1
EXHIBIT 10.5
FORMATION & SHAREHOLDERS' AGREEMENT
OF
XXXXXX - DTI, LTD.,
A XXXXX XXX FREE TRADE ZONE CORPORATION
2
TABLE OF CONTENTS
Page
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ARTICLE I
CONSTRUCTION AND DEFINITIONS . . . . . . . . . . 1
1.1 Construction . . . . . . . . . . . . . . . . . . . . 1
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1.2 References . . . . . . . . . . . . . . . . . . . . . 1
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1.3 Headings . . . . . . . . . . . . . . . . . . . . . . 1
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1.4 Definitions . . . . . . . . . . . . . . . . . . . . . 1
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ARTICLE II
ORGANIZATION . . . . . . . . . . . . . . 3
2.1 Formation . . . . . . . . . . . . . . . . . . . . . . 3
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2.2 Qualification in Other Jurisdictions . . . . . . . . 3
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ARTICLE III
NAME . . . . . . . . . . . . . . . . 4
ARTICLE IV
PURPOSE AND POWERS . . . . . . . . . . . . 4
ARTICLE V
REGISTERED OFFICE; REGISTERED AGENT; OTHER OFFICES . . . . 4
ARTICLE VI
TERM . . . . . . . . . . . . . . . . 4
ARTICLE VII
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS . . . . . . . 5
7.1 Capital Contributions . . . . . . . . . . . . . . . . 5
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ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF XXXXXX . . . . . . . 5
8.1 Incorporation . . . . . . . . . . . . . . . . . . . . 5
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8.2 Authorization . . . . . . . . . . . . . . . . . . . . 5
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8.3 Properties, Assets and Leasehold Estates . . . . . . 6
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ARTICLE IX
Representations and Warranties of DTI . . . . . . . . 6
9.1 Incorporation . . . . . . . . . . . . . . . . . . . . 6
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9.2 Authorization . . . . . . . . . . . . . . . . . . . . 6
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9.3 Properties, Assets and Leasehold Estates . . . . . . 6
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ARTICLE X
BOOKS OF ACCOUNT, RECORDS AND FINANCIAL INFORMATION . . . . 6
10.1 Books and Records . . . . . . . . . . . . . . . . . . 6
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10.2 Financial Information . . . . . . . . . . . . . . . . 7
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10.3 1997 Operating Budget . . . . . . . . . . . . . . . . 7
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ARTICLE XI
FISCAL YEAR . . . . . . . . . . . . . . 7
ARTICLE XII
COMPANY FUNDS . . . . . . . . . . . . . . 8
ARTICLE XIII
MANAGEMENT; BOARD OF DIRECTORS . . . . . . . . . 8
13.1 Management by Shareholders . . . . . . . . . . . . . 8
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13.2 Organization of Board . . . . . . . . . . . . . . . . 8
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13.3 Matters Requiring Consent . . . . . . . . . . . . . . 8
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13.4 Executive Committee . . . . . . . . . . . . . . . . . 9
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ARTICLE XIV
OFFICERS . . . . . . . . . . . . . . . 10
14.1 Officers . . . . . . . . . . . . . . . . . . . . . . 10
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14.2 Managing Director. The Company agrees to execute
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an employment agreement with Xx Xxxxxxxxx as
Managing Director of the Company containing
substantially the terms set forth on Exhibit C
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hereto.
ARTICLE XV
INDEMNIFICATION . . . . . . . . . . . . . 10
15.1 Indemnification . . . . . . . . . . . . . . . . . . . 10
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15.2 Expenses . . . . . . . . . . . . . . . . . . . . . . 10
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15.3 Insurance . . . . . . . . . . . . . . . . . . . . . . 10
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ARTICLE XVI
TRANSFER OF INTERESTS BY SHAREHOLDERS . . . . . . . . 11
16.1 Restrictions on Transfers . . . . . . . . . . . . . . 11
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16.2 Buy-Sell Procedure . . . . . . . . . . . . . . . . . 12
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ARTICLE XVII
NOTICES . . . . . . . . . . . . . . . 13
ARTICLE XVIII
AMENDMENT OF AGREEMENT . . . . . . . . . . . 15
ARTICLE XIX
MISCELLANEOUS . . . . . . . . . . . . . . 15
19.1 Entire Agreement . . . . . . . . . . . . . . . . . . 15
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19.2 Governing Law . . . . . . . . . . . . . . . . . . . . 15
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19.3 Binding Effect . . . . . . . . . . . . . . . . . . . 15
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19.4 Effect of Invalid Provision . . . . . . . . . . . . . 15
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19.5 Counterparts . . . . . . . . . . . . . . . . . . . . 16
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19.6 Negotiated Transaction . . . . . . . . . . . . . . . 16
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SCHEDULES
Schedule 11.3 Approved 1997 Operating Budget
Schedule 13.2 Representatives and Alternate
Representatives
EXHIBITS
Exhibit A General Indenture of Conveyance, Assignment on Transfer
by and between the Company and Xxxxxx
Exhibit B General Indenture of Conveyance, Assignment on Transfer of
Assets and Assumption of Liabilities by and between the
Company and DTI
Exhibit C Xxxxxxxxx Employment Agreement
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FORMATION & SHAREHOLDERS' AGREEMENT
OF
XXXXXX - DTI, LTD.
