AMENDED AND RESTATED
SHARE PURCHASE AGREEMENT
between
Unit Corporation,
Xxxxxx Xxxxxxx Charitable Income Trust B
and
Xxxxxx Xxxxxxx Oil Company
Dated as of June 24, 2002
TABLE OF CONTENTS
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Article 1. PURCHASE OF SHARES..............................................1
Section 1.1 LLC Shares..................................................1
Section 1.2 Purchase Consideration......................................1
Section 1.3 Closing.....................................................1
Section 1.4 Deliveries by the Seller....................................1
Section 1.5 Deliveries by the Purchaser.................................1
Section 1.6 Amounts owed by Company to Seller...........................2
Article 2. REPRESENTATIONS AND WARRANTIES OF THE SELLER....................2
Section 2.1 Organization and Authority of the Seller....................2
Section 2.2 Organization, Authority and Capitalization of the
Company; LLC Shares.........................................2
Section 2.3 Consents and Approvals; No Violations.......................3
Section 2.4 Financial Statements........................................3
Section 2.5 Absence of Certain Changes..................................3
Section 2.6 Litigation..................................................4
Section 2.7 Compliance with Applicable Law, Permits.....................4
Section 2.8 Environmental Matters.......................................4
Section 2.9 Intellectual Property.......................................4
Section 2.10 Employee Benefit Plans.....................................5
Section 2.11 Taxes......................................................5
Section 2.12 Material Contracts.........................................5
Section 2.13 Assets Necessary to Business...............................6
Section 2.14 Title to Assets............................................6
Section 2.15 Labor Relations............................................6
Section 2.16 Insurance..................................................6
Section 2.17 Investment.................................................6
Section 2.18 Brokers....................................................7
Section 2.19 No Implied Representations.................................7
Section 2.20 Affiliated Transactions....................................7
Section 2.21 Absence of Undisclosed Liability...........................7
Section 2.22 Relationship with Customers................................7
Section 2.23 Performance Bonds; Letters of Credit.......................8
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Section 2.24 Certain Property on Rigs...................................8
Section 2.25 Powers of Attorney; Authorized Signatories.................8
Section 2.26 Drilling Equipment.........................................8
Section 2.27 Workers' Compensation Claims...............................8
Section 2.28 Full Disclosure............................................8
Article 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.................8
Section 3.1 Organization and Authority of the Purchaser.................8
Section 3.2 Capitalization..............................................9
Section 3.3 Consents and Approvals; No Violations.......................9
Section 3.4 Absence of Certain Changes..................................9
Section 3.5 Investment..................................................9
Section 3.6 Business Combination Provision; Rights Plan.................9
Section 3.7 Purchaser Commission Documents.............................10
Section 3.8 Brokers....................................................10
Section 3.9 No Implied Representations.................................10
Article 4. COVENANTS......................................................10
Section 4.1 Conduct of the Business of the Company.....................10
Section 4.2 Access to Information......................................11
Section 4.3 Reasonable Best Efforts....................................12
Section 4.4 Further Assurances; No Hindrances..........................12
Section 4.5 Access to Records..........................................12
Section 4.6 Notice of Possible Breach..................................12
Section 4.7 Supplemental Disclosure....................................13
Section 4.8 Notices of Certain Events..................................13
Section 4.9 Confidentiality............................................13
Section 4.10 Insurance; Rig Loss.......................................13
Section 4.11 Non-Solicitation of Employees.............................14
Section 4.12 Listing of Purchase Consideration.........................14
Section 4.13 Nonsolicitation...........................................14
Section 4.14 Restrictive Covenants.....................................14
Section 4.15 Allocation of Assets and Liabilities......................15
Article 5. CONDITIONS.....................................................15
Section 5.1 Conditions to Each Party's Obligations.....................15
Section 5.2 Conditions to Obligations of the Purchaser.................15
Section 5.3 Conditions to Obligations of the Seller....................15
Article 6. TERMINATION AND AMENDMENT......................................16
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Section 6.1 Termination................................................16
Section 6.2 Effect of Termination......................................16
Section 6.3 Amendment..................................................16
Section 6.4 Extension; Waiver..........................................16
Article 7. TAX MATTERS....................................................17
Section 7.1 Retention of Records.......................................17
Section 7.2 Cooperation................................................17
Section 7.3 Transfer Taxes; Ad Valorem Taxes...........................17
Section 7.4 Tax Returns................................................17
Section 7.5 Allocation of Taxes........................................18
Section 7.6 Tax Indemnity..............................................19
Section 7.7 Contests...................................................19
Section 7.8 Miscellaneous..............................................20
Section 7.9 Tax Election...............................................20
Article 8. INDEMNIFICATION................................................21
Section 8.1 Indemnification by the Seller..............................21
Section 8.2 Indemnification by the Purchaser...........................21
Section 8.3 Notice of Claim............................................21
Section 8.4 Defense of Third Party Claims..............................22
Section 8.5 Payment of Claims..........................................22
Section 8.6 No Liability of Officers, Directors and Managers...........22
Section 8.7 No Third Party Benefit.....................................22
Section 8.8 Definition.................................................22
Section 8.9 Exclusive Remedy...........................................22
Section 8.10 Net Worth Requirement.....................................23
Article 9. Registration Rights............................................23
Section 9.1 Registration of Securities.................................23
Article 10. Standstill Agreement..........................................26
Section 10.1 Standstill................................................26
Article 11. MISCELLANEOUS.................................................27
Section 11.1 Notices...................................................27
Section 11.2 Headings..................................................28
Section 11.3 Counterparts..............................................28
Section 11.4 Entire Agreement; Assignment..............................28
Section 11.5 Governing Law.............................................29
Section 11.6 Specific Performance......................................29
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Section 11.7 Publicity.................................................29
Section 11.8 Binding Nature; No Third Party Beneficiaries..............29
Section 11.9 Severability..............................................29
Section 11.10 Interpretation...........................................29
Section 11.11 Payment of Expenses......................................29
Section 11.12 Survival of Representations, Warranties and Agreements...29
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INDEX OF DEFINED TERMS
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Acquisition Proposal......................................................14
Affiliate..................................................................2
Agreement..................................................................1
Cash Consideration.........................................................1
Claims and Damages........................................................22
Closing....................................................................1
Closing Date...............................................................1
Company....................................................................1
Company Balance Sheet......................................................3
Company Contracts..........................................................5
Company Employee Plans.....................................................5
Company Material Adverse Effect............................................2
Company Permitted Liens....................................................6
Company Shares.............................................................1
Confidential Information..................................................13
Consolidated Returns......................................................17
Controlling Party.........................................................20
Drilling Contracts.........................................................5
Effective Date.............................................................1
Elections.................................................................20
Environmental Law..........................................................4
ERISA......................................................................5
Exchange Act...............................................................9
Forms.....................................................................21
GAAP.......................................................................3
Governmental Entity........................................................3
Hazardous Substance........................................................4
HSR Act....................................................................3
Indemnitee................................................................21
Indemnitor................................................................21
Law........................................................................3
Liens......................................................................2
Non-Controlling Party.....................................................20
Notice of Claim...........................................................21
Part-Year Fraction........................................................19
Pre-Closing Period........................................................19
Purchase Consideration.....................................................1
Purchaser..................................................................1
Purchaser 10-K............................................................10
Purchaser Commission Documents............................................10
Purchaser Common Stock.....................................................1
Purchaser Disclosure Schedule..............................................8
Purchaser Material Adverse Effect..........................................8
Purchaser Returns.........................................................18
Representative............................................................14
representatives............................................................7
Restricted Business.......................................................14
Rig........................................................................8
Rigs.......................................................................8
Securities Act.............................................................6
Seller.....................................................................1
Seller Confidentiality Agreement..........................................11
Seller Disclosure Schedule.................................................2
Simultaneous Agreement....................................................15
Stock Consideration........................................................1
Straddle Period...........................................................18
Tax Controversy...........................................................20
Tax Indemnitor............................................................20
Tax Records...............................................................17
Taxes......................................................................5
Transfer Taxes............................................................17
AMENDED AND RESTATED SHARE PURCHASE AGREEMENT
Amended and Restated Share Purchase Agreement, (the "Agreement"), dated as
of June 24, 2002, between Unit Corporation, a Delaware corporation (the
"Purchaser"), Xxxxxx Xxxxxxx Charitable Income Trust B under agreement dated
April 5, 2002, a trust formed under the laws of the State of Oklahoma (Xxxxxxxx
Xxxxxxx, Trustee) (the "Seller") and, for purposes of Sections 2.8 and 2.20,
Xxxxxx Xxxxxxx Oil Company, a Delaware corporation (KFOC).
WHEREAS, CREC Rig Acquisition Company is an Oklahoma limited liability
company (the "Company) ;
WHEREAS, the Seller owns all of the issued and outstanding membership
interests of the Company (the "LLC Shares"); and,
WHEREAS, the Purchaser has agreed to acquire from the Seller, and the
Seller has agreed to sell to the Purchaser, all of the LLC Shares, on the terms
and subject to the conditions set forth herein.
NOW, THEREFORE, the parties agree as follows:
Article 1
PURCHASE OF SHARES
Section 1.1 LLC Shares. Upon the terms and subject to the conditions of
this Agreement, at the Closing, the Seller shall sell and deliver to the
Purchaser, and the Purchaser shall purchase and acquire, all (but not less than
all) of the LLC Shares.
Section 1.2 Purchase Consideration. The aggregate consideration to be paid
for the sale and delivery of the LLC Shares (the "Purchase Consideration") by
the Purchaser to the Seller shall consist of 6,819,748 shares of Purchaser
common stock, par value $0.20 per share ("Purchaser Common Stock")(the "Stock
Consideration") and $3,813,053 (the "Cash Consideration")
Section 1.3 Closing. Upon the terms and subject to the conditions of this
Agreement, the closing of the transactions contemplated by this Agreement (the
"Closing") will take place on the third business day following the satisfaction
or waiver of the conditions (other than conditions which by their nature are to
be satisfied at closing, but subject to such conditions) set forth in Article 5
hereof. The date on which the Closing occurs is hereinafter referred to as the
"Closing Date.". The Closing will be held at 10:00 a.m., Central Standard time,
at the offices of Purchaser, 1000 Kensington Tower, 0000 Xxxxx Xxxxx, Xxxxx,
Xxxxxxxx 00000 or at such other time or at such other place as shall be agreed
upon by the parties. For purposes of this Agreement, "Effective Date" shall mean
the Closing Date.
Section 1.4 Deliveries by the Seller. At the Closing, the Seller shall
deliver or cause to be delivered to the Purchaser the following:
(a) An assignment of the LLC Shares free and clear of any Liens;
(b) the resignations of each person that is a director, manager or officer
of the Company;
(c) the membership record books, interest records, minute books and
operating agreements of the Company; and
(d) such other duly executed documents and certificates as may be required
to be delivered by the Seller pursuant to the terms of this Agreement.
Section 1.5 Deliveries by the Purchaser. At the Closing, the Purchaser
shall deliver or cause to be delivered to the Seller the following:
(a) duly executed certificates representing the Stock Consideration;
(b) the Cash Consideration; and
(c) such other duly executed documents and certificates as may be required
to be delivered by the Purchaser pursuant to the terms of this Agreement.
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Section 1.6 Amounts owed by Company to Seller. As of the Closing Date, the
Company shall have no liability to the Seller (or any of Seller's Affiliates) in
respect of any payment obligations reflected or which should have been reflected
in the accounts of the Seller (or any of its Affiliates) as being due from the
Company as of the Effective Date (determined in a manner consistent with the
past practice of the Seller or its Affiliate, as the case may be) and the
Company shall not have any further liability or obligation to the Seller (or its
Affiliates) with respect to such amounts. For purposes of this Agreement, the
term "Affiliate" means, as to the person (or entity) specified, any person (or
entity) controlling, controlled by or under common control with such person (or
entity), with the concept of control in such context meaning the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of another, whether through the ownership of voting
securities, by contract or otherwise.
Article 2
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Except as set forth in the disclosure schedule being delivered by the
Seller to the Purchaser (the "Seller Disclosure Schedule"), the Seller
represents and warrants to the Purchaser as follows:
Section 2.1 Organization and Authority of the Seller. The Seller is a trust
duly organized, validly existing and in good standing under the laws of the
State of Oklahoma and has all necessary power and authority to execute and
deliver this Agreement, to perform its obligations under this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by the Seller and the consummation by the Seller of
the transactions contemplated by this Agreement have been duly authorized by all
necessary action on the part of Seller and no other actions or proceedings on
the part of the Seller are necessary to authorize this Agreement or for the
Seller to consummate the transactions contemplated by this Agreement. This
Agreement has been duly and validly executed and delivered by the Seller and
(assuming due authorization, execution and delivery by the Purchaser)
constitutes a legal, valid and binding obligation of the Seller, enforceable
against the Seller in accordance with its terms, subject to limitations imposed
by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights generally and general
equitable principles.
Section 2.2 Organization, Authority and Capitalization of the Company; LLC
Shares.
(a) The Company is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Oklahoma and has
all requisite power and authority to own, lease or operate its properties and
assets and to carry on its business as now being conducted. The Company is duly
qualified to do business and in good standing and is duly licensed, authorized
or qualified to transact business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing has
not had a Company Material Adverse Effect. "Company Material Adverse Effect"
means a change or effect on the Company's business or assets that is materially
adverse to the business, financial condition or results of operations of the
Company.
(b) The LLC Shares constitute all the outstanding membership interest of
the Company and there are no membership interests of the Company reserved for
issuance upon exercise of outstanding options or otherwise. The LLC Shares have
been duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the ownership
thereof. Except for this Agreement, there are no outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character calling for
the purchase or issuance of any membership interest of the Company.
(c) There are no subsidiaries of the Company.
(d) The Seller has good and valid title to the LLC Shares, free and clear
of any security interests, pledges, mortgages, liens, encumbrances, charges,
options or any other adverse claims, restrictions or third party rights of any
kind whatsoever ("Liens") and, at the Closing, the Seller will deliver the LLC
Shares to the Purchaser, free and clear of any Liens.
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(e) The Seller has heretofore delivered to the Purchaser true and complete
copies of the articles of organization and operating agreement or similar
organizational documents of the Company.
