UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
--------------------------------
DATE OF EARLIEST EVENT REPORTED: JUNE 26, 1999
TETRA TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-18335 74-2148293
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification No.)
25025 I-45 NORTH
THE WOODLANDS, TEXAS 77380
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (281) 367-1983
<PAGE>
Item 2. Acquisition or Disposition of Assets
On June 25, 1999, TETRA Real Estate, L.P., a wholly owned subsidiary of
TETRA Technologies, Inc. (the "Company") closed the sale of the TETRA Process
Technologies business segment ("TPT") to Capital Controls Co., Inc. ("CCC"). The
Company had no existing relationship with CCC at the time of the transaction.
TPT is involved in the wastewater and potable water treatment business. At the
closing, the Company entered into an Asset Purchase Agreement (the "Purchase
Agreement") with CCC under which it sold the assets and business that comprised
TPT in exchange for a purchase price of $38.825 million. The purchase price was
determined through arm's length negotiations after weighing various factors,
including earnings and total assets of TPT, trends and other customary valuation
methods. Of the $38.825 million, $36.825 was paid in cash at closing and $2
million was paid into an escrow account with a financial institution. The
escrowed funds will be maintained in escrow for a period of one year and may be
used to satisfy obligations of the Company to CCC, including any liabilities
that may exist in the future under the Purchase Agreement. The purchase was
effective for accounting purposes on May 1, 1999. Under the Asset Purchase
Agreement, the Company agreed not to compete with CCC for a period of five years
in the business conducted by TPT. This brief description of the Purchase
Agreement is qualified in its entirety by the conformed copy of the Purchase
Agreement attached hereto as an exhibit.
At the closing the Company also entered into a Transitional Services
Agreement, pursuant to which it will be providing certain transitional services
to CCC for a period of 120 days, and a License and Procurement Agreement. Under
the License and Procurement Agreement, CCC granted to the Company a
non-exclusive, worldwide, royalty-free, perpetual license under the CCIX(R)
(a/k/a Higgins Loop(TM)), ColOX(TM), and HDS(TM) technologies sold to CCC under
the Purchase Agreement (the "Grant Back Technologies") for use by the Company in
existing projects in which the Company has an interest and in certain projects
in the future in which the Company has an interest, none of which competes with
TPT. Under the License and Procurement Agreement, for a period of 10 years from
the closing, the Company agreed, on behalf of itself and its affiliates, to
offer to purchase any significant amounts of equipment, systems, filtration
media and related engineering services used in connection with the Grant Back
Technologies, to the extent marketed by CCC, related to the business of TPT and
with respect to engineering services, not available to the Company internally.
CCC has the option to sell any such goods and services requested by the Company,
at a preferential price
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) PRO FORMA FINANCIAL INFORMATION
The following pro forma financial information is filed as part of this
report:
Pro forma condensed consolidated balance sheet of TETRA Technologies, Inc.
and Subsidiaries at March 31, 1999 and pro forma condensed consolidated
statement of operations for the three months ended March 31, 1999 and year ended
December 31, 1998.
EXHIBITS
1. Asset Purchase Agreement, dated June 25, 1999, between TETRA
Technologies, Inc., TETRA Real Estate, L.P. and Capital Controls
Co., Inc.
- 2 -
<PAGE>
Pro-forma Condensed Financial Statements
TETRA Technologies, Inc. and Subsidiaries
(Unaudited)
On June 26, 1999, the Company sold the assets and liabilities of TETRA
Process Technologies ("TPT"), a wholly-owned subsidiary, for approximately
$38.825 million. Proceeds from the sale will initially be used to reduce bank
debt. As a result of the sale, the Company expects to recognize an after tax
gain of approximately $17.3 million.
The following pro forma condensed consolidated balance sheet as of March
31, 1999 and the pro forma consolidated statement of operations for the three
month period ended March 31, 1999 and the year ended December 31, 1998 give
effect to the divestiture of TETRA Process Technologies. The pro forma condensed
consolidated balance sheet has been prepared assuming that the sale of TPT had
occurred on March 31, 1999. The pro forma condensed consolidated statement of
operations have been prepared assuming that the sale of TPT occurred at the
beginning of the period presented. The gain on the sale, however, is not
reflected in the pro forma condensed consolidated statement of operations.
The unaudited pro forma financial data is based upon management's best
estimate of the effects of the disposition of TPT. Pro forma adjustments are
estimates which are based on currently available information; it is possible
that the actual results could differ from those presented.
The unaudited pro forma consolidated statements of operations for the three
months ended March 31, 1999 and the year ended December 31, 1998 are not
necessarily indicative of the results of operations that actually would have
been achieved had the sale of TPT been consummated on the dates indicated or
that may be achieved in the future. The audited pro forma consolidated financial
statements should be read in conjunction with the accompanying notes.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, REPORTING THE COSTS OF START-UP ACTIVITIES
("SOP 98-5"), which requires that costs related to start-up activities be
expensed as incurred. Prior to 1999, the Company capitalized those costs
incurred in connection with opening a new production facility. The Company
adopted the provisions of the SOP 98-5 in its financial statements for the year
ended December 31, 1999. The effect of adoption of SOP 98-5 was to record a
charge for the cumulative effect of an accounting change that was recorded in
the quarter ended March 31, 1999. For comparative purposes, the Pro Forma
Statement of Operations for the year ended December 31, 1998 includes an
adjustment to reflect the expense for such start-up costs which were originally
capitalized during that period.
- 3 -
<PAGE>
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
(In Thousands) HISTORICAL
-----------------------------------
TETRA TETRA PROCESS PRO FORMA PRO FORMA
TECHNOLOGIES, INC. TECHNOLOGIES ADJUSTMENTS CONSOLIDATED
------------------ -------------- ------------- ---------------
<S> <C> <C> <C>
Revenues .......................................... $ 238,468 $ 15,557 $ 222,911
Cost of revenues .................................. 178,033 9,840 $ 2,086(a) 170,279
--------- --------- --------- ---------
Gross profit ...................................... 60,435 5,717 (2,086) 52,632
General and administrative ........................ 39,055 2,419 36,636
--------- --------- --------- ---------
Operating Income (Loss) ....................... 21,380 3,298 (2,086) 15,996
Interest expense .................................. (6,458) 0 (2,600)(b) (3,858)
Interest income ................................... 172 0 172
Other income (expense) ............................ (478) 0 (478)
--------- --------- --------- ---------
Income from continuing operations
before Income Taxes .......................... 14,616 3,298 514 11,832
Provision for Income Taxes ........................ 5,718 5 (1,111)(c) 4,602
--------- --------- --------- ---------
Net Income from continuing operations ......... 8,898 3,293 1,625 7,230
========= ========= ========= =========
Net Income from continuing operations
per share .................................... $ 0.66 $ 0.53
========= =========
Average Shares .................................... 13,561 13,561
========= =========
Net Income from continuing operations
per share .................................... $ 0.64 $ 0.52
========= =========
Average diluted shares ............................ 13,994 13,994
========= =========
</TABLE>
SEE NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
-4-
<PAGE>
NOTES TO PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS OF DECEMBER 31, 1998
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
(Unaudited)
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
(a) Writeoff of startup costs incurred in 1998 in conjunction with cumulative
effect of accounting change recorded as of January 1, 1999 .................... ($2,086)
(b) Decrease in interest expense resulting from the reduction of debt ................ $ 2,600
from sale proceeds
(c) Increase in income tax provision associated with (a) & (b), above ................ ($ 206)
Decrease in income tax provision associated with reduced earnings
as a result of the disposition ................................................ $ 1,317
-------
Total tax provision adjustment ................ $ 1,111
-------
NET INCOME STATEMENT IMPACT .................................... $ 1,625
=======
</TABLE>
-5-
<PAGE>
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
AT MARCH 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
(In Thousands) HISTORICAL
----------------------------------
TETRA TETRA PROCESS PRO FORMA PRO FORMA
TECHNOLOGIES, INC. TECHNOLOGIES ADJUSTMENTS CONSOLIDATED
------------------ ------------- ----------- ------------
<S> <C> <C> <C>
Revenues .................................................... $ 57,997 $ 3,237 $ 54,760
Cost of Revenues: ........................................... 43,853 1,663 42,190
-------- -------- -------- --------
Gross Profit ................................................ 14,144 1,574 -- 12,570
General and Administrative Expense .......................... 10,521 625 9,896
Special Charge .............................................. 4,745 -- 4,745
-------- -------- -------- --------
Operating Income ................................. (1,122) 949 -- (2,071)
Gain on sale of Administration Building ..................... 6,731 6,731
Interest Expense, net ....................................... (2,213) (650)(a) (1,563)
Other Income (expense) ...................................... 107 107
-------- -------- -------- --------
Income (loss) From Continuing Operations
Before Income Taxes ..................................... 3,503 949 650 3,204
Provision for Income Taxes .................................. 1,400 (120)(b) 1,280
-------- -------- -------- --------
Net Income (loss) From Continuing Operations ................ $ 2,103 $ 949 770 $ 1,924
======== ======== ======== ========
Net Income from continuing operations
per share ............................................... $ 0.16 $ 0.14
======== ========
Average Shares .............................................. 13,521 13,521
======== ========
Net Income from continuing operations
per share ............................................... $ 0.16 $ 0.14
======== ========
Average diluted shares ...................................... 13,555 13,555
======== ========
</TABLE>
SEE NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
-6-
<PAGE>
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AT MARCH 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
(In Thousands) HISTORICAL
----------------------------------
TETRA TETRA PROCESS PRO FORMA PRO FORMA
TECHNOLOGIES, INC. TECHNOLOGIES ADJUSTMENTS CONSOLIDATED
------------------ -------------- ----------- ------------
<S> <C> <C> <C>
ASSETS:
Current Assets
Cash and cash equivalents ............................. $ 2,081 $ 6 $ 2,075
Trade accounts receivable ............................. 57,942 3,691 2,000(e) 56,251
Costs and estimated earnings in excess
of billings on incomplete contracts ................ 6,498 6,498 --
Inventories ........................................... 58,632 195 58,437
Deferred tax assets ................................... 4,063 0 4,063
Prepaid expenses and other current assets ............. 4,233 15 4,218
--------- --------- --------- ---------
Total Current Assets ............................... 133,449 10,405 2,000 125,044
Property, Plant and Equipment ............................ 188,259 2,436 185,823
Less accumulated depreciation and amortization ........ (54,623) (1,667) (52,956)
--------- --------- --------- ---------
Net Property, Plant and Equipment .................. 133,636 769 132,867
Other Assets
Cost in excess of net assets acquired ................. 34,396 333 34,063
Other, net of accumulated amortization ................ 6,471 160 6,311
--------- --------- --------- ---------
Total Other Assets ................................. 40,867 493 40,374
--
--------- --------- --------- ---------
$ 307,952 $ 11,667 $ 2,000 $ 298,285
========= ========= ========= =========
</TABLE>
SEE NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
-7-
<PAGE>
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AT MARCH 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
(In Thousands) HISTORICAL
----------------------------------
TETRA TETRA PROCESS PRO FORMA PRO FORMA
TECHNOLOGIES, INC. TECHNOLOGIES ADJUSTMENTS CONSOLIDATED
------------------ -------------- ------------- -------------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable ............................................ $ 29,195 $ 3,471 $ 25,724
Accrued expenses ............................................ 15,447 12,159 (c) 27,606
Billings in excess of costs and estimated
earnings on incomplete contracts ......................... 425 425 --
Current portion of all long-term debt and
capital lease obligations ................................ 1,127 1,127
--------- --------- --------- ---------
Total Current Liabilities ................................ 46,194 3,896 12,159 54,457
Long-term debt, less current portion ........................... 108,230 (36,000)(d) 72,230
Capital lease obligations, less current portion ................ 1,427 1,427
Deferred income taxes .......................................... 14,873 14,873
Other Liabilities .............................................. 1,670 1,670
Stockholders' Equity
Common stock, par value $.01 per share:
40,000,000 shares authorized, with 13,530,968 shares
issued and outstanding in 1996 ........................... 136 136
Additional paid-in capital ..................................... 77,923 77,923
Treasury Stock, at cost, 94,000 shares in 1999 ................. (1,107) (1,107)
Accumulated other comprehensive income ......................... (242) (242)
Retained earnings .............................................. 58,848 7,771 25,841 (f) 76,918
--------- --------- --------- ---------
Total Stockholders' Equity ............................... 135,558 7,771 25,841 153,628
--------- --------- --------- ---------
$ 307,952 $ 11,667 $ 2,000 $ 298,285
========= ========= ========= =========
</TABLE>
SEE NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
-8-
<PAGE>
NOTES TO PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS OF MARCH 31, 1999
TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
(Unaudited)
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
(a) Decrease in interest expense resulting from the reduction of debt .......... $ 650
from sale proceeds
(b) Increase in income tax provision associated with (a) ....................... ($ 260)
Decrease in income tax provision associated with reduced earnings
as a result of the disposition ......................................... $ 380
--------
Total tax provision adjustment .............. $ 120
NET INCOME STATEMENT IMPACT ............................. $ 770
========
(c) Taxes associated with the disposition and accrued expenses ................. $ 12,159
(d) Reduction of debt from proceeds of the dispostion .......................... ($36,000)
(e) Increase in accounts recievable fro escrowed amount due .................... $ 2,000
(f) Gain on the disposition, net of taxes of $11,500 ........................... $ 17,300
Equity retained from the disposition of assets ............................. $ 7,771
Net income statement effect ................................................ $ 770
--------
$ 25,841
TOTAL BALANCE SHEET IMPACT .............................. $ 0
========
</TABLE>
-9-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: July 12, 1999
TETRA TECHNOLOGIES, INC.
By: /s/ GEOFFREY M. HERTEL
Geoffrey M. Hertel
Executive Vice President -
Finance and Administration
- 10 -
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER
1. Asset Purchase Agreement, dated June 25, 1999, between TETRA Technologies,
Inc., TETRA Real Estate, L.P. and Capital Controls Co., Inc.
- 11 -
EXHIBIT 1
- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
BY AND AMONG
CAPITAL CONTROLS CO., INC.
(A PENNSYLVANIA CORPORATION),
TETRA TECHNOLOGIES, INC.
(A DELAWARE CORPORATION),
AND
TETRA REAL ESTATE, L.P.