This Formation & Shareholders' Agreement of XXXXXX - DTI, LTD., a
Xxxxx Xxx free trade zone company (the "Company"), effective as of 12:01 a.m.
on November __, 1996 (this "Agreement"), is entered into by and between Xxxxxx
Energy Services, Inc., a Delaware corporation ("Xxxxxx"), and Drilling Tools
International, Ltd., a Gibraltar corporation ("DTI").
WHEREAS, Xxxxxx and DTI shall be the shareholders of the Company;
WHEREAS, pursuant to a General Indenture of Conveyance, Assignment and
Transfer of Assets and Assumption, DTI shall transfer certain assets to the
Company, and the Company shall assume certain liabilities of DTI;
WHEREAS, pursuant to a General Indenture of Conveyance, Assignment and
Transfer of Assets, Xxxxxx shall transfer certain assets to the Company;
NOW, THEREFORE, in consideration of the premises and mutual
undertakings contained herein, the parties hereby agree as follows:
ARTICLE I
CONSTRUCTION AND DEFINITIONS
1.1 Construction. Words used in this Agreement, regardless of the
number or gender specifically used, shall be deemed and construed to include
any other number, singular or plural, and any other gender, masculine, feminine
or neuter, as the context shall require.
1.2 References. As used in this Agreement, unless expressly
stated otherwise, references to "including" mean "including, without
limitation." Unless otherwise specified, all references in this Agreement to
Articles, Sections, Exhibits, Schedules or paragraphs are deemed references to
the corresponding Articles, Sections, Exhibits, Schedules or paragraphs in this
Agreement.
1.3 Headings. The headings of the Articles, Sections, Schedules
and Exhibits of this Agreement are included for convenience only and shall not
be deemed to constitute part of this Agreement or to affect the construction or
interpretation hereof.
1.4 Definitions. The following definitions shall be applicable to
the terms set forth below as used in this Agreement.
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"Act" means the [LAW APPLICABLE TO XXXXX XXX FREE TRADE ZONE ENTITY],
and any successor statute, as amended from time to time.
"Affiliates" means, when used with respect to a specified Person, any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the specified Person, provided that the
Company shall not be deemed to be an Affiliate of any Shareholder. For
purposes of this definition "control", when used with respect to any specified
Person, means the power to direct the management and policies of the Person,
directly or indirectly, whether through the ownership of voting securities, by
contract, by family relationship or otherwise; and the terms "controlling" and
"controlled" have the meanings correlative to the foregoing.
"Agreement" means this Formation & Shareholders' Agreement of Xxxxxx -
DTI, Ltd. as the same may be amended or modified from time to time in
accordance with Article XVIII hereof.
"Board" means the Board of Directors of the Company.
"Business Day" means any day on which federal commercial banks are
open for business for the purpose of sending and receiving wire transfers in
Houston, Texas.
"Capital Stock" means the shares of common, preferred or other capital
stock of the Company.
"Certificate" shall have the meaning given that term in Section 2.1.
"Company" means Xxxxxx - DTI, Ltd., a Xxxxx Xxx free trade zone
corporation.
"Conveyance Agreements" means those certain General Indentures of
Conveyance, Assignment and Transfer, to be dated as of the date of organization
of the Company, between the Company and DTI, and between the Company and
Xxxxxx.
"Covered Person" means any Shareholder, an Affiliate of a Shareholder
or any officer, director or shareholder of the Company or of a Shareholder or
their respective Affiliates.
"DTI" means Drilling Tools International, Ltd., a Gibraltar
corporation.
"DTI Assets" shall have the meaning given that term in Section 7.1(a).
"Executive Committee" means the committee described in Section 13.1.
"Governmental Authority" means any entity of or pertaining to
government, including any federal, state, local, other governmental or
administrative authority, agency, court, tribunal, arbitrator, commission,
board or bureau.
"Nonwithdrawing Shareholder" shall have the meaning given that term in
Section 16.1(c).
"Notice" shall have the meaning given that term in Section 16.1(d).
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"Offer" shall have the meaning given that term in Section 16.2(b).
"Operating Budget" shall have the meaning given that term in Section
11.2(d).
"Originating Party" shall have the meaning given that term in Section
16.2(b).
"Parent" shall have the meaning given that term in Section 16.1(b).
