<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 16, 1997
DLB OIL & GAS, INC.
(Exact name of registrant as specified in its charter)
Oklahoma 0-26484 73-1352899
(State or other (Commission (IRS employer
jurisdiction of file number) identification no.)
incorporation or
organization)
1601 N.W. Expressway, Suite 700, Oklahoma City, Oklahoma 73118-1401
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code:
(405) 848-8808
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
DLB Oil & Gas, Inc. ("DLB"), its wholly-owned subsidiary, Bonray
Drilling Corporation ("Bonray"), Bayard Drilling Technologies, Inc. ("Bayard")
and Bonray Acquistion Corp. entered into a definitive Agreement and Plan of
Merger (the "Merger Agreement") on October 9, 1997, pursuant to which Bayard
would acquire Bonray. On October 16, 1997, the merger of Bonray with Bonray
Acquisition Corp was consummated. In the merger, each share of common stock of
Bonray was canceled and converted into 30.15 shares of common stock of Bayard
and DLB received 2,955,000 shares of Bayard common stock in consideration for
its interest in Bonray.
The Merger Agreement is filed with this Report as Exhibit 2.1 and is
incorporated herein by reference.
ITEM 5. OTHER EVENTS
On October 22, 1997, DLB entered into a definitive Agreement and Plan
of Merger with Chesapeake Energy Corporation and Chesapeake Merger Corp.
Registrant is filing as an exhibit to this Report a press release dated October
22, 1997 announcing the Agreement and Plan of Merger. Such exhibit is
incorporated herein by reference.
ITEM 7. PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(b) PRO FORMA FINANCIAL INFORMATION
The pro forma financial information required by this Item will
be filed by amendment or amendments of this Report as soon as
practicably available and no later than 60 days after the
date of this Report.
(c) EXHIBITS
The following Exhibits are filed herewith:
2.1 Agreement and Plan of Merger among DLB Oil & Gas,
Inc., Bayard Drilling Technologies, Inc., Bonray
Acquisition Corp. and Bonray Drilling Corporation,
dated as of October 9, 1997.
99.1 Press release dated October 22, 1997.
<PAGE> 3
SIGNATURE
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.
DLB OIL & GAS, INC.
/s/ Mike Liddell
------------------------------------
Mike Liddell
Chief Executive Officer
Date: October 31, 1997
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger among DLB Oil & Gas, Inc., Bayard
Drilling Technologies, Inc., Bonray Acquisition Corp. and Bonray
Drilling Corporation, dated as of October 9, 1997.
99.1 Press release dated October 22, 1997.
</TABLE>
<PAGE> 1
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DLB OIL AND GAS, INC.,
BAYARD DRILLING TECHNOLOGIES, INC.,
BONRAY ACQUISITION CORP.
AND
BONRAY DRILLING CORPORATION
DATED AS OF OCTOBER 9, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE I - THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - THE CLOSING; POST-CLOSING ADJUSTMENT . . . . . . . . . . . . . . 3
2.1 Date and Place . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Certain Actions . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Post-Closing Adjustment . . . . . . . . . . . . . . . . . . . 4
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE COMPANY . 6
3.1 Existence and Qualification . . . . . . . . . . . . . . . . . 6
3.2 Capitalization; Ownership of Shares; Subsidiary . . . . . . . 6
3.3 Authority; Binding Effect . . . . . . . . . . . . . . . . . . 7
3.4 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Consents and Filings . . . . . . . . . . . . . . . . . . . . . 8
3.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.7 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 8
3.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . 9
3.9 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . 9
3.10 Assets, Properties, etc. . . . . . . . . . . . . . . . . . . . 9
3.11 Absence of Certain Changes and Events . . . . . . . . . . . . 10
3.12 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.13 Overtime, Back Wages, Vacation and Minimum Wages . . . . . . . 13
3.14 Contracts, Agreements, Plans and Commitments . . . . . . . . . 13
3.15 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . 14
3.16 Employment Matters; Labor Relations . . . . . . . . . . . . . 17
3.17 Environmental Compliance . . . . . . . . . . . . . . . . . . . 18
3.18 Improper Payments . . . . . . . . . . . . . . . . . . . . . . 19
3.19 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . 19
3.20 Securities Law Matters . . . . . . . . . . . . . . . . . . . . 19
3.21 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE BUYER AND NEWCO . . . . . 20
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C>
4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.2 Authority; Binding Effect . . . . . . . . . . . . . . . . . . 21
4.3 Capitalization; Bayard Common Stock . . . . . . . . . . . . . 21
4.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . 21
4.5 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . 22
4.6 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . 22
4.7 Securities Law Matters . . . . . . . . . . . . . . . . . . . . 22
4.8 Consents and Filings . . . . . . . . . . . . . . . . . . . . . 23
4.9 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . 23
4.10 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.11 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 24
4.13 Environmental Compliance . . . . . . . . . . . . . . . . . . . 24
4.14 Improper Payments . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE V - CERTAIN COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . 26
5.1 Access to Information . . . . . . . . . . . . . . . . . . . . 26
5.2 Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . 26
5.3 Conduct of Business Pending Closing . . . . . . . . . . . . . 27
5.4 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.5 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.6 Return of Informational Material . . . . . . . . . . . . . . . 28
5.7 Confidentiality of Information . . . . . . . . . . . . . . . . 29
5.8 Employment Matters. . . . . . . . . . . . . . . . . . . . . . 29
5.9 Access to and Maintenance of Records . . . . . . . . . . . . . 29
5.10 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VI - CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . 30
6.1 Conditions to the Obligations of Each of the Parties . . . . . 30
6.2 Conditions to the Obligations of the Buyer and Newco . . . . . 30
6.3 Conditions to the Obligations of the Seller . . . . . . . . . 31
ARTICLE VII - TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.1 Tax Elections . . . . . . . . . . . . . . . . . . . . . . . . 32
7.2 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.3 Liability for Taxes; Indemnification and Control of Contests . 33
7.4 Cooperation on Tax Matters . . . . . . . . . . . . . . . . . . 35
7.5 Tax Refunds . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
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<TABLE>
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<S> <C>
7.6 Carrybacks and Carryovers . . . . . . . . . . . . . . . . . . 36
7.7 Termination of Existing Tax Sharing Agreements . . . . . . . . 36
7.8 Tax Matter Dispute Resolution . . . . . . . . . . . . . . . . 36
7.9 Survival for Tax Matters . . . . . . . . . . . . . . . . . . . 36
ARTICLE VIII - INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 37
8.1 Survival of Representations and Warranties . . . . . . . . . . 37
8.2 Indemnification by the Seller . . . . . . . . . . . . . . . . 37
8.3 Indemnification by the Buyer . . . . . . . . . . . . . . . . . 38
8.4 Indemnification for Third Party Claims . . . . . . . . . . . . 38
ARTICLE IX - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE X - DEFINITIONS AND MISCELLANEOUS . . . . . . . . . . . . . . . . . . 41
10.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.3 Binding Effect; Assignability . . . . . . . . . . . . . . . . 46
10.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.5 Section Headings . . . . . . . . . . . . . . . . . . . . . . . 46
10.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 46
10.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 46
10.8 Costs of Enforcement. . . . . . . . . . . . . . . . . . . . . 47
10.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
iii
<PAGE> 5
EXHIBITS
Exhibit A - Form of Stockholders Agreement
Exhibit B - Form of Registration Rights Agreement
SCHEDULES
Schedule 3.2 - Certain Liens
Schedule 3.4 - Company Conflicts
Schedule 3.6 - Litigation
Schedule 3.7 - Company Compliance with Laws
Schedule 3.9 - Undisclosed Company Liabilities
Schedule 3.10 - Title to Property and Assets
Schedule 3.11 - Recent Changes
Schedule 3.12(c) - Liens for Taxes
Schedule 3.12(d) - Pending Audits, Disputes or Claims
Schedule 3.12(e) - Third-Party Tax Liability
Schedule 3.12(f) - Foreign Country Taxes
Schedule 3.12(g) - State Income Tax
Schedule 3.12(h) - State Sales or Use Tax
Schedule 3.12(i) - Tax Allocation Agreements
Schedule 3.12(m) - Requests for Tax Information
Schedule 3.13 - Unpaid Wages
Schedule 3.14 - Material Contracts
Schedule 3.15 - ERISA Matters
Schedule 3.16(a) - Employees
Schedule 4.3 - Capitalization
Schedule 4.5 - Undisclosed Buyer Liabilities
Schedule 4.10 - Buyer Conflicts
Schedule 8.2(c) - Limitation on Indemnification
iv
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered
into as of October 9, 1997, by and among DLB OIL AND GAS, INC., an Oklahoma
corporation (the "Seller"), BAYARD DRILLING TECHNOLOGIES, INC., a Delaware
corporation (the "Buyer"), BONRAY ACQUISITION CORP., a Delaware corporation and
wholly-owned subsidiary of Buyer ("Newco"), and BONRAY DRILLING CORPORATION, a
Delaware corporation (the "Company").
WITNESSETH:
WHEREAS, as of the date hereof, the Seller owns all of the
outstanding capital stock (the "Shares") of the Company; and
WHEREAS, subject to and in accordance with the terms and
conditions of this Agreement, (i) the respective boards of directors of the
Buyer, Seller, Newco and the Company and (ii) the respective stockholders of
the Company and Newco have approved the merger of Newco with and into the
Company (the "Merger"), and the Buyer, Seller, Newco and the Company desire to
consummate the Merger in accordance with the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises, the terms and
conditions set forth herein and of the mutual covenants of the parties
hereinafter expressed, the parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to and in accordance with the terms
and conditions of this Agreement and in accordance with the Delaware General
Corporation Law (the "General Corporation Law"), at the Effective Time (as
hereinafter defined), Newco shall be merged with and into the Company. The
name, identity, existence, rights, privileges, powers, properties and assets of
the Company shall continue unaffected and unimpaired by the Merger. As a
result of the Merger, the separate corporate existence of Newco shall cease and
the Company shall continue as the surviving corporation (sometimes referred to
herein as the "Surviving Corporation") and shall succeed to and assume all of
the rights and obligations of Newco in accordance with the General Corporation
Law.
<PAGE> 7
1.2 Consummation of the Merger. The Merger shall become
effective upon the date and time specified in a properly executed Certificate
of Merger filed with the Secretary of State of the State of Delaware as
provided in Section 251 of the General Corporation Law. When used in this
Agreement, the term "Effective Time" shall mean the date and time so specified
in such Certificate of Merger.
1.3 Certificate of Incorporation; Bylaws. The Certificate of
Incorporation of the Surviving Corporation shall be restated in its entirety as
attached to the Certificate of Merger and the bylaws of the Surviving
Corporation shall be the bylaws of the Company, as in effect immediately prior
to the Effective Time, and thereafter such Certificate of Incorporation and
bylaws shall continue to be the Surviving Corporation's Certificate of
Incorporation and bylaws until amended as provided therein and under the
General Corporation Law.
1.4 Directors and Officers. The directors of Newco
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate
of Incorporation and bylaws of the Surviving Corporation, and the officers of
Newco immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
1.5 Conversion of Securities. Subject to the terms and
conditions of this Agreement, at the Effective Time, by virtue of the Merger
and without any action on the part of the Company, Newco or their respective
stockholders:
(a) Each share of the common stock, par value $0.001
per share, of the Company ("Bonray Common Stock") issued and outstanding
immediately prior to the Effective Time shall be canceled and be
converted into 30.15 shares of the common stock, par value $0.01 per
share, of the Buyer ("Bayard Common Stock"); provided, that if, after
the date hereof and prior to the Closing, Buyer shall have declared a
stock split (including a reverse stock split) of Bayard Common Stock or
a dividend payable in Bayard Common Stock to holders of Bayard Common
Stock with respect to their Bayard Common Stock, then the number of
shares of Bayard Common Stock into which the Bonray Common Stock shall
be converted shall be appropriately adjusted to reflect such stock split
or dividend or other distribution.
(b) Each share of Bonray Common Stock held in the
treasury of the Company, if any, shall be canceled and extinguished
without any conversion thereof.
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<PAGE> 8
(c) Each share of common stock, par value $.01 per
share, of Newco issued and outstanding immediately prior to the
Effective Time shall automatically without any action on the part of the
holder thereof be converted into one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
ARTICLE II
THE CLOSING;
POST-CLOSING ADJUSTMENT
2.1 Date and Place. The closing of the Merger (the "Closing")
shall be held at the offices of Baker & Botts, L.L.P., 2001 Ross Avenue,
Dallas, Texas, 75201 (or at such other place as the parties may mutually agree)
on October 13, 1997 (or, if the conditions to the obligations of the parties
set forth in Article VI hereof shall not be fulfilled as of such date, as
promptly as practicable after the fulfilment of such conditions). The date of
the Closing is hereinafter referred to as the "Closing Date."
2.2 Certain Actions. At the Closing, the parties hereto will
cause to be filed with the Secretary of State of the State of Delaware, as
provided in Section 251 of the General Corporation Law, a Certificate of
Merger.
2.3 Closing Deliveries.
(a) At the Closing, the Seller shall deliver the following to
the Buyer and Newco:
(i) stock certificates representing the Shares, free
and clear of any Liens;
(ii) the officer's certificate referred to in Section
6.2(c);
(iii) the opinions of counsel to the Seller referred to
in Section 6.2(d);
(iv) counterparts of the Stockholders Agreement (as
hereinafter defined) and the Registration Rights Agreement (as
hereinafter defined) each duly executed by the Seller and the Broker;
and
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<PAGE> 9
(v) a letter executed by the Broker covering certain
customary investment representations.
