ending on August 31, 2003. Any occupancy of the
Subleased Premises by Sublessee prior to the Commencement Date shall be
subject to all of the terms and conditions of this Sublease other than the
obligation to pay rentals.
(b) At the termination of this Sublease or of Sublessee's
right to possession of the Subleased Premises, by lapse of time or otherwise,
Sublessee shall deliver up the subleased Premises to Sublessor in as good
condition as existed on the date of possession by Sublessee, ordinary wear and
tear only excepted. Upon such termination of this Sublease or of Sublessee's
right to possession of the Subleased Premises, Sublessor shall have the right
to re-enter and resume possession of the Subleased Premises.
(c) In the event of holding over by Sublessee after
expiration or termination of this Sublease without the prior written consent
of Sublessor, Sublessee shall as liquidated damages and amount equal to one
and one-half (1-1/2) the amount of all base rental and additional rental that
was payable by Sublessee immediately prior to such expiration or termination,
pro rated on a daily basis for the entire holdover period. In the event of any
unauthorized holding over, Sublessee shall also indemnify Sublessor against
all claims for damages (i) by any other tenant to whom Sublessor may have
subleased all or any part of the Subleased Premises effective upon the
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termination of this Sublease, (ii) by Prime Lessor for default by Sublessor
under the Prime Lease, and (iii) by Prime Sublessor for default by Sublessor
under the Prime Sublease. Any such holding over without the prior written
consent of Sublessor shall create a tenancy at sufferance relationship with
Sublessee.
4. RENT
(a) Sublessee hereby agrees to pay an annual base rental
to Sublessor with respect to the Subleased Premises as follows:
Annual Base Rental
Per Square Foot of Net Monthly Base
Time Period Rentable Area Rental Payments
- ----------- ---------------------- ---------------
March 22, 1997 -
September 30, 1997 $15.11 $8,431.38
October 1, 1997 -
February 28, 1998 $13.28 $7,410.24
March 1, 1998 -
August 31, 2003 $11.21 $6,255.18
Sublessee shall pay such base rental to Sublessor in equal monthly
installments without demand, for each and every month during the Term, on the
first day of each month beginning on the Commencement Date.
(b) Beginning in 1998 and for each year thereafter during
the Sublease term, Sublessee will pay to Sublessor as additional rental its
proportionate share (defined below) of the amount, if any, by which (i) the
Basic Cost payable by Sublessor under the Prime Lease for each such year
exceeds the amount of the Basic Cost payable by Sublessor under the Prime Lease
for the year 1997, and (ii) the Basic Cost payable by Sublessor under the
Prime Sublease for each such year exceeds the amount of the Basic Cost payable
by Sublessor under the Prime Sublease for the year 1997. Sublessee's
proportionate share of Basic Cost will be payable monthly beginning January
1998 based on the estimates of Basic Cost provided by Prime Lessor under
Sections 5.04 and 5.05 of the Prime Lease and the estimates provided to
Sublessor by Prime Sublessor under the corresponding provisions of the Prime
Sublease. If any adjustment is made thereafter to Sublessor's payments with
respect to Basic Cost under Sections 5.06 or 5.07 of the Prime Lease and/or
under the corresponding provisions of the Prime Sublease, Sublessee will pay
or receive, as the case may be, a corresponding adjustment of its payments
with respect to Basic Cost under this Section 4(b).
(c) Each monthly installment of base rental and additional
rental due to Sublessor under this Sublease shall be payable by Sublessee on
the first day of each calendar month at Sublessor's address herein set forth
or at such other place as Sublessor shall designate in writing from time to
time. If less than all of any calendar month or year occurs during the Term,
rents for
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such partial month or year shall be prorated based on the actual number of
days during such month or year occurring within the Term.
(d) As used in this Section 4, Sublessee's "proportionate
share" means:
(i) as to the portion of the Subleased Premises that is
part of the Prime Leased Premises, the percentage determined by (x) dividing
the Net Rentable Area of that portion of the Subleased Premises by the Net
Rentable Area of the Prime Leased Premises, and (y) multiplying the
quotient obtained in clause 4(d)(i)(x) by 100; and
(ii) as to the portion of the Subleased Premises that is
part of the Prime Subleased Premises, the percentage determined by (x)
dividing the Net Rentable Area of that portion of the Subleased Premises by
the Net Rentable Area of the Prime Subleased Premises, and (y) multiplying the
quotient obtained in clause 4(d)(ii)(x) by 100.
