Stock Purchase Agreement
among
Key Energy Drilling, Inc.
and
Xxxxxx X. Xxxxx
and
Xxxx Xxxxxxx Xxxxx
Dated as of November 24, 1997
Stock Purchase Agreement
This Stock Purchase Agreement (this "Agreement") is entered into as of
November 24, 1997 by and among Key Energy Drilling, Inc., a Delaware corporation
("Buyer"), and Xxxxxx X. Xxxxx and Xxxx Xxxxxxx Xxxxx (the "Shareholders").
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WITNESSETH
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Whereas, Buyer is a corporation duly organized and validly existing under the
laws of the State of Delaware, with its principal executive offices at Xxx Xxxxx
Xxxxxx, Xxxxx Xxxxx, Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000; and
Whereas, Win-Tex Drilling Co., Inc. ("Win-Tex Drilling") and Win-Tex Trucking
Corporation ("Win-Tex Trucking") are each corporations duly organized and
validly existing under the laws of the state of Texas, with their principal
executive offices at 0000 Xxxx 000, Xxxxxxx, Xxxxx 00000; and
Whereas, the Shareholders own (a) 1,000 shares (the "Win-Tex Drilling Shares")
of common stock, $1.00 par value, of Win-Tex Drilling (the "Win-Tex Drilling
Common Stock"), which constitutes all of the issued and outstanding shares of
capital stock of Win-Tex Drilling and (b) 1,000 shares (the "Win-Tex Trucking
Shares") of common stock, $1.00 par value, of Win-Tex Trucking (the "Win-Tex
Trucking Common Stock") which constitutes all of the issued and outstanding
shares of capital stock of Win-Tex Trucking; and
Whereas the Shareholders desire to sell to Buyer, and Buyer desires to purchase
from the Shareholders all of the issued and outstanding capital stock of Win-Tex
Drilling and Win-Tex Trucking (individually, a "Company" and collectively, the
"Companies").
Now, Therefore, in consideration of the premises and of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:
ARTICLE 1
Purchase and Sale
1.1. Purchase and Sale of the Win-Tex Drilling Shares and the Win-Tex Trucking
Shares. Subject to the terms and conditions of this Agreement, on the date
hereof, the Shareholders agree to sell and convey to Buyer, free and clear of
all Encumbrances (as defined in Section 2.1.8.1 hereof), and Buyer agrees to
purchase and accept from the Shareholders, all of the Win-Tex Drilling Shares
and all of the Win-Tex Trucking Shares. In consideration of the sale of the
Win-Tex Drilling Shares and the Win-Tex Trucking Shares, Buyer shall pay to the
Shareholders a purchase price equal to the sum of the following:
(a) $5,000,000 ($50,000 of which is acknowledged by the parties to be
consideration for the covenant against competition set forth in Section 3.1
hereof) ;
(b) $36,029.00, being the amount expended by the Companies for capital
equipment purchased since October 17, 1997, all of which purchases have
been discussed with the Buyer and all of which are described on Schedule
1.1(b) hereto;
(c) $1,520,000.00 (the "80% Payment"), being approximately 80% of the Estimated
Net Closing Date Value of the Companies (defined below); and
(d) The Cash Adjustment Payment (as defined in Section 1.3 hereof), if any.
The amounts payable to the Shareholders pursuant to 1.1(a) and (c) above shall
be payable upon execution hereof by wire transfer of immediately available
funds.
The term "Estimated Net Closing Date Value of the Companies" means the dollar
amount by which the "Total Current Assets" plus $323,834.89 plus $262,843.00
exceeds "Total Liabilities" as reflected on the Estimated Closing Date Balance
Sheet (defined below).
The term "Estimated Closing Date Balance Sheet" means the consolidated balance
sheet of the Companies as of the date hereof prepared by the Shareholders in
accordance with the requirements for preparation of the Final Closing Date
Balance Sheet set forth in Section 1.3 hereof, a copy of which is attached
hereto as Schedule 1.1(c).
The Buyer acknowledges and agrees that the Companies will remain liable for all
liabilities of the Companies in existence on the date hereof or incurred by the
Companies after the date hereof; provided, however, that the foregoing shall not
in any way relieve the Shareholders from their indemnification obligations set
forth in Section 4.1 hereof.
1.2. Delivery of the Stock Certificates. The Shareholders shall deliver to Buyer
on the date hereof duly and validly issued certificates representing all of the
Win-Tex Drilling Shares and all of the Win-Tex Trucking Shares, each such
certificate having been duly endorsed in blank and in good form for transfer or
accompanied by stock powers duly executed in blank, sufficient and in good form
to properly transfer such shares to Buyer.
1.3 Adjustment of Purchase Price. Buyer shall cause to be prepared and delivered
to the Shareholders a consolidated balance sheet of the Companies as of the date
hereof (the "Final Closing Date Balance Sheet") within thirty (30) days after
the date hereof. The Final Closing Date Balance Sheet shall be accurately
compiled to reflect all of the Companies' accounts receivable, accounts payable
and other current assets and its current and long-term liabilities as of the
date hereof, including an accurate reflection of the income taxes payable by the
Companies which have accrued through the date hereof. Buyer and the Shareholders
shall jointly review the Final Closing Date Balance Sheet, endeavor in good
faith to resolve all disagreements regarding the entries thereon and reach a
final determination thereof within forty-five (45) days from the date hereof.
Within 10 days of reaching such final determination, the following adjusting
payments shall be made.
(1) If the Final Closing Date Value of the Companies (defined below) exceeds
the 80% Payment, Buyer shall pay to the Shareholders the amount of such
excess (the "Cash Adjustment Payment").
(2) If the Final Closing Date Value of the Companies is less than 80% Payment,
the Shareholders shall pay to Buyer the amount of such difference.
The term "Final Closing Date Value of the Companies" means the dollar amount by
which the "Total Current Assets" plus $323,834.89 plus $262,843.00 exceeds the
"Total Liabilities" as reflected on the Final Closing Date Balance Sheet.