Section 2.3 Consents and Approvals; No Violations.
(a) No filing or registration with, and no permit, authorization,
certificate, waiver, license, consent or approval of, any court of competent
jurisdiction or any governmental, regulatory or administrative authority, agency
or commission (a "Governmental Entity") is necessary for the execution, delivery
or performance by the Seller of this Agreement, except (x) for the applicable
requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), or (y) as a result of facts or circumstances particular
to the Purchaser.
(b) Neither the execution and delivery of this Agreement by the Seller nor
the consummation by the Seller of the transactions contemplated by this
Agreement nor compliance by the Seller with any of the provisions hereof will
(i) conflict with or result in any breach of any provision of the agreement
dated April 5, 2002 pursuant to which the Seller was organized (or similar
organizational documents of the Seller) or the articles of organization and
operating agreement or similar organizational documents of the Company, (ii)
require the consent or waiver of any person (other than a Governmental Entity)
or result in a violation or breach of, or constitute a default (or with notice
or lapse of time or both result in a breach of or constitute a default) under,
or give rise to a right of termination, cancellation or acceleration of any
obligation under, or the loss of any material benefit under, any Company
Contract, or result in the imposition of or the creation of any Lien upon any of
the assets or properties of the Company pursuant to or under, any of the terms,
conditions or provisions of any note, lease, license, contract or agreement to
which the Seller, Company or any of their Affiliates is a party or by which the
Seller, Company or any of their Affiliates or any of their respective assets, is
bound or (iii) violate any order, writ, injunction, decree, or any statute, law,
ordinance, regulation, rule, code, order or other requirement or rule of law
(each, a "Law") applicable to the Seller, Company or any of their Affiliates,
except in the case of violations, breaches or defaults which, or consents or
waivers the absence of which, individually or in the aggregate, have not had and
would not have a Company Material Adverse Effect or which would not prevent or
materially delay the consummation of the transactions contemplated by this
Agreement or which would not prevent or materially affect the ability of
Purchaser to conduct the business of the Company.
Section 2.4 Financial Statements. Section 2.4 of the Seller Disclosure
Schedule sets forth copies of (a) the combined balance sheets, statements of
operations, shareholders' equity and cash flows for the combined accounts of the
Company and CDC Drilling Company (f/k/a Cactus Drilling Company) for the fiscal
years 2001, 2000 and 1999, and (b) the unaudited balance sheets as of March 31,
2002 and related statements of income and cash flow for the 3 and 9 months ended
March 31, 2002 and 2001, all including the related notes, where applicable. The
March 31, 2002 combined balance sheet fairly present the results of the combined
operations and combined financial position as of the date thereof, and the other
financial statements referred to in this Section 2.4 (including the related
notes, where applicable) fairly present (subject, in the case of the unaudited
statements, to recurring audit adjustments normal in nature and amount) the
results of the combined operations and combined financial position of the
Company and CDC Drilling Company for the respective fiscal periods or as of the
respective dates therein set forth; and each of such statements (including the
related notes, where applicable) has been prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied during the periods
involved. The March 31, 2002 combined balance sheet of the Company and CDC
Drilling Company is sometimes referred to as the "Company Balance Sheet." On or
before July 5, 2002, Seller shall deliver to Purchaser an audit report with
respect to the financial statements described in clause (a) above and a review
report with respect to the financial statements described in clause (b) above of
Ernst & Young, LLP independent public accountants which reports shall report on
such financial statements without any material change in such statements.
Section 2.5 Absence of Certain Changes. The Company was formed on April 11,
2002 and prior thereto had no employees, operations, activities, assets,
liabilities or capital. Since its formation (i) the business of the Company has
been conducted only in the ordinary course of business, (ii) the Company has not
taken any of the actions set forth in Section 4.1(b) hereof, assuming that
Section 4.1(b) applied to the period since April 11, 2002 and (iii) the Company
has not suffered a Company Material Adverse Effect. No actions have been taken
and no circumstances exist which would result in the Company becoming subject to
the liabilities, obligations, commitments, or duties of any person or entity
except as may have been expressly assumed by the Company and disclosed in the
Company Balance Sheet, this Agreement or the Schedules hereto.
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Section 2.6 Litigation. There is no suit, claim, action, proceeding or, to
the knowledge of the Seller, investigation pending against the Company before or
by any Governmental Entity or non-governmental body or by any third party or, to
the knowledge of the Seller, threatened against the Company and Company is not
subject to any outstanding order of any Governmental Entity. As of the date of
this Agreement, there are no pending or, to the knowledge of the Seller,
threatened actions that would prevent or delay the Seller from consummating the
transactions contemplated hereby.
Section 2.7 Compliance with Applicable Law, Permits. Except as has not had
or would not have a Company Material Adverse Effect, (a) the Company possess all
permits, licenses, variances, exemptions, orders, approvals and authorizations
of all Governmental Entities and all consents and waivers of any other persons
(other than Governmental Entities) necessary for the Company to own, lease or
otherwise hold the assets of its business and to carry on its business as
currently conducted and (b) the Company's business is being conducted in
material compliance with all Laws. This Section 2.7 does not relate to matters
with respect to (x) environmental matters, which are the subject of Section 2.8,
(y) benefits and employment matters, which are the subject of Section 2.10 and
(z) Taxes, which are the subject of Section 2.11.
Section 2.8 Environmental Matters.
(a) Except as has not had or would not have a Company Material Adverse
Effect, (i) to the knowledge of Seller, KFOC and the Company, the Company has
been and is in compliance in all respects with all applicable Environmental Laws
(which compliance includes, without limitation, the possession by the Company of
all permits and other government authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof), (ii)
to the knowledge of Seller, KFOC and the Company, no Hazardous Substances have
been disposed on or released onto, under or adjacent to any of the properties
owned, leased or operated by the Company (including soils, groundwater, surface
water, buildings or other structures), (iii) to the knowledge of Seller, KFOC
and the Company, as of the date hereof, neither the Company nor the Seller or,
to the knowledge of the Seller, any person whose liability under any
Environmental Law the Company has or may have retained or assumed either
contractually or by operation of law, has received any written notice, demand,
letter or claim alleging that the Company or any such person is in violation of
or liable under any Environmental Law, (iv) as of the date hereof, neither the
Company nor the Seller has received any written notice, demand, letter or claim
alleging the potential responsibility of the Company for off-site disposal of
any Hazardous Substance pursuant to the Federal Comprehensive Environmental
Response, Compensation and Liability Act or any other Environmental Law and (v)
as of the date hereof, there are no present or, to the knowledge of the Seller,
past actions, activities, circumstances, conditions, events or incidents which
would be reasonably likely to form the basis of any legitimate notice, demand,
letter or claim under Sections 2.8(a)(ii), (iii) or (iv), including but not
limited to claims for personal injury, or property damage alleged to result from
use, handling or exposure to or injury from any Hazardous Substance.
(b) "Environmental Law" means any national, regional, federal, state,
municipal or local law, regulation, order, judgment or decree issued or
promulgated by any Governmental Entity, or common law, in effect relating to the
protection of human health or the indoor and outdoor environment (including,
without limitation, natural resources) or any Hazardous Substances.
(c) "Hazardous Substance" means any pollutant, contaminant, substance,
material, waste, hazardous material, industrial waste, solid waste, special
waste, toxic waste, toxic substance, hazardous waste, hazardous substance,
chemical oil, substance that is regulated pursuant to any Environmental Law,
including without limitation any petroleum product, by-product or additive,
asbestos, asbestos-containing material, medical waste, chlorofluorocarbon,
hydrochloroflourocarbon or polychlorinated biphenyls.
Section 2.9 Intellectual Property.
(a) There are no material trademarks, trade names, patents, service marks,
brand names, computer programs, databases, industrial designs, copyrights or
other intangible property that are necessary for the operation, or continued
operation, of the business of the Company or for the ownership and operation, or
continued ownership and operation, of any of its assets, for which the Company
does not hold valid and continuing authority in connection with the use thereof.
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(b) The Seller has not received written notice from any third party
regarding any actual or potential infringement by the Company of any
intellectual property of such third party and the Seller has no knowledge of any
legitimate basis for such a claim against the Company.
Section 2.10 Employee Benefit Plans. (a) The Company does not sponsor,
maintain, contribute to nor is it required to contribute to any employee benefit
plans (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), nor is the Company a party to any employment or
severance agreements, any bonus, share option, share purchase, incentive,
deferred compensation, supplemental retirement, severance and other similar
employee benefit plans, programs, policies and agreements for the benefit of any
person (together, the "Company Employee Plans").
Section 2.11 Taxes. The Company is a disregarded entity for federal income
tax purposes and, therefore, is not subject to payment of any such taxes. The
Company has never been a party to a tax sharing, tax indemnity or tax allocation
agreement. In addition, the Company has only recently been formed and
capitalized, it has no employees and it has not been subject to any other Taxes
on or with respect to its properties, assets, operations. For purposes of this
Agreement, "Taxes" shall mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, excise, stamp, real or personal property, ad valorem, withholding,
social security (or similar), unemployment, occupation, use, production,
service, service use, license, net worth, payroll, franchise, severance,
transfer, recording, employment, premium, windfall profits, environmental
(including taxes under Section 59A of the Code), customs duties, capital stock,
profits, disability, sales, registration, value added, alternative or add-on
minimum, estimated or other taxes, assessments or charges imposed by any
federal, state, local or foreign governmental entity and any interest,
penalties, or additions to tax attributable thereto.
Section 2.12 Material Contracts.
(a) Section 2.12(a) of the Seller Disclosure Schedule lists the following
notes, leases, licenses, contracts and agreements ("Company Contracts") to which
the Company, as of the date of this Agreement, is a party or is bound:
(i) each mortgage, indenture, note, installment obligation or other
instrument, contract, agreement or arrangement relating to the borrowing of
money by the Company;
(ii) any guaranty, direct or indirect, by the Company of any
obligation for borrowed money;
(iii) any obligation to sell or to register the sale of any of the
shares of capital stock or other securities of the Company;
(iv) any obligation to make payments, contingent or otherwise, arising
out of the prior acquisition or disposition of a business;
(v) each collective bargaining or union contract;
(vi) each material contract for the purchase of capital equipment,
materials or supplies;
(vii) each contract for the acquisition or disposition of material
assets, other than in the ordinary course of business;
(viii) each contract relating to the leasing of or other arrangement
for use of material personal property;
(ix) each contract between the Company, on the one hand, and the
Seller or its Affiliates on the other hand;
(x) any employment agreement with any director, officer or employee of
the Company;
(xi) all drilling contracts and any amendments thereto for the
employment of the Rigs (the "Drilling Contracts"); and
(xii) all material certificates, licenses, permits, consents,
operating authorities, orders, exemptions, franchises, approvals,
registrations and other authorizations and applications therefore specifically
associated with the ownership, maintenance and operation of the Company's
assets.
(b) The Company is not (and to the knowledge of the Seller, as of the date
of this Agreement, no other party is) in breach or default under the Company
Contracts and no event has occurred under the Company Contracts which
5
would constitute (with or without due notice or lapse of time or both) a breach
or default by the Company or, to the knowledge of the Seller, by any other party
thereto (or give rise to any right of termination, cancellation, modification or
acceleration against the Company, or, to the knowledge of the Seller, any other
party thereto) under the Company Contracts and (y) each Company Contract is a
valid and binding obligation of the Company and, to the knowledge of the Seller,
as of the date of this Agreement, the other party thereto, enforceable against
such persons in accordance with its terms, subject to limitations imposed by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights generally and general
equitable principles.
(c) As of the date of this Agreement, (i) neither the Seller nor the
Company has received written notice, or to the knowledge of the Seller, other
communication of any actual or alleged breach of or default under or threatened
cancellation, termination or acceleration of such contracts, and (ii) to the
knowledge of the Seller, no event has occurred or circumstances exist that would
give the Company or any other person or party to such contracts the right to
exercise any remedy under or to cancel or terminate any such contract.
(d) Prior to the date hereof, neither the Company nor the Seller has
received any prepayments, advance payments or other payments under any Drilling
Contract or other Company Contract which represents payment or consideration for
any services to be provided or performed by the Company or materials to be
supplied or other goods or inventory to be transferred by the Company after the
Closing Date.
(e) Seller has made available to Purchaser for review complete and correct
copies of all material Company Contracts (including all Drilling Contracts).
Section 2.13 Assets Necessary to Business. The assets, properties,
contracts and rights of the Company include all of the assets, properties,
contracts and rights that are necessary for the conduct of the business in the
manner as it is currently conducted, and are reflected in the Company Balance
Sheet (other than assets that have been sold or disposed of in the ordinary
course of business). The Company has maintained all of its tangible assets in
good and normal operating condition, all such assets are free and clear from all
defects in all material respects, ordinary wear and tear excepted, and all such
tangible assets are fully adequate and suitable for the purposes for which they
are presently used.
Section 2.14 Title to Assets. The Company has good and valid title to all
of its material assets, properties and rights, free and clear of all Liens,
other than (x) as set forth in Section 2.14 of the Seller Disclosure Schedule or
in the Company Balance Sheet and (y) (i) mechanics', carriers', workmen's,
repairmen's or other like Liens arising or incurred in the ordinary course of
business securing amounts that (A ) are not due and payable or (B) are being
contested in good faith and for which appropriate bonds have been posted (all of
which are listed in Section 2.14 of the Seller Disclosure Schedule) and (ii)
Liens for Taxes that are (A) not due and payable or (B) being contested in good
faith ("Company Permitted Liens"). The Company does not own any interest in real
property.
Section 2.15 Labor Relations. (a) The Company is in compliance in all
material respects with all applicable Laws respecting employment and employment
practices, terms and conditions of employment and wages and hours; (b) neither
the Seller nor the Company has received written notice of any charge or
complaint against the Company pending before the Equal Employment Opportunity
Commission, the National Labor Relations Board, or any other Governmental Entity
regarding an unlawful employment practice; (c) the Company is not a party to any
collective bargaining agreement and there is no labor strike, slowdown or
stoppage actually pending or, to the knowledge of the Seller, threatened or
being carried out against the Company; (d) neither the Seller nor the Company
has received written notice that any representation petition respecting the
employees of the Company has been filed with the National Labor Relations Board;
and (e) the Company is and has been in substantial compliance with all notice
and other requirements under the Worker Adjustment and Retaining Notification
Act of 1988 or similar state statute.