(b) At the Closing, the Company shall deliver the following to
the Buyer and Newco:
(i) the officer's certificate referred to in Section
6.2(c).
(c) At the Closing, the Buyer shall deliver the following to
the Seller:
(i) 3,015,000 shares of Bayard Common Stock (as
appropriately adjusted pursuant to Section 1.5) issued in the name of
the Seller or a wholly-owned subsidiary of the Seller, as designated by
the Seller at the Closing; provided, however, that 60,000 of such shares
shall be issued in the name of the Broker;
(ii) the officer's certificate referred to in Section
6.3(c);
(iii) the opinion of counsel to the Buyer referred to in
Section 6.3(d); and
(iv) duly executed counterparts of the Stockholders
Agreement and the Registration Rights Agreement.
(d) At the Closing, Newco shall deliver the following to the
Seller:
(i) the officer's certificate referred to in Section
6.3(c).
(e) At the Closing, the Seller shall deliver to the Buyer a
certified or official bank check or checks in New York Clearing House or other
similar next day funds in the amount of $1,000,000.
2.4 Post-Closing Adjustment.
(a) On the Post-Closing Adjustment Date (as hereinafter
defined), the Buyer shall pay to the Seller, or the Seller shall pay to the
Buyer, an amount in cash (the "Working Capital Adjustment Amount") equal to the
amount by which the sum of (i) any capital contributions from the Seller to the
Company made after June 30, 1997 but on or prior to the Closing Date plus (ii)
the current assets of the Company as of the Closing Date (such sum of (i) and
(ii) being the "Adjusted Current Assets") less (iii) the current liabilities of
the Company as of such date (the "Current Liabilities"), in each case
calculated in accordance with GAAP, is (x) greater than $1,000,000, in which
case the Buyer shall pay
4
<PAGE> 10
the Working Capital Adjustment Amount to the Seller, or (y) less than
$1,000,000, in which case the Seller shall pay the Working Capital Adjustment
Amount to the Buyer. The Working Capital Adjustment Amount shall be paid to
the Buyer or the Seller, as the case may be, by delivery of a certified or
official bank check or checks in New York Clearing House or other similar next
day funds.
(b) The Buyer shall deliver to the Seller, within 40 days
after the Closing Date, a schedule (the "Working Capital Schedule") which sets
forth the amounts of the Adjusted Current Assets and Current Liabilities, sets
forth in reasonable detail how the Adjusted Current Assets and the Current
Liabilities were determined, and sets forth the resulting Working Capital
Adjustment Amount.
(c) If within ten days after the Buyer delivers the Working
Capital Schedule to the Seller (the "Objection Period"), the Seller notifies
the Buyer of any objections to the calculation of the Adjusted Current Assets,
the Current Liabilities or the Working Capital Adjustment Amount set forth on
the Working Capital Schedule, the Buyer and the Seller shall attempt in good
faith to agree by the day which is 60 days after the Closing Date upon the
Adjusted Current Assets, the Current Liabilities and the resulting Working
Capital Adjustment Amount.
(d) If the Buyer and the Seller agree by the day which is 60
days after the Closing Date to a Working Capital Adjustment Amount which is
different from that shown on the Working Capital Schedule, the payment
described in subparagraph (a) will be of the agreed upon amount.
(e) If the Seller objects to the calculation of the Adjusted
Current Assets, the Current Liabilities or the resulting Working Capital
Adjustment Amount during the Objection Period and the Buyer and the Seller do
not agree by the day which is 60 days after the Closing Date to a Working
Capital Adjustment Amount, the matters in dispute (but no other matters) will
be submitted to Coopers & Lybrand L.L.P., or, if that firm declines to act as
provided in this paragraph, another firm of independent certified accountants
mutually acceptable to the Buyer and the Seller (in either case, the
"Accounting Arbiter"), which firm will make a final and binding determination
as to the matters in dispute within 45 days after its appointment. The
Accounting Arbiter will send its written determination to the Buyer and the
Seller, together with a calculation of the Working Capital Adjustment Amount
which results from that determination, at which point the determination of the
Accounting Arbiter, and the resulting calculation of the Working Capital
Adjustment Amount, will be binding on the Buyer and the Seller, absent fraud or
manifest error. The fees and expenses of the Accounting Arbiter will be borne
equally by the Buyer and the Seller.
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<PAGE> 11
(f) The date (the "Post-Closing Adjustment Date") upon which
the payment described in paragraph (a) is to be made shall be the day which is
three days after the earliest of (i) the day during the Objection Period when
the Buyer receives the Seller's written acceptance of the Working Capital
Adjustment Schedule, (ii) the last day of the Objection Period if the Buyer has
not received the Seller's written objection to any item on the Working Capital
Schedule, (iii) the day when the Buyer and the Seller agree upon the Working
Capital Adjustment Amount or (iv) the day on which the Accounting Arbiter
delivers its written determination to the Buyer and the Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SELLER AND THE COMPANY
The Seller and the Company, jointly and severally, represent and
warrant to the Buyer as follows:
3.1 Existence and Qualification.
(a) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Oklahoma and is
duly qualified to do business in each jurisdiction where it conducts business,
except where the failure to so qualify would not have a Seller Material Adverse
Effect. The Seller has all requisite corporate power and authority to own the
Shares, and to conduct its business and to own or lease its properties, as now
conducted, owned or leased.
(b) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified to do business in each jurisdiction where it conducts business,
except where the failure to so qualify would not have a Company Material
Adverse Effect. The Company has all requisite corporate power and authority to
conduct its business and to own or lease its properties, as now conducted,
owned or leased.
3.2 Capitalization; Ownership of Shares; Subsidiary. The
authorized capital stock of the Company consists of 100,000 shares of Bonray
Common Stock, of which 100,000 shares are issued and outstanding. All of the
issued and outstanding shares of capital stock of the Company have been duly
authorized and are validly issued, fully paid and nonassessable. None of the
issued shares of capital stock have been issued in violation of preemptive or
similar rights. There are no outstanding subscriptions, convertible or
exchangeable securities, warrants, options, contracts, calls, or other rights
of any kind
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<PAGE> 12
committing or obligating the Company to issue or sell any issued or unissued
shares of its capital stock, or any securities or obligations of any kind
convertible into its capital stock. All of the Shares are owned beneficially
and of record by the Seller, free and clear of all Liens, except as set forth
in Schedule 3.2. The Company owns no interest in any corporation, partnership,
limited liability company or other incorporated or unincorporated entity.
3.3 Authority; Binding Effect.
(a) Seller has all necessary power and authority to enter into
and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
have been duly and validly authorized by the Seller's Board of Directors, which
constitutes all necessary corporate action on the part of the Seller for such
authorization. No vote of the Seller's stockholders is required for the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Seller and constitutes a valid and binding agreement of the
Seller, enforceable against the Seller in accordance with its terms. All
agreements required hereunder to be executed and delivered by the Seller at the
Closing, upon execution and delivery in accordance with the provisions hereof,
will constitute valid and binding agreements enforceable against the Seller in
accordance with their terms.
(b) The Company has all necessary power and authority to enter
into and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
have been duly and validly authorized by the Company's Board of Directors and
stockholder, which constitutes all necessary corporate action on the part of
the Company for such authorization. This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms. All
agreements required hereunder to be executed and delivered by the Company at
the Closing, upon execution and delivery in accordance with the provisions
hereof, will constitute valid and binding agreements enforceable against the
Company in accordance with their terms.
3.4 No Conflicts. Except as set forth in Schedule 3.4 hereto,
the execution and delivery by the Seller and the Company of this Agreement, and
the performance by the Seller and the Company of the transactions contemplated
hereby, will not: (i) conflict with, or result in a violation or breach of,
any provision of the charter documents or by-laws of the Seller or the Company,
(ii) conflict with, or result in any violation or breach of, or constitute a
default under, any term or provision of any Material Agreement to which the
Seller or the Company is a party or by which their respective
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properties or assets are bound, (iii) conflict with, or result in any violation
of, any law, ordinance, statute, rule or regulation of any Governmental
Authority or of any order, writ, injunction, judgment or decree of any court,
arbitrator or Governmental Authority applicable to the Seller or the Company,
except, in the case of clauses (ii) and (iii), for any conflicts, violations,
breaches or defaults that would not (a) reasonably be expected to have a
Company Material Adverse Effect or (b) prevent the Seller or the Company from
consummating the transactions contemplated by this Agreement.
3.5 Consents and Filings. There is no requirement applicable
to the Seller or the Company to obtain any consent, approval or authorization
of, or to make or effect any declaration, filing or registration with, any
Governmental Authority for the valid execution and delivery by the Seller and
the Company of this Agreement, the due performance by the Seller and the
Company of their respective obligations hereunder or the lawful consummation of
the transactions contemplated hereby, except filings required with respect to
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and
except for consents, approvals, authorizations, filings and permits, which the
failure to obtain or make would not (i) reasonably be expected to have a
Company Material Adverse Effect or (ii) prevent the Seller or the Company from
consummating the transactions contemplated by this Agreement.
3.6 Litigation. Except as set forth on Schedule 3.6 hereto,
there are no actions, suits, inquiries, investigations or other proceedings
pending, or to the knowledge of the Seller, threatened against the Company or
its respective properties or assets which would be reasonably expected to (i)
have a Company Material Adverse Effect or (ii) question the validity of this
Agreement or any action taken or to be taken by the Seller or the Company in
connection herewith.
3.7 Compliance with Laws. Except as set forth on Schedule 3.7,
the Company is not in breach or violation of (i) any provision of its charter
documents or bylaws, (ii) any term or provision of any Material Agreement to
which it is a party or by which its properties or assets may be bound or (iii)
any law, ordinance, statute, rule or regulation of any Governmental Authority
or of any order, writ, injunction, judgment or decree of any court, arbitrator
or Governmental Authority applicable to it or its properties or assets, except,
in the case of clauses (ii) and (iii), for breaches, violations or defaults
which would not reasonably be expected to have a Company Material Adverse
Effect.
3.8 Financial Statements. The Seller has previously provided
the Buyer with (i) audited financial statements of the Company as of and for
the year ended December 31, 1996, consisting of balance sheets as of such date
and a statement of operations and a statement of cash flow for the year then
ended and accompanied by a report of Ernst & Young, L.L.P. with respect thereto
(the "Company Audited Financial Statements"), and (ii)
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the unaudited financial statements of the Company as of and for the six months
ended June 30, 1997, which financial statements consist of a balance sheet as
of such date and a statement of operations and a statement of cash flows for
the six months then ended (the "Company Unaudited Financial Statements" and,
together with the Audited Financial Statements, the "Company Financial
Statements"). The Company Financial Statements have been prepared and
presented in accordance with GAAP applied on a consistent basis (except that
the Company Unaudited Financial Statements do not contain notes and may be
subject to normal audit adjustments), and the Company Financial Statements
present fairly the financial position and results of operations and changes in
cash flows of the Company as of the dates and for the periods indicated. The
income reflected in the Company Financial Statements consists of ordinary
operating profits and, except as noted in the Company Financial Statements none
of such income is due to a sale or transaction outside of the Company's
ordinary course of business (whether or not such sale or transaction would be
otherwise classified as an extraordinary event under GAAP).
3.9 Absence of Undisclosed Liabilities. The Company has no
debt or liability of any kind, whether accrued, absolute, contingent or
otherwise, including, without limitation, any debt or liability on account of
taxes or any governmental charges or penalty, interest or fines, except (i) as
set forth in Schedule 3.9 (which debt or liability will be fully and
unconditionally released on or before the Closing Date), (ii) as and to the
extent disclosed or reserved against in the Company Financial Statements or
(iii) for debts or liabilities which were incurred by the Company since the
date of the Company Unaudited Financial Statements in the ordinary course of
business consistent with past practice and would not, individually or in the
aggregate, be reasonably expected to result in a Company Material Adverse
Effect. As of the Closing Date, the Company will have no debt or liability of
any kind which would constitute or qualify as a "long term liability," as such
term is defined in accordance with GAAP.
3.10 Assets, Properties, etc.. The Company has good and
indefeasible title to all properties and assets, real, personal, tangible and
intangible, owned by it, free and clear of all Liens, except for Permitted
Liens. Except as set forth on Schedule 3.10, the Company has good and
indefeasible title to all properties and assets, real, personal, tangible and
intangible reflected in the Company Unaudited Financial Statements or acquired
after such date, except for properties and assets disposed of in the ordinary
course of business after June 30, 1997, and except for such deficiencies as
would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
3.11 Absence of Certain Changes and Events. Since June 30,
1997, except as set forth in Schedule 3.11, the Company has conducted its
business only in the ordinary course consistent with past practice and there
has not been any Company Material Adverse Effect or, to the knowledge of the
Seller, any event or occurrence or development that
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would reasonably be expected to result in a Company Material Adverse Effect,
and the Company has not:
(a) amended its Certificate of Incorporation or bylaws;
(b) consolidated with, or merged with or into, any person;
(c) declared or set aside or paid any dividend or distribution
(whether in stock, cash or property) on shares of its capital stock;
(d) issued, sold or disposed of any shares of its capital
stock or any options, warrants, calls or other rights to acquire any shares of
its capital stock;
(e) changed its accounting methods or principles, except as
required by law or as a result of any mandatory change in accounting standards
that would be required to be disclosed in the Company Financial Statements
pursuant to GAAP;
(f) increased the compensation payable or to become payable to
the employees of the Company, increased benefits or benefit plan costs (other
than costs outside of the control of the Company), or increased any bonus,
insurance, pension, compensation or other benefit arrangement made for, with or
covering any directors, officers or employees, except in the ordinary course of
business;
(g) experienced any labor dispute, strike or lockout,
slowdown, stoppage, unfair labor practice complaint, grievance procedure or
employment arbitration proceeding;
(h) sold, assigned or transferred any material asset other
than in the ordinary course of business;
(i) borrowed money or incurred any material obligation, other
than in the ordinary course of business;
(j) made any material capital expenditure or committed to make
a material capital expenditure (exclusive of expenditures for repair or
maintenance of equipment) other than in the ordinary course of business; or
(k) canceled, terminated or substantively amended any Material
Agreement.