"Person" means any individual, corporation, partnership, joint
venture, association, limited liability company, joint stock company, trust,
unincorporated organization, Governmental Authority or government (or agency or
political subdivision thereof).
"Xxxxxx" means Xxxxxx Energy Services, Inc., a Delaware corporation.
"Xxxxxx Assets" shall have the meaning given that term in Section
16.2(b).
"Receiving Party" shall have the meaning given that term in Section
16.2(b).
"Remaining Shareholder" shall have the meaning given that term in
Section 16.1(c).
"Representative" and "Representatives" shall have the meaning given
those terms in Section 13.2(b).
"Shareholder" means each of Xxxxxx and DTI and any Person hereafter
acquiring shares in the Company as provided in this Agreement, but does not
include any Person who has ceased to be a shareholder in the Company.
"Shareholder Interest" means the interest of a Shareholder in the
Company, including the Shareholder's rights to a share of the profits and
losses of the Company, to receive distributions (liquidating or otherwise), to
obtain information and to consent to or approve actions by the Company.
"Transferor Shareholder" shall have the meaning given that term in
Section 16.1(c).
ARTICLE II
ORGANIZATION
2.1 Formation. The Company shall be organized as a Xxxxx Xxx free
trade zone corporation by the filing of a [CERTIFICATE OF ____________________]
(the "Certificate") under and pursuant to the Act on or before February 1,
1997. The Shareholders hereby agree to operate the Company as a Xxxxx Xxx free
trade zone corporation under and pursuant to the Act and agree that the rights,
duties and liabilities of the Shareholders shall be as provided in the Act,
except as otherwise provided herein.
2.2 Qualification in Other Jurisdictions. The Shareholders shall
cause the Company to be qualified, formed or registered under assumed or
fictitious name statutes or similar laws in any jurisdiction in which the
Company transacts business in which such qualification,
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formation or registration is required or desirable. The Shareholders shall
execute, deliver and file, or cause the execution, delivery or filing of, any
certificates (and any amendments or restatements thereof) necessary for the
Company to qualify to do business in a jurisdiction in which the Company may
wish to conduct business.
ARTICLE III
NAME
The name of the Company shall be "Xxxxxx - DTI, Ltd.", and all Company
business may be conducted in that name or any other name that complies with
applicable law as the Board may select from time to time.
ARTICLE IV
PURPOSE AND POWERS
The purpose of the Company is to engage in the oil field fishing and
rental tools business in the Middle East and Africa.
ARTICLE V
REGISTERED OFFICE; REGISTERED AGENT; OTHER OFFICES
The registered office of the Company required by the Act shall be
____________________________________________________________, or any other
office (which need not be a place of business of the Company) as the Board may
designate from time to time in the manner provided by law. The name and
address of the registered agent of the Company in the free trade zone of Xxxxx
Xxx shall be ____________________________________________________________. The
principal office of the Company shall be at such place as the Board may
designate from time to time, which need not be in the free trade zone of Xxxxx
Xxx and the Company shall maintain records there as required by the Act. The
Company may have such other offices as the Board may designate from time to
time.
ARTICLE VI
TERM
The duration for which the Company shall exist shall be perpetual,
unless sooner liquidated or dissolved in accordance with the provisions of the
Act.
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ARTICLE VII
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
7.1 Capital Contributions.
Xxxxxx and DTI agree that, upon the formation of the Company
pursuant to the terms of this Agreement:
(a) DTI shall execute a General Indenture of Conveyance,
Assignment and Transfer of Assets and Assumption of Liabilities
contributing all of the assets (the "DTI Assets") and liabilities set
forth on Exhibit A hereto to the Company;
(b) Xxxxxx shall execute a General Indenture of
Conveyance, Assignment and Transfer of Assets contributing all of the
assets set forth on Exhibit B hereto, (the "Xxxxxx Assets"); and
(c) Xxxxxx Industries, Inc. shall deliver to DTI a number
of shares of its common stock, $.01 par value ("Common Stock")
determined by dividing $1.4 million by the average of the closing bid
price for the Common Stock as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System over the last 20
trading days prior to the date of the capital contributions, but in no
event by less than $3.00 per share or more than $4.00 per share;
provided, however, that such issuance of shares shall be subject to
receipt by Xxxxxx Industries, Inc. of appropriate documentation
establishing compliance with the Securities Act of 1933, as amended
("Securities Act"). DTI acknowledges that the shares will not be
registered under the Securities Act or the securities laws of any
state of the United States, and that the transfer of such shares will
be restricted under such laws.
Upon execution of the Conveyance Agreements by Xxxxxx and DTI
respectively, the Company shall issue 50% of its outstanding capital
stock to Xxxxxx and 50% of its outstanding capital stock to DTI.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF XXXXXX
Xxxxxx represents and warrants to DTI as follows:
8.1 Incorporation. Xxxxxx is a Delaware corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Xxxxxx has full corporate power and lawful
authority to carry on its business as it is now being conducted and to own and
operate its assets, properties and business.