Section 2.16 Insurance. Section 2.16 of the Seller Disclosure Schedule sets
forth all material insurance policies maintained by the Company for the benefit
of or in connection with the Company or its business. Seller shall maintain
these insurance policies through the Closing Date.
Section 2.17 Investment. The Seller hereby acknowledges receipt of copies
of the Purchaser Commission Documents and represents, acknowledges and
understands that:
(a) the Stock Consideration has not been, and will not have been at the
time of its issuance pursuant to this Agreement, registered under the Securities
Act of 1933, as amended (the "Securities Act") or registered or qualified
6
under any state securities laws because it will be so issued in reliance upon
exemptions from registration or qualification that depend, in part, on the
Seller's acknowledgements, representations and warranties made herein;
(b) the certificates evidencing the Stock Consideration will bear a legend
in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE OKLAHOMA SECURITIES ACT. NEITHER
THE RECORD NOR THE BENEFICIAL OWNERSHIP OF SAID SECURITIES MAY BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SAID
SECURITIES UNDER BOTH OF SAID ACTS AND ANY OTHER APPLICABLE STATE
SECURITIES LAWS OR RULES UNLESS IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY, EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS
OF SAID ACTS ARE AVAILABLE WITH RESPECT TO SUCH SALE OR TRANSFER AND SAID
SALE OR TRANSFER IS MADE PURSUANT TO AND IN STRICT COMPLIANCE WITH THE
TERMS AND CONDITIONS OF SAID EXEMPTIONS;
(c) the Stock Consideration is being acquired for its own account and
without a view to the distribution thereof or any interest therein;
(d) Seller is an accredited investor within the meaning of Rule 501(a) of
Regulation D promulgated under the Securities Act;
(e) Seller has received copies of the Purchaser Commission Documents and
certain information concerning the Purchaser and has had the opportunity to
obtain additional information as desired in order to evaluate the merits and
risks inherent in holding the Purchaser Common Stock; and
(f) the Stock Consideration shall not be sold, transferred, offered for
sale, pledged, hypothecated or otherwise disposed of by Seller in violation of
any applicable securities laws or regulations.
Section 2.18 Brokers. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Seller or any
Affiliate of the Seller.
Section 2.19 No Implied Representations. The Seller acknowledges that the
Purchaser is not making any representations or warranties other than as
explicitly set forth in this Agreement. The Seller agrees that it shall not
assert any claims against or seek any damages or other remedies (including
pursuant to any implied warranties or similar rights, which the Seller expressly
and irrevocably waives and agrees not to seek to enforce) from the Purchaser or
any of its officers, directors, affiliates, stockholders, agents, advisors or
representatives (collectively, "representatives") for any matters contemplated
hereby except for fraud or as explicitly set forth or incorporated herein.
Section 2.20 Affiliated Transactions. Except as set forth in Section 2.20
of the Seller Disclosure Schedule, the Company has not, directly or indirectly,
furnished any service to, or entered into any agreement, commitment or
understanding with, (i) KFOC, the Seller or an Affiliate of the Seller, (ii) to
the knowledge of the Seller any director, officer or employee of KFOC, the
Seller or any Affiliate of the Seller, or (iii) to the knowledge of the Seller
any associate, relative or other related party of any person referred to in
clause (i) or (ii). Except as set forth in Section 2.20 of the Seller Disclosure
Schedule, none of the persons named in clause (i) (or to the knowledge of the
Seller clauses (ii) or (iii)) of the preceding sentence, directly or indirectly,
(x) owns any interest in any asset used or held for use in connection with the
business and operations of the Company, (y) owns or has any interest in a
supplier, customer or competitor of the Company, or (z) has received any loans
from or is otherwise a debtor of, or made any loans to or is otherwise a
creditor of, the Company.
Section 2.21 Absence of Undisclosed Liability. To the knowledge of the
Seller, except as described in Section 2.21 of the Seller Disclosure Schedule or
as otherwise disclosed in this Agreement, the Company has no liabilities or
obligations (whether direct, indirect, accrued or contingent).
Section 2.22 Relationship with Customers. To the knowledge of the Seller,
no material customer of the Company has, since April 11, 2002 and on or prior to
the date hereof, threatened to cancel or otherwise terminate its
7
relationship with the Company, or to materially decrease its usage of the
services of the Company (it being agreed that requests for proposals from
customers shall not be considered any such threat).
Section 2.23 Performance Bonds; Letters of Credit. There are no performance
or similar bonds or letters of credit currently posted by Seller or any of its
Affiliates for the purpose of owning, operating or maintaining any of the
Company's assets.
Section 2.24 Certain Property on Rigs. Since the date of completion of
Purchaser's inspection of each Rig, subject to normal wear and tear and
consumption in the ordinary course of business, Seller has not removed or
permitted to be removed any tangible property from such Rig, except for any such
tangible property relocated from one Rig to another Rig, or replaced in the
ordinary course of business.
Section 2.25 Powers of Attorney; Authorized Signatories. Section 2.25 of
the Company Disclosure Schedule lists the names and addresses of all persons
holding powers of attorney on behalf of the Company.
Section 2.26 Drilling Equipment. The 20 land drilling rigs described in
Section 2.26(a) of the Company Disclosure Schedule [and all such drilling units'
respective drilling machinery and equipment (including, without limitation,
floor tools and blow-out-preventers), engines, machinery, rigging, apparel,
furniture, computers and computer equipment on such units, fittings and
equipment, pumps and pumping equipment, spare components and parts, racking,
(supporting inventory and stores on the Rigs) and all appurtenances thereto
appertaining or belonging thereto] (collectively, the "Rigs" and each a "Rig")
and other related equipment is a complete list of the drilling rigs and related
drilling equipment owned by the Company.
Section 2.27 Workers' Compensation Claims. There are no workers'
compensation claims pending or, to the knowledge of Company, threatened against
the Company.
Section 2.28 Full Disclosure. No representation or warranty of the Seller
made in this Agreement or in any ancillary agreement, nor any written statement
furnished to the Purchaser pursuant to this Agreement or any ancillary agreement
or in connection with the transactions contemplated thereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statement in question not misleading. Each
of the schedules attached hereto is a true, complete and accurate list or
description, as appropriate, of the items purported to be listed or described on
that schedule
Article 3
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Except as set forth in the disclosure schedule being delivered by the
Purchaser to the Seller (the "Purchaser Disclosure Schedule"), the Purchaser
represents and warrants to the Seller as follows:
Section 3.1 Organization and Authority of the Purchaser.
(a) Each of the Purchaser and its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate power and
authority to own, lease or operate its properties and assets and to carry on its
business as now being conducted. Each of the Purchaser and its subsidiaries is
duly qualified to do business and in good standing and is duly licensed,
authorized or qualified to transact business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing has not had a Purchaser Material Adverse Effect. "Purchaser Material
Adverse Effect" means a change or effect that is materially adverse to the
business, financial condition or results of operations of the Purchaser and its
subsidiaries taken as a whole.(b) The Purchaser has all necessary corporate
power and authority to execute and deliver this Agreement, to perform its
obligations under this Agreement and to consummate the transactions contemplated
by this Agreement. The execution and delivery of each of this Agreement by the
Purchaser and the consummation by the Purchaser of the transactions contemplated
hereby have been duly authorized by all necessary corporate actions on the part
of Purchaser and no other corporate actions or proceedings on the part of the
Purchaser are necessary to authorize this Agreement or for the Purchaser to
consummate the transactions contemplated hereby. (c) This Agreement has been
duly and validly executed and delivered by Purchaser and (assuming due
authorization, execution and delivery by the Seller) constitutes a legal, valid
and binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms, subject to
8
limitations imposed by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and general equitable principles.
(d) The Purchaser has heretofore delivered to the Seller true and complete
copies of the certificate of incorporation and bylaws or similar organizational
documents of the Purchaser.
Section 3.2 Capitalization. The authorized capital stock of Purchaser
consists of 75,000,000 shares of Purchaser Common Stock, and 5,000,000 shares of
preferred stock, par value $1.00 per share. As of the close of business on May
23, 2002, (i) there were issued and outstanding 36,113,800 shares of Purchaser
Common Stock, (ii) no shares of preferred stock were issued and outstanding and
(iii) there were outstanding options to purchase 572,300 shares of Purchaser
Common Stock, and no other shares of capital stock or other voting securities of
Purchaser. All outstanding shares of capital stock of Purchaser have been duly
authorized and validly issued and are fully paid and nonassessable. One right to
purchase 1/100th of a share of Series A Junior Preferred Stock, issued in
accordance with the Purchaser's Rights Agreement dated as of May 19, 1995, as
amended, is associated with and attached to each outstanding share of Purchaser
Common Stock.
Section 3.3 Consents and Approvals; No Violations.
(a) No filing or registration with, and no permit, authorization,
certificate, waiver, license, consent or approval of, any Governmental Entity is
necessary for the execution, delivery or performance by the Purchaser of this
Agreement, except (x) for the applicable requirements of the HSR Act, (y) as a
result of facts or circumstances particular to the Seller, (z) compliance with
any applicable requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and compliance with any applicable requirements of the
Securities Act.
(b) Neither the execution and delivery of this Agreement by the Purchaser
nor the consummation by the Purchaser of the transactions contemplated hereby
nor compliance by the Purchaser with any of the provisions hereof will (i)
conflict with or result in any breach of any provision of the certificate of
incorporation or by-laws (or similar organizational documents) of the Purchaser,
(ii) require the consent or waiver of any person (other than a Governmental
Entity) or result in a violation or breach of, or constitute a default (or with
notice or lapse of time or both result in a breach of or constitute a default)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation under, or the loss of any material benefit under, any material
contract to which the Purchaser is a party or by which any of its material
assets may be bound or result in the imposition of or the creation of any Lien
upon any of the assets or properties of the Purchaser pursuant to or under, any
of the terms, conditions or provisions of any note, lease, license, contract or
agreement to which the Purchaser is a party or by which the Purchaser, or any of
its assets, is bound or (iii) violate any order, writ, injunction, decree or Law
applicable to the Purchaser or any subsidiary of the Purchaser, except in the
case of (ii) or (iii), for violations, breaches or defaults which, or consents
or waivers the absence of which, individually or in the aggregate, have not had
and would not have a Purchaser Material Adverse Effect.
Section 3.4 Absence of Certain Changes. Since December 31, 2001(i) the
businesses of the Purchaser have been conducted only in the ordinary course of
business and (ii) the Purchaser has not suffered a Purchaser Material Adverse
Effect.
Section 3.5 Investment. The Purchaser, with respect to all of the LLC
Shares to be acquired by it hereunder, is not acquiring such securities with a
present view to, or with any present intention of, distributing or reselling any
thereof in any transaction that would be in violation of the securities laws of
the United States of America or any State.
Section 3.6 Business Combination Provision; Rights Plan. The Board of
Directors of Purchaser has (i) taken the necessary action to render its Rights
Plan and any potentially applicable antitakeover or similar statute or
regulation inapplicable to this Agreement and the transactions contemplated
hereby and (ii) has resolved to, and promptly after the execution of this
Agreement will, take the necessary action to render the supermajority voting
provisions of Article 11 of Purchaser's certificate of incorporation
inapplicable to this Agreement and the transactions contemplated hereby, if
required.
9
Section 3.7 Purchaser Commission Documents.
(a) Purchaser has made available to Seller (i) its annual reports on Form
10-K for its fiscal years ended December 31, 1999, 2000 and 2001, (ii) its
quarterly reports on Form 10-Q for its fiscal quarters ended after December 31,
2001, (iii) its proxy or information statements relating to meetings of, or
actions taken without a meeting by, the stockholders of Purchaser held or to be
held since December 31, 2001, and (iv) all of its other reports, statements,
schedules and registration statements filed with the Securities and Exchange
Commission since December 31, 2001 (the documents referred to in this Section
3.7(a) being referred to collectively as the "Purchaser Commission Documents").
Purchaser's annual report on Form 10-K for its fiscal year ended December 31,
2001 is referred to herein as the "Purchaser 10-K".
(b) As of its filing date, each Purchaser Commission Document complied as
to form in all material respects with the applicable requirements of the
Exchange Act.
(c) As of its filing date, each Purchaser Commission Document filed
pursuant to the Exchange Act did not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(d) Each registration statement, as amended or supplemented, if applicable,
filed by Purchaser since January 1, 2000 pursuant to the Securities Act as of
the date such statement or amendment became effective did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
Section 3.8 Brokers. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Purchaser.
Section 3.9 No Implied Representations. The Purchaser acknowledges that the
Seller is not making any representations or warranties regarding the Company's
business other than as explicitly set forth in this Agreement. The Purchaser
agrees that it shall not assert any claims against or seek any damages or other
remedies (including pursuant to any implied warranties or similar rights, which
the Purchaser expressly and irrevocably waives and agrees not to seek to
enforce) from the Seller or any of its representatives for any matters relating
to the Company's business or the other matters contemplated hereby except for
fraud or as explicitly set forth herein.
Article 4
COVENANTS
Section 4.1 Conduct of the Business of the Company.
(a) During the period from the date hereof to the Closing Date, the Seller
shall, except as otherwise expressly provided in this Agreement, cause the
Company to operate only in the ordinary course of business consistent with past
practice. The Seller shall, and shall cause the Company to, use all reasonable
efforts to preserve intact the present organization of the Company's business
and preserve the Company's relationships with customers, suppliers, and others
having significant business dealings with its business.
