EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made and entered into
as of the 3rd day of October, 1996, by and among Drillers, Inc., a Texas
corporation (the "Buyer"), DI Industries, Inc., a Texas corporation ("DI"),
Meritus, Inc., a Texas corporation ("Meritus"), Mesa Rig 4 L.L.C., a Texas
limited liability company (the "LLC"), Mesa Venture, a Texas general partnership
(the "Partnership") (Meritus, the LLC, and the Partnership are sometimes
collectively referred to herein as the "Sellers" or singularly as a "Seller")
and Mesa Drilling, Inc., a Texas corporation ("Mesa"; Mesa and the Sellers are
sometimes referred to herein collectively as the "Seller Parties" or singularly
as a "Seller Party").
WITNESSETH:
WHEREAS, Sellers desire to sell to the Buyer, and the Buyer desires to
purchase from the Sellers, the Assets (as hereinafter defined) on the terms and
subject to the conditions of this Agreement in exchange for the consideration
stated herein;
WHEREAS, Mesa is managing the Assets on behalf of the Sellers; and
WHEREAS, DI owns 100% of the stock of the Buyer and therefore would
benefit from the consummation of the acquisition of the Assets by the Buyer;
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants herein contained, and the benefits to be derived herefrom, the parties
hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS
1.01 AGREEMENT TO PURCHASE AND SELL. Subject to the terms and the
conditions set forth in this Agreement, at the Closing (as defined in Article
II), the Sellers will sell to the Buyer, and the Buyer will purchase from the
Sellers, all of the right, title, and interest of the Sellers in and to the
drilling rigs and auxiliary engines, systems, tanks, pipe, collars, blowout
preventers and other equipment described on Schedule 1.01 (collectively, the
"Assets").
1.02 PURCHASE CONSIDERATION. As consideration for the transfer and sale of
the Assets, at the Closing the Buyer will cause DI to issue, and DI shall issue,
in the amounts indicated on Schedule 1.02, 5,500,000 shares of the Common Stock,
$0.10 par value per share, of DI (the "DI Shares").
1.03 DRILLING CONTRACTS. At the Closing, the Sellers shall assign to the
Buyer all of their rights and interests in and to the Drilling Contracts (as
defined in Section 4.01(g)) from and after
the Closing and the Buyer shall assume the obligations of the Sellers under the
Drilling Contracts from and after the Closing.
1.04 EFFECTIVE TIME. The transfer of the ownership of the Assets shall be
effective as of 12:00 a.m. Central Daylight Time on the date immediately
subsequent to the date the Closing occurs (the "Effective Time").
1.05 MANAGEMENT AGREEMENTS. At the Closing, the Sellers and Mesa will
terminate and cancel the Management Agreement dated May 24, 1994 between Meritus
and Mesa.
1.06 EXCLUDED ASSETS. The parties agree that the Excluded Assets (defined
below) shall not be included as part of the Assets and shall be retained by each
of the respective Sellers. The term "Excluded Assets" shall mean with respect to
each of the Sellers all cash and accounts receivables owned by it as of the
Closing.
1.07 PLAN OF REORGANIZATION OF MERITUS. The acquisition of the Assets of
Meritus by Buyer in exchange for DI Shares pursuant to this Agreement is
intended to be a "reorganization" as defined in section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and each of Meritus, the Buyer
and DI is intended to be a party to such reorganization, within the meaning of
section 368(b) of the Code.
ARTICLE II
CLOSING
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Cokinos, Bosien & Young, Houston,
Texas on October 4, 1996, at 2:00 p.m., Houston time. The date the Closing is to
occur may be extended past October 4, 1996 if any of the conditions precedent
set forth in Article IX have not been satisfied so long as the parties hereto
are using diligent efforts to satisfy such conditions precedent. The date the
Closing occurs is referred to herein as the "Closing Date."
ARTICLE III
ACTIONS TAKEN AT THE CLOSING
3.01 ACTIONS TAKEN BY THE SELLERS. At the Closing the Sellers shall
execute and deliver a xxxx of sale substantially identical in form and content
to Exhibit 3.01 (the "Xxxx of Sale") and any other instruments reasonably
necessary to transfer all of the right, title, and interest of the Sellers in
the Assets to the Buyer, free and clear of all Liens other than Permitted Liens.
All tangible Assets shall be delivered to Buyer at their location at the time of
Closing.
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As used in this Agreement, (i) the term "Liens" shall mean any lien,
pledge, claim, charge, purchase option, preferential purchase right or other
right of any third party, security interest, mortgage or encumbrance of any
nature whatsoever, and (ii) the term "Permitted Liens" shall mean (a) Liens for
current taxes and assessments not yet due and payable, (b) materialmen's,
mechanics', workers', repairmen's or other similar Liens arising in the ordinary
course of the operation of the Assets for amounts not due and payable, (c) all
rights to, consents by, required notices to, filings with, or other actions by
governmental entities disclosed on Schedule 3.01 if the same are customarily
obtained subsequent to sale or conveyance; and (d) Liens disclosed on Schedule
3.01 to be released at or before Closing.
3.02 ACTIONS TAKEN BY THE BUYER AND DI. At the Closing, the Buyer shall
cause DI to deliver, and DI shall deliver, to each of the Sellers certificates
representing the number of DI Shares set forth next to such Seller's name on
Schedule 1.02 hereof, each bearing such legends as shall be required by
applicable securities laws and Section 8.05.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES
4.01 REPRESENTATIONS AND WARRANTIES. Meritus and Mesa jointly and
severally represent and warrant, and each of the other Seller Parties severally,
and not jointly, as to itself, represents and warrants, to the Buyer and DI as
set forth below:
(a) ORGANIZATION AND POWERS. Meritus and Mesa are each corporations
duly organized, validly existing, and in good standing under the laws of
the state of Texas. The LLC is a limited liability company duly organized,
validly existing, and in good standing under the laws of the state of
Texas. The Partnership is a general partnership duly formed, validly
existing and in good standing under the laws of the state of Texas. The
Seller Parties have all power and authority necessary to conduct their
business as presently conducted, and to own, lease, or operate all
properties now owned, leased, or operated by any of the Seller Parties,
including the Assets.
(b) AGREEMENTS AND CONSENTS. Neither the execution, delivery, nor
performance of this Agreement and/or the Xxxx of Sale will: (i) conflict
with or result in any breach of any provisions of the charter or bylaws of
Meritus or Mesa, the articles of organization or regulations of the LLC,
or the partnership agreement of the Partnership; (ii) to such Seller
Party's knowledge, require the consent, approval, authorization or
permission of, or filing with or notification to, any governmental or
regulatory authority, (iii) violate, effect acceleration of, or result in
the termination,
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cancellation, or modification of any material agreement, indenture,
instrument, lease, or contract to which any Seller Party is a party or is
bound, (iv) violate any order, writ, or injunction or decree to which the
Seller Party is bound or may be bound, or (v) to the knowledge of the
Seller Party, violate any decree, statute, rule, or regulation to which
the Seller Party is bound or may be bound.
(c) LITIGATION; ORDERS. There is no action, suit, investigation,
inquiry, or proceeding, including any arbitration proceeding
("Litigation"), pending, or to the knowledge of any of the Seller Parties,
threatened, to which a Seller Party is or, to its knowledge, would be a
party. There is no Litigation, judgment or outstanding order, writ,
injunction, decree, stipulation, or award (whether rendered by a court or
administrative agency, or by arbitration), pending or, to the knowledge of
any of the Seller Parties, threatened, to which a Seller Party or any of
the Assets are bound that, in each case, would have an adverse effect on
the ability of the Seller Parties to consummate the transactions
contemplated hereby, that would prevent or delay in any material respect
the consummation of the transactions contemplated hereby or that could
otherwise be reasonably expected to materially adversely affect the
Assets.
