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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Filed Pursuant to Section 13 or 15(d) of the Securities Act of 1934
Date of Report (Date of earliest event reported) January 13, 1998
PONDER INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-18656 75-2268672
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
5005 Riverway Drive, Suite 550, Houston, Texas 77056
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77056 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 965-0653
-----------------------------
Not Applicable
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(Former name or former address, if changed since last report)
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Item 1. Change in Control of Registrant.
Not Applicable.
Item 2. Acquisition or Disposition of Assets.
On January 13, 1998, Ponder Industries, Inc., a Delaware corporation
("Issuer"), acquired all of the issued and outstanding shares of common stock
(the "Acquisition") of Fishing Tools, Inc., a Louisiana corporation ("FTI").
The Acquisition was consummated pursuant to a Stock Purchase Agreement dated
January 12, 1998 (the "Purchase Agreement"), among Issuer, Robert W. Gerdes,
Sr., Reggie W. Hanberry and Brian Sokol (Gerdes, Hanberry and Sokol
collectively referred to as "Sellers").
Pursuant to the terms of the Purchase Agreement, 644,496 shares of the
common stock, $.01 par value of Issuer ("Common Stock"), were issued to Sellers
along with $6,500,000 in cash. In determining the amount of such
consideration, a multiple of fair market value was used and subsequently
adjusted based on the results of the due diligence efforts of Issuer. A
broker's fee of $180,000 was paid by the Sellers to J.E.V. Marketing, a
Louisiana partnership.
The source of funds for the Acquisition came from the proceeds of a
Securities Purchase and Exchange Agreement dated January 12, 1998 (the
"Securities Purchase Agreement"), among Issuer, White Owl Investors L.L.C.
("White Owl"), Somerset Capital Partners ("Somerset"), White Owl Capital
Partners ("WOCP"), Arvid Sanger ("Sanger"), Antony T.F. Lundy ("Lundy") and
Karl Bandtel ("Bandtel") (White Owl, Somerset, WOCP, Sanger, Lundy and Bandtel
collectively referred to as "Investors"). Pursuant to the terms of the
Securities Purchase Agreement, Issuer sold an aggregate of 11,000,000 shares of
Common Stock to White Owl and Somerset in consideration for an aggregate of
$11,000,000. In connection with the issuance of the Common Stock to the
Sellers, White Owl and Somerset, and pursuant to the terms of the Purchase
Agreement and a Joinder Agreement dated January 12, 1998 among Issuer and
Investors, Issuer granted to Sellers, White Owl and Somerset certain
registration rights.
The assets acquired by Issuer through the Acquisition relate to the
business of renting specialized tools designed to recover unwanted obstructions
from the bore holes of oil wells. The assets acquired include leased property,
vehicles and equipment utilized in the rental of down hole recovery tools.
Issuer intends to continue to use such leased property, intellectual property,
vehicles and equipment in the same manner as used prior to the Acquisition.
The Acquisition was accounted for using the purchase method.
Item 3. Bankruptcy or Receivership.
Not Applicable.
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Item 4. Changes in Registrant's Certifying Accountant.
Not Applicable.
Item 5. Other Events.
Not Applicable.
Item 6. Resignations of Registrant's Directors.
Not Applicable.
Item 7. Financial Statements and Exhibits.
(a) Combined Financial Statements.
It is impractical to provide the required financial statements of FTI
at the time of filing this Report. It is anticipated that such financial
statements will be filed by amendment as soon as practicable but in no event
later than 60 days following the date on which this Report must be filed.
(b) Combined Pro Forma Financial Information.
It is impractical to provide the required pro forma financial
information with respect to FTI at the time of filing this Report. It is
anticipated that such financial information will be filed by amendment as soon
as practicable but in no event later than 60 days following the date on which
this Report must be filed.
(c) Exhibit Index.
Exhibit 2.1 Stock Purchase Agreement dated January 12, 1998,
among Ponder Industries, Inc., Robert W. Gerdes,
Sr., Reggie W. Hanberry and Brian J. Sokol.
Exhibit 4.1 Joinder Agreement dated January 12, 1998, among
Ponder Industries, Inc., White Owl Investors L.L.C.,
Somerset Capital Partners, White Owl Capital
Partners, Arvid Sanger, Antony T.F. Lundy and Karl
Bandtel.
Exhibit 10.1 Securities Purchase and Exchange Agreement dated
January 12, 1998, among Ponder Industries, Inc.,
White Owl Investors L.L.C. Somerset Capital Partners,
White Owl Capital Partners, Arvid Sanger, Antony T.F.
Lundy and Karl Bandtel.
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Item 8. Change in Fiscal Year.
Not Applicable.
Item 9. Sales of Equity Securities Pursuant to Regulation S.
Not Applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PONDER INDUSTRIES, INC.
By:/s/ Eugene L. Butler
-----------------------------------
Eugene L. Butler,
President
Chief Executive Officer and
Chairman of the Board
(Principal Accounting Officer)
DATE: January 27, 1998
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
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<S> <C>
Exhibit 2.1 Stock Purchase Agreement dated January 12, 1998,
among Ponder Industries, Inc., Robert W. Gerdes,
Sr., Reggie W. Hanberry and Brian J. Sokol.
Exhibit 4.1 Joinder Agreement dated January 12, 1998, among
Ponder Industries, Inc., White Owl Investors L.L.C.,
Somerset Capital Partners, White Owl Capital
Partners, Arvid Sanger, Antony T.F. Lundy and Karl
Bandtel.
Exhibit 10.1 Securities Purchase and Exchange Agreement dated
January 12, 1998, among Ponder Industries, Inc.,
White Owl Investors L.L.C. Somerset Capital Partners,
White Owl Capital Partners, Arvid Sanger, Antony T.F.
Lundy and Karl Bandtel.
</TABLE>
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
DATED JANUARY 12, 1998
BY AND AMONG
PONDER INDUSTRIES, INC.
AND
ROBERT W. GERDES, SR.,
REGGIE W. HANBERRY AND
BRIAN J. SOKOL
COVERING THE PURCHASE
OF ALL OF THE ISSUED AND OUTSTANDING COMMON STOCK OF
FISHING TOOLS, INC.
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1. General Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Best Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Governmental Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Governmental Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Market Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Ponder Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Section . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Purchase and Sale of the Stock; Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Delivery and Endorsement of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. Representations and Warranties of Sellers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1 Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2 Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.5 Liabilities, Debts and Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.6 Events Since the Balance Sheet Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.7 Directors, Officers and Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.8 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.9 Taxes and Governmental Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.10 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.11 Contracts and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.12 Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.13 Properties, Assets and Leasehold Estates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.14 Intangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.15 Suits, Actions and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.16 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.17 Licenses and Permits; Compliance With Governmental Requirements . . . . . . . . . . . . . . . . . . 11
4.18 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.19 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.20 No Dissolution or Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.21 Environmental Protection Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.22 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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4.23 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.24 Payment of Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.25 Deferred Purchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.26 Telephone Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.27 Customer List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.28 No Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.29 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.30 No Untrue Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.31 No Other Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5. Representations and Warranties of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.1 Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.3 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.4 Notice and Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.5 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.6 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.7 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.8 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6. Nature of Statements and Survival of Indemnifications, Guarantees, Representations and Warranties of
Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7. Covenants Regarding the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.1 Covenants of Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.2 Covenants of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8. Conditions to Obligations of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.1 Accuracy of Representations and Warranties and Fulfillment of Covenants . . . . . . . . . . . . . . 19
8.2 Phase I Environmental Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.3 No Governmental Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.4 No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.5 Stockholder's Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.6 Related Party Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.7 Notices and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.8 Corporate Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.9 Transfer and Assignment Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.10 Ordinary Course of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.11 Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.12 Board of Directors Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9. Conditions Precedent to Obligations of Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.1 Accuracy of Representations and Warranties and Fulfillment of Covenants . . . . . . . . . . . . . . 21
9.2 Delivery of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.3 No Governmental Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.4 No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.5 Notices and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.6 Corporate Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
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9.7 Release of Personal Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.1 INDEMNITY BY SELLERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.2 INDEMNITY BY PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.3 Notice of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.4 Right of Sellers to Participate in Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.5 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.6 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.7 Exceptions and Limitations to Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.8 Sole Basis of Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11. Requirements of Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.1 Accredited Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.2 Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.3 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.4 Incidental Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12. Access to Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
13. Non-Competition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
14. Post-Closing Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
14.1 Cooperation in Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
14.2 Pre-Closing Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
14.3 Amended Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
14.4 Section 338(h)(10) Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
15. Non-Disclosure of Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
16. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
17. Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
18. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
19. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
20. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
20.1 Governing Law; Interpretation; Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 33
20.2 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
20.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
20.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
20.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
20.6 Amendment; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
20.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
20.8 Telecopy Execution and Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into this 12th day of January, 1998, by and among Robert W. Gerdes, Sr., Reggie
W. Hanberry and Brian J. Sokol ("Sellers") and Ponder Industries, Inc., a
Delaware corporation ("Purchaser").
W I T N E S S E T H :
WHEREAS, Sellers own all of the outstanding shares of capital stock of
Fishing Tools, Inc., a Louisiana corporation ("Target"), being 375 shares of
common stock, no par value (the "Stock"), and desire to sell the Stock to
Purchaser pursuant to this Agreement as hereinafter provided;
WHEREAS, Purchaser desires to acquire the Stock from Sellers pursuant
to this Agreement as hereinafter provided; and
WHEREAS, the parties hereto desire to set forth certain
representations, warranties and covenants made by each to the other as an
inducement to the execution and delivery of this Agreement, and to set forth
certain additional agreements related to the transactions contemplated hereby.
NOW, THEREFORE, for and in consideration of the premises, the mutual
representations, warranties and covenants herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. General Definitions. For purposes of this Agreement, the
following terms shall have the respective meanings set forth below:
1.1 Affiliate. "Affiliate" of any Person shall mean any Person
Controlling, Controlled by or under common Control with such Person.
1.2 Best Knowledge "Best Knowledge" shall mean both what a Person
knew as well as what the Person should have known had the person exercised
reasonable diligence. When used with respect to a Person other than a natural
person, the term "Best Knowledge" shall include matters that are known to the
directors, officers, partners, trustees, administrators, executors, managers,
employees, consultants and agents of the Person.
1.3 Code "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.4 Control. "Control" and all derivations thereof shall mean the
ability to either (i) vote (or direct the vote of) 50% or more of the voting
interests in any Person or (ii) direct the affairs of another, whether through
voting power, contract or otherwise.
1.5 Exchange Act. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
1.6 Governmental Authority. "Governmental Authority" shall mean
any and all foreign, federal, state or local governments, governmental
institutions, public authorities and governmental
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entities of any nature whatsoever, and any subdivisions or instrumentalities
thereof, including, but not limited to, departments, boards, bureaus,
commissions, agencies, courts, administrations and panels, and any divisions or
instrumentalities thereof, whether permanent or ad hoc and whether now or
hereafter constituted or existing.
1.7 Governmental Requirement. "Governmental Requirement" shall
mean any and all laws (including, but not limited to, applicable common law
principles), statutes, ordinances, codes, rules, regulations, orders,
judgments, writs, injunctions, decrees, or decisions of any Governmental
Authority.
1.8 Market Price. "Market Price" shall mean the average of the
closing bid and asked prices of a share of Ponder Stock for the ten consecutive
trading days immediately prior to the third trading day prior to the Closing
Date, as reported in the over-the-counter market as reported by the National
Association of Securities Dealers Automated Quotation System; provided that,
for the purposes of this Agreement, the Market Price shall not be more than
$1.75 nor less than $1.00.
1.9 Person. "Person" shall mean any natural person, any
Governmental Authority and any entity the separate existence of which is
recognized by any Governmental Authority or Governmental Requirement,
including, but not limited to, corporations, partnerships, joint ventures,
joint stock companies, trusts, estates, companies and associations, whether
organized for profit or otherwise.
1.10 Ponder Stock. "Ponder Stock" shall mean the common stock,
$.01 par value, of Purchaser.
1.11 Schedule. "Schedule" shall mean the Schedules to this
Agreement, unless otherwise stated. The Schedules to this Agreement may be
attached to this Agreement or may be set forth in a separate document denoted
as the Schedules to this Agreement, or both.
1.12 SEC. "SEC" shall mean the Securities and Exchange Commission.
1.13 Section. "Section" shall mean the section of this Agreement
referred to by number.
1.14 Securities Act. "Securities Act" shall mean the Securities
and Exchange Act of 1933, as amended.
1.15 Taxes. "Tax" and "Taxes" shall mean any and all income,
excise, franchise or other taxes and all other charges or fees imposed or
collected by any Governmental Authority or pursuant to any Governmental
Requirement, and shall also include any and all penalties, interest,
deficiencies, assessments and other charges with respect thereto.
2. Purchase and Sale of the Stock; Closing Date.
2.1 Purchase and Sale. Subject to the terms and conditions herein
contained, Sellers agree to sell, assign, transfer and deliver to Purchaser at
the Closing (as hereinafter defined) all right, title and interest in and to
the Stock, the Stock being all of the issued and outstanding capital stock of
Target. Subject to the terms and conditions herein contained, Purchaser agrees
to purchase
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from Sellers the Stock and to pay at the Closing the Purchase Price (as
hereinafter defined) pursuant to the provisions of Section 3 below.
2.2 Delivery and Endorsement of Certificates. At the Closing,
Sellers shall deliver to Purchaser certificates representing the Stock, duly
endorsed in blank by Sellers, or accompanied by stock powers duly executed in
blank by Sellers, and with all necessary transfer tax and other revenue stamps,
acquired at Sellers' expense, affixed and canceled. Sellers agree to cure any
deficiencies with respect to the endorsements of the certificates representing
the Stock or with respect to the stock powers accompanying any such
certificates.
2.3 Closing Date. Subject to the terms and conditions contained
herein, the consummation of transactions referred to above shall take place
(the "Closing") on or before January 12, 1998, at the offices of Allen & Gooch
in Lafayette, Louisiana, or at such other time, date and place as Purchaser and
Sellers shall in writing designate (the "Closing Date").
3. Purchase Price. The aggregate consideration for the Stock
(the "Purchase Price") is (a) $6,500,000 by delivery at the Closing of a bank
certified or cashier's check or by wire transfer (the "Cash Consideration"),
and (b) a number of shares of Ponder Stock equal to the quotient of $1,000,000
divided by the Market Price (the "Stock Consideration"); to be allocated among
Sellers as described on Schedule 4.2.
4. Representations and Warranties of Sellers. Sellers jointly
and severally represent and warrant to Purchaser, except as disclosed in the
Schedules to this Agreement or in documents provided to Purchaser pursuant to
the terms of this Agreement, as follows:
4.1 Incorporation. Target is a corporation duly organized,
validly existing and in good standing under the laws of the State of Louisiana,
and is duly authorized, qualified and licensed under all applicable
Governmental Requirements to carry on its business in the places and in the
manner as now conducted. Schedule 4.1 sets forth a true and complete list of
all jurisdictions in which Target owns or leases properties, has employees or
conducts business, and a complete list of all jurisdictions in which Target is
qualified as a foreign corporation. Target is in good standing in each of such
jurisdictions. Target has full corporate power and lawful authority to carry
on its business as it is now being conducted and to own and operate its assets,
properties and business. The copies of the Articles of Incorporation of Target
and all amendments thereto to date (certified by the Secretary of the State of
Louisiana) and of the bylaws of Target as amended to date (certified by its
Secretary), each of which are included in Schedule 4.1, are true, complete and
correct.
4.2 Share Capital. The authorized share capital of Target
consists of 10,000 shares of common stock, no par value, of which 375 shares
are issued and outstanding. All of such issued and outstanding shares are
validly issued and outstanding, fully paid and nonassessable. There are no
outstanding subscriptions, options, warrants, calls, commitments, obligations
or agreements relating to any of the authorized or outstanding capital stock of
Target. Sellers own all of the issued and outstanding shares of the Stock, as
described on Schedule 4.2, free and clear of all liabilities, liens,
encumbrances, pledges, trusts, voting trusts or stockholders' agreements,
equities, charges, options, conditional sale or title retention agreements,
covenants, restrictions, reservations, commitments, obligations or other
burdens or encumbrances of any nature whatsoever, and the consummation of the
purchase and sale contemplated by this Agreement will transfer to Purchaser
good and marketable title to the Stock free and clear of any such items.
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4.3 Subsidiaries. Except as described on Schedule 4.3, Target
does not, directly or indirectly, own or control any capital stock, bonds or
other securities of, or have any proprietary interest in, any corporation,
association, partnership, firm or business organization or enterprise, nor does
it directly or indirectly control the management of any such entities, nor does
it have any obligation to acquire any such interest in the future.
4.4 Financial Statements. Sellers have delivered to Purchaser
copies of the following financial statements for Target, all of which financial
statements are included in Schedule 4.4:
(a) Unaudited Balance Sheet (the "Reference Balance
Sheet") as of August 31, 1997 (the "Balance Sheet Date") and Unaudited
Income Statement for the eighth-month period ended on the Balance
Sheet Date;
(b) Unaudited Balance Sheet as of October 31, 1997 and
Unaudited Income Statement for the ten-month period ended on October
31, 1997; and
(c) Unaudited Balance Sheets and Income Statements for
each of Target's three (3) most recent fiscal years.
All financial statements supplied to Purchaser by Sellers, are true and
accurate in all material respects, have been prepared in accordance with a tax
basis of accounting applied on a consistent basis throughout the periods
indicated, and present fairly the financial condition and results of operations
of Target as of the dates and for the periods indicated thereon in accordance
with a tax basis of accounting. The Reference Balance Sheet reflects, as of
the Balance Sheet Date, all liabilities, debts and obligations of any nature of
Target, whether accrued, absolute, contingent or otherwise, and whether due, or
to become due, including, but not limited to, liabilities, debts or obligations
on account of Taxes to the extent such items are required to be reflected on
such balance sheet under a tax basis of accounting consistently applied.
4.5 Liabilities, Debts and Obligations. Other than accounts
payable arising in the ordinary course of business since the Balance Sheet Date
and except as described on Schedule 4.5, Target has no liabilities, debts or
obligations of any nature whatsoever, whether due or to become due, and whether
accrued, absolute, contingent or otherwise, that are not disclosed on the
Reference Balance Sheet or in this Agreement and the Schedules hereto. Except
as described on Schedule 4.5, there are no outstanding claims against Target by
any person who is now or has been an officer or employee of Target nor any
dispute between Target and a material number or class of its employees.