3.12 Tax Matters.
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(a) All Tax Returns required to be filed on or before the
Closing Date by or on behalf of, or in which is required to be reported the
income, gains, losses, deductions, or credits of, the Company have been or will
be filed within the time prescribed by law (including extensions of time
permitted by the appropriate taxing authority).
(b) The Company has paid or will pay, on a timely basis
(including extensions), all Taxes of the Company that are due on or before the
Closing Date (including, but not limited to, Taxes shown to be due on the Tax
Returns described in the preceding paragraph), except those Taxes that are
being disputed in good faith. Adequate provision has been made in the Company
Financial Statements for all Tax liabilities of the Company which are
attributable to periods or partial periods ending prior to the Closing Date.
(c) Except as set forth on Schedule 3.12(c), there are no
liens (other than Permitted Liens) for Taxes upon any of the properties or
assets of the Company except liens for Taxes not yet due.
(d) Except as set forth on Schedule 3.12(d), there are no
pending audits, actions, proceedings, investigations, disputes or claims with
respect to any Taxes payable by or asserted against the Company. The Company
has not received written notice from any taxing authority of its intent to
examine or audit any Tax Returns of the Company.
(e) Except as set forth on Schedule 3.12(e), the Company does
not have any liability for the Taxes of any person other than the Company under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign tax law), as a transferee or successor, by contract, or otherwise.
(f) Schedule 3.12(f) hereto lists (i) each foreign country in
which the Company currently is, or has been, subject to foreign income Tax and
(ii) the taxable years or periods of the Company for which the applicable
periods of limitation for the assessment of foreign income Taxes are currently
open for each such foreign country.
(g) Schedule 3.12(g) hereto lists (i) each state in which the
Company is, or has been, subject to state income Tax and (ii) the taxable years
or periods of the Company for which the applicable periods of limitation for
the assessment of state income Taxes are currently open for each such state.
(h) Schedule 3.12(h) hereto lists each state in which the
Company currently is, or has been, subject to state sales or use Tax, or is
currently doing or has done business, within the three year period preceding
the Closing Date.
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(i) Except as set forth in Schedule 3.12(i), no agreements
relating to the allocation or sharing of, or liability or indemnification for,
Taxes exist among the Company and any other person.
(j) All Taxes required by law to be withheld or collected by
the Company (including, but not limited to, Taxes required to be withheld with
respect to amounts paid or owing to any officer, employee, creditor,
stockholder, independent contractor or other person) have been timely withheld
or collected and, to the extent required by law, have been timely paid,
remitted or deposited to or with the relevant taxing authority.
(k) As of the Closing Date, (i) all material undisputed
assessments or asserted deficiencies made as a result of any examination of the
Company's Tax Returns have been paid or accrued, (ii) no material adjustments
or assessments for Taxes have been proposed in writing against the Company, and
(iii) to the knowledge of Seller, there does not exist any proper basis for any
material assessment or adjustment for Taxes against the Company which has not
yet been proposed in writing.
(l) No closing agreement or agreements pursuant to Section
7121 of the Code or any similar provision of any state, local or foreign law
has been entered into by or with respect to the Company which requires the
Company to include any item of income in, or exclude any item of deduction
from, any Tax Return for any taxable period ending after the Closing Date.
(m) Except as set forth in Schedule 3.12(m), there are no
requests for rulings, outstanding subpoenas or unsatisfied written requests
from any taxing authority for information with respect to Taxes of the Company
and, to the knowledge of the Company, there are no material proposed
reassessments (for property or ad valorem Tax purposes) of any assets or any
property owned (or leased in the case of leased property or assets with respect
to which the Company is responsible for the payment of property Taxes) by the
Company.
(n) There are no outstanding agreements or waivers that would
extend the statutory period in which a taxing authority may assess or collect a
Tax against the Company or for which the Company may be liable.
(o) The Company has not agreed to make any adjustment pursuant
to Section 481(a) of the Code (or any predecessor provision) by reason of any
change in any accounting method of the Company, and the Company does not have
any application pending with any taxing authority requesting permission for any
changes in any accounting method of the Company. Neither the IRS nor any other
taxing authority has proposed, and
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the Company is not otherwise required to make, any such adjustment or change in
accounting method.
(p) The Company is not a foreign person within the meaning of
Section 1445 of the Code.
3.13 Overtime, Back Wages, Vacation and Minimum Wages. Except
as set forth on Schedule 3.13 hereto, and except for claims accrued as a
liability of the Company and included in the Company Financial Statements, to
the Seller's knowledge no present or former employee of the Company has any
material claim against the Company on account of or for (i) overtime pay, other
than overtime pay for the current payroll period, (ii) wages or salary for any
period other than the current payroll period, (iii) vacation, time off or pay
in lieu of vacation or time off other than that earned in respect of the
current year, or (iv) any violation of any statute, ordinance or regulation
relating to minimum wages or minimum hours of work.
3.14 Contracts, Agreements, Plans and Commitments. The Company
has not entered into any footage or turn-key contracts that are reasonably
expected to result in a loss. Schedule 3.14 hereto sets forth all Material
Agreements of the Company (including all amendments, modifications and
supplements thereto). Copies of each Material Agreement have been previously
provided to Buyer. The Company has complied with the material provisions of
all Material Agreements (including without limitation leases and right-of-way
grants) and no default or event of default (by the Company or any other person
or entity) exists under any of the Material Agreements and the Material
Agreements constitute valid and legally binding obligations of the Company and
of each other person or entity that is a party thereto enforceable against each
party in accordance with their terms. None of the Material Agreements limit
the freedom of the Company to compete in any line of business or with any
person or in any geographical area. The enforceability of the Material
Agreements and the ability of the Company to exercise its rights, privileges
and remedies thereunder will not be affected in any manner by the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated herein.
3.15 Employee Benefit Matters.
(a) Schedule 3.15 sets forth each "employee benefit plan," as
defined in section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and all other employee compensation and benefit
arrangements or payroll practices, including, without limitation, all severance
pay, sick leave, vacation pay, salary continuation for disability, consulting
or other compensation agreements, retirement, deferred compensation, bonus,
long-term incentive, stock option, stock purchase,
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hospitalization, medical insurance, life insurance, and scholarship plans or
programs maintained by, covering any employee of the Company or any subsidiary,
or to which the Company or any subsidiary is or has contributed or is or has
been obligated to contribute within the past six years (all such plans or
arrangements being hereinafter referred to as the "Employee Benefit Plans").
The Company has no commitment or obligation to establish or adopt any new or
additional Employee Benefit Plans or to materially increase the benefits under
any existing Employee Benefit Plan.
(b) Except as otherwise disclosed on Schedule 3.15, each
Employee Benefit Plan that is an "employee pension benefit plan," as defined in
section 3(2) of ERISA, (a "Pension Plan") is intended to qualify under section
401 of the Code and each trust maintained pursuant thereto is intended to be
exempt from federal income taxation under section 501 of the Code, and the
Company has received a determination letter from the Internal Revenue Service
with respect to each such Pension Plan and trust to the effect that such
Pension Plan and trust are so qualified and exempt. No such determination
letter has been revoked, and to the knowledge of the Company, revocation has
not been threatened and nothing has occurred with respect to the operation of
any such Pension Plan that could reasonably be expected to cause such
revocation. None of such Pension Plans have been amended since the effective
date of each respective determination letter in any respect that might
adversely affect its qualification, increase its cost or require security under
section 307 of ERISA.
(c) With respect to each Employee Benefit Plan, the Company
has delivered or made available to Buyer (i) a true, correct, and complete copy
of each Employee Benefit Plan, including, in the case of a Pension Plan, copies
of all amendments made since the most recent favorable determination letter,
or, in the case of any unwritten Employee Benefit Plan, descriptions thereof;
(ii) copies of the determination letters with respect to each Employee Benefit
Plan, as applicable; (iii) copies of the most recent Form 5500 filed with the
Service with respect to each Employee Benefit Plan for which such report is
required by applicable law; (iv) the most recent summary plan description for
each Employee Benefit Plan for which such a summary plan description is
required by applicable law; and (v) each trust agreement and insurance or
annuity contract relating to any Employee Benefit Plan.
(d) Except as disclosed on Schedule 3.15, neither the Company
nor any ERISA Affiliate has ever contributed to any plan subject to section 413
of the Code or multiple employer welfare arrangement, as defined in section
3(40) of ERISA. An "ERISA Affiliate" shall mean any trade or business (whether
or not incorporated) which is under common control, or which is treated as a
single employer, with the Company under section 414(b), (c), (m) or (o) of the
Code ("ERISA Affiliate").
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(e) Except as disclosed on Schedule 3.15, (i) all
contributions to, and payments from, each Employee Benefit Plan that have been
required to be made in accordance with the terms of such plans and, when
applicable, section 302 of ERISA or section 412 of the Code, have been timely
made, (ii) there has been no application for or waiver of the minimum funding
standards of section 412 of the Code with respect to any Pension Plan or for
any "defined benefit plan," as defined in Section 3(35) of ERISA maintained or
contributed to by the Company or by any ERISA Affiliate (a "Defined Benefit
Plan") and (iii) none of the Defined Benefit Plans has an "accumulated funding
deficiency" within the meaning of section 412(a) of the Code as of the end of
the most recently completed plan year. All such contributions to, and payments
from any Employee Benefit Plan, except those payments to be made from a trust
exempt from taxation under section 501 of the Code, for any period ending
before the Closing Date that are not yet but will be required to be made will
be properly accrued and will be disclosed on Schedule 3.15. Except as
disclosed on Schedule 3.15, as of the most recent valuation date for each
Defined Benefit Plan, there was no amount of "unfunded benefit liability," as
defined in section 4001(a)(18) of ERISA under such Defined Benefit Plan, and
the Company is not aware of any facts or circumstances that could materially
adversely change the funded status of such Defined Benefit Plan. The Company
has furnished or made available to Buyer the most recent actuarial report or
valuation with respect to each Defined Benefit Plan and, as applicable,
Employee Benefit Plan and with a letter of the actuary which outlines such
plan's funded status, on both an ongoing and termination basis, as of the most
recent valuation date. The information supplied to the actuary by the Company
(or ERISA Affiliate) for use in preparing these reports was complete and
accurate in all respects and the Company (or ERISA Affiliate) has no reason to
believe that the conclusions expressed in the letter were inaccurate.
(f) Except as disclosed on Schedule 3.15, neither the Company
nor an ERISA Affiliate has incurred any liability to a Defined Benefit Plan
(other than for contributions not yet due) that has not been fully paid as of
the date hereof and all premium payments due to the Pension Benefit Guaranty
Corporation pursuant to section 4007 of ERISA prior to the date hereof have
been timely paid.
(g) Except as disclosed on Schedule 3.15, the Employee Benefit
Plans have been maintained and administered, in all material respects, in
accordance with their terms and with all provisions of ERISA (including rules
and regulations thereunder), the Code, and other applicable Federal and state
law, and none of the Company, any ERISA Affiliate, any "party in interest" or
any "disqualified person" with respect to the Employee Benefit Plans has
engaged in a "prohibited transaction" within the meaning of section 4975 of the
Code or section 406 of ERISA with respect to the Employee Benefit Plans. No
event has occurred that could subject any Employee Benefit Plan, as applicable,
to tax under section 511 of the Code.
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(h) Except as disclosed on Schedule 3.15, there is no
violation of ERISA, the Code or other applicable law with respect to the filing
of reports, returns, and other similar documents required to be filed with any
governmental agency with respect to any Employee Benefit Plan and all reports,
returns or similar documents required to be distributed to any Employee Benefit
Plan participant have been timely distributed.
(i) Except as disclosed on Schedule 3.15, none of the Company,
any trustee, administrator or other fiduciary of an Employee Benefit Plan has
engaged in any transaction or acted in a manner that could, or failed to act so
as to, subject the Company or any fiduciary to any liability for breach of
fiduciary duty under ERISA or other applicable law.
(j) Except as disclosed in Schedule 3.15, there has been no
"reportable event" as that term is defined in section 4043 of ERISA and the
regulations thereunder with respect to the Defined Benefit Plan subject to
Title IV of ERISA that would require the giving of notice or any event
requiring disclosure under section 4041(c)(3)(C) or 4063(a) of ERISA.
(k) Except as disclosed on Schedule 3.15, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment becoming due to
any employee or group of employees of the Company or of any ERISA Affiliate;
(ii) increase any benefits otherwise payable under any Employee Benefit Plan or
(iii) result in the acceleration of the time of payment or vesting of any such
benefits. Except as disclosed on Schedule 3.15, there are no severance
agreements or employment agreements between the Company and any employee of the
Company. The Company has no leased employees, as defined in Section 414(n) of
the Code. Except as set forth on Schedule 3.15, the Company has no consulting
agreements or arrangement with any person for the provision of personal
services, except as are terminable upon one month's notice or less.