(d) VALIDITY AND ENFORCEABILITY. The Seller Parties have the power
and authority to execute and deliver this Agreement and the Xxxx of Sale.
The execution and delivery by the Seller Parties of this Agreement and the
Xxxx of Sale and the consummation by the Seller Parties of the
transactions and performance of the terms and conditions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate, limited liability company, or partnership action, as the case
may be. This Agreement has been, and at the Closing the Xxxx of Sale will
be, duly and validly executed and delivered by the Seller Parties and this
Agreement constitutes, and at the Closing and the Xxxx of Sale will
constitute, valid and binding obligations of the Seller Parties,
enforceable against the Seller Parties in accordance with their respective
terms (except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, bank moratorium, fraudulent conveyance, or
similar laws affecting creditors' rights generally, general principles of
equity, and laws restricting the availability of equitable remedies).
(e) OWNERSHIP OF ASSETS. Each Seller is the owner of and has title
to the Assets which are owned by it as shown on Schedule 1.01, free and
clear of all Liens other than Permitted Liens.
(f) COMPLIANCE WITH LAWS. To such Seller Party's knowledge, the
Seller Parties are operating the Assets in
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compliance with all laws, rules and regulations of federal, state, or
local entities which have jurisdiction over the Seller Parties or the
ownership, operation, and maintenance of the Assets. The Seller Parties
are not charged or, to the knowledge of any of the Seller Parties,
threatened with or under investigation with respect to, any violation of
any applicable law relating to any aspect of the ownership or operation of
the Assets.
(g) DRILLING CONTRACTS. The Seller Parties have made available to
the Buyer accurate and complete copies of the agreements to which any
Seller Party is a party pursuant to which one or more of the Seller
Parties have agreed to provide services utilizing any of the Assets which
relate to periods subsequent to the Effective Time, each of which is
listed on Schedule 4.01(g) (the "Drilling Contracts"). With respect to
each Drilling Contract, (i) such Drilling Contract is a valid, binding and
enforceable agreement of Mesa, and to the knowledge of the Seller Parties,
the other parties thereto; (ii) there has not occurred any breach or
default under such Drilling Contract on the part of Mesa, and to the
knowledge of the Seller Parties, the other parties thereto, (iii) no event
has occurred which with the giving of notice or the lapse of time, or
both, would constitute a default of Mesa, and to the knowledge of the
Seller Parties, the other parties thereto, under the Drilling Contract,
and (iv) neither Mesa nor, to the knowledge of the Seller Parties, the
other parties to the Drilling Contract have assigned or delegated any of
their rights or obligations under the Drilling Contracts.
(h) EMPLOYEE BENEFITS AND WAGES. Except as set forth in Schedule
4.01(h), and except for any applicable Worker's Compensation policies, no
Seller Party is a party to any written contract with or with respect to
any of its employees who are engaged in the operation of the Assets in the
field (the "Employees"). Schedule 4.01(h) sets forth a complete and
accurate list of (i) the Employees, (ii) employee benefits plans (within
the meaning of Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended) that any Seller Party maintains for the benefit of
any of the Employees, and (iii) the wages (within the meaning of section
3401(a) of the Internal Revenue Code of 1986, as amended for purposes of
Federal income tax withholding at the source) paid to each such Employee
by such Seller Party from January 1, 1996 through August 31, 1996. No
Seller Party has agreed to pay to any of the Employees any compensation
which is not described on Schedule 4.01(h), except for compensation for
services rendered to Seller Party after August 31, 1996, in amounts based
upon the compensation rates in effect prior to September 1, 1996, as
disclosed on Schedule 4.01(h). The Buyer agrees to hold in confidence the
financial information listed on Schedule 4.01(h). The Seller Parties have
no knowledge or information of any intention of any of the
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Employees to sever employment relations with his or her employer.
(i) NO CHANGE; LOCATION. Except as indicated on Schedule 4.01(i),
since September 6, 1996, the Assets have been operated only in the
ordinary course of business and there has been no material casualty or
loss with respect to any of the Assets; provided, however, that the Buyer
and DI understand and acknowledge that Rigs Nos. 5, 10 and 12 are stacked
and have not been operated during Meritus' ownership thereof. The Seller
Parties have not modified or altered in any material respect any of the
Assets since their inspection by the Buyer. The locations at which any of
the Assets have been located during the 12 month period ending on the date
hereof, and their location on the date hereof, are set forth on Schedule
4.01(i).
(j) INVESTOR STATUS. Each Seller: (i) is acquiring the DI Shares for
investment for its own account, and not with a view to, or for resale in
connection with, any distribution thereof (other than distributions to the
respective Ultimate Owners of each Seller, as defined in Section 4.01(k)),
(ii) understands that the issuance of the DI Shares pursuant to Section
1.02 has not been registered under the Securities Act or applicable state
securities laws, and that such DI Shares may not be transferred except in
compliance with the Securities Act and applicable state securities laws,
(iii) acknowledges that it has had the opportunity to review the SEC
Documents (as defined in Section 5.02(g)) and other information filed by
DI with the Securities and Exchange Commission under the Securities and
Exchange Act of 1934, (iv) has had an opportunity to discuss DI's
business, management and financial affairs with its management and has
received all information deemed necessary by it to make the investment in
the DI Shares pursuant to Section 1.02, and (v) is able to bear the
economic risk and lack of liquidity inherent in holding the DI Shares.
Meritus and the LLC are each "accredited investors" as defined in Rule
501(a) promulgated under the Securities Act of 1933, as amended (the
"Securities Act"). The Partnership is a sophisticated investor with
knowledge and experience in business and financial matters.
(k) APPROVAL BY SHAREHOLDERS/MEMBERS/PARTNERS. All of the
shareholders, members, or partners of the Sellers are listed on Schedule
4.01(k) (the "Ultimate Owners"). Each of the Ultimate Owners have approved
the execution by the Sellers of this Agreement. The Seller Parties will
cause each Ultimate Owner of the Sellers to execute and deliver to DI at
the Closing a written acknowledgment concerning the investor status of
such Ultimate Owner substantially to the effect of Section 4.01(j) in a
form which is reasonably satisfactory to DI.
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(l) MANAGEMENT AGREEMENTS. None of the Seller Parties are in default
under the terms of the Management Agreements.
(m) INSURANCE COVERAGE. The Sellers have provided to the Buyer
complete and accurate copies of the policies of insurance which are in
force on the date hereof which are applicable to the Assets, the
operations of the Assets, and the Employees.
(n) SALES TAX. None of the Sellers are engaged in the business of
selling tangible personal property at retail, hold a sales and use tax
permit issued by the state of Texas, or have made any retail sale of
tangible personal property during the twelve month period ending on the
Closing Date. With respect to each Seller, the Assets to be sold by such
Seller pursuant to this Agreement constitutes the entire operating assets
of a business or of a separate division, branch, or identifiable segment
of a business for purposes of Section 151.304 of the Texas Tax Code.
(o) TAXES. Meritus has filed all Tax (as defined in Section 7.02)
returns, estimates and statements which are required to be filed by it and
has paid all taxes, governmental assessments and charges that are
currently due and payable. All of said Tax returns and statements
correctly set forth and report the entire liability of Meritus for such
Taxes and contain accurate and complete information in the form, manner
and content as required by relevant taxing authorities. The basis of the
Sellers with respect to the Assets for federal income tax purposes as of
the date hereof are set forth on Schedule 4.01(o).