8.2 Authorization. Xxxxxx has full legal right and corporate
power and authority to enter into and deliver this Agreement and to consummate
the transactions set forth herein and to perform all the terms and conditions
hereof to be performed by it. This Agreement has been
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duly executed and delivered by Xxxxxx and is a legal, valid and binding
obligation of Xxxxxx enforceable in accordance with its terms, except as
limited by applicable bankruptcy, moratorium, insolvency or other laws
affecting generally the rights of creditors or by principles of equity.
8.3 Properties, Assets and Leasehold Estates. Xxxxxx owns or has
the right to use all of the Xxxxxx Assets. Xxxxxx has good and marketable
title to all the Xxxxxx Assets, free and clear of all mortgages, liens,
pledges, conditional sales agreements, charges, easements, covenants,
assessments, restrictions and encumbrances of any nature whatsoever.
ARTICLE IX
Representations and Warranties of DTI
9.1 Incorporation. DTI is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. DTI has full corporate power and lawful authority to carry on
its business as it is now being conducted and to own and operate its assets,
properties and business.
9.2 Authorization. DTI has full legal right and corporate power
and authority to enter into and deliver this Agreement and to consummate the
transactions set forth herein and to perform all the terms and conditions
hereof to be performed by it. This Agreement has been duly executed and
delivered by DTI and is a legal, valid and binding obligation of DTI
enforceable in accordance with its terms, except as limited by applicable
bankruptcy, moratorium, insolvency or other laws affecting generally the rights
of creditors or by principles of equity.
9.3 Properties, Assets and Leasehold Estates. DTI owns or has the
right to use all of the DTI Assets. DTI has good and marketable title to all
the DTI Assets, free and clear of all mortgages, liens, pledges, conditional
sales agreements, charges, easements, covenants, assessments, restrictions and
encumbrances of any nature whatsoever.
ARTICLE X
BOOKS OF ACCOUNT, RECORDS AND FINANCIAL INFORMATION
10.1 Books and Records. The Shareholders shall cause the Company
to keep proper and complete records and books of account (including those
required by the Act) in which shall be entered all transactions and other
matters relative to the Company's business as are usually entered into records
and books of account maintained by persons engaged in businesses of like
character. The Company books and records shall be maintained in accordance
with U.S. generally accepted accounting principles and shall be kept on the
accrual basis. The books and records shall at all times be made available and
shall be open to the reasonable inspection and examination of the Shareholders
or their duly authorized representatives during the business hours of the
Company for any purpose reasonably related to the interest of such Shareholder
as a Shareholder in the Company.
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10.2 Financial Information. The Board shall cause the Company to
transmit the following financial information to each Shareholder:
(a) as soon as available, but in any event within 60 days
after the end of each fiscal year of the Company, a copy of the
balance sheet of the Company as at the end of such fiscal year and the
related statements of income and Shareholders' capital and changes in
Shareholders' capital and cash flow for such fiscal year, setting
forth, after fiscal year 1997, in each case in comparative form the
figures for the previous year, reported on, without a qualification or
exception as to the scope of the audit, by the Company's auditors;
(b) as soon as available, but in any event not later than
30 days after the end of each of the first three fiscal quarters of
each fiscal year of the Company, the unaudited balance sheet of the
Company as at the end of each such quarter and the related unaudited
statements of income and Shareholders' capital and changes in
Shareholders' capital and cash flow of the Company for such quarter
and the portion of the fiscal year through such date, setting forth,
after fiscal year 1997, in each case in comparative form, the figures
for the previous year;
(c) not later than 100 days prior to the end of each
fiscal year of the Company, a copy of the annual operating plan (the
"Operating Budget") for the next fiscal year. Such plan shall
contain, but not be limited to, a complete set of financial statements
by month in appropriate detail for Shareholder review, a summary of
capital expenditures, a human resources discussion summarizing
staffing level assumptions and an overall management summary
addressing the business operations and related strategic business
assumptions;
(d) promptly after becoming available, but in any event
within 15 days after the end of each calendar month, a report setting
forth the year-to-date revenues, operating expenses, general and
administrative expenses and capital expenditures of the Company,
together with a comparison of the Operating Budget for such period,
and a projection of revenues and expenses for the remainder of the
Company's fiscal year; and
(e) within a reasonable time, any other financial
information that may be reasonably requested from time to time by a
Shareholder.
10.3 1997 Operating Budget. The Operating Budget for the Company's
1997 fiscal year is attached as Schedule 10.3.
ARTICLE XI
FISCAL YEAR
The fiscal year of the Company shall end on the 31st day of December
in each calendar year.