(l) Except as disclosed on Schedule 3.15, the Company and
all ERISA Affiliates have complied in all material respects with all
obligations imposed by Section 4980B of the Code and no employee or former
employee of the Company or any ERISA Affiliate is, by reason of such employee's
or former employee's employment, entitled to receive any benefits, including
without limitation, death or medical benefits (whether or not insured) beyond
retirement or other termination of employment, other than (i) death or
retirement benefits under a Pension Plan or (ii) continuation coverage pursuant
to section 4980B of the Code.
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(m) Except as disclosed on Schedule 3.15, there are no
investigations by any governmental agency, other claims, suits or proceedings
against or involving any Company Pension Plan or Company Employee Benefit Plan,
and, to the knowledge of the Company, there is no basis for any such
investigation, legal action or proceeding.
3.16 Employment Matters; Labor Relations.
(a) Set forth on Schedule 3.16(a) is a list of all employees,
officers or managers of the Company, their current rates of compensation, their
length of service with the Company. Schedule 3.16 sets forth a true, complete
and accurate description of all practices, policies, understandings and
agreements with all such employees relating to their employment. All contracts
and arrangements with employees are in full force and effect, and neither the
Company nor, to the Company's knowledge, any other person or entity is in
default under any of them. In the conduct of its affairs and business, as of
the Closing Date the Company has complied with all applicable laws and
regulations relating to the employment of labor including those related to
wages, hours, discrimination, employee pension and welfare benefit plans,
collective bargaining, and the payment of Social Security or similar taxes, and
the Company has withheld and paid to the appropriate governmental authority all
amounts required by law or agreement to be withheld from wages or salaries of
such employees.
(b) There is no pending or, to the Seller's knowledge,
threatened labor dispute, strike or lockout, slowdown, stoppage, unfair labor
practice complaint, grievance procedure or arbitration proceeding relating to
the Company. No employees of the Company are subject to any collective
bargaining agreement or labor contracts. There are currently no efforts
underway respecting proposed union representation of the employees of the
Company and no collective bargaining agreement is currently being negotiated.
(c) The Seller has provided to the Buyer with copies of all
Occupational Safety and Health Administration ("OSHA") reports having to do
with the Company, its operations or its business and received by the Company
during the last three years. No other oral or written complaints or notices
have been received by the Company from OSHA or any other regulatory agencies or
offices having jurisdiction over health or safety matters relating to the
Company. All matters noticed in such reports have been resolved or cured as of
the Closing Date.
(d) Neither the Company nor any person with whom the Company
would be treated as an "employer" for purposes of the Worker Adjustment and
Retraining Notification Act or any similar state law ("WARN") has taken any
action or failed to take any action which could result in any liability or
obligation under WARN.
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3.17 Environmental Compliance.
(a) The Company is and has been in compliance with all
applicable Environmental Laws, except where the failure to do so would not
reasonably be expected to have a Company Material Adverse Effect. The Company
has obtained and is and has been in material compliance with all permits
required under applicable Environmental Laws. Neither the Seller nor the
Company knows or has reason to suspect that there is any past or present event,
condition or circumstance that is likely to interfere with the conduct of the
business of the Seller in the manner now conducted or which would interfere in
any material respect with the Seller's compliance with Environmental Laws or
constitute a material violation thereof.
(b) Neither the Company nor any property previously owned by
the Company, is subject to any actual or, to the knowledge of the Seller,
potential action, claim, investigation, review or other proceeding by any third
party or before any governmental, judicial or regulatory body, under or based
upon any Environmental Law or exposure to hazardous or toxic substances.
(c) The facilities and property presently owned or leased by
the Company have been operated in material compliance with all applicable
Environmental Laws and are not (and would not be, if all relevant facts were
known to the applicable governmental authorities) subject to any removal,
clean-up, remediation, restoration or recordation obligations under such laws,
except such as would not reasonably be expected to have a Company Material
Adverse Effect. There are no underground or above-ground storage tanks or pits
on the real property now or previously owned or leased by the Company that
require (or that would require, if all relevant facts were known to the
applicable governmental authorities) removal, clean-up, remediation,
restoration, reporting, notification, recordation or any other action except as
would not reasonably be expected to have a Company Material Adverse Effect.
(d) No hazardous substances, solid wastes or other wastes
generated by the Company (or, to the knowledge of the Seller, from properties
previously owned by the Company) have been sent to a site which, pursuant to
any applicable Environmental Law, has been placed, or is proposed to be placed,
on the "National Priority List" or any similar state list of hazardous waste
sites or which is subject to a claim, administrative order or other request to
take any cleanup, removal or remedial action or to pay for any costs relating
to such site. All hazardous substances, solid wastes and other wastes
generated by the Company (or, to the knowledge of the Seller, any properties
previously owned by the Company) and requiring disposal have, to the extent
required by any Environmental Law, been transported only by authorized carriers
and been treated, stored and disposed of only at permitted facilities.
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(e) The Seller shall provide to the Buyer true and correct
copies of all environmental audits, assessments or other reports with respect
to the compliance by the Company with, or liability of the Company under,
Environmental Laws.
3.18 Improper Payments. Neither the Company, any officer,
agent or employee of the Company, nor, to the Company's knowledge, any
distributor or licensee of any of the foregoing, nor any other person or entity
(including, without limitation, any Affiliate of the Seller) acting on behalf
of the Company, in any case for which such action may be attributable to the
Company, has directly or indirectly, on behalf of or with respect to the
Company, (i) made any political contributions with funds of the Company, (ii)
made any payment which was not legal to make or which was not legal for the
payee to receive, (iii) received any payment which was not legal to receive or
which was not legal for the payor to make, (iv) executed any material
transaction or payment which is not properly booked in accordance with GAAP or
(v) had any off-book bank or cash accounts of which the Company was the
beneficial owner.
3.19 Brokers and Finders. The Seller has not incurred any
liability, contingent or otherwise, for brokers' or finders' fees in respect of
this transaction for which the Buyer shall have any responsibility whatsoever.
3.20 Securities Law Matters. The Seller hereby acknowledges
that the shares of Bayard Stock to be transferred to the Seller pursuant to
this Agreement will not be registered under the Securities Act of 1933, as
amended (the "Securities Act"), or any applicable state securities laws. The
Seller represents and warrants to the Buyer that the Seller (i) has reviewed
such information as the Seller has deemed relevant in connection with the
acquisition of such securities, and (ii) is acquiring such securities for
investment purposes only and not with a view to, or in connection with, a
distribution.
3.21 Disclosure. Neither this Agreement nor any certificate,
instrument, or written statement or schedule furnished or to be furnished to
the Buyer by the Seller contains or will contain an untrue statement of
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which they were made, not misleading. There is no fact which the Seller has
not disclosed to the Buyer and of which the Seller has knowledge which
materially and adversely affects or which could reasonably be expected to
materially and adversely affect the business, condition (financial or
otherwise), prospects, operations, property or affairs of the Company as
proposed to be conducted or the ability of the Seller to perform its
obligations hereunder or under any agreement, document or instrument entered in
connection with the transactions contemplated hereby.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND NEWCO
The Buyer and Newco, jointly and severally, represent and warrant
to the Seller as follows:
4.1 Organization.
(a) The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified to do business in each jurisdiction where it conducts business
except where the failure to so qualify would not have a Buyer Material Adverse
Effect. The Buyer has all requisite corporate power and authority to conduct
its business and to own or lease its properties, as now conducted, owned or
leased.
(b) Newco is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and is qualified
to do business in each jurisdiction where it conducts business. Newco has all
requisite corporate power and authority to conduct its business and to own or
lease its properties, as now conducted, owned or leased.
4.2 Authority; Binding Effect.
(a) Buyer has all necessary power and authority to enter into
and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
have been duly and validly authorized by the Buyer's Board of Directors, which
constitutes all necessary corporate action on the part of the Buyer for such
authorization. This Agreement has been duly executed and delivered by the
Buyer and constitutes a valid and binding agreement of the Buyer, enforceable
against the Buyer in accordance with its terms. All agreements required
hereunder to be executed and delivered by the Buyer at the Closing will, upon
execution and delivery in accordance with the provisions hereof, constitute
valid and binding agreements enforceable against the Buyer in accordance with
their terms.
(b) Newco has all necessary power and authority to enter into
and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
have been duly and validly authorized by Newco's Board of Directors, which
constitutes all necessary corporate action on the part of Newco for such
authorization. This Agreement has been duly executed and delivered by Newco
and constitutes a valid and binding agreement of the Newco,
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enforceable against Newco in accordance with its terms. All agreements
required hereunder to be executed and delivered by Newco at the Closing will,
upon execution and delivery in accordance with the provisions hereof,
constitute valid and binding agreements enforceable against Newco in accordance
with their terms.
4.3 Capitalization; Bayard Common Stock. The authorized
capital stock of the Buyer consists of (i) 100,000,000 shares of Bayard Common
Stock, of which 10,932,000 shares are issued and outstanding and (ii)
20,000,000 shares of preferred stock, par value $0.01 per share, of which no
shares are issued and outstanding. All of the issued and outstanding shares of
Bayard Common Stock are validly authorized and issued, fully paid and
nonassessable and have not been issued in violation of preemptive or similar
rights. Except as set forth on Schedule 4.3, there are no outstanding
subscriptions, convertible or exchangeable securities, warrants, options,
contracts, calls, or other rights of any kind committing or obligating the
Buyer to issue or sell any issued or unissued shares of its capital stock, or
any securities or obligations of any kind convertible into its capital stock.
The shares of Bayard Common Stock to be issued to the Seller in connection with
this transaction are duly authorized and, when issued in accordance with the
terms of this Agreement, will be validly issued, fully paid and nonassessable.
4.4 Financial Statements. The Buyer has previously provided
the Seller with (i) audited financial statements of the Buyer as of and for
the year ended December 31, 1996, consisting of a balance sheet as of such date
and a statement of operations and statement of cash flow for the year then
ended and accompanied by a report of KPMG Peat Marwick, L.L.P. with respect
thereto, and (ii) unaudited financial statements of the Buyer as of and for the
six months ended June 30, 1997, which financial statements consist of a balance
sheet as of such date and a statement of operations and statement of cash flow
for the six months then ended (the "Buyer Financial Statements"). The Buyer
Financial Statements have been prepared and presented in accordance with GAAP
applied on a consistent basis (except that the unaudited financial statements
do not contain notes and may be subject to normal audit adjustments), and the
Buyer Financial Statements present fairly the financial position and results of
operations and changes in cash flows of the Buyer as of the dates and for the
periods indicated. The income reflected in the Buyer Financial Statements
consists of ordinary operating profits and, except as noted in the Buyer
Financial Statements, none of such income is due to a non-reoccurring sale or
transaction outside of the Buyer's ordinary course of business (whether or not
such sale or transaction would be otherwise classified as an extraordinary
event under GAAP).
4.5 Absence of Undisclosed Liabilities. The Buyer has no debt
or liability of any kind, whether accrued, absolute, contingent or otherwise,
including, without limitation, any debt or liability on account of taxes or any
governmental charges or penalty, interest or fines, except (i) as set forth in
Schedule 4.5, (ii) as and to the extent disclosed
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or reserved against in the Buyer Financial Statements or (iii) for debts or
liabilities which were incurred by the Buyer since June 30, 1997 in the
ordinary course of business consistent with past practice and would not,
individually or in the aggregate, be reasonably expected to result in a Buyer
Material Adverse Effect.
4.6 Brokers and Finders. The Buyer has incurred no liability,
contingent or otherwise, for brokers' or finders' fees in respect of this
transaction for which the Seller will have any responsibility whatsoever.
4.7 Securities Law Matters.
(a) The Buyer hereby acknowledges that the Shares will not be
registered under the Securities Act of 1933 or any applicable state securities
laws. The Buyer represents and warrants to the Seller that the Buyer (i) has
reviewed such information as the Buyer has deemed relevant in connection with
the Buyer's acquisition of such securities, and (ii) is acquiring such
securities for investment purposes only and not with a view to, or in
connection with, a distribution.
(b) The shares of Bayard Stock to be transferred to the Seller
pursuant to this Agreement will not be registered under the Securities Act or
any applicable state securities laws. Such securities will be issued to the
Seller in reliance upon the exemption from registration contained in Section
4(2) of the Securities Act and similar provisions of state securities laws.
4.8 Consents and Filings. There is no requirement applicable
to the Buyer or Newco to obtain any consent, approval or authorization of, or
to make or effect any declaration, filing or registration with, any
Governmental Authority for the valid execution and delivery by the Buyer or
Newco of this Agreement, the due performance by the Buyer or Newco of their
respective obligations hereunder or the lawful consummation of the transactions
contemplated hereby, except filings required with respect to the HSR Act and
except for consents, approvals, authorizations, filings and permits, which the
failure to obtain or make would not (i) reasonably be expected to have a Buyer
Material Adverse Effect or (ii) prevent the Buyer or Newco from consummating
the transactions contemplated by this Agreement.
4.9 No Litigation. There are no actions, suits, inquiries,
investigations or other proceedings pending, or, to the knowledge of Buyer, any
basis therefor or threat thereof, against Buyer, its properties or its assets,
which (i) question the validity of this Agreement or the ability of the Buyer
to consummate the transactions contemplated by this Agreement or (ii) would (a)
reasonably be expected to have a Buyer Material Adverse
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Effect or (b) prevent the Buyer or Newco from consummating the transactions
contemplated by this Agreement.