(p) FINANCIAL STATEMENT. The financial statements of Xxxxxxx Finance
Corp., a Liberian corporation ("Xxxxxxx"), provided to the Buyer and DI by
Mesa have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved and
fairly present the financial position of Xxxxxxx.
(q) BROKERAGE. No investment banker, broker, finder or other person
is entitled to any brokerage or finder's fee or similar commission in
respect of this Agreement or the transactions contemplated hereby based in
any way on agreements, arrangements or understandings made by or on behalf
of any of the Seller Parties.
4.02 DISCLAIMER OF CERTAIN WARRANTIES. The Assets are being transferred
hereunder and will be delivered to Buyer on an "AS IS, WHERE IS" basis (WITH ALL
FAULTS). EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, THE SELLER PARTIES
DISCLAIM ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED, AND THE SELLER PARTIES MAKE
NO REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE REGARDING
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SUITABILITY, UTILITY, CONDITION, CAPABILITIES OR CAPACITIES OF THE ASSETS, WHICH
ARE BEING SOLD WITH ALL FAULTS.
4.03 KNOWLEDGE. The term "knowledge", when used in this Article IV with
respect to a Seller Party, shall mean the actual present knowledge of Asbjorn
Vavik, Chairman of Mesa, Xxx Xxxxxxxx, President of Mesa, and Xxxx Xxxxxx, in
each case based only on such investigation as would normally occur within the
scope of their normal duties.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND DI
5.01 REPRESENTATIONS AND WARRANTIES OF BUYER. The Buyer and DI jointly and
severally represent and warrant to the Seller Parties as set forth below:
(a) ORGANIZATION AND POWERS. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
state of Texas. The Buyer has all power and authority necessary to conduct
its business as presently conducted, and to own, lease, or operate all
properties now owned, leased, or operated by the Buyer.
(b) AGREEMENTS AND CONSENTS. Neither the execution, delivery, nor
performance of this Agreement and/or the Xxxx of Sale by the Buyer will
(i) conflict with or result in any breach of any provisions of the charter
or bylaws of the Buyer, (ii) to the Buyer's knowledge, require the consent
or approval, authorization, or permit of, or filing with or notification
to, any governmental or regulatory authority, (iii) violate, effect
acceleration of, or result in termination, cancellation, or modification
of any material agreement, indenture, instrument, lease, or contract to
which the Buyer is a party or by which it is bound, except for such
defaults (or rights of termination, cancellation, or acceleration) as to
which requisite waivers or consents have been obtained or will be obtained
prior to the Closing, (iv) violate any order, writ, or injunction or
decree to which the Buyer is bound or may be bound, or (v) to the
knowledge of the Buyer, violate any decree, statute, rule, or regulation
to which the Buyer is bound or may be bound.
(c) LITIGATION; ORDERS. There is no Litigation, judgment or
outstanding order, writ, injunction, decree, stipulation or award (whether
rendered by a court or administrative agency, or by arbitration) pending
or, to Buyer's knowledge, threatened to which Buyer is bound that would
have an adverse effect on the ability of the Buyer to consummate the
transactions contemplated hereby or that would prevent or delay in any
material respect the consummation of the transactions contemplated hereby.
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(d) VALIDITY AND ENFORCEABILITY. Buyer has the power and authority
to execute and deliver this Agreement and the Xxxx of Sale. The execution
and delivery by Buyer of this Agreement and the Xxxx of Sale and the
consummation by the Buyer of the transactions and performance of the terms
and conditions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on behalf of Buyer. This
Agreement has been, and at the Closing the Xxxx of Sale will be, duly and
validly executed and delivered by the Buyer and this Agreement
constitutes, and at the Closing the Xxxx of Sale will constitute, valid
and binding obligations of the Buyer, enforceable against the Buyer in
accordance with their respective terms (except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization, bank
moratorium, fraudulent conveyance or similar laws affecting creditors'
rights generally, general principles of equity and laws restricting the
availability of equitable remedies).
(e) BROKERAGE. No investment banker, broker, finder or other person
is entitled to any brokerage or finder's fee or similar commission in
respect of this Agreement or the transactions contemplated hereby based in
any way on agreements, arrangements or understandings made by or on behalf
of the Buyer.
5.02 REPRESENTATIONS AND WARRANTIES OF DI. DI represents and warrants to
the Seller Parties as set forth below:
(a) ORGANIZATION AND POWERS. DI is a corporation duly organized,
validly existing, and in good standing under the laws of the state of
Texas. DI has all power and authority necessary to conduct its business as
presently conducted, and to own, lease, or operate all properties now
owned, leased, or operated by DI.
(b) AGREEMENTS AND CONSENTS. Neither the execution, delivery, nor
performance of this Agreement will: (i) conflict with or result in any
breach of any provisions of the charter or bylaws of DI; (ii) to DI's
knowledge, require the consent, approval, authorization or permission of,
or filing with or notification to, any governmental or regulatory
authority; (iii) violate, effect acceleration of, or result in
termination, cancellation, or modification of any material agreement,
indenture, instrument, lease, or contract to which DI is a party or is
bound; (iv) violate any order, writ, or injunction or decree to which DI
is bound or may be bound, or (v) to the knowledge of DI, violate any
decree, statute, rule, or regulation to which DI is bound or may be bound.
(c) LITIGATION; ORDERS. There is no Litigation, judgment or
outstanding order, writ, injunction, decree, stipulation or award (whether
rendered by a court or
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administrative agency, or by arbitration) pending or, to DI's knowledge,
threatened to which DI is bound that would have an adverse effect on the
ability of DI to consummate the transactions contemplated hereby or that
would prevent or delay in any material respect the consummation of the
transactions contemplated hereby.
(d) VALIDITY AND ENFORCEABILITY. DI has the power and authority to
execute and deliver this Agreement. The execution and delivery by DI of
this Agreement and the consummation by DI of the transactions and
performance of the terms and conditions contemplated hereby have been duly
and validly authorized by all necessary corporate action on behalf of DI.
This Agreement has been duly and validly executed and delivered by DI and
this Agreement constitutes a valid and binding obligation of DI,
enforceable against DI in accordance with its terms (except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, bank moratorium, fraudulent conveyance or similar laws
affecting creditors' rights generally, general principles of equity and
laws restricting the availability of equitable remedies).
(e) BROKERAGE. No investment banker, broker, finder or other person
is entitled to any brokerage or finder's fee or similar commission in
respect of this Agreement or the transactions contemplated hereby based in
any way on agreements, arrangements or understandings made by or on behalf
of DI.
(f) AUTHORIZATION FOR DI SHARES. DI has taken all necessary action
to permit it to issue the DI Shares. The DI Shares will, when issued, be
validly issued, fully paid and nonassessable and not subject to preemptive
rights.
(g) DI DOCUMENTS. DI has provided to the Sellers its Annual Report
on Form 10-K for the year ended December 31, 1995, its Quarterly Report on
Form 10-Q for the quarter ended March 31, 1996, its Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996, and its proxy statement
with respect to the Annual Meeting of Shareholders of DI held on August
27, 1996 (such documents collectively referred to herein as the "SEC
Documents"). As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Securities Exchange Act
of 1934, as amended, and the rules and regulations of the Securities and
Exchange Commission (the "Commission") promulgated thereunder applicable
to such SEC Documents. None of the SEC Documents contained any untrue
statements of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The financial statements of DI included in the SEC Documents comply as to
form in all material respects with applicable
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accounting requirements and the published rules and regulations of the
Commission with respect thereto, have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
during the periods involved. Since June 30, 1996, other than as discussed
in the SEC Documents, there has been no material adverse change in the
business of DI and its subsidiaries, taken as a whole.