ARTICLE 2
Representations and Warranties
2.1. Representations and Warranties of the Shareholders. Each of the
Shareholders jointly and severally represents and warrants to Buyer as follows:
2.1.1. Organization and Standing. Each of the Companies is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Texas, has full requisite corporate power and authority to carry on its business
as it is currently conducted, and to own and operate the properties currently
owned and operated by it, and is duly qualified or licensed to do business and
is in good standing as a foreign corporation authorized to do business in all
jurisdictions in which the character of the properties owned or the nature of
the business conducted by it would make such qualification or licensing
necessary, except where the failure to be so qualified or licensed would not
have a material adverse effect on its financial condition, properties or
business.
2.1.2. Agreement Authorized and its Effect on Other Obligations. Each of the
Shareholders is a resident of Xxxxxx County, Texas, above the age of 18 years
and has the legal capacity and requisite power and authority to enter into, and
perform his or her obligations under this Agreement. This Agreement is a valid
and binding obligation of the Shareholders enforceable against each of the
Shareholders (subject to normal equitable principles) in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, debtor relief or similar laws affecting the rights of creditors
generally. The execution, delivery and performance of this Agreement by the
Shareholders will not conflict with or result in a violation or breach of any
term or provision of, nor constitute a default under (i) the Articles of
Incorporation or Bylaws of either of the Companies or (ii) any obligation,
indenture, mortgage, deed of trust, lease, contract or other agreement to which
either of the Companies or either of the Shareholders is a party or by which
either of the Companies or either of the Shareholders or their respective
properties are bound.
2.1.3. Capitalization. The authorized capitalization of the Win-Tex Drilling
consists of 1,000 shares of Win-Tex Drilling Common Stock, of which, as of the
date hereof, 1,000 shares are issued and outstanding and held beneficially and
of record by the Shareholders. The authorized capitalization of Win-Tex Trucking
consists of 1,000,000 shares of Win-Tex Trucking Common Stock, of which, as of
the date hereof, 1,000 shares are issued and outstanding and held of record by
the Shareholders. On the date hereof, neither of the Companies has any
outstanding options, warrants, calls or commitments of any character relating to
any of their authorized but unissued shares of capital stock. All issued and
outstanding shares of the Win-Tex Drilling Common Stock and the Win-Tex Trucking
Common Stock are validly issued, fully paid and non-assessable and are not
subject to preemptive rights. The outstanding shares of Win-Tex Drilling Common
Stock and Win-Tex Trucking Common Stock are not subject to any voting trusts,
voting agreement or other agreement or understanding with respect to the voting
thereof, nor is any proxy in existence with respect thereto.
2.1.4. Ownership of the Win-Tex Drilling Shares and the Win-Tex Trucking Shares.
The Shareholders hold good and valid title to all of the Win-Tex Drilling Shares
and all of the Win-Tex Trucking Shares, free and clear of all Encumbrances. The
Shareholders possess full authority and legal right to sell, transfer and assign
to Buyer the Win-Tex Drilling Shares and the Win-Tex Trucking Shares, free and
clear of all Encumbrances. Upon transfer to Buyer by the Shareholders of the
Win-Tex Drilling Shares and the Win-Tex Trucking Shares, Buyer will own the
Win-Tex Drilling Shares and the Win-Tex Trucking Shares free and clear of all
Encumbrances. There are no claims pending or, to the knowledge of the
Shareholders, threatened, against either of the Companies or the Shareholders
that concern or affect title to the Win-Tex Drilling Shares and the Win-Tex
Trucking Shares, or that seek to compel the issuance of capital stock or other
securities of either of the Companies.
2.1.5. No Subsidiaries. There is no corporation, partnership, joint venture,
business trust or other legal entity in which either of the Companies, either
directly or indirectly through one or more intermediaries, owns or holds
beneficial or record ownership of at least a majority of the outstanding voting
securities.
2.1.6. Financial Statements. Each of the Companies has delivered to Buyer copies
of its unaudited balance sheet (the "9/30 Balance Sheets") and related
statements of income as, at and for the nine months ended September 30, 1997
(the "Balance Sheet Date"), copies of which are attached hereto as Schedule
2.1.6 (collectively, the "9/30 Financial Statements"). The 9/30 Financial
Statements are complete in all material respects. Except for the exclusion of
accounts receivable and accounts payable on the 9/30 Balance Sheets, the 9/30
Financial Statements present fairly the financial condition of the Companies in
accordance with accounting practices used for Federal income tax purposes
applied on a consistent basis at the date and for the period indicated. All
accounts receivable of the Companies as of the Balance Sheet Date have been
collected or are collectible in full. The inventories of each of the Companies
consist of items of a quality usable and salable in the normal course of the
Companies= businesses.
2.1.7. Liabilities. Except as disclosed on Schedule 2.1.7 hereto, neither of the
Companies has any liabilities or obligations, either accrued, absolute or
contingent, nor do the Shareholders have any knowledge of any potential
liabilities or obligations, other than those (i) reflected or reserved against
in the 9/30 Balance Sheets or (ii) incurred in the ordinary course of business
since the Balance Sheet Date, none of which would materially adversely affect
the value and conduct of the business of either of the Companies.