4.10 No Conflicts. Except as set forth in Schedule 4.10
hereto, the execution and delivery by the Buyer and Newco of this Agreement,
and the performance by the Buyer or Newco of the transactions contemplated
hereby, will not: (i) conflict with, or result in a violation or breach of,
any provision of the charter documents or by-laws of the Buyer or Newco, (ii)
conflict with, or result in any violation or breach of, or constitute a default
under, any term or provision of any material mortgage, indenture, deed of
trust, note, bond, lease, permit, license or other instrument, contract or
agreement to which the Buyer or Newco is a party or by which their respective
properties or assets are bound, (iii) conflict with, or result in any violation
of, any material law, ordinance, statute, rule or regulation of any
Governmental Authority or of any order, writ, injunction, judgment or decree of
any court, arbitrator or Governmental Authority applicable to the Buyer or
Newco except, in the case of clause (ii) and (iii), for any conflicts,
violations, breaches or defaults that would not reasonably be expected to have
a Buyer Material Adverse Effect.
4.11 Disclosure.
(a) Neither this Agreement nor any certificate, instrument, or
written statement or schedule furnished or to be furnished to the Seller on
behalf of the Buyer contains or will contain an untrue statement of material
fact or omits to state a material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which they were made, not misleading. There is no fact which the Buyer has not
disclosed to the Seller and of which the Buyer has knowledge which materially
and adversely affects or which could reasonably be expected to materially and
adversely affect the business, condition (financial or otherwise), prospects,
operations, property or affairs of the Buyer as proposed to be conducted or the
ability of the Buyer to perform its obligations hereunder or under any
agreement, document or instrument entered in connection with the transactions
contemplated hereby.
(b) The Registration Statement (as hereinafter defined)
previously provided to the Seller complies in all material respects with the
rules and regulations of the Securities and Exchange Commission and does not
and will not contain an untrue statement of material fact or omit to state a
material fact necessary in order to make the statements contained therein, in
the light of the circumstances under which they were made, not misleading. As
of the date hereof there is no fact or circumstance that has not been disclosed
to the Seller that would reasonably be expected to result in Buyer Material
Adverse Effect.
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4.12 Compliance with Laws. The Buyer is not in breach or
violation of (i) any provision of its charter documents or bylaws, (ii) any
term or provision of any Material Agreement to which it is a party or by which
its properties or assets may be bound or (iii) any law, ordinance, statute,
rule or regulation of any Governmental Authority or of any order, writ,
injunction, judgment or decree of any court, arbitrator or Governmental
Authority applicable to it or its properties or assets, except, in the case of
clauses (ii) and (iii), for breaches, violations or defaults which would not
reasonably be expected to have a Buyer Material Adverse Effect.
4.13 Environmental Compliance.
(a) The Buyer is and has been in compliance with all
applicable Environmental Laws, except where the failure to do so would not
reasonably be expected to have a Buyer Material Adverse Effect. The Buyer has
obtained and is and has been in material compliance with all permits required
under applicable Environmental Laws. The Buyer does not know or have reason to
suspect that there is any past or present event, condition or circumstance that
is likely to interfere with the conduct of the business of the Buyer in the
manner now conducted or which would interfere in any material respect with the
Buyer's compliance with Environmental Laws or constitute a material violation
thereof.
(b) Neither the Buyer nor any property previously owned by the
Buyer, is subject to any actual or, to the knowledge of the Buyer, potential
action, claim, investigation, review or other proceeding by any third party or
before any governmental, judicial or regulatory body, under or based upon any
Environmental Law or exposure to hazardous or toxic substances.
(c) The facilities and property presently owned or leased by
the Buyer have been operated in material compliance with all applicable
Environmental Laws and are not (and would not be, if all relevant facts were
known to the applicable governmental authorities) subject to any removal,
clean-up, remediation, restoration or recordation obligations under such laws,
except such as would not reasonably be expected to have a Buyer Material
Adverse Effect. There are no underground or above-ground storage tanks or pits
on the real property now or previously owned or leased by the Buyer that
require (or that would require, if all relevant facts were known to the
applicable governmental authorities) removal, clean-up, remediation,
restoration, reporting, notification, recordation or any other action except as
would not reasonably be expected to have a Buyer Material Adverse Effect.
(d) No hazardous substances, solid wastes or other wastes
generated by the Buyer (or, to the knowledge of the Buyer, from properties
previously owned by the Buyer) have been sent to a site which, pursuant to any
applicable Environmental Law, has
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been placed, or is proposed to be placed, on the "National Priority List" or
any similar state list of hazardous waste sites or which is subject to a claim,
administrative order or other request to take any cleanup, removal or remedial
action or to pay for any costs relating to such site. All hazardous
substances, solid wastes and other wastes generated by the Buyer (or, to the
knowledge of the Buyer, any properties previously owned by the Buyer) and
requiring disposal have, to the extent required by any Environmental Law, been
transported only by authorized carriers and been treated, stored and disposed
of only at permitted facilities.
(e) The Buyer shall provide to the Seller true and correct
copies of all environmental audits, assessments or other reports with respect
to the compliance by the Buyer with, or liability of the Buyer under,
Environmental Laws.
4.14 Improper Payments. Neither the Buyer, any officer, agent
or employee of the Buyer, nor, to the Buyer's knowledge, any distributor or
licensee of any of the foregoing, nor any other person or entity (including,
without limitation, any Affiliate of the Buyer) acting on behalf of the Buyer,
in any case for which such action may be attributable to the Buyer, has
directly or indirectly, on behalf of or with respect to the Buyer, (i) made any
political contributions with funds of the Buyer, (ii) made any payment which
was not legal to make or which was not legal for the payee to receive, (iii)
received any payment which was not legal to receive or which was not legal for
the payor to make, (iv) executed any material transaction or payment which is
not properly booked in accordance with GAAP or (v) had any off-book bank or
cash accounts of which the Buyer was the beneficial owner.
ARTICLE V
CERTAIN COVENANTS AND AGREEMENTS
5.1 Access to Information.
(a) From the date hereof until the Closing Date, the Seller
and the Company shall grant to the Buyer and its agents and other
representatives, upon reasonable notice and during normal business hours,
access to the books and records, facilities, tangible assets and personnel of
the Company to the extent reasonably required to enable the Buyer to conduct
its due diligence review for purposes of the transactions contemplated by this
Agreement. All such information obtained by the Buyer and its agents and
representatives shall be subject to Section 5.7 of this Agreement.
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(b) From the date hereof until the Closing Date, the Buyer
shall grant to the Seller and its agents and other representatives, upon
reasonable notice and during normal business hours, access to the books and
records, facilities, tangible assets and personnel of the Buyer to the extent
reasonably required to enable the Seller to conduct its due diligence review
for purposes of the transactions contemplated by this Agreement. All such
information obtained by the Seller and its agents and representatives shall be
subject to Section 5.7 of this Agreement.
5.2 Reasonable Best Efforts. Subject to the terms and
conditions hereof, each of the parties hereto shall use its reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things which are necessary, proper or advisable under applicable laws
and regulations or otherwise in order to consummate and make effective the
transactions contemplated by this Agreement. Without limiting the generality
of the foregoing, each of the parties hereto shall execute and deliver, or
cause to be executed and delivered, all agreements, certificates and other
instruments and shall use its reasonable best efforts promptly to obtain all
waivers, permits, consents, approvals and other authorizations from, and to
effect all registrations, filings and notices with or to, any Governmental
Authorities or other Persons which are necessary or appropriate in connection
with said transactions or in order to fulfill all conditions to obligations of
the parties under this Agreement.
5.3 Conduct of Business Pending Closing.
(a) From the date hereof until the Closing, except as
permitted by this Agreement or as otherwise consented to by the Buyer in
writing, the Seller shall take all actions to cause the Company to, and the
Company shall, (a) conduct its business in the ordinary course and in a manner
consistent with past practice and to preserve its present business organization
and to maintain and preserve intact its present relationships with customers,
suppliers, insurers, lessors and licensees, (b) maintain its books, accounts
and records in the usual, regular and ordinary manner, consistent with past
practice, (c) comply in all material respects with all applicable laws and
regulations. Without limiting the generality of the foregoing, from the date
hereof until the Closing Date, except as permitted by this Agreement or as
otherwise consented to by the Buyer in writing, the Seller shall cause the
Company not to, and the Company shall not, (i) amend or modify its charter
documents or bylaws (ii) issue, sell or dispose of any shares of capital stock
of the Company or any options, warrants, calls or other rights to acquire any
shares of capital stock of the Company, (iii) consolidate or merge with any
person; (iv) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property) with respect to the capital stock of the
Company; (v) reclassify, combine split or subdivide any shares of capital stock
of the Company; (vi) change the accounting principles or methods of the
Company, except as required by law or as a result of any mandatory change in
accounting
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standards; (vii) mortgage, pledge or subject to any lien, claim or encumbrance
any of the assets of the Company, except for liens, claims or encumbrances
incurred in the ordinary course of business, consistent with past practice,
(viii) enter into, amend or terminate any Material Agreement, except in the
ordinary course of business; (ix) sell, assign, lease, transfer or dispose of
any properties or assets with a value, individually or in the aggregate, in
excess of $50,000; (x) borrow any funds, or prepay any debt obligation; (xi)
lend any funds to, or guarantee any obligations of, any person or entity; (xii)
enter any agreement or make any commitment which involves, individually or in
the aggregate, a capital expenditure of $50,000 or more; or (xiii) grant any
increase in compensation or pay or agree to pay or accrue any bonus or like
benefit to or for the benefit of any director, officer, employee or other
person, or increase benefits or benefit plan costs, or establish or increase
any bonus, insurance, pension, compensation or other Employee Benefit Plan or
Pension Plan made for or with or covering any directors, officers or employees;
provided, however, that nothing in this Section 5.3(a) shall prohibit the
Company from declaring, setting aside or paying any cash dividend or other cash
distribution with respect to the capital stock of the Company in an amount
which, after giving effect to such cash dividend or other cash distribution,
would, in the good faith estimate of the Seller, result in the Working Capital
Adjustment Amount being approximately zero; provided further, that such cash
dividend or other cash distribution shall be effected by the Company solely for
the purpose of ensuring that the Working Capital Adjustment Amount will be
approximately zero.
(b) From the date hereof until the Closing, the Buyer shall
not pay any dividend in cash or other assets of the Buyer to holders of Bayard
Common Stock.
5.4 Exclusivity. From the date hereof until the Closing, (i)
neither the Seller nor any of its Affiliates, agents or representatives shall,
directly or indirectly, solicit, encourage or accept any offer from, or
negotiate or engage in discussions with, any party with respect to the
transfer, sale, disposition or similar transaction involving the Company, or
provide any information to, any Person concerning such a transaction and (ii)
neither the Buyer nor any of its Affiliates, agents or representatives shall,
directly or indirectly, solicit, encourage or accept any offer from or
negotiate or engage in discussions with, any Person with respect to any
material acquisition transaction. Seller will promptly notify Buyer of any
inquiry (including the terms thereof and the identity of the Person making such
inquiry) which it may receive in respect of any such transaction.
5.5 Notice.
(a) The Seller and the Company shall give written notice to
the Buyer promptly after the Seller or the Company obtains knowledge of the
occurrence, or the alleged occurrence, of any event or omission which would
result in (i) any of the Seller's
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or the Company's representations or warranties being or becoming inaccurate or
misleading or (ii) any breach by the Seller or the Company of this Agreement.
(b) The Buyer shall give written notice to the Seller promptly
after the Buyer obtains knowledge of the occurrence, or the alleged occurrence,
of any event or omission which would result in (i) any of the Buyer's
representations or warranties being or becoming inaccurate or misleading or
(ii) any breach by the Buyer of this Agreement.
5.6 Return of Informational Material. If the transactions
contemplated by this Agreement are not consummated, the parties shall return to
each other all of the items of information which they have received from any
other party hereunder, including all copies of same made by the parties.
5.7 Confidentiality of Information.
(a) If the transactions contemplated by this Agreement are not
completed, Buyer (i) will keep the information furnished to it hereunder or in
contemplation hereof strictly confidential, except to the extent such
information (A) was already known to the Buyer, or (B) is furnished to the
Buyer by a third party independently of the Buyer's investigation in connection
with the transactions contemplated by this Agreement (and which such third
party is under no restriction prohibiting it from disclosing such information),
or (C) is required to be disclosed by law, provided, however, that if the Buyer
proposes to make any such disclosure required by law, the Buyer shall, at least
five business days prior to such disclosure, provide to the Seller the
information proposed to be disclosed, as well as the facts and circumstances
involved and the reason the Buyer is required to make such disclosure; and (ii)
will not use any of such information to the Buyer's financial advantage or in
competition with the Seller.
(b) From and after the Closing, the Seller shall not, directly
or indirectly, disclose or provide to any other person or entity any nonpublic
information of a confidential nature concerning the business or operations of
the Buyer (including any information related to the Company acquired pursuant
to this Agreement), except as may be required by law; provided, however, that
if the Seller proposes to make any such disclosure required by law, the Seller
shall, at least five business days prior to such disclosure, provide to the
Buyer the information proposed to be disclosed, as well as the facts and
circumstances involved and the reason the Seller is required to make such
disclosure.
5.8 Employment Matters. Except for the employment agreements
set forth on Schedule 3.16 hereto, Buyer is under no obligation to employ any
individual employed by the Company and, to the extent Buyer does employ any
such individual, such
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employment shall be at-will and Buyer shall be under no obligation to provide
compensation or benefits comparable to those provided to such individual by the
Company.
5.9 Access to and Maintenance of Records. For a period of
three years after the Closing Date, each of the Buyer and the Seller will
preserve and maintain the corporate, accounting, auditing, tax and other books
and records of the Company that are held by it or transferred pursuant to this
Agreement and will make such books and records available to each other upon
reasonable notice and at reasonable times. The Buyer and the Seller shall be
entitled to make copies of any such books and records as they shall deem
reasonably necessary for purposes of making the same available to appropriate
tax authorities or for other proper purposes.