5.03 KNOWLEDGE. The term "knowledge", when used in this Article V with
respect to DI or the Buyer, shall mean the actual present knowledge of Xxxx
Xxxx, Chairman of the Board of Directors of DI and the Buyer, Xxxxxx X.
Xxxxxxxx, President and Chief Executive Officer of DI and the Buyer, and T.
Xxxxx X'Xxxxx, Chief Financial Officer of DI and the Buyer, in each case based
only on such investigation as would normally occur within the scope of their
normal duties.
5.04 TAX MATTERS. Notwithstanding anything herein to the contrary, neither
DI, the Buyer, or any of their affiliates or representatives have made any
representation or warranty, express or implied, relating to the Tax consequences
to the Seller Parties which may accrue from the consummation of the transactions
contemplated in this Agreement; PROVIDED, HOWEVER, that DI and the Buyer,
jointly and severally, covenant and agree that (i) DI and the Buyer shall report
for all tax purposes the acquisition of the Assets of Meritus as a
"reorganization" described in section 368(a)(1)(C) of the Code, (ii) neither DI
nor the Buyer has any plan or intention to reacquire any of its stock issued in
the transactions contemplated by this Agreement, (iii) the Buyer has no plan or
intention to sell or otherwise dispose of any of the Assets, except for
dispositions made in the ordinary course of business or transfers described in
Section 368(a)(2)(C) of the Code, (iv) following the transaction, the Buyer will
continue the historic business of Meritus or use a significant portion of
Meritus' historic business assets in a business, and (v) neither DI nor the
Buyer are "investment companies" as defined in section 368(a)(2)(F)(iii) and
(iv) of the Code.
ARTICLE VI
CONDUCT OF BUSINESS
Except as expressly provided in this Agreement, during the period from the
date hereof to the Closing, the Seller Parties shall operate the Assets only in
the ordinary course of business consistent with past practice and use their
commercially reasonable efforts to operate such Assets in compliance with all
applicable laws, and the Sellers shall use their commercially reasonable efforts
to (i) preserve, maintain, and protect the Assets, (ii) preserve intact their
respective business organizations and work force, (iii) maintain in effect any
of their respective authorizations or similar rights, (iv) maintain and keep the
Assets in as good a repair and condition as presently exists, and (v)
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maintain in full force and effect insurance with respect to the Assets
comparable in amounts and scope of coverage to that currently maintained by
them. Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement, prior to the Closing, no Seller Party
shall, without the prior written consent of the Buyer:
(a) make any material change in the ongoing operations of the Assets
or amend or agree to terminate any of the Drilling Contracts;
(b) mortgage or pledge any of the Assets or create any
Lien thereon, other than any Permitted Lien;
(c) sell, lease, transfer, or otherwise dispose of,
directly or indirectly, any of the Assets;
(d) terminate the employment of any of the Employees or hire any
additional Employees, or change or agree to change the compensation
payable to the Employees or the benefits to which any of such Employees
are entitled; or
(e) enter into any agreement to provide services
utilizing any of the Assets.
Notwithstanding the foregoing, the Buyer and DI agree that (i) the Partnership
and the LLC shall be permitted to distribute to Meritus an undivided interest in
their respective Assets to allow Meritus to be in a position to transfer
substantially all of its assets to the Buyer as contemplated by Section
368(a)(1)(C) of the Code, and (ii) Mesa shall be permitted to sell its one
percent general partnership interest in the Partnership to Meritus.
ARTICLE VII
ADDITIONAL COVENANTS
7.01 PUBLIC ANNOUNCEMENTS. Without the prior written approval of the other
parties hereto, which approval shall not be unreasonably withheld, no party
hereto will issue, or permit any agent or affiliate to issue, any press releases
or otherwise make or cause any agent or affiliate to make, any public statements
with respect to this Agreement or the transactions contemplated hereby except
where such release or statement is deemed in good faith by the releasing party
to be required by applicable law or any national securities exchange. Any party
or parties issuing such a release or statement will use its or their reasonable
efforts to provide a copy to the other parties prior to the issuance of such
release or statement.
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7.02 TAX MATTERS.
(a) The term "Taxes" shall mean all income, gross receipts, profits,
franchise, sales, use, occupation, property (including in lieu-of-taxes),
ad valorem, capital, wealth, environmental, employment, severance,
production, excise, stamp, transfer, workers' compensation, social
security, value added, withholding or similar taxes, customs or import
duties, and all other taxes or other governmental fees or charges imposed
by any country or political subdivision thereof, together with any
interest, additions or penalties with respect thereto.
(b) The Buyer and the Seller Parties, collectively, shall each pay
fifty percent (50%) of any transfer taxes, including without limitation,
sales, use, excise, value added, stamp, documentary, filing, recording,
permit, license, authorization, and other similar Taxes, customs or import
duties, filing fees and similar charges ("Transfer Taxes"), incurred or
imposed in connection with or as a result of the transactions effected
pursuant to this Agreement regardless of upon whom such Transfer Tax is
levied or imposed by law.
(c) The Sellers shall be liable for all income and similar Taxes
incurred in connection with the sale of the Assets and all Taxes with
respect to the ownership and operation of the Assets for tax reporting
periods ending on or before the Effective Time. The Buyer shall be liable
for all Taxes imposed with respect to the ownership and operation of the
Assets for tax reporting periods beginning after the Effective Time. With
respect to any tax reporting period which includes the Effective Time (i)
property and other ad valorem Taxes accruing with respect to the Assets
shall be apportioned between the Sellers, on the one hand, and the Buyer,
on the other hand, based on the daily proration of such Taxes, and (ii)
any other Taxes accruing during such period shall be equitably apportioned
among the parties. The Sellers shall pay the Buyer at the Closing the
amount which the Buyer estimates in good faith to reflect the property and
other ad valorem Tax liability allocated to the Sellers pursuant to this
Section 7.02(c).
(d) The Seller Parties and the Buyer agree that the DI Shares shall
be allocated among the Assets for tax reporting and other purposes in the
manner set forth in Schedule 7.02(d). Each party agrees to complete IRS
Form 8594 and any other forms or reports required by the Internal Revenue
Service or any other taxing authority in a manner which is consistent with
the agreed allocation and to furnish the other parties hereto with a draft
copy of such form within a reasonable period before the filing due date of
such form.
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7.03 FURTHER ASSURANCES. After the Closing, the Seller Parties and the
Buyer shall, and shall cause their affiliates to, execute, acknowledge, and
deliver all such further conveyances, notices, assumptions, releases, and
acquittances, and such other instruments, and shall take such further actions,
as may be necessary or appropriate more fully to assure to the Buyer, and its
successors or assigns, all of the properties, rights, titles, interests,
estates, remedies, powers, and privileges intended to be conveyed to the Buyer
pursuant to this Agreement and to assure fully to the Sellers, their affiliates
and successors and assigns, the assumption of the liabilities and obligations
intended to be assumed by the Buyer pursuant to this Agreement.