(b) Without limiting the generality of the foregoing, and except as set
forth in Section 4.1 of the Seller Disclosure Schedule or as otherwise expressly
provided in this Agreement, from the date of this Agreement to the Closing Date,
the Seller shall cause the Company not to, and the Company shall not, without
the written consent of the Purchaser:
(i) amend its articles of organization or operating agreement (or
other similar organizational documents) or alter through merger, liquidation,
reorganization, restructuring or in any other fashion, the corporate structure
or ownership of the Company;
(ii) issue, sell or agree or commit to issue, sell or deliver (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise), pledge or otherwise encumber
any membership interest of the Company, or any securities convertible into, or
exchangeable for, any such membership interest or amend the terms of any such
agreements outstanding on the date hereof;
10
(iii) (A) declare, set aside, make or pay any dividend or other
distribution in respect of its membership interests or other equity
securities, or (B) redeem, repurchase or otherwise acquire any of its
membership interest;
(iv) (A) transfer, sell, lease, license or dispose of any assets or
rights, unless in the ordinary course of business consistent with past
practice; or (B) acquire or agree to acquire, by merging or consolidating
with, by purchasing an equity interest in or a portion of the assets of or by
any other manner any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire or agree
to acquire any assets of any other person (other than the purchase of assets
in the ordinary course of business and consistent with past practices);
(v) (A) incur, assume, discharge, cancel or prepay any material
indebtedness or other obligation or issue or sell any debt securities or
rights to acquire any debt securities, (B) assume, guarantee, endorse or
otherwise become liable (whether directly, contingently or otherwise) for the
obligations of any other person, (C) change the Company's practices with
respect to the timing of payments or collections; or (D) mortgage or pledge
any of its assets or permit to exist any Lien (other than Company Permitted
Liens) thereupon;
(vi) enter into or adopt any employee benefit plan, or incur in any
respect compensation or fringe benefits for any officer or employee of the
Company;
(vii) enter into any employment or severance agreement with any
person, or adopt or enter into any collective bargaining agreement;
(viii) enter into, amend, assign or terminate any Company Contract,
except in the ordinary course of business and consistent with past practices;
(ix) enter into any agreement or engage in any transactions with the
Seller or any director, officer or employee of Seller other than in the
ordinary course of business and consistent with past practices and on a basis
no less favorable than would at the time be obtainable for a comparable
transaction in arm's-length dealing with an unrelated third party;
(x) settle or compromise any litigation of the Company (whether or not
commenced prior to the date of this Agreement) or settle, pay or compromise
any claims, liabilities or obligations;
(xi) change or agree to change any accounting method or policy other
than as required by GAAP or by Law;
(xii) change, or agree to change, any business policies which relate
to advertising, pricing, personnel, labor relations, sales, returns or product
acquisitions, in each case in a manner which would have a Company Material
Adverse Effect;
(xiii) settle or compromise any material Tax liability;
(xiv) make any capital expenditures in excess of $100,000 in any
single case; or
(xv) take, or agree in writing or otherwise to take, any of the
foregoing actions.
Section 4.2 Access to Information. (a)Upon reasonable notice, and subject
to applicable law and any applicable contractual restrictions, the Seller shall,
and shall cause the Company to, afford to the officers, employees, accountants,
counsel and other representatives of the Purchaser reasonable access during
normal business hours to all of the Company's offices, facilities, properties,
books and records relating to its business, and the Seller shall furnish
promptly to the Purchaser all information concerning the business, properties
and personnel of the Company as the Purchaser may reasonably request. All
information provided or made available to, or obtained by, the Purchaser or any
of its officers, employees, accountants, counsel or other representatives (or
their respective accountants or counsel) shall be kept confidential pursuant to
the confidentiality agreement dated April 18, 2002, between the Purchaser, the
Company and the Seller (the "Confidentiality Agreement"). Notwithstanding the
foregoing, the Purchaser shall not have the right to receive or obtain any
information relating to Taxes or Tax Returns of the Seller or any of its
Affiliates, other than information relating solely to the Company.
(b) Upon reasonable notice, and subject to applicable law and any
applicable contractual restrictions, the Purchaser shall, and shall cause its
subsidiaries to, afford to the officers, employees, accountants, counsel and
other representatives of the Seller reasonable access during normal business
hours to all of the Purchaser's offices, facilities,
11
properties, books and records, and the Purchaser shall furnish promptly to the
Seller all information concerning the business, properties and personnel of the
Purchaser as the Seller may reasonably request. All information provided or made
available to, or obtained by, the Seller or any of its officers, employees,
accountants, counsel or other representatives (or their respective accountants
or counsel) shall be kept confidential pursuant to the Confidentiality
Agreement.
Section 4.3 Reasonable Best Efforts.
(a) Upon the terms and subject to the conditions of this Agreement, 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 necessary, proper
or advisable under applicable Laws to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable including
the preparation and filing of all forms, registrations and notices required to
be filed to consummate the transactions contemplated by this Agreement and the
taking of such actions as are necessary to obtain any requisite approvals,
consents, orders, exemptions or waivers by any Governmental Entity, including
making the filings pursuant to the HSR Act within 20 business days of the date
hereof. Each party shall promptly consult with the other with respect to,
provide any necessary information with respect to and provide the other (or its
counsel) copies of, all filings made by such party with any Governmental Entity
or any other information supplied by such party to a Governmental Entity in
connection with this Agreement and the transactions contemplated by this
Agreement.
(b) Notwithstanding the provisions set forth in Section 4.3(a), or any
other covenant herein contained, in connection with the receipt of any necessary
approvals under the HSR Act, the Purchaser shall not be required to divest or
hold separate or otherwise take or commit to take any action that materially
limits the Purchaser's freedom of action with respect to, or its ability to
retain, the Company or any material portions of the businesses, product lines,
properties or assets of the Company, without the Purchaser's prior written
consent.
(c) Notwithstanding the provisions set forth in Section 4.3(a), or any
other covenant herein contained, in connection with the receipt of any necessary
approvals under the HSR Act, neither the Seller nor any Affiliate of the Seller
shall be required to divest or hold separate or otherwise take or commit to take
any action that materially limits Seller's freedom of action with respect to, or
its ability to retain, any material portions of the businesses, product lines,
properties or assets of the Seller or any Affiliates of the Seller, without the
Seller's prior written consent.
Section 4.4 Further Assurances; No Hindrances. From time to time after the
Closing, without additional consideration, each of the Seller and the Purchaser
will execute and deliver such further instruments and take such other action as
may be necessary to make effective the transactions contemplated by this
Agreement. Upon the terms and subject to the conditions of this Agreement, each
of the parties hereto shall use its reasonable best efforts (i) to cause all
conditions precedent to its obligations to consummate the transactions
contemplated hereby to be satisfied and (ii) not to take, or cause to be taken,
any actions to hinder or delay the consummation of the transactions contemplated
hereby.
Section 4.5 Access to Records.
(a) The Purchaser agrees that it shall take reasonable efforts to preserve
and keep all books and records in respect of the Company business that relate to
periods prior to the Closing, or to matters for which the Seller may be required
to provide indemnification hereunder, for a period of four years from the
Closing Date (or any longer period required by applicable law or until the final
resolution of any matters for which the Seller may be required to provide
indemnification hereunder), and shall give the Seller reasonable access to such
books and records during normal business hours. However, failure of Purchaser to
maintain such records will not result in any liability to the Seller or any of
its Affiliates.
(b) Subject to applicable law and any applicable contractual restrictions,
if following the Closing a party hereto (or its subsidiaries) is in possession
of any information relating to the business of the Company which the other party
requires in order to prepare documents required to be filed with Governmental
Entities or its financial statements, such party shall furnish such information
to the other party as soon as reasonably practicable following a written request
for such information.
Section 4.6 Notice of Possible Breach. Prior to the Closing, if any party
to this Agreement shall become aware of any fact, event or circumstance that
would constitute a breach of this Agreement by the other party or that
12
would result in the failure to satisfy any condition set forth in Article 5,
such party shall promptly notify the other party thereof in writing. The parties
shall thereupon provide reasonable cooperation to cure or remedy such breaches
or satisfy such closing conditions.
Section 4.7 Supplemental Disclosure. From time to time prior to the
Closing, the Seller will, and will cause the Company to, promptly following its
becoming aware thereof supplement or amend the Seller Disclosure Schedule with
respect to any matter hereafter arising or discovered which, if known, existing
or occurring at the date of this Agreement, would have been required to be set
forth or described in the Seller Disclosure Schedule. From time to time prior to
the Closing, the Purchaser will, promptly following its becoming aware thereof
supplement or amend the Purchaser Disclosure Schedule with respect to any matter
hereafter arising or discovered which, if known, existing or occurring at the
date of this Agreement, would have been required to be set forth or described in
the Purchaser Disclosure Schedule. Any supplement or amendment of the Seller
Disclosure Schedule or the Purchaser Disclosure Schedule made pursuant to this
Section 4.7 shall not be deemed to cure any breach or inaccuracy of any
representation or warranty made in this Agreement.
Section 4.8 Notices of Certain Events. The Seller shall, and shall cause
the Company to, notify the Purchaser in writing and the Purchaser shall notify
the Seller in writing of:
(a) any notice or other communication received by the Seller, the Company
or the Purchaser, as the case may be, from any person alleging that the consent
of such person is or may be required in connection with the transactions
contemplated by this Agreement;
(b) any notice or other communication from any Governmental Entity received
by the Seller, the Company or the Purchaser, as the case may be, that relates to
the transactions contemplated by this Agreement or that is materially
significant to the Business; and
(c) any actions, suits, claims, investigations or proceedings commenced or,
to the Seller's or the Purchaser's, as the case may be, knowledge threatened
against, relating to or involving or otherwise affecting the Seller, the Company
or the Purchaser, as the case may be, that relate to the consummation of the
transactions contemplated by this Agreement.
Section 4.9 Confidentiality. From the Closing Date until the third
anniversary of the Closing Date, the Seller will not, and will not permit its
Affiliates or any of their respective affiliates to, disclose to any person
without the prior written consent of the Purchaser any confidential or
non-public information relating to or concerning the business of the Company
(the "Confidential Information"), unless (i) disclosure is required to be made
under applicable Law or (ii) such information is or becomes generally available
(a) to the public other than as a result of disclosure by the Seller in
violation of this Section 4.11 or (b) to the Seller on a non-confidential basis
from a source, other than the Company or the Purchaser, which to the knowledge
of the Seller, is not prohibited from disclosing the confidential information by
contractual, legal or fiduciary obligation. The Seller shall notify the
Purchaser promptly after receipt by the Seller of any request for such
information.
Section 4.10 Insurance; Rig Loss. The Seller shall keep, or cause to be
kept, all material insurance policies maintained by the Seller for the benefit
of the business of the Company, or suitable replacements therefor (which may
include policies containing terms equal or more favorable than the policies that
they are replacing), in full force and effect up to the Closing. Except as
otherwise provided in subsections (a) and (b) below, or in respect of a
liability for which Seller is liable, to the extent the Seller or any of its
Affiliates receives, whether before or after the Closing Date, any proceeds from
any insurance policy with respect to the business of the Company, the Seller
shall or shall cause its Affiliates to pay over to the Company such proceeds as
promptly as practicable.
(a) If any Rig or other related equipment shall become an actual or
constructive total loss prior to the Closing Date: (i) the Purchase
Consideration shall be reduced by the amount allocated to such Rig or other
related equipment pursuant to Section 4.10 of the Seller Disclosure Schedule and
the Seller shall be entitled to any insurance proceeds and claims with respect
thereto together with all rights to salvage and (ii) the other provisions of
this Agreement shall continue to be in effect and the Closing shall take place
in the manner contemplated herein.
(b) If a Rig or other related equipment sustains damage (estimated to cost
more than $50,000 to repair) not amounting to an actual or constructive total
loss prior to the Closing Date, at the Seller's election, either (i) the Seller
shall repair or cause to be repaired the damage to the Rig or other related
equipment at the Seller's own expense or (ii)
13
elect not to repair such Rig or other related equipment. In the case of an
election of clause (ii) of this subsection, the Purchaser may (x) require the
Seller to assign to Purchaser at the Closing the rights, if any, the Seller has
to receive insurance proceeds in respect of such loss or damage, or (y) elect to
have the Rig or other related equipment excluded as an asset of the Company and
be entitled to a reduction in Purchase Consideration equal to its value as set
out in Section 4.10 of the Seller's Disclosure Schedule. In the case of either
(i) or (ii)(x) above, the Purchase Consideration shall not be reduced.
Section 4.11 Non-Solicitation of Employees.
(a) From and after the date hereof, the Seller (nor any of its Affiliates)
shall not, without the prior written approval of the Purchaser, for a period of
two years from the Closing Date, directly or indirectly, solicit, encourage,
entice or induce any person who becomes an employee of the Company after the
Closing Date, to terminate his or her employment with the Company, or hire or
employ any person who is an employee of the Company after the Closing Date;
provided that the foregoing shall not apply to persons who approach the Seller
or any of its Affiliates for the purposes of employment or who are hired as a
result of the use of an independent employment agency where contact between such
person and the independent employment agency was initiated by such person or as
a result of the use of a general solicitation (such as an advertisement) not
specifically directed to employees of the Company.
(b) If it is ever held that the restriction placed on any party to this
Agreement by this Section 4.11 is too onerous and is not necessary for the
protection of the other party or parties hereto, each party to this Agreement
agrees that any court of competent jurisdiction may impose lesser restrictions
which such court may consider to be necessary or appropriate to properly protect
the other party or parties hereto.
Section 4.12 Listing of Purchase Consideration. The Purchaser shall use its
reasonable best efforts to cause the shares of Purchaser's common stock to be
issued hereunder to be listed on the New York Stock Exchange, subject to
official notice of issuance, as promptly as possible.
Section 4.13 Nonsolicitation. Prior to the Closing, except with respect to
this Agreement, none of the Seller, any Affiliate of the Seller, or any
director, officer, employee or Representative of the Seller or any of its
Affiliates may directly or indirectly (1) solicit, initiate, encourage or
knowingly facilitate (including by way of furnishing information) any inquiries
relating to, or the making of, any Acquisition Proposal by any person, or (2)
have any discussion with or furnish any confidential information or data to any
person relating to an Acquisition Proposal, or engage in any negotiations
concerning an Acquisition Proposal, or knowingly facilitate any effort or
attempt to make or implement an Acquisition Proposal. The Seller shall, and will
cause its officers, directors and Representatives to, immediately cease and
cause to be terminated any activities, discussions or negotiations existing as
of the date of this Agreement with any parties conducted heretofore with respect
to any Acquisition Proposal and Seller will use its reasonable best efforts to
cause such parties to return or destroy confidential information concerning the
Company provided to such parties by or on behalf of the Seller. The Seller shall
promptly inform its directors, officers, employees, and Representatives of the
obligations undertaken in this Section 4.13. "Acquisition Proposal" means any
proposal or offer (whether or not in writing) to acquire in any manner, directly
or indirectly, any LLC Shares, any shares of capital stock or other securities
of the Company or all or any material portion of the assets or properties of
Company. "Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative.