2.1.8. Additional Win-Tex Drilling and Win-Tex Trucking Information. Attached as
Schedule 2.1.8 hereto are true, complete and correct lists of the following
items:
2.1.8.1. Real Estate. All real property and structures thereon owned, leased or
subject to a contract of purchase and sale, or lease commitment, by each of the
Companies (by Company), with a description of the nature and amount of any
Encumbrances (defined below) thereon. The term "Encumbrances" means all liens,
security interests, pledges, mortgages, deed of trust, claims, rights of first
refusal, options, charges, restrictions or conditions to transfer or assignment,
liabilities, obligations, privileges, equities, easements, rights-of-way,
limitations, reservations, restrictions and other encumbrances of any kind or
nature;
2.1.8.2. Machinery and Equipment. All rigs, carriers, rig equipment, machinery,
transportation equipment, tools, equipment, furnishings and fixtures owned,
leased or subject to a contract of purchase and sale, or lease commitment, by
each of the Companies (by Company) with a description of the nature and amount
of any Encumbrances thereon;
2.1.8.3. Inventory. All inventory items or groups of inventory items owned by
each of the Companies (by Company) together with the amount of any Encumbrances
thereon;
2.1.8.4. Receivables. All accounts and notes receivable of each of the Companies
(by Company), together with (i) aging schedules by invoice date and due date,
(ii) the amounts provided for as an allowance for bad debts, (iii) the identity
and location of any asset in which either of the Companies hold a security
interest to secure payment of the underlying indebtedness, and (iv) a
description of the nature and amount of any Encumbrances on such accounts and
notes receivable;
2.1.8.5. Payables. All accounts and notes payable of each of the Companies (by
Company), together with appropriate aging schedules;
2.1.8.6. Insurance. All insurance policies or bonds currently maintained by each
of the Companies (by Company), including title insurance policies and those
covering the Companies= properties, rigs, carriers, rig equipment, machinery,
transportation equipment, fixtures, employees and operations, as well as a
listing of any premiums, audit adjustments or retroactive adjustments due or
pending on such policies or any predecessor policies;
2.1.8.7. Contracts; Leases. All contracts, including leases under which either
of the Companies is lessor or lessee, which are to be performed in whole or in
part after the date hereof;
2.1.8.8. Employee Compensation Plans. All bonus, incentive compensation,
deferred compensation, profit-sharing, retirement, pension, welfare, group
insurance, death benefit, or other employee benefit or fringe benefit plans,
arrangements or trust agreements of each of the Companies (by Company) or any
employee benefit plan maintained by either of the Companies (collectively, the
"Employee Plans"), together with copies of the most recent reports with respect
to such plans, arrangements, or trust agreements filed with any governmental
agency and all Internal Revenue Service determination letters and other
correspondence from governmental entities that have been received with respect
to such plans, arrangements or agreements;
2.1.8.9. Certain Salaries. The names and salary rates of all present employees
of each of the Companies (by Company), and, to the extent existing on the date
of this Agreement, all arrangements with respect to any bonuses to be paid to
them from and after the date of this Agreement;
2.1.8.10. Bank Accounts. The name of each bank in which either of the Companies
has an account and the names of all persons authorized to draw thereon;
2.1.8.11. Labor Agreements. Any collective bargaining agreements of either of
the Companies (by Company) with any labor union or other representative of
employees, including amendments, supplements, and written or oral
understandings, and all employment and consulting and severance agreements of
either of the Companies;
2.1.8.12. Intellectual Property. All patents, patent applications, trademarks
and service marks (including registrations and applications therefor), trade
names, copyrights and written know-how, trade secrets and all other similar
proprietary data and the goodwill associated therewith (collectively, the
"Intellectual Property") used by either of the Companies;
2.1.8.13. Trade Names. All trade names, assumed names and fictitious names used
or held by either of the Companies, whether and where such names are registered
and where used;
2.1.8.14. Licenses and Permits. All permits, authorizations, certificates,
approvals, registrations, variances, waivers, exemptions, rights-of-way,
franchises, ordinances, licenses and other rights of every kind and character
(collectively, the "Permits") of either of the Companies under which such
Company conducts its business.
2.1.8.15. Promissory Notes. All long-term and short-term promissory notes,
installment contracts, loan agreements, credit agreements, and any other
agreements of either of the Companies relating thereto or with respect to
collateral securing the same;
2.1.8.16. Guaranties. All indebtedness, liabilities and commitments of others
and as to which either of the Companies is a guarantor, endorser, co-maker,
surety, or accommodation maker, or is contingently liable therefor and all
letters of credit, whether stand-by or documentary, issued by any third party;
2.1.8.17. Reserves and Accruals. All accounting reserves and accruals maintained
in the 9/30 Balance Sheets; and
2.1.8.18. Environment. All environmental permits, approvals, certifications,
licenses, registrations, orders and decrees applicable to current operations
conducted by either of the Companies and all environmental audits, assessments,
investigations and reviews conducted by either of the Companies within the last
five years or otherwise in the possession of either of the Companies on any
property owned, leased or used by either of the Companies.
2.1.9. No Defaults. Neither Company is not a party to, or bound by, any contract
or arrangement of any kind to be performed after the date hereof (except as
provided in Schedule 2.1.8.7 hereto), nor is either of the Companies in default
in any obligation or covenant on its part to be performed under any obligation,
lease, contract, order, plan or other arrangement.
2.1.10. Absence of Certain Changes and Events. Other than as specified in
Schedule 2.1.10 hereto, since the Balance Sheet Date, there has not been:
2.1.10.1. Financial Change. Any adverse change in the financial condition,
backlog, operations, assets, liabilities or business of either of the Companies;
2.1.10.2. Property Damage. Any material damage, destruction, or loss to the
business or properties of either of the Companies (whether or not covered by
insurance);
2.1.10.3. Dividends. Any declaration, setting aside, or payment of any dividend
or other distribution in respect of the Win Tex Drilling Common Stock or the
Win-Tex Trucking Common Stock, or any direct or indirect redemption, purchase or
any other acquisition by either of the Companies of any such stock;
2.1.10.4. Capitalization Change. Any change in the capital stock or in the
number of shares or classes of the authorized or outstanding capital stock of
either of the Companies as described in Section2.1.3 hereof;
2.1.10.5. Labor Disputes. Any labor or employment dispute of whatever nature; or
2.1.10.6. Other Adverse Changes. Any other event or condition known to the
Shareholders particularly pertaining to and adversely affecting the operations,
assets or business of either of the Companies.