5.10 Publicity. Each of the parties hereto agrees that it
shall not and shall not permit its respective Affiliates to make any public
statement (whether written or oral) with respect to this Agreement or the
transactions contemplated herein without the prior written consent of the other
party hereto, unless such public statement is required by law, stock exchange
requirements or legal process, in which case the party required to make such
public statement shall afford the other party reasonable opportunity to review
and comment on such statement prior to dissemination.
ARTICLE VI
CONDITIONS TO CLOSING
6.1. Conditions to the Obligations of Each of the Parties. The
obligations of the Buyer, the Seller the Company and Newco to consummate the
transactions contemplated hereby at the Closing are subject to the fulfillment,
at or prior to the Closing, of the following conditions:
(a) there shall not be any injunction, writ, temporary
restraining order or any order issued by any court or governmental agency
restraining or prohibiting the consummation of the transactions contemplated by
this Agreement; and
(b) all applicable waiting periods under the HSR Act shall
have terminated or expired and no objection shall have been made to the
transaction by either the Federal Trade Commission or the Department of
Justice.
(c) All Liens on the Shares shall have been removed, and the
Shares shall be free and clear of all Liens and the indebtedness of the Company
set forth on Schedule 3.9 hereto shall have been fully and unconditionally
released.
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6.2. Conditions to the Obligations of the Buyer and Newco. The
obligation of the Buyer and Newco to consummate the transactions contemplated
hereby at the Closing is subject to the fulfillment, or waiver by the Buyer and
Newco, at or prior to the Closing, of the following conditions:
(a) The representations and warranties of the Seller and the
Company contained in this Agreement shall be true and correct in all material
respects as of the Closing Date as if made on such date.
(b) The Seller and the Company shall have duly performed or
complied in all material respects with all of the agreements, covenants and
obligations to be performed or complied with by the Seller and the Company
under the terms of this Agreement on or prior to the Closing Date.
(c) The Buyer shall have received certificates, dated the
Closing Date, from the Seller and the Company, executed by the respective chief
executive officer and the chief financial officer of the Seller and the
Company, certifying that the conditions set forth in paragraphs (a) and (b)
above, have been fulfilled.
(d) Buyer shall have received opinions from (i) Michael
Blaschke, general counsel to the Company, (ii) Akin, Gump, Strauss, Hauer &
Feld, L.L.P., counsel to the Seller and the Company (solely as to matters
governed by Delaware law) and (iii) Fellers, Snider, Blankenship, Bailey &
Tippens, A Professional Corporation (solely as to the absence of any
requirement under Oklahoma law that a vote of the stockholders of the Seller be
obtained in order to consummate the transactions contemplated hereby), each
dated the Closing Date, and each in form and substance reasonably satisfactory
to the Buyer.
(e) Each of the Seller and the Broker shall have entered into
(i) the Second Amended and Restated Stockholder and Voting Agreement (the
"Stockholders Agreement") in the form attached as Exhibit A hereto and (ii) the
Registration Rights Agreement (the "Registration Rights Agreement") in the form
attached as Exhibit B hereto.
(f) Buyer shall have received the SAS 71 Review and such SAS
71 Review shall not have contained any material differences from the Company
Unaudited Financial Statements.
(g) Buyer shall have received an assignment of all of Seller's
interests under any contracts or documents relating to the Prior Acquisition
(as hereinafter defined).
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6.3 Conditions to the Obligations of the Seller. The
obligation of the Seller and the Company to consummate the transactions
contemplated hereby at the Closing is subject to the fulfillment, or waiver by
the Seller and the Company, at or prior to the Closing, of the following
conditions:
(a) The representations and warranties of the Buyer and Newco
contained in this Agreement shall be true and correct in all material respects
as of the Closing Date as if made on such date.
(b) The Buyer and Newco shall have duly performed or complied
in all material respects with all of the agreements, covenants and obligations
to be performed or complied with by the Buyer and Newco under the terms of this
Agreement on or prior to the Closing Date.
(c) The Seller shall have received certificates, dated the
Closing Date, from the Buyer and Newco, executed by the respective chief
executive officer and the chief financial officer of the Buyer and Newco,
certifying that the conditions set forth in paragraphs (a) and (b) above, have
been fulfilled.
(d) The Seller shall have received an opinion from Baker &
Botts, L.L.P., counsel to the Buyer, dated the Closing Date, in form and
substance reasonably satisfactory to the Seller.
(e) The Buyer shall have entered into (i) the Stockholders
Agreement and (ii) the Registration Rights Agreement.
ARTICLE VII
TAX MATTERS
7.1 Tax Elections.
(a) Seller shall make a timely and effective election under
Section 338 of the Code (and any corresponding elections under state, local or
foreign tax law) with respect to Seller's acquisition of the Company pursuant
to its tender offer for the Bonray Common Stock on February 11, 1997 (the
"Prior Acquisition") and shall treat the transaction consistently with such
election for state, local and foreign income tax purposes to the extent allowed
by law (the "Section 338 Election"). For purposes of allocating the purchase
price paid by Seller in the Prior Acquisition among the assets of the Company
in accordance with the Treasury regulations promulgated under Section 338 of
the Code,
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Seller shall consult with, and adopt such allocations as are reasonably
requested by, Buyer. Seller shall (i) be responsible for the timely and
accurate filing of all income tax returns of the Company which are required to
include, or on which are required to be reported, any income, gain, loss, or
deduction attributable to, or resulting from, the Section 338 Election and (ii)
follow the allocations requested by Buyer (which are described in the preceding
sentence) for purposes of reporting such income, gain, loss, and deduction.
Seller shall pay, and shall indemnify and hold Buyer harmless against, all
liabilities for Taxes of the Company which are attributable to, or result from,
the Section 338 Election.
(b) Except as contemplated in (a) above and as is consistent
with past practice, without the prior written consent of Buyer, neither Seller
nor the Company nor any Affiliate of Seller shall, to the extent it may affect
or relate to the Company, make or change any election, change any annual tax
accounting period, adopt or change any tax accounting method, file any amended
return, enter into any closing agreement, settle any Tax claim or assessment,
surrender any right to claim a refund of Taxes, consent to any extension or
waiver of the limitation period applicable to any Tax claim or assessment, take
any other action or omit to take any action, if any such election, adoption,
change, amendment, agreement, settlement, surrender, consent or other action or
omission would have any adverse tax effects to the Buyer or to the Company for
any period beginning on or after the Closing Date.
7.2 Tax Returns. Seller shall, to the extent permitted by
applicable law, include the Company in its consolidated federal Income Tax
return, and in those state, local and foreign Income Tax returns that are filed
on a consolidated, combined or unitary basis, for the Seller's tax period that
includes the Closing Date. Such Tax Returns shall include, without limitation,
(i) any deferred income and gain taken into income by reason of Treasury
Regulation Section 1.1502-13 or any similar provision of state, local or
foreign law upon consummation of the Merger, (ii) any excess loss accounts
taken into income by reason of Treasury Regulation Section 1.1502-19 or any
similar provision of state, local or foreign law upon consummation of the
Merger, (iii) any cancellation of indebtedness income arising out of the
termination of Seller's and the Company's obligations to each other, and (iv)
all other items of income, gain, loss, deduction and credit of the Company for
the period up to and including the Closing Date, as determined by closing the
books of the Company as of the end of the Closing Date. Seller shall also be
responsible for the timely filing of those tax returns described in Section
7.1(a) hereof and all other Tax Returns of or which include the Company which
are due on or before the Closing Date. Buyer shall be responsible for the
filing of all Tax Returns of the Company which are due after the Closing Date,
other than those described in the first and third sentences of this Section
7.2.
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7.3 Liability for Taxes; Indemnification and Control of
Contests.
(a) Seller shall be liable for (i) all Taxes that are required
to be reflected on or paid with, or that relate to or arise out of, the Tax
Returns that Seller is responsible for filing pursuant to Sections 7.1(a) and
7.2 hereof, including, without limitation, any increase in Taxes attributable
to any subsequent adjustments of such Tax Returns, except to the extent
attributable to any action of Buyer or the Company after its acquisition by
Buyer, (ii) a portion, determined as described below, of any ad valorem Taxes,
excise Taxes, in-lieu-of Taxes or similar Taxes that are imposed on or
connected with the Company and its assets for any taxable period beginning
before and ending after the Closing Date (a "Straddle Period"), and (iii) all
other Taxes imposed on or connected with the Company which are attributable to
periods ending on or before the Closing Date (except to the extent attributable
to actions of Buyer or the Company after its acquisition by Buyer). Buyer and
the Company shall be liable for all other Taxes imposed on or connected with
the Company; provided, however, Seller shall be liable for such Taxes only to
the extent the aggregate amount of such Taxes exceeds the amount accrued on the
balance sheet in the Company Unaudited Financial Statements in accordance with
past accounting practice. Should any ad valorem Taxes, excise Taxes, in-lieu-
of Taxes or similar Taxes be imposed on the Company or its assets for any
Straddle Period, Seller shall be liable for a portion of such Taxes that shall
be determined by pro-rating such Taxes for the Straddle Period on a daily
basis.
(b) Seller shall indemnify Buyer and the Company, and Buyer
shall indemnify Seller in the manner described in the following paragraph,
against liability for any Taxes or other amounts for which the indemnifying
party (the "Tax Indemnitor") is liable pursuant to Section 7.2(a). The amount
of such indemnity shall also include (i) out-of-pocket costs and expenses
(including, without limitation, reasonable attorney fees, accountants fees and
outside consultant fees) incurred in investigating, defending, or contesting
the Taxes and/or claims for which indemnification is sought and (ii) any
additional amount reasonably necessary to indemnify the indemnified party (the
"Tax Indemnitee") against any additional liability for Taxes that such party
may incur as a result of the indemnity payment itself after taking into account
the Tax benefit to such party from having paid the amount for which the party
is being indemnified or Tax payments resulting from payments under this
Section.
(c) On or after payment of any Taxes or such other amounts by
the Tax Indemnitee, the Tax Indemnitee shall submit an invoice to the Tax
Indemnitor stating that such Taxes or such other amounts have been paid and
giving in reasonable detail the particulars relating thereto. Within 30 days
of receipt of such notice, the Tax Indemnitor shall remit payment for such
Taxes or other amounts to the Tax Indemnitee. Any payment required under this
Section 7.3 that is not made when due shall bear interest (from the date of
receipt of the written notice) at the rate per annum determined, from time to
time, under the provisions of Section 6621(a)(2) of the Code for each day until
paid.
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<PAGE> 39
(d) The Tax Indemnitee agrees to give prompt notice to the Tax
Indemnitor of the assertion or payment of any claim, or the commencement of any
suit, action or proceeding, in respect of which indemnity may be sought
hereunder and will give the Tax Indemnitor such information with respect
thereto as it may reasonably request. The failure of the Tax Indemnitee to
exercise promptness in such notification shall not amount to a waiver of such
claim unless the resulting delay materially prejudices the position of the Tax
Indemnitor with respect to the claim. The Tax Indemnitor may, at its own
expense and upon notice to the Tax Indemnitee, (i) participate in and (ii)
except as provided in Section 7.3(e), assume the defense of any such suit,
action or proceeding (including any Tax audit); provided that (i) the Tax
Indemnitor's counsel is reasonably satisfactory to the Tax Indemnitee, and (ii)
the Tax Indemnitor shall thereafter consult with the Tax Indemnitee upon the
Tax Indemnitee's reasonable request for such consultation from time to time
with respect to such suit, action or proceeding (including any Tax audit). If
the Tax Indemnitor assumes such defense, (i) the Tax Indemnitee shall have the
right (but not the duty) to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel employed by the Tax
Indemnitor and (ii) the Tax Indemnitor shall not assert that the loss, or any
portion thereof, with respect to which the Tax Indemnitee seeks indemnity is
not within the ambit of this Section. If the Tax Indemnitor elects not to
assume such defense, the Tax Indemnitee may pay, compromise or contest the Tax
at issue. Whether or not the Tax Indemnitor chooses to defend or prosecute any
claim, all of the parties hereto shall cooperate in the defense or prosection
thereof.
(e) Notwithstanding the foregoing, Buyer shall control the
defense of any Tax claim that relates to any Tax issue if the settlement of
such issue would be expected to have a greater potential aggregate cost
(determined on a present value basis using an 8% discount rate) to the Company
and to Buyer and its affiliates for any Tax period ending after the Closing
Date than the potential cost of such tax issue to Seller.
7.4 Cooperation on Tax Matters. Buyer and Seller shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the preparation and filing of any Tax Return, statement,
report or form, any audit, litigation or other proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the other
party's request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and naming employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Company, Buyer and Seller
agree (i) to retain all books and records with respect to Tax matters pertinent
to the Company relating to any tax period that includes, or ends on or prior
to, the Closing Date for at least six years after the Closing Date, and to
abide by all record retention agreements entered into with any Taxing Authority
and (ii) to give the other party reasonable written notice prior to destroying
or discarding any such books and records that relate directly to the Company's
operations and,
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<PAGE> 40
if the other party so requests, the Company, Buyer or Seller, as the case may
be, shall allow the other party to take possession of such books and records.
7.5 Tax Refunds. Buyer agrees to pay Seller that portion of
any refund of Taxes previously paid by the Company which is received by Buyer
or the Company to the extent such refund is attributable to any Tax for which
Seller is responsible under Section 7.3. Seller agrees to pay Buyer that
portion of any refund of Taxes previously paid by Buyer which is received by
Seller or any of its Affiliates to the extent such refund is attributable to
any Tax for which Buyer is responsible. Payments required under this Section
7.5 shall be made within 45 days after the receipt of such refund.