Section 4.14 Restrictive Covenants.
(a) As a material inducement to the Purchaser to enter into this Agreement,
the Seller shall not engage for a term of two (2) years after the Closing Date
in the onshore oil and natural gas contract drilling business (a "Restricted
Business") within the States of Oklahoma and Texas; provided that it shall not
be a violation of this subsection for the Seller or any of its Affiliates to:
(i) acquire or own less than five percent (5.0%) of any class of securities of
any entity engaged in a Restricted Business that is listed on any securities
exchange or otherwise publicly traded; (ii) acquire or own any interest in any
entity engaged in a Restricted Business so long as such Restricted Business does
not contribute more than ten percent (10%) of the revenues of such entity and
the Seller on a pro forma combined basis for twelve month period ending at the
time of such acquisition; and (iii) acquire or own any interest in any entity
engaged in a Restricted Business that contributes more than ten percent (10%) of
the revenues of such entity and the Seller on a pro forma combined basis for the
twelve month period ending at the time of such acquisition; provided that within
one year following such acquisition, the Seller disposes of such Restricted
Business
14
or portions thereof so that such Restricted Business does not then contribute
more than ten percent (10%) of the revenues of such entity and the Seller on a
combined basis. Any acquisition or investment made by the Seller that is
permissible under this Section 4.14 at the time when made cannot thereafter be
the basis of a claim of violation of this Section 4.14.
(b) Notwithstanding anything contained herein to the contrary, in the event
of a breach or threatened breach of the covenants contained in Section 4.14(a)
hereof, Purchaser may, in addition to any other available remedies, be entitled
to an injunction enjoining the Seller or any person or persons acting for or
with the Seller in any capacity whatsoever from violating any of the terms
herein, in accordance with applicable law regarding the award of an equitable
remedy.
Section 4.15 Allocation of Assets and Liabilities. All assets and
liabilities of the Company, including pre-paid expense accounts receivables and
payables of the Company arising from operation of the Company prior to the
Closing Date, except the Rigs, Company Contracts related to the Rigs, and the
going business of the Rigs, shall be allocated to and remain the sole property
or liability of the Seller and all accounts receivables or payables arising at
or subsequent to the Closing Date shall remain with the Company.
Article 5
CONDITIONS
Section 5.1 Conditions to Each Party's Obligations. The respective
obligation of each party to effect the transactions contemplated by this
Agreement shall be subject to the satisfaction of each of the following
conditions, unless waived in writing by each of the parties hereto:
(a) No statute, rule, regulation, order, decree, temporary restraining
order or injunction shall have been enacted, entered, promulgated or enforced by
a United States Governmental Entity which prohibits or materially restricts the
consummation of the transactions contemplated by this Agreement and shall be in
effect.
(b) Any applicable waiting period under the HSR Act with respect to the
transactions contemplated by this Agreement shall have expired or been
terminated and all other material authorizations, consents, approvals, or
clearances of any Governmental Entity necessary for the consummation of the
transactions contemplated by this Agreement shall have been obtained.
(c) The Purchaser and Xxxxxx X. Xxxxxx shall have entered into an agreement
of even date hereof (the "Simultaneous Agreement") pursuant to which the
Purchaser and Xxxxxx X. Xxxxxx have agreed, among other things, that the
Purchaser shall acquire all of the capital stock of CDC Drilling Company.
Section 5.2 Conditions to Obligations of the Purchaser. The obligation of
the Purchaser to effect the transactions contemplated by this Agreement is
further subject to the satisfaction of each of the following conditions, unless
waived in writing by the Purchaser:
(a) The representations and warranties of the Seller contained in Article 2
of this Agreement, without regard to any amendment of or supplement to the
Seller Disclosure Schedule since the date of this Agreement and prior to
Closing, shall have been true and correct in all material respects (except those
representations and warranties qualified by "materiality" and those shall be
true and correct in all respects) when made and shall be true and correct in all
material respects (except those representations and warranties qualified by
"materiality" and those shall be true and correct in all respects) as of the
Closing, with the same force and effect as if made at the Closing, except that
representations and warranties which are made as of a specific date need only be
true and correct as of such date.
(b) The Seller shall have performed and complied in all material respects
with all covenants and agreements required to be performed or complied with by
it under this Agreement at or prior to the Closing.
(c) The Purchaser shall have received a certificate of the trustee of the
Seller to the effect that the conditions set forth in Sections 5.2(a) and 5.2(b)
above have been satisfied.
Section 5.3 Conditions to Obligations of the Seller. The obligation of the
Seller to effect the transactions contemplated by this Agreement is further
subject to the satisfaction of each of the following conditions, unless waived
in writing by the Seller:
15
(a) The representations and warranties of the Purchaser contained in
Article 3 of this Agreement, without regard to any amendment of or supplement to
the Seller Disclosure Schedule since the date of this Agreement and prior to
Closing, shall have been true and correct in all material respects (except those
representations and warranties qualified by "materiality" and those shall be
true and correct in all respects) when made and shall be true and correct in all
material respects (except those representations and warranties qualified by
"materiality" and those shall be true and correct in all respects) as of the
Closing, with the same force and effect as if made at the Closing, except that
representations and warranties which are made as of a specific date need only be
true and correct as of such date.
(b) The Purchaser shall have performed and complied in all material
respects with all covenants and agreements required to be performed or complied
with by it under this Agreement at or prior to the Closing.
(c) The Seller shall have received from an executive officer of the
Purchaser a certificate, to the effect that the conditions set forth in Sections
5.3(a) and 5.3(b) above have been satisfied.
Article 6
TERMINATION AND AMENDMENT
Section 6.1 Termination. This Agreement may be terminated:
(a) at any time prior to the Closing, by mutual written consent of the
Seller and the Purchaser;
(b) at any time prior to the Closing, by either the Seller or the Purchaser
if the Closing shall not have occurred on or before September 23, 2002 (unless
the failure to consummate the Closing by such date shall be due to the action or
failure to act of the party seeking to terminate this Agreement);
(c) at any time prior to the Closing, by either the Seller or the Purchaser
if any United States court of competent jurisdiction or other competent United
States Governmental Entity shall have issued an order, decree or injunction or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such order,
decree or injunction or other action shall have become final and nonappealable;
or
(d) at any time prior to the Closing, by either the Purchaser or the Seller
if there shall have been a material breach by the other of any of its
representations, warranties, covenants or agreements contained in this
Agreement, which if not cured would cause the conditions set forth in Section
5.2 or Section 5.3, as the case may be, not to be satisfied, provided, however,
that as a condition to the right of the party to elect to terminate this
Agreement pursuant to the immediately preceding clause, such party shall first
provide 15 days' prior notice to the other party specifying in reasonable detail
the nature of the condition that such party has concluded will not be satisfied,
and the other party shall be entitled during such 15 day period to commence any
actions it may elect consistent with the terms of this Agreement to provide
reasonable assurance to the first party that such condition will be satisfied
prior to September 23, 2002 and provided, further, that if such condition can be
satisfied by the other party through the exercise of its best efforts and for so
long as that party continues to use such best efforts, the first party may not
terminate this Agreement under this Section 6.1(d) prior to September 23, 2002.
Section 6.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 6.1 hereof, this Agreement shall forthwith become
void and have no effect, without any liability on the part of any party hereto
or its Affiliates, directors, officers or stockholders to any other party to
this Agreement, except that (a) the provisions of this Section 6.2, Sections
11.7 and 11.11 and the Confidentiality Agreement shall remain in effect
notwithstanding such termination and (b) notwithstanding anything to the
contrary contained in this Agreement (including Section 6.1(d)), no party shall
be relieved or released from any liabilities or damages arising out of its
breach of any provision of this Agreement.
Section 6.3 Amendment. This Agreement may be amended or modified at any
time by the parties hereto, but only by an instrument in writing signed on
behalf of each of the parties hereto.
Section 6.4 Extension; Waiver. At any time prior to the Closing, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to
16
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. Neither the failure nor the delay on
the part of any party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof.
Article 7
TAX MATTERS
Section 7.1 Retention of Records. Each of the Purchaser and the Seller
shall retain, and the Purchaser shall cause the Company to retain, all Tax
Records in its possession for all open Tax Periods ending on or before or
including the Closing Date, until six months following the expiration of the
statute of limitations (and any extensions thereof) of the respective Tax
Periods. "Tax Records" means any Tax Return, Tax Return work papers,
documentation relating to any Audit, and any other books of account or records
(whether on paper, computer disk or any other medium) required to be maintained
under the applicable Tax Law or under any record retention agreement with any
Tax Authority.
Section 7.2 Cooperation. The Purchaser and the Seller covenant and agree
that subsequent to the Closing, upon reasonable notice and during normal
business hours, they and their Affiliates will (i) give the other party and its
representatives information, books and records relevant to the Company to the
extent necessary to enable the other party to prepare its Tax Returns and (ii)
provide the other party or its Affiliates with such information, books and
records as may reasonably be requested in connection with any Tax Return,
inquiry, election, audit or other examination by any Tax Authority, or judicial
or administrative proceedings relating to liability for Taxes. The Seller and
the Purchaser also shall make available to each other, as reasonably requested,
and at the expense of the requesting party, knowledgeable employees or advisors
of the party or its Affiliates of which the request is made and personnel
responsible for preparing and maintaining information, books, records and
documents in connection with Tax filings, audits, disputes or litigation.
Notwithstanding the foregoing or any other provision in this Agreement, neither
the Purchaser nor the Company (or any Affiliates of either) shall have the right
to receive or obtain any information relating to Taxes of the Seller, any of its
Affiliates, or any of its predecessors other than information relating solely to
the Company.
Section 7.3 Transfer Taxes; Ad Valorem Taxes. All transfer, documentary,
recording, notarial, use, registration, stamp and other similar taxes, fees and
expenses (but not including sales taxes, if any, which shall be borne solely by
Purchaser) (including, but not limited to, all applicable stock transfer Taxes
and including any penalties, interest and additions to such tax) ("Transfer
Taxes") incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne equally by the Seller and the Purchaser,
regardless of which party is obligated to pay such tax under applicable law. The
Purchaser and the Seller shall cooperate in timely making and filing all Tax
Returns as may be required to comply with the provisions of laws relating to
such Transfer Taxes.
(b) Any real property taxes, personal property taxes, similar ad valorem
obligations and any other Taxes (other than income or franchise taxes) imposed
for a tax or assessment period that includes, but does not end on, the Closing
Date, shall be apportioned between Purchaser and Seller, [with Seller bearing a
portion of such Taxes based on the number of days in the tax or assessment
period prior to and including the Closing Date and Purchaser bearing a portion
of such Taxes based on the number of days in the tax or assessment period after
the Closing Date].
Section 7.4 Tax Returns.
(a) Consolidated Returns. Seller shall prepare (or cause to be prepared)
and timely file all consolidated United States Income Tax Returns (within the
meaning of Section 1501 of the Code and the Treasury Regulations promulgated
pursuant to Section 1502 of the Code) and all other combined, joint,
consolidated or unitary Tax Returns required to be filed with any Tax Authority
(collectively the "Consolidated Returns") with respect to the Company for any
Tax Period including, or ending on or before, the Closing Date. Payment of Taxes
shown to be due on such Consolidated Returns shall be made in accordance with
Section 7.6 hereof. In a manner consistent with past custom and practice of
Seller and the Company, Purchaser shall timely provide (or cause to be provided)
to the Seller all information (including pro forma Tax Returns, schedules,
statements and supporting documentation) reasonably required in connection with
the preparation and filing of such Consolidated Returns. Seller shall not elect,
pursuant to Treasury Regulation Section 1.1502-20(g) or Treasury Regulation
Section 1.1502-96(d), or any comparable provision of law or regulations, to
reattribute to itself any portion of the net operating loss carryovers, net
capital loss carryovers
17
or section 382 limitation, if any, attributable to the Company. Any consolidated
section 382 limitation applicable to the Seller and its subsidiaries (including
the Company) as of the Closing Date, if any, shall be apportioned between the
Seller and its subsidiaries (other than the Company), on the one hand, and the
Company, on the other, pursuant to Treasury Regulation Section 1.1502-95 based
on the relative fair market value of such entities immediately prior to the
Closing Date. Any such allocation shall be proposed by the Seller for approval
by the Purchaser, which approval shall not be unreasonably withheld.
(b) Separate Company Returns. Seller shall prepare (or cause to be
prepared) and timely file all other Tax Returns with respect to the Company that
are not Consolidated Returns and that are for Tax Periods ending on or before
the Closing Date; provided however, that the filing of any such Tax Return
shall, except as set forth on Section 7.4(b) of the Seller Disclosure Schedule,
be subject to the Purchaser's prior written consent, which shall not be
unreasonably withheld; provided further that the Purchaser shall consent to the
filing of any such Tax Return if such filing would not have a significant
adverse effect on the Taxes of the Company for any Post-Closing Period.
Purchaser shall prepare (or cause to be prepared) and timely file all Tax
Returns for any Tax Period ending after the Closing Date that are not
Consolidated Returns (the "Purchaser Returns"). If the Seller is obligated under
this Agreement to indemnify the Purchaser for any Taxes due with respect to a
Purchaser Return, the filing of such Purchaser Return shall be subject to the
Seller's prior written consent, which shall not be unreasonably withheld;
provided however, that the Seller shall consent to the filing of any such Tax
Return if such filing would not have a significant adverse effect on the Taxes
of the Company for any Pre-Closing Period. Payment of Taxes shown to be due on
such Tax Returns shall be made in accordance with Section 7.5 hereof and shall
be allocated among the parties in accordance with Section 7.5(b) hereof.