4.6 Events Since the Balance Sheet Date. Except as described on
Schedule 4.6, since the Balance Sheet Date, there has not been:
(a) any change in the condition (financial or otherwise)
or in the properties, assets, liabilities, business or prospects of
Target, except normal and usual changes in the ordinary course of
business, none of which has been adverse and all of which in the
aggregate have not been adverse;
(b) any declaration, setting aside, or payment of any
dividend or other distribution on or in respect of the capital stock
of Target, or any direct or indirect redemption, purchase
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or other acquisition of any of such stock or any issuance of any
shares of such stock or any granting or entering into of any option or
commitment relating to any of such stock;
(c) any increase in the compensation or rate of
compensation or commissions payable or to become payable by Target to
any of its directors, officers, employees or consultants, or any
hiring of any employee by Target who is entitled to compensation in
excess of $25,000.00 per annum, or any payment or accrual of any
bonus, profit-sharing or other extraordinary compensation to any
director, officer, employee or consultant, or any change in any then
existing bonus, profit-sharing, pension, retirement or other similar
plan, agreement or arrangement or any adoption of or entering into of
any new bonus, profit-sharing, pension, stock option, retirement,
group life or health insurance or other similar plan, agreement or
arrangement;
(d) any change in the accounting methods or practices
followed by Target or any change in depreciation or amortization
policies or rates heretofore adopted by it;
(e) any sale, lease, abandonment or other disposition by
Target of any interest in real property or, other than in the ordinary
course of business, of any machinery, equipment or other asset;
(f) any labor trouble, strike or any other occurrence,
event or condition affecting the employees of Target that adversely
affects the condition (financial or otherwise) or the properties,
assets, liabilities, business or prospects of Target;
(g) any breach or default by Target or, to the Best
Knowledge of Sellers, by any other party, under any agreement or
obligation to which Target is a party or by which any of its assets
are bound;
(h) any damage, destruction or loss (whether or not
covered by insurance) adversely affecting the assets or the business
of Target;
(i) any transaction entered into or engaged in by Target
other than transactions in the ordinary course of business; or
(j) to the Best Knowledge of Sellers, any other
occurrence, event or condition that has adversely affected (or can
reasonably be expected to adversely affect) the properties, assets,
business or prospects of Target.
4.7 Directors, Officers and Employees. Schedule 4.7 sets forth a
true and complete list of the names of and current annual compensation paid by
Target to each director, officer and employee of Target. With respect to each
employee of Target hired after November 6, 1986, to the best knowledge of
Sellers, a copy of the Form I-9 completed pursuant to the Immigration Reform
and Control Act of 1986, and the rules and regulations promulgated thereunder,
has been attached to Schedule 4.7. Except as described on Schedule 4.7,
neither Sellers nor, to the Best Knowledge of Sellers, any director or officer
of, and no Associate (as hereinafter defined) of any of them:
(a) owns, directly or indirectly, 5% or more of the
outstanding equity interests in, or is a director, officer or employee
of, or consultant to, any entity which is a competitor,
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potential competitor, supplier or customer of Target, or, to the Best
Knowledge of Sellers, a competitor, supplier or customer of Purchaser
or an Associate of Purchaser (except for ownership, if any, of less
than one percent (1%) by value of the outstanding capital stock of any
corporation, the capital stock of which is traded on a nationally
recognized securities exchange);
(b) owns, directly or indirectly, in whole or in part,
any property, asset or right (i) which is associated with any
property, asset or right owned by Target or (ii) which Target is
presently operating or using or the use of which is necessary for or
material to any of its business; or
(c) has, directly or indirectly, engaged in any
transaction with Target except transactions inherent in the capacities
of director, officer, employee, consultant or stockholder.
For purposes of this Agreement, the term "Associate" shall mean:
(x) with respect to an individual:
(i) the spouse of the individual and all
ancestors and lineal descendants of the individual and the
spouse,
(ii) any trust in which the individual or any
person described in (i) above has an interest or any trustee
of such a trust, and
(iii) any business entity which is directly or
indirectly Controlled by any of the foregoing; and
(y) with respect to a corporation, any Person
Controlling, Controlled by or under common Control with such
corporation, and any director or officer of such corporation and any
Associate of any such Person.
4.8 Inventories. The inventories of Target reflected on the
Reference Balance Sheet under the category entitled "Prepaid Expenses" consist
of steel utilized to fabricate tools used in Target's rental business and as
replacement parts for repairs to its power swivel units, all of which are of a
quality and quantity usable in the normal course of business of Target. The
method of valuing such inventories as of the Balance Sheet Date is consistent
with that used in respect of the beginning and end of each of the two (2) most
recent fiscal years of Target. The value of obsolete materials and materials
below standard quality has been written down on the books of account of Target
to realizable market value, or adequate reserves have been provided therefor.
The inventories of Target are not excessive in kind or amount in light of the
business done or reasonably expected to be done by it. The values at which
such inventories are carried reflect the inventory valuation policy applied by
Target of stating inventory at the lower of actual cost (first in-first out
method) or realizable market value in accordance with a tax basis of
accounting.
4.9 Taxes and Governmental Returns. Except as described in
Schedule 4.9, all tax returns, information returns and governmental reports of
every nature required by any Governmental Authority required or Governmental
Requirement to be filed by Target prior to the date hereof or
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which include or should include Target prior to the date hereof, including, but
not limited to, those relating to Taxes of any nature to which Target or any of
its business is subject ("Governmental Returns"), have been filed, and all
Taxes shown to be due and payable on such Governmental Returns or on any
assessments related to such Governmental Returns have been paid. Except as
described in Schedule 4.9, all such Governmental Returns and reports and the
information and data contained therein have been properly and accurately
compiled and completed, fairly present the information purported to be shown
therein, and reflect all Tax liabilities of Target for the periods covered by
such Governmental Returns. Except as specifically disclosed in this Agreement
or the Schedules hereto, Target has no unpaid liability for any Taxes of any
nature whatsoever for any period prior to the date hereof. Except as described
in Schedule 4.9, the Governmental Returns of Target or that include Target have
not been audited since January 1, 1994, and are not now under audit, by any
Governmental Authority. There are no agreements, waivers or other arrangements
providing for an extension of time with respect to the assessment of any Taxes
of any nature against Target or with respect to any Governmental Return filed
by Target or that include Target, or any suits or other actions, proceedings,
investigations or claims now pending or threatened against Target with respect
to any Taxes or any matters under discussion with any Governmental Authority
relating to any Taxes, or any claims for additional Taxes asserted by any
Governmental Authority. Except as described in Schedule 4.9, the charges,
accruals and reserves on the Reference Balance Sheet in respect of all accrued
Taxes are adequate to provide fully for all Taxes, if any, payable by Target
with respect to periods ended on or before the Balance Sheet Date. Schedule
4.9 sets forth the accrued and unpaid taxes of Target as of January 9, 1998.
At all times since its inception, Target has been a validly electing
"S" Corporation within the meaning of Section 1361 and 1362 of the Code and
Target will be an "S" Corporation for the period up to and including the
Closing Date.
4.10 Employee Benefit Plans. Except as set forth on Schedule 4.10,
Target has no employee benefit plans (including, but not limited to, pension
plans and health or welfare plans), arrangements or understandings, whether
formal or informal. Target does not now and has never contributed to a
"multiemployer plan" as defined in section 4001(a)(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). Target has
complied with all applicable provisions of ERISA and all rules and regulations
promulgated thereunder and neither Target nor any trustee, administrator,
fiduciary, agent or employee thereof has at any time been involved in a
transaction that would constitute a "prohibited transaction" within the meaning
of Section 406 of ERISA. Target is not a party to any collective bargaining or
other union agreements. Target has not, within the last five years, had or
been threatened with any union activities, work stoppages or other labor
trouble with respect to its employees which had or might have had a material
adverse effect on the business of Target. To the Best Knowledge of Sellers, no
union activities, work stoppages or other labor trouble with respect to the
employees of any of the customers or suppliers of the business of Target are
pending or threatened which might have an adverse effect on the business of
Target. Other than wage increases in the ordinary course of business or
disclosed on Schedules to this Agreement, since the Balance Sheet Date Target
has not made any commitment or agreement to increase the wages or modify the
conditions or terms of employment of any of the employees of Target used in
connection with its business.
4.11 Contracts and Agreements. Schedule 4.11 sets forth a true and
complete list of and briefly describes (including termination date) all of the
following contracts, agreements, leases, licenses, plans, arrangements or
commitments, written or oral, to which Target is a party or by
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which Target or any of its assets or properties is in any way bound or
obligated (including all amendments, supplements and modifications thereto),
excluding any master service agreement entered into in the ordinary course of
business which is terminable by Target on not more than 30 days notice to the
other party thereto;
(a) all contracts, agreements or commitments in respect
of the sale of products or services or the purchase of raw materials,
supplies or other products or utilities, except those entered into in
the ordinary course of business involving payments or receipts by
Target of less than $5,000.00;
(b) all offers, tenders or the like outstanding and
capable of being converted into an obligation of Target by the passage
of time or by an acceptance or other act of some other person or
entity or both, except those entered into in the ordinary course of
business involving payments or receipts by Target of less that $5,000;
(c) all sales, agency or distributorship agreements or
franchises or legally enforceable commitments or obligations with
respect thereto;
(d) all collective bargaining agreements, union
agreements, employment agreements, consulting agreements or agreements
providing for the services of an independent contractor;
(e) all profit-sharing, pension, stock option, severance
pay, retirement, bonus, deferred compensation, group life and health
insurance or other employee benefit plans, agreements, arrangements or
commitments of any nature whatsoever, whether or not legally binding,
and all agreements with any present or former officer, director or
shareholder of Target;
(f) all loan or credit agreements, indentures, guarantees
(other than endorsements made for collection), mortgages, pledges,
conditional sales or other title retention agreements, and all
equipment financing obligations, lease and lease-purchase agreements;
(g) all leases and all other contracts, agreements or
legally enforceable commitments relating to or affecting real property
or any interest therein;
(h) all contracts, agreements, arrangements or legally
enforceable commitments relating to the issuance of capital stock,
bonds or other securities of Target;
(i) all contracts, agreements, arrangements or legally
enforceable commitments relating to the acquisition by Target of any
substantial part of its business or assets;
(j) all performance bonds, bid bonds, surety bonds and
the like, all contracts and bids covered by such bonds, and all
letters of credit and guaranties;
(k) all consent decrees and other judgments, decrees or
orders, settlement agreements and agreements relating to competitive
activities, requiring or prohibiting any future action;
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(l) all accounts, notes and other receivables, and all
security therefor, and all documents and agreements related thereto;
and
(m) all other contracts, agreements, arrangements or
legally enforceable commitments that are material to Target or the
operation of any of its businesses, except those entered into in the
ordinary course of business involving payments or receipts by Target
of less that $5,000.
All of such contracts, agreements, leases, licenses, plans, arrangements, and
commitments (collectively, the "Contracts") are valid, binding and in full
force and effect in accordance with their terms and conditions and there is no
existing default thereunder or breach thereof by Target or, to the Best
Knowledge of Sellers, by any other party to the Contracts, or any conditions
which, with the passage of time or the giving of notice or both, might
constitute such a default by Target, or, to the Best Knowledge of Sellers, by
any other party to the Contracts, and the Contracts will not be breached by or
give any other party a right of termination as a result of the transactions
contemplated by this Agreement. To the Best Knowledge of Sellers there is no
reason why any of the Contracts (i) will result in a loss to Target on
completion by performance or (ii) cannot readily be fulfilled or performed by
Target on time without undue or unusual expenditure of money or effort. Copies
of all of the documents (or in the case of oral commitments, descriptions of
the material terms thereof) relevant to the Contracts listed in Schedule 4.11
have been furnished to Purchaser, and such copies and/or descriptions are true,
complete and accurate and include all amendments, supplements or modifications
thereto.
4.12 Effect of Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
result in any breach of any of the terms or conditions of, or constitute a
default under, the Articles of Incorporation or other charter documents or
bylaws of Target, or any commitment, mortgage, note, bond, debenture, deed of
trust, contract, agreement, license or other instrument or obligation to which
Target or either of Sellers is now a party or by which Target or either of
Sellers or any of their respective properties or assets may be bound or
affected; result in any violation of any Governmental Requirement; cause
Target to lose the benefit of any right or privilege it presently enjoys or, to
the Best Knowledge of Sellers, cause any Person who normally does business with
Target not to continue to do so on the same basis as before; relieve any
Person of any obligation to Target (whether contractual or otherwise) or enable
any Person to terminate any such obligation or any right or benefit enjoyed by
Target or to exercise any right under any agreement in respect of Target or the
assets or business of Target or require notice to or the consent,
authorization, approval or order of any Person. To the Best Knowledge of
Sellers, the business relationships of clients, customers and suppliers of
Target will not be adversely affected by the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
4.13 Properties, Assets and Leasehold Estates. Target owns or has
the right to use (pursuant to a valid lease or license disclosed on Schedule
4.11) all property, real or personal, tangible or intangible, (i) reflected on
the Reference Balance Sheet (other than items sold by Target since the Balance
Sheet Date in the ordinary course of its business) or (ii) utilized in or
necessary for the operation of its business. Schedule 4.13 sets forth a true
and complete list of all such property as of the date hereof (with all property
that is leased or licensed being designated as such). Except as described in
Schedule 4.13, Target has good and marketable title to all the properties,
interests in properties, assets and leasehold estates, real and personal, set
forth in Schedule 4.13, free
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and clear of all mortgages, liens, pledges, conditional sales agreements,
charges, easements, covenants, assessments, restrictions and encumbrances of
any nature whatsoever. All leases of property under which Target purports to
be a lessee are valid, binding and in full force and effect. Except as
described in Schedule 4.13, the plants, structures, equipment and other
properties owned or used by Target are in good operating condition and repair,
normal wear and tear excepted, and are capable of being used for their intended
purpose in the business of Target as now conducted. All such plants,
structures, equipment and other properties of Target and the present use of
such items conform to all Governmental Requirements, and no notice of any
violation of any such Governmental Requirements relating to such assets or
their use has been received by Target. Target has all easements, rights of
ingress and egress, and utilities and services necessary for all operations
conducted by it. Neither the whole nor any portion of any real property owned
or occupied by Target has been condemned or otherwise taken by any public
authority, nor, to the Best Knowledge of Sellers, is any such condemnation or
taking threatened or planned.
4.14 Intangible Property. Except as set forth on Schedule 4.14,
Target does not own, and its business does not require the use of, any rights
under any patents, inventions, trademarks, trade names, brand names or
copyrights, and the operation of its business as presently conducted does not
violate or infringe upon any such items owned by any Person. Neither Sellers
nor any officer, director, employee, consultant or agent of Target has entered
into any agreement regarding know-how, trade secrets, assignment of rights in
inventions, or prohibition or restriction of competition or solicitation of
customers, or any other similar restrictive agreement or covenant, whether
written or oral, with any Person other than Target. Target owns and has the
full and exclusive right to use in connection with its business all of the
items listed on Schedule 4.14, which items are in full force and effect.
Target has not transferred, encumbered or licensed to any Person any rights to
own or use any portion of the items listed on Schedule 4.14 or any other
intangible property included in the assets of Target. To the Best Knowledge of
Sellers, none of the items listed on Schedule 4.14 or any other intangible
property included in the assets of Target is being infringed upon by any
Person.
4.15 Suits, Actions and Claims. Except as set forth in Schedule
4.15, (i) there are no suits, actions, claims, inquiries or investigations by
any Person, or any legal, administrative or arbitration proceedings in which
Target is engaged or which are pending or, to the Best Knowledge of Sellers,
threatened against or affecting Target or any of its properties, assets or
business, or to which Target is or might become a party, or which question the
validity or legality of the transactions contemplated hereby, (ii) no basis or
grounds for any such suit, action, claim, inquiry, investigation or proceeding
exists, and (iii) there is no outstanding order, writ, injunction or decree of
any Governmental Authority against or affecting Target or any of its
properties, assets or business. Without limiting the foregoing, Sellers have
no Best Knowledge of any state of facts or the occurrence of any event forming
the basis of any present or potential claim against Target.
4.16 Insurance Policies. Schedule 4.16 contains a list of all
insurance policies (specifying the insurer, the amount of coverage, the type of
insurance and the policy number) maintained by Target on its properties,
assets, business and personnel. Except as set forth on Schedule 4.16, there is
no claim outstanding under any such insurance policy nor, to the Best Knowledge
of Sellers, any circumstances that are likely to give rise to such a claim.
Target is not in default with respect to any provision contained in such
insurance policies, nor has it failed to give any notice or present any claim
thereunder in a timely fashion. All such policies are in full force and
effect, with all premiums due thereon to date fully paid except as set forth on
Schedule 4.16.
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4.17 Licenses and Permits; Compliance With Governmental
Requirements. Schedule 4.17 sets forth a true and complete list of all
licenses and permits necessary for the conduct of Target's business. Target
has all such licenses and permits validly issued to it and in its name, and all
such licenses and permits are in full force and effect. True and correct
copies of all such licenses and permits are included in Schedule 4.17. No
violations are or have been recorded in respect of such licenses or permits and
no proceeding is pending or, to the Best Knowledge of Sellers, threatened
seeking the revocation or limitation of any of such licenses or permits.
Target has complied with all Governmental Requirements applicable to its
business, and all Governmental Requirements with respect to the distribution
and sale of products and services by it.
4.18 Authorization. Sellers have full legal right, power and
authority to enter into and deliver this Agreement and to consummate the
transactions set forth herein and to perform all the terms and conditions
hereof to be performed by each of them. The execution and delivery of this
Agreement by Sellers and the performance of the transactions contemplated
herein have been duly and validly executed and delivered by Sellers and is the
legal, valid and binding obligation of Sellers, enforceable against Sellers in
accordance with its terms, except as limited by applicable bankruptcy,
moratorium, insolvency or other similar laws affecting generally the rights of
creditors or by principles of equity.
4.19 Records. The books, records and minutes kept by Target with
respect to the assets and the business of Target, including, but not limited
to, all customer files, service agreements, quotations, correspondence and
historic revenue data of Target, have been kept properly and contain records of
all matters required to be included therein by any Governmental Requirement or
by a tax basis of accounting, and such books, records and minutes are true,
accurate and complete.
4.20 No Dissolution or Judgment. Except as set forth on Schedule
4.20, no order has been entered or petition presented or resolution passed for
the dissolution or winding up of Target nor has any distress, execution or
other process been levied in respect of Target or any of its assets nor is
there any unfulfilled or unsatisfied judgment or order outstanding against
Target.
4.21 Environmental Protection Laws.
(a) For purposes of this Section 4.21, unless the context
otherwise specifies or requires, the following terms shall have the
meaning herein defined:
(i) "Waste Materials" shall mean
(A) any "hazardous waste" as defined by the
Resource Conservation and Recovery Act of 1976, 42. U.S.C.
Sections 6901 et seq., as amended from time to time, and
regulations promulgated thereunder;
(B) any "hazardous substance" as defined by the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Sections 9601, et seq., as
amended from time to time;
(C) asbestos;
(D) polychlorinated biphenyls;
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(E) underground storage tanks, whether empty,
filled or partially filled with any substance;
(F) any other substance the presence of which is
prohibited by any Governmental Requirement in its present form
or as currently used by Target; and
(G) any other substance which by any Governmental
Requirement requires special handling or notification of any
federal, state or local governmental entity in its collection,
storage, treatment, recycling or disposal.