7.04 CASUALTY LOSS AND CONDEMNATION. In the event that there exists prior
to the Effective Time any casualty loss or condemnation proceeding with respect
to the Assets, the Sellers shall assign to the Buyer at and as of the Closing
any rights it may have to claims against any governmental entity or third party
with respect to such casualty loss or condemnation proceeding. If a casualty
loss has occurred subsequent to the execution of this Agreement but prior to the
Effective Time, the Sellers will cause such Assets to be repaired as soon as may
be reasonably practicable, in which event the claims described in the
immediately preceding sentence, if any, shall be retained by the Sellers. To the
extent it is impractical or uneconomical to repair the damage caused by such
casualty loss, the amount of DI Shares shall be proportionately reduced to
reflect the value of such damage to the Assets, net of (i) insurance proceeds
assigned to Buyer under this Section, and (ii) the value of any of the claims
described in the first sentence of this Section that are assigned to Buyer under
this Section. The Buyer and DI shall negotiate in good faith to determine the
amount of the reduction of DI Shares required pursuant to this Section.
7.05 SATISFACTION OF CONDITIONS. All of the parties hereto agree to use
their reasonable efforts to cause each of the conditions precedent set forth in
Article IX to be satisfied before October 31, 1996. The Sellers or the Buyer and
DI shall use their respective reasonable efforts to obtain all consents,
approvals, orders, authorizations, and waivers of, and to effect all
declarations, filings, and registrations with, all third parties (including
governmental entities) that are necessary or required to enable the Sellers to
transfer the Assets to the Buyer as contemplated by this Agreement and to
otherwise consummate the transactions contemplated hereby.
7.06 EMPLOYEES. On the Closing Date, and effective as of and conditioned
on the occurrence of the Closing, (i) Seller Parties shall terminate the
employment of the Employees and shall pay any severance or other obligation owed
by Seller Parties to them, and shall not within six months of the Closing Date
directly or indirectly encourage or solicit any of the Employees to accept
employment with any party other than the Buyer, and (ii) the Buyer
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shall make an offer of employment at will to all of the Employees, with such
offers being contingent upon the Employees passing appropriate physical and drug
testing, and, upon acceptance of such offer by any such Employee, enter into an
at will employer-employee relationship with the Employee. Notwithstanding the
foregoing, Mesa shall be free to offer employment to Xxx Xxxxxxxxx to continue
with Mesa following the Closing.
7.07 INQUIRIES AND NEGOTIATIONS. The Seller Parties, their affiliates, and
their respective officers, directors, partners, managers, employees,
representatives and agents, shall immediately cease any existing discussions or
negotiations with respect to any acquisition of any portion of the Assets.
Unless and until this Agreement is terminated in accordance with Section 9.03
hereof, none of the foregoing shall, directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to any person relating to or in connection with any proposed
acquisition of any of the Assets.
7.08 VICTORIA LOCATION. Mesa hereby grants to the Buyer the right to store
free of charge the Assets at the premises of Mesa in Victoria, Texas during any
period that Mesa holds leasehold rights with respect to the premises. At such
time as Mesa acquires ownership of such premises, Mesa will grant to the Buyer
the right to store the Assets at such premises pursuant to such lease terms as
shall be reasonably acceptable to both the Buyer and Mesa. All risk of loss and
taxes on such Assets shall be for the account of the Buyer. DI and the Buyer
shall promptly remove the Assets from the Victoria, Texas location if Mesa no
longer has an ownership or leasehold interest in such location or is prohibited
by the landlord from continuing the storage of the Assets on behalf of the Buyer
pursuant to this Section.
7.09 HEALTH BENEFITS. Buyer and DI agree that, with respect to any
Employees who are hired as new employees of Buyer or DI in connection with the
transactions contemplated in this Agreement (the "New Employees"), Buyer and DI
shall take all actions necessary or appropriate to permit the New Employees and
their dependents who were participating in a group health plan maintained by any
Seller Party immediately prior to the Closing Date to immediately, effective as
of the Closing Date, participate in a group health plan maintained by Buyer or
DI, modified to the extent necessary to (i) provide medical and dental benefits
to such New Employees and such dependents effective immediately upon the
cessation of coverage of such individuals under the Seller Party's group health
plan, (ii) credit to such New Employees with any deductible payments made by
them under the Seller Party's group health plan, and (iii) waive any preexisting
condition restrictions except to the extent such New Employees were subject to a
preexisting condition limitation under the Seller Parties' health plans.
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ARTICLE VIII
REGISTRATION RIGHTS
8.01 REGISTRATION. Within 20 days after the Effective Time, DI will file a
registration statement under the Securities Act to register the sale by the
Sellers and Ultimate Owners (the Sellers and the Ultimate Owners are
collectively referred to herein as "Shareholders" or individually as a
"Shareholder") of the DI Shares (references in this Article VIII to "DI Shares"
shall be deemed to include any shares of common stock received by the
Shareholders on account of any stock split, stock dividend or merger of DI)
pursuant to an "at the market" non-underwritten distribution and will use its
commercially reasonable efforts to cause such registration statement to become
effective as promptly as practicable. Prior to or contemporaneously with such
registration statement becoming effective, DI will list the DI Shares with the
American Stock Exchange, Inc.
8.02 PROCEDURE. With respect to such registration statement,
DI will,
(a) as expeditiously as reasonably practicable, prepare and file
with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to comply with
the provisions of the Securities Act with respect to the disposition of
such DI Shares covered by such registration statement in accordance with
the intended method of distribution set forth in such registration
statement;
(b) as expeditiously as reasonably practicable, furnish to each of
the Shareholders such number of copies of a prospectus and preliminary
prospectus in conformity with the requirements of the Securities Act, and
such other documents as the Shareholders may reasonably request, in order
to facilitate the public sale or other disposition of such DI Shares owned
by the Shareholders; PROVIDED, HOWEVER, that the obligation of DI to
deliver copies of prospectuses or preliminary prospectuses to the
Shareholders shall be subject to the receipt by DI of reasonable
assurances from the Shareholders that they will comply with the applicable
provisions of the Securities Act and of such other securities laws as may
be applicable in connection with any use by them of any prospectuses or
preliminary prospectuses;
(c) as expeditiously as practicable, use its commercially reasonable
efforts to register or qualify the DI Shares covered by such registration
statement under such other securities laws of such United States
jurisdictions as the Shareholders making such request shall reasonably
request
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(considering the nature and size of the offering) and do any and all other
acts and things which may be necessary or desirable to enable the
Shareholders making such request to consummate the public sale or other
disposition in such jurisdictions of the DI Shares owned by such
Shareholders, provided, however, that the Company shall not be required to
qualify to transact business as a foreign corporation in any jurisdiction
in which it would otherwise not be required to be so qualified or to take
any action which would subject it to general service of process in any
jurisdiction in which it is not then so subject;
(d) bear all Registration Expenses (as defined below) in connection
with all registrations hereunder; provided, however, that all Selling
Expenses (as defined below) of the DI Shares held by the Shareholders and
all fees and disbursements of counsel for the Shareholders in connection
with each registration pursuant to this Agreement shall be borne by such
Shareholders pro rata in proportion to the number of DI Shares or in such
proportion as they may agree. For purposes of this Section 8.02, expenses
incurred by DI in complying with this Article VIII, including, without
limitation: (i) all registration and filing fees; (ii) all printing
expenses; (iii) all fees and disbursements of counsel for DI; (iv) all
blue sky fees and expenses; and (v) all fees and expenses of accountants
for DI, are herein referred to as "Registration Expenses". All discounts
and brokerage and selling commissions applicable to the sales in
connection with any such registration are herein referred to as "Selling
Expenses"; and
(e) keep such registration effective for a period of two years or
such shorter period of time until the transfer or sale by the Shareholders
of all DI Shares so registered has been completed.