(c) Tax Accounting Practices. Any Tax Return that includes any of the
Company's assets or activities for any Pre-Closing Period shall be prepared in
accordance with past Tax accounting practices used with respect to the Tax
Returns in question (unless the party responsible for preparing the Tax Return
determines that the past practices are no longer permissible under the Code or
other applicable Tax law), and to the extent any items are not covered by past
practices (or in the event such past practices are no longer permissible under
the Code or other applicable Tax law), in accordance with reasonable Tax
accounting practices selected by the party responsible for preparing the Tax
Return.
(d) Amendment of Tax Returns. Except as set forth on Schedule 7.4(d) or as
required under applicable law, from the date of this Agreement, Seller agrees
not to amend any Tax Return attributable to a Pre-Closing Period (as defined in
Section 7.5 of this Agreement) without the consent of the Purchaser, such
consent not to be unreasonably withheld; provided however, that the Purchaser
shall consent to the filing of any amended Tax Return if such filing would not
have a significant adverse effect on the Taxes of the Company for any
Post-Closing Period. From the Closing Date, Purchaser agrees not to amend any
Tax Return attributable to a Pre-Closing Period (as defined in Section 7.6 of
this Agreement) without the consent of the Seller, such consent not to be
unreasonably withheld; provided however, that the Seller shall consent to the
filing of any amended Tax Return if such filing would not have a significant
adverse effect on the Taxes of the Company for any Pre-Closing Period.
Section 7.5 Allocation of Taxes.
(a) Purchaser Return Taxes. From and after the Closing Date, Purchaser
shall pay (or cause the Company to pay) to the appropriate Tax Authorities any
Taxes due on or after the Closing Date with respect to a Purchaser Return.
(b) Allocation of Straddle Period Taxes. Purchaser and Seller shall, to the
extent permitted by applicable Tax Law and except as otherwise provided herein,
elect with the relevant Tax Authority to close the Tax Period of the Company as
of and including the Closing Date. Subject to the preceding sentence, in the
case of Taxes attributable to the Company that are payable with respect to any
Tax Period beginning before the Closing Date and ending after the Closing Date
(a "Straddle Period") the portion of any such Taxes that are allocable to the
portion of the Straddle Period ending on the Closing Date shall: (1) in the case
of Taxes that are either (A) based upon or related to income or receipts or (B)
imposed in connection with any sale, transfer or assignment of property (real or
personal, tangible or intangible) be deemed equal to the amount that would be
payable if the Tax year ended on and included the Closing Date and (2) in the
case of Taxes (other than those described in clause (i)) imposed on a period
basis with respect to the business or assets of the Company or otherwise
measured by the level of any item, be deemed to be the amount of such Taxes for
the entire Straddle Period (or, in the case of such Taxes determined on an
arrears basis, the amount of such Taxes for the immediately preceding Tax
Period) multiplied by a fraction the numerator of which is
18
the number of calendar days in the portion of the Straddle Period ending on and
including the Closing Date and the denominator of which is the number of
calendar days in the entire Straddle Period (the "Part-Year Fraction"). For
purposes of clause (1) of the preceding sentence, any exemption, deduction,
credit or other item that is calculated on an annual basis shall be allocated to
the portion of the Straddle Period ending on the Closing Date on a pro rata
basis determined by multiplying the total amount of such item allocated to the
Straddle Period times the Part-Year Fraction. In the case of any Tax based upon
or measured by capital (including net worth or long-term debt) or intangibles,
any amount thereof required to be allocated under this Section 7.5(b) shall be
computed by reference to the level of such items on the Closing Date.
(c) Post-Closing Tax Periods. From and after the Closing Date, for the
portion of any Straddle Period that begins on the day after the Closing Date and
any other Tax Period beginning after the Closing Date, without duplication of
any amount otherwise payable by Purchaser pursuant to this Agreement, Purchaser
shall pay, or cause the Company or any subsidiary to pay, to the appropriate Tax
Authority any other Taxes due with respect to the Company for any such period.
Section 7.6 Tax Indemnity.
(a) Seller's Indemnity for Taxes for Pre-Closing Periods. Notwithstanding
Article 8, from and after the Closing Date, without duplication of any amount
otherwise payable by Seller pursuant to this Agreement, Seller shall indemnify
Purchaser and its respective Affiliates against all Taxes imposed on or payable
by the Company:
(i) with respect to any Tax Period ending on or before the Closing
Date and the portion of the Straddle Period ending on the Closing Date (a
"Pre-Closing Period"); or
(ii) that are attributable to Seller or any member of an affiliated,
consolidated, combined or unitary Tax group of which the Company is or was a
member prior to the Closing Date that is imposed under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign law) by
reason of such Company being included in any such affiliated, consolidated,
combined or unitary Tax group.
(b) Seller's Indemnity for Payments Attributable to Pre-Closing Periods.
Notwithstanding Article 8, from and after the Closing Date, without duplication
of any amount otherwise payable by Seller pursuant to this Agreement, Seller
shall indemnify Purchaser and its respective Affiliates against any payments
owed by the Company to any third party (other than a Governmental Entity) with
respect to Taxes accruing on or before the Closing Date.
(c) Purchaser Indemnity for Taxes for Post-Closing Tax Periods.
Notwithstanding Article 8, from and after the Closing Date, Purchaser shall
indemnify Seller against all Taxes of Purchaser, relating to any Tax Period or
portion thereof that begins on or after the Closing Date.
(d) Payments. Payment by the indemnitor of any amount due under this
Section 7.6 shall be made within 30 days following written notice by the
indemnitee that payment of such amounts to the appropriate Tax Authority is due,
such written notice to reasonably demonstrate that the indemnitee is entitled to
such payment under the terms of this Agreement. If Seller or any of its
Affiliates receives an assessment or other notice of Taxes due with respect to
the Company for any period for which Seller is not responsible, in whole or in
part, pursuant to Section 7.4 hereof, then Purchaser shall pay such Tax, or if
Seller pays such Tax, then Purchaser shall pay to Seller the amount of such Tax
for which Seller is not responsible. In the case of a Tax that is contested in
accordance with the provisions of Section 7.6 hereof, payment of the Tax to the
appropriate Tax Authority will not be considered to be due earlier than the date
of a final determination to such effect is made by the appropriate Tax Authority
or court.
(e) Tax Refund. If the Purchaser or any of its subsidiaries (including, for
this purpose, the Company after the Closing Date) receives a Tax refund of the
Company with respect to a Pre-Closing Period, the Purchaser shall pay (or cause
the Company to pay) to the Seller the amount of such Tax refund (net of any
costs or expenses incurred by the Purchaser or the Company in obtaining the Tax
Refund). Such payment shall be made within 15 days of the receipt of such Tax
refund by the Purchaser or any of its subsidiaries.
Section 7.7 Contests.
(a) Notices. After the Closing Date, Purchaser and Seller each shall notify
the other in writing within 5 days of receipt of any notice of the commencement
of any Tax audit or administrative or judicial proceeding affecting the Taxes of
any of the Company or any of its subsidiaries, which, if determined adversely to
the taxpayer, would be
19
grounds for indemnification under this Agreement by the other party (or parties,
in the case of Seller) ("Tax Indemnitor"). Such notice shall contain factual
information describing any asserted Tax liability in reasonable detail and shall
include copies of any notice or other document received from any Tax Authority
in respect of any such asserted Tax liability. If either Purchaser or Seller
fail to give the other party prompt notice of an asserted Tax liability as
required under this Agreement, then (i) if the Tax Indemnitor is precluded by
the failure to give prompt notice from contesting the asserted Tax liability in
any administrative or judicial forums, such party shall not have any obligation
to indemnify the other party for any loss or damage arising out of such asserted
Tax liability, and (ii) if the Tax Indemnitor is not so precluded from
contesting, if such failure to give prompt notice results in a detriment to the
Tax Indemnitor, any amount which the Tax Indemnitor is otherwise required to pay
pursuant to this Agreement with respect to such liability shall be reduced by
the amount of such detriment.
(b) Control of Contests Involving Consolidated Returns. In the case of an
audit or administrative or judicial proceeding involving any asserted liability
for Taxes ("Tax Controversy") with respect to a Consolidated Return for a
Pre-Closing Period, Seller shall have the right, at its expense, to control the
conduct of such Tax Controversy.
(c) Control of Contests Involving Separate Company Returns. In the case of
a Tax Controversy with respect to a Tax Return that is not a Consolidated Return
and is for a Tax Period ending on or before the Closing Date, Seller shall have
the right, at its expense, to control the conduct of such Tax Controversy. In
the case of a Tax Controversy involving an asserted liability for Taxes with
respect to the Company relating to a Straddle Period, other than a Tax
Controversy with respect to a Consolidated Return, Purchaser shall have the
right, at its expense, to control the conduct of such Tax Controversy.
(d) Post-Closing Periods. Purchaser shall control the defense and
settlement of any Tax Controversy involving any asserted liability for Taxes
imposed with respect to the Company relating to Tax Periods that begin after the
Closing Date.
(e) Procedures. If the resolution of any Tax Controversy would be grounds
for indemnification under this Agreement (including, for this purpose, as a
result of altering the Tax Period in which items of income, gain, loss,
deduction or credit are reported) by the party not in control of the conduct of
such Tax Controversy (the "Non-Controlling Party") or otherwise adversely affect
the Tax liability of the Non-Controlling Party, (i) the party in control of such
Tax Controversy (the "Controlling Party") shall keep the Non-Controlling Party
fully informed of any proceedings, events, and developments relating to or in
connection with such Tax Controversy; (ii) the Non-Controlling Party shall be
entitled to receive copies of all correspondence and documents relating to such
Tax Controversy; (iii) the Controlling Party shall consult with the
Non-Controlling Party and shall not enter into any settlement with respect to
any such Tax Controversy without the Non-Controlling Party's prior written
consent, such consent not to be unreasonably withheld; and (iv) at its own cost
and expense, the Non-Controlling Party shall have the right to participate (but
not control) the defense of such Tax Controversy.
Section 7.8 Miscellaneous.
(a) Character of Payments. Any payment made by the Seller, the Purchaser,
or any of their respective subsidiaries (including the Company) under this
Article 7 shall constitute an adjustment to the Purchase Consideration for all
tax purposes.
(b) Interest on Payments. To the extent any payment obligation under this
Article 7 is not made on a timely basis (as determined by the relevant provision
of this Article 7), the amount due and payable shall bear interest at an annual
rate equal to the Interest Rate from the last date such payment would be timely
under the relevant provision of this Article 7 to the date of the payment of
such amount.
(c) Survival of Tax Claims. Notwithstanding any other provision of this
Agreement to the contrary, any obligations of the parties pursuant to this
Article 7 shall be unconditional and absolute and shall survive until the
expiration of the applicable statute of limitations (taking into account any
applicable extensions or tollings thereof) relating to the Taxes at issue.
Section 7.9 Tax Election. At the sole discretion of Purchaser, Purchaser
and Seller (or its applicable Affiliate) shall make timely, joint elections
under Section 338(h)(10) of the Code and any comparable election under foreign,
state or local tax law (the "Elections") with respect to the sale and purchase
of the LLC Shares pursuant to this Agreement. Purchaser shall be responsible for
and control the preparation and filing of the Elections. In
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particular, Seller shall deliver to Purchaser all information reasonably
requested to enable Purchaser to prepare Forms 8023 and all attachments required
to be filed therewith (the "Forms"), including the schedule of data required by
the Forms no later than ninety (90) days before the Forms are due to be filed.
Once prepared by Purchaser, a draft copy of the Forms shall be forwarded to
Seller for its approval at least thirty (30) days prior to the filing due date
for the Forms and which approval shall not be unreasonably withheld. The Forms
shall be duly executed by an authorized person for each party and duly and
timely filed by Purchaser on behalf of Purchaser and Seller (or its applicable
Affiliate). Purchaser and Seller shall agree on the allocation of the Purchase
Consideration among the assets of the Company which shall be made in accordance
with Section 338(h)(10) of the Code and the Treasury Regulations promulgated
thereunder. The Purchaser and Seller will file all Tax Returns (including the
Forms) in a manner consistent with such election.
Article 8
INDEMNIFICATION
Section 8.1 Indemnification by the Seller. Subject to the provisions of
Section 11.12, the Seller hereby agrees to indemnify and hold harmless the
Purchaser, the Company and their respective successors and assigns after the
Closing Date from and against:
(a) Any Claims and Damages asserted against or incurred by the Purchaser or
the Company and occasioned by, arising out of or resulting from any breach of
the representations and warranties of the Seller that are set forth in this
Agreement (determined after taking into account any amendments or supplements to
the Seller Disclosure Schedule since the date of this Agreement and not less
than three days before Closing);
(b) Any Claims and Damages asserted against or incurred by the Purchaser or
the Company and occasioned by, arising out of or resulting from the Seller's
failure to perform any of the Seller's obligations for which performance after
the Closing is specifically required or contemplated under this Agreement;
(c) Any obligation (financial or otherwise), Claim or Damages based upon or
arising out of or otherwise in respect of the ownership, maintenance or use of
the Company or its assets prior to Closing;
(d) any violation by Seller or any of its Affiliates of or default by
Seller or any such Affiliate under any Laws, including, without limitation,
Environmental Laws, which affects the ownership or operation of the Company, or
any remedial obligation under any Environmental Law arising out of or related to
the ownership, operation, performance of or the maintenance of the assets of the
Company prior to the Closing Date; or
(e) any liability arising out of, relating to or resulting from an
employment relationship between the Company, Seller and any person.
Section 8.2 Indemnification by the Purchaser. The Purchaser hereby agrees
to indemnify and hold harmless the Seller, its successors and assigns, after the
Closing Date from and against:
(a) Any Claims and Damages asserted against or incurred by the Seller and
occasioned by, arising out of or resulting from any breach of the
representations or warranties of the Purchaser that are set forth or
incorporated by reference in this Agreement (determined after taking into
account any amendments or supplements to the Seller Disclosure Schedule since
the date of this Agreement and not less than three days before Closing); and
(b) Any Claims and Damages asserted against or incurred by the Seller and
occasioned by, arising out of or resulting from the Purchaser's failure to
perform any of the Purchaser's obligations for which performance after the
Closing is specifically required or contemplated under this Agreement.
(c) Any obligation (financial or otherwise), Claim or Damages based upon or
arising out of or otherwise in respect of the ownership, maintenance or use of
the Company or its assets after Closing.