(ii) "Waste Materials Contamination" shall mean
the presence of Waste Materials on, in or under any property
whatsoever which is associated with or is in any way related
to the business of Target, including the improvements,
facilities, soil, ground, water or air.
(b) Except as described in Schedule 4.21, all business
conducted by Target has been and is being operated, and the assets of
Target have been and are being used and were obtained, in all respects
in compliance with all Governmental Requirements relating to Waste
Materials.
(c) Except as described in Schedule 4.21, Target is not
now, and has not been, in violation of any Governmental Requirement
and the assets, business and operations of Target are in full
compliance with all Governmental Requirements relating to Waste
Materials. Except as set forth on Schedule 4.21, there are no
judicial or administrative actions, including non-compliance orders or
demand letters, pending that relate to such Governmental Requirements
relating to Waste Materials. Without in any way limiting the
foregoing, except as set forth on Schedule 4.21, Sellers hereby
specifically represent and warrant that:
(i) Target has complied with all applicable
Governmental Requirements relating to pollution and
environmental control;
(ii) Target is not in violation of any of the
permits described in or required to be described on Schedule
4.17 or any Governmental Requirement regulating emissions,
discharges or releases (including solids, liquids and gases)
into the environment or the proper transportation, handling,
storage, treatment or disposal of Waste Materials;
(iii) Target has received all permits and approvals
with respect to emissions, discharges or releases (including
solids, liquids and gases) into the environment and the proper
transportation, handling, storage, treatment and disposal of
Waste Materials required for the operation of the businesses
of Target as presently conducted;
(iv) Target has kept all records and made all
filings required by applicable Governmental Requirements with
respect to emissions, discharges or releases (including
solids, liquids and gases) into the environment and the proper
transportation, handling, storage, treatment and disposal of
Waste Materials;
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(v) All hazardous waste, hazardous materials and
hazardous substances on, in or under any real property owned
or leased by Target have been removed and no past or present
disposal, spill or other release of hazardous waste, hazardous
materials or hazardous substances on, in, under or adjacent to
any real property owned or leased by Target will subject
Purchaser to corrective or response action or any other
liability under any Governmental Requirement or the common
law;
(vi) No investigation, administrative order,
consent order or agreement, litigation or settlement with
respect to Waste Materials or Waste Materials Contamination is
proposed, threatened, anticipated or in existence with respect
to the assets or the business of Target. None of such assets
are currently on, and to the Best Knowledge of Sellers, have
ever been on, any federal or state "Superfund" or "Superlien"
list.
(vii) Target does not have any contingent
liabilities under any Governmental Requirement to any Person
and whether or not such contingent liability is required
pursuant to a tax basis of accounting to be reflected on the
financial statements of Target, in connection with any
emission, discharge or release of any hazardous or toxic
waste, substance or constituent or any other substance into
the environment; and
(viii) Target has not handled, treated, stored,
generated, transported or disposed of any Waste Material in
contravention of any Governmental Requirement, and there have
been no acts or omissions of Target or any of its agents or
employees in connection that would result in liability under
any Governmental Requirement.
(d) Schedule 4.21 contains a true, correct, accurate and
complete list of all transfer, storage or disposal facilities used
since January 1, 1987 by Target in any businesses or operations
conducted by or on behalf of Target. To the Best Knowledge of
Sellers, none of the transfer, storage or disposal facilities used by
Target in connection with any businesses or operations conducted by or
on behalf of Target are the subject of, or have conducted their
businesses or operations in a manner which may give rise to,
litigation, investigation, inquiry or other proceeding, ruling, order
or citation relating to emissions or potential emissions, discharges
or potential discharges or releases or potential releases (including
solids, liquids and gases) into the environment or relating to the
transportation, handling, storage, treatment or disposal of materials,
or any other liability under any Governmental Requirement or the
common law. The underground storage tanks located on the property at
1145 MacArthur Drive, Harvey, Louisiana shall be removed by Fishing
Tools, Inc. at its sole cost and expense as soon as reasonably
possible at a cost not to exceed $11,000. In addition, Fishing Tools,
Inc. shall bear the first Ten Thousand and 00/100 ($10,000.00) Dollars
of costs, if any, incurred to remove any hazardous waste, hazardous
materials, hazardous substances, Waste Material or other contaminated
material resulting from the underground storage tanks without any
right to indemnification from Sellers. Any removal costs of the
storage tanks and any hazardous waste, hazardous materials, hazardous
substances, Waste Material or other contaminated material in excess of
the amounts specified above shall be subject to the provisions of
Article 10 of this Agreement.
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(e) Target has, and has listed on Schedule 4.17, all
necessary environmental and operations permits for operations relating
to the business or assets of Target.
4.22 Accounts Receivable. All notes and accounts receivable of
Target that are reflected on the Reference Balance Sheet or that have arisen
since the Balance Sheet Date ("Accounts Receivable") have arisen in the
ordinary course of business. Except as described on Schedule 4.22, all
Accounts Receivable either (i) have been collected or (ii) are collectible on
the respective due dates thereof, or, if no due date is stated with respect
thereto, within ninety (90) days of their creation in the ordinary course of
business, in each case in the aggregate recorded amounts thereof, less the
applicable reserves with respect thereto reflected on the Reference Balance
Sheet. Except as described in Schedule 4.22, Target has not factored or
discounted or agreed to factor or discount any Account Receivable. The values
at which the Accounts Receivable are carried reflect the accounts receivable
valuation policy of Target which is consistent with Target's past practice and
in accordance with a tax basis of accounting consistently applied. Schedule
4.22 sets forth a true, correct and complete list of all Accounts Receivable
written off by Target, in whole or in part, as uncollectible during the two (2)
years preceding the date hereof. Schedule 4.22 also sets forth a true, correct
and complete aging of the Accounts Receivable of Target as of the most recent
practicable date.
4.23 Brokers and Finders. Except for J.E.V. Marketing, to be paid
by Sellers at Closing, no broker or finder has acted for Target or Sellers in
connection with this Agreement or the transactions contemplated by this
Agreement and no broker or finder is entitled to any brokerage or finder's fee
or to any commission in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of Sellers or Target.
4.24 Payment of Creditors. Except as set forth on Schedule 4.24,
Target has paid its creditors within the times agreed with such creditors, and
there are no debts outstanding against Target (other than those being disputed
in good faith by Target and those that are by their terms not yet due and
payable) that have been outstanding for more than ninety (90) days.
4.25 Deferred Purchase Agreements. Except as described on Schedule
4.25, Target has not acquired or agreed to acquire any material asset on terms
that provide that title thereto does not pass until full payment is made.
4.26 Telephone Numbers. All telephone numbers used by Target in
connection with the business of Target are transferable to Purchaser to the
extent allowed by the respective Service Provider.
4.27 Customer List. Schedule 4.27 sets forth a true, correct and
complete list of all customers of Target to which Target has sold or provided
products or services during the two fiscal years ending September 30, 1997.
This list provides an accurate statement of the gross revenues billed to each
such customer by Target during the twelve-month period ended September 30,
1997. Each list also indicates by special designation all customers on the
list with respect to which Target has not sold or provided products or services
during the six (6)-month period immediately preceding the date hereof. Two (2)
days prior to the Closing Date, Sellers shall cause Target to deliver to
Purchaser a true, correct and complete update of this list from October 1,
1997, through three (3) days prior to the Closing Date, and immediately prior
to the Closing, Sellers shall cause Target to deliver to Purchaser a true,
correct and complete update of this list as of the Closing Date, in each case
noting all deletions therefrom and additions thereto and updating all
information contained
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<PAGE> 19
thereon, and conspicuously marking all changes from the previous list or
update, as the case may be.
4.28 No Royalties. Except as described on Schedule 4.28, no
royalty or similar item or amount is being paid or is owing by Target, nor is
any such item accruing, with respect to the operation, ownership or use of the
business or the assets of Target.
4.29 Bank Accounts. Schedule 4.29 sets forth a true and complete
list of all bank or financial accounts and safe deposit boxes of Target and of
the credit and debit balances of such bank and financial accounts as of the
most recent practicable date. Since the date of the balances set forth on such
list, there have been no payments out of or drafts against any of the accounts
included therein other than routine payments and drafts in the ordinary course
of business, and the balances in such accounts as of the date hereof are not
materially different from those reflected in such list. Schedule 4.29 also
lists all persons having signatory authority over or access to such bank and
financial accounts and safe deposit boxes.
4.30 No Untrue Statements. The representations and warranties of
Sellers set forth in this Agreement and the Schedules do not include any untrue
statement of a material fact or omit to state any material fact necessary to
make the representations and warranties made not misleading. To the Best
Knowledge of Sellers, there is no fact or matter that is not disclosed to
Purchaser in this Agreement or the Schedules that materially and adversely
affects or, so far as Sellers or Target can now reasonably foresee, could
materially and adversely affect the condition (financial or otherwise) of
Target or the ability of Sellers or Target to perform their respective
obligations under this Agreement.
4.31 No Other Representations. Sellers are not making any
representation or warranty, express or implied, of any nature whatsoever,
except as specifically set forth in this Agreement.
5. Representations and Warranties of Purchaser. Purchaser
represents and warrants to Sellers as follows:
5.1 Incorporation. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
5.2 Authorization. Purchaser has full legal right and corporate
power to enter into and deliver this Agreement and to consummate the
transactions set forth herein and to perform all the terms and conditions
hereof to be performed by it. This Agreement has been duly executed and
delivered by Purchaser and is a legal, valid and binding obligation of
Purchaser enforceable in accordance with its terms, except as limited by
applicable bankruptcy, moratorium, insolvency or other laws affecting generally
the rights of creditors or by principles of equity; provided that as
specifically set forth herein the obligation of Purchaser to consummate the
transactions contemplated hereby is (among other conditions), subject to
approval of this Agreement and the transactions contemplated hereby by
Purchaser's board of directors.
5.3 Brokers and Finders. No broker or finder has acted for
Purchaser in connection with this Agreement or the transactions contemplated by
this Agreement and no broker or finder is entitled to any brokerage or finder's
fee or to any commission in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of Purchaser.
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5.4 Notice and Consent. Purchaser need not give any notice to,
make any filing with, or obtain any authorization, consent or approval of any
Governmental Authority in order to consummate the transactions contemplated by
this Agreement. Furthermore, there are no legal, judicial, administrative,
governmental, arbitration or other action or proceeding pending, or to the Best
Knowledge of the Purchaser, threatened against Purchaser that could affect its
ability to perform its obligations under this Agreement.
5.5 Noncontravention. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, Governmental Requirement, or other restriction
of any government, governmental agency, Governmental Authority, or court to
which Purchaser is subject or any provisions of its charter or by-laws other
than violations, defaults, or conflicts that would not materially and adversely
affect the ability of Purchaser to consummate the transactions contemplated by
this Agreement. Furthermore, neither the execution and the delivery of this
Agreement by Purchaser, nor the consummation of the transactions by Purchaser
as contemplated hereby, will conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice under any
agreement, contracts, lease, license, instrument, or other arrangement to which
Purchaser or its assets is subject.
5.6 SEC Documents. Purchaser has provided to Sellers (a) a copy
of the Annual Report on Form 10-K of Purchaser for the fiscal year ended August
31, 1995 in the form filed with the SEC, and (b) copies of all filings since
August 31, 1995 by Purchaser with the SEC in compliance with Section 13 or 14
of the Exchange Act (such documents collectively referred to herein as the "SEC
Documents"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act of 1933, as
amended, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder applicable to such SEC Documents, and none of
the SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements ,therein, in light of the circumstances under which they
were made, not misleading. The statements of Purchaser included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the commission with
respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto), and fairly present the
consolidate financial position of Purchaser and its consolidated subsidiaries,
if any, as of the dates thereof and the results of operations and cash flows
for the periods then ended.
5.7 Capitalization. The authorized capital of Purchaser consists
of 50,000,000 shares of common stock with a par value of $.01 of which
43,733,981 shares are issued and outstanding. The Ponder Stock delivered by
Purchaser to Sellers in connection with this Agreement are validly issued and
outstanding, fully paid and nonassessable. There are no outstanding
subscriptions, options, warrants, calls, commitments, obligations or agreements
relating to any of the shares of the Ponder Stock issued to Sellers in
connection with this Agreement. The Ponder Stock is being delivered to Sellers
free and clear of all liabilities, liens, encumbrances, pledges, trusts, voting
trusts or stockholders' agreements, covenants, restrictions, reservations,
commitments, obligations or other burdens or encumbrances of any nature
whatsoever, and upon the delivery of said shares to Sellers
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upon the consummation of this Agreement, Sellers will have good and marketable
title to the Ponder Stock free and clear of any such items.
5.8 Investment Intent. Purchaser is acquiring the Stock with the
intention as of the date hereof of holding the Stock for purposes of
investment, and Purchaser has no intention as of the date hereof of selling the
Stock in a public distribution in violation of federal securities laws or any
applicable state securities laws.
6. Nature of Statements and Survival of Indemnifications,
Guarantees, Representations and Warranties of Sellers. All statements of fact
contained in this Agreement or in any schedule delivered by or on behalf of
Sellers or Purchaser pursuant to this Agreement shall be deemed representations
and warranties of Sellers or Purchaser, respectively, hereunder. All
indemnifications, guarantees, covenants, agreements, representations and
warranties made by Sellers or Purchaser hereunder or pursuant hereto or in
connection with the transactions contemplated hereby shall survive the Closing
regardless of any investigation at any time made by or on behalf of Purchaser
or Sellers, respectively, in accordance with Section 10 hereof.
7. Covenants Regarding the Closing.
7.1 Covenants of Sellers. Sellers, jointly and severally, hereby
covenant and agree that they will (i) use commercially reasonable efforts to
cause all of their representations and warranties set forth in this Agreement
to be true on and as of the Closing Date, (ii) use commercially reasonable
efforts to cause all of their obligations that are to be fulfilled on or prior
to the Closing Date to be so fulfilled, (iii) use commercially reasonable
efforts to cause all conditions to the Closing set forth in this Agreement to
be satisfied on or prior to the Closing Date, and (iv) deliver to Purchaser at
the Closing the certificates, updated lists, notices, consents, authorizations,
approvals, agreements, leases, transfer documents, receipts and amendments
contemplated by Section 8 hereof (with such additions or exceptions to such
items as are necessary to make the statements set forth in such items accurate,
provided that if any of such additions or exceptions cause any of the
conditions to Purchaser's obligations hereunder as set forth in Section 8 below
not to be fulfilled, such additions and exceptions shall in no way limit the
rights of Purchaser under Section 8 hereof to terminate this Agreement or
refuse to consummate the transactions contemplated hereby).
7.2 Covenants of Purchaser. Purchaser hereby covenants and agrees
that it will use commercially reasonable efforts to cause all of its
representations and warranties set forth in this Agreement to be true on and as
of the Closing Date, use commercially reasonable efforts to cause all of its
obligations that are to be fulfilled on or prior to the Closing Date to be so
fulfilled, use commercially reasonable efforts to cause all conditions to the
Closing set forth in this Agreement to be satisfied on or prior to the Closing
Date, and deliver to Sellers at the Closing the certificate contemplated by
Section 9 hereof (with such additions or exceptions to such certificate as are
necessary to make the statements set forth in such certificate accurate,
provided that if any of such additions or exceptions cause any of the
conditions to Sellers' obligations hereunder as set forth in Section 9 below
not to be fulfilled, such additions and exceptions shall in no way limit the
rights of Sellers under Section 9 hereof to terminate this Agreement or refuse
to consummate the transactions contemplated hereby).
8. Conditions to Obligations of Purchaser. The obligations of
Purchaser hereunder to proceed to closing are, at the option of Purchaser,
subject to the satisfaction, on or prior to the
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Closing Date, of the following conditions (any of which may be waived by
Purchaser in its sole discretion):
8.1 Accuracy of Representations and Warranties and Fulfillment of
Covenants. The representations and warranties of Sellers contained in this
Agreement shall be true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date. Each and all of the agreements and covenants of Sellers to be
performed on or before the Closing Date pursuant to the terms hereof shall have
been performed. Sellers shall have delivered to Purchaser a certificate dated
the Closing Date and executed by Sellers to all such effects.
8.2 Phase I Environmental Audit. Purchaser shall, at Purchaser's
own expense, have completed a Phase I Environmental Audit on the properties of
Target.
8.3 No Governmental Actions. No action or proceeding before a
Governmental Authority shall have been instituted or threatened to restrain or
prohibit the transactions contemplated by this Agreement, and Sellers shall
have delivered to Purchaser a certificate dated the Closing Date and executed
by Sellers stating they have no Best Knowledge of any such matters. No
Governmental Authority shall have taken any other action as a result of which
the management of Purchaser reasonably deems it inadvisable to proceed with the
transactions contemplated by this Agreement.
8.4 No Adverse Change. No adverse change in the results of
operations, financial condition, net worth or business of Target shall have
occurred, and no loss or damage to any of the properties or assets of Target,
whether or not covered by insurance, shall have occurred since the Balance
Sheet Date, and Sellers shall have delivered to Purchaser a certificate dated
the Closing Date and executed by Sellers to all such effects.
8.5 Stockholder's Release. Sellers shall have delivered to
Target, with a copy to Purchaser, a Stockholder's Release duly executed by
Sellers in the form of and containing the same terms and provisions as the
Stockholder's Release provided herewith as Schedule 8.5.
8.6 Related Party Loans. All loans or advances outstanding as of
the Closing Date owed to Target by Sellers or any Affiliates of Sellers shall
have been paid in full.
8.7 Notices and Consents. No notice to or consent, authorization,
approval or order of any Person shall be required for the consummation of the
transactions contemplated by this Agreement (except for notices that have been
duly and timely given and consents, authorizations and approvals that have been
obtained), and Sellers shall have delivered to Purchaser a certificate dated
the Closing Date and executed by Sellers to such effect.
8.8 Corporate Approval. Sellers shall have taken or caused to be
taken all necessary or desirable actions, steps and corporate proceedings
(whether by directors and/or shareholders) to approve and authorize the
transfer of the Stock by Sellers to Purchaser, and to approve and authorize the
acceptance of this Agreement by Sellers, and Sellers shall have delivered to
Purchaser a certificate dated the Closing Date to all such effects.
8.9 Transfer and Assignment Documents. Sellers shall have
delivered to Purchaser all documents reasonably necessary or required to
effectively transfer and assign the Stock to Purchaser
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<PAGE> 23
(including, without limitation, all required consents), such transfers and
assignments to convey good and marketable title to the Stock to Purchaser, free
and clear of all liens and encumbrances whatsoever, and to be in form and
substance reasonably satisfactory to Purchaser and its counsel.
8.10 Ordinary Course of Business. During the period from the
Balance Sheet Date until Closing, Target shall have carried on its business in
the ordinary and usual course and the Sellers shall have delivered to Purchaser
a certificate dated the Closing Date to that effect.