8.03 INDEMNIFICATION. In connection with the registration of any DI Shares
under the Securities Act pursuant to this Agreement, DI will indemnify and hold
harmless each selling Shareholder and any other person, if any, who controls
such selling Shareholder within the meaning of Section 15 of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
such selling Shareholder or such controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities or actions in respect thereof arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained, on
the effective date thereof, in any registration statement under which such DI
Shares were registered under the Securities Act, any preliminary prospectus
distributed with the consent of DI or final prospectus contained therein, or any
amendment thereof or supplement thereto, including all documents incorporated by
reference therein, or arise out of or are based upon the omission
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or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each such Shareholder and each such controlling person for any legal
or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that DI will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, such preliminary prospectus, such final
prospectus or such amendment or supplement, including all documents incorporated
by reference therein, in reliance upon and in conformity with information
furnished in writing to DI by or on behalf of any of the Shareholders or a
controlling person of any of the Shareholders specifically for use in the
preparation thereof.
In connection with the registration of any DI Shares under the Securities
Act pursuant to this Agreement, each Seller will severally, as to such Seller,
indemnify and hold harmless DI and each person, if any, who controls DI within
the meaning of Section 15 of the Securities Act, each officer of DI who signs
the registration statement and each director of DI, against any and all such
losses, claims, damages, liabilities or actions which DI or such officer,
director or controlling person may become subject under the Securities Act or
otherwise, and will reimburse DI, each such officer, director and controlling
person for any legal or any other expenses reasonably incurred by such party in
connection with investigating or defending any such loss, claim, damage,
liability or action, if (a) such loss, claim, damage, liability or action in
respect thereof arises out of or is based upon any untrue statement or alleged
untrue statement of any material fact contained in any such registration
statement or any such prospectus, or any amendment thereof or supplement
thereto, or arises out of or is based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading and (b) any such statement or omission of
a material fact was made in reliance upon and in conformity with information
furnished in writing to DI by or on behalf of the Seller specifically for use in
connection with the preparation of such registration statement or prospectus.
Prior to the filing of the registration statement which covers the DI Shares of
any Ultimate Owner, DI shall be entitled to require such Ultimate Owner to
execute an agreement pursuant to which such Ultimate Owner agrees to indemnify
DI to the same extent that the Sellers are required to indemnify DI pursuant to
this paragraph.
Promptly after receipt by any indemnified person of notice of any claim or
commencement of any action in respect of which indemnity is to be sought against
an indemnifying person pursuant to this Agreement, such indemnified person shall
notify the indemnifying person in writing of such claim or of the commencement
of such action, and, subject to provisions hereinafter stated, in
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case any such action shall be brought against an indemnified person and such
indemnifying person shall have been notified of the same, such indemnifying
person shall be entitled to participate therein, and, to the extent it shall
wish, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified person, and after notice from the indemnifying person to such
indemnified person of its election to assume the defense thereof, such
indemnifying person shall not be liable to such indemnified person in connection
with the defense thereof; provided, however, if there exists or will exist a
conflict of interest which would make it inappropriate in the reasonable
judgment of the indemnified person for the same counsel to represent both the
indemnified person and such indemnifying person then such indemnifying person
shall be entitled to retain its own counsel at the expense of such indemnifying
person.
8.04 VOLUME LIMITATIONS. On three business days prior written notice by DI
to the Shareholders that, in the good faith judgment of the Board of Directors
of DI expressed by resolution specifying the reason therefor, DI reasonably
believes that the sale or distribution of the DI Shares at the time requested
would materially and adversely affect a pending or proposed offering of
securities of DI, an acquisition, merger, recapitalization, consolidation,
reorganization or similar transaction relating to DI or its affiliates or
negotiations, discussions or pending proposals with respect thereto or would
require premature disclosure of information not otherwise required to be
disclosed to the potential detriment of DI, the Shareholders agree that no sale
or transfer by any of them or their Assigns (as hereinafter defined) of any of
the DI Shares shall be permitted to the extent such sale or transfer would cause
the amount of DI Shares so sold or disposed of by the Shareholders and their
Assigns on that trading day to exceed ten percent (10%) of the average daily
reported volume of trading in the Common Stock of DI on the national securities
exchange and/or the automated quotation system on which the Common Stock of DI
is then traded during the thirty (30) trading days preceding such date. Sales or
transfers which are effected as "brokers transactions" (as defined under Rule
144 of the Securities Act) shall be the only sales or transfers subject to the
restrictions of this Section. A legend placing third parties on notice of the
restrictions of this Section shall be placed on the certificates representing
the DI Shares. The term "Assigns" shall mean any person who acquired DI Shares
directly or indirectly from a Seller and who directly or indirectly through its
affiliates is the beneficial owner of more than One Hundred Thousand (100,000)
DI Shares.
ARTICLE IX
CONDITIONS TO CLOSING; TERMINATION
9.01 CONDITIONS TO THE BUYER'S AND DI'S OBLIGATION TO CLOSE. The
obligation of the Buyer and DI to consummate the transactions
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contemplated hereby is subject to the satisfaction or waiver at or prior to the
Closing of all of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Seller Parties contained in this Agreement shall be true
and correct in all material respects at and as of the Closing with the
same effect as though such representations and warranties had been made at
and as of the Closing, except for the representations and warranties that
speak as of a specific date or time other than the date of this Agreement,
which need only be true and correct as of such date or time.
(b) COMPLIANCE WITH COVENANTS. The Seller Parties shall have
performed in all material respects the covenants and agreements to be
performed by the Seller Parties on or before the Closing in accordance
with this Agreement.
(c) OFFICER'S CERTIFICATE. The Buyer shall have received at the
Closing a certificate confirming the matters referred to in Section 9.01
(a) and (b) dated the Closing Date and validly executed on behalf of the
Seller Parties by duly authorized officers, managers, or general partners
thereof.
(d) NO INJUNCTION. At and as of the Closing, there shall be no
injunction, restraining order or decree of any nature of any court or
governmental agency or body of competent jurisdiction that is in effect or
is threatened that restrains or prohibits the Closing.
(e) ALL NECESSARY CONSENTS AND APPROVALS. All material consents and
approvals of third parties (including governmental entities) necessary or
required in connection with the consummation of the transactions
contemplated to occur at the Closing shall have been obtained.
(f) OPINION OF COUNSEL. The Buyer shall have received opinion of
counsel to the Seller Parties, dated the Closing Date, in the form of
Exhibit 9.01(f)A and the opinion of counsel to Advantage Income Fund Ltd.,
in the form of Exhibit 9.01(f)B.
9.02 CONDITIONS TO THE OBLIGATION OF THE SELLER PARTIES TO CLOSE. The
obligation of the Seller Parties to consummate the transactions contemplated
hereby is subject to the satisfaction or waiver at or prior to the Closing of
all of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Buyer and DI contained in this Agreement shall be true
and correct in all material respects at and as of the Closing with the
same effect as though such representations and warranties had been made at
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and as of the Closing, except for the representations and warranties that
speak as of a specific date or time other than the date of this Agreement,
which need only be true and correct as of such date or time.
(b) COMPLIANCE WITH COVENANTS. The Buyer and DI shall have performed
in all material respects the covenants and agreements to be performed by
such parties at or before the Closing in accordance with this Agreement.