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ARTICLE XII
COMPANY FUNDS
The Shareholders will cause the Company to deposit its funds in such
bank accounts, or invest in such interest-bearing or non-interest-bearing
accounts, as shall be designated by the Board. All withdrawals from any such
bank accounts shall be made by the officers or other agent or agents duly
authorized by the Board. Company funds shall not be commingled with those of
any other person.
ARTICLE XIII
MANAGEMENT; BOARD OF DIRECTORS
13.1 Management by Shareholders. The Board shall have full,
exclusive and complete discretion to manage and control the business and
affairs of the Company in accordance with the terms and provisions of this
Agreement. The Shareholders shall act by and through their respective
Representatives as elected pursuant to this Agreement. Each Shareholder agrees
that neither it nor its Representatives will bind the Company or otherwise act
on its behalf without the prior authorization of the Board or the Executive
Committee as required by Sections 13.3 or 13.5 to take such action. If any
Shareholder breaches or threatens to breach the covenant provided in the
preceding sentence, the Company and the other Shareholder may exercise any
remedies available to them in law or in equity, including seeking an injunction
restraining such Shareholder from breaching such covenant.
13.2 Organization of Board.
(a) The Board shall be composed of six directors.
(b) Each Shareholder shall designate three individuals to
represent it on the Board (individually, such Shareholder's
"Representative" and collectively, such Shareholder's
"Representatives"). No individual may serve as the Representative of
more than one Shareholder. As of the date hereof, each Shareholder's
Representatives are those individuals listed on Schedule 13.2. Each
Shareholder reserves the right to remove any one or more of its
Representatives and to appoint successors and substitutes therefor,
from time to time, and any such change shall be effective upon such
Shareholder's delivering a written notice of such change to the other
Shareholder. Each Shareholder agrees to vote all of its shares of
Capital Stock in favor of the Representatives designated by the other
Shareholder herewith and from time to time.
13.3 Matters Requiring Consent. The Shareholders of the Company
shall cause the bylaws of the Company to require that, except as set forth in
the Operating Budget for each fiscal year, the following decisions must be
unanimously approved by the Board:
a) acquiring or disposing of any real property
or interest therein by the Company or entering into any
agreement for the purchase or sale of any real property or
interest therein;
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b) acquiring financing for the Company or
incurring any indebtedness whatsoever in excess of $25,000;
c) declaring or paying any dividend or making
any distribution in respect of the Company's Capital Stock;
d) except for transactions in the ordinary
course of business, selling or otherwise transferring any
property or asset of the Company or any interest therein;
e) making any capital expenditures (including,
without limitation, payments with respect to capitalized
leases) exceeding $25,000 for any single expenditure or
$100,000 in the aggregate during any fiscal year of the
Company;
f) creating, assuming or permitting any lien to
be taken upon any properties or assets of the Company, whether
now owned or hereafter acquired;
g) making any loan or advance to any person,
including, without limitation, any employee of the Company,
excluding advances for travel and entertainment expenses and
similar expenditures in the ordinary course of business;
h) determining the annual aggregate cash or non-
cash compensation payable to any executive officer of the
Company;
i) entering into any agreements, including
leases or other rental agreements, under which the amount of
the aggregate payments for all such agreements exceeds $25,000
in the aggregate for any 12-month period;
j) authorizing or declaring any distribution of
cash or property of the Company;
k) entering into any transaction in the name of
the Company not permitted by this Agreement;
l) selecting or varying depreciation and
accounting methods of the Company or changing the fiscal year
of the Company; and
m) except for transactions in the ordinary
course of business, adjusting, settling or compromising any
claim, obligation, debt, demand, suit or judgment against the
Company.
13.4 Executive Committee. Each Shareholder shall appoint one of
its three Representatives to serve on the Executive Committee of the Board. As
of the date hereof, each Shareholder's Representative on the Executive
Committee is the individual so identified on Schedule 13.2. Except for those
actions set forth in Section 13.3, the Executive Committee shall be responsible
for the day-to-day operations of the Company and shall have the same power and
authority as the Board.
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ARTICLE XIV
OFFICERS
14.1 Officers. The following persons shall be designated to serve
in the respective capacities set forth beside each of their names:
Xx Xxxxxxxxx - Managing Director and Chief Executive Officer
Xxxxx Xxxxx - Chief Financial Officer
Xxxxxxx X. Xxxxx - Operations Manager
Any subsequent modifications to the above listed designations shall be
unanimously approved by the Board.
14.2 Managing Director. The Company agrees to execute an
employment agreement with Xx Xxxxxxxxx as Managing Director of the Company
containing substantially the terms set forth on Exhibit C hereto.