8.11 Other Documents. Sellers and Target shall have delivered or
caused to be delivered all other documents, agreements, resolutions,
certificates or declarations as Purchaser or its attorneys may have reasonably
requested.
8.12 Board of Directors Approval. The board of directors of
Purchaser, in its sole discretion, shall have approved this Agreement and the
consummation by Purchaser of the transactions contemplated hereby.
9. Conditions Precedent to Obligations of Sellers. The
obligations of Sellers hereunder are, at their option, subject to the
satisfaction, on or prior to the Closing Date, of the following conditions (any
of which may be waived by Sellers, in their sole discretion):
9.1 Accuracy of Representations and Warranties and Fulfillment of
Covenants. The representations and warranties of Purchaser contained in this
Agreement shall be true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date. Each of the agreements and covenants of Purchaser to be performed
on or before the Closing Date shall have been performed. Purchaser shall have
delivered to Sellers a certificate dated the Closing Date and executed by
Purchaser to all such effects.
9.2 Delivery of Purchase Price. Purchaser shall have paid to
Sellers the Cash Consideration and the Stock Consideration as required by this
Agreement.
9.3 No Governmental Actions. No action or proceeding before a
Governmental Authority shall have been instituted or threatened to restrain or
prohibit the transactions contemplated in this Agreement, and Purchaser shall
have delivered to Sellers a certificate dated the Closing Date and executed by
Purchaser stating they have not Best Knowledge of any such matters. No
Governmental Authority shall have taken any other action as a result of which
Sellers reasonably deems it inadvisable to proceed with the transactions
contemplated by this Agreement.
9.4 No Adverse Change. No adverse change in the results of
operations, financial condition, net worth or business of Purchaser shall have
occurred, and no loss or damage to any of the properties or assets of
Purchaser, whether or not covered by insurance, shall have occurred since
August 31, 1997, and Purchaser shall have delivered to Sellers a certificate
dated the Closing Date and executed by Purchaser to all such effects.
9.5 Notices and Consents. No notice to or consent, authorization,
approval or order of any Person shall be required for the consummation of the
transactions contemplated by this Agreement (except for notices that have been
duly and timely given and consents, authorizations and approvals that have been
obtained), and Purchaser shall have delivered to Sellers a certificate dated
the Closing Date and executed by Purchasers to such effect.
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9.6 Corporate Approval. Purchaser shall have taken or caused to
be taken all necessary or desirable actions, steps and corporate proceedings
(whether by directors and/or shareholders) to approve and authorize the
issuance of the Ponder Stock to Sellers, and to approve and authorize the
acceptance of this Agreement by Purchaser, and Purchaser shall have delivered
to Sellers a certificate dated the Closing Date to all such effects.
9.7 Release of Personal Guarantees. Sellers shall be released of
any and all personal guarantees that are outstanding to secure any debts,
liabilities and/or obligations of Target of whatever nature or kind.
10. Indemnity.
10.1 INDEMNITY BY SELLERS. SELLERS, (COLLECTIVELY THE
"INDEMNITORS" AND SINGULARLY AN "INDEMNITOR FOR PURPOSES OF SECTION 10.1)
JOINTLY AND SEVERALLY, COVENANT AND AGREE THAT THEY WILL INDEMNIFY, HOLD
HARMLESS AND DEFEND PURCHASER AND TARGET AND THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES AND AFFILIATES
(COLLECTIVELY, THE "INDEMNIFIED PARTIES" AND SINGULARLY AN "INDEMNIFIED PARTY"
FOR PURPOSES OF SECTION 10.1), FROM AND AFTER THE DATE OF THIS AGREEMENT, FROM
AND AGAINST ANY AND ALL PENALTIES, DEMANDS, DAMAGES, PUNITIVE DAMAGES, LOSSES,
LOSS OF PROFITS, LIABILITIES, SUITS, COSTS, COSTS OF ANY SETTLEMENT OR
JUDGMENT, CLAIMS OF ANY AND EVERY KIND WHATSOEVER, REFUND OBLIGATIONS
(INCLUDING, WITHOUT LIMITATION, INTEREST AND PENALTIES THEREON), REMEDIATION
COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES)
OF OR TO ANY OF THE INDEMNIFIED PARTIES ("DAMAGES"), WHICH MAY NOW OR IN THE
FUTURE BE PAID, INCURRED OR SUFFERED BY OR ASSERTED AGAINST THE INDEMNIFIED
PARTIES BY ANY PERSON RESULTING OR ARISING FROM OR INCURRED IN CONNECTION WITH
ANY ONE OR MORE OF THE FOLLOWING:
(a) ANY MISREPRESENTATION, BREACH OF WARRANTY OR
NONFULFILLMENT OF ANY COVENANT OR AGREEMENT ON THE PART OF SELLERS
UNDER THIS AGREEMENT;
(b) ALL ACTIONS, SUITS, PROCEEDINGS, DEMANDS,
ASSESSMENTS, ADJUSTMENTS, COSTS AND EXPENSES (INCLUDING COSTS OF COURT
AND ATTORNEYS' FEES) INCIDENT TO ANY OF THE FOREGOING.
10.2 INDEMNITY BY PURCHASER. PURCHASER, (AN INDEMNITOR FOR
PURPOSES OF SECTION 10.2) COVENANTS AND AGREES THAT IT WILL INDEMNIFY, HOLD
HARMLESS AND DEFEND SELLERS AND THEIR RESPECTIVE EMPLOYEES, AGENTS,
CONSULTANTS, REPRESENTATIVES AND AFFILIATES (COLLECTIVELY THE "INDEMNIFIED
PARTIES" AND SINGULARLY AND "INDEMNIFIED PARTY" FOR PURPOSES OF SECTION 10.2)
FROM AND AFTER THE DATE OF THIS AGREEMENT, FROM AND AGAINST ANY AND ALL DAMAGES
(AS THE TERM "DAMAGES" IS DEFINED BY SECTION 10.1) WHICH MAY NOW OR IN THE
FUTURE BE PAID, INCURRED OR SUFFERED BY OR ASSERTED AGAINST SELLERS BY ANY
PERSON
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RESULTING OR ARISING FROM OR INCURRED IN CONNECTION WITH ANY ONE OR MORE OF THE
FOLLOWING:
(a) ANY MISREPRESENTATION, BREACH OF WARRANTY OR
NONFULFILLMENT OF ANY COVENANT OR AGREEMENT ON THE PART OF PURCHASER
UNDER THIS AGREEMENT;
(b) ALL ACTIONS, SUITS, PROCEEDINGS, DEMANDS,
ASSESSMENTS, ADJUSTMENTS, COSTS AND EXPENSES (INCLUDING COSTS OF COURT
AND ATTORNEYS' FEES) INCIDENT TO ANY OF THE FOREGOING.
10.3 Notice of Claim. Purchaser and each of the Sellers agree that
upon its discovery of facts giving rise to a claim for indemnity under the
provisions of this Agreement, including receipt by it or any Indemnified Party
of notice of any demand, assertion, claim, action or proceeding, judicial or
otherwise, by any Person with respect to any matter as to which any of the
Indemnified Parties are entitled to indemnity under the provisions of this
Agreement (such actions being collectively referred to herein as the "Claim"),
Purchaser, or Sellers, as the case may be, will give prompt notice thereof in
writing to the other party together with a statement of such information
respecting any of the foregoing as it shall then have; provided that any delay
in giving or failure to give such notice shall not limit the rights of any
Indemnified Party to indemnity hereunder except to the extent that any
Indemnitor is shown to have been damaged by such delay or failure.
10.4 Right of Sellers to Participate in Defense. With respect to
any Claim as to which an Indemnified Party seeks indemnity hereunder, such
Indemnified Party shall provide the Indemnitor with the opportunity to
participate in the defense of such Claim with counsel of the Indemnitor's
choice and at the Indemnitor's cost and expense. The Indemnified Party shall
reasonably cooperate with the Indemnitor and its representatives and counsel in
any dispute or defense related to any Claim.
10.5 Payment. The Indemnitor shall promptly pay to the Indemnified
Party in cash the amount of any Damages to which such Indemnified Party may
become entitled by reason of the provisions of this Agreement.
10.6 Survival of Representations and Warranties. All of the
representations and warranties of Sellers contained in this Agreement shall
survive the closing hereunder and continue in full force and effect until
January 11, 1999. All of the representations and warranties of Purchaser
contained in this Agreement shall survive the closing hereunder and continue in
full force and effect until expiration of the applicable statute of
limitations. A failure of an Indemnified Party to make a notice of claim as
provided in Section 10.3 of this Agreement prior to the expiration of the
applicable survival period with respect to any representation or warranty shall
thereafter preclude a claim. All of the covenants of Purchaser and Sellers
contained in this Agreement shall survive the closing hereunder and continue in
full force and effect until expiration of the applicable statute of
limitations.
10.7 Exceptions and Limitations to Indemnities.
(a) Notwithstanding anything contained in this Article 10
to the contrary, Sellers and Purchaser agree that consequential and punitive
damages and damages for lost profits shall be
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recoverable only to the extent that they are included in a third-party claim
for which an Indemnitor is responsible for indemnity to Indemnified party.
(b) Sellers shall not be liable for any indemnification
obligation under this Agreement unless, and only to the extent that, the
aggregate amount for which Sellers are liable to Purchaser for indemnity
hereunder exceeds the aggregate sum of $150,000. Without otherwise altering
the indemnification obligations of Sellers under this Agreement, Sellers shall
not be liable for any indemnification obligation under this Agreement for
Damages arising as a result of the pending sales tax audit by the State of
Louisiana described on Schedule 4.5 hereto except to the extent such Damages
exceed $52,000, plus penalties and interest thereon. Furthermore, with respect
to any and all indemnity obligations of Sellers under this Agreement the
aggregate amount payable by each Seller shall not exceed $1,500,000.
(c) The amount of any liabilities for which any
Indemnified Party is entitled to indemnification or other compensation under
this Agreement shall be reduced by any corresponding insurance proceeds
realized by such party in respect of such matter.
10.8 Sole Basis of Recovery. The parties hereto agree that the
provisions of this Article 10 shall be the sole and exclusive method or basis
for compensating each other against claims relating to the transactions
contemplated by and the subject matter of this Agreement.
11. Requirements of Securities Laws.
11.1 Accredited Investors. Sellers recognize that the Stock
Consideration is not being registered under the Securities Act in reliance upon
an exemption from the Securities Act which is predicated, in part, on the
representations and agreements of Sellers set forth in this Agreement. Each of
Sellers represents and warrants to Purchaser that he is an "accredited
investor" as that term is defined in Rule 501(a) of the Securities Act and that
the Stock Consideration is being acquired solely for his own account for
investment and not with a view to, or for offer or resale in connection with, a
distribution thereof within the meaning of the Securities Act. Each of Sellers
understands that the effect of such representation and warranty is that the
Stock Consideration must be held indefinitely unless subsequently registered
under the Securities Act or an exemption from such registration is available at
the time for any proposed sale or other transfer thereof. Sellers also
understand that, except as set forth in Section 11.4, Purchaser is under no
obligation to file a registration statement under the Securities Act covering
the Stock Consideration or to take any other action to enable Sellers to
transfer or otherwise dispose of the Stock Consideration. Each of Sellers
represents that he has consulted with counsel in regard to the Securities Act
and that he is fully familiar with the circumstances under which he is required
to hold the Stock Consideration and the limitations upon the transfer or other
disposition thereof. Sellers acknowledge that Purchaser is relying upon the
truth and accuracy of the foregoing representations and warranties in issuing
the Stock Consideration under the Securities Act. Each of Sellers agrees to
indemnify and hold Purchaser harmless against all liabilities, costs and
expenses, including reasonable attorneys' fees, incurred by Purchaser as a
result of any sale, transfer or other disposition by him of all or any part of
the Stock Consideration in violation of the Securities Act.
11.2 Legend. The certificates representing the Stock Consideration
shall bear the following legend:
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"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT.
11.3 SEC Documents. Sellers acknowledge that they have been
furnished by Purchaser with (a) a copy of the Annual Report on Form 10-K of
Purchaser for the fiscal year ended August 31, 1995, in the form filed with the
SEC, and (b) copies of all filings since August 31, 1995 by Purchaser with the
SEC in compliance with Section 13 or 14 of the Exchange Act. Sellers represent
that they have reviewed the foregoing documents and acknowledge that they have
been afforded the opportunity to obtain any additional information necessary to
verify the accuracy of the information contained in the foregoing documents,
including the opportunity to ask questions of, and receive answers from,
officers and representatives of Purchaser concerning Purchaser and the terms
and conditions of the transactions contemplated by this Agreement. Sellers
acknowledge that Allen & Gooch, attorney at law, and Thompson & Knight,
attorney at law, have advised Sellers during the course of the negotiation of
this Agreement, and that Sellers have consulted Allen & Gooch, attorney at law,
and Thompson & Knight, attorney at law, with respect to the transactions
contemplated by this Agreement.
11.4 Incidental Registration. If, at any time after the Closing
Date, Purchaser proposes to register any of the Ponder Stock (whether unissued,
yet to be authorized or held by any person) under the Securities Act, it shall,
at least 30 days prior to the filing under the Securities Act of the
registration statement relating thereto, give written notice to Sellers of
their intention to do so, (which notice shall state the proposed method of
distribution), and, upon the written request of Sellers given within ten days
after the giving of any such notice (which request shall state the proposed
method of distribution), Purchaser shall include or cause to be included in any
such registration statement the Stock Consideration; provided, however, that
Purchaser may at any time withdraw or cease proceeding with any such
registration if it shall at the time withdraw or cease proceeding with the
registration of such Ponder Stock originally proposed to be registered; and
provided further, that if the registration proposed by Purchaser relates to an
underwritten offering, Sellers shall not have any right to sell the Stock
Consideration in any manner or through any underwriter other than in the manner
and through the managing underwriter or underwriters being used by Purchaser.
(a) Notwithstanding any other provision of this Section
11.4, if a registration pursuant to this Section 11.4 involves a firm
commitment, underwritten offering of the securities so being
registered and if the managing underwriter of such offering informs
Purchaser and Sellers by letter of their belief that marketing factors
require a limitation of the number of shares to be underwritten,
Purchaser may limit the amount of Stock Consideration to be included
in the registration and underwriting; provided that no such reduction
shall reduce the securities being offered by Purchaser for its own
account or for the account of [White Owl]; and provided that those
shares which are excluded from the underwritten offering shall be
withheld from the market by the holders thereof for a period, not to
exceed the period during which the officers and directors of Purchaser
agree not to sell any shares of Ponder Stock, which the managing
underwriter reasonably determines as necessary in order to effect the
underwritten offering.
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(b) Registration Procedures and Expenses. If and
whenever Purchaser is required to include the Stock Consideration in a
registration statement under the Securities Act, as provided in
Section 11.4 hereof, Purchaser shall, as expeditiously as is
reasonably practicable, do each of the following:
(i) prepare and file with the SEC a registration
statement with respect to the Stock Consideration and, subject to the
limitations under Section 11.4 hereof, use its best efforts to cause
such registration statement to become effective;
(ii) cooperate with Sellers and any underwriter
who shall sell the Stock Consideration in connection with their review
of Purchaser made in connection with such registration;
(iii) prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective for 120 days from the date of its effectiveness,
and to comply with the provisions of the Securities Act and the
Exchange Act with respect to the disposition of all the Stock
Consideration covered by such registration statement for such period;
(iv) furnish to Sellers such number of copies of
the prospectus forming a part of such registration statement
(including each preliminary prospectus), in conformity with the
requirements of the Securities Act, and such other documents as
Sellers may reasonably request in order to facilitate the disposition
of the Stock Consideration; and
(v) Purchaser shall (x) notify Sellers at any
time when a prospectus relating to the Stock Consideration is required
to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus forming a part of such
registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing, and (y) prepare and furnish to Sellers a reasonable number
of copies as Sellers may reasonably request of any supplement to or
any amendment of such prospectus that may be necessary so that, as
thereafter delivered to the purchasers of the Stock Consideration such
prospectus shall not include any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances then existing.
(c) Agreement by Sellers. In the event that Sellers
participate, pursuant to this Section 11.4, in the offering of the
Stock Consideration Sellers shall:
(i) furnish Purchaser all material information
reasonably requested by Purchaser concerning Sellers and the proposed
method of sale or other disposition of the Stock Consideration and
such other information and undertakings as shall be reasonably
required in connection with the preparation and filing of the
registration statement covering the Stock Consideration in order to
ensure full compliance with the Securities Act and the rules and
regulations of the SEC thereunder;
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(ii) cooperate in good faith with Purchaser and
its underwriters, if any, in connection with such registration,
including placing the Stock Consideration in escrow or custody to
facilitate the sale and distribution thereof provided that such escrow
or custody arrangement shall be no more restrictive upon Sellers than
upon any other holder of Ponder Stock for the benefit of whom such
registration is undertaken; and
(iii) make no further sales or other dispositions,
or offers therefor, of the Stock Consideration under such registration
statement if, during the effectiveness of such registration statement,
an intervening event should occur which, in the opinion of counsel to
Purchaser, makes the prospectus included in such registration
statement no longer comply with the Securities Act, so long as written
notice containing the facts and legal conclusions relied upon by
Purchaser in this regard has been received by Sellers from Purchaser,
until such time as Sellers have received from Purchaser copies of a
new, amended or supplemented prospectus complying with the Securities
Act, which prospectus shall be delivered to Sellers by Purchaser as
soon as practicable after such notice.
(d) Allocation of Expenses. If and whenever Purchaser is
required by the provisions of this Section 11.4to use its best efforts
to effect the registration of the Stock Consideration under the
Securities Act, Purchaser shall pay the costs and expenses in
connection therewith; provided, however, that Sellers shall pay all
underwriting discounts, selling commissions and stock transfer taxes
attributable to the Stock Consideration under such registration
statement.
(e) Indemnification. In the event of any registration of
any of the Stock Consideration under the Securities Act pursuant to
this Section 11.4, Sellers shall indemnify and hold harmless,
Purchaser, each director of Purchaser, each officer of Purchaser who
shall sign such registration statement, each underwriter and any
person who controls Purchaser or such underwriter within the meaning
of the Securities Act, with respect to any statement in or omission
from such registration statement, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto,
if such statement or omission was made in reliance upon and in
conformity with written information furnished to Purchaser or its
underwriter through an instrument duly executed by any of Sellers
specifically for use in the preparation of such registration
statement, preliminary prospectus, final prospectus or amendment or
supplement. In the event of any registration of any of the Stock
Consideration under the Securities Act, Purchaser shall indemnify and
hold harmless Sellers with respect to any statement in or omission
from such registration statement, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto,
unless such statement or omission was made in reliance upon and in
conformity with written information furnished to Purchaser or its
underwriter through an instrument duly executed by any Seller
specifically for use in such registration statement, preliminary
prospectus, final prospectus or amendment or supplement.