(c) OFFICER'S CERTIFICATE. The Sellers shall have received at the
Closing a certificate confirming the matters referred to in Section 9.02
(a) and (b) dated the Closing Date and validly executed on behalf of the
Buyer and DI by duly authorized officers thereof.
(d) NO INJUNCTION. At and as of the Closing, there shall be no
injunction, restraining order or decree of any nature of any court or
governmental agency or body of competent jurisdiction that is in effect or
is threatened that restrains or prohibits the Closing.
(e) ALL NECESSARY CONSENTS AND APPROVALS. All material consents and
approvals of third parties (including governmental entities) necessary or
required in connection with the consummation of the transactions
contemplated to occur at the Closing shall have been obtained.
(f) OPINION OF COUNSEL. The Seller Parties shall have received an
opinion of Xxxxxxx, Bosien & Young, legal counsel to the Buyer and DI,
dated the Closing Date, in the form of Exhibit 9.02(f).
9.03 TERMINATION.
(a) TERMINATION OF AGREEMENT. Prior to the Closing the parties
hereto may terminate this Agreement as provided below:
(i) The Buyer, DI, and the Seller Parties may terminate this
Agreement by mutual written consent at any time;
(ii) the Buyer or DI may terminate this Agreement by giving
written notice to the Seller Parties at any time prior to the Closing (A)
in the event any of the Seller Parties have breached any representation,
warranty, or covenant contained in this Agreement in any material respect,
the Buyer or DI has notified the Seller Parties of the breach, and the
breach has continued without cure for a period of 15 days after the notice
of breach or (B) if the Closing shall not have occurred on or before
October 31, 1996, by reason of the failure of any condition precedent
under Section 9.01 (unless the failure results primarily from either of
the Buyer or DI breaching any
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representation, warranty, or covenant contained in this Agreement); and
(iii) the Seller Parties may terminate this Agreement by
giving written notice to DI and the Buyer at any time prior to the Closing
(A) in the event DI or the Buyer has breached any representation,
warranty, or covenant contained in this Agreement in any material respect,
the Seller Parties have notified DI and the Buyer of the breach, and the
breach has continued without cure for a period of 15 days after the notice
of breach or (B) if the Closing shall not have occurred on or before
October 31, 1996, by reason of the failure of any condition precedent
under Section 9.02 (unless the failure results primarily from any of the
Sellers breaching any representation, warranty, or covenant contained in
this Agreement).
(b) EFFECT OF TERMINATION. If any party terminates this Agreement
pursuant to the preceding Section (a), all rights and obligations of the
parties hereunder shall terminate without any liability of any party to
any other party (except for any liability of any party then in breach);
provided, however, that the provisions contained in Section 7.01 shall
survive termination.
ARTICLE X
INDEMNIFICATION
10.01 INDEMNIFICATION BY THE SELLERS. Meritus and Mesa shall jointly and
severally indemnify, defend, and hold harmless the Buyer and DI (and their
respective directors, officers, employees, affiliates, successors, and assigns)
from and against any duties, obligations, and liabilities ("Obligations") based
upon, arising out of or otherwise in respect of (a) any inaccuracy in or breach
of any representation, warranty, or covenant of any of the Seller Parties
contained in this Agreement; (b) any Obligations arising out of, in connection
with, or otherwise in respect to the ownership or operation of the Assets before
the Effective Time, including any Permitted Liens, (c) any liability for Taxes
the responsibility for the payment of which is retained by the Sellers pursuant
to Section 7.02(b) or Section 7.02(c); (d) any liability with respect to the
Employees relating to periods prior to the Effective Time relating to their
employment by the Seller Parties; and (e) the activities of the Seller Parties
prior to the Effective Time; provided, however, that the aggregate liability of
Meritus and Mesa under this Section 10.01 shall be limited to the value of the
DI Shares (based on the closing price thereof on the Closing Date as reported by
the American Stock Exchange, Inc.).
10.02 INDEMNIFICATION BY THE DI AND BUYER. DI and the Buyer shall jointly
and severally indemnify, defend, and hold harmless each of the Seller Parties
(and their respective directors,
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officers, employees, partners, affiliates, successors, and assigns) from and
against any Obligations based upon, arising out of or otherwise in respect of
(a) any inaccuracy in or breach of any representation, warranty, or covenant of
the Buyer or DI contained in this Agreement, (b) any liability for Taxes the
responsibility for the payment of which is assumed by the Buyer pursuant to
Section 7.02(b) or Section 7.02(c), (c) any Obligations arising out of, in
connection with, or otherwise in respect to the ownership or operation of the
Assets after the Effective Time, and (d) any Obligation relating to the
employment of any of the Employees by the Buyer subsequent to the Effective
Time, including liabilities arising thereby under the Worker Adjustment and
Retraining Notification Act or the Consolidated Omnibus Budget Reconciliation
Act of 1995; provided, however, that the aggregate liability of DI and the Buyer
under this Section 10.02 shall be limited to the value of the DI Shares (based
on the closing price thereof on the Closing Date as reported by the American
Stock Exchange, Inc.).
10.03 NOTICE OF ASSERTED LIABILITY. Promptly after receipt by any party
hereto (the "Indemnitee") of notice of any demand, claim, or circumstance which,
with the lapse of time, would give rise to a claim or the commencement (or
threatened commencement), or any action, proceeding, or investigation (an
"Asserted Liability") that may result in an Obligation, the Indemnitee shall
give notice thereof (the "Claims Notice") to the other party hereto (the
"Indemnifying Party"). The Claims Notice shall describe the Asserted Liability
in reasonable detail, and shall indicate the amount (estimated, if necessary) of
the Obligation that has been or may be suffered by the Indemnitee.
10.04 OPPORTUNITY TO DEFEND. The Indemnifying Party may elect to
compromise or defend, at its own expense and by its own counsel, any Asserted
Liability and if it does so the Indemnifying Party shall have the right to make
all judgments and decisions in respect of the handling of the defense of such
Asserted Liability and the settlement or compromise of the Asserted Liability,
subject to the provisions of this Section 10.04. If the Indemnifying Party
elects to defend such Asserted Liability, it shall within 30 days of the Claims
Notice (or sooner, if the nature of the Asserted Liability so requires) notify
the Indemnitee of its intent to do so, and the Indemnitee shall cooperate, as
requested by and at the expense of the Indemnifying Party, in the compromise of,
or defense against, such Asserted Liability. If the Indemnifying Party elects
not to defend the Asserted Liability, fails to notify the Indemnitee of its
election as herein provided or contests its obligation to indemnify under this
Agreement, the Indemnitee may pay, compromise, or defend such Asserted
Liability. Notwithstanding the foregoing, neither the Indemnifying Party nor the
Indemnitee may settle or compromise any claim subject to indemnification over
the objection of the other; provided, however, that consent to settlement or
compromise shall not be unreasonably withheld. In any event, the Indemnitee and
the Indemnifying Party may participate, at their own expense, in the defense of
such
- 23 -
Asserted Liability. If the Indemnifying Party chooses to defend any claim, the
Indemnitee shall make available to the Indemnifying Party any books, records, or
other documents within its control that are necessary or appropriate for such
defense.
10.05 NEGLIGENCE AND STRICT LIABILITY WAIVER. The indemnification provided
for in this Article X shall be applicable regardless of whether Obligations in
question arose solely or in part from the ACTIVE, PASSIVE, OR CONCURRENT
NEGLIGENCE OF ANY INDEMNITEE (OR UNDER ANY THEORY OF STRICT LIABILITY) prior to
the Effective Time or after the Effective Time, as the case may be.