2.1.11. Taxes. All federal, state and local income, value added, sales, use,
franchise, gross revenue, turnover, excise, payroll, property, employment,
customs, duties and any and all other tax returns, reports, and estimates have
been filed with appropriate governmental agencies, domestic and foreign, by each
of the Companies for each period for which any such returns, reports, or
estimates were due (taking into account any extensions of time to file before
the date hereof); all such returns are true and correct; the Companies have only
done business in the State of Texas; all taxes shown by such returns to be
payable and any other taxes due and payable have been paid; and the tax
provisions reflected in the 9/30 Balance Sheets are sufficient to cover
liabilities of each of the Companies at the date thereof for all taxes,
including any assessed interest, assessed penalties and additions to taxes of
any character whatsoever applicable to the Companies or their assets or
businesses. No waiver of any statute of limitations executed by either of the
Companies with respect to any income or other tax is in effect for any period.
The income tax returns of the Companies have never been examined by the Internal
Revenue Service or the taxing authorities of any other jurisdiction. There are
no tax liens on any assets of either of the Companies except for taxes not yet
currently due. Neither of the Companies is subject to any tax-sharing or
allocation agreement. Neither of the Companies is, nor has it ever attempted to
become a Subchapter S-Corporation under the Internal Revenue Code of 1986, as
amended. Neither of the Companies is or ever has been, a member of a
consolidated group subject to Treasury Regulation 1.1502-6 or any similar
provision.
2.1.12. Intellectual Property. Each of the Companies owns or possesses licenses
to use all Intellectual Property that is either material to the business of such
Company or that is necessary for the rendering of any services rendered by such
Company and the use or sale of any equipment or products used or sold by such
Company, including all such Intellectual Property listed in Schedule 2.1.8.12
hereto (the "Required Intellectual Property"). The Required Intellectual
Property is owned or licensed by the Company using the same free and clear of
any Encumbrance. Neither Company has granted to any other person any license to
use any Required Intellectual Property. Neither Company has received any notice
of infringement, misappropriation, or conflict with, the Intellectual Property
rights of others in connection with the use by such Company of the Required
Intellectual Property or otherwise in connection with such Company's operation
of its business.
2.1.13. Title to and Condition of Assets. Each of the Companies has good,
indefeasible and marketable title to all its properties, interests in properties
and assets, real and personal, reflected in the 9/30 Balance Sheets or in
Schedule 2.1.8.1 hereto, free and clear of any Encumbrance of any nature
whatsoever, except (i) Encumbrances reflected in the 9/30 Balance Sheets or in
Schedule 2.1.8.1 hereto, (ii) liens for current taxes not yet due and payable,
and (iii) such imperfections of title, easements and Encumbrances, if any, as
are not substantial in character, amount, or extent and do not and will not
materially detract from the value, or interfere with the present use, of the
property subject thereto or affected thereby, or otherwise materially impair
business operations. All leases pursuant to which either of the Companies leases
(whether as lessee or lessor) any substantial amount of real or personal
property are in good standing, valid, and effective; and there is not, under any
such leases, any existing default or event of default or event which with notice
or lapse of time, or both, would constitute a default by either of the Companies
and in respect to which such Company has not taken adequate steps to prevent a
default from occurring. The buildings and premises of each of the Companies that
are used in its business are in good operating condition and repair, subject
only to ordinary wear and tear. All rigs, carriers, rig equipment, machinery,
transportation equipment, tools and other major items of equipment of each of
the Companies are, to the best knowledge of the Shareholders, in good operating
condition and in a state of reasonable maintenance and repair, ordinary wear and
tear excepted, and are free from any known defects except as may be repaired by
routine maintenance and such minor defects as to not substantially interfere
with the continued use thereof in the conduct of normal operations. To the best
of the Shareholders= knowledge, all such assets conform to all applicable laws
governing their use. No notice of any violation of any law, statute, ordinance,
or regulation relating to any such assets has been received by either of the
Companies or the Shareholders, except such as have been fully complied with.
2.1.14. Contracts. All contracts, leases, plans or other arrangements to which
either of the Companies is a party, by which it is bound or to which it or its
assets are subject are in full force and effect, and constitute valid and
binding obligations of such Company. Neither of the Companies is, and to the
knowledge of the Shareholders, no other party to any such contract, lease, plan
or other arrangement is, in default thereunder, and no event has occurred which
(with or without notice, lapse of time, or the happening of any other event)
would constitute a default thereunder. No contract has been entered into on
terms which could reasonably be expected to have an adverse effect on either of
the Companies. The Shareholders have not received any information which would
cause either of the Shareholders to conclude that any customer of the Company
will (or is likely to) cease doing business with either of the Companies (or its
successors) as a result of the consummation of the transactions contemplated
hereby.
2.1.15. Licenses and Permits. Each of the Companies possesses all Permits
necessary under law or otherwise for such Company to conduct its business as now
being conducted and to construct, own, operate, maintain and use its assets in
the manner in which they are now being constructed, operated, maintained and
used, including all such Permits listed in Schedule 2.1.8.15 hereto
(collectively, the "Required Permits"). Each of the Required Permits and the
rights of each of the Companies with respect thereto is valid and subsisting, in
full force and effect, and enforceable by such Company subject to administrative
powers of regulatory agencies having jurisdiction. Each of the Companies is in
compliance in all respects with the terms of each of the Required Permits. None
of the Required Permits has been, or to the knowledge the Shareholders, is
threatened to be, revoked, canceled, suspended or modified.
2.1.16. Litigation. Except as set forth in Schedule 2.1.16 hereto, there is no
suit, action, or legal, administrative, arbitration, or other proceeding or
governmental investigation pending to which either of the Companies is a party
or, to the knowledge of the Shareholders, might become a party or which
particularly affects the either of Companies or their assets, nor is any change
in the zoning or building ordinances directly affecting the real property or
leasehold interests of either of the Companies, pending or, to the knowledge of
the Shareholders, threatened.