12. Access to Books and Records. Sellers, jointly and severally,
represent and warrant to Purchaser that all of the books and records of Target
are physically located at the principal office of Target in Harvey, Louisiana.
Purchaser covenants that, until the expiration of any applicable statute of
limitation or any extensions thereof, relating to taxes, it will provide
Sellers with reasonable access to such books and records of Target covering
periods prior to the Closing Date
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as are reasonably needed in connection with the preparation of any Tax returns
of Sellers or any dispute between Sellers and any Person.
13. Non-Competition Agreement. For a period of two years from the
date hereof, neither Sellers nor any Affiliate of Sellers shall, within the
State of Louisiana or the offshore waters of Louisiana, (i) compete directly or
indirectly with the business engaged in by Target as of the Closing Date, (ii)
solicit directly or indirectly any of the accounts of Target or (iii) become
the employee or consultant of or otherwise render services to, or own any
interest in, any enterprise that directly or indirectly competes with the
business engaged in by Target as of the Closing Date. For purposes of this
Section 13, the term "accounts" shall mean any Person for which Target has
performed or does perform services or to which Target has sold or does sell
merchandise during the period beginning two (2) years immediately prior to the
date of this Agreement and ending one (1) year after the date of this
Agreement.
Each of Sellers agrees that the limitations set forth herein on the
rights of him and his Affiliates to compete with Target are reasonable and
necessary for the protection of Target. In this regard, each of Sellers
specifically agrees that the limitations as to period of time and geographic
area, as well as all other restrictions specified herein, are reasonable and
necessary for the protection of Target. Sellers further recognize and agree
that violation of any of the agreements contained in this Section 13 will cause
irreparable damage or injury to Target and Purchaser, the exact amount of which
may be impossible to ascertain, and that, for such reason, among others, Target
and Purchaser shall be entitled to an injunction, without the necessity of
posting bond therefor, restraining any further violation of such agreements.
Such rights to any injunction shall be in addition to, and not in limitation
of, any other rights and remedies Target or Purchaser may have against Sellers,
including, but not limited to, the recovery of damages. Further, it is agreed
by Sellers that in the event that the provisions of this Section 13 should ever
be deemed to exceed the time or geographic limitations permitted by applicable
law, then such provisions shall be reformed to the maximum time or geographic
limitations permitted. Notwithstanding anything contained herein to the
contrary, no Seller may be held liable for the breach by another Seller of his
obligations under this Section 13.
Purchaser hereby acknowledges and recognizes that Robert W. Gerdes,
Sr. and Reggie W. Hanberry, Jr. each own a one-third (1/3rd) interest in and to
TBM Enterprises, L.L.C. (hereinafter referred to as "TBM") and may serve as an
officer, director, employee or manager of TBM subsequent to the date hereof.
TBM is the owner of land and a building located in Golden Meadow, Louisiana
that will be made available for rental to the general public, including
possibly a Person that is in competition with FTI and/or Purchaser.
Notwithstanding anything contained herein to the contrary, Purchaser hereby
agrees that Robert W. Gerdes, Sr. and Reggie W. Hanberry, Jr.'s respective
ownership interest in TBM, serving as an officer, director, employee or manager
of TBM, or any other participation in the affairs of TBM shall not constitute a
violation of the provisions of Section 13 of this Agreement.
14. Post-Closing Agreements. The parties agree as follows with
respect to periods following the execution of this Agreement:
14.1 Cooperation in Litigation. Each party will fully cooperate
with the other in the defense or prosecution of any litigation or proceeding
already instituted or which may be instituted hereafter against or by such
party relating to or arising out of the conduct of the Target prior to or
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after the closing date (other than litigation arising out of the transactions
contemplated by this Agreement). The party requesting such cooperation shall
pay the out-of-pocket expenses (including legal fees and disbursements) of the
party providing such cooperation and of its officers, directors, employees and
agents reasonably incurred in connection with providing such cooperation, but
shall not be responsible to reimburse the party providing such cooperation for
such party's time spent in such cooperation or the salaries or costs of fringe
benefits or other similar expenses paid by the party providing such cooperation
to its officers, directors, employees and agents while assisting in the defense
or prosecution of any such litigation or proceeding.
14.2 Pre-Closing Tax Returns. Sellers will be responsible for and
will cause to be prepared and duly filed all federal and state income tax
returns in which the Target is includable for all taxable periods ending on or
before the Closing Date. All such federal and state income tax returns shall
be prepared in a manner consistent with prior periods. All such federal and
state income tax returns filed after the Closing Date shall be submitted to
Purchaser no later than thirty (30) days prior to the due date and filing
thereof, and Purchaser shall have the right to review and comment thereon.
Except as otherwise provided herein, Sellers will pay or cause to be paid, and
shall indemnify and hold Purchaser and the Target harmless against, all taxes
to which such federal and state income tax returns relate; provided, however,
that to the extent such federal and state income taxes are included in and
specifically identified on the Closing Financial Statement (as finally
determined) or an attachment or schedule thereto (such amount referred to
herein as the "Tax Reserve"). Purchaser shall issue a certified check to the
relevant taxing authority in an amount equal to the lesser of (i) the Tax
Reserve, or (ii) the taxes due according to the federal or state income tax
return to which such taxes relate. Notwithstanding anything contained herein
to the contrary, franchise taxes due to the States of Louisiana and Texas for
the 1997 and 1998 calendar years shall be the sole and exclusive responsibility
of Target and Sellers shall have no responsibility for the payment thereof.
14.3 Amended Returns. In the event that any federal or state
income tax returns of Target are amended after the closing date for any period
prior to the closing date, Purchaser and Target shall reimburse Sellers for any
net detrimental change ("Net Change") in their respective tax liabilities (both
Federal and State) caused solely by such amended Return, except to the extent
Purchaser undertakes to pay such tax liabilities on behalf of Sellers. In the
event Target and/or Purchaser exercises its right pursuant to this Section
14.3, Sellers shall, at Purchaser's written request confirming Purchaser's
obligations under this Section 14.3, sign such amended returns, or execute an
IRS Form 2848 Power of Attorney (or successor or similar form) in favor of a
representative of Purchaser for the sole purpose of filing such return. Should
it become necessary for any Seller to retain an attorney to recover the Net
Change, Purchaser shall also reimburse such Seller for the attorney's fees and
costs incurred in connection therewith.
14.4 Section 338(h)(10) Election. At the Purchaser's option,
Target and the Sellers will join with Purchaser in making an election under
Section 338(h)(10) of the Code (and any corresponding elections under state,
local, and foreign tax law) with respect to the purchase and sale of the stock
of Target hereunder (a "Section 338(h)(10) Election"). Sellers will include any
income, gain, loss, deduction, or other tax item resulting from the Section
338(h)(10) Election on their Governmental Returns. Sellers shall also pay any
Tax attributable to the making of the Section 338(h)(10) Election. Purchaser
agrees to reimburse Sellers for the Tax paid by Sellers attributable to the
Section 338(h)(10) Election that is in excess of the amount of Tax Sellers
would have properly paid had no Section 338 Election been made.
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Purchaser shall be responsible for the preparation and filing of such
election. The allocation of purchase price among the assets of the Company
shall be made in accordance with Code Sections 338 and the regulations
thereunder and any comparable provisions of state, local or foreign law, as
appropriate. Purchaser and Sellers shall mutually agree in good faith on a
purchase price allocation and Sellers shall report, act, file in all respects
and for all purposes consistent with such mutually accepted purchase price
allocation. In connection therewith, Purchaser shall propose an allocation and
provide to Sellers the appraisals and other documentation that supports the
same. Purchaser shall reimburse Sellers for all costs incurred to review the
allocation in an amount not to exceed $10,000.00. In the event that Purchaser
and Sellers are unable to mutually agree in good faith upon an allocation of
the purchase price for the aforesaid election, the same shall be submitted to a
mutually acceptable "Big Six" accounting firm not associated with Purchaser or
any of Sellers for its determination. The cost of said review shall be borne
50% by Purchaser and 50% by Sellers. At Closing, Sellers shall execute and
deliver to Purchaser an IRS Form 8023.
Purchaser shall reimburse Sellers for any net change in their
respective federal and/or state tax liability caused by such election. As a
condition to filing the election, Purchaser and/or Target shall deposit in
escrow with any bank designated by Sellers an amount equal to the sum of the
estimated additional tax due by each Seller as a result of such election, which
escrow shall be pursuant to an escrow agreement providing for payment to each
Seller upon certification of such Seller that any such additional tax is due
and payable or that an estimated tax payment is due by Seller for said
additional tax, and on terms otherwise reasonably acceptable to Purchaser and
Sellers. Notwithstanding anything to the contrary set forth in Section 14.2 or
any other provision of this Agreement, should Purchaser cause to be filed an
election pursuant to Section 388(h)(10) of the Internal Revenue Code, Target
and Purchaser shall be responsible for, and shall reimburse and indemnify
Sellers from (i) the payment of all accounting fees, legal fees, appraisal fees
or other costs incurred in connection with said election, (ii) any costs
incurred in connection with the audit of the tax return of Sellers and/or
Target associated with said election, (iii) the payment of any additional Tax,
penalties and interest imposed on or incurred by Sellers in connection with
said election (whether imposed as a result of audit or otherwise), and (iv) any
costs whatsoever incurred in connection with the preparation of the tax return
of Target through the Closing Date attributable to an election pursuant to
Section 338(h)(10) of the Internal Revenue Code. Should it become necessary
for any Seller to retain an attorney to recover any amounts due under this
Section 14.4, Purchaser shall reimburse each Seller the attorney's fees and
costs in connection therewith.
Prior to the Closing, Sellers will not take or allow any action that
would result in the termination of Target's status as a valid S corporation
within the meaning of Sections 1361 and 1362 of the Code.
15. Non-Disclosure of Confidential Information. Sellers recognize
and acknowledge that they have and will have access to certain confidential
information of Target, such as lists of customers, and costs and financial
information, that is valuable, special and unique property of Target. Sellers
agree that they will not disclose, and they will use their best efforts to
prevent disclosure by any other Person of, any such confidential information to
any Person or for any purpose or reason whatsoever, except to authorized
representatives of Purchaser. Sellers recognize and agree that violation of
any of the agreements contained in this Section 15 will cause irreparable
damage or injury to Target and Purchaser, the exact amount of which may be
impossible to ascertain, and that, for such reason, among others, Target and
Purchaser shall be entitled to an injunction, without the necessity of posting
bond therefor, restraining any further violation of such
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agreements. Such rights to any injunction shall be in addition to, and not in
limitation of, any other rights and remedies Target or Purchaser may have
against the undersigned. No Seller shall be held liable for the breach by
another Seller of his obligations under this Section 15.
16. Expenses. Whether or not the transactions contemplated hereby
are consummated, each of the parties will pay all costs and expenses of its
performance of and compliance with this Agreement. Notwithstanding the
foregoing, (1) Target may reimburse Sellers for legal fees and expenses not to
exceed $15,000, and (2) Target shall be responsible for fees and expenses of
accountants in connection with preparation of the final income tax return not
to exceed $10,000.
17. Further Actions. From time to time, at the request of any
party hereto, the other parties hereto shall execute and deliver such
instruments and take such action as may be reasonably requested to evidence the
transactions contemplated hereby.
18. Arbitration. The parties agree that any dispute or
controversy arising out of or in connection with this Agreement or any alleged
breach hereof shall be settled by arbitration in Houston, Texas pursuant to the
Commercial Arbitration Rules of the American Arbitration Association. If
Purchaser, on the one hand, and Sellers, on the other hand, cannot jointly
select a single arbitrator to determine the matter, one arbitrator shall be
chosen by Purchaser, on the one hand, and Sellers, on the other hand (or, if
either fails to make a choice, by a court of competent jurisdiction on behalf
of such party), and the two arbitrators so chosen will select a third. The
decisions of the single arbitrator jointly selected by the parties, or, if
three arbitrators are selected, the decision of any two of them, will be final
and binding upon the parties and the judgment of a court of competent
jurisdiction may be entered thereon. Each party shall pay the fees and
expenses of its chosen arbitrator, and the fees and expenses of the third
arbitrator shall be shared equally by the parties.
19. Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given if delivered personally, given by
prepaid telex or telegram or by facsimile or other similar instantaneous
electronic transmission device or mailed first class, postage prepaid,
certified United States mail, return receipt requested, as follows:
(a) If to Purchaser, at:
Ponder Industries, Inc.
5005 Riverway, Suite 550
Houston, Texas 77056
Attention: Eugene L. Butler
Facsimile No. (713) 965-0653
With a copy to:
Fulbright & Jaworski L.L.P.
300 Convent Street, Suite 2200
San Antonio, Texas 78205
Attention: Phillip M. Renfro
Facsimile No. (210) 270-7205
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(b) If to Sellers, at:
Robert W. Gerdes, Sr.
3536 Tolmas Drive
Metairie, Louisiana 70002
Reggie W. Hanberry, Jr.
2942 Burnt Bridge Road
Picayune, Mississippi
Brian J. Sokol
206 Old Settlement Road
Lafayette, Louisiana
With a copy to:
Allen & Gooch
1015 St. John Street
Lafayette, Louisiana 70501
Attention: Blaise Sonnier
Facsimile No. 318-291-1200
provided that any party may change its address for notice by giving to the
other party written notice of such change. Any notice given under this Section
19 shall be effective (i) if delivered personally, when delivered, if sent by
telex or telegram or by facsimile or other similar instantaneous electronic
transmission device, 24 hours after sending and (ii) if mailed, 48 hours after
mailing.
20. General Provisions.
20.1 Governing Law; Interpretation; Section Headings. This
Agreement shall be governed by and construed and enforced in accordance with
the laws of the State of Texas. The section headings contained herein are for
purposes of convenience only, and shall not be deemed to constitute a part of
this Agreement or to affect the meaning or interpretation of this Agreement in
any way.
20.2 Severability. Should any provision of this Agreement be held
unenforceable or invalid under the laws of the United States of America or the
State of Texas, or under any other applicable laws of any other jurisdiction,
then the parties hereto agree that such provision shall be deemed modified for
purposes of performance of this Agreement in such jurisdiction to the extent
necessary to render it lawful and enforceable, or if such a modification is not
possible without materially altering the intentions of the parties hereto, then
such provision shall be severed herefrom for purposes of performance of this
Agreement in such jurisdiction. The validity of the remaining provisions of
this Agreement shall not be affected by any such modification or severance,
except that if any severance materially alters the intentions of the parties
hereto as expressed herein (a modification being permitted only if there is no
material alteration), then the parties hereto shall use commercially reasonable
effort to agree to appropriate equitable amendments to this Agreement in light
of such severance, and if no such agreement can be reached within a reasonable
time, any party hereto may initiate arbitration as provided in Section 18
above.
30
<PAGE> 35
20.3 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the
transactions contemplated hereby, and supersedes all prior agreements,
arrangements and understandings related to the subject matter hereof. No
representation, promise, inducement or statement of intention has been made by
any party hereto which is not embodied in this Agreement, and no party hereto
shall be bound by or liable for any alleged representation, promise, inducement
or statement of intention not so set forth.
20.4 Binding Effect. All the terms, provisions, covenants and
conditions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and their respective successors and
assigns.
20.5 Assignment. Except as specifically permitted herein, this
Agreement and the rights and obligations of the parties hereto shall not be
assigned or delegated by either party hereto without the prior written consent
of the other party hereto.
20.6 Amendment; Waiver. This Agreement may be amended, modified,
superseded or canceled, and any of the terms, provisions, representations,
warranties, covenants or conditions hereof may be waived, only by a written
instrument executed by all parties hereto, or, in the case of a waiver, by the
party waiving compliance. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
to enforce the same. No waiver by any party of any condition contained in this
Agreement, or of the breach of any term, provision, representation, warranty or
covenant contained in this Agreement, in any one or more instances, shall be
deemed to be or construed as a further or continuing waiver of any such
condition or breach, or as a waiver of any other condition or of the breach of
any other term, provision, representation, warranty or covenant.
20.7 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. This Agreement
shall be binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of the parties reflected hereon as
signatories.
20.8 Telecopy Execution and Delivery. A facsimile, telecopy or
other reproduction of this Agreement may be executed by one or more parties
hereto, and an executed copy of this Agreement may be delivered by one or more
parties hereto by facsimile or similar instantaneous electronic transmission
device pursuant to which the signature of or on behalf of such party can be
seen, and such execution and delivery shall be considered valid, binding and
effective for all purposes. At the request of either party hereto, all parties
hereto agree to execute an original of this Agreement as well as any facsimile,
telecopy or other reproduction hereof.
[signatures on next page]
31
<PAGE> 36
IN WITNESS WHEREOF, the parties have executed this Stock Purchase
Agreement as of the date first above written.
PURCHASER:
PONDER INDUSTRIES, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
SELLERS:
------------------------------------------
Robert W. Gerdes, Sr.
------------------------------------------
Reggie W. Hanberry, Jr.
------------------------------------------
Brian J. Sokol
32
<PAGE> 1
EXHIBIT 4.1
JOINDER AGREEMENT
This Joinder Agreement dated as January 12, 1998, is being entered
into with respect to the Registration Rights Agreement dated as of October 15,
1997 (as modified and supplemented and in effect from time to time, the
"Registration Rights Agreement") among Ponder Industries, Inc., a Delaware
corporation (the "Company"), and each of the Purchasers party thereto (the
"Purchasers"). Terms used but not defined herein have the respective meanings
given to such terms in the Registration Rights Agreement.
This Joinder Agreement is being entered into in connection with a
Securities Purchase and Exchange Agreement (the "Purchase Agreement") dated
January 12, 1998, between the Company, the Purchasers, Somerset Capital
Partners, a New York general partnership, and White Owl Investors, L.L.C., a
Delaware limited liability company (the "Additional Purchasers"), providing for
the issuance by the Company to the Purchasers and the Additional Purchaser of
an aggregate of 15,000,000 shares of Common Stock, par value $.01 per share, of
the Company, upon the terms and subject to the conditions set forth therein.
It is a condition precedent to the obligations of the Purchasers and the
Additional Purchasers to consummate the transactions contemplated by the
Purchase Agreement that the Company, the Purchasers and the Additional
Purchasers enter into this Agreement.