10.06 EXCLUSIVE REMEDY. After the Closing, and to the extent permitted by
applicable law, the rights and remedies expressly set forth in this Agreement
shall be the exclusive rights and remedies of the parties hereto with respect to
or which concern the sale of the Assets and the issuance of the DI Shares
pursuant to the terms hereof.
10.07 SURVIVAL. The several representations and warranties of the parties
to this Agreement shall survive the Closing Date and shall remain in full force
and effect for a period of eighteen (18) months following the Closing Date;
provided, however that the representations and warranties contained in Sections
4.01(e), (j), (k), or (q), 5.01(e) and 5.02(e), and (f) shall survive the
Closing Date without limitation. The representations and warranties set forth in
Section 4.01(n) and (o) shall expire upon the lapse of the applicable statute of
limitations. The covenants and agreements entered into pursuant to this
Agreement shall survive the Closing Date without limitation.
ARTICLE XI
MISCELLANEOUS
11.01 INSPECTION AND DUE DILIGENCE REVIEW. At any time subsequent to the
date hereof and prior to Closing, during normal business hours with a minimum of
disruption to the activities of the Sellers, the Buyer shall be provided access
to the Assets and the opportunity to conduct such inspection of the Assets and
other due diligence relating to the Assets and this Agreement as it shall
determine in its sole discretion to be appropriate.
11.02 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.
11.03 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without reference to the
conflicts of law principles thereof.
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11.04 ENTIRE AGREEMENT. The Agreements and the Schedules and Exhibits
hereto supersede all prior agreements between the parties (written or oral) and,
except as aforesaid, is intended as a complete and exclusive statement of the
terms of the agreement between the parties. This Agreement may be amended only
by a written instrument duly executed by the parties.
11.05 EXPENSES. Except as expressly set forth in this Agreement, whether
the transactions contemplated hereby are or are not consummated, all legal and
other costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such costs
and expenses.
11.06 NOTICES. All notices hereunder shall be sufficiently given (and
deemed made) for all purposes hereunder if in writing and (a) delivered
personally, (b) sent by documented overnight delivery service, (c) to the extent
receipt is confirmed, sent by telecopy, telefax, or other electronic
transmission service to the appropriate address or number as set forth below, or
(d) sent by United States mail, postage prepaid with return receipt requested.
Notices to DI or the Buyer shall be transmitted or addressed to:
000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: President
Telecopier No.: (000) 000-0000
with a copy to:
Cokinos, Bosien & Young
1500 Liberty Tower
0000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
or at such other addresses or telefax numbers and to the attention of such other
person as Buyer or DI may designate by written notice to each of the other
parties.
Notices to Seller Parties shall be transmitted or addressed to:
Mesa Drilling, Inc.
Xxxxx Xxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: President
Telecopier No.: (000) 000-0000
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with a copy to:
Fulbright & Xxxxxxxx, L.L.P.
0000 XxXxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxx X. Hope
Telecopier No.: (000) 000-0000
or at such other addresses or telefax numbers and to the attention of such other
person as each of the Seller Parties may designate by written notice to each of
the other parties.
11.07 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that no party hereto may assign its rights or
delegate its obligations under this Agreement without the express prior written
consent of each other party hereto. Notwithstanding anything contained in this
Agreement to the contrary, the Buyer and DI understand and consent to the fact
that, following the Closing, the Sellers will liquidate and distribute all of
the Assets to the Ultimate Owners; provided, however, that prior to such
distribution, (i) the Sellers notify DI and the Buyer of such distribution, (ii)
with respect to the liquidation of, and the distribution by, Meritus, the
shareholders of Meritus deliver to DI and the Buyer a written undertaking to
jointly and severally assume the obligations of Meritus in the form of Exhibit
11.07(a), and (iii) DI and the Buyer receive in such form as shall be reasonably
acceptable to DI and the Buyer an opinion of counsel for Xxxxxxx Finance Corp.
regarding the matters set forth in this Section 11.07 to the effect of Exhibit
11.07(b).
11.08 HEADINGS. The section and article headings contained in this
Agreement are inserted for convenience of reference only and will not affect the
meaning or interpretation of this Agreement.
11.09 SEVERABILITY. If any term or provision of this Agreement is invalid,
illegal, or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any material adverse manner
to any party. Upon such determination that any term or other provision is
invalid, illegal, or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
11.10 CONSENT TO JURISDICTION. Any legal action, suit, or
proceeding in law or equity arising out of this Agreement and the
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transactions contemplated hereby shall be brought exclusively in a federal or
state court situated in Xxxxxx County, Texas, and with respect to any such claim
the parties irrevocably waive, to the fullest extent permitted by law, any
claim, or any objection that it may now or hereafter have, that venue is not
proper with respect to any such suit, action, or proceeding brought in such a
court, including any claim that such suit, action, or proceeding brought in such
court has been brought in an inconvenient forum, that its property is exempt or
immune from attachment or execution, that venue of the action, suit, or
proceeding is improper, that this Agreement or the subject matter thereof may
not be enforced in or by such court, or that it is not subject to personal
jurisdiction or service of process in such Xxxxxx County forum. Each party
further irrevocably submits to the jurisdiction of any such court in any such
action, suit, or proceeding. any and all service of process and any other notice
in any such action, suit, or proceeding shall be effective against any party if
given by registered or certified mail, return receipt requested or by any other
means of mail which requires a signed receipt, postage prepaid, mailed to such
party at the address listed in Section 11.07. Nothing herein contained shall be
deemed to affect the right of any party to serve process in any manner permitted
by law.
11.11 NO THIRD PARTY BENEFICIARIES. Except as provided in Article IX,
nothing in this Agreement shall entitle any person to any claim, cause of
action, remedy or right of any kind, other than (i) the Seller Parties, (ii) the
Buyer and DI, (iii) their respective successors and assigns permitted hereby,
and (iv) in the event of the distribution of the DI Shares by a Seller Party to
the Ultimate Owners, the Ultimate Owners of such Seller Party.
11.12 CROSS-REFERENCES. References in this Agreement to Articles,
Sections, Exhibits, or Schedules shall be deemed to be references to Articles,
Sections, Exhibits, and Schedules of this Agreement unless the context
specifically and expressly requires otherwise.
11.13 RULES OF CONSTRUCTION. The normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting party shall not be
applicable to the interpretation of the terms or provisions of this Agreement or
any agreement, instrument, or document executed or delivered in connection
herewith.
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IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each
of the parties as of the date first above written.
The Buyer: The Seller Parties:
DRILLERS, INC., MERITUS, INC., a
a Texas corporation Texas corporation
BY:/s/ XXXX XXXX BY:/s/ XXXX XXXXXX
NAME: Xxxx Xxxx NAME: Xxxx Xxxxxx
TITLE:_____________________ TITLE: Treasurer
DI:
DI INDUSTRIES, INC., a Texas MESA RIG 4 L.L.C., a
corporation Texas limited liability
company
BY: /s/ XXXX XXXX BY: /s/ ASBJORN VAVIK
NAME: Xxxx Xxxx NAME: Asbjorn Vavik
TITLE:_____________________ TITLE: Manager
MESA VENTURE, a
Texas general partnership
BY: /s/ XXXX XXXXXX
NAME: Xxxx Xxxxxx
TITLE: Treasurer
MESA DRILLING, INC., a
Texas corporation
BY:/s/ ASBJORN VAVIK
NAME: Asbjorn Vavik
TITLE: Managing Director
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