Section 8.3 Notice of Claim. Upon obtaining knowledge of any claim or
demand that has given rise to, or could reasonably give rise to, a claim for
indemnification hereunder, the party seeking indemnification ("Indemnitee")
shall give written notice ("Notice of Claim") of such claim or demand to the
other party ("Indemnitor"). Indemnitee shall furnish to Indemnitor in reasonable
detail such information as Indemnitee may have with respect to such
indemnification claim (including copies of any summons, complaint or other
pleading which may have been served on it and any written claim, demand,
invoice, billing or other document evidencing or
21
asserting the same). No failure or delay by Indemnitee in the performance of the
foregoing shall reduce or otherwise affect the obligation of Indemnitor to
indemnify and hold Indemnitee harmless, except to the extent that such failure
or delay shall have adversely affected Indemnitor's ability to defend against,
settle or satisfy any liability, damage, loss, claim or demand for which such
Indemnitee is entitled to indemnification hereunder. The Seller and the
Purchaser shall take reasonable actions to mitigate Claims and Damages.
Section 8.4 Defense of Third Party Claims. If the claim or demand set forth
in the Notice of Claim given by Indemnitee pursuant to Section 8.3 hereof is a
claim or demand asserted by a third party, Indemnitor shall have fifteen (15)
business days after the date on which such Notice of Claim is given by the
Indemnitee to notify Indemnitee in writing of Indemnitor's election to defend
such third party claim or demand on behalf of Indemnitee. If Indemnitor elects
to defend such third party claim or demand, Indemnitee shall make available to
Indemnitor and its agents and representatives all witnesses, pertinent records,
materials and information in the Indemnitee's possession or under the
Indemnitee's control as is reasonably required by Indemnitor and shall otherwise
cooperate with and assist Indemnitor in the defense of such third party claim in
good faith. Indemnitee shall not pay, settle or compromise such third party
claim or demand. If Indemnitor elects to defend such third party claim or
demand, Indemnitee shall have the right to participate in the defense of such
third party claim or demand, at Indemnitee's own expense. In the event, however,
that the named parties to the action or proceeding include both Indemnitor and
Indemnitee and Indemnitee reasonably determines that representation by counsel
to Indemnitor of both Indemnitor and Indemnitee may present such counsel with a
conflict of interest, then such Indemnitee may employ separate counsel to
represent or defend it in any such action or proceeding and Indemnitor will pay
the reasonable fees and disbursements of such counsel. If Indemnitor does not
elect to defend such third party claim or demand or does not defend such third
party claim or demand in good faith, Indemnitee shall have the right, in
addition to any other right or remedy it may have hereunder, at Indemnitor's
expense, to defend such third party claim or demand; provided, however, that (a)
Indemnitor shall not have any obligation to participate in the defense of, or
defend, any such third party claim or demand; and (b) Indemnitee's defense of or
its participation in the defense of any such third party claim or demand shall
not in any way diminish or lessen the obligations of Indemnitor under the
agreements of indemnification set forth in this Article 8.
Section 8.5 Payment of Claims. Except for third party claims being defended
in good faith, Indemnitor shall satisfy any undisputed obligations hereunder in
cash immediately after the date of Notice of Claim is given by Indemnitee.
Section 8.6 No Liability of Officers, Directors and Managers. Each of the
Purchaser and the Seller acknowledges and agrees that it shall not assert any
claims it may have arising from this Agreement against officers, directors,
beneficiaries, managers, principals or agents of the other party or any
Affiliate of such party.
Section 8.7 No Third Party Benefit. The rights to indemnification provided
in this Agreement are intended solely for the benefit of the Purchaser, the
Seller and the Company and their permitted successors and assigns, and are not
intended to and shall not be construed as granting or creating a right to
payment or indemnification to any other person. Without limiting the generality
of the foregoing, no person providing insurance coverage to any Indemnitee shall
have rights, whether of subrogation or otherwise, against the Indemnitor by
virtue of this Agreement.
Section 8.8 Definition. For purposes of this Article 8, "Claims and
Damages" shall mean any and all losses, claims, demands, liabilities,
obligations, actions, suits, orders, statutory or regulatory compliance
requirements, or proceedings asserted by any third party, person or entity,
including but not limited to Governmental Entities, and all damages, costs,
expenses, assessments, judgments, recoveries and deficiencies, including
interest, penalties, investigatory expenses, consultant's fees, and reasonable
attorneys' fees and costs (including, without limitation, costs incurred in
enforcing the indemnity), incurred by or awarded against a party for which a
party is entitled to indemnification hereunder; provided that Claims and Damages
shall expressly exclude punitive, exemplary, special or similar losses or
damages.
Section 8.9 Exclusive Remedy. Subject to Sections 7.6, 11.6 and 11.12,
after the Closing the sole and exclusive remedy of any party for any inaccuracy
of any representation or warranty, or any breach of any agreement or obligation
made in this Agreement, shall be the indemnification contained in this Article
8.
Section 8.10 Net Worth Requirement. For the period ending on the second
anniversary of the date Closing, the Seller will maintain a net worth of not
less than $10,000,000 based on the fair market value of its assets, for the
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purpose of assuring Seller's financial ability to meet and perform the
continuing obligations that Seller has to Purchaser under this Agreement. For
the purpose of calculating Seller's net worth for this purpose, any assets which
are illiquid or whose disposition is materially restricted (i.e., which would be
generally or practically unavailable to unsecured creditors of the Seller for
the satisfaction of the debts and obligations of the Seller), shall not be
included. The fair market value of the assets that are included shall be
estimated based upon the realizable value of those assets in a forced sale
situation. If at any xxxx Xxxxxx'x minimum net worth falls below this amount,
Seller will grant a security interest, mortgage, lien or other encumbrance in
its remaining assets to Purchaser to serve as security for continuing
obligations. Seller will, from time to time, on the request from Purchaser,
provide to Purchaser Seller's current financial statements and a list of its
assets in order to allow Purchaser to determine Seller's compliance with its
obligations under this Section. This Section shall be subject to enforcement as
provided for in Section 11.6.
Article 9
Registration Rights
Section 9.1 Registration of Securities.
(a) As used in this Article 9, the following terms have the meanings set
forth below:
"Disadvantageous Condition" has the meaning set forth in Section 9.1(b)(iii).
"Holders" means the Seller or any Person who becomes a holder of Subject
Securities after the Closing Date as a result of a No-Sale Transaction.
"No-Sale Transaction" means a transfer from a Holder of Subject Securities that
does not constitute a "sale" (as such term is understood and defined under the
Securities Act), including without limitation a distribution from a Holder that
is a corporation, partnership, joint venture, limited liability company,
association or trust to the owner of a beneficial interest in such Holder to the
extent that such distribution would not constitute a sale under the current
rules, regulations, case law and administrative rulings and interpretations by
the Commission.
"Piggy-back Registration" has the meaning set forth in Section 9.1(g)(i).
"Registration Expenses" has the meaning set forth in Section 9.1(e).
"Registration Termination Date" means the date which is three and one-half years
from the date when the Commission first declares the Shelf Registration
Statement effective; provided, however that the Registration Termination Date
shall be extended for a period equal to the aggregate period or periods during
which the Holders have been precluded from selling any Subject Securities under
subparagraph (b) (iii) by reason of receipt of a Suspension Notice.
Notwithstanding anything to the contrary, the Registration Termination Date
shall occur at such earlier date as the Subject Securities become freely
transferable on the public market without any restrictions or limitations
pursuant to Rule 144(k) promulgated by the Commission.
"Shelf Registration Statement" means a registration statement on Form S-3 filed
with the Commission under the Securities Act.
"Subject Securities" means the shares of Purchaser Common Stock issued as part
of the Purchase Consideration to Seller and any common stock or other security
issued or issuable as a dividend or other distribution with respect to, or in
exchange for, or upon conversion or in replacement of, any of such Purchaser
Common Stock.
"Suspension Notice" has the meaning set forth in Section 9.1(b)(iii).
(b) (i) If the Closing occurs, as promptly as practicable thereafter,
Purchaser will, on one occasion only, prepare and file with the Commission a
Shelf Registration Statement for the purpose of registering the resale in the
market from time to time of the Subject Securities by Holders or by potential
assignees of such Holders to which all or a portion of such Holders' Subject
Securities may be transferred in a No-Sale Transaction.
(ii) Purchaser will use its Best Efforts to have the Shelf
Registration Statement promptly declared effective by the Commission and
thereafter to maintain the effectiveness of the Shelf Registration Statement
and, subject to subparagraph (iv) below, to maintain such Shelf Registration
Statement "current" (as below defined) at all times until the Registration
Termination Date. Purchaser shall promptly give written notice to the Holders
when the Registration Statement has been declared effective by the Commission
and is available for use by Holders for the
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resale of Subject Securities. The Shelf Registration Statement shall not be
considered to be "current" at any time when, by reason of occurrence of any
event or by reason of the passage of time, the Shelf Registration Statement
does not meet the requirements of Section 10, Section 12(2) or Section 17 of
the Securities Act, or the Shelf Registration Statement contains an untrue
statement of a material fact or omits to state any material fact required to
be stated therein or necessary to make the statements therein not misleading.
(iii) If at any time or times after the Shelf Registration Statement
is declared effective by the Commission, Purchaser's Board of Directors
determines that the offering of Purchaser Common Stock under the Shelf
Registration Statement would be significantly disadvantageous to Purchaser's
ability to negotiate or complete a material financing, merger, acquisition or
other material transaction or event involving Purchaser or its subsidiaries
that has not been publicly disclosed or the unavailability of any required
financial statements for reasons substantially beyond the control of the
Purchaser, (a "Disadvantageous Condition"), Purchaser shall be entitled to
either suspend the effectiveness of the Shelf Registration Statement with the
Commission or suspend the availability of the Shelf Registration for resales
of Subject Securities by Holders, or may take both such actions, and shall
promptly notify all Holders thereof by delivery of written notice (a
"Suspension Notice"); provided, however, that Purchaser's obligation to
maintain the Shelf Registration Statement current under this Section 9.1(b)
shall not be suspended by reason of Purchaser's failure to disclose
information at a time when public disclosure of such information is required
by law. Upon receipt of a Suspension Notice, Holders shall immediately
discontinue the use of the Shelf Registration Statement for any purpose until
notified by Purchaser that the Shelf Registration Statement is current and
available for use by Holders for sales of Subject Securities. Purchaser shall
not be entitled to suspend the effectiveness of the Shelf Registration
Statement for more than 60 consecutive days or an aggregate of 120 days within
any twelve-month period and no subsequent suspension period shall occur unless
at least 90 days have elapsed during which Seller can utilize the Registration
Statement. As promptly as practicable after the public disclosure of such
Disadvantageous Condition or the Purchaser determines that the Disadvantageous
Condition no longer exists, Purchaser shall amend or supplement the Shelf
Registration Statement to the extent necessary to make the Shelf Registration
Statement current, and shall give prompt written notice to all Holders when
the Shelf Registration Statement is again available for resales of Subject
Securities.
(iv) If Purchaser should undertake an underwritten public offering of
its shares either after the Shelf Registration Statement has been declared
effective or prior to the consummation of the transactions contemplated by
this Agreement, Seller and any other Holder shall, upon the request of the
managing underwriter of such offering, agree and commit, and Seller does
hereby agree and commit (and shall cause any other Holder to agree and
commit), that it will not effect any public sale or distribution, directly or
indirectly, or make any offer to sell, contract to sell (including without
limitation any short sale), grant any option to purchase or otherwise transfer
or dispose (including sales pursuant to Rule 144) of any of the Subject
Securities during a period of seven days prior to and up to 90 days after the
closing of such public offering without the consent of the managing
underwriter. This restriction shall not apply to the offer and sale of any
Subject Securities which may be covered by the registration statement covering
such public offering.
(v) Purchaser shall promptly notify all Holders of Subject Securities
of, and confirm in writing, the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement or the
initiation of any proceedings for that purpose. Purchaser shall use its best
efforts to obtain the withdrawal of any order suspending the effectiveness of
the Shelf Registration Statement at the earliest possible time.
(vi) Purchaser will cause all of the Subject Securities to be listed
on each securities exchange on which similar securities issued by Purchaser
are then listed no later than the effective date of the Shelf Registration
Statement.
(c) Purchaser will indemnify and hold harmless each Holder, each of such
Holder's officers, directors, partners, or members, as the case may be, and each
Person controlling such Holder, with respect to which registration or
qualification of Subject Securities has been effected pursuant to this Article 9
against all claims, losses, damages, and liabilities, joint or several (or
actions in respect thereof), arising out of or based upon any untrue statement
(or alleged untrue statement) of a material fact contained in the Shelf
Registration Statement, prospectus, or offering circular, or in any document
incorporated by reference in any of the foregoing, or arising out of or based
upon any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by Purchaser of any rule or regulation promulgated
under the
24
Securities Act applicable to Purchaser and relating to action or
inaction required of Purchaser in connection with the Shelf Registration and
will promptly reimburse Holder and, each of such Holder's officers, directors,
partners, or members, as the case may be, and each Person controlling such
Holder, for any legal and any other expenses reasonably incurred in connection
with investigating or defending any such claims, loss, damage, liability or
action; provided, however, that Purchaser will not be liable in any such case to
the extent that any such claim, loss, damage, liability or expense arises out of
or is based upon any untrue statement or omission based upon written information
furnished to Purchaser by such Holder specifically for inclusion in any such
registration statement, prospectus or offering circular. The obligations of
Purchaser under the foregoing indemnity agreement shall survive the completion
of the offering of Subject Securities under the Shelf Registration Statement .
(d) Each Holder with respect to which registration or qualification of
Subject Securities has been effected pursuant to this Article 9 will indemnify
and hold harmless Purchaser, each of Purchaser's officers, directors, and each
Person controlling Purchaser, against all claims, losses, damages, and
liabilities, joint or several (or actions in respect thereof), arising out of or
based upon any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, or offering circular, or in
any document incorporated by reference in any of the foregoing, or arising out
of or based upon any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or any violation by such Holder of any rule or regulation
promulgated under the Securities Act or Exchange Act applicable to such Holder
and relating to action or inaction required of such Holder in connection with
any such registration or qualification, and will promptly reimburse Purchaser,
each of Purchaser's officers, directors, and each Person controlling Purchaser,
for any legal and any other expenses reasonably incurred in connection with
investigating or defending any such claims, loss, damage, liability or action;
provided, however, that such Holder will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense does not arise
out of or is not based upon any untrue statement or omission based upon written
information furnished by such Holder specifically for inclusion in any such
registration statement, prospectus or offering circular. The obligations of
Holders under the foregoing indemnity agreement shall survive the completion of
the offering of Subject Securities under any registration statement provided for
in this Article 9. Notwithstanding the foregoing, in no event shall any selling
Holder be liable for an amount in excess of the proceeds from the sale of the
Subject Securities realized by such Holder.