2.1.17. Environmental Compliance.
2.1.17.1. Environmental Conditions. There are no environmental conditions or
circumstances, including, without limitation, the presence or release of any
Substance of Environmental Concern or Waste on any property presently or
previously owned, leased or operated by either of the Companies, or on any
property on which any Substance of Environmental Concern or Waste generated by
either of the Companies= operations or use of its assets were disposed of, which
would have a material adverse effect on the business or business prospects of
such Company. The term "Substance of Environmental Concern or Waste" means (a)
any gasoline, petroleum (including crude oil or any fraction thereof), petroleum
product, polychlorinated biphenyls, urea-formaldehyde insulation, asbestos,
pollutant, contaminant, radiation and any other substance of any kind, whether
or not any such substance is defined as toxic or hazardous under any
Environmental Law (as defined in Section 2.1.17.3 hereof), that is regulated
pursuant to or could give rise to liability under any Environmental Law;
2.1.17.2. Permits, etc. Each Company has, and within the period of all
applicable statutes of limitations has had, in full force and effect all
Environmental Permits required to conduct its operations. Each Company is, and
within the period of all applicable statutes of limitations has been, operating
in compliance under such Environmental Permits. "Environmental Permits" as used
in this Agreement means any and all permits, licenses, registrations, approvals,
notifications, exemptions and any other authorizations required under
Environmental Laws (as defined in Section 2.1.17.3 hereof);
2.1.17.3. Compliance. Each Company's operations and use of its assets are, and
within the period of all applicable statutes of limitations, have been in
compliance with applicable Environmental Law. "Environmental Law" as used in
this Agreement means any and all laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, and other legally enforceable requirements
(including, without limitation, common law) of the United States, or any State,
local, municipal or other governmental authority or quasi-governmental
authority, regulating, relating to, or imposing liability or standards of
conduct concerning protection of the environmental or of human health, or
employee health and safety as from time to time has been or is now in effect.
2.1.17.4. Environmental Claims. No notice has been received by either of the
Companies or the Shareholders, or to the knowledge of either of the Companies or
the Shareholders, by any predecessor of either of the Companies or the
Shareholders, from any entity, governmental agency or individual regarding (nor
is either of the Companies or either of the Shareholders otherwise aware of) any
existing, pending or threatened investigation, inquiry, enforcement action.
litigation, or liability, including, without limitation any claim for remedial
obligations, response costs or contribution, relating to any Environmental Law;
2.1.17.5. Enforcement. Neither of the Companies, and to the knowledge of the
Shareholders, no predecessor of either of the Companies or other party acting on
behalf of either of the Companies, has entered into or agreed to any consent
decree, order, settlement or other agreement, nor is subject to any judgment,
decree, order or other agreement, in any judicial, administrative, arbitral, or
other forum, relating to compliance with or liability under any Environmental
Law;
2.1.17.6. Liabilities. Neither of the Companies has assumed or retained, by
contract or operation of law, any liabilities of any kind, fixed or contingent,
known or unknown, under any Environmental Law;
2.1.17.7. Renewals. Neither the Companies nor the Shareholders know of any
reason either of the Companies (or their successors) would not be able to renew
without material expense any Environmental Permit required pursuant to any
Environmental Law to conduct and use any of either of the Companies= current or
planned operations; and
2.1.17.8. Asbestos and PCBs. No friable asbestos currently exists on any
property owned or operated by either of the Companies, nor do polychlorinated
biphenyls exist in concentrations of 50 parts per million or more in electrical
equipment owned or being used by either of the Companies in their operations or
on their properties.
2.1.18. Compliance with Other Laws. Neither of the Companies is in violation of
or in default with respect to, or in alleged violation of or alleged default
with respect to, the Occupational Safety and Health Act (29 U.S.C. ''651 et
seq.) as amended, or any other applicable law or any applicable rule,
regulation, or any writ or decree of any court or any governmental commission,
board, bureau, agency, or instrumentality, or delinquent with respect to any
report required to be filed with any governmental commission, board, bureau,
agency or instrumentality.
2.1.19. ERISA Plans and Labor Issues. Other than the plans (the "Qualified
Plans") described in Schedule 2.1.8.8 hereto, the Companies do not currently
sponsor, maintain or contribute to, and have not at any time sponsored,
maintained or contributed to any employee benefit plan which is or was subject
to any provisions of the Employee Retirement Income Security Act of 1974, as
Amended ("ERISA"). The Qualified Plans comply with and have been administered in
a form and in operation in compliance with all applicable laws, including
without limitation, ERISA, the Internal Revenue Code of 1986, as amended (the
"Code") and the Consolidated Omnibus budget Reconciliation Act of 1985, as
amended ("COBRA"), and neither of the Shareholders has received any notice from
any governmental authority questioning or challenging such compliance. The
Qualified Plans have not been conducted in such a manner as would give rise to
any material fine, penalties, taxes, claims or charges against the Companies by
a governmental entity or any third party or otherwise result in a material
adverse effect on the financial condition of either Company. No claims, demands
or causes of action exist with respect to the Qualified Plans except routine
claims for benefits thereunder. All contributions required to be made to the
Qualified Plans have been timely made prior to the date hereof. The execution,
delivery and performance of this agreement will not cause the Qualified Plans to
be terminated or otherwise adversely affect the administration or operation
thereof. The Companies' administration of their Qualified Plans following the
date hereof in the same manner as such Qualified Plans were administered by the
Companies prior to the date here of will not violate any applicable laws or
otherwise result in any material adverse effect on the financial condition of
the Companies. The Companies do not maintain any plan, program, policy, contract
or other arrangement that provide retirement, medical, dental, disability, life
insurance or other benefits to any current or former employees of the Companies,
including any retired employees, or their beneficiaries or dependents. During
the six years preceding the date hereof (i) the Companies have not participated
in or contributed to or had any obligation to contribute to any multiemployer
plan (as defined in ERISA Section 3(7)) and has no withdrawal liability with
respect to any multiemployer plan, and (ii) have not maintained any pension plan
subject to ERISA. The Companies are not obligated to pay any severance or
benefits to any employee or former employee of the Companies as the result of
any change in the ownership or control of the Companies. The Companies have not
engaged in any unfair labor practices which could reasonably be expected to
result in an adverse effect on their operations or assets. The Companies do not
have any dispute with any of their existing or former employees. The Companies
are not subject to any collective bargaining agreement with any labor union or
other representative of employees. There are no labor disputes or, to the
knowledge of either of the Shareholders, any disputes threatened by current or
former employees of the Companies.