The Additional Purchasers have on the date hereof purchased 11,000,000
shares of Common Stock of the Company. The Additional Purchasers wish to be
made a party to the Registration Rights Agreement, and to be entitled to the
benefits of and be bound by the terms and conditions of the Registration Rights
Agreement as "Purchasers" thereunder, and the Company and the other Purchasers
are willing to admit the Additional Purchasers as parties to the Registration
Rights Agreement. Accordingly, the undersigned hereby agree that, upon the
execution and delivery of this Joinder Agreement:
1. a counterpart of this Joinder Agreement may be
attached to any counterpart of the Registration Rights Agreement;
2. the Additional Purchasers shall become Purchaser (as
such term is used in the Registration Rights Agreement) parties to the
Registration Rights Agreement (with all of the rights and obligations
of Purchasers thereunder) as if such Additional Purchasers were
signatories thereto;
3. for the purposes of Section 6 of the Registration
Rights Agreement, the addresses for notices of the Additional
Purchasers are as set forth in the Purchase Agreement;
4. Clause (i) of the definition of "Registrable
Securities" set forth in the Registration Rights Agreement is hereby
amended to include any shares of Common Stock issued pursuant to the
Purchase Agreement;
5. this Joinder Agreement shall be governed by and
construed in accordance with the law of the State of New York.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned have caused this Joinder
Agreement to be duly executed as of the day and year first above written.
PONDER INDUSTRIES, INC.
By:
----------------------------
Name: Eugene L. Butler
Title: President
PURCHASERS: WHITE OWL CAPITAL
PARTNERS
By:
------------------------------
William R. Ziegler, General
Partner
---------------------------------
Arvind Sanger
---------------------------------
Antony T. F. Lundy
---------------------------------
Karl Bandtel
SOMERSET CAPITAL PARTNERS
By:
------------------------------
William R. Ziegler, General
Partner
WHITE OWL INVESTORS, L.L.C., by
White Owl Capital Partners, its
Managing Member
By:
------------------------------
William R. Ziegler, General
Partner
-2-
<PAGE> 1
EXHIBIT 10.1
- - --------------------------------------------------------------------------------
PONDER INDUSTRIES, INC.
--------------------------------------------------------------
SECURITIES PURCHASE AND EXCHANGE
AGREEMENT
Dated as of January 12, 1998
--------------------------------------------------------------
COMMON STOCK
- - --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
PURCHASE AND SALE OR EXCHANGE OF COMMON STOCK
1.1 Authorization of Common Stock..........................................................1
1.2 Sale and Purchase of Securities........................................................2
1.3 Exchange of Senior Notes for Securities................................................2
1.4 Closing................................................................................2
1.5 Application of Proceeds................................................................2
1.6 Purchaser's Conditions of Closing......................................................3
1.7 Company's Conditions of Closing........................................................4
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Organization, Authority and Capitalization of the Company;
Stock Ownership........................................................................4
2.2 Subsidiaries...........................................................................5
2.3 Qualification; Enforceability..........................................................5
2.4 Business and Property; Financial Statements............................................6
2.5 Compliance with Laws, Other Instruments;
No Conflicts, etc......................................................................6
2.6 Consents and Approvals.................................................................7
2.7 Litigation.............................................................................7
2.8 Private Offering.......................................................................7
2.9 No Defaults; Debt, etc; Liens..........................................................8
2.10 Full Disclosure........................................................................8
2.11 Environmental Matters..................................................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
3.1 Investment Representation..............................................................9
3.2 Organization and Authority of the New Purchasers; No Conflicts; Approvals;
Enforceability........................................................................11
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV
COVENANTS
4.1 Financial Statements; Information.....................................................12
4.2 Corporate Existence...................................................................14
4.3 Compliance with Laws; Government Filings..............................................14
4.4 Environmental Matters.................................................................14
ARTICLE V
CERTAIN OTHER COVENANTS
5.1 Use of Proceeds.......................................................................15
ARTICLE VI
MISCELLANEOUS
6.1 Expenses..............................................................................15
6.2 Reliance on and Survival of Representations...........................................15
6.3 Amendment and Waiver..................................................................16
6.4 Directly or Indirectly................................................................16
6.5 Successors and Assigns................................................................16
6.6 Notices...............................................................................16
6.7 LAW GOVERNING.........................................................................16
6.8 SUBMISSION TO JURISDICTION;
Service of Process....................................................................17
6.9 Headings, etc.........................................................................18
6.10 Entire Agreement......................................................................18
6.11 WAIVER OF TRIAL BY JURY...............................................................18
6.12 Indemnification.......................................................................18
6.13 Interpretive Provision................................................................19
6.14 Severability..........................................................................19
6.15 Counterparts..........................................................................19
6.16 Finder's Fee..........................................................................19
</TABLE>
- ii -
<PAGE> 4
Schedules:
Schedule 1.1 Purchasers
Schedule 1.5 Use of Proceeds
Schedule 2.1(b) Capitalization of the Company
Schedule 2.1(c) Capitalization of the Subsidiaries
Schedule 2.2 Subsidiaries
Schedule 2.5 Noncontravention
Schedule 2.6 Consent and Approvals
Schedule 2.7 Litigation
Schedule 2.9 Debts; Liens
Exhibits:
Exhibit A Registration Rights Joinder Agreement
Exhibit B Form of Opinion of Company Counsel
- iii -
<PAGE> 5
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
THIS SECURITIES PURCHASE AND EXCHANGE AGREEMENT, dated as of January
12, 1998, among PONDER INDUSTRIES, INC., a Delaware corporation (the "Company"),
WHITE OWL INVESTORS, L.L.C., a Delaware limited liability company ("White Owl"),
SOMERSET CAPITAL PARTNERS, a New York general partnership ("SCP" and, with White
Owl, the "New Purchasers"), and each of the undersigned HOLDERS OF THE SENIOR
NOTES (individually, a "Holder" and collectively, the "Holders"; the New
Purchasers and the Holders being sometimes hereinafter collectively referred to
as the "Purchasers" and individually as a "Purchaser").
WHEREAS, the capitalized terms used herein have the meaning given to
such terms in Appendix I; and
WHEREAS, the Company has authorized the issuance of an aggregate of
15,000,000 shares of Common Stock and wishes to sell to the New Purchasers an
aggregate of 11,000,000 shares of Common Stock for the consideration provided
herein, and wishes to issue to the Holders an aggregate of 4,000,000 shares of
Common Stock, in the individual amounts set forth opposite each Holder's name on
Schedule 1.1, in exchange for the surrender of the Senior Notes, in each case,
subject to the terms and conditions of this Agreement; and
WHEREAS, the New Purchasers wish to purchase an aggregate of 11,000,000
shares of Common Stock, in the individual amounts set forth opposite each New
Purchaser's name on Schedule 1.1, subject to the terms and conditions of this
Agreement; and
WHEREAS, the Holders wish to exchange the Senior Notes, in the
aggregate principal amount of $2,500,000, for an aggregate of 4,000,000 shares
of Common Stock, in the individual amounts set forth opposite each Holder's name
on Schedule 1.1, subject to the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and upon the terms and conditions hereinafter set forth, the Company
and the Purchasers, intending to be mutually bound, agree as follows:
ARTICLE I
PURCHASE AND SALE OR EXCHANGE OF COMMON STOCK
1.1 Authorization of Common Stock.
The Company has authorized (i) the issuance and sale to the New
Purchasers at the Closing of an aggregate of 11,000,000 shares of Common Stock,
in the individual amounts set forth opposite each New Purchaser's name on
Schedule 1.1, and (ii) the issuance to the Holders of an aggregate of 4,000,000
shares of Common Stock, in the individual
<PAGE> 6
amounts set forth opposite each Holder's name on Schedule 1.1, in exchange for
the surrender of the Senior Notes, in the aggregate principal amount of
$2,500,000.
1.2 Sale and Purchase of Securities.
On the Closing Date, the Company will sell to the New Purchasers and
the New Purchasers will purchase from the Company, subject to the terms and
conditions of this Agreement and in reliance on the representations, warranties
and covenants of the Company contained herein, 11,000,000 shares of Common
Stock, registered in the name of the New Purchasers in the individual amounts
set forth opposite each New Purchaser's name on Schedule 1.1, in consideration
of an aggregate purchase price of $11,000,000 ($1.00 per share) (the "New
Purchasers Purchase Price"). The New Purchasers Purchase Price shall be payable
in cash by wire transfer of immediately available funds to the Company's bank
account with American Bank of Texas (the "Cash Payment"), in accordance with
wire transfer instructions delivered by the Company to the New Purchasers at
least one business day prior to the Closing.
1.3 Exchange of Senior Notes for Securities.
On the Closing Date, the Company will sell to each of the Holders and
each Holder severally will purchase from the Company, subject to the terms and
conditions of this Agreement and in reliance on the representations, warranties
and covenants of the Company contained herein, an aggregate of 4,000,000 shares
of Common Stock, registered in the names of the Holders in the individual
amounts set forth opposite each Holder's name on Schedule 1.1, in consideration
of an aggregate purchase price of $2,500,000 ($0.625 per share) (the "Holders'
Purchase Price"). The Holders' Purchase Price shall be payable by the surrender
and delivery by the Holders to the Company of the Senior Notes, in the aggregate
principal amount of $2,500,000.
1.4 Closing.
The sale and purchase or exchange (the "Closing") of the shares of
Common Stock (the "Securities") shall take place on the date hereof (the
"Closing Date") at the offices of Parson & Brown LLP, 666 Third Avenue, 9th
Floor, New York, New York 10017. At the Closing the Company will deliver to each
Purchaser certificates for the shares of Common Stock purchased hereunder, each
dated the Closing Date, and registered in the names and amounts as set forth on
Schedule 1.1 hereto, against delivery by the Purchasers of the Purchase Price in
the form of the Cash Payment and the surrender for cancellation of the Senior
Notes. The failure of any Purchaser to deliver such Purchase Price shall not
excuse any other Purchaser from delivery of his or its Purchase Price.
1.5 Application of Proceeds.
The Company shall apply the proceeds from the sale of the Securities as
set forth in Schedule 1.5 attached hereto.
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<PAGE> 7
1.6 Purchaser's Conditions of Closing.
Each Purchaser's obligations to purchase and pay for the Securities to
be purchased by him or it is subject to satisfaction, prior to or simultaneously
with the closing, of the following conditions:
(a) The Company shall have delivered a certificate of the President of
the Company, dated the Closing Date, certifying that the representations and
warranties of the Company contained in this Agreement and any Exhibit to which
the Company is a party are true and correct in all material respects and that
the Company has performed in all material respects all agreements and complied
with all conditions contained in this Agreement and in any Exhibit to which it
is a party that are required to be performed or complied with on or before the
Closing Date.
(b) The Company shall have delivered a certificate of the Secretary of
the Company, dated the Closing Date, certifying as to (i) the certificate of
incorporation of the Company and any amendments thereto, (ii) the by-laws of the
Company, and (iii) resolutions of the Board of Directors of the Company
authorizing the issuance of the shares of Common Stock and the execution and
delivery of this Agreement.
(c) The Company shall have executed and delivered to the New Purchasers
the Registration Rights Joinder Agreement, substantially in the form of Exhibit
"A" hereto.
(d) Messrs. Steven A. Webster and William R. Ziegler and one other
person designated by the Managing Member shall have been duly elected to the
Board of Directors of the Company, effective and conditioned upon the Closing.
(e) Fulbright & Jaworski L.L.P., counsel for the Company, shall have
delivered to the Purchasers the Opinion of Company Counsel, substantially in the
form of Exhibit "B" hereto.
(f) All proceedings taken in connection with the authorization,
issuance and sale of the Securities and the consummation of the transactions
contemplated hereby to occur on or prior to the Closing Date and all documents
and papers relating thereto shall be satisfactory in form, scope and substance
to the Purchasers and their counsel, and each Purchaser and their counsel shall
have received copies (executed or certified as may be appropriate) of such
documents and papers as each may reasonably request in connection therewith.
(g) The Company shall have paid the reasonable legal fees and other
expenses of the Purchasers' counsel and all other expenses for which the Company
is obligated to pay pursuant to Section 6.1 and for which the Company shall have
received invoices on or prior to the Closing.
(h) The Company shall have consummated the acquisition of Fishing
Tools, Inc. on substantially the terms described in the White Owl PPM. (i) White
Owl shall have raised $10 million pursuant to the White Owl PPM.
- 3 -
<PAGE> 8
(j) The Company shall be in compliance with all covenants under its
loan agreements with KBK Financial, Inc. and not otherwise in default under any
of such agreements.
1.7 Company's Conditions of Closing.
The Company's obligations to issue and sell the Securities are subject
to satisfaction, prior to or simultaneously with the closing, of the following
conditions:
(a) Each of the Purchasers shall have delivered a certificate, dated
the Closing Date, certifying that the representations and warranties of such
Purchaser contained in this Agreement and any Exhibit to which the Purchaser is
a party are true and correct in all material respects and that the Purchaser has
performed in all material respects all agreements and complied with all
conditions contained in this Agreement and in any Exhibit to which it is a party
that are required to be performed or complied with on or before the Closing
Date.
(b) Each of the Holders shall have surrendered to the Company for
cancellation the Senior Note registered in his name.
(c) All proceedings taken in connection with the purchase by the
Purchasers of the Securities and the consummation of the transactions
contemplated hereby to occur on or prior to the Closing Date and all documents
and papers relating thereto shall be satisfactory in form, scope and substance
to the Company and its counsel, and the Company and its counsel shall have
received copies (executed or certified as may be appropriate) of such documents
and papers as each may reasonably request in connection therewith.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants as follows:
2.1 Organization, Authority and Capitalization of the Company;
Stock Ownership.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own or hold under lease the property it
purports to own or hold under lease, to carry on its business as now conducted,
to enter into this Agreement and the other Exhibits to which it is or is to be a
party, to issue and sell the Securities, to perform its obligations under this
Agreement and the other Exhibits to which it is or is to be a party and to
consummate the transactions contemplated hereby and thereby. The Company has, by
all necessary corporate action (no action of stockholders of the Company being
required by law, by its charter or by-laws, or otherwise in connection
therewith), duly authorized the execution and delivery of this Agreement, the
Securities, and the other Exhibits to which it is
- 4 -
<PAGE> 9
or is to be a party, the performance of its obligations hereunder and thereunder
and the consummation of the transactions contemplated hereby and thereby.
(b) Schedule 2.1(b) sets forth the authorized capital stock of the
Company. All such authorized capital stock has been duly and validly authorized,
and either are, or will be when issued, duly and validly issued and outstanding
and are, or will be, fully paid and nonassessable. Such capital stock is not
subject to any rights (either preemptive or otherwise) or warrants to subscribe
for or to purchase, nor any options for the purchase of, nor any agreements
providing for the issue (contingent or otherwise) of, nor any calls, commitments
or claims of any character relating thereto or any stock or securities
convertible into or exchangeable for any capital stock, other than as set forth
in Schedule 2.1(b). The sale of the Securities pursuant to this Agreement will
not trigger any anti-dilution rights of any holder of any securities of the
Company, nor require the Company to issue any securities to any person other
than the Purchasers, or adjust the number or purchase price of any securities
subject to options, warrants or similar rights issued or granted by the Company
(including, without limitation, those described on Schedule 2.1(b). All
securities of the Company have been issued in compliance with the Securities Act
and applicable state securities laws.
(c) Schedule 2.1(c) sets forth the authorized, issued and outstanding
capital stock of each Subsidiary, including the record ownership thereof, and
the ownership interests of the Company (direct and indirect), in any other
Person. There are no liens on any capital stock of any Subsidiary or on the
Company's ownership interests in any other Person, except as set forth in
Schedule 2.1(c). There are no outstanding rights, options, warrants, conversion
rights or agreements for the purchase or acquisition from the Company or any
Subsidiary of any shares of capital stock of any Subsidiary or any other
securities convertible into or exchangeable for any shares of capital stock of
any Subsidiary, except as set forth in Schedule 2.1(c).
2.2 Subsidiaries.
(a) Schedule 2.2 sets forth the name and jurisdiction of incorporation
or other organization of each Subsidiary. Except for the Subsidiaries and as
indicated on Schedule 2.2, the Company does not directly or indirectly own any
interest in any other Person.
(b) Each of the Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, has all requisite corporate power and authority to own or hold
under lease the property it purports to own or hold under lease, and to carry on
its business as conducted by it.
2.3 Qualification; Enforceability.
(a) Each of the Company and each Subsidiary is duly qualified or
licensed and in good standing as a foreign corporation duly authorized to do
business in each jurisdiction in which the nature of the activities or the
character of the properties owned or
- 5 -
<PAGE> 10
leased makes such qualification or licensing necessary, except for jurisdictions
in which the failure to be so qualified would not have a Material Adverse
Effect.
(b) This Agreement and the Exhibits hereto to which the Company is a
party have been (or at the Closing will be, as the case may be) duly executed
and delivered by the Company and, assuming due execution and delivery by the
Purchasers of this Agreement and the Exhibits that require execution by the
Purchasers, constitute (or upon execution and delivery at the Closing, will
constitute) the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect relating
to or affecting the enforcement of creditors' rights generally or by the
application of equitable principles (whether such application is considered in
equity or in law).
2.4 Business and Property; Financial Statements.
The Company has furnished to each Purchaser a true and complete copy of
the Offering Disclosure Documents (other than the PPM, which was prepared by the
Purchasers, in large part, with information with respect to the Company and its
industry provided by or on behalf of the Company). The Offering Disclosure
Documents correctly describe in all material respects the business and material
properties of the Company and its Subsidiaries and the nature of their
operations as of the date thereof. The Financial Statements included in the
Offering Disclosure Documents, were prepared in accordance with GAAP, applied on
a consistent basis throughout the periods specified, and present fairly in all
material respects the financial position of the Company and its Subsidiaries for
the respective periods specified. Except as specifically described in the
Financial Statements contained in the Offering Disclosure Documents, neither the
Company nor any Subsidiary has as of the date thereof any material liabilities,
contingent or otherwise, which under GAAP are required to be disclosed therein.
There has been no material adverse change in the financial position or condition
of the Company and its Subsidiaries since the date of such Financial Statements.
2.5 Compliance with Laws, Other Instruments; No Conflicts, etc.
(a) Except as set forth in Schedule 2.5, neither the Company nor any
Subsidiary is (i) in violation of any term or provision of its corporate charter
or by-laws or (ii) in violation of or default under (A) any term or provision of
any agreement, indenture, mortgage, instrument, permit or license to which it is
a party or by which it or any of its properties may be bound or affected or (B)
to the Company's knowledge, any existing statute, law, governmental rule,
regulation or ordinance, or any order of any court, arbitrator or Governmental
Body applicable to it or its properties (including, without limitation, any
statute, law, rule, regulation, ordinance or order relating to occupational
health and safety standards, or equal employment practice requirements), the
consequences of which violation or default, either in any one case or taken
together with all other such violations or defaults, (x) could have a Material
Adverse Effect or (y) could materially and adversely affect the ability of the
Company to perform its obligations under this Agreement or any Exhibit to which
it is a party.