ARTICLE XV
INDEMNIFICATION
15.1 Indemnification. To the fullest extent permitted by
applicable law, a Covered Person shall be entitled to indemnification from the
Company for any loss, damage or claim incurred by such Covered Person (a) by
reason of any act or omission performed or omitted by such Covered Person in
good faith on behalf of the Company and in a manner reasonably believed to be
within the scope of authority conferred on such Covered Person by this
Agreement or (b) by reason of being a Shareholder, an Affiliate of a
Shareholder or an officer, director, shareholder, partner, representative,
advisor or agent of the Company or a Shareholder or its Affiliate, except that
no Covered Person shall be entitled to be indemnified in respect of any loss,
damage or claim incurred by such Covered Person by reason of gross negligence
or willful misconduct with respect to such acts or omissions; provided,
however, that any indemnity under this Article XV shall be provided out of and
to the extent of Company assets only, and no Covered Person shall have any
personal liability on account thereof.
15.2 Expenses. To the fullest extent permitted by applicable law,
expenses (including legal fees) incurred by a Covered Person in defending any
claim, demand, action, suit or proceeding for which indemnity is sought under
this Agreement shall, from time to time, be advanced by the Company prior to
the final disposition of such claim, demand, action, suit or proceeding upon
receipt by the Company of an undertaking by or on behalf of the Covered Person
to repay such amount if it shall be determined that the Covered Person is not
entitled to be indemnified as authorized under this Article XV.
15.3 Insurance. The Company may purchase and maintain insurance,
to the extent and in such amounts as the Board shall deem reasonable, on behalf
of Covered Persons and such
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other Persons as the Board shall determine, against any liability that may be
asserted against or expenses that may be incurred by any such Person in
connection with the activities of the Company or such indemnities, regardless
of whether the Company would have the power to indemnify such Person against
such liability under the provisions of this Agreement. The Company may enter
into indemnity contracts with Covered Persons and adopt written procedures
pursuant to which arrangements are made for the advancement of expenses and the
funding of obligations under Section 15.2 hereof and containing such other
procedures regarding indemnification as are appropriate.
ARTICLE XVI
TRANSFER OF INTERESTS BY SHAREHOLDERS
16.1 Restrictions on Transfers.
(a) No Shareholder shall have the right, directly or
indirectly, to sell, assign, mortgage, pledge, encumber, exchange,
transfer or otherwise dispose of its interest in the Company, or any
portion thereof, without the prior written consent of all Shareholders
except as specifically provided in this Article XVI. Any attempted
transfer or assignment of any interest in the Company in violation of
the provisions of this Article XVI shall be void and of no force and
effect. Any permitted transferee of shares of Capital Stock must
agree, prior to any sale, transfer, assignment or conveyance, to
become a party to this Agreement and agree to be bound by all
applicable terms and conditions, including this Article XVI. Upon
becoming a party to this Agreement, each such purchaser or transferee
shall be substituted fully for, and shall enjoy the same rights and be
subject to the same duties and obligations as its predecessor
hereunder.
(b) Either Shareholder may sell, assign or transfer all,
but not less than all, of its Capital Stock or the Person(s) owning
all the issued and outstanding capital stock of such Shareholder (the
"Parent(s)") may sell, assign or transfer all but not less than all of
the capital stock of such Shareholder or its Parent, to an Affiliate
of such Shareholder or its Parent(s) provided that (i) all the capital
stock or other equity interest of such Affiliate is owned, directly or
indirectly, by such Shareholders' Ultimate Parent (as defined below),
and (ii) each such purchaser or transferee, prior to such sale,
assignment or transfer, becomes a party to this Agreement and agrees
to be bound by all applicable terms and conditions, including this
Article XVI.
(c) If, at any time following the third anniversary of
the effective date of this Agreement and so long as an Offer has not
been delivered pursuant to the provisions of Section 16.2, either
Shareholder other than a Departing Shareholder (the "Transferor
Shareholder") desires to sell, assign or transfer its entire Capital
Stock for a purchase price payable in cash, other than pursuant to the
provisions of Sections 16.1(b) hereof, the Transferor Shareholder
shall give notice thereof to the other Shareholder (the "Notice").
The Notice shall specify the price and other material terms of the
sale. The other Shareholder shall have a period of 30 days during
which it may elect to acquire the Capital Stock of the Transferor
Shareholder for the price and under the same terms and conditions
included in the Notice. If the other Shareholder elects to acquire
the Capital
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Stock of the Transferor Shareholder, the Transferor Shareholder and
the other Shareholder shall be bound to consummate the transaction in
accordance with the Notice, as promptly as practicable. If the other
Shareholder fails to respond to the Notice within such 30-day period,
elects not to purchase the Capital Stock or elects to purchase the
Capital Stock and the transaction is not consummated through no fault
of the Transferor Shareholder within 30 days of the delivery of the
acceptance of the other Shareholder, the Transferor Shareholder shall,
for a period of 90 days thereafter, be free to transfer its Capital
Stock, subject only to the requirements of Sections 16.1(d) and 16.3
to any Person, pursuant to the terms described in the Notice. After
such 90-day period, the Transferor Shareholder shall not transfer its
Capital Stock pursuant to a third party offer without again complying
with the provisions of this Section 16.1. In the event an Offer has
been delivered pursuant to Section 16.2, no Shareholder may offer to
sell, assign or transfer its Capital Stock other than in accordance
with the provisions of Section 16.2 during the pendency of the
procedures required by Sections 16.2(b) and (c) as a result of the
delivery of the Offer.