2.1.20. Investigations; Litigation. No investigation or review by any
governmental entity with respect to either of the Companies or any of the
transactions contemplated by this Agreement is pending or, to the knowledge of
the Shareholders, threatened, nor has any governmental entity indicated to
either of the Companies an intention to conduct the same, and there is no
action, suit or proceeding pending or, to the knowledge of the Shareholders,
threatened against or affecting either of the Companies at law or in equity, or
before any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, that either individually
or in the aggregate, does or is likely to result in any material adverse change
in the financial condition, properties or business of either of the Companies.
2.1.21. Absence of Certain Business Practices. Neither of the Companies nor any
officer, employee or agent of either of the Companies, nor any other person
acting on either Company's behalf, has, directly or indirectly, within the past
five years, given or agreed to give any gift or similar benefit to any customer,
supplier, government employee or other person who is or may be in a position to
help or hinder the business of either of the Companies (or to assist either of
the Companies in connection with any actual or proposed transaction) which (i)
might subject either of the Companies to any damage or penalty in any civil,
criminal or governmental litigation or proceeding, (ii) if not given in the
past, might have had a material adverse effect on the assets, business or
operations of either of the Companies as reflected in the 9/30 Financial
Statements, or (iii) if not continued in the future, might materially adversely
effect the assets, business operations or prospects of either of the Companies
or which might subject the Companies to suit or penalty in a private or
governmental litigation or proceeding.
2.1.22. No Untrue Statements. Each of the Companies and each of the Shareholders
have made available to Buyer true, complete and correct copies of all contracts,
documents concerning all litigation and administrative proceedings, licenses,
permits, insurance policies, lists of suppliers and customers, and records
relating principally to the Companies= assets and business, and such information
covers all commitments and liabilities of the Companies relating to their
businesses and assets. This Agreement and the agreements and instruments to be
entered into in connection herewith do not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements made herein and therein not misleading in any material respect.
2.1.23. Consents and Approvals. No consent, approval or authorization of, or
filing or registration with, any governmental or regulatory authority, or any
other person or entity other than the Shareholders, is required to be made or
obtained by either of the Companies or either of the Shareholders in connection
with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
2.1.24. Finder's Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by the Shareholders and
their counsel directly with Buyer and its counsel, without the intervention of
any other person in such manner as to give rise to any valid claim against the
Buyer or the Companies for a brokerage commission, finder's fee or any similar
payments.
2.2. Representations and Warranties of Buyer. Buyer represents and warrants to
the Shareholders as follows
2.2.1. Organization and Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
has full requisite corporate power and authority to carry on its business as it
is currently conducted, and to own and operate the properties currently owned
and operated by it, and is duly qualified or licensed to do business and is in
good standing as a foreign corporation authorized to do business in all
jurisdictions in which the character of the properties owned or the nature of
the business conducted by it would make such qualification or licensing
necessary, except where the failure to be so qualified or licensed would not
have a material adverse effect on its financial condition, properties or
business.
2.2.2. Agreement Authorized and its Effect on Other Obligations. The
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Buyer, and this
Agreement is a valid and binding obligation of Buyer enforceable (subject to
normal equitable principles) in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, debtor
relief or similar laws affecting the rights of creditors generally. The
execution, delivery and performance of this Agreement by Buyer will not conflict
with or result in a violation or breach of any term or provision of, or
constitute a default under (a) the Certificate of Incorporation or Bylaws of
Buyer or (b) any obligation, indenture, mortgage, deed of trust, lease, contract
or other agreement to which Buyer or any of its property is bound.
2.2.3. Consents and Approvals. No consent, approval or authorization of, or
filing of a registration with, any governmental or regulatory authority, or any
other person or entity is required to be made or obtained by Buyer in connection
with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
2.2.4. Finder's Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Buyer and its counsel
directly with the Companies and the Shareholders and their counsel, without the
intervention by any other person as the result of any act of Buyer in such a
manner as to give rise to any valid claim against any of the parties hereto for
any brokerage commission, finder's fee or any similar payments.
ARTICLE 3
Additional Agreements
3.1. Noncompetition. Except as otherwise consented to or approved in writing by
Buyer, each Shareholder agrees that for a period of 60 months from the date
hereof, he or she will not, directly or indirectly, acting alone or as a member
of a partnership or as an officer, director, employee, consultant,
representative, holder of, or investor in as much as 5% of any security of any
class of any corporation or other business entity (i) engage in the contract oil
and gas drilling business within a two hundred (200) mile radius of Abilene,
Texas, (ii) request any present customers or suppliers of either of the
Companies, Buyer or any affiliate of Buyer to curtail or cancel their business
with either of the Companies, Buyer or any affiliate of Buyer; (iii) disclose to
any person, firm or corporation any trade, technical or technological secrets of
either of the Companies, Buyer or any affiliate of Buyer or any details of their
organization or business affairs or (iv) induce or actively attempt to influence
any employee of either of the Companies, Buyer or any affiliate of Buyer to
terminate his employment. Each Shareholder agrees that if either the length of
time or geographical area set forth in this Section 3.1 is deemed too
restrictive in any court proceeding, the court may reduce such restrictions to
those which it deems reasonable under the circumstances. The obligations
expressed in this Section 3.1 are in addition to any other obligations that the
Shareholders may have under the laws of the states in which they do business
requiring an employee of a business or a Shareholders who sells his stock in a
corporation (including a disposition in a merger) to limit his or her activities
so that the goodwill and business relations of his or her employer and of the
corporation whose stock he or she has sold (and any successor corporation) will
not be materially impaired. Each Shareholder further agrees and acknowledges
that the Companies, Buyer and its affiliates do not have any adequate remedy at
law for the breach or threatened breach by the Shareholders of this covenant,
and agree that each of the Companies, Buyer or any affiliate of Buyer may, in
addition to the other remedies which may be available to them hereunder, file a
suit in equity to enjoin the Shareholders from such breach or threatened breach.