- 6 -
<PAGE> 11
(b) Except as set forth in Schedule 2.5, neither the execution,
delivery or performance by the Company of this Agreement or any other Exhibit to
which it is a party, nor compliance by the Company with the respective terms
hereof and thereof, as the case may be, will result in (i) any violation of or
be in conflict with or constitute a default under (A) any term or provision of
the corporate charter or by-laws of the Company or any Subsidiary, (B) any term
or provision of any agreement, indenture, mortgage, instrument, permit or
license to which it is a party or by which it or any of its properties may be
bound or affected, or (C) to the Company's knowledge, any existing statute, law,
governmental rule, regulation or ordinance, or any order of any court,
arbitrator or Governmental Body applicable to it or its properties, or (ii) the
creation of (or impose any obligation on the Company or any Subsidiary to
create) any lien upon any of the properties or assets of the Company or any
Subsidiary.
2.6 Consents and Approvals.
Except as set forth on Schedule 2.6, no consent, approval or
authorization of, or filing or registration with, or the taking of any other
action in respect of, any Governmental Body or any other Person (including any
trustee or holder of any indebtedness, securities or other obligations of the
Company or any Subsidiary) is required (i) for or in connection with the valid
execution and delivery by the Company of, or the performance by the Company of
any obligation under, this Agreement or any Exhibit to which it is a party or
the consummation by the Company of the transactions contemplated hereby and
thereby, including, without limitation, the offer, issue, sale and delivery of
the Securities or (ii) as a condition to the legality, validity or
enforceability as against the Company of this Agreement or any Exhibit to which
it is a party.
2.7 Litigation.
Except as set forth on Schedule 2.7, there are no actions, suits or
proceedings pending (or, to the knowledge of the Company, threatened) against
the Company or any Subsidiary or affecting any of their respective properties in
any court or before any arbitrator of any kind or before or by any Governmental
Body, which (i) question the validity or legality of this Agreement or any
Exhibit or any action taken or to be taken pursuant hereto or thereto or (ii)
might result, either in any one case or in the aggregate, in (A) a material
impairment of the ability of the Company to perform its obligations under this
Agreement or any other Exhibit to which it is a party, or (B) a Material Adverse
Effect.
2.8 Private Offering.
Neither the Company, any Subsidiary, nor any other person acting on
behalf of the Company or any Subsidiary has taken, or will take, any action
which would subject the issuance or sale of the Securities to Section 5 of the
Securities Act or to the registration or qualification requirements of any
securities law of any state.
- 7 -
<PAGE> 12
2.9 No Defaults; Debt, etc; Liens.
(a) Schedule 2.9 correctly lists (i) all secured and unsecured funded
debt of the Company and any Subsidiary and (ii) any liens (other than Permitted
Liens) on any assets of the Company or any Subsidiary, in each case, as of the
date hereof. Upon receipt of any Required Consent, no default or event of
default, after giving effect to the issuance and sale of the Units and the
consummation of the other transactions contemplated by this Agreement and the
Exhibits, will exist (or, but for the waiver thereof, would exist) under any
instrument or agreement evidencing, providing for the issuance or securing of,
or otherwise relating to, any such debt or liens.
(b) There is no pending foreclosure with respect to any assets or
properties of the Company or any Subsidiary, and as of the Closing there will
not be any pending foreclosure with respect thereto.
2.10 Full Disclosure.
None of this Agreement, any Exhibit, the Offering Disclosure Documents
or any document, certificate or instrument delivered to the Purchasers by or on
behalf of the Company or any Subsidiary in connection with the transactions
contemplated by this Agreement as of their respective dates contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which the same were made, not misleading.
2.11 Environmental Matters.
(a) To the Company's knowledge, the Company and the Subsidiaries hold
all Environmental Permits required under all Environmental Laws except to the
extent failure to have any such Environmental Permit has not had and will not
have a Material Adverse Effect.
(b) To the Company's knowledge, the Company and the Subsidiaries
currently are, and at all times heretofore have been, in compliance with all
terms and conditions of all such Environmental Permits and all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in all applicable Environmental
Laws except to the extent failure to comply therewith, in any one case or in the
aggregate, has not had and will not have a Material Adverse Effect.
(c) Neither any of the Company nor any Subsidiary has ever received,
and, to the Company's knowledge, no predecessor in interest of any the Company
and the Subsidiaries has ever received in respect of any of the Company
Premises, from any Governmental Body or other Person any written notice of, and
the Company has no knowledge of, any past, present or future events, conditions,
circumstances, activities, practices, incidents, actions or plans that could
reasonably be expected to interfere with or prevent compliance or continued
compliance in all material respects with the Environmental Permits referred to
in Section 2.11(a) or any scheduled renewals thereof or any Environmental Laws,
or that could reasonably be expected to give rise to any liability on the part
of any the Company and the Subsidiaries or otherwise form the basis of any
claim,
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action, demand, request, notice, suit, proceeding, hearing, study or
investigation (collectively, "Environmental Claims") involving any of the
Company and the Subsidiaries based on or related to (i) a violation of any
Environmental Law or (ii) the manufacture, refining, generation, processing,
distribution, use, sale, treatment, receipt, storage, disposal, transport,
arranging for transport or handling, or the emission, discharge, release or
threatened release into the environment, of any Hazardous Substance, other than
liabilities or Environmental Claims referred to in this Section 2.11(c) that
have not had and will not have, either in any one case or in the aggregate, a
Material Adverse Effect.
(d) To the Company's knowledge, there has not been any civil, criminal
or administrative action, suit, demand, summons, citation, claim, hearing,
notice or demand letter, information request, notice of violation, judgment,
order, lien, investigation, study or proceeding pending or threatened against
any of the Company or the Subsidiaries, or against any predecessor in interest
thereof, in its capacity as such, relating to any such Environmental Permits or
any scheduled renewals thereof or any Environmental Laws that has had or will
have, either in any one case or in the aggregate, a Material Adverse Effect.
(e) To the Company's knowledge, (i) no part of the Company Premises or,
so far as is known to the Company, the area surrounding the Company Premises is
being used, or has been used at any time in the past, to manufacture, generate,
refine, process, distribute, use, sell, treat, receive, store, dispose of,
transport, arrange for transport of, handle, or conduct any other activity
involving any Hazardous Substance except in a manner that has been in compliance
in all material respects with all applicable Environmental Laws and
Environmental Permits and to an extent that has not had and will not have a
Material Adverse Effect; and (ii) neither the Company nor any Subsidiary is
conducting or has ever conducted any such activities anywhere else except in a
manner that has been in compliance in all material respects with all applicable
Environmental Laws and Environmental Permits and to an extent that has not had
and will not have a Material Adverse Effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, severally as to himself, represents and warrants as
follows:
3.1 Investment Representation. (a) The Purchaser of the Securities
hereby acknowledges that the Securities are not being registered (i) under the
Securities Act or (ii) under any applicable state securities law; and that the
Company's reliance on the Section 4(2) exemption of the Act and under applicable
state securities laws is predicated in part on the representations hereby made
to the Company in the Agreement.
(b) The Purchaser of the Securities will not sell or transfer all or
any part of the Securities unless and until he shall first have given notice to
the Company describing such sale or transfer and, if requested by the Company,
furnished to the Company either (a) an opinion, reasonably satisfactory to
counsel for the Company, of counsel skilled in securities matters (selected by
the Purchaser and reasonably satisfactory to the Company) to the effect that the
proposed sale or transfer may be made without registration under the Act and
without registration or qualification under applicable state law, or (b) an
interpretive
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<PAGE> 14
letter from the Commission to the effect that no enforcement action will be
recommended if the proposed sale or transfer is made without registration under
the Act. The Purchaser acknowledges that the certificates representing the
Common Stock subscribed for hereby will bear a legend restricting transfer
thereof as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ISSUED PURSUANT TO A
CLAIM OF EXEMPTION FROM THE REGISTRATION OR QUALIFICATION PROVISIONS OF
FEDERAL AND STATE SECURITIES LAWS BASED, IN PART, ON AN INVESTMENT
REPRESENTATION OF THE PART OF THE PURCHASER THEREOF. THESE SECURITIES
MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE
TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION
PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
APPLICABLE EXEMPTIONS THEREFROM."
(c) The Company may refuse to recognize a transfer of the Securities on
its books should a Purchaser attempt to transfer the Securities otherwise than
in compliance with this Section 3.1.
(d) The Purchaser has adequate means of providing for his or its
current needs and possible personal contingencies, he or it anticipates no need
now or in the foreseeable future to sell the Securities which he or it is
purchasing and he or it can afford the loss of his or its entire investment in
the Company.
(e) If an individual, the Purchaser either
(i) has a net worth or joint net worth with spouse which
exceeds $1,000,000; or
(ii) has had an individual income in excess of $200,000 in
each of 1995 and 1996 or joint income with spouse in excess of $300,000
in each of those years and has a reasonable expectation of reaching the
same income level in 1997.
(f) The Purchaser has such knowledge and experience in financial and
business matters that he or it is capable of evaluating the merits and risks of
investment in the Company and of making an informed investment decision.
(g) The Purchaser has received and read and is familiar with the
Offering Disclosure Documents and confirms that all documents, records and books
pertaining to his or its proposed investment in the Company have been made
available to him or it. The
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<PAGE> 15
Purchaser is aware that no federal or state agency has passed upon the
Securities or made any finding or determination concerning the fairness of the
investment represented thereby.
(h) The Purchaser had an opportunity to ask questions of and receive
answers from representatives of the Company concerning the terms and conditions
of this investment, and all such questions have been answered to the full
satisfaction of the Purchaser. The Purchaser understands that no person other
than the Company has been authorized to make any representation or warranty
other than as contained herein (inclusive of the Exhibits hereto) or in the
Offering Disclosure Documents and, if made, such representation may not be
relied on unless it is made in writing and signed by the Company. The Company
has not rendered any investment or tax advice to the Purchaser with respect to
the suitability of an investment in the Securities or the tax consequences
thereof. The Company has urged each Purchaser to consult his or its own tax
adviser concerning any tax matters relating to this investment.
(i) The Securities which Purchaser is acquiring will be acquired for
his or its own account for investment. The Purchaser intends to hold the
Securities indefinitely and he or it is not purchasing such securities with a
view toward distribution in a manner which would require registration under the
Securities Act, and he or it does not presently have any reasons to anticipate
any change in his or its circumstances or other particular occasion or event
which would cause him or it to sell, the Securities which he or it is purchasing
hereunder, subject, nevertheless, to any requirement of law that the disposition
of his or its property shall at all times be within his or its control.
(j) The Purchaser acknowledges that it has been called to his or its
attention both in the Offering Disclosure Documents and by those individuals
with whom he has dealt in connection with his investment in the Company that his
or its investment in the Company involves a high degree of risk.
(k) The Purchaser has received no representations or warranties from
the Company other than those contained herein (inclusive of the Exhibits hereto)
or in the Offering Disclosure Documents or otherwise furnished in writing and
signed by the Company.
3.2 Organization and Authority of the New Purchasers; No
Conflicts; Approvals; Enforceability.
(a) White Owl is a limited liability company organized, validly
existing and in good standing under the laws of the State of Delaware. SCP is a
general partnership organized and validly existing under the laws of the State
of New York. Each of the New Purchasers has all requisite power and authority to
enter into this Agreement, to perform its obligations under this Agreement and
the other Exhibits to which it is or is to be a party and to consummate the
transactions contemplated hereby and thereby. Each of the New Purchasers has by
all requisite action as required by law and its governing instruments duly
authorized the execution and delivery of this Agreement and the other Exhibits
to which it is or is to be a party, the performance of its obligations hereunder
or thereunder and the consummation of the transactions contemplated hereby and
thereby.
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<PAGE> 16
(b) Neither of the New Purchasers is in violation of or in default with
respect to any term or provision of its organizational documents or any terms or
provision of any agreement, indenture, mortgage, instrument, permit or license
to which it is a party or by which it or any of its properties may be bound or
affected or any existing statute, law, governmental rule, regulation or
ordinance, or any order of any court the consequences of such violation or
default would conflict with this Agreement or any Exhibit to which the New
Purchaser is or is to be a party or adversely affect the ability of the New
Purchaser's to perform its obligations hereunder or thereunder.
(c) No approval by, from or with, and not other action, in respect of,
any Governmental Body or any other Person is required in connection with the
execution and delivery of this Agreement or any Exhibit to which the New
Purchasers are or will be parties and the consummation of the transactions
contemplated hereby and thereby.
(d) This Agreement has been duly executed and delivered by the New
Purchasers and is a legal, valid and binding obligation of each of the New
Purchasers, enforceable against the New Purchasers in accordance with its terms
and conditions, except to the extent that its enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally and by general equity
principles (regardless of whether such enforceability is considered in a
proceeding a law or in equity).
ARTICLE IV
COVENANTS
The Company, so long as at least 10% of the Common Stock is owned by
the Purchasers, agrees to perform and comply with each of the following
covenants.
4.1 Financial Statements; Information.
The Company shall furnish to each Purchaser the following:
(a) Financial Information. The Company shall send, or cause to be sent,
to each Purchaser (i) its consolidated audited annual financial statements,
fairly and accurately presenting in all material respects the financial
condition and the results of operations and cash flows of the Company and its
Subsidiaries, prepared in accordance with GAAP, as soon as is practicable after
the same have been issued but in any case within ninety days of the end of its
fiscal year, together with the report thereon by independent public auditors as
may be acceptable to the Majority-in-Interest, (ii) its unaudited quarterly
consolidated financial statements, of each of the first three fiscal quarters of
its fiscal year, fairly and accurately presenting in all material respects the
financial condition and the results of operations and cash flows of the Company
and its Subsidiaries, prepared in accordance with GAAP, as soon as is
practicable after the end of each fiscal quarter but in any case within
forty-five days of the end of its fiscal quarters, certified by its duly
authorized chief financial officer, (iii) a copy of any monthly financial report
or statement of the Company
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<PAGE> 17
and/or any of its Subsidiaries as may be prepared by or for the directors of
such company or for any other Person, as soon as same is available, and (iv)
such financial or other information relating to the Company and its Subsidiaries
or any of the transactions contemplated by this Agreement or any Exhibit to
which the Company is a party, as may be reasonably requested by a
Majority-in-Interest of the Purchasers.
(b) Information Delivered to Creditors. Concurrently with the
furnishing thereof, copies of any statements, reports or documents relating to
the business or condition generally of the Company or any Subsidiary which are
furnished by the Company or any Subsidiary to any other holder of funded debt of
the Company or Subsidiary, or any notices which are so furnished, in each case
pursuant to the terms of any indenture, loan, credit or similar agreement and
not otherwise required to be furnished pursuant to any other clause of this
Section 4.1
(c) Commission and Other Reports. Promptly upon their becoming
available (and in any event within five Business Days thereafter), copies of (i)
all financial statements, reports, notices, proxy statements and other
information sent or made available generally by the Company to any class of its
security holders (in their capacity as such) or by any Subsidiary to any class
of its security holders other than the Company or another Subsidiary, (ii) all
regular and periodic reports and all registration statements, forms and
prospectuses filed by the Company or any of its Subsidiaries with any securities
exchange or with the Commission, and (iii) all press releases and other
statements made available generally by the Company or any of its Subsidiaries to
the public concerning material developments in the business of the Company or
any of its Subsidiaries.
(d) Defaults, etc. Promptly upon and in any event within five Business
Days after any officer of the Company obtaining knowledge of any condition or
event which constitutes a default or an event of default under any agreement
with respect to any debt for borrowed money in excess of $100,000 of the Company
or any Subsidiary or becoming aware that any person has given any notice to the
Company or any of its Subsidiaries or taken any other action with respect to a
claimed default under or in respect of any debt for borrowed money in excess of
$100,000 or with respect to the occurrence or existence of any event or
condition of such type, written notice in reasonable detail specifying the facts
and circumstances of such condition, event or action.
(e) Litigation, etc. Promptly and in any event within five Business
Days after any officer of the Company obtains knowledge of any litigation,
administrative proceeding or judgment (i) affecting the Company or any of its
Subsidiaries which involves claims against the Company or its Subsidiaries
aggregating, when taken together with all other such litigation, proceedings and
judgments, $100,000 which are not considered by the Company, in its reasonable
judgment, to be covered by insurance, or (ii) relating in any material way to
this Agreement or any Exhibit to which the Company is a party, notice thereof
specifying in each case in reasonable detail the facts and circumstances
surrounding such litigation, proceeding or judgment.
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<PAGE> 18
4.2 Corporate Existence.
The Company will, and will cause each of its Subsidiaries to, do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence.
4.3 Compliance with Laws; Government Filings.
The Company shall, and shall cause each of its Subsidiaries to, comply
in all material respects with all laws, statutes, rules, regulations and
ordinances and all orders of, and restrictions imposed by, any court, arbitrator
or Governmental Body in respect of the conduct of the business of the Company or
Subsidiary and the ownership of the properties of the Company or Subsidiary
(including, without limitation, applicable laws, statutes, rules, regulations,
ordinances and orders relating to occupational health and safety standards,
consumer protection and equal employment opportunities), except to the extent
that the applicability or validity of any such law, statute, rule, regulation,
ordinance or order is being contested in good faith by appropriate and timely
actions or proceedings diligently pursued, and for which such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been
made.
4.4 Environmental Matters.
(a) The Company shall, and shall cause each of its Subsidiaries to, (i)
obtain and maintain in full force and affect all Environmental Permits that may
be required from time to time in order for the Company and such Subsidiary to
comply in all material respects with all Environmental Laws applicable to the
Company or such Subsidiaries and (ii) be and remain in compliance in all
material respects with all terms and conditions of all such Environmental
Permits and with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
all applicable Environmental Laws.
(b) The Company shall not, and shall not permit any of its Subsidiaries
to, (i) cause or allow (A) any Hazardous Substance to be present at any time on,
in, under or above the Company Premises or any part thereof or (B) the Company
Premises or any part thereof to be used at any time to manufacture, generate,
refine, process, distribute, use, sell, treat, receive, store, dispose of,
transport, arrange for transport of, handle, or be involved in any other
activity involving, any Hazardous Substance, or (ii) conduct any such activities
described in the foregoing clause (i) on the Company Premises or anywhere else,
except, in each case referred to in the foregoing clauses (i) and (ii), in a
manner that is in compliance in all material respects with all applicable
Environmental Laws and Environmental Permits or to an extent that will not have
a Material Adverse Effect.
ARTICLE V
CERTAIN OTHER COVENANTS
5.1 Use of Proceeds. The Company covenants and agrees to use the
proceeds of the sale of the Securities as provided in Schedule 1.5.