5. SECURITY DEPOSIT. On the date of execution of this Sublease by
Sublessee, there shall be due and payable by Sublessee a security deposit in
the amount of $7,929.00, such deposit to be held for the performance by
Sublessee of Sublessee's covenants and obligations under this Sublease, it
being expressly understood that the deposit shall not be considered an advance
payment of rental or a measure of Sublessor's damages in case of default by
Sublessee. Upon the occurrence of any event of default by Sublessee or breach
by Sublessee of Sublessee's covenants or obligations under this Sublease,
Sublessor may, from time to time, without prejudice to any other remedy, use
the security deposit to the extent necessary to make good any arrears of
rental or other payments hereunder and/or any damage, injury, expense or
liability caused to Sublessor by such event or breach of covenant. Following
any such application of the security deposit, sublessee shall pay to Sublessor
on demand the amount so applied in order to restore the security deposit to
the amount thereof existing prior to such application. Any remaining balance
of the security deposit shall be returned by Sublessor to Sublessee within
thirty (30) days after the termination of this Sublease; provided, however,
Sublessor shall have the right to retain and expend such remaining balance (a)
to reimburse Sublessor for any and all rentals or other sums due hereunder
that have not been paid in full by Sublessee and/or (b) for cleaning and
repairing the Subleased Premises if Sublessee shall fail to deliver same at
the termination of this Sublease in a neat and clean condition and in as good
a condition as existed at the date of possession of same by Sublessee,
ordinary wear and tear only excepted. Sublessee shall not be entitled to any
interest on the security deposit.
6. USE. The Subleased Premises will be used for general office
purposes only, and Sublessee will use and maintain the Subleased Premises in a
lawful manner consistent with the standards of operation of the Building and
the other tenants thereof.
-5-
<PAGE>
7. PARKING. Sublessee will be entitled to the use of 15 parking
permits in the Building Parking Garage throughout the Term at no additional
cost, all of which will be for unreserved/unassigned parking. Sublessee
acknowledges that Sublessor's rights to such parking spaces arise under the
Prime Sublease and are accordingly subject to the terms of that sublease.
8. ASSIGNMENT AND SUBLETTING
(a) Sublessee shall not, without the prior written consent
of Sublessor, assign, transfer, mortgage, pledge, hypothecate or encumber this
Sublease or any interest herein or sublet the Subleased Premises or any part
thereof, or permit the use of the Subleased Premises by any party other than
Sublessee. Any such assignment or subletting without such consent by Sublessor
shall be void. Any such consent by Sublessor to any such assignment or
subletting shall not release Sublessee from any of Sublessee's obligations
hereunder to be deemed to be a consent to any subsequent assignment,
subletting, occupation or use by another person.
(b) Sublessor's consent to any proposed assignment or
subleting will not be unreasonably withheld, provided that notwithstanding
Sublessor's consent the proposed assignment of subletting will be subject to
the further consent of Prime Lessor and Prime Sublessor (provided that in the
case of a subletting, Prime Lessor's consent will be required only if
Sublessor's rights to any portion of the Subleased Premises being sublet are
derived under the Prime Lease, and Prime Sublessor's consent will be required
only if Sublessor's rights to any portion of the Subleased Premises being
sublet are derived under the Prime Sublease). Sublessee agrees that reasonable
bases upon which Sublessor may decide whether to consent to the proposed
assignment or subletting include (but are not limited to) the criteria
enumerated in Section 13.02 of the Prime Lease.
9. INDEMNITIES
(a) Sublessor shall indemnify Sublessee and Prime Lessor
for and hold Sublessee harmless from and against all costs, expenses
(including reasonable attorney's fees), fines, suits, claims, demands,
liabilities and actions resulting from any breach, violation or nonperformance
of any covenant or condition hereof or from any negligent act or omission of
Sublessor or Sublessor's employees, agents or contractors, except to the
extent that any such costs, expenses, fines, suits, claims, demands,
liabilities and actions which are also attributable to the negligence of
Sublessee, its employees, agents or contractors.
(b) Sublessee shall indemnify Sublessor and Prime Lessor
for and hold Sublessor and Prime Lessor harmless from and against all costs,
expenses (including reasonable attorneys' fees), fines, suits, claims,
demands, liabilities and actions resulting from any breach, violation or
nonperformance of any covenant or condition hereof, from any liens imposed for
non-payment of any mechanics or materialmens in connection with any tenant
improvements to the subleased premises, or from any negligent act or omission
of Sublessee or Sublessee's employees, agents and contractors, except to the
extent that any such costs, expenses, fines, suits, claims,
-6-
<PAGE>
demands, liabilities and actions which are also attributable to the negligence
of Sublessor, its employees, agents or contractors.