If any provisions of this Section 3.1 are held to be invalid or against public
policy, the remaining provisions shall not be affected thereby. Each Shareholder
acknowledges that the covenants set forth in this Section 3.1 are being executed
and delivered by the Shareholders in consideration of the covenants of Buyer
contained in this Agreement, and for other good and valuable consideration,
including the payment of the sum of $50,000, receipt of all of which is hereby
acknowledged.
3.2. Further Assurances. From time to time, as and when requested by any party
hereto, any other party hereto shall execute and deliver, or cause to be
executed and delivered, such documents and instruments and shall take, or cause
to be taken, such further or other actions as may be reasonably necessary to
effectuate the transactions contemplated hereby.
3.3. Companies= Stock Not Registered. Each Company is a privately held
corporation and Buyer acknowledges such. The stock of the Companies has not been
registered under the Securities Act of 1933, as amended (the "Act") or under any
applicable state securities laws, and the stock, therefore, cannot be offered
for sale, sold, transferred, pledged or otherwise hypothecated except in
accordance with the registration requirements of the Act and other such state
laws as may be applicable. Buyer acknowledges that the Shareholders have made
available to it such information and documents, and that Buyer understands the
risk associated with ownership of the capital stock of the Companies, and Buyer
is capable of bearing the financial risk associated therewith. The Companies=
shares and the dealings with Buyer are proceeding in reliance on exceptions from
registration or qualification requirements pursuant to state law.
3.4. Opinion of Shareholders= Counsel. Buyer shall have received a favorable
opinion, dated as of the date hereof, from Xxxxxx Xxxxx Xxxxxx, counsel to the
Shareholders, in form and substance satisfactory to Buyer, to the effect that
(i) each of the Companies has been duly incorporated and is validly existing as
a corporation and is in good standing under the laws of the State of Texas; (ii)
each of the Companies has fully requisite corporate power and authority to carry
on its business as it is currently conducted and to own and operate the
properties currently used and operated by it, and is duly qualified to do
business and is in good standing as a foreign corporation in each state in which
the nature of its business requires such qualification; (iii) all outstanding
shares of the common stock of each of the Companies have been validly issued and
are fully paid and non-assessable; (iv) the Shareholders hold good and valid
title to all of the shares of each of the Companies free and clear of all
Encumbrances; and (v) this Agreement has been duly executed and delivered by,
and is the legal, valid and binding obligation of the Shareholders, and is
enforceable against the Shareholders in accordance with its terms, except as the
enforceability may be limited by (a) equitable principles of general
applicability or (b) bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the rights of creditors generally. In
rendering such opinion, such counsel may rely upon certificates of public
officials and of officers of each of the Companies or the Shareholders as to
matters of fact.
3.5. Opinion of Buyer=s Counsel. Shareholders shall have received a favorable
opinion, dated as of the date hereof, from Xxxxx, Xxxxxxxx & Xxxxx, a
Professional Corporation, counsel for Buyer, in form and substance satisfactory
to the Shareholders, to the effect that (i) Buyer has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
State of Delaware and has full requisite corporate power and authority to carry
on its business as it is currently conducted and to own and operate the
properties currently owned and operated by it and is duly qualified or licensed
to do business and is in good standing as a foreign corporation authorized to do
business in the State of Texas; (ii) all corporate proceedings required to be
taken by or on the part of Buyer to authorize the execution of this Agreement
and the implementation of the transactions contemplated hereby have been taken;
(iii) this Agreement has been duly executed and delivered by, and is the legal,
valid and binding obligation of Buyer and is enforceable against Buyer in
accordance with its terms, except as the enforceability may be limited by (a)
equitable principles of general applicability or (b) bankruptcy, insolvency,
reorganization, fraudulent conveyance or similar laws affecting the rights of
creditors generally. In rendering such opinion, such counsel may rely upon
certificates of public officials and of officers of Buyer as to matters of fact.
3.6. Fees and Expenses. Except as otherwise expressly provided in this
Agreement, all fees and expenses, including fees and expenses of counsel,
financial advisors and accountants incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such fee or expense by or on the date hereof.
ARTICLE 4
Indemnification
4.1. Indemnification by the Shareholders. In addition to any other remedies
available to Buyer under this Agreement, or at law or in equity, the
Shareholders shall indemnify, defend and hold harmless each of the Companies,
Buyer and their affiliates and their respective officers, directors, employees,
agents and stockholders (collectively, the "Buyer Indemnified Parties"), against
and with respect to any and all claims, costs, damages, losses, expenses,
obligations, liabilities, recoveries, suits, causes of action and deficiencies,
including interest, penalties and reasonable fees and expenses of attorneys,
consultants and experts (collectively, the "Damages") that the Buyer Indemnified
Parties shall incur or suffer, which arise, result from or relate to (i) any
breach by the Shareholders of (or the failure of the Shareholders to perform)
their representations, warranties, covenants or agreements in this Agreement or
in any schedule, certificate, exhibit or other instrument furnished or delivered
to Buyer by the Shareholders under this Agreement (including, specifically,
those set forth in Section 2.1.17 hereto), (ii) the ownership and/or operation
by either of the Companies of those assets distributed to the Shareholders prior
to the date hereof (which are described in Schedule 2.1.10 hereto), and the
assumption by the Shareholders of the liabilities applicable to those assets.
Notwithstanding the foregoing, the Shareholders' obligations to indemnify,
defend and hold harmless the Buyer Indemnified Parties for liabilities resulting
from Damages that the Buyer Indemnified Parties may incur as a result of a
breach of the representations and warranties contained in Section 2.1.17 above
shall be limited to those Damages which exceed $150,000 in the aggregate.