(e) All expenses incident to Purchaser's performance of or compliance with
this Section 9.1, including, without limitation, all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws
(including fees and disbursements of counsel in connection with blue sky
qualifications of the Subject Securities), rating agency fees, printing
expenses, messenger and delivery expenses, internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the fees and expenses incurred in connection with
the listing of the securities to be registered on the New York Stock Exchange
and all securities exchanges on which similar securities issued by Purchaser are
then quoted or listed, the fees and disbursements of counsel for Purchaser and
its independent certified public accountants (including the expense of any
special audit or comfort letters required by or incident to such performance),
securities act liability insurance (if Purchaser elects to obtain such
insurance), the fees and expenses of any special experts retained by Purchaser
in connection with such registration, and fees and expenses of other persons
retained by Purchaser, in connection with each registration hereunder (but not
including discounts, commissions, fees or expenses payable to underwriters that
are attributable to the Subject Securities offered on behalf of the Selling
Holder or the fees and expenses of counsel for any selling Holder)
(collectively, the "Registration Expenses") will be borne by Purchaser.
(f) Purchaser will also take such action as may be required to be taken
under applicable blue sky laws in connection with the issuance of Purchaser
Common Stock pursuant to this Agreement and in connection with resale of Subject
Securities by Holders pursuant to the Shelf Registration Statement; provided
that Purchaser will not be required to become qualified as a foreign corporation
in any jurisdiction.
(g) (i) If, at any time during the period ending on the fourth anniversary
of the date of this Agreement, the Purchaser proposes to file a registration
statement under the 1933 Act with respect to an offering by the Purchaser for
its own account or for the account of any other Person of any class of equity
security, including any security convertible into or exchangeable for any equity
security (other than a registration statement on Forms S-4 or S-8 (or their
successor forms) or filed in connection with an exchange offer or an offering of
securities solely to the Purchaser's existing stockholders, and other than as
set forth in (ii) below), then the Purchaser shall in each case give written
notice of such proposed filing to the Holders of the Subject Securities at least
twenty days before the
25
anticipated filing date, and such notice shall offer such Holders the
opportunity to register such number of Subject Securities as each such Holder
may request (a "Piggy-back Registration"). The Purchaser shall use reasonable
efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering to permit the Holders of Subject Securities requested to
be included in the registration for such offering to include such securities in
such offering on the same terms and conditions as any similar securities of the
Purchaser included therein. Notwithstanding the foregoing, if the managing
underwriter or underwriters of such offering delivers an opinion to the Holders
of Subject Securities that the total amount of securities which they and any
other Persons (other than the Purchaser) intend to include in such offering is
sufficiently large to materially and adversely affect the success of such
offering, then the amount of Subject Securities to be offered in such event
shall be allocated first to the Purchaser, and then, to the extent that any
additional securities can, in the opinion of such managing underwriter or
underwriters, be sold without any such material adverse affect, pro rata among
the Holders of Subject Securities on the basis of the number of outstanding
shares of Purchaser common stock requested to be included in such registration
by each such Holder to the amount recommended by such managing underwriter.
(ii) Notwithstanding anything to the contrary contained in this
Agreement, the Purchaser shall not be required to include Subject Securities
in any registration statement if the proposed registration is (A)a
registration of a stock option or other employee incentive compensation or
employee benefit plan or of securities issued or issuable pursuant to any such
plan, or a registration statement relating to warrants, options or shares of
capital stock granted or to be granted or sold primarily to employees,
directors or officers of the Purchaser, (B) a registration of securities
issued or issuable pursuant to a stockholder reinvestment plan or other
similar plan, (C) a registration of securities issued in exchange for any
securities or any assets of, or in connection with a merger or consolidation
with, an unaffiliated Purchaser, (D) a registration of securities pursuant to
a "rights" or other similar plan designed to protect the Purchaser's
stockholders from a coercive or other attempt to cause a change in control of
the Purchaser, (E) registration of securities filed pursuant to Rule 145 under
the 1933 Act or any successor rule, or (F) a registration of preferred stock
or securities issued in connection with any debt or preferred stock financing
of the Purchaser.
(iii) The Purchaser may withdraw any registration statement and
abandon any proposed offering initiated by the Purchaser without the consent
of any Holder of Subject Securities, notwithstanding the request of any such
Holder to participate therein in accordance with this provision, if the
Purchaser determines in its sole discretion that such action is in the best
interests of the Purchaser and its stockholders (for this purpose, the
interest of the Holders shall not be considered).
Article 10
Standstill Agreement
Section 10.1 Standstill. From and after the date of this Agreement and for
a period ending on the earliest to occur of (A) five years or (B) three years in
the event that five of the individuals who, as of the date hereof, constitute
the Board of Directors of the Purchaser cease for any reason to serve on the
Board, neither the Seller nor any of its Affiliates shall:
(i) solicit proxies or be or become a member of a group which solicits
proxies (as used herein, the term "proxy" shall have the meaning provided in
Regulation 14A promulgated by the Securities and Exchange Commission under the
Exchange Act) for the purpose of (i) removing from office, or nominating or
voting for a candidate to run in opposition to, any person who is serving as a
director of Purchaser at the date of this Agreement or any person who may
hereafter be elected to the board of directors of Purchaser as a result of the
nomination or recommendation by at least a majority of those persons serving
as directors of Purchaser at the date of this Agreement, or (ii) vote against
or otherwise opposing any matter which has been proposed or recommended by the
board of directors of Purchaser which is then comprised of persons at least a
majority of which are persons serving as directors of Purchaser at the date of
this Agreement and any persons who may hereafter be elected to the board of
directors of Purchaser based upon the nomination or recommendation by at least
a majority of those persons serving as directors of Purchaser at the date of
this Agreement; or
(ii) permit any entity under his, her or its control (including but
not limited to subsidiaries and employee pension, profit sharing or other
trusts under his, her or its investment management control) to acquire or
offer to acquire or agree to acquire, directly or indirectly, by purchase or
otherwise, any Purchaser Common Stock or any option to purchase Purchaser
Common Stock; or
26
(iii) acquire or offer to acquire or agree to acquire, directly or
indirectly, by purchase or otherwise shares of Purchaser Common Stock or any
option to purchase Purchaser Common Stock by any person or entity ; or
(iv) finance or arrange the financing or participate in the financing
of the acquisition of Purchaser Common Stock by any person or entity; or
(v) join or permit any Affiliate of its to join a partnership, limited
partnership, syndicate, or other group (within the meaning of Section 13(d) of
the Exchange Act) for the purpose of acquiring or holding of Purchaser Common
Stock; or
(vi) initiate, propose or otherwise solicit shareholders for any
matter at any time, or induce or attempt to induce any other person or entity
to initiate any stockholder proposal or a tender offer for shares of Purchaser
Common Stock or any change of control of Purchaser, or for the purpose of
convening a stockholders' meeting of Purchaser; or
(vii) other than in connection with this Agreement, acquire or permit
any entity under his, her or its control (including but not limited to
subsidiaries and employee pension, profit sharing or other trusts under his,
her or its investment management control) to acquire, by purchase or
otherwise, more than 5% of any class of equity securities of any entity which,
prior to the time such entity acquires more than 5% of such class, is the
beneficial owner of, or intends to acquire more than 5% of Purchaser Common
Stock; or
(viii) seek or propose to influence or control Purchaser's management
or policies (or request information to do so);
(ix) enter into discussions, negotiations, arrangements or
understandings with any third party with respect to any of the foregoing; or
(x) transfer more than five percent of the Purchaser's outstanding
Common Stock to a single person or group (as that term is used in Section 13
of the Securities Exchange Act of 1934, as amended) without obtaining from
such transferee a commitment or agreement subjecting such persons to the
restrictions set forth in this Section 10.1.
(b) Notwithstanding anything herein to the contrary, for 2 years after the
date of this Agreement, the Seller and its Affiliates will vote all its shares
of Purchaser Common Stock in accordance with the recommendation made by the
Board of Directors of the Purchaser, except with respect to matters concerning
compensation and rights plans in such manner as Seller shall determine in its
sole discretion.
Article 11
MISCELLANEOUS
Section 11.1 Notices. All notices and other communications hereunder shall
be in writing and shall be effective upon receipt. Notice shall be given (i) by
personal delivery to the appropriate address as set forth below (or at such
other address for the party as shall be specified by like notice), (ii) by
reliable overnight courier service to the appropriate address as set forth below
(or at such other address for the party as shall be specified by like notice),
or (iii) by facsimile transmission to the appropriate facsimile number set forth
below (or at such other facsimile number for the party as shall be specified by
like notice) with follow-up copy by reliable overnight courier service the next
business day:
if to Purchaser:
Unit Corporation
1000 Kensington Tower I
0000 Xxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
Attention: President
Facsimile: 000-000-0000
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with copies to:
Xxxx X. Xxxxxx
General Counsel
Unit Corporation
1000 Kensington Tower I
0000 Xxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
Facsimile: 000-000-0000
And
if to the Seller, KFOC or the Company:
Xxxxxx Xxxxxxx Charitable Income Trust B
Xxxxxxxx Xxxxxxx, Trustee
Old City Hall
000 Xxxx Xxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Facsimile: 918-583-8251
with copies to:
Xxxxxxxx Xxxxxxx
Xxxxxxxx Xxxxxxx, Lawyers
Old City Hall
000 Xxxx Xxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Facsimile: 918-583-8251
Section 11.2 Headings. The headings herein are inserted for convenience
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
Section 11.3 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered the same instrument.
Section 11.4 Entire Agreement; Assignment.
(a) This Agreement and the documents and certificates delivered in
connection herewith constitute the entire agreement among the parties hereto
with respect to the subject matter hereof, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof, other than the Confidentiality Agreement.
(b) This Agreement shall not be assigned by a party hereto by operation of
law or otherwise; provided, that the Purchaser may assign all or part of its
rights and obligations hereunder to any wholly owned subsidiary of the
Purchaser. No such assignment shall relieve the assigning party of its
obligations hereunder if such assignee does not perform such obligations.
Section 11.5 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Oklahoma, without regard to any
applicable conflicts of law principles. The parties hereto expressly and
irrevocably (i) consent to the exclusive jurisdiction of the state or federal
courts sitting in the City of Tulsa, Oklahoma, (ii) agree not to bring any
action related to this Agreement or the transactions contemplated hereby in any
other court (except to enforce the judgment of such courts), (iii) agree not to
object to venue in such courts or to claim that such forum is inconvenient and
(iv) agree that notice or the service of process in any proceeding shall be
properly served or delivered if delivered in the manner contemplated by Section
11.1 hereof. A final non-appealable judgment
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by such courts shall be conclusive and may be enforced in any manner permitted
by law. In addition, each of the parties hereto waives any right to trial by
jury with respect to any claim or proceeding related to or arising out of this
agreement or any of the transactions contemplated hereby.
Section 11.6 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions contained
in this Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
Section 11.7 Publicity. Unless other wise required to comply with
applicable legal requirements, no party hereto shall issue any press release
with respect to the transactions contemplated by this Agreement without prior
written notice to the other party hereto and only after giving the other party
hereto a reason able opportunity to consult with respect to the content thereof.
Section 11.8 Binding Nature; No Third Party Beneficiaries. This Agreement
shall be binding upon and inure solely to the benefit of each party hereto and
their permitted successors and assigns, and except as otherwise expressly set
forth herein, nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person or persons any rights, benefits or remedies
of any nature whatsoever under or by reason of this Agreement.
Section 11.9 Severability. This Agreement shall be deemed severable and the
invalidity or unenforceability of any term or provision of this Agreement shall
not affect the validity or enforceability of this Agreement or of any other term
hereof, which shall remain in full force and effect.
Section 11.10 Interpretation. As used in this Agreement, (a) "including"
(or similar terms) shall be deemed followed by "without limitation" and shall
not be deemed to be limited to matters of a similar nature to those enumerated,
(b) and the phrases "the date of this Agreement," "the date hereof" and words of
similar import shall be deemed to refer to the date first written above.
Section 11.11 Payment of Expenses. Except as otherwise expressly set forth
in this Agreement, whether or not the transactions contemplated by this
Agreement shall be consummated, each party hereto shall pay its own expenses
incident to preparing for, entering into and carrying out this Agreement. The
Seller will not cause the Company to assume responsibility for any such expenses
of the Seller.
Section 11.12 Survival of Representations, Warranties and Agreements. Each
of the representations and warranties made by the Seller and the Purchaser in
this Agreement shall survive the Closing but only for a period of eighteen (18)
months from the Closing Date; provided, however, that the representations and
warranties made by the Seller in Section 2.6, 2.8, 2.10 and 2.11 shall survive
until expiration of the applicable statute of limitations and any
representations and warranties made by the Purchaser and incorporated herein
regarding Taxes shall survive until the expiration of the applicable statute of
limitations. Following the date of termination of a representation or warranty,
no claim can be brought with respect to a breach of such representation or
warranty, but no such termination shall affect any claim for a breach of a
representation or warranty that was asserted before the date of termination. To
the extent that such are to be performed after the Closing, each of the
covenants and agreements contained in this Agreement shall survive the Closing
for the period stated or, if no such period is stated, such covenant or
agreement shall survive indefinitely.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
Unit Corporation
By:_____________________________________
Name: Xxxx X. Xxxxxx
Title: Chief Executive Officer
29
Xxxxxx Xxxxxxx Charitable Income Trust B
By: ______________________________________
Name: Xxxxxxxx Xxxxxxx
Title: Trustee
Xxxxxx Xxxxxxx Oil Company
By: ______________________________________
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer
30