(A TEXAS LIMITED PARTNERSHIP)
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
1. Definitions....................................................... - 1 -
2. Sale and Purchase:................................................ - 9 -
2.1 Agreement to Sell and Purchase.............................. - 9 -
2.2 Purchase Price..............................................- 11 -
2.3 Escrow Account..............................................- 12 -
2.4 Allocation of the Purchase Price............................- 12 -
2.5 Assumption of Liabilities...................................- 12 -
2.6 Post-Closing Purchase Price Adjustment......................- 14 -
2.7 Consent of Third Parties....................................- 15 -
3. Closing...........................................................- 16 -
3.1 Location, Date..............................................- 16 -
3.2 Deliveries..................................................- 16 -
4. Representations and Warranties with respect to the Companies......- 17 -
4.1 Corporate Status............................................- 17 -
4.2 Authorization...............................................- 17 -
4.3 Consents and Approvals......................................- 18 -
4.4 Ownership...................................................- 18 -
4.5 Financial Statements........................................- 18 -
4.6 Title to Purchased Assets and Related Matters. .............- 19 -
4.7 Real Property. .............................................- 19 -
4.8 Certain Personal Property...................................- 20 -
4.9 Non-Real Estate Leases......................................- 20 -
4.10 Cash Balance of the Business................................- 20 -
4.11 Inventory...................................................- 20 -
4.12 [RESERVED]..................................................- 20 -
4.13 Taxes.......................................................- 21 -
4.14 [RESERVED]..................................................- 21 -
4.15 Legal Proceedings and Compliance with Law...................- 21 -
4.16 Contracts...................................................- 22 -
4.17 Insurance...................................................- 23 -
4.18 Intellectual Property.......................................- 24 -
4.19 Software....................................................- 27 -
4.20 Employee Relations..........................................- 28 -
4.21 ERISA.......................................................- 28 -
i
<PAGE>
4.22 Absence of Certain Changes..................................- 28 -
4.23 [RESERVED]..................................................- 29 -
4.24 Customers and Suppliers.....................................- 29 -
4.25 Operation of the Business...................................- 29 -
4.26 Finder's Fees...............................................- 29 -
4.27 Accuracy of Information.....................................- 29 -
5. Representations and Warranties of Buyer...........................- 30 -
5.1 Organizational Status.......................................- 30 -
5.2 Authorization...............................................- 30 -
5.3 Financing...................................................- 30 -
5.4 Consents and Approvals......................................- 30 -
5.5 Finder's Fees...............................................- 30 -
5.6 Companies' Representations and Warranties...................- 30 -
5.7 Accuracy of Information.....................................- 30 -
6. Additional Covenants of the Companies.............................- 31 -
6.1 Satisfaction of Liabilities.................................- 31 -
6.2 Competition and Confidentiality.............................- 31 -
6.3 Related Parties.............................................- 32 -
6.4 Collection of Accounts Receivables..........................- 32 -
6.5 Use of Trade Names..........................................- 34 -
7. Covenants of Buyer................................................- 34 -
7.1 Tetra Engineering Plans.....................................- 34 -
7.2 Additional Financial Statements.............................- 34 -
7.3 Use of Trade Names..........................................- 34 -
7.4 Replacement Bonds...........................................- 34 -
8. Mutual Covenants..................................................- 35 -
8.1 Bulk Sales..................................................- 35 -
8.2 Public Announcements........................................- 35 -
8.3 Taxes.......................................................- 35 -
8.4 Expenses....................................................- 35 -
8.5 Operations Following Effective Date.........................- 35 -
8.6 Access to Employees.........................................- 36 -
9. Indemnification...................................................- 36 -
9.1 By Seller...................................................- 36 -
9.2 By Buyer....................................................- 37 -
9.3 Procedure for Claims........................................- 37 -
ii
<PAGE>
9.4 Claims Period...............................................- 39 -
9.5 Third Party Claims..........................................- 39 -
9.6 Effect of Investigation or Knowledge........................- 40 -
10. General Matters...................................................- 40 -
10.1 Contents of Agreement.......................................- 40 -
10.2 Amendment, Parties in Interest, Assignment, Etc.............- 40 -
10.3 Further Assurances..........................................- 41 -
10.4 Interpretation..............................................- 41 -
10.5 Counterparts................................................- 41 -
10.6 Disclosure Schedules........................................- 41 -
11. Remedies..........................................................- 41 -
12. Notices...........................................................- 42 -
13. Governing Law.....................................................- 43 -
iii
<PAGE>
SCHEDULES
2.1(a)(vii) Purchased Patents
2.1(a)(xii) Purchased Software
2.1(a)(xiii) Purchased Trademarks
2.1(b) Excluded Real Estate
2.5(a) Assumed Expenses
4.3 Consents and Approvals
4.5 Financial Statements
4.6 Title of Purchased Assets
4.7 Real Property
4.8 Personal Property
4.9 Non-Real Estate Leases
4.13 Taxes
4.15 Legal Proceedings
4.16 Contracts
4.17 Insurance
4.18 Intellectual Property
4.18(a) Intellectual Property - Contracts
4.18(b) Intellectual Property - Know How
4.18(c) Intellectual Property - Patents
4.18(d) Intellectual Property - Trademarks
4.19(b) Custom Software - Title
4.19(c) Custom Software - Year 2000
4.19(d) Custom Software - Secrecy
4.21 ERISA
4.22 Absence of Change
4.24 Customers and Suppliers
4.25 Operation of the Business
6.5 Use of Tradenames
EXHIBITS
A Bill of Sale
B Escrow Agreement
C License and Procurement Agreement
D Transitional Services Agreement
iv
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT is made as of June 25, 1999, by and among
TETRA TECHNOLOGIES, INC., a Delaware corporation ("Tetra"), TETRA REAL ESTATE,
L.P., a Texas limited partnership ("Seller," and together with Tetra, the
"Companies"), and CAPITAL CONTROLS CO., INC., a Pennsylvania corporation
("Buyer," and together with the Companies, the "Parties"). Certain other terms
are used herein as defined below in Section 1 or elsewhere in this Agreement.
BACKGROUND
Tetra, together with its controlled Affiliates (as defined below), owns
all of the outstanding equity interests of Seller. Seller owns and operates the
Business (defined below).
This Agreement sets forth the terms and conditions upon which Buyer is
purchasing the Purchased Assets (defined below) and assuming the Assumed
Liabilities (defined below) from Seller and Seller is selling the Purchased
Assets and transferring the Assumed Liabilities to Buyer.
WITNESSETH
NOW, THEREFORE, the Parties, intending to be legally bound hereby, for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in consideration of the mutual covenants contained herein,
hereby agree as follows:
1. DEFINITIONS
For convenience, certain terms used in more than one part of this
Agreement are listed in alphabetical order and defined or referred to below
(such terms as well as any other terms defined elsewhere in this Agreement shall
be equally applicable to both the singular and plural forms of the terms
defined).
"Accounts Receivable" means, as of any date, any trade accounts
receivable, notes receivable, employee advances and other miscellaneous
receivables of the Business. Accounts Receivable do not include other current
assets as shown on the Balance Sheet.
"Affiliates" means, with respect to a particular Party, Persons or
entities controlling, controlled by or under common control with that Party, as
well as any officers, directors, and majority-owned entities of that Party and
of its other Affiliates. For the purposes of the foregoing, ownership, directly
or indirectly, of greater than 20% of the voting stock or other equity interest
shall be deemed to constitute control.
<PAGE>
"Agreement" means this Agreement and the Exhibits and Disclosure Schedules
hereto.
"Assumed Contracts" is defined in SECTION 4.16.
"Assumed Liabilities" is defined in SECTION 2.5(A).
"Balance Sheet" is defined in SECTION 4.5.
"Balance Sheet Date" is defined in SECTION 4.5.
"Benefit Plan" means any (a) "employee benefit plan" as defined in Section
3(3) of ERISA, and (b) supplemental retirement, bonus, deferred compensation,
severance, incentive plan, program or arrangement or other employee fringe
benefit plan, program or arrangement.
"Bill of Sale, Assignment and Assumption Agreement" means a bill of sale,
assignment and assumption agreement by and between Seller and Buyer in
substantially the same form as EXHIBIT "A."
"Building Leases" means the leases, as amended, by and between Tetra and
(a) Massachusetts Mutual Life Insurance Company dated April 5, 1995 for the
premises located at Park West One, Suite 600, Cliff Mine Road, Pittsburgh,
Pennsylvania, (b) Thompson and Rubin Limited dated May 7, 1991 for the premises
located at Thompson Center, 6302 Benjamin Road, Suite 408, Tampa, Florida and
(c) J.L. Irons dated February 1, 1995 for the premises located at 134 Peaks
Station Road, Clinton, Tennessee.
"Business" means the business and operations previously conducted by the
operating unit of Tetra known as TETRA Process Technologies ("TPT") and
currently conducted by the Companies which consists of the wastewater and
potable water activities conducted by TPT, including the assets and liabilities
relating to such business activities which include the Tetra Technologies. The
term "Business" shall not include any other operations of the Companies not
related to the wastewater and potable water business activities or the corporate
services provided by Tetra and its Affiliates to the Business.
"Business Day" means any day other than a Saturday or Sunday, or a day on
which the banking institutions of the Commonwealth of Pennsylvania are
authorized or obligated by law or executive order to close.
"Buyer" is defined above in the preamble.
"Buyer's knowledge" means the actual knowledge of Andrew C. Rykaczewski.
- 2 -
<PAGE>
"Charter Documents" means a Person's certificate or articles of
incorporation, certificate defining the rights and preferences of securities,
articles of organization, general or limited partnership agreement, certificate
of limited partnership, joint venture agreement or similar document governing
the entity.
"Closing" is defined in SECTION 3.1.
"Closing Date" is defined in SECTION 3.1.
"Closing Payment" is defined in SECTION 2.2(A).
"Code" means the Internal Revenue Code of 1986, as amended.
"Companies" means both Seller and Tetra and "Company" means Seller or
Tetra, as appropriate.
"Companies' knowledge," "Company's knowledge," "knowledge of the
Companies" or "knowledge of a Company" means the actual knowledge of any
director, officer or management level employee of any of the Companies or of any
Affiliate thereof performing substantive duties for the benefit of the Business.
"Component" means any software, Software Product, Custom Software,
Hardware, Database or Embedded Control.
"Contract" means any written or oral contract, agreement, lease,
instrument, or other document or commitment, arrangement, undertaking, practice
or authorization that is binding on any Person or its property under any
applicable Law.
"Copyrights" means any copyrights in both published and unpublished works
primarily used in the Business.
"Court Order" means any judgment, decree, injunction, order or ruling of
any federal, state, local or foreign court or governmental or regulatory body or
authority that is binding on any person or its property under applicable Law.
"Custom Software" means any computer software that has been developed or
designed for use in the Business.
"Database" means all data and other information recorded, stored,
transmitted and retrieved in electronic form by a System or any Component,
whether located on any Components of a System
- 3 -
<PAGE>
or archived in storage media of a type employed or used in conjunction with any
Component or System.
"Default" means (a) a breach, default or violation, (b) the occurrence of
an event that with or without the passage of time or the giving of notice, or
both, would constitute a breach, default or violation or cause an Encumbrance to
arise, or (c) with respect to any Contract, the occurrence of an event that with
or without the passage of time or the giving of notice, or both, would give rise
to a right of termination, renegotiation or acceleration or a right to receive
damages or a payment of penalties.
"Designated Employee" means any employee of any Company engaged in the
operation of the Business that has been designated in writing by Buyer as an
individual Buyer wishes to employ after the Closing.
"Disclosure Schedule" means any of the Schedules hereto containing
information relating to Seller pursuant to SECTION 4 and other provisions hereof
that has been provided to Buyer on the date hereof.
"Effective Date" means 12:01 am May 1, 1999.
"Embedded Control" means any microprocessor, microcontroller, smart
instrumentation or other sensor, driver, monitor, robotic or other device
containing a semiconductor, memory circuit, BIOS, PROM or other microchip.
"Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability, defect of title or other claim, charge or
encumbrance of any nature whatsoever on any property or property interest,
including any restriction on the use, voting, transfer, receipt of income or
other exercise of any attributes of ownership.
"Environmental Condition" is defined in SECTION 4.15(B).
"Environmental Law" means all Laws and Court Orders relating to pollution
or protection of the environment as well as any principles of common law under
which a Party may be held liable for the Release or discharge of any Hazardous
Substance into the environment.
"Environmental Liability" means any liability, known or unknown, relating
to or arising out of an Environmental Condition.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Chase Manhattan Trust Company, National Association.
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"Escrow Agreement" means the escrow agreement by and among Seller, Buyer
and the Escrow Agent in substantially the same form as EXHIBIT "B."
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted US accounting principles.
"Governmental Permits" means all governmental permits, licenses,
registrations, certificates of occupancy, approvals and other governmental
authorizations.
"Hardware" means any mainframe, midrange computer, personal computer,
notebook or laptop computer, server, switch, printer, modem, driver, peripheral
or any component of any of the foregoing.
"Hazardous Substances" means any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous
or toxic or a pollutant or a contaminant under any Law, including (i) any
"hazardous substances" as defined by the federal Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. ss.ss. 9601 ET SEQ., (ii)
any "extremely hazardous substance," "hazardous chemical," or "toxic chemical"
as those terms are defined by the federal Emergency Planning and Community
Right-to-Know Act, 42 U.S.C. ss.ss. 11001 ET SEQ., (iii) any "hazardous waste,"
as defined under the federal Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act, 42 U.S.C. ss.ss. 6901 ET SEQ., (iv) any
"pollutant," as defined under the federal Water Pollution Control Act, 33 U.S.C.
ss.ss. 1251 ET SEQ., as any of such laws in clauses (i) through (iv) as amended,
and (v) any regulated substance or waste under any Laws or Court Orders that
have been or will be enacted, promulgated or issued by any federal, state or
local governmental authorities concerning protection of the environment.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Intellectual Property" means any Copyrights and registrations or
applications for registration of Copyrights in any jurisdiction, and any
renewals or extensions thereof, Patents, Trademarks, technology rights and
licenses, Trade Secrets, franchises, inventions, discoveries, formulae,
specifications and ideas, rights in research and development, and commercially
practiced processes and inventions, whether patentable or not in any
jurisdiction and any other intellectual property used by any Company in the
Business.
"Inventory" means all inventory of the Business, including raw materials,
supplies, packaging supplies, work in process and finished goods.