(d) The Company shall not recognize for any purpose any
purported sale, assignment or other disposition of all or part of the
shares of Capital Stock unless and until the other applicable
provisions of this Section 16.1 and Section 16.3 have been satisfied
and the Board has received, on behalf of the Company, a document that:
(i) is executed by both the Shareholder effecting
the disposition and the Person to whom the Capital Stock or
part thereof is transferred;
(ii) includes the notice address of any Person to
be admitted to the Company as a Shareholder and its agreement
to be bound by this Agreement; and
(iii) contains a representation and warranty in
favor of the other Shareholder that the disposition was made
in accordance with all applicable laws and regulations.
16.2 Buy-Sell Procedure. Either Shareholder desiring to terminate
its relationship with the other Shareholder with respect to the Company (the
"Originating Party"), may at any time following the third anniversary of the
effective date of this Agreement so long as a Transaction Notice or a Notice
has not been delivered pursuant to the provisions of Section 16.1(c), give
written notice to the other Shareholder that it is invoking the procedures of
this Section 16.2. In such event:
(a) The Shareholders shall negotiate in good faith for a
period of 60 days following such notice in an effort to avoid the
necessity of proceeding with the provisions of this Section 16.2.
(b) Within 10 days after the end of such 60-day period
and so long as a Transaction Notice or a Notice has not been delivered
pursuant to the provisions of Section 16.1(c) within such 60-day
period, the Originating Party may deliver to the other Shareholder
(the "Receiving Party") an offer ("Offer") in writing, stating the
price payable in cash and other material terms on which the
Originating Party is willing to purchase the Capital Stock held by the
Receiving Party. The Receiving Party shall then
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be obligated to either (i) purchase the Capital Stock of the
Originating Party at a price equal to the purchase price set forth in
the Offer or (ii) sell to the Originating Party the Capital Stock held
by it at a price equal to the purchase price set forth in the Offer.
The Receiving Party shall give written notice of such election to the
Originating Party within 120 days after receipt of the Offer. Failure
of the Receiving Party to give the Originating Party notice of its
election within said 120-day period shall be conclusively deemed to be
an election to sell its Capital Stock to the Originating Party.
(c) The closing of a purchase pursuant to this Section
16.2 shall be held at the principal executive offices of the Company on
a mutually acceptable date not more than 30 days after the effective
date of the Receiving Party's notice or deemed election under Section
16.2(b) unless a longer period is necessary to secure any necessary
third party or governmental consents or approvals. At such closing
the selling Shareholder shall assign or cause to be assigned to the
purchasing Shareholder, or its designee, all right, title and interest
in and to the selling Shareholder's Capital Stock free and clear of
all liens, claims and encumbrances.
(d) In the event that a Transaction Notice or a Notice
has been delivered pursuant to Section 16.1(c), no Shareholder may
invoke the procedures of this Section 16.2 during the pendency of the
procedures required by Section 16.1(c) as a result of the delivery of
the Notice.
ARTICLE XVII
NOTICES
All notices, requests, demands and other communications required or
permitted to be given under this Agreement shall be deemed to have been duly
given if in writing and delivered personally or sent via first-class, postage
prepaid, registered or certified mail (return receipt requested), or by
overnight delivery service or facsimile transmission addressed as follows:
If to Xxxxxx:
Xxxxxx Energy Services, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: President
Facsimile Number: (000) 000-0000
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and copy to:
Fulbright & Xxxxxxxx L.L.P.
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx
Facsimile Number: (000) 000-0000
If to DTI:
Drilling Tools International, Ltd.
P. O. Box 26073
Dubai, UAE
Attention: President
Facsimile Number: (___) ___-____
and copy to:
Xxxxxx & Xxxxxx, L.L.P.
000 Xxxxxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxx, Xx.
Facsimile Number: (000) 000-0000
Any Person may change the address to which the communications are to
be directed by giving notice to the other Persons listed above in the manner
provided in this Article XVII. Notice by mail shall be deemed to have been
given and received on the third calendar day after posting. Notice by
overnight delivery service, facsimile transmission or personal delivery shall
be deemed given on the date of actual delivery.