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<PAGE> 19
ARTICLE VI
MISCELLANEOUS
6.1 Expenses.
Whether or not the transactions contemplated by Article I hereof are
consummated, the Company shall: (a) directly pay the reasonable fees and
expenses of special counsel to the Purchasers rendered in connection with such
transactions (up to $40,000) or in connection with any actual or proposed
amendment, waiver or consent pursuant to the provisions hereof, and all other
expenses in connection with the foregoing (including, without limitation,
document production and reproduction expenses); (b) reimburse each Purchaser for
his reasonable out-of-pocket expenses in connection with each such actual or
proposed amendment, waiver or consent pursuant to the provisions of this
Agreement, and any items of the character referred to in clause (a) which shall
have been paid by any Purchaser; (c) pay, and save each Purchaser of any
Securities harmless from and against, any and all liability and loss with
respect to or resulting from the nonpayment or delayed payment of any and all
placement fees and other liability to pay any agent or finder in connection with
the sale of the Securities to each Purchaser; (d) pay all fees and other charges
payable in connection with the filings, recordings and registrations
contemplated by this Agreement or any other Exhibit; and (e) pay all
documentary, stamp or similar taxes (including interest and penalties) which may
be payable in respect of the execution and delivery or issuance (but not the
transfer) of any of the Securities or of any amendment of, or waiver or consent
under or with respect to, this Agreement, any of the Securities or any other
Exhibit and save each Purchaser of the Securities harmless against each
Purchaser any loss or liability resulting from nonpayment or delay in payment of
any such tax.
6.2 Reliance on and Survival of Representations.
All agreements, covenants, representations and warranties of the
Company herein or of (or on behalf of) the Company in any Exhibit or in any
certificate or other instrument delivered pursuant hereto or thereto shall: (a)
be deemed to be material and to have been relied upon by each Purchaser,
notwithstanding any investigation heretofore or hereafter made by each Purchaser
or on his or its behalf, and (b) survive the execution and delivery of this
Agreement and the execution and delivery of the Securities to each Purchaser and
any investigation made at any time by him or it or on his or its behalf or any
disposition of any of the Securities, until the expiration of any applicable
statute of limitations.
6.3 Amendment and Waiver.
(a) Any term, provision, covenant, agreement or condition of this
Agreement or any other Exhibit hereto may, with the written consent of the
Company, be amended or modified, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by one or more substantially concurrent written instruments
signed by the Purchasers.
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<PAGE> 20
6.4 Directly or Indirectly.
Where any provision of this Agreement refers to actions to be taken by
any person, or which such person is prohibited from taking, such provision shall
be applicable whether the action in question is taken directly or indirectly by
such person.
6.5 Successors and Assigns.
All covenants and agreements in this Agreement by or on behalf of the
respective parties hereto shall bind and inure to the benefit of their
respective successors and assigns.
6.6 Notices.
Unless otherwise expressly provided in this Agreement, all notices,
opinions and other communications provided for in this Agreement shall be in
writing and delivered by hand or mailed, first class postage prepaid, return
receipt requested or sent by overnight courier, or by confirmed telefax
transmission (confirmed by hand-delivered, mailed or overnight courier copy)
addressed (a) if to the Company, to the Company at 5005 Riverway, Suite 550,
Houston, Texas 77056 (with a copy sent by telefax transmission to it at (713)
850-7730), marked to the attention of the President, with a copy to Fulbright &
Jaworski L.L.P., 300 Convent Street, Suite 2200, San Antonio, Texas 78205,
telecopy number (210) 270-7205, to the attention of Phillip Renfro, Esq., or at
such other address as the Company may hereafter designate by notice to each
Purchaser of Securities, or (b) if to the Purchasers, at the address of each
Purchaser as set forth in Schedule 1.1 or at such other address as such
Purchaser may hereafter designate by notice to the Company.
6.7 LAW GOVERNING.
THIS AGREEMENT AND ALL AMENDMENTS, SUPPLEMENTS, MODIFICATIONS, WAIVERS
AND CONSENTS RELATING HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED IN THE STATE OF NEW YORK.
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<PAGE> 21
6.8 SUBMISSION TO JURISDICTION;
Service of Process.
(a) THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK, AND
IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT OR
ANY EXHIBIT MAY BE LITIGATED IN SUCH COURTS, AND THE COMPANY WAIVES ANY
OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO
THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT.
(b) In relation to any dispute arising out of or in connection with
this Agreement or any Exhibit, and for the exclusive benefit of the Purchasers
and any Holders, the Company irrevocably and unconditionally submits to the
non-exclusive jurisdiction of the United States District Court for the Southern
District of New York, and to the non-exclusive jurisdiction of any court of the
State of New York located in the City and County of New York, for the purposes
of any suit, action or other proceeding arising out of, or relating to, this
Agreement or any Exhibit or any of the transactions contemplated hereby or
thereby, and hereby waives, and agrees not to assert, by way of motion, as a
defense, or otherwise, that it is not personally subject to the jurisdiction of
the above named courts for any reason whatsoever, that such suit, action or
proceeding is brought in an inconvenient forum, or that the venue of such suit,
action or proceeding is improper, or that this Agreement or any Exhibit or the
subject matter hereof may not be enforced in or by such courts. The Company
hereby agrees that process against it may be served by mail or delivery of
service of process in any of the aforementioned action, suits or proceedings to
CT Corporation System, 1633 Broadway, New York, New York 10019 (such agent being
hereinafter called the "Process Agent"), which the Company hereby irrevocably
designates and appoints as its attorney-in-fact to receive service of process in
any action, suit or proceeding with respect to any matter as to which it submits
to jurisdiction as set forth above, it being agreed that service to such office
or upon such agent shall constitute valid service upon the Company. The Company
hereby directs the Process Agent to receive and accept all process on its
behalf. The Company shall promptly notify the Purchasers of any change in the
address of the Process Agent and may, with prior notice given to Holders,
appoint a successor Process Agent; provided, however, that if the Process Agent
shall at any time cease to exist or its agency shall for any reason cease, the
Company shall designate forthwith a successor Process Agent in the County and
State of New York and shall give prompt notice of such designation to the
Holders, together with evidence of the acceptance of any such appointment. The
Company agrees irrevocably to the service of process of any of the
aforementioned courts in any suit, action or proceeding described above by
mailing of copies of such process to the Company at its address specified in
Section 6.7 hereof. Nothing herein shall preclude service of process in any
other manner permitted by applicable law or prohibit any Holder from commencing
legal proceedings against the Company or any of its properties in any other
jurisdiction.
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<PAGE> 22
6.9 Headings, etc.
The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning or construction of any of
the terms hereof. Unless otherwise specified, any reference in this Agreement to
a particular section, clause or other subdivision, or a particular schedule or
exhibit, shall be considered a reference to that section, clause or other
subdivision of, or to that schedule or exhibit to, this Agreement.
6.10 Entire Agreement.
This Agreement (inclusive of the Exhibits hereto) embodies the entire
agreement and understanding among the Company and the Purchasers and supersedes
all prior agreements and understandings among such parties relating to the
subject matter hereof.
6.11 WAIVER OF TRIAL BY JURY.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES
HERETO IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY EXHIBIT HERETO OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR THE ACTIONS OF THE PURCHASERS
IN THE NEGOTIATION OR ENFORCEMENT HEREOF OR THEREOF.
6.12 Indemnification.
In consideration of the execution and delivery of this Agreement by
each Purchaser, the Company hereby agrees to indemnify, defend and hold each
Purchaser and the Managing Member and each partner of the Managing Member and
the employees and agents thereof (herein called the "Indemnitees"), free and
harmless from and against any and all claims, actions, causes of action, suits
or other proceedings (whether or not any such Indemnitee is a party thereto),
losses, liabilities and damages, and expenses in connection therewith,
including, without limitation, fees and disbursements of counsel, consultants
and experts and claims relating to personal injury or property damage (herein
called the "Indemnified Liabilities", which term shall not include, however, in
respect of any particular Indemnitee, liabilities incurred by reason of the
gross negligence or willful misconduct of such Indemnitee) incurred by the
Indemnitees or any of them as a result of, or arising out of, or relating to (a)
any transaction financed or to be financed in whole or in part directly or
indirectly with proceeds from the sale of any Securities, or (b) the execution,
delivery, performance or enforcement of this Agreement or any Exhibit, or the
consummation of any of the transactions contemplated hereby or thereby or (c)
any failure of any representation or warranty set forth in Section 2.11 to be
true and correct when made or any failure by the Company to comply with any of
its covenants or agreements set forth in Section 4.4 or any liability of the
Company arising pursuant to Environmental Laws. If and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Company hereby
agrees to make the maximum contribution to the payment of each of the
Indemnified Liabilities
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<PAGE> 23
which is permissible under applicable law. The provisions of, and obligations of
the Company under, this Section 6.13 shall survive the execution and delivery of
this Agreement, the enforcement of any provision hereof, the consummation of the
transactions to occur on the Closing Date, and any amendments or waivers, and
shall be enforceable by each Indemnitee separately or together; and any such
Indemnitee seeking to enforce the indemnification provided for hereunder may
initially proceed directly against the Company without first resorting to any
other rights of indemnification or otherwise that it may have.
6.13 Interpretive Provision.
Wherever any representation, warranty or other statement made by the
Company in this Agreement is limited to the Company's knowledge, such limitation
shall mean the actual knowledge or awareness of any person who, on the date
hereof, is an executive officer or director of the Company after due inquiry of
the circumstances thereof.
6.14 Severability.
Any provision of this Agreement which shall be prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or enforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
6.15 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
6.16 Finder's Fee.
(a) The Company represents and warrants that it has not incurred any
obligation or liability to any broker or finder for any fee or payment with
respect to the offering or sale of the Securities and agrees to indemnify and
hold the Purchasers harmless against any claims or liabilities asserted against
them by any person acting or claiming to act as a broker or finder on behalf of
the Company or any Subsidiary.
(b) Each Purchaser represents and warrants that it has not incurred any
obligation or liability to any broker or finder for any fee or payment with
respect to the offering or sale of the Securities and agrees to indemnify and
hold the Company harmless against any claims or liabilities asserted against
them by any person acting or claiming to act as a broker or finder on behalf of
such Purchaser.
- 19 -
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first before written.
COMPANY:
PONDER INDUSTRIES, INC.
By:
------------------------------
Name: Eugene L. Butler
Title: President
PURCHASERS:
WHITE OWL INVESTORS, L.L.C.
By: White Owl Capital Partners,
Managing Member
By:
------------------------------
Name: William R. Ziegler
Title: Partner
SOMERSET CAPITAL PARTNERS
By:
------------------------------
Name: William R. Ziegler
Title: Partner
WHITE OWL CAPITAL PARTNERS
By:
------------------------------
Name: William R. Ziegler
Title: Partner
------------------------------
Arvind Sanger, Individually
------------------------------
Antony T. F. Lundy, Individually
------------------------------
Karl Bandtel, Individually
- 20 -
<PAGE> 25
APPENDIX I
DEFINITIONS
As used in this Agreement the following terms shall have the meanings
ascribed thereto:
"Agreement" means this agreement, as it may be amended from time to
time, including all schedules and exhibits thereto.
"Bridge Loan Securities Purchase Agreement" means that certain
Securities Purchase Agreement dated as of October 15, 1997, between the Company
and the Holders.
"Business Day" means any day other than a Saturday, Sunday or any other
day on which commercial banks are required or authorized by law or regulation to
be closed in New York, New York.
"Cash Payment" has the meaning set forth in Section 1.2.
"Closing" has the meaning set forth in Section 1.4.
"Commission" means the Securities and Exchange Commission or any other
United States agency at the time administering the Securities Act.
"Common Stock" means common stock of the Company having a par value of
$.01 per share.
"Company" means Ponder Industries, Inc., a Delaware corporation.
"Company Premises" means real property in which (a) the Company, (b)
any Subsidiary of any person referred to in clause (a) of this definition or (c)
any person which has at any time been a Subsidiary of any person referred to in
clause (a) of this definition at any time has or ever had any direct or indirect
interest, including, without limitation, ownership thereof, or any arrangement
for the lease, rental or other use thereof, or the retention or claim of any
mortgage or security interest therein or thereon.
"Environmental Claims" has the meaning set forth in Section 2.12(c).
"Environmental Law" any past, present or future Federal, state, local
or foreign statutory or common law, or any regulation, ordinance, code, plan,
Order, permit, grant, franchise, concession, restriction or agreement issued,
entered, promulgated or approved thereunder, relating to (a) the environment,
human health or safety, including, without limitation, emissions, discharges,
releases or threatened releases of Hazardous Substances into the environment
(including, without limitation, air, surface water, groundwater or land), or (b)
the manufacture, generation, refining, processing, distribution, use, sale,
treatment, receipt, storage, disposal, transport, arranging for transport, or
handling of Hazardous Substances,
- 21 -
<PAGE> 26
"Environmental Permit" means any and all permits, consents, licenses,
approvals and registrations of any nature at any time required pursuant to or in
order to comply with any Environmental Law.
"Exhibit" means any of the exhibits to this Agreement, including such
exhibits as executed and delivered pursuant to the terms of this Agreement.
"Financial Statements" means the consolidated balance sheet of the
Company and the Subsidiaries as of August 31, 1997, and the consolidated
statement of operations and cash flows for the year ended August 31, 1997,
together with the notes thereto.
"GAAP" means generally accepted accounting principles as from time to
time set forth in the opinions of the Accounting Principles Board of the
American Institute of Certified Public Accountants and in statements by the
Financial Accounting Standards Board or in such opinions and statements of such
other entities as shall be approved by a significant segment of the accounting
profession in the United States of America.
"Governmental Body" means any Federal, state, municipal, local or other
governmental department, commission, board, bureau, agency, instrumentality,
political subdivision or taxing authority of any country.
"Hazardous Substances" collectively, contaminants; pollutants; toxic or
hazardous chemicals, substances, materials, wastes and constituents; petroleum
products; polychlorinated biphenyls; medical wastes; infectious wastes;
asbestos; paint containing lead; and urea formaldehyde.
"Holder" means a holder of Senior Notes.
"Holders' Purchase Price" has the meaning set forth in Section 1.3.
"Indemnified Liabilities" has the meaning set forth in Section 6.12.
"Indemnitees" has the meaning set forth in Section 6.12.
"Majority-in-Interest" means the Holders of more than 50% of the Common
Stock purchased hereunder.
"Managing Member" means White Owl Capital Partners, a Texas general
partnership and the managing member of White Owl.
"Material Adverse Effect" means any circumstance or event which is
material and adverse to the financial condition or business operations or
prospects of the Company and its Subsidiaries, taken as a whole.
"Material Contract" means any contract of the Company or any Subsidiary
with any Person that is presently in effect and (i) that either (A) accounted
for 10 percent or more of the annual revenues of the Company or any Subsidiary
during any of the past three fiscal years or (B) is expected to account for 10
percent or more of the annual revenues of the Company or
- 22 -
<PAGE> 27
any Subsidiary during the present fiscal year or (ii) the expiration or
termination of which would have a Material Adverse Effect.
"Offering Disclosure Documents" means (i) the Annual Report on Form
10-K of the Company for the fiscal year ended August 31, 1997, as filed with the
Commission, (ii) the Financial Statements and (iii) the White Owl PPM, but only
to the extent of the information provided or supplied to White Owl or its
counsel by or on behalf of the Company.
"Opinion of Company Counsel" means the legal opinion of Fulbright &
Jaworski L.L.P., counsel for the Company, in favor of the Purchasers, in the
form of Exhibit "B" hereto
"Permitted Liens" means (i) liens of carriers, warehousemen, mechanics
and materialmen incurred in the ordinary course of business securing sums not
overdue; (ii) liens incurred in the ordinary course of business in connection
with workmen's compensation, unemployment insurance or other forms of government
insurance or benefits, relating to employees, securing sums (a) not overdue or
(b) being diligently contested in good faith provided that adequate reserves
with respect thereto are maintained on the books of the Company in conformity
with GAAP, (iii) liens for taxes (a) not yet due or (b) being diligently
contested in good faith, provided that adequate reserves with respect thereto
are maintained on the books of the Company in conformity with GAAP.
"Person" means a corporation, a partnership, an organization or
business, an individual, a government or political subdivision thereof or
governmental agency.
"Purchaser" means a person set forth on Schedule 1.1 with respect to
that number of Securities set forth opposite his or its name and a person who
executes and delivers a counterpart signature page to this Agreement, and
Purchasers means two or more Purchasers.
"Registration Rights Joinder Agreement" means that certain registration
rights joinder agreement to be entered into between the Company and the
Purchasers in the form of Exhibit "A" hereto.
"Securities" has the meaning set forth in Section 1.4.
"Securities Act" means the Securities Act of 1933, or any similar
United States statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Senior Notes" means those certain Senior Convertible Promissory Notes
of the Company, in the aggregate principal amount of $2,500,000, executed and
delivered pursuant to the Bridge Loan Securities Purchase Agreement.
"Subsidiary" means any corporation or other legal entity 50% or more of
the voting stock of which is owned by the Company or another Subsidiary of the
Company. For these purposes voting stock means the capital stock or other form
of ownership which ordinarily, in the absence of contingencies, entitles the
holder to elect corporate directors or persons performing similar functions. For
purposes of the covenants contained in Article IV hereof, Subsidiary generally
includes any corporation or other legal entity in which the
- 23 -
<PAGE> 28
Company or any other Subsidiary of the Company hereafter acquires 50% or more of
the voting stock, and specifically includes Signature.
"White Owl PPM" means that certain Confidential Private Placement
Memorandum of White Owl dated December 23, 1997
"The New Purchasers Purchase Price" has the meaning set forth in
Section 1.2.
- 24 -
<PAGE> 29
SCHEDULE 1.1
PURCHASERS
<TABLE>
<CAPTION>
Name, Address, Telefax No.
and Tax Identification No. No. of Shares
of Purchaser Common Stock Price
- - -------------------------- ------------- -----
<S> <C> <C>
White Owl Capital Partners 3,040,000 $1,900,000
20 Pine Brook Road
Bedford, NY 10506
Fax: (914) 234-0103
TIN:
Arvind Sanger 400,000 $250,000
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, NY 10172
Fax: (212) 892-2913
SSN:
Antony T. F. Lundy 400,000 $250,000
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, NY 10172
Fax: (212) 892-7976
SSN:
Karl Bandtel 160,000 $100,000
c/o Wellington Management Co., LLP
75 State Street, 18th Floor
Boston, MA 02109
Fax: (617) 428-3649
SSN:
White Owl Investors, L.L.C. 10,000,000 $10,000,000
20 Pine Brook Road
Bedford, NY 10506
Fax: (914) 234-0103
TIN:
Somerset Capital Partners 1,000,000 $1,000,000
20 Pine Brook Road
Bedford, NY 10506
Fax: (914) 234-0103
TIN:
Total: 15,000,000 $13,500,000
</TABLE>
<PAGE> 30
SCHEDULE 1.5
USE OF PROCEEDS
See Attached.
<PAGE> 31
SCHEDULE 2.2
SUBSIDIARIES
See Attached.
<PAGE> 32
SCHEDULE 2.5
NONCONTRAVENTION
Not Applicable.
<PAGE> 33
SCHEDULE 2.6
CONSENTS AND APPROVALS
Not Applicable.
<PAGE> 34
SCHEDULE 2.7
LITIGATION
See Attached.
<PAGE> 35
SCHEDULE 2.9
DEBTS; LIENS
See Attached.