"Law" means any statute, law, ordinance, regulation, order or rule of any
federal, state, local, foreign or other governmental or quasi-governmental
agency or body or of any other type of
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regulatory body, including those covering environmental, energy, safety, health,
transportation, bribery, record keeping, zoning, antidiscrimination, antitrust,
wage and hour, and price and wage control matters.
"Liability" means any direct or indirect liability, indebtedness,
obligation, expense, capital expenditure, claim, loss, damage, deficiency,
guaranty or endorsement of or by any person, absolute or contingent, accrued or
unaccrued, due or to become due, liquidated or unliquidated.
"License and Procurement Agreement" means the license agreement by and
between Tetra and Buyer whereby Buyer will license to Tetra the Tetra
Technologies and Tetra shall purchase certain products from Buyer in
substantially the form as EXHIBIT "C."
"Litigation" means any lawsuit, action, arbitration, administrative,
quasi-administrative or other proceeding, criminal prosecution or governmental
investigation or inquiry.
"Material Adverse Effect" means a material adverse effect on the Business,
including the assets, financial condition, results of operations, liquidity,
products, competitive position, customers and customer relations thereof.
"Minor Contract" means (a) any Contract that is terminable by a party on
not more than 30 days' notice without any Liability or (b) any Contract under
which the obligation of a party (fulfilled and to be fulfilled) involves an
amount of less than $5,000.
"Non-Assignable Contract" is defined in SECTION 2.7.
"Non-Competition Period" is defined in SECTION 6.2.
"Non-Real Estate Leases" is defined in SECTION 4.9.
"Off-the-Shelf-Software" is defined in SECTION 4.18(A)(I).
"Ordinary course" or "ordinary course of business" means the ordinary
course of business for the Business that is consistent with past practices.
"Parties" is defined above in the preamble.
"Party" is defined above in the preamble.
"Patents" means any patents together with any extensions, reexaminations
and reissues of such patents, patents of addition, patent applications,
divisions, continuations, continuations-in-part, and any subsequent filings in
any country or jurisdiction claiming priority therefrom.
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"Permitted Liens" means the (a) Encumbrances identified as such and
described in SCHEDULE 4.6 and (b) Encumbrances for current Taxes and assessments
not yet due and payable including, Encumbrances for nondelinquent ad valorem
taxes, nondelinquent statutory Encumbrances arising other than by reason of any
Default on behalf of the Seller (c) Encumbrances arising under the Assumed
Liabilities and (d) such other Encumbrances that do not interfere with the use
of any of the Purchased Assets or the Business.
"Person" means any natural person, business trust, corporation,
partnership, limited liability company, joint stock company, proprietorship,
association, trust, joint venture, unincorporated association or any other legal
entity of whatever nature.
"Prime Rate" means the prime lending rate as announced from time to time
in THE WALL STREET JOURNAL.
"Purchased Assets" is defined in SECTION 2.1(A).
"Real Property" is defined in SECTION 4.7.
"Release" means any release, spill, emission, leaching, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, or leaching into the indoor
or outdoor environment, or into or out of any property.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" is defined above in the preamble.
"Seller Representatives" means any investment advisors, accountants,
counsel, agents or other Persons who may act on behalf of any Company.
"Seller Required Consents" is defined in SECTION 4.3.
"Software Products" means any computer operating, security or programming
software, that is owned by or licensed to any Company and used or has been
developed or designed for or is in the process of being developed or designed
for use in the conduct of the Business of any nature whatsoever, including all
systems software, all applications software, whether for general business usage
(e.g., accounting, finance, word processing, graphics, spreadsheet analysis,
etc.) or specific, unique-to-the-Business usage (e.g., telephone call
processing, etc.), and any and all documentation and object and source codes
related thereto.
"System" means any combination of any software, Software Product, Custom
Software, Hardware, Database or Embedded Control.
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"Taxes" means all taxes, duties, charges, fees, levies or other
assessments imposed by any taxing authority including income, gross receipts,
value-added, excise, withholding, personal property, real estate, sale, use, ad
valorem, license, lease, service, severance, stamp, transfer, payroll,
employment, customs, duties, alternative, add-on minimum, estimated and
franchise taxes (including any interest, penalties or additions attributable to
or imposed on or with respect to any such assessment).
"Tetra Engineering Plans" means all engineering and auto-cad drawings,
designs, plans, blue prints, specifications and other similar information
relating to any plants or facilities involved in a Tetra operation which have
been prepared by any Company in connection with the Business.
"Tetra Technologies" means the Intellectual Property related to the
Companies' HDS(TM), CCIX(TM) (a.k.a. the Higgins Loop(TM)) and ColOX(TM)
technologies.
"Trade Secrets" means all know-how, trade secrets, customer lists,
software, know-how and other technical information, data, process technology,
plans, drawings (including engineering and auto-cad drawings), innovations,
designs, ideas, proprietary information and blue prints, owned, used or licensed
either directly or indirectly (as licensor or licensee) by any Company and used
in the operation of the Business, except for (a) any such item that is generally
available to the public and (b) the Tetra Engineering Plans.
"Trademarks" means all registered or unregistered trademarks, service
marks and service mark applications, brand names, certification marks and trade
dress and any goodwill associated with the foregoing and registrations in any
jurisdictions of, and applications in any jurisdiction to register, the
foregoing, including any extension, modification or renewal of any such
registration or application owned or licensed to any of the Companies for use in
the operation of the Business.
"Transaction Documents" means this Agreement, the Bill of Sale, Assignment
and Assumption Agreement, the Escrow Agreement, the License and Procurement
Agreement and the Transitional Services Agreement.
"Transactions" means the purchase and sale of the Purchased Assets at the
Closing and the other transactions contemplated by the Transaction Documents.
"Transitional Services Agreement" means the transitional services
agreement by and between Seller and Buyer in substantially the same form as
EXHIBIT "D."
"US" means the United States of America.
"Welfare Plan" is defined in SECTION 4.21(G).
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"Working Capital Valuation" is defined in SECTION 7.2.
"Working Capital Value" is defined in SECTION 7.2.
"Year 2000 Compliant" means, with respect to any Component that is a
Purchased Asset, that such Component shall (a) operate without error arising
from the creation, recognition, acceptance, calculation, display, storage,
retrieval, accessing, comparison, sorting, manipulation, processing or other use
of dates or date-based, date-dependent or date-related data, including century
recognition, day-of-the-week recognition, leap years, date values and interfaces
of date functionalities and (b) will not be adversely affected by the advent of
the year 2000, the advent of the twenty-first century or the transition from the
twentieth century through the year 2000 and into the twenty-first century.
"Year 2000 Problem" means any actual or potential failure of the Business
or any of its Systems, Components or products to be Year 2000 Compliant.
2. SALE AND PURCHASE:
2.1 AGREEMENT TO SELL AND PURCHASE.
(a) At the Closing, the Companies shall grant, sell, convey, assign,
transfer and deliver to Buyer, and Buyer shall purchase from the Companies, all
right, title and interest of each Company in and to all of the assets,
properties, and rights of every kind, and description, real, personal and mixed,
tangible and intangible wherever situated constituting the Business on the
Closing Date other than the Excluded Assets (the "Purchased Assets"), free and
clear of all Encumbrances, other than Permitted Liens and the continuing rights,
interests and licenses of Tetra as provided for in the Transaction Documents,
but including the following:
(i) all cash and cash equivalents;
(ii) all Accounts Receivable;
(iii) all Inventory;
(iv) all furniture, fixtures, automobiles, leasehold
improvements, tooling, machinery and equipment;
(v) all customer records, including principal contacts,
addresses and telephone numbers, purchasing history, equipment
demographics, payment information and any other information;
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(vi) all records with respect to suppliers, employees and
other aspects of the Business;
(vii) all Patents listed on SCHEDULE 2.1(A)(VII);
(viii) all Trade Secrets;
(ix) the Tetra Technologies;
(x) all Copyrights;
(xi) all manufacturing, warehouse and office supplies;
(xii) all software and Custom Software (including
documentation and related object and source codes) listed on
SCHEDULE 2.1(A)(XII);
(xiii) all Trademarks listed on SCHEDULE 2.1(A)(XIII);
(xiv) all rights under the Building Leases and the Non-Real
Estate Leases, and any easements, deposits or other rights
pertaining thereto;
(xv) all rights under any Governmental Permits;
(xvi) all rights related to any prepaid expenses;
(xvii) all the assets of Seller set forth on the Balance Sheet
and those assets of Seller whose ownership by Seller is implied by
the assumptions made in the preparation of the Balance Sheet and any
assets acquired by the Business after the Effective Date;
(xviii) all rights to insurance proceeds and insurance claims
under any insurance contracts relating to the Purchased Assets; and
(xix) all rights under any Contracts identified as Assumed
Contracts on SCHEDULE 4.16, except to the extent specified in
SECTION 2.7.
(b) Notwithstanding the foregoing, the Purchased Assets shall not
include any of the following (the "Excluded Assets"):
(i) the rights that accrue or will accrue to the Companies
under this Agreement;
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(ii) the Tetra Engineering Plans;
(iii) the AS400 computer system owned by Tetra;
(iv) the Motorola and Vanguard routers;
(v) the J.D. Edwards software system and Rhumba software owned
and licensed by Tetra;
(vi) the Adtran equipment;
(vii) the rights to receive any royalties prior to the
Effective Date with respect to that certain technology license by
and between Severn Trent, plc, TETRA Europe Limited and TETRA dated
March 29,1996;
(viii) the rights accruing to Tetra with respect to current
disputes between Tetra and Severn Trent plc with respect to Tetra
Europe Limited joint venture formerly between such parties;
(ix) the real estate identified on SCHEDULE 2.1(B);
(x) all assets used to provide the corporate services provided
by Tetra and its Affiliates to the Business; and
(xi) any assets of any Company, the use of which is not
primarily related to the Business, unless any such asset is
specifically identified as being a Purchased Asset herein.
2.2 PURCHASE PRICE.
(a) The total purchase price for the Purchased Assets (the "Purchase
Price") equals the sum of (i) $31.075 million (the "Closing Payment"), (ii)
$5.75 million, as adjusted pursuant to SECTION 2.6 (the "Net Working Capital
Payment"), and (iii) $2.0 million (the "Escrow Payment").
(b) Buyer shall pay the Purchase Price as set forth below:
(i) at the Closing, Buyer shall pay to Seller the Closing
Payment and the Net Working Capital Payment by a wire transfer of
immediately
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available funds, in accordance with written instructions provided by
Seller to Buyer prior to the Closing Date; and
(ii) at the Closing, Buyer shall pay the Escrow Payment to the
Escrow Agent in accordance with the Escrow Agreement. Such cash
delivered to the Escrow Agent, together with any investment proceeds
thereon and any distributions with respect thereto as provided in
the Escrow Agreement, are referred to collectively herein as the
"Escrow Funds."
2.3 ESCROW ACCOUNT. At the Closing, Seller and Buyer shall enter into the
Escrow Agreement with the Escrow Agent under which the Escrow Agent shall hold
the Escrow Funds for possible claims against Seller under SECTION 9 hereof.
2.4 ALLOCATION OF THE PURCHASE PRICE.
(a) The Purchase Price shall be allocated among the Purchased Assets
and the Non-Competition Covenant set forth in SECTION 6.2 as follows:
AMOUNT
------
Purchased Assets $38.725 million
Non-Competition Covenant $100,000
If there is an adjustment to the Purchase Price under SECTION 2.6, such
adjustment will change only the amount of the foregoing allocated to the
Purchased Assets.
(b) The portion of the Purchase Price to be allocated to the
Purchased Assets (as set forth in SECTION 2.4(A)) shall be allocated among the
Purchased Assets in accordance with the respective fair market values of the
Inventory and other Purchased Assets pursuant to an allocation schedule prepared
by Buyer and approved by Seller after the Closing in accordance with Section
1060 of the Code and the regulations adopted thereunder. Neither Seller nor
Buyer will take a position on any income tax return, before any governmental
agency charged with the collection of any income tax, or in any judicial
proceeding that is in any way inconsistent with the terms of this SECTION 2.4,
and Seller and Buyer shall file Form 8594 with the US Internal Revenue Service
in a manner consistent with this allocation.
2.5 ASSUMPTION OF LIABILITIES.
(a) At the Closing, Buyer shall assume and agree to pay, discharge
or perform, as appropriate, when due only the Liabilities of the Companies
relating to the Business specifically identified below in this SECTION 2.5(A)
(the "Assumed Liabilities"):
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(i) all expenses, accounts payable and other current
liabilities of the Business set forth on SCHEDULE 2.5(A), in each
case as set forth on the Balance Sheet and all expenses and accounts
payable and other current liabilities of the Business incurred in
the ordinary course on or after the Effective Date through the
Closing Date consistent with SECTION 4.22;
(ii) all Liabilities of the Business incurred in the ordinary
course, including the Assumed Contracts, other than those
Liabilities related to or resulting from (A) any personal injury
whether based upon theories of tort, products liability or workmen's
compensation through the Closing Date, (B) Environmental Conditions
arising from or related to circumstances existing on or before the
Closing Date, and (C) the wilful misconduct or gross negligence of
any Company; and
(iii) ad valorem or other similar Taxes to be prorated
pursuant to SECTION 8.3(B).
(b) Notwithstanding paragraph (a) above or any other provision of
this Agreement, Buyer is not assuming under this Agreement or any other
Transaction Document, unless otherwise expressly stated therein, any Liability
that is not specifically identified as an Assumed Liability under SECTION
2.5(A), including any of the following (each, an "Unassumed Liability"): (i)
Liabilities arising out of any Default by any Company of any provision of any
Contract; (ii) any product liability or similar claim for injury to any Person
or property, regardless of when made or asserted, that arises out of or is based
upon any express or implied representation, warranty, agreement or guarantee
made by any Company prior to the Closing Date, or alleged to have been made by
any Company, or that is imposed or asserted to be imposed by operation of law in
connection with any service performed or product sold or leased by or on behalf
of any Company on or prior to the Closing; (iii) any Federal, state or local
income or other Tax payable with respect to the Business, the Purchased Assets,
or other properties or operations of any Company or any member of any affiliated
group of which any Company is a member for a period prior to the Effective Date,
except to the extent that such Taxes are included in the Taxes specified in
SUBPARAGRAPH (I) of SECTION 2.5(A); (iv) any Liabilities under or in connection
with any Excluded Assets; (v) except for the salaries and wages of the
Designated Employees which are assumed by Buyer pursuant to SECTION 2.5(A)(I)
above, any Liabilities arising prior to the Closing Date or as a result of the
Closing for severance, bonuses, accrued vacation pay or any other form of
compensation to any employees, agents or independent contractors of any Company,
whether or not employed by Buyer after the Closing and whether or not arising or
under any applicable Law, Benefit Plan or other arrangement with respect
thereto; (vi) any Liabilities of any Company arising or incurred in connection
with the negotiation, preparation and execution of this Agreement and the
Transactions; (vii) any Environmental Liability arising from or related to
circumstances existing on or before the Closing Date; (viii) any Liabilities to
give credits or take other remedial actions for defective goods
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or services; (ix) any Liabilities for money borrowed; and (x) any other
Liabilities that are not otherwise assumed by Buyer hereunder, that are not
specifically listed as an Assumed Liability under SECTION 2.5(A). None of the
foregoing exclusions shall operate to exclude any of the Liabilities assumed by
Buyer under SECTION 2.5(A)(II).
2.6 POST-CLOSING PURCHASE PRICE ADJUSTMENT.
(a) Within 10 days of the completion of the Working Capital
Valuation, Buyer shall give Seller notice (the "Working Capital Notice") of the
results of the Working Capital Valuation. Within 20 days of receipt of the
Working Capital Notice, or, in the alternative, within 20 days of the final
resolution of any dispute of the Working Capital Valuation, Seller shall pay the
Post-Closing Purchase Price Adjustment, if any, to Buyer by wire transfer of
immediately available funds. The phrase "Post-Closing Purchase Price Adjustment"
shall mean the amount, if any, by which the Working Capital Value is less than
the Net Working Capital Payment.
If Seller is liable for a Post-Closing Purchase Price
Adjustment, then Buyer, in addition to any other right of against Seller
provided for at law or in SECTION 9, shall be entitled to recover any
Post-Closing Purchase Price Adjustment from Seller; such claims shall not be
subject to the requirements of SECTION 9. Interest shall accrue on the
outstanding balance or any overdue payments from the date on which such payment
was due until the date on which such payment is received by Buyer at the Prime
Rate plus 5%.
(b) Seller may dispute the Working Capital Valuation in the
following manner. After Seller's receipt of Working Capital Notice, Seller may,
at its option, cause its independent auditors ("Seller's Accountants") to review
the Working Capital Valuation, and if Seller's Accountants determine that the
Working Capital Valuation is incorrect, then within 10 days of Seller's receipt
of the Working Capital Notice, Seller shall cause Seller's Accountants to give
Buyer notice of its disagreement with the Working Capital Valuation (the
"Dispute Notice"), and such notice shall specify in detail the nature of the
disagreement and contain the proper documentation to support such disagreement.
During the 20 days after the day on which any Dispute Notice is given, Seller
and Buyer shall attempt to resolve such dispute. If they fail to reach a written
agreement regarding the dispute, Seller and Buyer shall refer the matter to a
firm of certified independent accountants that is mutually agreeable to each of
Buyer and Seller (the "Second Firm") and request the Second Firm to also
determine the Working Capital Value (the "Second Working Capital Value") in
accordance with the methods set forth in SECTION 7.2 (the "Second Working
Capital Valuation"). Buyer and Seller shall be entitled to have their respective
independent accountants or other representatives observe the Second Working
Capital Valuation. Seller shall give Buyer prompt notice of the results of the
Second Working Capital Valuation. The Second Working Capital Value shall be the
final and binding Working Capital Value for the purposes of determining the
Post-Closing Purchase Price Adjustment. The fees and expenses of the Second Firm
with respect to the Second Working Capital Valuation shall be paid by the Party
whose calculation
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is furthest from that of the Second Value. If Seller shall be responsible for
such fees and expenses, such fees and expenses shall be deducted from the
Post-Closing Purchase Price Adjustment up to the full amount of the Post-Closing
Purchase Price Adjustment and any excess fees and expenses shall be paid
promptly by Seller.
(c) Any rights accruing to any Party under this SECTION 2.6 shall be
in addition to and independent of the rights to indemnification under SECTION 9
and any payments made to any Party under this SECTION 2.6 shall not be subject
to the requirements of SECTION 9; PROVIDED, HOWEVER, that any amounts recovered
under this SECTION 2.6 shall be Buyer's exclusive remedy with respect to the
claims upon which such recoveries were based.
2.7 CONSENT OF THIRD PARTIES.
(a) Nothing in this Agreement shall be construed as an attempt by
Seller to assign to Buyer pursuant to this Agreement any Contract, permit,
franchise, claim or asset included in the Purchased Assets that is by its terms
or by law nonassignable without the consent of any other party or parties,
unless such consent or approval shall have been given, or as to which all the
remedies for the enforcement thereof available to Seller or Tetra, as
appropriate, would not by law pass to Buyer as an incident of the assignments
provided for by this Agreement (a "Non-Assignable Contract"). To the extent that
any Seller Required Consent in respect of, or a novation of, a Non-Assignable
Contract shall not have been obtained on or before the Closing Date, Buyer may
elect to proceed with the Closing, in which case, Seller and Tetra shall each
continue to use reasonable efforts to obtain any such Seller Required Consent or
novation after the Closing Date until such time as it shall have been obtained,
or as the Parties otherwise agree, and Seller or Tetra, as appropriate, shall
cooperate with Buyer in structuring and entering into an economically feasible
arrangement to provide that Buyer shall receive the interest of Seller or Tetra,
as appropriate, in the benefits under such Non-Assignable Contract, including
performance by Seller or Tetra, as appropriate, as agent if economically
feasible, provided that Buyer shall undertake to pay or satisfy the
corresponding Liabilities under the terms of such Non-Assignable Contract to the
extent that Buyer would have been responsible therefor if such consent or
approval had been obtained and such Liabilities shall be deemed an Assumed
Liability. Seller shall pay and discharge, and shall indemnify and hold harmless
Buyer and its Affiliates from and against, any and all out-of-pocket costs of
seeking to obtain or obtaining any such Seller Required Consent whether before
or after the Closing Date. Nothing contained in this SECTION 2.7 or elsewhere in
this Agreement shall be deemed a waiver by Buyer of its right to have received
on the Closing Date an effective assignment of all of the Purchased Assets or of
the covenant of Seller to use reasonable efforts obtain all of Seller Required
Consents, nor shall this SECTION 2.7 or any other provision of this Agreement be
deemed to constitute an agreement to exclude from the Purchased Assets any
Contracts as to which a Seller Required Consent may be necessary. The Parties
hereby acknowledge that there can be no assurances that the Seller will be able
to obtain the Seller Required Consents prior to or after the Closing.
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(b) Buyer shall indemnify and hold harmless such Indemnified Seller
Party from and against any Damages that any Indemnified Seller Party may
sustain, suffer or incur that results from, arises out of, or otherwise relates
to any breach by the Buyer of its obligation to pay or satisfy the Liabilities
under the terms of any such Non-Assignable Contract except to the extent that
any such damages which result from or are attributable to any Companies' gross
negligence or willful misconduct. The obligations of the Buyer pursuant to this
SECTION 2.7 shall continue to survive for so long as any Company is providing
services to the Buyer with respect to any Non-Assignable Contract and for a
period of three years thereafter.
3. CLOSING.
3.1 LOCATION, DATE. The closing for the Transactions (the "Closing") shall
be held at the offices of Tetra, on June 25, 1999 at 2:00 p.m. (local time),
unless the Parties agree in writing to another date or place. The date on which
the Closing occurs is referred to herein as the "Closing Date."
3.2 DELIVERIES. At the Closing, subject to the terms and conditions
contained herein:
(a) Seller and Tetra, as applicable, shall deliver to Buyer the
following items:
(i) an executed Bill of Sale, Assignment and Assumption
Agreement;
(ii) an executed Escrow Agreement;
(iii) an executed License and Procurement Agreement;
(iv) an executed Transitional Services Agreement;
(v) all Seller Required Consents;
(vi) executed releases of any Encumbrance (other than the
Permitted Liens) identified on SCHEDULE 4.6 of the Business; and
(vii) such other instruments and documents of conveyance and
transfer, in form reasonably satisfactory to Buyer and its counsel,
as shall be necessary and effective to transfer and assign to, and
vest in, Buyer all of right, title and interest of any Company in
and to the Purchased Assets. Simultaneously with such deliveries,
all such steps will be taken by each of the Companies as may be
reasonably required to put Buyer in operating control of the
Purchased Assets.
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(b) Buyer shall deliver to either Seller or Tetra, as applicable:
(i) an executed Bill of Sale, Assignment and Assumption
Agreement;
(ii) an executed Escrow Agreement;
(iii) an executed License and Procurement Agreement; and
(iv) an executed Transitional Services Agreement.
(c) Buyer shall deliver the Purchase Price in accordance with
SECTION 2.2(B);
(d) The Parties shall also deliver to each other the respective
agreements, legal opinions and other documents and instruments in addition to
good standing certificates, certified resolutions, cross receipts and such other
items as may be reasonably requested.
4. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COMPANIES.
The Companies, jointly and severally, hereby represent and warrant to
Buyer as follows:
4.1 CORPORATE STATUS.
(a) Seller is a limited partnership duly organized and validly
existing under the laws of the State of Texas and is qualified to do business as
a foreign limited partnership in any jurisdiction where it is to be qualified.
The Charter documents of Seller are effective under applicable Laws and are
current, correct and complete.
(b) Tetra is a corporation duly organized, validly existing and in
good standing under the Laws of the jurisdiction in which it was incorporated
and is qualified to do business as a foreign corporation in any jurisdiction
where it is to be qualified. The Charter Documents are effective under
applicable Laws and are current, correct and complete.
4.2 AUTHORIZATION. Each of the Companies has the requisite power and
authority to (a) own the Purchased Assets owned by it, (b) carry on the Business
as is conducted by it, (c) execute and deliver the Transaction Documents to
which it is or will be a party, and (d) perform the Transactions performed or to
be performed by it that it is or will be a party thereto. Such execution,
delivery and performance by each of the Companies has been duly authorized by
all necessary corporate or partnership action, as appropriate. Each Transaction
Document executed and delivered by each of the Companies has been duly executed
and delivered by such Company and constitutes
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a valid and binding obligation of such Company, enforceable against such Company
in accordance with its terms.
4.3 CONSENTS AND APPROVALS. Except for any filings, consents or approvals
specified in SCHEDULE 4.3 (collectively the "Seller Required Consents"), neither
the execution and delivery by either of the Companies of the Transaction
Documents to which it is a party, nor the performance of the Transactions
performed or to be performed by such Company, require any filing, consent,
renegotiation or approval, constitute a Default or cause any payment obligation
to arise under (a) any Law or Court Order to which such Company is subject, (b)
the Charter Documents or bylaws of such Company or (c) any Contract,
Governmental Permit or other document to which such Company is a party or by
which the properties or other assets that are Purchased Assets of such Company
may be bound.
4.4 OWNERSHIP. Tetra, together with its controlled Affiliates is the
record and beneficial owner of all of the issued and outstanding equity
interests of Seller.
4.5 FINANCIAL STATEMENTS. Seller has delivered to Buyer correct and
complete copies of unaudited financial statements for the Business at December
31, 1996, 1997 and 1998 and unaudited financial statements for the quarterly
period ended March 31, 1999 and the month ending April 30, 1999 together with
and the related statements of income and cash flows for the years then ended.
All such financial statements are referred to herein collectively as the
"Financial Statements." Complete and correct copies of the Financial Statements
are attached hereto as SCHEDULE 4.5. The Financial Statements are consistent in
all material respects with the books and records of Tetra, and there have not
been any material transactions that have not been recorded in the accounting
records underlying such Financial Statements. The balance sheets included in the
Financial Statements (a) present accurately the financial condition of the
Business, and the Purchased Assets and the Assumed Liabilities as of the dates
thereof, subject to normal recurring year-end adjustments and the absence of
notes in the case of unaudited Financial Statements and (b) except for Inventory
sold, cash disposed of, Accounts Receivable collected, prepaid expenses
realized, Contracts fully performed, properties or assets replaced by equivalent
or superior assets, in each case in the ordinary course of business, do not
include any assets that are not intended by Seller to constitute part of the
Business or the Purchased Assets after giving effect to the Transactions. The
profit and loss statements included in the Financial Statements present
accurately the results of operation of the Business for the periods indicated
thereon, subject to normal recurring year-end adjustments and the absence of
notes in the case of unaudited Financial Statements. The profit and loss
statements included in the Financial Statements do not reflect any operations
that are not intended by Seller to constitute part of the Business or the
Purchased Assets after giving effect to the Transactions, and such statements
reflect, on a basis consistent with past practices, all costs incurred by the
Business (other than Unassumed Liabilities) for the periods covered thereby.
There are no Liabilities arising out of, relating to or connected with the
Business except (a) as set forth or reflected on the Financial Statements, (b)
for items disclosed in the Disclosure Schedules to this Agreement, (c) for
purchase
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contracts and orders for Inventory in the normal course of the Business, (d) for
Liabilities incurred since the Balance Sheet Date in the ordinary course of the
Business consistent with past practice and (e) Liabilities pursuant to this
Agreement. The Financial Statements have been prepared, in all material
respects, in accordance with GAAP consistently applied, and the Financial
Statements present accurately the financial position and Assets and Liabilities
of the Business as of the dates thereof, and the results of its operations for
the periods then ended, subject to normal recurring year-end adjustments and the
absence of notes in the case of unaudited Financial Statements. The balance
sheet of the Business as of April 30, 1999 that is included in the Financial
Statements is referred to herein as the "Balance Sheet," and the date thereof is
referred to as the "Balance Sheet Date."
4.6 TITLE TO PURCHASED ASSETS AND RELATED MATTERS. Either Seller has,
individually, or the Companies collectively have good and marketable title to,
valid leasehold interests in or valid licenses to use, all of the Purchased
Assets, free from any Encumbrances except those specified in SCHEDULE 4.6 and
the Permitted Liens. SCHEDULE 4.6 separately identifies those Encumbrances which
shall, for purposes of this Agreement, be classified as a "Permitted Lien." The
use of the Purchased Assets is not subject to any Encumbrances (other than those
specified in the preceding sentence), and such use does not encroach on the
property or rights of any Person. All Real Property and tangible personal
property (other than Inventory) included in the Purchased Assets are suitable
for the purposes for which they are used, in good working condition, reasonable
wear and tear excepted, and are free from any known defects. Except for
Inventory sold, cash disposed of, Accounts Receivable collected, prepaid
expenses realized, Contracts fully performed, properties or assets replaced by
equivalent or superior assets, in each case in the ordinary course of business,
the Purchased Assets and the Excluded Assets, taken as a whole, constitute all
the properties and assets used by Seller in the operation of the Business during
the 12 months prior to the date hereof. The Purchased Assets are all the assets
important to the income generation capability of the Business and the important
needs of the Business. There are no assets or properties used in the operation
of the Business that are owned by any Person other than Seller except for the
Excluded Assets and as set forth on SCHEDULE 4.6.
4.7 REAL PROPERTY. Except for any real estate owned by the customers of
the Business upon which the Business is conducting operations, SCHEDULE 4.7
accurately describes all real estate used, possessed or leased by either of any
Company in the operation of the Business, and the improvements (including
fixtures, buildings and other structures) located on such real estate together
with all rights, privileges, easements, licenses, hereditaments and other
appurtenances relating thereto (collectively, the "Real Property"), and lists
any leases other than the Building Leases under which any such Real Property is
possessed (the "Real Estate Leases"). Neither Tetra nor any Affiliate thereof
has any ownership interest in any real property used in the Business. To the
knowledge of any Company, all of the Real Property conforms with any applicable
Laws relating to its construction, use and operation. To the knowledge of any
Company, the Real Property complies with applicable zoning Laws. Seller, or, to
any Company's knowledge, the landlord of any Real Property used in the operation
of the Business by any Company, as the case may be, has
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obtained all licenses and rights-of-way from governmental entities or private
parties that are necessary to ensure vehicular and pedestrian ingress and egress
to and from the Real Property. Each Real Estate Lease is in full force and
effect and except for term extensions has not been modified, supplemented or
amended. Neither the Seller nor Tetra has assigned any interest in any real
estate lease and neither of the Companies, either individually or collectively,
nor, to any Company's knowledge, the landlord under any such lease is in default
under any such lease, and, except as set forth on SCHEDULE 4.7, no circumstance
or set of facts exist which, with the giving of notice or passage of time, or
both, would permit tenant or to any Company's knowledge, any landlord to
terminate any such lease.
4.8 CERTAIN PERSONAL PROPERTY. SCHEDULE 4.8 is a complete schedule of all
fixed assets, describing all items of tangible personal property that were
included in the Balance Sheet at a carrying value of at least $10,000. Except as
specified in SCHEDULE 4.8, since the Balance Sheet Date, no Company has, with
respect to the Business, acquired any items of tangible personal property that
have a carrying value in excess of $5,000. All of such personal property
included in SCHEDULE 4.8 is usable in the ordinary course of business, and
conforms and will conform with any applicable Laws relating to its construction,
use and operation. Except for those items subject to the Non-Real Estate Leases,
no Person other than the Companies owns any vehicles, equipment or other
tangible assets located on the Real Property that have been used in the Business
or that are necessary for the operation of the Business. There are no facts or
conditions affecting the Purchased Assets that could, individually or in the
aggregate, interfere in any respect with the use, occupancy or operation thereof
as used, occupied or operated for the 12 months preceding the date hereof or
their adequacy for such use.
4.9 NON-REAL ESTATE LEASES. SCHEDULE 4.9 lists all assets and property
used in the operation of the Business (other than Real Property) that are
possessed by any Company as of the Balance Sheet Date under an existing lease,
including all trucks, automobiles, forklifts, machinery, equipment, furniture
and computers, except for any lease under which the aggregate annual payments
are less than $5,000 (each, an "Immaterial Lease"). SCHEDULE 4.9 also lists the
leases under which such assets and property listed in SCHEDULE 4.9 are
possessed. All of such leases (excluding Immaterial Leases) are referred to
herein as the "Non-Real Estate Leases."
4.10 CASH BALANCE OF THE BUSINESS. The cash balance of the Business as of
June 24, 1999 was equal to $631,991.87.
4.11 INVENTORY. The Inventory included in the Purchased Assets consists of
items of good, usable and merchantable quality in all material respects and none
of such Inventory carried at a value in excess of $0 on the Balance Sheet is
damaged or, in accordance with industry standards, obsolete. Such Inventory is
recorded in the Financial Statements in accordance with GAAP at the lower of
average cost or market value, and through the Closing Date no write-downs of
such Inventory which,
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in the aggregate, exceed $5,000 have been made or should have been made pursuant
to GAAP during the past two years.
4.12 [RESERVED]
4.13 TAXES. Except as set forth in SCHEDULE 4.13, Tetra has duly filed all
returns for Taxes that are required to be filed and has paid all Taxes related
to the Business shown as being due pursuant to such returns or pursuant to any
assessment received. All material Taxes related to the Business that any Company
has been required by Law to withhold or to collect have been duly withheld and
collected and have been paid over to the proper governmental authorities or are
properly held or accrued by Seller or Tetra, as applicable, for such payment.
There are no pending proceedings or other actions, nor to any Company's
knowledge is there any basis for any proceedings or other actions, for the
assessment and collection of additional Taxes of any kind related to the
Business for any period for which returns have or should have been filed.
4.14 [RESERVED]
4.15 LEGAL PROCEEDINGS AND COMPLIANCE WITH LAW.
(a) Except as set forth in SCHEDULE 4.15, there is no Litigation
related to the Business that is pending or, to any Company's knowledge,
threatened against any Company related to the Business or any Purchased Asset.
There has been no Default by any Company under any Laws, including Environmental
Laws, applicable to the Business or any Purchased Asset and no Company has
received any notices from any governmental entity regarding any alleged Defaults
applicable to the Business or any Purchased Asset under any Laws. There has been
no Default with respect to any Court Order applicable to the Business or any
Purchased Asset.
(b) Without limiting the generality of SECTION 4.15(A), except as
described in SCHEDULE 4.15, there has not been any Environmental Condition (i)
at any premises, other than those described in the following clauses (ii) and
(iii), at which the Business has been conducted by Seller, any Affiliate thereof
or any predecessor of any of them and which is attributable to any Company, (ii)
at any property owned, leased or operated (as defined under Environmental Laws)
at any time by any Company, any Person controlled by any Company or any
predecessor of any of them at which the Business is or has been conducted, or
(iii) at any property at which wastes of the Business have been deposited or
disposed by or at the behest or direction of any of the foregoing, nor has any
Party received notice of any such Environmental Condition. "Environmental
Condition" means any condition or circumstance, including a Release or the
presence of Hazardous Substances, whether created by any Company or any third
party, at or relating to any such property or premises specified in any of
clauses (i) through (iii) of this paragraph (b) that has or may reasonably be
expected to (A) requires abatement or correction under an Environmental Law, (B)
gives rise to any civil or criminal
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liability on the part of any Company under an Environmental Law, or (C) has
created a public or private nuisance.
(c) Tetra has delivered to Buyer complete copies of any written
reports, studies or assessments in the possession or control of any Company or
any Affiliate thereof that relate to any Environmental Condition. SCHEDULE 4.15
identifies any other reports, studies or assessments that relate to any
Environmental Condition of which any Company has knowledge.
(d) The Companies have obtained and are in full compliance with all
Governmental Permits relating to the Business or any Purchased Asset, all of
which are listed in SCHEDULE 4.15 along with their respective expiration dates,
that are required for the complete operation of the Business as currently
operated. All of such Governmental Permits are currently valid and in full force
and either Seller or Tetra has filed such timely and complete renewal
applications as may be required with respect to such Governmental Permits. To
the knowledge of any Company, no revocation, cancellation or withdrawal thereof
has been threatened.
4.16 CONTRACTS.
(a) SCHEDULE 4.16 lists all Contracts primarily related to the
Business as of May 31, 1999 of the following types to which any Company is a
party or by which any Company is bound (the "Assumed Contracts"):
(i) Contracts with any present or former stockholder,
director, officer, employee, partner or consultant of any Company or
any Affiliate thereof other than the confidentiality agreements
referred to in SECTION 4.18(A)(II).
(ii) Contracts for the future purchase of, or payment for,
supplies or products, or for the lease of any real or personal
property from or the performance of services by a third party, in
excess of $5,000 in any individual case, or any Contracts for the
purchase of products that involve an amount in excess of $20,000
with respect to any one supplier or other party;
(iii) Contracts to sell or supply products or to perform
services that involve an amount in excess of $10,000 in any
individual case;
(iv) Contracts to lease to or to operate for any other party
any real or personal property that involve an amount in excess of
$10,000 in any individual case;
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(v) Any license, franchise, distributorship, sales agency of
other arrangements, including those that relate in whole or in part
to any software technical assistance or other know-how currently
used in the Business;
(vi) Any notes, debentures, bonds, conditional sale
agreements, equipment trust agreements, letter of credit agreements,
reimbursement agreements, loan agreements or other Contracts for the
borrowing or lending of money (including loans to or from officers,
directors, partners, stockholders or Affiliates of any Company or
any members of their immediate families), agreements or arrangements
for a line of credit or for a guarantee of, or other undertaking in
connection with, the indebtedness of any other Person;
(vii) Contracts for any capital expenditure or leasehold
improvements;
(viii) Any Contracts under which any Encumbrances (other than
the Permitted Liens) exist; and
(ix) Any other Contracts (other than Minor Contracts and those
described in any of (i) through (ix) above) not made in the ordinary
course of business.
(b) The Companies have delivered or made available to Buyer complete
and correct copies of all written Contracts, together with all amendments
thereto, and accurate descriptions of all material terms of all oral Contracts,
set forth or required to be set forth on SCHEDULE 4.16.
(c) Except as set forth on SCHEDULE 4.16(C), no Company is in
Default under any Assumed Contracts (including any Real Estate Leases and
Non-Real Estate Leases), which Default could result in a Liability on the part
of any Company in excess of $1,000 in any individual case, and the aggregate
Liabilities that could result from all such Defaults do not exceed $5,000. No
Company has received any communication from, or given any communication to, any
other party indicating that such Company or such other party, as the case may
be, is in Default under any Assumed Contract. To the knowledge of any Company,
(i) none of the other parties in any such Assumed Contract is in Default
thereunder and (ii) each such Assumed Contract is enforceable against any other
parties thereto in accordance with terms thereof.
4.17 INSURANCE. SCHEDULE 4.17 lists all policies or binders of insurance
related to the Business held by or on behalf of any Company, specifying with
respect to each policy the insurer, the amount of the coverage, the type of
insurance, the risks insured, the expiration date, the policy
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number and any pending claims thereunder. There is no Default by any Company
and, to any Company's knowledge, there is no Default by any third party with
respect to any such policy or binder, nor has there been any failure to give any
notice or present any claim under any such policy or binder in a timely fashion
or in the manner or detail required by the policy or binder. There is no notice
of nonrenewal or cancellation with respect to, or disallowance of any claim
under, any such policy or binder that has been received by any Company.
4.18 INTELLECTUAL PROPERTY
(a) CONTRACTS.
(i) SCHEDULE 4.18(A) contains a complete and accurate list and
summary description, including any royalties paid or received by either of the
Companies, of all Contracts relating to the Intellectual Property that are
included in the Purchased Assets, except for any license implied by the sale of
a product and perpetual, paid-up royalty free and transferable license rights
for "off-the-shelf" third party application software that such Company licenses
for use in the Business, in any individual case, under a license with a maximum
payment obligation on the part of Seller of less than $10,000 ("Off-the-Shelf
Software"). There are no outstanding and, to any Company's knowledge, no
threatened disputes or disagreements with respect to any such Contract. Except
for any rights under written licenses or other written Contracts related to
Intellectual Property set forth on SCHEDULE 4.18 (A), no current or former
employee of any Company and no other Person owns or has any proprietary,
financial or other interest, direct or indirect, in whole or in part, and
including any right to royalties or other compensation, in any of the
Intellectual Property that is included in the Purchased Assets, or in any
application therefor.
(ii) All employees and consultants of any Company who are
involved in the design, review, evaluation or development of the Intellectual
Property used in the operation of the Business have executed a nondisclosure and
assignment of inventions agreement (a "Confidentiality Agreement").
(iii) Except as specified on SCHEDULE 4.18(A), to the
knowledge of any Company none of the employees or consultants of Seller that are
or will be Designated Employees are subject to any contractual or legal
restrictions that might interfere with the use of his or her best efforts to
promote the interests of the Business. To the knowledge of any Company no
Designated Employee has entered into any Contract that restricts or limits in
any way the scope or type of work in which the employee may be engaged or
requires the employee to transfer, assign or disclose information concerning his
or her work to any Person other than any of the Parties.
(iv) To the knowledge of any Company, no employee or
consultant of any Company (a) has used any other Persons' Trade Secrets or other
information that is confidential in the course of his or her work related to the
Business or (b) is, or is currently expected to be, in
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Default under any term of any employment contract, agreement or arrangement
relating to the Intellectual Property that is included in the Purchased Assets,
or any Confidentiality Agreement or any other Contract or any restrictive
covenant relating to the Intellectual Property that is included in the Purchased
Assets, or the development or exploitation thereof.
(b) KNOW-HOW NECESSARY FOR THE BUSINESS.
(i) Except as set forth on SCHEDULE 4.18(B), the Intellectual
Property included in the Purchased Assets constitutes all of the Intellectual
Property (A) that has been used or relied upon in the operation of the Business
during the past 12 months and (B) the exploitation of which was a material
factor to the financial projections previously delivered to Buyer by Tetra
(nothing herein shall be construed as a representation or warranty of any
Company as to the accuracy or attainability of any such projections). Except as
described on SCHEDULE 4.18(B), a Company is the owner of all right, title and
interest in and to each item of the Intellectual Property included in the
Purchased Assets, free and clear of any Encumbrances (other than the Permitted
Liens), and has the right to use without payment to a third party all of the
Intellectual Property included in the Purchased Assets.
(c) PATENTS.
(i) SCHEDULE 2.1(A)(VII) contains a complete and accurate list
and summary description of all Patents included in the Purchased Assets.
(ii) All of the issued Patents that are included in the
Purchased Assets are currently in compliance with formal legal requirements
(including payment of filing, examination, and maintenance fees and proofs of
working or use), except as set forth on SCHEDULE 4.18, are valid and enforceable
and are not subject to any maintenance fees or taxes or actions falling due as
of the Closing Date.
(iii) Except as set forth on SCHEDULE 4.18, No Patent used in
the operation of the Business has been or is now involved in any interference,
reissue, reexamination, or opposition proceeding. To the Companies' knowledge,
there is no potentially interfering patent or patent application of any third
party.
(iv) Except as set forth on SCHEDULE 4.18, to the Companies'
knowledge, no Patent used in the operation of the Business is infringed or has
been challenged or threatened in any way. None of the products manufactured and
sold, nor any process or know-how used, by Seller has been determined to
infringe or, to any Company's knowledge, is alleged to infringe any patent or
other proprietary right of any other Person.
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(v) All products made, used or sold under the Patents that are
included in the Purchased Assets have been marked with the proper patent notice.
(d) TRADEMARKS.
(i) SCHEDULE 2.1(A)(XIII) contains a complete and accurate
list and summary description of all Trademarks that are included in the
Purchased Assets.
(ii) All Trademarks that are included in the Purchased Assets
that have been registered with the US Patent and Trademark Office are currently
in compliance with all formal legal requirements (including the timely
post-registration applications), are valid and enforceable, and, except as set
forth on SCHEDULE 4.18(D), are not subject to any maintenance fees or taxes or
actions falling due as of after the Closing Date.
(iii) No Trademark that are included in the Purchased Assets
has been or is now involved in any opposition, invalidation or cancellation and
no such action is, to any Company's knowledge, threatened with respect to any of
the Trademarks that are included in the Purchased Assets.
(iv) To the Companies' knowledge, there is no potentially
interfering trademark or trademark application of any third party with respect
to Trademarks that are included in the Purchased Assets.
(v) To the Companies' knowledge, no Trademark that is included
in the Purchased Assets is infringed or has been challenged or threatened in any
way. None of the Trademarks that are included in the Purchased Assets has been
determined to infringe or, to any Company's knowledge, is alleged to infringe
any trade name, trademark or service mark of any third party.
(vi) All products and materials of the Business containing a
Trademark bear the proper federal registration notice where permitted by law.
(e) COPYRIGHTS.
There are no Copyrights used in the Business other than rights
at common law.
(f) TRADE SECRETS.
(i) With respect to each Trade Secret that is documented and
included in the Purchased Assets, the documentation relating to such Trade
Secret is current and accurate.
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(ii) Each Company has taken all reasonable precautions to
protect the secrecy, confidentiality and value of its Trade Secrets that are
included in the Purchased Assets.
(iii) Each Company has the right to use and to transfer to
Buyer its Trade Secrets that are included in the Purchased Assets. Except as set
forth on SCHEDULE 4.18, no Trade Secret that is included in the Purchased Assets
is subject to any adverse claim or, to any Company's knowledge has been
challenged or threatened in any way.
4.19 SOFTWARE.
(a) SCHEDULE 2.1(A)(XII) contains a complete list of all the
software, including Custom Software, that is included in the Purchased Assets.
The Custom Software and Hardware included in the Purchased Assets performs
substantially in accordance with its specifications, and is free of defects in
programming and operation except such defects as would not materially and
adversely affect the use of such Component for its intended purposes.
(b) Except as specified on SCHEDULE 4.19(B), all right, title and
interest in and to the software, including Custom Software, that is included in
the Purchased Assets is owned by Seller, free and clear of all Encumbrances
other than Permitted Liens. The use of the Custom Software in the operation of
the Business or the Off-the-Shelf-Software used in the operation of the Business
by any Company does not violate any rights of any other Person, and no Company
has received any communication alleging such a violation. Except as specified on
SCHEDULE 4.19(B), no Company has any obligation to compensate any Person for the
use of the Software Products that are included in the Purchased Assets. Other
than as set forth on SCHEDULE 4.19(B), Seller has not granted to any other
Person any license, option or other right in or to any of the Software Products
that are included in the Purchased Assets, except for non-exclusive,
royalty-bearing, end-user licenses (the "End-User Licenses") granted by Seller
in the ordinary course of business.
(c) Except as set forth on SCHEDULE 4.19(C), there is no Year 2000
Problem with respect to the Business. Except as disclosed in SCHEDULE 4.19(C),
no Custom Software included in the Purchased Assets contains any "backdoor" or
concealed access or any "software locks" or similar devices which, upon the
occurrence of a certain event, the passage of a certain amount of time or the
taking of any action (or failure to take any action) by or on behalf of any
Company, will cause any Component used in the operation of the Business to be
destroyed, erased, damaged, or otherwise rendered inoperable or inaccessible.
(d) Except as described in SCHEDULE 4.19(D), Seller has no reason to
believe that Seller or any employee thereof either is or was not in compliance
with any obligation of noncompetition, secrecy, confidentiality or
non-disclosure to any third party with respect to the operations of the Business
when employed in connection by any Company in connection with the Business.
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(e) Any Custom Software included in the Purchased Assets, together
with all know-how and processes used in connection therewith, functions as
intended, is in machine-readable form, and includes all computer programs,
materials, tapes, know-how, object and source codes and procedures used by
Seller.
4.20 EMPLOYEE RELATIONS. With respect to employees participating in the
operation of the Business, Seller is not (a) a party to, involved in or, to
Seller's knowledge, threatened by, any labor dispute or unfair labor practice
charge, (b) currently negotiating any collective bargaining agreement or (c)
currently a party to any collective bargaining agreement. Seller has not
experienced during the last three years any work stoppage with respect to the
operations of the Business. Seller has delivered to Buyer a complete and correct
list of the names and salaries, bonus and other cash compensation of all
employees (including officers) of Seller engaged in performing services for the
Business whose cash compensation for 1999 is expected to be at least $20,000.
4.21 ERISA.
(a) SCHEDULE 4.21 contains a complete list of all Benefit Plans
applicable to any Designated Employee that is sponsored or maintained by Seller
or under which Seller is obligated. Seller has delivered or made available to
Buyer (i) accurate and complete copies of all such Benefit Plan documents and
all other material documents relating thereto, including (if applicable) all
summary plan descriptions, summary annual reports and insurance contracts (ii)
accurate and complete detailed summaries of all unwritten Benefit Plans
applicable to any Designated Employee.
(b) All Benefit Plans applicable to any Designated Employee conform
(and at all times have conformed) in all material respects to, and are being
administered and operated (and have at all time been administered and operated)
in material compliance with, the requirements of ERISA, the Code and all other
applicable Laws.
4.22 ABSENCE OF CERTAIN CHANGES. Except as contemplated by this Agreement
or as set forth on SCHEDULE 4.22, the Business has been conducted in the
ordinary course since the Balance Sheet Date, and there has not been with
respect to the Business any of the items specified below since the Balance Sheet
Date:
(a) any change that has had or is reasonably likely to have a
Material Adverse Effect;
(b) any increase in the compensation payable or to become payable to
any Designated Employee, except for increases for non-officer employees
made in the ordinary course of business and certain "stay" bonuses
previously paid to certain of the Designated Employees, nor any other
change in any employment or consulting arrangement;
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(c) any sale, assignment or transfer of Purchased Assets, or any
additions to or transactions involving any Purchased Assets, other than
those made in the ordinary course of business; or
(d) other than in the ordinary course of business, any waiver or
release of any claim or right or cancellation of any debt held.
4.23 [RESERVED]
4.24 CUSTOMERS AND SUPPLIERS. Each of the Companies, as appropriate, has
used reasonable business efforts to maintain, and currently maintains, good
working relationships with all of the customers and suppliers of the Business.
SCHEDULE 4.24 specifies for each year of the three years ending December 31,
1996, 1997 and 1998 the names of the respective customers that were, in the
aggregate, the 20 largest customers in terms of dollar value of products or
services, or both, sold by the Business. Except as specified on SCHEDULE 4.24,
none of such customers has given any Company notice terminating, canceling or
threatening to terminate or cancel any Contract related to the Business or
relationship with such Company related to the Business. SCHEDULE 4.24 also
specifies for each year of the three years ending December 31, 1996, 1997 and
1998 the names of the respective suppliers that were, in the aggregate, the 20
largest suppliers in terms of dollar value of products or services, or both,
used by the Business. None of such suppliers has given any Company notice
terminating, canceling or threatening to terminate or cancel any Assumed
Contract related to the Business or relationship with such Company related to
the Business.
4.25 OPERATION OF THE BUSINESS. Except as described on SCHEDULE 4.25, (a)
the Business has been conducted only through the Companies and not through any
direct or indirect subsidiary or Affiliate thereof, (b) no part of the Business
has been operated by any Person other than the Companies and (c) from the
Effective Date through the Closing Date the books and records of the Business
have been kept, in all material respects, in accordance with GAAP consistently
applied and in accordance with the past practices of the Business. Other than
through the Business, neither Company, either individually or collectively, nor
any Affiliate thereof, engages, directly or indirectly, in any business
activities that are competitive with the Business.
4.26 FINDER'S FEES. No Person retained by any Company is or will be
entitled to any commission or finder's or similar fee in connection with the
Transactions.
4.27 ACCURACY OF INFORMATION. No representation or warranty by any Company
in any Transaction Document, and no information contained therein or otherwise
delivered by or on behalf of any Company to Buyer in connection with the
Transactions, including the Financial Statements, Disclosure Schedules and
Exhibits hereto contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements contained
herein or therein not misleading in light of the circumstances under which such
statements were made.
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5. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer hereby represents and warrants to the Companies, as follows:
5.1 ORGANIZATIONAL STATUS. Buyer is a corporation duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation and is qualified to do business in any jurisdiction where it is
required to be so qualified.
5.2 AUTHORIZATION. Buyer has the requisite power and authority to execute
and deliver the Transaction Documents to which it is a party and to perform the
Transactions performed or to be performed by it. Such execution, delivery and
performance by Buyer has been duly authorized by all necessary corporate action.
Each Transaction Document executed and delivered by Buyer has been duly executed
and delivered by Buyer and constitutes a valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms.
5.3 FINANCING. Buyer has the funds required to pay the Purchase Price in
accordance with SECTION 2.2 and to consummate the Transactions.
5.4 CONSENTS AND APPROVALS. Except for filings that may be required to
comply with the HSR Act, neither the execution and delivery by Buyer of the
Transaction Documents to which it is a party, nor the performance of the
Transactions performed or to be performed by Buyer, require any filing, consent
or approval, constitute a Default or cause any payment obligation to arise under
(a) any Law or Court Order to which Buyer is subject, (b) the Charter Documents
or bylaws of Buyer or (c) any Contract, Governmental Permit or other document to
which Buyer is a party or by which the properties or other assets of Buyer may
be bound.
5.5 FINDER'S FEES. No Person retained by Buyer is or will be entitled to
any commission or finder's or similar fee in connection with the Transactions.
5.6 COMPANIES' REPRESENTATIONS AND WARRANTIES. To Buyer's knowledge, as of
the Closing Date, there is no breach of any of the Companies' representations or
warranties set forth in SECTION 4.
5.7 ACCURACY OF INFORMATION. No representation or warranty by Buyer in any
Transaction Document, and no information contained therein or otherwise
delivered by or on behalf of Buyer to any other Party in connection with the
Transactions contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which such statements
were made.
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6. ADDITIONAL COVENANTS OF THE COMPANIES.
6.1 SATISFACTION OF LIABILITIES. After the Closing, each of the Companies,
as appropriate, shall satisfy in accordance with the terms thereof any and all
of its Liabilities related to the Business that are not Assumed Liabilities.
6.2 COMPETITION AND CONFIDENTIALITY.
(a) During the period beginning on the Closing Date and ending on
the fifth anniversary thereof (the "Non-Competition Period"), neither Company,
either individually or collectively, shall, and each Company shall use
commercially reasonable efforts not to allow any of such Company's subsidiaries
or controlled Affiliates (each, a "Restricted Party") to, anywhere in the world,
directly or indirectly, in any capacity, render services, engage or have a
financial interest in, any aspect of business that shall be competitive with the
Business as it exists on the Closing Date, nor shall any Restricted Party assist
any Person that shall be engaged in any such business activities, including
making available any information or funding to any such Person. During the Non-
Competition Period, no Restricted Party shall solicit any employee of the
Business for the purposes of having any such employee terminate his or her
employment with the Business. In addition, during the Non-Competition Period,
each Restricted Party immediately shall inform any Person that inquires about
the Business that the Business has been sold to Buyer, and such Restricted Party
shall promptly inform Buyer of such inquiry. If a court determines that the
foregoing restrictions are too broad or otherwise unreasonable under applicable
Law, including with respect to time or space, the court is hereby requested and
authorized by the Parties to revise the foregoing restriction to include the
maximum restrictions allowable under applicable Law. Each Restricted Party
acknowledges, however, that this SECTION 6.2 has been negotiated by the Parties
and that the geographical and time limitations, as well as the limitation on
activities, are reasonable in light of the circumstances pertaining to the
Business.
(b) No Restricted Party will, at any time, represent that it is
continuing to carry on the Business, other than as specifically agreed to herein
or in the Transaction Documents.
(c) Each Company recognizes and acknowledges that by reason of its
involvement with the Business, it has had access to Trade Secrets relating to
the Business. Each acknowledges that such Trade Secrets are a valuable and
unique asset and covenants that such Company will not allow the disclosure of
any such Trade Secrets, except as provided in the License and Procurement
Agreement, to any Person for any reason whatsoever, unless such information is
in the public domain through no wrongful act of Seller or such disclosure is
required by law.
(d) The terms of this SECTION 6.2 shall apply to any Restricted
Party that is not one of the Parties to the same extent as if it were a party
hereto, and each Company shall take
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whatever commercially reasonable actions may be necessary to cause any of its
controlled Affiliates to adhere to the terms of this SECTION 6.2.
(e) In the event of any breach or threatened breach by any
Restricted Party of any provision of this SECTION 6.2, Buyer shall be entitled
to injunctive or other equitable relief, restraining such party from using or
disclosing any Trade Secrets in whole or in part, or from engaging in conduct
that would constitute a breach of the obligations of a Restricted Party under
this SECTION 6.2. Such relief shall be in addition to and not in lieu of any
other remedies that may be available, including an action for the recovery of
Damages.
6.3 RELATED PARTIES. Each Company shall cause its respective officers,
directors, partners (and any officers or directors of any partners) and any
controlled Affiliate to the take or refrain from taking any action that may be
necessary to carry out the Transactions.
6.4 COLLECTION OF ACCOUNTS RECEIVABLES.
(a) Subject to the provisions of SECTION 6.4(B) below, each of the
Companies shall guarantee the collection of all Accounts Receivables of the
Business included as a Purchased Asset (the "Guaranteed Receivables"), but for
the purposes of administering this SECTION 6.4, all references to Tetra below in
this SECTION 6.4 shall be deemed to apply to both Companies, which shall be
jointly and severally obligated for the obligations assigned to Tetra in this
SECTION 6.4. Buyer and Tetra shall jointly, at Tetra's expense, take
commercially reasonable efforts to collect any Guaranteed Receivables and
perfect any claims with respect thereto, but if Buyer does not receive payment
in full on any Guaranteed Receivable within 90 days of the date of the invoice
evidencing, such Guaranteed Receivable (in any such case, a "Delinquent
Receivable"), Buyer shall notify Tetra, in writing, of such non-payment (the
"Delinquency Notice"), and thereafter Buyer and Tetra shall jointly, at Tetra's
expense, endeavor to collect such Delinquent Receivable on behalf of Buyer, in
which case Buyer and Tetra shall have six months from the date on which the
Delinquency Notice is given (the "Collection Period") within which to collect
such Delinquent Receivable on behalf of Buyer. Tetra shall pay Buyer interest at
an annual rate equal to 9% on any Guaranteed Receivable from the date such
Guaranteed Receivable becomes a Delinquent Receivable until all amounts owed
under such Delinquent Receivable have been fully paid to Buyer as a result of
either collection of the Delinquent Receivable or sale of the Delinquent
Receivable to Buyer as provided below. Tetra shall pay the accrued interest on
any Delinquent Receivable when payments of collected amounts are paid to Buyer
or upon sale of the Delinquent Receivable to Tetra as provided below. Buyer
shall give Tetra prompt notice of any funds that Buyer receives on account of
any Delinquent Receivables, and Tetra shall pay promptly to Buyer any funds that
Tetra receives on account of any Delinquent Receivables. Upon the expiration of
the Collection Period as to a particular Delinquent Receivable, Tetra shall
purchase such Delinquent Receivable from Buyer for an amount equal to the amount
outstanding thereunder plus all accrued interest, and thereupon Buyer shall
assign to Tetra all rights to collect such Delinquent Receivable. Tetra shall
have the right at any time during the Collection
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Period for a particular Delinquent Receivable to elect to purchase such
Delinquent Receivable at that time.
(b) Notwithstanding the provisions of SECTION 6.4(A) above, Seller's
obligation to purchase any Delinquent Receivable, other than the Guaranteed
Receivables for (a) Danis Heavy Construction, Tetra invoice number 20673-1 in
the amount of $998,946 and $66,646.40 in tax with respect thereto (the "Danis
Tax Amount") and (b) Beers Construction, Tetra invoice number 20774-1 (the
"Beers Invoice") in the amount of $346,620 (collectively, the "Excepted
Receivables"), shall not become applicable until the aggregate amount of monies
owed under all Delinquent Receivables for which Buyer has not been paid is
greater than $425,000 (the "Receivables Threshold"), and, other than with
respect to the Excepted Receivables, only to the extent such amount of monies
owed exceeds the Receivables Threshold. The Receivables Threshold shall not
apply, however, to Tetra's obligation to pay interest on any Delinquent
Receivables under SECTION 6.4(A), nor shall the Receivables Threshold be
applicable to Tetra's obligation to purchase the Excepted Receivables, with
respect Tetra's obligation to pay principal or interest.
(c) The provisions of this SECTION 6.4 shall be Buyer's sole and
exclusive remedy with respect to the collection of any Accounts Receivable and
any breach of any representation or warranty with respect to the Accounts
Receivable. Any reserve for Accounts Receivable that may have been recorded for
purposes of the Purchased Assets shall be disregarded for the purposes of the
remedies in this SECTION 6.4.
(d) If any Accounts Receivable has been reinvoiced, i.e. an earlier
invoice is cancelled and a more recent invoice with respect to the same
obligation is issued, the date of the earlier invoice shall be used for the
purpose of determining whether the Accounts Receivable is a Delinquent
Receivable. It is acknowledged that the Parties expect that the Beers Invoice
will be reinvoiced, in which case the date of Invoice number 20774-1 shall be
the date used for determining whether the Beers Invoice represents a Delinquent
Receivable, as contemplated by the immediately preceding sentence. In
determining whether any Guaranteed Receivable is a Delinquent Receivable, the
invoice date used for this purpose shall be the actual date of the invoice
unless the invoice was sent prior to any date as of which an invoice could have
been sent under any written arrangement with the related customer, in which case
the date specified in such arrangement for invoicing shall be the date used for
determining whether the Guaranteed Receivable is a Delinquent Receivable.
(e) If it is determined that both Danis Construction and the
Business paid the Danis Tax Amount and that Buyer, as the owner of the Business,
shall be entitled therefore to a refund equal to the Danis Tax Amount, the Danis
Tax Amount shall not be treated as a Delinquent Receivable for the purpose of
the collection and purchase obligations of Tetra in this SECTION 6.4. Tetra
shall remain obligated, however, (i) to pay to Buyer the Danis Tax Amount if
Buyer shall not have received the refund by the end of the Collection Period, in
which case Buyer shall assign the
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rights to such refund to Tetra and (ii) to pay to Buyer interest, if applicable,
until Buyer receives the full amount of the Danis Tax Amount, whether through a
refund or a payment from Tetra.
6.5 USE OF TRADE NAMES. Each of the Companies and any Affiliate thereof
shall not use, directly or indirectly, any of the trade names of the Business
listed on SCHEDULE 6.5 for a period of 10 years after the date hereof. The
appropriate Company hereby grants to Buyer a non-revocable, royalty-free,
worldwide license to use such trade names for such period of time.
7. COVENANTS OF BUYER.
7.1 TETRA ENGINEERING PLANS. Within 30 days of the Closing Date, Buyer
shall cause all Tetra Engineering Plans to be downloaded, recorded and stored in
either paper or electronic form and transferred to Tetra. In addition, the Buyer
shall, upon reasonable request of Tetra, provide to Tetra the originals or
copies of any records evidencing the Tetra Engineering Plans.
7.2 ADDITIONAL FINANCIAL STATEMENTS. Within 30 days after the Closing
Date, Buyer shall cause its independent accountants to prepare and deliver to
Seller pro-forma unaudited financial statements of the Business as of the
Effective Date (the "Closing Balance Sheet"). In preparing the Closing Balance
Sheet, Buyer's accountants, except as otherwise set forth in this SECTION 7.2,
shall follow GAAP, consistently applied and in accordance with Tetra's past
practices. In determining the working capital of the Business as of the
Effective Date (the "Working Capital Valuation"), Buyer's independent
accountants shall: compute the working capital of the Business by calculating
the difference between the current assets (which shall include Accounts
Receivable, other current assets and inventory) and current liabilities (which
shall include disclosed and accrued accounts payable and accrued expenses,
including any Contract expenses) of the Business. Such result is referred to
herein as the Working Capital Value.
7.3 USE OF TRADE NAMES. Buyer shall only use the trade names of the
Business in conjunction with Buyer's marketing, use, operation, distribution,
sale and manufacturing of products used in the water/waste water industry
consistent with the operation of the Business prior to the Closing Date or as
otherwise agreed to in writing among the Parties.
7.4 REPLACEMENT BONDS. With respect to any Assumed Contracts, promptly
after the Closing, Buyer shall either (a) post a replacement bond or letter of
credit or (b) post a back-up performance bond or letter of credit with respect
to any performance bond or letter of credit that any Company may have in place
with respect to any Assumed Contract. Buyer shall reimburse any Company for the
costs of any such bonds or letters of credit that are maintained after the
Closing.
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8. MUTUAL COVENANTS.
8.1 BULK SALES. Buyer hereby waives Seller's compliance with any bulk
sales laws that may apply to the Transactions, including with respect to Taxes,
but Seller hereby indemnifies Buyer against any Damages that Buyer may incur
that it would not have incurred if Seller had complied with any such bulk sales
laws.
8.2 PUBLIC ANNOUNCEMENTS. The Parties shall consult with each other before
issuing any press release or making any public statement with respect to this
Agreement and the Transactions and, except as may be required by applicable Law,
none of the Parties nor any other party shall issue any such press release or
make any such public statement without the prior written consent of the other
Parties. Notwithstanding the foregoing, Buyer acknowledges that Tetra is
required by The New York Stock Exchange rules to issue a press release with
respect to this Transaction.
8.3 TAXES.
(a) Seller and Buyer shall each pay at the Closing one-half of all
state and local sales, documentary and other transfer taxes, if any, due as a
result of the purchase, sale or transfer of the Purchased Assets hereunder.
(b) Seller and Buyer shall each pay their respective pro rata
portion of all 1999 ad valorem or other similar Taxes under any property or
lease included in the Purchased Assets. Seller shall pay to Buyer at the Closing
estimated ad valorem or other estimated similar Taxes for the current year
(based on the prior year's Taxes) pro rated to the Effective Date and Seller
shall make available to Buyer copies of all statements and assessments
reflecting such prior year's taxes. Buyer shall pay such sums to the appropriate
taxing authorities when due, prior to becoming delinquent. Buyer shall promptly
forward to Seller after receipt by Buyer copies of all 1999 Tax Assessments
under any such property or lease. If the 1999 Taxes shall be readjusted such
that the amounts payable are greater than the prior year's Taxes, Seller shall
pay its pro rata share of any difference promptly upon notice of such Taxes
having been paid by Buyer. If such 1999 Taxes shall be readjusted such that the
amounts payable are less than the prior year's Taxes, Buyer shall refund to
Seller its pro rata share of such reduction upon notice of such Taxes having
been paid by Buyer.
8.4 EXPENSES. Except as otherwise provided herein, the Parties shall each
pay all of their respective legal, accounting and other expenses incurred by
such Party in connection with the Transactions.
8.5 OPERATIONS FOLLOWING EFFECTIVE DATE. For the period following the
Effective Date through and until the Closing Date (the "Interim Period"), the
Companies have operated the Business, in all respects, for the benefit of the
Buyer. All income, gains, losses, expenses, receipts, payments and liabilities
arising or accruing during the Interim Period have been for the benefit of
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the Buyer and Seller shall account for such items in accordance with GAAP
consistent with Seller's past practices. Pursuant to the terms of this
Agreement, Buyer is entitled to receive all benefits, and shall have assumed all
Liabilities, arising or occurring during the Interim Period. The Companies have,
in SECTION 4 of this Agreement, made certain representations and warranties
regarding the operation of the Business during the Interim Period. The Buyer
shall indemnify and hold the Companies harmless from any and all Damages that
the Companies may sustain, suffer or incur that result from the Companies'
operation of the Business on behalf of the Buyer during the Interim Period
except to the extent any such Damages are attributable to the gross negligence
or willful misconduct of the Companies. Within 30 days after the Closing Date,
the Company shall prepare and deliver to the Buyer an unaudited accounting of
the cash disbursements made and capital expenditures incurred by the Company
(the "Cash Disbursements") and the cash received by any Company (the "Cash
Receipts") during the Interim Period. Such accounting shall also set forth any
Cash Receipts and Cash Disbursements following the Closing Date through the date
of such accounting. To the extent the Cash Receipts exceed the amount of Cash
Disbursements, the Company shall, within 3 business days of such accounting, pay
such excess to the Buyer. If the Cash Disbursements exceed the Cash Receipts,
the Company shall give the Buyer written notice thereof and within 3 business
days of the Buyer's receipt of such written notice, the Buyer shall pay such
excess to the Seller. The Company shall make available to Buyer all records and
workpapers relating to the calculation of the Cash Receipts and Cash
Disbursements including, without limitation, copies of all bank records,
invoices and other appropriate records.
8.6 ACCESS TO EMPLOYEES. From and after the date hereof each Party shall
give the other access to those employees of such Party that have any knowledge
of any Confidential Information or Trade Secrets related to the Purchased Assets
in the case of the Buyer and the Tetra Technologies in the case of Tetra.
9. INDEMNIFICATION.
9.1 BY SELLER. Subject to the terms of this SECTION 9, from and after the
Closing Date, the Companies, jointly and severally, shall indemnify and hold
harmless Buyer and (if any) its respective successors and assigns, and their
respective officers, directors, employees, stockholders, agents, Affiliates and
any Person who controls any of such Persons within the meaning of the Securities
Act or the Exchange Act (each, an "Indemnified Buyer Party") from and against
any liabilities, claims, demands, judgments, losses, costs, damages or expenses
whatsoever (including reasonable attorneys', consultants' and other professional
fees and disbursements of every kind, nature and description incurred by such
Indemnified Buyer Party in connection therewith, including consequential and
punitive damages) (collectively, "Damages") that such Indemnified Buyer Party
may sustain, suffer or incur and that result from, arise out of or relate to (a)
any breach of any of the respective representations, warranties, covenants or
agreements of Seller contained in this Agreement, (b) any Environmental
Condition related to the Business alleged to have occurred on or before the
Closing, (c) any Unassumed Liability, (d) any Liability of any Company involving
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Taxes due and payable by, or imposed with respect to the Business for any all
taxable periods ending on or prior to the Effective Date (whether or not such
Taxes have been due and payable), (e) any Liability arising out of or related to
the actual or constructive termination of any employee of the Business and (f)
any Liability of any Company involving any Excluded Asset.
9.2 BY BUYER. From and after the Closing Date, Buyer shall indemnify and
hold harmless each of the Companies and their respective successors and assigns,
and (if any) their respective officers, directors, employees, stockholders,
agents, Affiliates and any Person who controls any of such Persons within the
meaning of the Securities Act or the Exchange Act (each, an "Indemnified Seller
Party") from and against any Damages that such Indemnified Seller Party may
sustain, suffer or incur and that result from, arise out of or relate to (a) any
breach of any of the respective representations, warranties, covenants or
agreements of Buyer contained in this Agreement, (b) Buyer's operation and
ownership of the Business or the Purchased Assets from and after the Effective
Date other than those Damages that arise out of or relate to Liabilities that
are not Assumed Liabilities pursuant to SECTION 2.5(A)(II), (c) Buyer's use of
the trade names of the Business and (d) any Assumed Liability.