ARTICLE XVIII
AMENDMENT OF AGREEMENT
This Agreement may be modified or amended from time to time by the
written agreement of all Shareholders.
ARTICLE XIX
MISCELLANEOUS
19.1 Entire Agreement. This Agreement and the additional documents
and agreements referred to herein constitute the entire agreement among the
parties. It supersedes any prior agreement or understandings among them, and
it may not be modified or amended in any manner other than as set forth herein.
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19.2 Governing Law. This Agreement and the rights of the parties
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Texas.
19.3 Binding Effect. Except as herein otherwise specifically
provided, this Agreement shall be binding upon and inure to the benefit of the
parties and their legal representatives, heirs, administrators, executors,
successors and assigns.
19.4 Effect of Invalid Provision. If any provision of this
Agreement, or the application of such provision to any person or circumstance,
shall be held invalid, the remainder of this Agreement, or the application of
such provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.
19.5 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
19.6 Negotiated Transaction. The provisions of this Agreement were
negotiated by the parties hereto, and this Agreement shall be deemed to have
been drafted by all of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
November 15, 1996, to be effective as of the time, day and in the year first
above written.
XXXXXX ENERGY SERVICES, INC.
By: /s/ XXXXX XXXXXXXXX
--------------------------------
President/CEO
DRILLING TOOLS INTERNATIONAL, LTD.
By: /s/ XX XXXXXXXXX
--------------------------------
Managing Director
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SCHEDULE 10.3
Approved 1997 Operating Budget
1997 Operating Budget to be Attached Upon Execution
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SCHEDULE 13.2
REPRESENTATIVES
XXXXXX:
REPRESENTATIVES:
Xxxxx Xxxxxxxxx*
Xxxxxx X. Xxxxxx
Xxxxx Xxxxx
DTI:
REPRESENTATIVES:
Xx Xxxxxxxxx*
Xxxxxx Xxxxxx
Xxxxxxx X. Xxxxxx
__________________________________
* Executive Committee Member
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EXHIBIT C
XXXXXXXXX EMPLOYMENT AGREEMENT
Upon formation of the Company, the Company and Xx Xxxxxxxxx shall
enter into an Employment Agreement (the "Employment Agreement") containing the
following terms among others:
(i) The Employment Agreement shall provide that Xx.
Xxxxxxxxx shall serve as the Managing Director and Chief Executive
Officer of the Company for an initial term of three years, subject to
automatic renewal for successive one-year periods unless one party
gives notice to the other, at least 120 days before the expiration of
the three-year initial term or any one-year renewal term, as the case
may be, of its or his intent to terminate the Employment Agreement, in
which case the Employment Agreement shall terminate at the expiration
of such three-year or one-year period, as the case may be.
(ii) If at any time during the term of the Employment
Agreement, Xx. Xxxxxxxxx shall not be elected to serve as the Managing
Director and Chief Executive Officer of the Company, the Company shall
be deemed to be in default under the Employment Agreement.
(iii) If the Company defaults under the Employment
Agreement, Xx. Xxxxxxxxx shall be relieved of any further obligation
under the Employment Agreement, and the Company shall pay to Xx.
Xxxxxxxxx, upon such default, a lump sum equal to the total amount of
salary and other compensation that would have been payable to Xx.
Xxxxxxxxx had he continued to be employed by the Company for the
balance of the then current term of Employment Agreement.
(iv) Notwithstanding the foregoing, the Company upon 90
days written notice to Xx. Xxxxxxxxx, may terminate the Employment
Agreement "for cause." "For cause" shall mean:
(a) Xx. Xxxxxxxxx is voluntarily absent from his
employment with the Company for more than 30 days, in the
aggregate, in any period of six consecutive months, exclusive
of any authorized vacation or other authorized leave of
absence and not due to his illness; or
(b) Xx. Xxxxxxxxx is convicted of a felony crime
involving moral turpitude; or
(c) The repeated neglect, malfeasance or
nonfeasance of Xx. Xxxxxxxxx in the performance of his
services contemplated by the Employment Agreement, which in
the reasonable and justifiable business judgment of the Board
(acting by vote of at least four directors of the Company, but
without regard to any vote by Xx. Xxxxxxxxx), is detrimental
to the best interests of the Company and notice of which and
reasonable opportunity to cure has previously been given to
Xx. Xxxxxxxxx at least twice in writing by the Board of
Directors at intervals at least three months apart.
23
(v) Upon any termination of his employment by the
Company, the Company may elect to require Xx. Xxxxxxxxx not to
compete with the Company within 100 miles of any Company store
in operation at the date of termination, for a period of one
year following such termination, provided that during such
one-year period the Company shall pay to Xx. Xxxxxxxxx, as
consideration for his agreement not to complete, an amount
equal to the amount of his salary in effect at the time of
termination, in the same installments as his salary would have
been paid had he continued in the Company's employ.