10. DEFAULT BY SUBLESSEE: REMEDIES OF SUBLESSOR. In case of any
breach hereof by Sublessee, in addition to all other rights of Sublessor
hereunder or available to Sublessor at law or equity, Sublessor shall have all
the rights against Sublessee as would be available to the Prime Lessor against
Sublessor under the Prime Lease if such breach were by Sublessor thereunder.
11. QUIET ENJOYMENT. Provided Sublessee has performed all of the
terms, covenants, agreements and conditions of this Sublease, including the
payment of rental and all other sums due hereunder, Sublessee shall peaceably
and quietly hold and enjoy the Subleased Premises against Sublessor and all
persons claiming by, through or under Sublessor, for the term herein
described, subject to the provisions and conditions of this Sublease, the
Prime Lease and the Prime Sublease.
12. LIMITATION OF SUBLESSOR'S LIABILITY.
(a) It is understood and agreed that the provisions of
Section 11 above and any and all other covenants of Sublessor contained in
this Sublease shall be binding upon Sublessor and its successors only with
respect to breaches occurring during its and their respective ownership of the
Sublessor's interest hereunder. This Sublease is subject to and subordinate to
all matters of public record in Harris, Texas.
(b) Sublessor shall not be liable to Sublessee or
Sublessee's employees, agents, contractors, licensees or invitees for any
damage to person or property resulting from any act or omission of any visitor
to the Subleased Premises except as Sublessor's own negligence may contribute
thereto.
13. NOTICES. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal process
in regard hereto shall be validly given, made or served, if in writing and
delivered personally or sent by United States certified or registered mail,
postage prepaid, return receipt requested, if to:
Sublessor: Apache Corporation
2000 Post Oak Boulevard, Suite 100
Houston, Texas 77056
Attention: Manager, Administrative Services
-7-
<PAGE>
Sublessee: IWC Services, Inc.
5151 San Felipe Road, 4th Floor
Houston, Texas 77056
Attention: Charles Phillips
or to such other addresses as either party hereto may, from time to time,
designate in writing delivered in a like manner.
(b) Prime Lessor shall be copied on all notices given,
made, or served pursuant to this Paragraph 13, at the address set forth below:
Prime Sublessor: Halliburton Company
5151 San Felipe, Suite 200
Houston, Texas 77056
Attn: Real Estate Manager
14. MISCELLANEOUS.
(a) No amendment, modification or alteration of the terms
hereof shall be binding unless the same shall be in writing, dated subsequent
to the date hereof and duly executed by the parties hereto.
(b) Descriptive headings are for convenience only and
shall not control or affect the meaning or construction of any provision of
this Sublease. Whenever the context of this Sublease requires, words used in
the singular shall be construed to include the plural and vice versa and
pronouns of whatsoever gender shall be deemed to include and designate the
masculine, feminine or neuter gender.
(c) For the convenience of the parties, any number of
counterparts of this Sublease may be executed by one or more parties hereto
and each such executed counterpart shall be, and shall be deemed to be, an
original instrument.
(d) This Sublease shall be binding upon and inure to the
benefit of the parties hereto and (to the extent permitted in accordance with
the terms of this Sublease) their respective successors and assigns.
(e) Time is of the essence in the performance by Sublessee
of its obligations hereunder.
(f) Sublessor and Sublessee hereby represent and warrant
each to the other that they have not employed any agents, brokers or such other
parties in connection with this Sublease, and each agrees that they shall hold
the other harmless from and against any and all claims of all other agents,
brokers or other such parties claiming by, through or under the respective
indemnifying party.
(g) Sublessee shall have no right, and Sublessee hereby
waives and relinquishes all rights which Sublessee might otherwise have, to
claim any nature of lien against, or to withhold, deduct from or offset
against any Rent or other sums to be paid to Sublessor by Sublessee, except as
expressly provided under this Sublease.
-8-
<PAGE>
(h) All rights and remedies of Sublessor under this
Sublease shall be cumulative and none shall exclude any other rights or
remedies allowed by law; and this Sublease is declared to be a Texas contract,
and all of the terms thereof shall be construed according to the laws of the
State of Texas.
(i) This Sublease constitutes the entire agreement of the
parties with respect to the subject matter hereof, and all prior
correspondence, memoranda, agreements or understandings (written or oral) with
respect hereto are merged into and superseded by this Sublease.
(j) Sublessee warrants, represents and covenants that (i)
it is a duly organized and existing legal corporation under the laws of the
state in which it is organized, and in good standing in the State of Texas,
(ii) it has full right and authority to execute, deliver and perform this
Sublease, (iii) the person executing this Sublease on behalf of Sublessee was
authorized to do so and (iv) upon request of Sublessor, Sublessee will deliver
to Sublessor satisfactory evidence of the due authorization, execution and
delivery of this Sublease by Sublessee.
(k) If any term or provision of this Sublease, or the
application thereof to any person or circumstance, shall to any extent be
invalid or unenforceable, the remainder of this Sublease, or the application
of such provision to persons or circumstances other than those as to which it
is invalid or unenforceable, shall not be affected thereby, and each
provision of this Sublease shall be valid and shall be enforceable to the
extent permitted by law.
(l) This Sublease shall not be recorded without the prior
written consent of Prime Lessor and Sublessor.
(m) Sublessee acknowledges that, pursuant to the
provisions of the Prime Lease and of the Prime Sublease, Sublessor is required
to obtain Prime Lessor's and Prime Sublessor's written consent to this
Sublease, and accordingly, that the obligations of Sublessor hereunder are
expressly subject to Sublessor obtaining such consents. If Prime Lessor's and
Prime Sublessor's written consent to this Sublease is not obtained by 5:00
p.m. Central Time on March 15, 1997, this Sublease shall automatically
terminate and be of no further force and effect. Sublessee acknowledges and
agrees that if Sublessor permits Sublessee to take occupancy of the Subleased
Premises before the consents of Prime Lessor and Prime Sublessor are obtained,
Sublessee will do so at its own risk and shall have no claim against Sublessor
for any loss or damage whatsoever which Sublessee may suffer or incur as a
result of the termination of this Sublease if either such consent is not
obtained (including, without limitation, the cost of any improvements or
repairs to the Subleased Premises made by Sublessee pursuant to Section 1
above). If this Sublease is so terminated, Sublessee agrees to remove its
furniture, equipment and other property from the Subleased Premises within
fourteen (14) days thereafter, and to repair any damage to the Subleased
Premises occurring as a result of its occupancy thereof, all at Sublessee sole
cost and expense.
-9-
<PAGE>
IN WITNESS WHEREOF, Sublessor and Sublessee have executed this
Sublease effective as of the date and year first written above.
"SUBLESSOR"
APACHE CORPORATION
By: /s/ H. Craig Clark
----------------------------------------
Name: H. Craig Clark
-------------------------------------
Title: VP E&P
-------------------------------------
"SUBLESSEE"
IWC SERVICES, INC.
By: /s/ Charles T. Phillips
----------------------------------------
Name: Charles T. Phillips
-------------------------------------
Title: General Counsel - VP
-------------------------------------
-10-
<PAGE>
[LEVEL 04 FLOOR PLAN GRAPHIC APPEARS HERE]
-11-
<PAGE>
CONSENT TO SUBLEASE
This Consent to Sublease is made and entered into effective this 4th
day of April 1997, by and between Barnhart Interests, Inc., as agent for Sage
Plaza One Ltd ("Landlord"), Halliburton Company ("Tenant"), and Apache
Corporation ("Subtenant"), and IWC Services, Inc. ("Subtenant's Sublessee").
RECITALS:
Reference is made to that certain Lease Agreement dated December 18,
1992, executed by and between Landlord and Tenant, together with all
amendments thereto ("Master Lease"), and that certain Sublease Agreement dated
March 13, 1995, by and between Landlord, Tenant and Subtenant, together with
all amendments thereto ("Sublease"). Words with initial capital letters used
but not defined herein shall have the respective meanings assigned to them in
the Master Lease and the Sublease.
Tenant and Subtenant have advised Landlord of their desire to sublease
a portion of the Leased Premises to Subtenant's Sublessee, and Landlord has
indicated its willingness to consent to a sublease of a portion of the Leased
Premises to Subtenant's Sublessee upon the terms and conditions set forth
herein.
AGREEMENTS:
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and agreements contained herein, Landlord, Tenant, Subtenant, and
Subtenant's Sublessee hereby agree as follows:
1. Tenant, Subtenant and Subtenant's Sublessee hereby agree that
(i) no consent evidenced by this Agreement shall be deemed a
modification of any of the terms and provisions of the Master
Lease, (ii) to the extent the terms and provisions of the
proposed sublease conflict with the terms and provisions of
the Master Lease, the terms and provisions of the Master Lease
shall prevail, (iii) Landlord shall not be responsible for or
bound by any of the terms and provisions of the proposed
sublease, all of the rights and remedies of Landlord with
respect to the Leased Premises and the rights of Tenant,
Subtenant and Subtenant's Sublessee to occupy and the terms
and conditions of such occupation
Page 1 of 3
<PAGE>
*****************************************************************************
[PAGE MISSING AND TO COME LATER]
****************************************************************************
Page 2 of 3
<PAGE>
Tenant's relocation of its personal office to accomodate
Tenant's sublease of its Leased Premises.
5. Subtenant and Subtenant's Sublessee shall pay all costs
related to the sublease transaction contemplated herein, including, without
limitation, the fees set forth in Section 13.05. of the Master Lease. Landlord
and Tenant shall incur no costs related to the sublease.
6. Subject to the terms and provisions hereof, Landlord hereby
consents to the sublease of the Leased Premises to Subtenant's Sublessee.
7. Except as expressly amended hereby, the Master Lease is hereby
ratified and confirmed. The Master Lease and all rights, powers and remedies
created hereby or thereunder are hereby ratified and confirmed in all
respects.
8. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
9. Executed effective as of the date here first above written.
BARNHART INTERESTS, INC. HALLIBURTON ENERGY SERVICES
AS AGENT FOR F/F/A HALLIBURTON CORPORATION
SAGE PLAZA ONE LTD. A DELAWARE CORPORATION
("LANDLORD") ("TENANT")
/s/ Paul F. ???? /s/ Tamara W. Blair
- -------------------------------- ----------------------------------
Name: Paul F. ??? Name: Tamara W. Blair
--------------------------- ----------------------------
Title: President Title: Director of Real Estate
Services
-------------------------- ---------------------------
APACHE CORPORATION IWC SERVICES, INC.
("SUBTENANT") ("SUBTENANT'S SUBLESSEE")
/s/ H. Craig Clark /s/ Charles T. Phillips
- -------------------------------- ----------------------------------
Name: H. Craig Clark Name: Charles T. Phillips
--------------------------- -----------------------------
Title: VP E&P Title: VP-General Counsel
-------------------------- ----------------------------
Page 3 of 3
<PAGE>
EXHIBIT 10.18
SUBLEASE AGREEMENT
THE SUBLEASE AGREEMENT is made and entered into on this 31st day of
December, 1997 by and between ITS SUPPLY CORPORATION, a corporation organized
and existing under the laws of the State of Delaware (hereinafter referred to
as "Sublessee"), and International Tool & Supply Company, Inc., a corporation
organized and existing under the laws of the State of Delaware (hereinafter
referred to as "Sublessor").
WITNESSETH:
WHEREAS, Sublessor is the Lessee under a Lease Contract (the "Lease")
entered into by and between Camac Holdings, Inc., as Lessor ("Camac") and
Sublessor, which Lease includes 10,454 square feet of Rentable Area located on
the fourth floor of the building currently known as "Camac Plaza", located at
4669 Southwest Freeway, Houston, Texas; and
WHEREAS, Sublessee desires to sublease 10,454 square feet of Rentable
Area located on the fourth floor of Camac Plaza and 238 square feet of
Rentable Area currently used for storage located on the first floor of Camac
Plaza (collectively, the "Sublease Area") from Sublessor pursuant to and
subject to the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants and promises
set forth below, the parties hereto do hereby agree as follows:
1. Sublessor hereby subleases to Sublessee and Sublessee hereby subleases
from Sublessor the Sublease Area pursuant to and subject to the terms
and conditions hereinafter set forth. The Sublease Area is subleased
"as is" and neither Sublessor nor Camac (or its successors or assigns)
shall have any obligation to make improvements thereto.
2. This Sublease shall become effective on January 1, 1998 and, except as
otherwise provided herein, shall continue in full force until the 30th
day of June 1999. Notwithstanding the foregoing, however, Sublessee
shall have the right to terminate this Sublease Agreement, and the
sublease thereunder, at any time by giving no less than twelve (12)
months written notice of its intent to so terminate prior to such
termination.
3. Sublessee agrees to pay without demand a rental rate of $9,028.00 per
month for the Sublease Area located on the fourth floor and $236.00
per month for the Sublease Area located on the first floor. Such
rental rate shall be due and payable on the first day of each calendar
month, and Sublessee hereby agrees to pay such rent monthly in advance
without demand to Sublessor at Sublessor's address as may be
designated from time to time by Sublessor.
4. Sublessor agrees that there shall be no escalation in the rental rate
to be paid by Sublessee during the term of this Sublease.
<PAGE>
5. Except as expressly otherwise provided herein, Sublessee agrees to be
bound by all of the terms and conditions of the Lease (including Exhibit
"D"thereto), a copy of which is attached hereto, as if Sublessee were
the Lessee thereunder and Sublessor were the Lessor thereunder.
Additionally, Sublessee understands and agrees that, except with respect
to any amounts to be paid by Sublessee to Sublessor hereunder, Camac
(and its successors and assigns) shall also be entitled to enforce the
performance of Sublessee's covenants, duties and obligations under this
Sublease and the Lease.
IN WITNESS THEREOF, this Agreement has been executed on the date first
written above.
ITS SUPPLY CORPORATION INTERNATIONAL TOOL & SUPPLY
COMPANY, INC.
By: By:
---------------------------------- ---------------------------
Kendal A. Gladys Greg O'Brien
Chairman Vice President
<PAGE>
APPROVAL OF SUBLEASE
Camac Holdings, Inc. ("Camac"), Lessor under that Lease Contract (the "Lease")
entered into by and between Camac, as Lessor and International Tool & Supply
Company, Inc. ("ITS"), as Lessee, which Lease includes 10,454 square feet of
Rentable Area located on the fourth floor of the building currently known as
"Camac Plaza", located at 4669 Southwest Freeway, Houston, Texas, hereby
consents to the sublease by ITS to ITS Supply Corporation, which sublease shall
be subject to the terms and conditions of a Sublease Agreement in the form
attached hereto as Exhibit A.
Dated as of December 15, 1997.
CAMAC HOLDINGS, INC.
By:
--------------------------------------
Kamoru A. Lawal
Senior Vice President
<PAGE>
EXHIBIT 11.01
EARNINGS PER SHARE CALCULATION OF
IWC SERVICES, INC.
(a wholly-owned subsidiary of
Boots & Coots International Well Control, Inc.)
Days Weighted
Shares Outstanding Shares
------ ----------- --------
Balance June 30, 1996 11,500,000 365 11,500,000
Common shares issued 12/17/96 483,000 195 258,041
Common shares issued 3/1/97 460,000 121 152,493
Common shares issued 4/25/97 686,368 66 124,110
Common shares issued 5/7/97 1,058,000 54 156,527
---------- ----------
Balance June 30, 1997 14,187,368 12,191,171
========== ==========
Shares outstanding at June 30, 1977 14,187,368 184 14,187,368
Common shares issued 7/29/97 2,747,607 154 2,299,628
Common shares issued 9/12/97 3,866,666 110 2,311,594
Common shares issued 9/18/97 7,475,000 104 4,225,000
Common shares issued 9/22/97 300,000 100 163,043
Common shares issued 10/3/97 1,387,440 89 671,099
Common shares issued 11/4/97 11,580 57 3,587
Common shares issued 12/9/97 23,000 22 2,750
---------- ----------
29,998,661 23,864,069
========== ==========
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1996
<CASH> 1,718,060
<SECURITIES> 0
<RECEIVABLES> 2,636,718
<ALLOWANCES> 7,000
<INVENTORY> 1,131,011
<CURRENT-ASSETS> 6,041,812
<PP&E> 7,455,771
<DEPRECIATION> 506,962
<TOTAL-ASSETS> 14,061,373
<CURRENT-LIABILITIES> 3,730,621
<BONDS> 99,207
0
0
<COMMON> 300
<OTHER-SE> 10,231,246
<TOTAL-LIABILITY-AND-EQUITY> 14,061,373
<SALES> 0
<TOTAL-REVENUES> 5,821,293
<CGS> 3,785,787
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 285,306
<LOSS-PROVISION> 7,000
<INTEREST-EXPENSE> 106,848
<INCOME-PRETAX> (717,462)
<INCOME-TAX> 41,370
<INCOME-CONTINUING> (758,832)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (758,832)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