9.3 PROCEDURE FOR CLAIMS.
(a) Any Person who desires to seek indemnification under any part of
this SECTION 9 (each, an "Indemnified Party") shall give written notice in
reasonable detail (a "Claim Notice") to each Party responsible or alleged to be
responsible for indemnification hereunder (an "Indemnitor") and in the case of
an Indemnified party the Escrow Agent prior to any applicable Expiration Date
(as defined in SECTION 9.4). Such notice shall briefly explain the nature of the
claim and the parties known to be invoked, and shall specify the amount thereof.
If the matter to which a claim relates shall not have been resolved as of the
date of the Claim Notice, the Indemnified Party shall estimate the amount of the
claim in the Claim Notice, but also specify therein that the claim has not yet
been liquidated (an "Unliquidated Claim"). If an Indemnified Party gives a Claim
Notice for an Unliquidated Claim, the Indemnified Party shall also give a second
Claim Notice (the "Liquidated Claim Notice") within 60 days after the matter
giving rise to the claim becomes finally resolved, and the Liquidated Claim
Notice shall be given in accordance with SECTION 12 and shall specify the amount
of the claim. Each Indemnitor to which a Claim Notice is given shall respond to
any Indemnified Party that has given a Claim Notice (a "Claim Response") within
30 days (the "Response Period") after the later of (i) the date that the Claim
Notice is given or (ii) if a Claim Notice is first given with respect to an
Unliquidated Claim, the date on which the Liquidated Claim Notice is given. Any
Claim Response shall be given in accordance with SECTION 12 and shall specify
whether or not the Indemnitor giving the Claim Response disputes the claim
described in the Claim Notice. If any Indemnitor fails to give a Claim Response
within the Response Period, such Indemnitor shall be deemed not to dispute the
claim described in the related Claim Notice. If any Indemnitor elects not to
dispute a claim described in a Claim Notice, whether by failing to give a
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timely Claim Response in accordance with the terms hereof or otherwise, then the
amount of such claim shall be conclusively deemed to be an obligation of such
Indemnitor.
(b) If any Indemnitor shall be obligated to indemnify an Indemnified
Party pursuant to this SECTION 9, such Indemnitor shall pay to such Indemnified
Party the amount to which such Indemnified Party shall be entitled within 15
Business Days after the day on which such Indemnitor became so obligated to the
Indemnified Party. If the Indemnified Party shall be an Indemnified Buyer Party,
it shall first seek payment of the Damages to which it is entitled under this
SECTION 9 from the Escrow Funds, but only to the extent that Escrow Funds are
then being held by the Escrow Agent and are not subject to other claims for
indemnification; thereafter, if the amount of the Escrow Funds available for
payment of Damages is less than the amount of Damages to which such Indemnified
Buyer Party is entitled, such Indemnified Buyer Party shall seek indemnification
directly from Seller Parties. If any Indemnitor fails to pay all or part of any
indemnification obligation when due, then such Indemnitor shall also be
obligated to pay to the applicable Indemnified Party interest on the unpaid
amount for each day during which the obligation remains unpaid at an annual rate
equal to the Prime Rate plus 5%.
(c) The claims period for the Escrow Funds shall commence on the
date hereof and shall continue for one year thereafter (the "Claims Period").
Any Claim Notice shall be considered timely made for the purposes of this
SECTION 9 if given prior to the termination of the Claims Period and in
accordance with the notice requirements of SECTION 12. Any Claim Response shall
be considered timely made for the purposes of this SECTION 9 if given prior to
the termination of the Response Period and in accordance with the notice
requirements of SECTION 12.
(d) If, during the Response Period, an Indemnified Party receives a
Claim Response from the Indemnitor, then for a period of 45 days (the
"Resolution Period") after the Indemnified Party's receipt of such Claim
Response, the Indemnified Party and the Indemnitor shall endeavor to resolve any
dispute arising therefrom. If such dispute is resolved by the parties during the
Resolution Period, the amount that the parties have specified as the amount to
be paid by the Indemnitor, if any, as settlement for such dispute shall be
conclusively deemed to be an obligation of such Indemnitor. If the parties are
unable agree upon a resolution to such dispute prior to the expiration of the
Resolution Period (or any extension thereto to which the Indemnitor and
Indemnified Party agree in writing), the issue shall be presented to the
American Arbitration Association in Pittsburgh, Pennsylvania (the "AAA") for
determination. The written determination of the AAA shall be binding upon the
Parties.
(e) If the Indemnified Party is an Indemnified Buyer Party and,
pursuant to SECTION 9(B), such Indemnified Buyer Party is obligated to seek any
portion of the funds to which such Indemnified Buyer Party is entitled from the
Escrow Funds, then, within two Business Days from the date on which such
Indemnified Buyer Party became entitled to such funds, the Indemnified Party and
the Indemnitor shall provide joint written instructions to the Escrow Agent as
to (i) the
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amount of funds, if any, to be dispersed from the Escrow Funds and (ii)
instructions as to the manner in which such funds shall be dispersed by the
Escrow Agent.
(f) Notwithstanding any other provision of this SECTION 9, except as
provided below in this PARAGRAPH (F), the Indemnified Buyer Parties shall be
entitled to indemnification hereunder with respect to the breach of a
representation or warranty herein by the Companies only when the aggregate of
all Damages to such Indemnified Buyer Parties from all such breaches of
representations or warranties exceeds $200,000 (the "Deductible Amount") and
then only to the extent of such excess amount. The foregoing limitation with
respect to the Deductible Amount shall not apply, however, to (a) any breach of
any Company's representations or warranties under SECTIONS 4.10 or 4.18(C) as to
the costs of any Patent filings necessary for any previously filed Patent
included in the Purchased Assets that is determined to be invalid and (b) a
breach of any Company's representations or warranties under this Agreement that
were made with an intent to defraud. Notwithstanding the foregoing, the maximum
dollar amount recoverable by the Buyer Indemnified Parties hereunder for claims
arising out of or related to any Company's (x) breaches of its representations
or warranties under SECTIONS 4.1, 4.2, 4.4 or 4.6(A)--as to title only shall be
the Purchase Price; (y) breaches of any Company's representations or warranties
under SECTIONS 4.13, 4.15--as to litigation and Environmental Conditions only or
4.18 shall be two-thirds of the Purchase Price; and (z) for breaches of any of
the Companies' representations or warranties not listed in the foregoing clauses
(x) and (y) shall be one-third of the Purchase Price.
9.4 CLAIMS PERIOD. Any claim for indemnification under this SECTION 9
shall be made by giving a Claim Notice under SECTION 9.3 on or before the
applicable "Expiration Date" specified below in this SECTION 9.4, or the claim
under this SECTION 9 shall be invalid. The following claims shall have the
following respective "Expiration Dates": (a) the date on which the applicable
statute of limitations expires--any claim for Damages related to (i) a breach of
any covenant or agreement or (ii) a breach of any representations or warranties
of any Company under this Agreement that were made with an intent to defraud;
(b) the fifth anniversary of the Closing Date--any claim with respect to
breaches of any of the Companies' representations or warranties under SECTIONS
4.13, 4.15--as to litigation and Environmental Conditions only, and 4.18; and
(c) the second anniversary of the Closing Date -- any claim with respect to
breaches of any representations or warranties not listed in the foregoing
clauses (a) or (b). If more than one of such Expiration Dates applies to a
particular claim, the latest of such Expiration Dates shall be the controlling
Expiration Date for such claim. So long as an Indemnified Party gives a Claim
Notice for an Unliquidated Claim on or before the applicable Expiration Date,
such Indemnified Party shall be entitled to pursue its rights to indemnification
regardless of the date on which such Indemnified Party gives the related
Liquidated Claim Notice.
9.5 THIRD PARTY CLAIMS. An Indemnified Party that desires to seek
indemnification under any part of this SECTION 9 with respect to any actions,
suits or other administrative or judicial proceedings (each, an "Action") that
may be instituted by a third party shall give each Indemnitor
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prompt notice of a third party's institution of such Action. After such notice,
any Indemnitor may, or if so requested by such Indemnified Party, any Indemnitor
shall, participate in such Action or assume the defense thereof, with counsel
satisfactory to such Indemnified Party; provided, however, that such Indemnified
Party shall have the right to participate at its own expense in the defense of
such Action; and provided, further, that the Indemnified Party shall not consent
to the entry of any judgment or enter into any settlement, except with the
written consent of the Indemnitor (which consent shall not be unreasonably
withheld). Any failure to give prompt notice under this SECTION 9.4 shall not
bar an Indemnified Party's right to claim indemnification under this SECTION 9,
except to the extent that an Indemnitor shall have been harmed by such failure.
9.6 EFFECT OF INVESTIGATION OR KNOWLEDGE. Any claim by Buyer for
indemnification shall not be adversely affected by any investigation by or
opportunity to investigate afforded to Buyer, nor shall such a claim be
adversely affected by Buyer's knowledge on or before the Closing Date of any
breach of the type specified in the first sentence of Section 9.1 or of any
state of facts that may give rise to such a breach. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, will not adversely affect the
right to indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants or obligations.
10. GENERAL MATTERS.
10.1 CONTENTS OF AGREEMENT. This Agreement, together with the other
Transaction Documents, sets forth the entire understanding of the Parties with
respect to the Transactions and supersedes all prior agreements or
understandings among the parties regarding those matters except for those
agreements set forth in the Confidentiality Agreement.
10.2 AMENDMENT, PARTIES IN INTEREST, ASSIGNMENT, ETC. This Agreement may
be amended, modified or supplemented only by a written instrument duly executed
by each of the Parties. If any provision of this Agreement shall for any reason
be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision
hereof, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
heirs, legal representatives, successors and permitted assigns of the Parties.
Nothing in this Agreement shall confer any rights upon any Person other than the
Parties and their respective heirs, legal representatives, successors and
permitted assigns, except as provided in SECTION 9. No Party shall assign this
Agreement or any right, benefit or obligation hereunder. Any term or provision
of this Agreement may be waived at any time by the Party entitled to the benefit
thereof by a written instrument duly executed by such Party.
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10.3 FURTHER ASSURANCES. At and after the Closing, the Parties shall
execute and deliver any and all documents and take any and all other actions
that may be deemed reasonably necessary by their respective counsel to complete
the Transactions.
10.4 INTERPRETATION. Unless the context of this Agreement clearly requires
otherwise, (a) references to the plural include the singular, the singular the
plural, the part the whole, (b) references to any gender include all genders,
(c) "including" has the inclusive meaning frequently identified with the phrase
"but not limited to" and (d) references to "hereunder" or "herein" relate to
this Agreement. The section and other headings contained in this Agreement are
for reference purposes only and shall not control or affect the construction of
this Agreement or the interpretation thereof in any respect. Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified. Each accounting term used herein that is not specifically
defined herein shall have the meaning given to it under GAAP. Any reference to a
Party's being satisfied with any particular item or to a Party's determination
of a particular item presumes that such standard will not be achieved unless
such Party shall be satisfied or shall have made such determination in its sole
or complete discretion.
10.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be binding as of the date first written above,
and all of which shall constitute one and the same instrument. Each such copy
shall be deemed an original, and it shall not be necessary in making proof of
this Agreement to produce or account for more than one such counterpart.
10.6 DISCLOSURE SCHEDULES. Any items listed or described on the Disclosure
Schedules shall be listed or described under a caption that specifically
identifies the Section(s) of this Agreement to which the item relates (which, in
each case, shall constitute the only valid disclosure with respect to such
Section(s)).
11. REMEDIES.
It is a fundamental point of mutual agreement among the Parties that the
Parties' liability, if any, for and in respect of this Agreement shall, except
for matters of proven fraud and as otherwise expressly stated herein, be limited
to the absolute, fixed dollar amounts and for the absolute, fixed time
limitations specified in SECTION 9. These limitations of amount of liability and
time to assert any such liability shall apply to all claims and other demands,
charges, allegations, liabilities, responsibilities, exposures and the like
(collectively "Claims Against A Party") no matter how any and all such Claims
Against A Party may be brought or asserted, whether sounding in contract, tort
or otherwise, including Claims Against A Party based upon breach of contract,
breach of representation, warranty, indemnity (contractual or otherwise), or
loss in reliance.
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12. NOTICES.
All notices that are required or permitted hereunder shall be in writing
and shall be sufficient if personally delivered or sent by registered or
certified mail, facsimile message or Federal Express or other nationally
recognized overnight delivery service. Any notices shall be deemed given upon
the earlier of the date when received at, or the third day after the date when
sent by registered or certified mail or the day after the date when sent by
Federal Express or facsimile to, the address or facsimile number set forth
below, unless such address or facsimile number is changed by notice to the other
Parties:
If to any Company:
TETRA Technologies, Inc.
25025 I-45 North
The Woodlands, TX 77380
Attn: Geoffrey M. Hertel, Executive Vice President
FAX: (281) 364-4398
with a required copy to:
Andrews & Kurth L.L.P.
2170 Buckthorne Place, Suite 150
The Woodlands, TX 77380
Attn: Jeffrey R. Harder, Esquire
FAX: 713-238-7282
If to Buyer:
Capitol Controls Co., Inc.
3000 Advance Lane
Colmar, PA 18915
Attn: President
FAX: 215-997-4002
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with a required copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103-6993
Attn: Thomas J. Sharbaugh, Esquire
FAX: 215-963-5299
13. GOVERNING LAW.
This Agreement shall be construed and interpreted in accordance with the
laws of the Commonwealth of Pennsylvania without regard to its provisions
concerning choice of laws or choice of forum. The Parties hereby irrevocably
submit themselves to the non-exclusive jurisdiction of the state and federal
courts sitting in the Commonwealth of Pennsylvania and agree and consent that
services of process may be made upon it in any legal proceedings relating hereto
by any means allowed under state or federal law.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the day and year first written above.
TETRA TECHNOLOGIES, INC.
By: /s/ GEOFFREY M. HERTEL
Name: Geoffrey M. Hertel
Title: Executive Vice President
CAPITAL CONTROLS CO., INC.
By: /s/ ROGER K. PEACE
Name: Roger K. Peace
Title: Chief Financial Officer
TETRA REAL ESTATE, L.P.
By: TETRA REAL ESTATE, L.L.C.
General Partner
By: TETRA Technologies, Inc.
Member
By: /s/ GEOFFREY M. HERTEL
Name: Geoffrey M. Hertel
Title: Executive Vice President