7.6 Carrybacks and Carryovers. Seller will not pay to the
Buyer any refund of Taxes or reduction in Seller's liability for Taxes
resulting from a carryback of a post-acquisition tax attribute of the Company
into the Seller Group's consolidated tax return, and Buyer and the Company
shall be permitted to waive the carryback of any such post-acquisition tax
attribute. Such payment shall be made promptly after such refund or reduction
is realized by the Seller Group. Seller will cooperate with the Company and
the Buyer in obtaining any such refund or reduction in Taxes, including through
the filing of amended tax returns or refund claims.
7.7 Termination of Existing Tax Sharing Agreements. The
Seller shall cause any and all existing Tax sharing agreements or arrangements,
written or unwritten, express or implied, binding the Company, including any
agreements or arrangements which afford any other Person the right to receive
any payment from the Company in respect of any Taxes or the benefit of any tax
attribute of the Company or require or permit the transfer or assignment of any
income, revenues, receipts or gains, to be terminated as of the Closing Date.
After the Closing Date, the Company shall not have any further rights or
obligations under any such agreements.
7.8 Tax Matter Dispute Resolution. To the extent provided in
this Article VI, any disputed items shall be resolved by a nationally
recognized accounting firm chosen by and mutually acceptable to both Buyer and
Seller. The selected accounting firm shall resolve any disputed items within
15 days of having the item referred to it pursuant to such procedures as it may
require. Such resolution shall be final and binding upon the parties hereto,
and shall constitute an arbitral award upon which judgment may be entered in
any court having jurisdiction thereof. The costs, fees and expenses of the
selected accounting firm shall be borne equally by Buyer and Seller.
7.9 Survival for Tax Matters. Notwithstanding anything in
this Agreement to the contrary, the provisions of this Article VII shall
survive for the full period of all statutes of limitations (giving effect to
any waiver, mitigation or extension thereof).
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<PAGE> 41
ARTICLE VIII
INDEMNIFICATION
8.1 Survival of Representations and Warranties. The
representations and warranties contained in this Agreement shall survive until
the second anniversary the Closing Date, except for the representations and
warranties in Sections 3.12 and 3.15, which shall survive until the expiration
of the applicable statute of limitations (taking into account any waiver or
extension thereof).
8.2 Indemnification by the Seller. From and after the Closing
Date, the Seller shall indemnify and hold harmless Buyer, the Company, and each
of their respective directors, officers, stockholders and Affiliates against
any and all damages, losses, liabilities, costs or expenses, including legal
and other expenses reasonably incurred in investigating and defending against
the same (collectively, "Damages") incurred or sustained by such person
resulting from (i) the breach of any representation or warranty of the Seller
or the Company contained in this Agreement, or in any agreement, document or
instrument delivered in connection with the transactions contemplated by this
Agreement (a "Related Agreement"), (ii) any breach of any agreement or covenant
of the Seller or the Company (in the case of any agreement or covenant to be
performed by the Company prior to or at the Effective Time) contained in this
Agreement or in any Related Agreement and (iii) any claim relating to or
arising out of (A) the acquisition of the Shares by the Seller, including, but
not limited to, any appraisal or other action brought by the former
stockholders of the Company, or (B) any action, suit or proceeding identified
in Schedule 3.6 hereto.
The Buyer's rights to indemnification under this Section shall be
limited as follows:
(a) The amount of any Damages incurred by the Buyer shall be
reduced by the net amount the Buyer or the Company recovers (after deducting
all attorneys' fees, expenses and other costs of recovery) from any insurer or
other party liable for the Damages, and the Buyer shall use reasonable efforts
to effect any such recovery.
(b) The Buyer shall not be entitled to indemnification unless
and to the extent the aggregate amount of such Damages (reduced as provided in
paragraph (a) above) exceeds $1,000,000; provided, that for all Damages
incurred or sustained in respect of the matters referred to in subparagraph
(iii) of the first paragraph of Section 8.2, the Buyer shall be entitled to
full indemnification from the first dollar of damages, whether or not the
provisions of this Section 8.2(b) have been satisfied.
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<PAGE> 42
(c) In no event shall the Buyer be entitled to indemnification
pursuant to this Section 8.2 in respect of any Damages arising from a breach of
the representations and warranties set forth in Section 3.17, to the extent
that such breach arises from or is based upon events, conditions or
circumstances occurring or existing at, or arising out of the ownership of, the
property owned by the Company which is identified in Schedule 8.2(c) hereto (it
being understood that the limitation set forth in this paragraph (c) is granted
for and in consideration of the payment by the Seller to the Buyer referred to
in Section 2.3(e)).
(d) In no event shall the Buyer be entitled to indemnification
pursuant to this Section 8.2 for Damages in an aggregate amount exceeding
$60,000,000.
8.3 Indemnification by the Buyer. From and after the Closing
Date, the Buyer shall indemnify and hold harmless the Seller and its directors,
officers, stockholders and Affiliates against any and all Damages incurred or
sustained by such Person resulting from (i) the breach of any representation or
warranty of Buyer contained in this Agreement or in any Related Agreement and
(ii) any breach of any agreement or covenant of the Buyer contained in this
Agreement or in any Related Agreement.
The Seller's rights to indemnification under this Section shall
be limited as follows:
(a) The amount of any Damages incurred by the Seller shall be
reduced by the net amount the Seller recovers (after deducting all attorneys'
fees, expenses and other costs of recovery) from any insurer or other party
liable for the Damages, and the Seller shall use reasonable efforts to effect
any such recovery.
(b) The Seller shall not be entitled to indemnification unless
and to the extent the aggregate amount of such Damages (reduced as provided in
paragraph (a) above) exceeds $1,000,000.
(d) In no event shall the Seller be entitled to
indemnification pursuant to this Section 8.3 for Damages in an aggregate amount
exceeding $60,000,000.
8.4 Indemnification for Third Party Claims. The following
procedures shall be applicable with respect to indemnification for Damages made
or asserted by third parties ("Third Party Claims").
(a) Each Person entitled to indemnification under Section 8.2
or 8.3 hereof (each, an "Indemnified Party") shall give the party or parties
from whom it is seeking indemnification hereunder (collectively, the
"Indemnifying Party") written notice as
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<PAGE> 43
promptly as reasonably practicable after the written assertion of any Third-
Party Claim or commencement of any action, suit or proceeding in respect
thereof; provided, however, that, if an Indemnified Party fails to give
Indemnifying Party written notice as provided herein, Indemnifying Party shall
only be relieved of its obligations under this Article VIII in respect of such
Third-Party Claim if and to the extent that the Indemnifying Party is
materially prejudiced thereby (whether as a result of the forfeiture of
substantive defenses or otherwise).
(b) Promptly after receipt of written notice of a Third-Party
Claim as contemplated by Section 8.4(a), the Indemnifying Party may in its sole
discretion elect to assume the defense of such Third-Party Claim with counsel
reasonably satisfactory to the Indemnified Party; provided, however, that (i)
if the Indemnifying Party fails, within a reasonable time after receipt of
written notice of such Third-Party Claim, to assume the defense thereof with
counsel reasonably satisfactory to the Indemnified Party, the Indemnified Party
shall have the right to undertake the defense, compromise and settlement of
such Third-Party Claim on behalf of and for the account and risk of the
Indemnifying Party, subject to the right of the Indemnifying Party (upon
notifying the Indemnified Party of its election to do so) to assume the defense
of such Third-Party Claim with counsel reasonably satisfactory to the
Indemnified Party at any time prior to the settlement, compromise, judgment or
other final determination thereof, (ii) if in the reasonable judgment of the
Indemnified Party a direct or indirect conflict of interest exists between the
Indemnified Party and the Indemnifying Party in respect of the Third-Party
Claim that would prohibit the assumption of the defense by the Indemnified
Party under the applicable principles of legal ethics, the Indemnified Party
shall (upon written notice to the Indemnifying Party of its election to do so)
have the right to undertake the defense, compromise and settlement of such
Third-Party Claim on behalf of and for the account and risk of the Indemnifying
Party (it being understood and agreed that the Indemnifying Party shall not be
entitled to assume the defense of such Third-Party Claim), (iii) if the
Indemnified Party in its sole discretion so elects, it shall be entitled to
employ separate counsel and to participate in the defense of such Third-Party
Claim (and the Indemnifying Party shall cooperate with the Indemnified Party so
as to allow it to participate in the defense thereof), but the fees and
expenses of counsel so employed shall (except as otherwise contemplated by
clauses (i) and (ii) above) be borne solely by the Indemnified Party and (iv)
without the prior written consent of the Indemnified Party, the Indemnifying
Party shall not settle or compromise any Third-Party Claim, or consent to the
entry of any judgment relating thereto, that does not include as an
unconditional term thereof the grant by the claimant or plaintiff to each
Indemnified Party of a release from any and all liability in respect thereof.
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ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated:
(a) at any time prior to the Closing by mutual consent of the
Buyer and the Seller;
(b) by the Buyer upon notice to the Seller if any of the
conditions set forth in Sections 6.1 or 6.2 shall have become incapable of
fulfillment and shall not have been waived by the Buyer; provided however, that
Buyer has diligently and in good faith performed and complied in all material
respects with the agreements and covenants required to be performed by it
hereunder;
(c) by the Seller upon notice to the Buyer if any of the
conditions set forth in Sections 6.1 or 6.3 shall have become incapable of
fulfillment and shall not have been waived by the Seller; provided however,
that Seller has diligently and in good faith performed and complied in all
material respects with the agreements and covenants required to be performed by
it hereunder;
(d) by the Buyer, if the Closing shall not have taken place on
or before October 14, 1997, or such later date as the parties may have agreed
to in writing, provided that the nonoccurrence of the Closing is not
attributable to a breach of the terms hereof by the Buyer; or
(e) by the Seller, if the Closing shall not have taken place
on or before October 14, 1997, or such later date as the parties may have
agreed to in writing, provided that the nonoccurrence of the Closing is not
attributable to a breach of the terms hereof by the Seller or the Company.
9.2 Survival. In the event of termination pursuant to Section
9.1, no party shall have any further liability hereunder, except (i) with
respect to any willful breach of this Agreement prior to such termination and
(ii) Sections 5.7, 5.10 and 10.4 shall survive such termination and shall
remain in full force and effect.
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ARTICLE X
DEFINITIONS AND MISCELLANEOUS
10.1 Definitions.
(a) As used in this Agreement, the terms set forth below shall
have the following respective meanings:
"Affiliate" means, with respect to any Person, any other Person
who, directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. As used herein, the term "control" means
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Broker" means Donaldson, Lufkin & Jenrette Securities
Corporation.
"Buyer Material Adverse Effect" means a material adverse effect
on the business, properties, financial condition or results of operation of the
Buyer and its subsidiaries, taken as a whole.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Material Adverse Effect" means a material adverse effect
on the business, properties, financial condition or results of operations of
the Company.
"Environmental Laws" shall mean laws (including, without
limitation, federal, state or local laws, ordinances, rules, regulations,
guidelines, interpretations and orders of courts or governmental agencies or
authorities) relating to health, safety, pollution or protection of the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface and subsurface strata), including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, the Resource Conservation and Recovery Act of
1976, the Solid Waste Disposal Act, the Federal Clean Water Act, the Federal
Clean Air Act, the Hazardous Materials Transportation Act (all as amended), and
any common law or equitable doctrines (including, without limitation,
negligence, nuisance, trespass and strict liability) when applied to health,
safety or the environment.
"GAAP" means United States generally accepted accounting
principles as set forth in the opinions of the Accounting Principles Board of
the American Institute of
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<PAGE> 46
Certified Public Accountants and in statements by the Financial Accounting
Standards Board.
"Governmental Authority" means any nation or government, any
state or political subdivision thereof, any federal or state court and any
other agency or authority exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Income Tax" (and, with correlative meaning, "Income Taxes")
means (i) any Tax (including, without limitation, a franchise, withholding or
environmental Tax) imposed on or measured in whole or in part by income or a
taxable base in the nature of income (it being understood that (x) where a tax
is based on the greater of an amount measured by income and an amount measured
by one or more alternative bases, the whole amount of such tax shall be
considered an Income Tax and (y) where tax is the sum of an amount measured by
income and an amount measured by some other tax bases, only the amount of such
tax based on income shall be considered an Income Tax) together with any
interest or any penalty, addition to tax or additional amount imposed by any
governmental authority (domestic or foreign) responsible for the imposition of
any such Tax (a "Taxing Authority"), (ii) any liability of the Company for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated or combined group or being a party to any
agreement or arrangement whereby liability of the Company for payment of such
amounts is determined or taken into account with reference to the liability of
any other Person for any period and (iii) liability of the Company with respect
to the payment of any amounts of the type described in (i) or (ii) as a result
of any express or implied obligation to indemnify any other Person.
"Liens" means liens, security interests, options, rights of first
refusal, easements, mortgages, charges, debentures, indentures, deeds of trust,
rights-of-way, restrictions, agreements, encroachments, licenses, leases,
permits, security agreements, or any other encumbrances or other restrictions
or limitations on the use of real or personal property or irregularities in
title thereto.
"Material Agreement" means any agreement, mortgage, indenture,
deed of trust, note, bond, lease, permit, license, security agreement,
guarantee, drilling contracts, partnership or joint venture agreements or other
instrument or contract that involves a present or future obligation to deliver
goods or services or pay monies of an amount or value in excess of $20,000,
excluding agreements that are terminable without penalty or forfeiture upon not
more than 60 days notice and agreements with customers in the ordinary course
of business.
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"Permitted Liens" are (i) Liens for Taxes or assessments not yet
due and payable or which are being contested in good faith and by appropriate
proceedings and (ii) mechanics, suppliers, carriers or other similar Liens
arising in the ordinary course of business.
"Person" means an individual, a partnership (whether general,
limited or limited liability), a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity or any department, agency or political
subdivision thereof.
"Registration Statement" means the Buyer's Registration Statement
on Form S-1 as filed with the Securities and Exchange Commission on August 27,
1997 and all amendments thereto.
"SAS 71 Review" means the review of the Company Unaudited
Financial Statements, to be performed by Coopers & Lybrand in accordance with
the American Institute of Certified Public Accountants, Inc.'s Statement on
Accounting Standards No. 71.
"Seller Group" means, with respect to Federal Income Taxes, the
affiliated group of corporations (as defined in Section 1504(a) of the Code) of
which Seller is a member, and with respect to state, local or foreign Income
Taxes, the combined, consolidated or unitary group of which Seller or any
Affiliate of Seller is a member.
"Seller Material Adverse Effect" means a material adverse effect
on the business, properties, financial condition or results of operations of
the Seller and its subsidiaries, taken as a whole.
"Tax Return" means all returns, declarations, reports, estimates,
information returns and statements required to be filed by or with respect to
the Company in respect of any Taxes, including, without limitation, (i) any
consolidated Federal Income Tax return of the Seller Group in which the Company
is included or (ii) any state, local or foreign Income Tax returns filed by the
Seller Group on a consolidated, combined or unitary basis (for purposes of
determining tax liability) in which the Company is included.
"Tax" (and, with correlative meaning, "Taxes" and "Taxable")
means (i) any net income, alternative or add-on minimum tax, gross income,
gross receipts, sales, use, ad valorem, value added, transfer, franchise,
profits, license, withholding on amounts paid to or by the Company, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with
any interest or any penalty, addition to tax or additional amount imposed by
any Taxing Authority, (ii) any
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<PAGE> 48
liability of the Company for the payment of any amounts of the type described
in (i) as a result of being a member of an affiliated or consolidated group, or
arrangement whereby liability of the Company for payment of such amounts was
determined or taken into account with reference to the liability of any other
person for any period and (iii) liability of the Company with respect to the
payment of any amounts of the type described in (i) or (ii) as a result of any
express or implied obligation to indemnity any other Person.
(b) Each of the terms set forth below has the meaning set
forth opposite such term in the following table:
<TABLE>
<CAPTION>
Term Provision
- ---- ---------
<S> <C>
Accounting Arbiter Section 2.4(e)
Agreement Preamble
Adjusted Current Assets Section 2.4(a)
Bayard Common Stock Section 1.5(a)
Bonray Common Stock Section 1.5(a)
Buyer Preamble
Buyer Financial Statements Section 4.4
Closing Section 2.1
Closing Date Section 2.1
Company Preamble
Company Audited Financial Statements Section 3.8
Company Financial Statements Section 3.8
Company Unaudited Financial Statements Section 3.8
Current Liabilities Section 2.4(a)
Damages Section 8.2
Defined Benefit Plan Section 3.15(e)
Effective Time Section 1.2
Employee Benefit Plans Section 3.15(a)
ERISA Section 3.15(a)
ERISA Affiliate Section 3.15(d)
General Corporation Law Section 1.1
HSR Act Section 3.5
Indemnified Party Section 8.4(a)
Indemnifying Party Section 8.4(a)
Merger Recitals
Newco Preamble
</TABLE>
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<PAGE> 49
<TABLE>
<CAPTION>
Term Provision
- ---- ---------
<S> <C>
Objection Period Section 2.4(c)
OSHA Section 3.16(c)
Pension Plan Section 3.15(b)
Post-Closing Adjustment Date Section 2.4(f)
Prior Acquisition Section 7.1(a)
Registration Rights Agreement Section 6.2(e)
Related Agreement Section 8.2
Section 338 Election Section 7.1(a)
Securities Act Section 3.20
Seller Preamble
Shares Recitals
Straddle Period Section 7.3(a)
Stockholders Agreement Section 6.2(e)
Surviving Corporation Section 1.1
Tax Indemnitee Section 7.3(b)
Tax Indemnitor Section 7.3(b)
Third Party Claims Section 8.4
WARN Section 3.16(d)
Working Capital Adjustment Amount Section 2.4(a)
Working Capital Schedule Section 2.4(b)
</TABLE>
10.2 Notices. All communications required or permitted to be
given under this Agreement shall be in writing and delivered, mailed or
transmitted to the parties at the addresses set out below. Notices shall be
deemed given when received except that notices given by facsimile transmission
on weekends, holidays or after 5:00 p.m. Central Time, shall be deemed received
on the next business day. If delivered by commercial delivery service or
mailed by registered or certified mail, the delivery receipt shall be evidence
of the date of receipt. Either party may, by written notice so delivered to
the other, change the address to which delivery shall thereafter be made.
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<PAGE> 50
(a) Notices to the Buyer or Newco:
Bayard Drilling Technologies, Inc.
4005 N.W. Expressway, Suite 400E
P.O. Box 268867
Oklahoma City, OK 73126-8867
Attention: James E. Brown, President
Fax No. (405) 879-3847
(b) Notices to the Seller or the Company:
DLB Oil and Gas, Inc.
1601 Northwest Expressway, Suite 700
Oklahoma City, Oklahoma 73702
Attention: Mark Liddell, President
Fax No. (405) 848-9449
10.3 Binding Effect; Assignability. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. The Buyer shall be entitled to assign this
Agreement or any of its rights hereunder so long as it remains liable to
perform its obligations hereunder.
10.4 Expenses. Each party hereto will bear and pay its own
expenses of negotiating and consummating the transactions contemplated hereby.
10.5 Section Headings. The section headings contained in this
Agreement are for convenience of reference only and shall not in any way affect
the meaning or interpretation of this Agreement.
10.6 Entire Agreement. This Agreement (including the Exhibits
and Schedules hereto and the certificates, opinions and documents delivered in
accordance with the provisions hereof) constitutes the entire agreement among
the parties with respect to the subject matter hereof and supersedes all prior
written or oral agreements and understandings and all contemporaneous oral
agreements and understandings among the parties or any of them with respect to
the subject matter hereof. All Exhibits and Schedules hereto and certificates,
opinions and other documents delivered in accordance with the provisions hereof
are expressly made a part of this Agreement.
10.7 Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed entirely therein.
45
<PAGE> 51
10.8 Costs of Enforcement. The prevailing party in any
litigation initiated to enforce rights under or collect damages for breach of
this Agreement shall be entitled to reimbursement from the nonprevailing party
of all costs and expenses, including attorneys' fees, incurred by the
prevailing party in connection with such litigation.
10.9 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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<PAGE> 52
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
SELLER:
DLB OIL AND GAS, INC.
By:
-----------------------------------------
Mark Liddell
President
BUYER:
BAYARD DRILLING TECHNOLOGIES, INC.
By:
-----------------------------------------
James E. Brown
President
NEWCO:
BONRAY ACQUISITION CORP.
By:
-----------------------------------------
James E. Brown
President
COMPANY:
BONRAY DRILLING CORPORATION
By:
-----------------------------------------
Mark Liddell
Vice President
<PAGE> 1
EXHIBIT 99.1
DLB OIL & GAS, INC.
1601 N.W. Expressway, Suite 700
Oklahoma City, OK 73118-1401
Phone: 405-848-8808
Fax: 405-848-9449
NEWS RELEASE
For Further Information FOR IMMEDIATE RELEASE
Contact: Fred Standefer
Vice President Corporation Development
(405) 848-8808
DLB TO MERGE MID-CONTINENT/BARBADOS
ASSETS INTO CHESAPEAKE ENERGY CORPORATION,
AND SPIN-OFF BAYARD AND WRT
OKLAHOMA CITY, OKLAHOMA - October 22, 1997 - DLB Oil & Gas, Inc. (NASDAQ-DLBI)
today announced that it has entered into a definitive merger agreement with
Chesapeake Energy Corporation pursuant to which DLB shareholders will realize
the value of their DLB shares in the form of three separate securities.
Consideration will consist of $65 million of Chesapeake common stock and the
assumption of approximately $85 million in debt and other liabilities for DLB's
Mid-Continent and Barbados oil and gas assets. As of June 30, 1997, proved
reserves attributable to these properties were estimated by the Company to be
approximately 27 million barrels of oil equivalent. In addition, as part of the
transaction, DLB shareholders will receive their proportionate share of the
common stock of Bayard Drilling Technologies, Inc. (Bayard) and WRT Energy,
Inc. (WRT) owned by DLB. DLB currently owns 2,955,000 shares of Bayard and
10,354,198 shares of WRT, all of which will be distributed to DLB shareholders.
Charles Davidson, DLB's Chairman, said, "This merger will allow DLB
shareholders to enjoy the benefits of direct ownership of the three distinct
assets currently in our portfolio. First, each of us as shareholders will own
equity in Bayard Drilling, which is one of the largest land contract drilling
companies in the United States. Second, we will achieve significant operational
synergies by combining our Mid-Continent assets and our team with Chesapeake.
Third, by virtue of our WRT position, we will also own interests in a focused
South Louisiana exploration and production company with excellent core assets
in one of the most exciting areas in the country. We believe this realignment
of our three core businesses will ultimately maximize the value inherent in
each unique segment."
<PAGE> 2
Mark Liddell, DLB's President, stated "Strategically, we believe this
transaction creates the best way to participate in the rapid consolidation we
see occurring in both oil field services and exploration and production. Our
fellow shareholders will experience higher liquidity, diversification, and
increased exposure to the positive effects of the consolidation process."
Under the terms of the merger, a subsidiary of Chesapeake will merge with and
into DLB. In the merger, shares of DLB common stock will be converted into the
right to receive: (1) a fractional interest in a share of Chesapeake common
stock equal to $65 million divided by the average of the closing prices of
Chesapeake stock for each of the first 20 consecutive trading days in the
period commencing 25 trading days prior to the date of DLB's special
stockholders meeting with respect to the merger, divided by the number of
shares outstanding on the closing date, (2) a number of shares of Bayard common
stock equal to 2,955,000 divided by the number of DLB shares outstanding on the
closing date, and (3) a number of shares of WRT common stock equal to
10,354,198 divided by the number of DLB shares outstanding on the closing date.
In the event that the average closing price for Chesapeake common stock used in
this calculation is less than $7.50 per share, each of DLB and Chesapeake shall
have the right, but not the obligation, to terminate the merger agreement.
Chesapeake will have the option to pay $65 million in cash rather than in
shares of Chesapeake common stock.
The merger is subject to approval of the holders of at least a majority of the
outstanding shares of DLB common stock as of the record date for the DLB
special shareholders meeting. The company anticipates a mid-January date for
the special meeting of shareholders. DLB currently has 12,975,000 shares
outstanding. Option acceleration under existing incentive plans may affect the
shares outstanding at closing. Charles Davidson, Mark Liddell and Mike Liddell,
who collectively own over 75% of DLB's outstanding common stock, have entered
into an agreement with Chesapeake pursuant to which, among other things, they
have agreed to vote in favor of the merger at the DLB special meeting.
The distributions of the WRT and Bayard shares will be subject to the
effectiveness of registration statements for such shares under the Securities
Act of 1933. In addition, the shares of Bayard, assuming a successful initial
public offering, will not be distributed until the expiration of 180 days from
the date of the pricing of Bayard's IPO. Pending distribution of the WRT and
Bayard shares, the shares will be held in escrow by the exchange agent for the
merger.
Lehman Brothers acted as DLB's financial advisor in connection with the merger
and DLB's review of strategic alternatives.
Chesapeake Energy Corporation (NYSE-CHK) is an Oklahoma City based independent
oil and gas exploration company with approximately 67 million barrels of oil
equivalent of proved reserves at June 30, 1997. The company utilizes advanced
drilling and completion techniques to develop significant new oil and natural
gas discoveries in major onshore producing areas of the United States.
Bayard Drilling Technologies is a leading provider of contract drilling
services to major and independent oil and gas companies and operates the fifth
largest land drilling fleet in the United
<PAGE> 3
States and is the market-share leader in Oklahoma. As of August 15, 1997, the
Bayard fleet consisted of 54 rigs primarily focused on deep drilling
applications (well depths of 15,000 feet or greater). Bayard is headquartered
in Oklahoma City. DLB acquired its interest in Bayard on October 16, 1997 upon
the merger of DLB's Bonray Drilling subsidiary with a Bayard subsidiary,
realizing a substantial return on its investment of approximately $18 million
in Bonray.
WRT Energy Corporation is an Oklahoma City-based independent oil and gas
exploration company, which owns interests in 19 field in south Louisiana. As of
December 31, 1996, WRT proved reserves, as estimated by Netherland, Sewell, and
Associates, Inc. totaled approximately 28 million barrels of oil equivalent.
DLB Oil and Gas, Inc. is an Oklahoma City-based independent energy company
engaged primarily in oil and gas exploration, development and production, and
in the acquisition of producing properties. The Company's common stock trades
under the symbol of DLBI.
This material includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1993, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, prepared by the Company and
security analysts. The opinions, forecasts, projections or other statements
other than statements of historical fact, including, without limitation,
estimates of proved reserves of oil and gas, reserve potential and plans and
objectives of management of the Company for financing, are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Certain risks and
uncertainties inherent in the Company's business are set forth in the filings
of the Company with the Securities and Exchange Commission.