4.2. Indemnification by Buyer. In addition to any other remedies available to
the Shareholders under this Agreement, or at law or in equity, Buyer shall
indemnify, defend and hold harmless the Shareholders against and with respect to
any and all Damages that the Shareholders shall incur or suffer, which arise,
result from or relate to any breach of, or failure by Buyer to perform, any of
its representations, warranties, covenants or agreements in this Agreement or in
any schedule, certificate, exhibit or other instrument furnished or delivered to
the Shareholders by or on behalf of Buyer under this Agreement.
4.3. Indemnification Procedure. If any party hereto discovers or otherwise
becomes aware of an indemnification claim arising under Article 4 of this
Agreement, such indemnified party shall give written notice to the indemnifying
party, specifying such claim, and may thereafter exercise any remedies available
to such party under this Agreement; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of any obligations hereunder, to the extent the indemnifying
party is not materially prejudiced thereby. Further, promptly after receipt by
an indemnified party hereunder of written notice of the commencement of any
action or proceeding with respect to which a claim for indemnification may be
made pursuant to Sections 4.1 or 4.2 hereof, such indemnified party shall, if a
claim in respect thereof is to be made against any indemnifying party, give
written notice to the latter of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of any obligations hereunder, to
the extent the indemnifying party is not materially prejudiced thereby. In case
any such action is brought against an indemnified party, the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified, to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
such notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof unless the
indemnifying party has failed to assume the defense of such claim and to employ
counsel reasonably satisfactory to such indemnified person. An indemnifying
party who elects not to assume the defense of a claim shall not be liable for
the fees and expenses of more than one counsel in any single jurisdiction for
all parties indemnified by such indemnifying party with respect to such claim or
with respect to claims separate but similar or related in the same jurisdiction
arising out of the same general allegations. Notwithstanding any of the
foregoing to the contrary, the indemnified party will be entitled to select its
own counsel and assume the defense of any action brought against it if the
indemnifying party fails to select counsel reasonably satisfactory to the
indemnified party, the expenses of such defense to be paid by the indemnifying
party. No indemnifying party shall consent to entry of any judgment or enter
into any settlement with respect to a claim without the consent of the
indemnified party, which consent shall not be unreasonably withheld, or unless
such judgment or settlement includes as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability with respect to such claim. No indemnified party shall consent to
entry of any judgment or enter into any settlement of any such action, the
defense of which has been assumed by an indemnifying party, without the consent
of such indemnifying party, which consent shall not be unreasonably withheld or
delayed.
ARTICLE 5
Miscellaneous
5.1. Survival of Representations, Warranties and Covenants. All representations
and warranties made by the parties hereto shall survive the execution of this
Agreement and the closing of the transaction contemplated hereunder for a period
of two (2) years; provided, however, the representations and warranties
contained in Section 2.1.11 shall survive until the expiration of the applicable
statute of limitations associated with tax issues. All statements contained in
any certificate, schedule, exhibit or other instrument delivered pursuant to
this Agreement shall be deemed to have been representations and warranties by
the respective party or parties, as the case may be, as of the date hereof,
except for information furnished as of a specific date as noted on the Schedules
hereto, and shall survive for a period of two (2) years from the date hereof
despite any investigation made by any party hereto or on its behalf. All
covenants and agreements contained herein shall survive as provided herein.
5.2. Entirety. This Agreement embodies the entire agreement among the parties
with respect to the subject matter hereof, and all prior agreements between the
parties with respect thereto are hereby superseded in their entirety.
5.3. Counterparts. Any number of counterparts of this Agreement may be executed
and each such counterpart shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one instrument.
5.4. Notices and Waivers. Any notice or waiver to be given to any party hereto
shall be in writing and shall be delivered by courier, sent by facsimile
transmission or first class registered or certified mail, postage prepaid,
return receipt requested:
If to Buyer
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Addressed to: With a copy to:
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Key Energy Drilling, Inc. Xxxxx, Xxxxxxxx & Xxxxx
Two Tower Center, Tenth Floor 000 X. Xxxxxxxxxx, Xxxxx 000
Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000 Xxxxxxx, Xxxxx 00000
Attn: General Counsel Attn: Xxxxx X. Xxxxx
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
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If to Shareholders
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Addressed to: With a copy to:
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Xx. Xxxxxx X. Xxxxx Xx. Xxxxxx Xxxxx Xxxxxx
Xx. Xxxx Xxxxxxx Xxxxx Attorney at Law
0000 Xxxxxxxxxx Xxxxx 000, First National Xxxx Xxxxxxxx
Xxxxxxx, Xxxxx 00000 000 Cypress
Telephone: (000) 000-0000 Xxxxxxx, Xxxxx 00000-0000
Facsimile: (000) 000-0000
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Any communication so addressed and mailed by first-class registered or certified
mail, postage prepaid, with return receipt requested, shall be deemed to be
received on the third business day after so mailed, and if delivered by courier
or facsimile to such address, upon delivery during normal business hours on any
business day.
5.5. Table of Contents and Captions. The table of contents and captions
contained in this Agreement are solely for convenient reference and shall not be
deemed to affect the meaning or interpretation of any article, section, or
paragraph hereof.
5.6. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the successors and assigns of the
parties hereto.
5.7. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
5.8. Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the applicable laws of the State of Texas.
5.9. Multiple Counterparts. This Agreement is executed in duplicate and multiple
originals and multiple signature pages. Each duplicate is considered an original
and has the same force and effect as if executed with an original signature by
all of the parties hereto.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Shareholders have executed this Agreement and the Buyer
has caused this Agreement to be signed in its corporate name by its respective
duly authorized representative, all as of the day and year first above written.
Shareholders
__________________________________________
Xxxxxx X. Xxxxx
__________________________________________
Xxxx Xxxxxxx Xxxxx
KEY ENERGY DRILLING, INC.
By:
Name:
Title:
