Stock Purchase Agreement
among
Key Energy Group, Inc.,
Key Energy Drilling, Inc.
and
Xxxxxx X. Xxxxxx and Xxxxx X. Xxxxxx
Dated as of December 12, 1997
Stock Purchase Agreement
This Stock Purchase Agreement (this "Agreement") is entered into as of December
12, 1997 by and among Key Energy Group, Inc., a Maryland corporation (the
"Parent"), Key Energy Drilling, Inc., a Delaware corporation ("Key"), and Xxxxxx
X. Xxxxxx and Xxxxx X. Xxxxxx (collectively, the "Shareholders").
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WITNESSETH
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Whereas, the Parent is a corporation duly organized and validly existing under
the laws of the State of Delaware and Key is a corporation duly organized and
validly existing under the laws of the State of Delaware, both with their
principal executive offices at Xxx Xxxxx Xxxxxx, Xxxxx Xxxxx, Xxxx Xxxxxxxxx,
Xxx Xxxxxx 00000;
and
Whereas, Xxxxxx Drilling Co. ("Xxxxxx") is a corporation duly organized and
validly existing under the laws of the State of Texas, with its principal
executive offices at 0000 Xxxxxxxxx Xxxxx, X. X. Xxx 00000, Xxxxxxx, Xxxxx
00000-0000; and
Whereas, the Shareholders own 1,000 shares (the "Xxxxxx Shares") of common
stock, par value $1.00 , of Xxxxxx ("Xxxxxx Common Stock"), which constitutes
all of the issued and outstanding shares of capital stock of Xxxxxx; and
Whereas the Shareholders desire to sell to Key, and Key desires to purchase
from the Shareholders all of the issued and outstanding capital stock of Xxxxxx.
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 Xxxxxx Shares. Subject to the terms and conditions of
this Agreement, at the Closing (as defined in Section 1.2 hereof), the
Shareholders agree to sell and convey to Key, effective as of 12:01 A.M. on
January 1, 1998 (the "Effective Time"), free and clear of all Encumbrances (as
defined in Section 2.1.8.1 hereof), and Key agrees to purchase and accept from
the Shareholders, all of the Xxxxxx Shares. Subject to the provisions of Section
1.5 hereof, in consideration of the sale of the Xxxxxx Shares, Key shall pay to
the Shareholders, at the Closing, a total of $12,950,000 (less (a) the
Prepayment Shortfall (as defined in Section 1.5 hereof) and (b) $100,000 (the
"Retention") which shall be retained for the period specified in Section 1.6
hereof) by wire transfer of immediately available funds (which sum shall include
$100,000.00 payable to each Shareholder for his covenants set forth in Section
6.1 hereof). In addition, Key shall cause to be issued to the Shareholders, in
accordance with Section 6.2 hereof, 100,000 shares (the "Key Energy Shares") of
common stock par value, $.10 per share, of the Parent ("Key Energy Common
Stock").
1.2. Time and Place of Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall be at the offices of Xxxxxxxx, Field,
Krier, Manning, Xxxxx & Stone, P.C., 0000 Xxxxxxx, Xxxxxxx, Xxxxx 00000 at 10:00
a.m. on January 5, 1998 (the "Closing Date"), unless another time or place is
agreed upon by the Shareholders, Key and the Parent .
1.3. Delivery of Xxxxxx Certificates. The Shareholders shall deliver to Key, on
the Closing Date, duly and validly issued certificates representing all of the
Xxxxxx Shares, each of which certificates shall be 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 Key (or its
designee).
1.4. Distribution of Current Assets and Assumption of Liabilities. On and after
the Closing Date, all Current Assets of Xxxxxx at the Effective Time (defined
below) shall be the sole property of the Shareholders and, subject to Section
1.6 hereof, Xxxxxx shall have no rights thereto. On and after the Closing Date,
the Shareholders shall be solely responsible for the Liabilities of Xxxxxx at
the Effective Time (defined below). On the Closing Date, the Shareholders shall
deliver to Key an executed copy of an assignment and assumption agreement in a
form reasonably satisfactory to Key (the "Assignment/Assumption Agreement")
effecting (i) the transfer and assignment of the Current Assets of Xxxxxx at the
Effective Time to the Shareholders and (ii) the assumption of the Liabilities of
Xxxxxx at the Effective Time by the Shareholders . As used herein, the term
"Current Assets of Xxxxxx at the Effective Time" means (i) all of Xxxxxx'x
accounts receivable and all other rights of Xxxxxx to payment for services
rendered by Xxxxxx before the Effective Time ("Prior Accounts Receivable"),
including, without limitation, those accounts receivable described in Schedule
2.1.8.4 hereto; (ii) all cash accounts of Xxxxxx and all xxxxx cash of Xxxxxx
kept on hand for use in the business in existence at the Effective Time; and
(iii) all right, title and interest of Xxxxxx in and to all prepaid rentals,
other prepaid expenses (other than the prepayments referred to in Section 1.5
hereof), bonds, deposits and financial assurance requirements and other current
assets relating to any of the assets of the business in existence at the
Effective Time. As used herein, the term "Liabilities of Xxxxxx at the Effective
Time" means any and all liabilities and obligations of Xxxxxx, incurred in the
ordinary course of business but not yet due and payable or the amount of which
is not yet known and all notes or other indebtedness or obligations of Xxxxxx
which has not been satisfied in full as of the Closing Date, including without
limitation (i) the litigation referred to in Schedule 2.1.16 hereto and any
other litigation brought or threatened against Xxxxxx arising out of events or
circumstances occurring or existing before the Effective Time; (ii) any and all
taxes payable by Xxxxxx for any period before the Effective Time (iii) the
amounts due under all indebtedness referred to in Schedule 2.1.8.14 hereto and
any and all other indebtedness of Xxxxxx in existence at the Effective Time; and
(v) all accounts payable and trade payables of Xxxxxx in existence at the
Effective Time, including, without limitation, the accounts payable described in
Schedule 2.1.8.5 hereto (the "Prior Payables"). Nothing in this Section 1.4 is
intended to limit the representations and warranties of or indemnifications by
the Shareholders contained herein or to expand the indemnification provisions of
7.1 or extend the period of time for which the representations, warranties and
covenants of the parties shall survive the Closing Date. Key shall be
responsible for any and all liabilities and obligations arising with respect to
the ownership and operation of Xxxxxx'x assets from and after the Effective
Date, except to the extent that such liabilities or obligations arise out of a
breach by the Shareholders of any of their respective representations,
warranties or covenants contained herein.
1.5. Required Payments. Before the Effective Time, the Shareholders shall cause
Xxxxxx to make prepayments totaling at least $450,000 for the purchase of drill
bits to be delivered to Xxxxxx after the Effective Time. The term "Prepayment
Shortfall" as used herein means the amount, if any, by which such prepayments
total less than $450,000.
1.6. Retention of Receivables; Payment of Payables; Post-Closing Adjusting
Payments. It is the intention and agreement of the parties that the Shareholders
will have full power and authority to collect the Prior Accounts Receivable from
and after the Closing Date, and Xxxxxx shall take no action designated to
interfere with the collection of the Prior Accounts Receivable by the
Shareholders. However, for a period of 90 days from the Closing Date, Xxxxxx
shall have the right to deposit and use any payments received by Xxxxxx or Key
(as opposed to payments received by the Shareholders) on account of Prior
Accounts Receivables and the right to pay any Prior Payables and any other
unpaid Liabilities of Xxxxxx at the Effective Time. At the end of such period,
Xxxxxx shall deliver an accounting (the "Final Accounting") of such payments to
the Shareholders. Key and the Shareholders shall jointly review the Final
Accounting, endeavor in good faith to resolve any disagreements regarding the
entries thereon and reach a final determination thereof within 120 days from the
Closing Date. If the parties are unable to reach a final determination relative
to all disagreements regarding entries on the Final Accounting within such 120
day period they shall submit the unresolved issue or issues to a nationwide firm
of independent certified public accountants selected by mutual agreement (or if
mutual agreement cannot be reached, by lot), whose decision on the unresolved
issue or issues shall be binding on all parties hereto. The following adjusting
payments shall be made:
(1) If the total of all proceeds retained by Xxxxxx from the Prior Accounts
Receivable plus the Retention exceeds the total of all Prior Payables and
other Liabilities of Xxxxxx at the Effective Time paid by Xxxxxx , Key
shall pay to the Shareholders the amount of such excess.
(2) If the total of all proceeds retained by Xxxxxx from the Prior Accounts
Receivable plus the Retention is less than the total of all Prior Payables
and other Liabilities of Xxxxxx at the Effective Time paid by Xxxxxx, the
Shareholders shall pay to Key the amount of such difference.
From and after the 90 day period referred to above, (i) all payments received by
Xxxxxx on account of Prior Accounts Receivables shall be promptly endorsed over
and delivered to the Shareholders in accordance with Section 8.4 hereof and (ii)
all unpaid Liabilities of Xxxxxx at the Effective Time shall be subject to the
Shareholders' indemnification obligations in accordance with Section 7.1 hereof.
ARTICLE 2
Representations and Warranties
2.1. General Representations and Warranties of the Shareholders. Each of the
Shareholders jointly and severally represents and warrants to Key and the Parent
as follows:
2.1.1. Organization and Standing. Xxxxxx 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.
2.1.2. Agreement Authorized and its Effect on Other Obligations. Each of the
Shareholders is a resident of Texas, above the age of 18 years, and has the
legal capacity and requisite power and authority to enter into, and perform his
obligations under this Agreement. This Agreement is a valid and binding
obligation of each 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 Xxxxxx or (ii) any obligation, indenture, mortgage,
deed of trust, lease, contract or other agreement to which Xxxxxx or either of
the Shareholders is a party or by which Xxxxxx or either of the Shareholders or
their respective properties are bound.
2.1.3. Capitalization. The authorized capitalization of Xxxxxx consists of
1,000,000 shares of Xxxxxx Common Stock, of which, as of the date hereof, 1,000
shares were issued and outstanding and held beneficially and of record by the
Shareholders. On the date hereof, Xxxxxx does not have any outstanding options,
warrants, calls or commitments of any character relating to any of its
authorized but unissued shares of capital stock. All issued and outstanding
shares of Xxxxxx Common Stock are validly issued, fully paid and non-assessable
and are not subject to preemptive rights. None of the outstanding shares of
Xxxxxx Common Stock are 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 Xxxxxx Shares. Each Shareholder holds good and valid title
to 500 of the Xxxxxx Shares, free and clear of all Encumbrances. The
Shareholders possess full authority and legal right to sell, transfer and assign
to Key the Xxxxxx Shares, free and clear of all Encumbrances. Upon transfer to
Key by the Shareholders of the Xxxxxx Shares, Key will own the Xxxxxx Shares
free and clear of all Encumbrances. There are no claims pending or, to the
knowledge of either of the Shareholders, threatened, against Xxxxxx or either of
the Shareholders that concern or affect title to either the Xxxxxx Shares, or
that seek to compel the issuance of capital stock or other securities of Xxxxxx.
2.1.5. No Subsidiaries. There is no corporation, partnership, joint venture,
business trust or other legal entity in which Xxxxxx, 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. The Shareholders have delivered to Key and the
Parent copies of Xxxxxx'x unaudited balance sheet (the A9/30 Balance Sheet@) and
statement of income, as of and for the nine months ended September 30, 1997
(collectively, the A9/30 Financial Statements@), copies of which are attached
hereto as Schedule 2.1.6. With the exception of the exclusion of footnotes, the
9/30 Financial Statements are complete in all respects. The 9/30 Financial
Statements present fairly the financial condition of Xxxxxx as of the date and
for the period indicated and, except for the exclusion of footnotes, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis. The inventories of Xxxxxx reflected in the 9/30 Balance
Sheet, or which have thereafter been acquired by it, consist of items of a
quality usable and salable in the normal course of Xxxxxx'x business.
2.1.7. Liabilities. Except as disclosed on Schedule 2.1.7 hereto, Xxxxxx does
not have any liabilities or obligations, either accrued, absolute or contingent,
nor do either of the Shareholders have any knowledge of any potential
liabilities or obligations, other than those incurred in the ordinary course of
business since the Balance Sheet Date that will not adversely affect the value
and conduct of the business of Xxxxxx.
2.1.8. Additional Xxxxxx 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 Xxxxxx, with
a description of the nature and amount of any Encumbrances thereon, except 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 the business
operations of Xxxxxx. The term "Encumbrances" (as used in this Agreement) 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, except liens for current taxes not yet due and payable;
2.1.8.2. Machinery and Equipment. All vehicles, rigs, carriers, rig equipment,
machinery and transportation equipment, and all significant tools, equipment,
furnishings and fixtures owned, leased or subject to a contract of purchase and
sale, or lease commitment, by Xxxxxx with a description of the nature and amount
of any Encumbrances thereon, except (i) Encumbrances disclosed on Schedule
2.1.8.2 hereto and (ii) 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 the business operations of Xxxxxx;
2.1.8.3. Inventory. All inventory items or groups of inventory items owned by
Xxxxxx, excluding raw materials and work in process, which raw materials and
work in process are valued on the 9/30 Balance Sheet, together with the amount
of any Encumbrances thereon;
2.1.8.4. Receivables. All accounts and notes receivable of Xxxxxx as of December
9, 1997 (all of which will be assigned to the Shareholders on or before the
Effective Time).
2.1.8.5. Payables. All accounts and notes payable of Xxxxxx as of December 9,
1997 (all of which will be paid or otherwise discharged on or before the
Effective Time).
2.1.8.6. Insurance. All insurance policies or bonds currently maintained by
Xxxxxx, including title insurance policies, including those covering Xxxxxx'x
properties, rigs, machinery, 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. Leases; Contracts. All material contracts, including leases under which
Xxxxxx 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, health insurance, death benefit, or other employee benefit or fringe
benefit plans, arrangements or trust agreements of Xxxxxx or any other employee
benefit plan maintained or adopted by Xxxxxx (collectively, the "Employee
Plans"), together with copies of the most recent reports or returns with respect
to each such Employee Plan, filed with any governmental agency and all Internal
Revenue Service determination letters and all other correspondence from
governmental entities that would bring into question the continued qualification
or validity of any such Employee Plan;
2.1.8.9 Certain Salaries. The names and salary rates of all present employees of
Xxxxxx, 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 the Agreement;
2.1.8.10. Bank Accounts. The name of each bank in which Xxxxxx has an account,
the account numbers of each account and the names of all persons authorized to
draw thereon;
2.1.8.11. Employee Agreements. Xxxxxx does not have any collective bargaining
agreements with any labor union or other representative of employees, or any
written or oral understandings, employment or consulting and severance
agreements;
2.1.8.12. Intellectual Property. Xxxxxx does not own, lease or use any patents,
patent applications, trademarks and service marks (including registrations and
applications therefor), copyrights and other intellectual property
(collectively, "Intellectual Property") ;
2.1.8.13. Trade Names. All trade names, assumed names and fictitious names used
or held by Xxxxxx, whether and where such names are registered and where used;
2.1.8.14. Promissory Notes. All long-term and short-term promissory notes,
installment contracts, loan agreements, credit agreements, and any other
agreements of Xxxxxx relating thereto and a description of the collateral
securing the same (all of which shall be paid or otherwise discharged by the
Shareholders or Xxxxxx on or before the Effective Time);
2.1.8.15. Guaranties. There are no indebtednesses, liabilities and commitments
of others as to which Xxxxxx is a guarantor, endorser, co-maker, surety or
accommodation maker, or that Xxxxxx is contingently liable for or any letters of
credit, whether stand-by or documentary, issued by any third party for the
benefit of Xxxxxx;
2.1.8.16. Reserves and Accruals. Xxxxxx has no accounting reserves or accruals;
and
2.1.8.17. Environmental. All environmental permits, approvals, certifications,
licenses, registrations, orders and decrees applicable to current operations
conducted by Xxxxxx and all environmental audits, assessments, investigations
and reviews conducted by Xxxxxx within the last five years (or otherwise within
the possession of Xxxxxx) on any property owned or used by it.
2.1.9. No Defaults. Xxxxxx is not in default in any material 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. Except as disclosed on
Schedule 2.1.10 hereto, since the Balance Sheet Date, there has not been (and as
of the Closing Date there will not be):
2.1.10.1. Financial Change. Any adverse change in the financial condition,
backlog, operations, assets, liabilities or business of Xxxxxx;
2.1.10.2. Property Damage. Any damage, destruction, or loss to the business or
properties of Xxxxxx (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 Xxxxxx Common Stock, or any direct or
indirect redemption, purchase or any other acquisition by Xxxxxx 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 Xxxxxx'x authorized or outstanding capital stock
as described in Section 2.1.3 hereof;
2.1.10.5. Labor Disputes. Any labor or employment dispute of whatever nature
involving Xxxxxx; or
2.1.10.6. Other Adverse Changes. Any other event or condition known to either of
the Shareholders particularly pertaining to and adversely affecting the
operations, assets or business of Xxxxxx.
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
Xxxxxx and each of the Shareholders (with respect to their distributive share of
Xxxxxx income) 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; Xxxxxx has only done business in
Texas and New Mexico, all taxes shown by such returns to be payable have been
paid other than those being contested in good faith by Xxxxxx or either of the
Shareholders (to the extent of their distributive share of Xxxxxx income). No
waiver of any statute of limitations executed by Xxxxxx or either of the
Shareholders (to the extent of their distributive share of Xxxxxx income) with
respect to any income or other tax is in effect for any period. Neither the
income tax returns of Xxxxxx nor either of the Shareholders (to the extent of
their distributive share of Xxxxxx income) has ever been examined by the
Internal Revenue Service or the taxing authorities of any other jurisdiction
except for an audit of Xxxxxx conducted by the Internal Revenue Service in 19__
for the calendar year 1983 and there are no current or pending audits. There are
no tax liens on any assets of Xxxxxx or either of the Shareholders (to the
extent of their distributive share of Xxxxxx income) except for taxes not yet
currently due. Xxxxxx is not subject to any tax-sharing or allocation agreement.
Xxxxxx is not, and never has been, a member of a consolidated group subject to
Treasury Regulation 1.1502-6 or any similar provision. Xxxxxx (i) made a valid,
effective and binding election pursuant to Section 1362 of the Internal Revenue
Code of 1986, as amended (the "Code"), effective ______, 19__, (ii) has since
maintained its status as an S Corporation pursuant to Section 1361 of the Code
and (iii) has made and continuously maintained elections similar to the federal
S election in each state or local jurisdiction where Xxxxxx does business or is
required to file a tax return to the extent such states or jurisdictions permit
such elections. Xxxxxx neither is nor will or can be subject to the built-in
gains tax under Section 1374 of the Code or any similar corporate level tax
imposed on Xxxxxx by any taxing authority. Xxxxxx (x) has not adopted or
utilized LIFO as a method of accounting for inventory, and (y) has no other tax
item, election, agreement or adjustment which will accelerate or trigger income
or deferred deductions of Xxxxxx as a result of termination of Xxxxxx'x status
as an S Corporation.
2.1.12. Intellectual Property. There is no Intellectual Property that is either
material to Xxxxxx'x business or that is necessary for the rendering of any
services rendered by Xxxxxx or and the use or sale of any equipment or products
used or sold by it. Xxxxxx has not received any notice of infringement,
misappropriation, or conflict with, the intellectual property rights of others
in connection with the use by it of the Intellectual Property or otherwise in
connection with the operation of its business.
2.1.13. Title to and Condition of Assets. Except as reflected on Schedule
2.1.8.1 hereto, Xxxxxx has good, indefeasible and marketable title to all its
properties, interests in properties and assets, real and personal, reflected in
the 9/30 Balance Sheet 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 Sheet or in Schedule 2.1.8.1 hereto, and (ii)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 the business operations of Xxxxxx. All
leases pursuant to which Xxxxxx 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 Xxxxxx and in respect to which Xxxxxx has not taken
adequate steps to prevent a default from occurring. The buildings and premises
of Xxxxxx that are used in its business are in good operating condition and
repair, subject only to ordinary wear and tear. All rigs, rig equipment,
machinery, transportation equipment, tools and other major items of equipment of
Xxxxxx (except for surplus equipment located in Xxxxxx'x yard and not currently
being used by Xxxxxx) are 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 each Shareholder's
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 Xxxxxx or either of the
Shareholders, except such as have been fully complied with.
2.1.14. Contracts. All contracts, leases, plans or other arrangements to which
Xxxxxx 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
Xxxxxx and the other parties thereto. Xxxxxx is not, and to the knowledge of
either 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 Xxxxxx.
Neither of the Shareholders has received any information which would cause such
Shareholder to conclude that any customer of Xxxxxx will (or is likely to) cease
doing business with Xxxxxx (or its successors) as a result of the consummation
of the transactions contemplated hereby.
2.1.15. Licenses and Permits. Xxxxxx possesses 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") necessary under law or otherwise for
Xxxxxx 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 (collectively, the "Xxxxxx Permits").
Each of the Xxxxxx Permits and Xxxxxx'x rights with respect thereto is valid and
subsisting, in full force and effect, and enforceable by Xxxxxx subject to
administrative powers of regulatory agencies having jurisdiction. Xxxxxx is in
compliance in all material respects with the terms of each of the Xxxxxx
Permits. No Xxxxxx Permit has been, or to the knowledge of either of the
Shareholders, is threatened to be, revoked, canceled, suspended or modified.
2.1.16. Litigation. Except as disclosed on Schedule 2.1.16 hereto, there is no
suit, action, or legal, administrative, arbitration, or other proceeding or
governmental investigation pending to which Xxxxxx is a party or, to the
knowledge of either of the Shareholders, might become a party or which affects
Xxxxxx, nor is any change in the zoning or building ordinances directly
affecting the real property or leasehold interests of Xxxxxx, pending or, to the
knowledge of either 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 (defined below), on any property presently or
previously owned, leased or operated by Xxxxxx, or on any property to which
Substances of Environmental Concern or waste generated by Xxxxxx'x operations or
use of its assets was disposed of, which would have an adverse effect on the
business or business prospects of Xxxxxx. The term "Substance of Environmental
Concern" means 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 (defined below), that is regulated pursuant to or
could give rise to liability under any Environmental Law;
2.1.17.2. Permits, etc. Xxxxxx has, and within the period of all applicable
statutes of limitations has had in full force and effect all environmental
permits, licenses, approvals and other authorizations required to conduct its
operations, and is and within the period of all applicable statute of
limitations has been operating in substantial compliance thereunder;
2.1.17.3. Compliance. The operations of Xxxxxx and the use of its assets are,
and within the period of all applicable statutes of limitation have been, in
compliance with all applicable Environmental Laws other than such non compliance
that in the aggregate is not material to the business or operations of Xxxxxx.
"Environmental Law" 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 environment or of human health, or employee
health and safety as is now in effect;
2.1.17.4. Past Compliance. None of the operations or assets of Xxxxxx has ever
been conducted or used in such a manner as to constitute violation of any of the
Applicable Environmental Laws;
2.1.17.5. Environmental Claims. No notice has been served on Xxxxxx or any of
the Shareholders from any entity, governmental agency or individual regarding
any existing, pending or threatened investigation, inquiry, enforcement action
or litigation or liability, including without limitation any claims for remedial
obligations, response costs or contribution, relating to any Environmental Law;
2.1.17.6. Enforcement. Neither Xxxxxx nor to either Shareholder's knowledge, any
predecessor of Xxxxxx, nor any other party acting on behalf of Xxxxxx, (i) has
entered into or agreed to any consent decree, order, settlement or other
agreement, or (ii) 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;
2.1.17.7. Liabilities. Xxxxxx has not assumed or retained, by contract or
operation of law, any liabilities of any kind, fixed or contingent, known or
unknown, under any Environmental Law;
2.1.17.8. Renewals. Neither of the Shareholders knows of any reason why Xxxxxx
(or its successors) would not be able to renew without material expense any of
the permits, licenses, or other authorizations required pursuant to any
Environmental Law in connection with any of Xxxxxx'x current operations; and
2.1.17.9. Asbestos and PCBs. No known material amounts of friable asbestos
currently exist on any property owned or operated by Xxxxxx, nor do
polychlorinated biphenyls exist in concentrations of 50 parts per million or
more in electrical equipment owned or being used by Xxxxxx in its operations or
on the properties of Xxxxxx.
2.1.18. Compliance with Other Laws. Xxxxxx is not 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. No ERISA Plans or Labor Issues. Xxxxxx does not currently sponsor,
maintain or contribute to and has 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"). Xxxxxx has not engaged in any unfair labor practices which could
reasonably be expected to result in a material adverse effect on its operations
or assets. Xxxxxx does not have any dispute with any of its existing or former
employees. There are no labor disputes or, to the knowledge of any of the
Shareholders, any disputes threatened by current or former employees of Xxxxxx.
2.1.20. Investigations; Litigation. No investigation or review by any
governmental entity with respect to Xxxxxx or any of the transactions
contemplated by this Agreement is pending or, to the knowledge of either of the
Shareholders, threatened, nor has any governmental entity indicated to Xxxxxx an
intention to conduct the same. Except as described on Schedule 2.1.16 hereto,
there is no action, suit or proceeding pending or, to the knowledge of either of
the Shareholders, threatened against or affecting Xxxxxx 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 an adverse change in the
financial condition, properties or business of Xxxxxx.
2.1.21. Absence of Certain Business Practices. Neither Xxxxxx nor any officer of
Xxxxxx, nor, to the knowledge of either of the Shareholders, any employee or
agent of Xxxxxx or any other person acting on behalf of Xxxxxx, has, directly or
indirectly, within the past five years, given or agreed to give any gift or
similar benefit of greater than nominal value to any customer, supplier,
government employee or other person who is or may be in a position to help or
hinder the business of Xxxxxx (or to assist Xxxxxx in connection with any actual
or proposed transaction) which (i) might subject Xxxxxx to any damage or penalty
in any civil, criminal or governmental litigation or proceeding, (ii) if not
given in the past, might have had an adverse effect on the assets, business or
operations of Xxxxxx, or (iii) if not continued in the future, might adversely
affect the assets, business operations or prospects of Xxxxxx or which might
subject Xxxxxx to suit or penalty in a private or governmental litigation or
proceeding.
2.1.22 Consents and Approvals. No consents, approvals or authorizations of, or
filing or registration with, any governmental or regulatory authority, or any
other person are required to be made or obtained by the Shareholders or Xxxxxx
in connection with the consummation of the transactions contemplated hereby.
2.1.23 Broker or Financial Advisors Fee. Neither the Shareholders nor Xxxxxx
have retained any broker, agent or finder or agreed to pay any financial broker,
agent or finder on account of this Agreement in such manner as to give rise to
any valid claim against Key or the Parent for a brokerage commission, finder's
fee or any similar payments.
2.2. Investment Representations of the Shareholders. Each of the Shareholders
acknowledges, represents and agrees that:
2.2.1. Shareholders Investment Suitability and Related Matters. (i) The Parent
has made available to the Shareholders the information and documents described
in Section 2.4.3 hereof and the Shareholders have had access to the other
reports filed with the Commission (as defined in Section 2.4.3 hereof), (ii)
such Shareholder understands the risks associated with ownership of Key Energy
Common Stock, and (iii) such Shareholder is capable of bearing the financial
risks associated with such ownership;
2.2.2. Key Energy Shares Not Registered. The Key Energy Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or registered or qualified under any applicable state securities laws;
2.2.3. Reliance on Representations. The Key Energy Shares are being issued to
such Shareholder in reliance upon exemptions from such registration or
qualification requirements, and the availability of such exemptions depends in
part upon such Shareholder's bona fide investment intent with respect to the Key
Energy Shares;
2.2.4. Investment Intent. Such Shareholder's acquisition of the Key Energy
Shares is solely for his own account for investment, and such Shareholder is not
acquiring the Key Energy Shares for the account of any other person or with a
view toward resale, assignment, fractionalization, or distribution thereof,
except as permitted by applicable securities laws;
2.2.5. Permitted Resale. Such Shareholder shall not offer for sale, sell,
transfer, pledge, hypothecate or otherwise dispose of any of the Key Energy
Shares except in accordance with the registration requirements of the Securities
Act and applicable state securities laws or upon delivery to the Parent of an
opinion of legal counsel reasonably satisfactory to the Parent that an exemption
from registration is available;
2.2.6. Investor Sophistication. Such Shareholder has such knowledge and
experience in financial and business matters that he or she is capable of
evaluating the merits and risks of an investment in the Key Energy Shares, and
to make an informed investment decision with respect thereto;
2.2.7. Availability of Information. Each Shareholder has had the opportunity to
ask questions of, and receive answers from the Parent's officers and directors
concerning such Shareholder's acquisition of the Key Energy Shares and to obtain
such other information concerning the Parent and the Key Energy Shares, to the
extent the Parent's officers and directors possessed the same or could acquire
it without unreasonable effort or expense, as such Shareholder deemed necessary
in connection with making an informed investment decision; and
2.2.8. Restrictive Legends. In addition to any other legends required by law or
the other agreements entered into in connection herewith, each certificate
evidencing the Key Energy Shares will bear a conspicuous restrictive legend
substantially as follows:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED ("ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS,
AND THEY CANNOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
HYPOTHECATED EXCEPT IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE ACT
AND SUCH OTHER STATE LAWS OR UPON DELIVERY TO THIS CORPORATION OF AN OPINION OF
LEGAL COUNSEL SATISFACTORY TO THE CORPORATION THAT AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
2.3. General Representations of Key. Key represents and warrants to each of the
Shareholders as follows:
2.3.1. Organization and Good Standing. Key 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.
2.3.2. 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 Key, and this
Agreement is a valid and binding obligation of Key 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 Key will not conflict
with or result in a violation or breach of any term or provision of, or
constitute a default under (i) the Certificate of Incorporation or Bylaws of Key
or (ii) any obligation, indenture, mortgage, deed of trust, lease, contract or
other agreement to which Key or any of its property is bound.
2.3.3. Broker or Financial Advisor's Fee. Key has not retained any broker, agent
or finder or agreed to pay any financial agent or finder on account of this
Agreement in such a manner as to give rise to any valid claim against the
Shareholders for any brokerage commission, finder's fee or any similar payments.
2.4. General Representations and Warranties of the Parent. The Parent represents
and warrants to the Shareholders as follows:
2.4.1. Organization and Good Standing. The Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland, 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.
2.4.2. Agreement Authorized and its Effect on Other Obligations. The execution
and delivery of this Agreement have been authorized by all necessary corporate,
shareholder and other action on the part of the Parent, and this Agreement is
the valid and binding obligation of the Parent and enforceable (subject to
normal equitable principals) against the Parent 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 and the
consummation of the transactions contemplated hereby, will not conflict with or
result in a violation or breach of any term or provision of, nor constitute a
default under (i) the charter or bylaws (or other organizational documents) of
the Parent or (ii) any obligation, indenture, mortgage, deed of trust, lease,
contract or other agreement to which the Parent is a party or by which the
Parent is bound.
2.4.3. Reports and Financial Statements. The Parent has previously furnished to
the Shareholders true and complete copies of the following (collectively, the
"Key SEC Documents"): (i) the Parent's annual report filed with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), for the Parent's fiscal
year ended June 30, 1997; (ii) the Parent's quarterly and other reports filed
with the Commission since June 30, 1997; (iii) all definitive proxy solicitation
materials filed with the Commission since June 30, 1997; and (iv) any
registration statements (other than those relating to employee benefit plans)
declared effective by the Commission since June 30, 1997. The consolidated
financial statements of the Parent and its consolidated subsidiaries included in
the Parent's most recent annual report on Form 10-K and most recent quarterly
reports on Form 10-Q were prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as noted therein)
during the periods involved and fairly present the consolidated financial
position of the Parent and its consolidated subsidiaries as of the dates thereof
and the consolidated results of their operations and changes in financial
position for the periods then ended; and the Key SEC Documents did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading as of
the date of such documents or other such date specified therein. The Parent
further represents that there has been no material adverse change in its
consolidated financial condition since September 30, 1997.
2.5. 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 Key or the Parent in
connection with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby, other than what is
required by the American Stock Exchange for the listing of the Key Shares to be
issued hereunder.
2.6. Finder's Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Key, the Parent and
their counsel directly with the Shareholder and their counsel, without the
intervention by any other person as the result of any act of Key or the Parent
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
OBLIGATIONS PENDING CLOSING DATE
3.1 Agreements of the Shareholders. Except as expressly contemplated elsewhere
in this Agreement, the Shareholders agree that from the date hereof until the
Closing Date, the Shareholders will cause Xxxxxx to (and unless otherwise
indicated by the context, since September 30, 1997, Xxxxxx has):
3.1.1 Maintenance of Present Business. Operate its business only in the usual,
regular and ordinary manner so as to maintain the goodwill it now enjoys and, to
the extent consistent with such operation, use all reasonable efforts to
preserve intact its present business organization, keep available the services
of its present officers and employees and preserve its relationships with
customers, suppliers, jobbers, distributors and others having business dealings
with it;
3.1.2. Maintenance of Properties. At its expense, maintain all of its property
and assets in customary repair, order and condition, reasonable wear and tear
excepted;
3.1.3. Maintenance of Books and Records. Maintain its books of account and
records in the usual, regular and ordinary manner, in accordance with generally
accepted accounting principles applied on a consistent basis;
3.1.4. Compliance with Law. Duly comply in all material respects with all laws
applicable to it and to the conduct of its business;
3.1.5. Inspection. Permit Key, the Parent and their authorized representatives,
during normal business hours, to inspect Xxxxxx'x records and to consult with
its officers, employees, attorneys and agents for the purpose of determining the
accuracy of the representations and warranties herein made and the compliance
with covenants contained in this Agreement; and
3.1.6. Notice of Material Developments. Promptly notify Key and the Parent in
writing of any material adverse change in, or any changes which, in the
aggregate, could result in an adverse change in, the consolidated financial
condition, business or affairs of Xxxxxx, whether or not occurring in the
ordinary course of business.
3.2. Additional Agreements of the Shareholders. Except as expressly contemplated
elsewhere in this Agreement, each of the Shareholders agree that since September
30, 1997 (the "Balance Sheet Date") Xxxxxx has not, and from the date hereof
until the Closing Date, they will not cause or permit Xxxxxx to:
3.2.1. Prohibition of Certain Employment Contracts. Enter into any contracts of
employment which cannot be terminated on notice of 30 days or less or which
provide for any severance payments or benefits covering a period beyond the
earlier of the termination date or notice thereof.
3.2.2. Prohibition of Loans. Incur any borrowings which will not be repaid in
full on or before the Closing Date;
3.2.3. Prohibition of Certain Commitments. Enter into commitments of a capital
expenditure nature or incur any contingent liabilities which would exceed
$10,000 in the aggregate except (i) as may be necessary for maintenance of
existing facilities, machinery and equipment in good operating condition and
repair in the ordinary course of business, or (ii) as is otherwise approved in
writing by Key;
3.2.4. Disposal of Assets. Sell, dispose of, or encumber, any property or
assets, except (i) in the usual and ordinary course of business, (ii) property
or assets which individually have a value of less than $1,000; (iii) as
described on Schedule 2.1.10 hereto; or (iii) as may be approved in writing by
Key;
3.2.5. Maintenance of Insurance. Discontinue its current level of insurance;
provided, that if during the period from the date hereof to and including the
Closing Date any of its property or assets are damaged or destroyed by fire or
other casualty, the obligations of Key, the Parent and the Shareholders under
this Agreement shall not be affected thereby, and upon the Closing Date all
proceeds of insurance and claims of every kind arising as a result of any such
damage or destruction shall remain the property of Xxxxxx.
3.2.6. Acquisition Proposals. Directly or indirectly (i) solicit, initiate or
encourage any inquiry or Acquisition Proposal from any person or (ii)
participate in any discussions or negotiations regarding, or furnish to any
person other than Key, the Parent or their representatives any information with
respect to, or otherwise facilitate or encourage any Acquisition Proposal by any
other person. As used herein "Acquisition Proposal" means any proposal for a
merger, consolidation or other business combination involving Xxxxxx or for the
acquisition or purchase of any equity interest in, or a material portion of the
assets of, Xxxxxx, other than the transactions with Key, the Parent and the
Shareholders contemplated by this Agreement. Xxxxxx shall promptly communicate
to Key and the Parent the terms of any such written Acquisition Proposals which
it may receive or any written inquiries made to it or any of its directors,
officers, representatives or agents;
3.2.7. No Amendment to Articles of Incorporation. Amend its Articles of
Incorporation or merge or consolidate with or into any other corporation or
change in any manner the rights of its common stock or the character of its
business;
3.2.8. No Issuance, Sale, or Purchase of Securities. Issue or sell, or issue
options or rights to subscribe to, or enter into any contract or commitment to
issue or sell (upon conversion or otherwise), any shares of Xxxxxx Common Stock,
or subdivide or in any way reclassify any shares of Xxxxxx Common Stock, or
acquire, or agree to acquire, any shares of Xxxxxx Common Stock; and
3.2.9. Prohibition on Dividends. Declare or pay any dividend on shares of Xxxxxx
Common Stock or make any other distribution of assets to the holders thereof,
except as described on Schedule 2.1.10 hereto.
ARTICLE 4
Conditions Precedent to Obligations
4.1. Conditions Precedent to Obligations of Shareholders. The obligations of
Shareholders to consummate and effect the transactions contemplated hereunder
shall be subject to the satisfaction of the following conditions, or to the
waiver thereof by Shareholders before the Closing Date:
4.1.1. Representations and Warranties of Key and the Parent True at the
Effective Time and the Closing Date. The representations and warranties of Key
and the Parent herein contained shall be, in all material respects, true as of
and at the Effective Time and the Closing Date with the same effect as though
made at such dates, except as affected by transactions permitted or contemplated
by this Agreement; Key and the Parent shall have performed and complied, in all
material respects, with all covenants required by this Agreement to be performed
or complied with by them before the Effective Time and the Closing Date; and Key
and the Parent shall have delivered to the Shareholders a certificate, dated the
Closing Date and signed by their president or vice president and their secretary
or assistant secretary, to such effect.
4.1.2. No Material Litigation. No suit, action, or other proceeding shall be
pending, or to the knowledge of Key or the Parent, threatened, before any court
or governmental agency in which it will be, or it is, sought to restrain or
prohibit or to obtain damages or provide other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby or which
might result in a material adverse change in the value of the consolidated
assets and business of Key or the Parent.
4.1.3 Opinion of Key Counsel. The Shareholders shall have received a favorable
opinion, dated as of the Closing Date, from Xxxxx, Xxxxxxxx & Xxxxx, a
Professional Corporation, counsel for Key and the Parent, in form and substance
satisfactory to the Shareholders, to the effect that (i) Key and the Parent have
been duly incorporated and are validly existing as corporations in good standing
under the laws of the States of Delaware and Maryland, respectively; (ii) Key
and the Parent have fully requisite corporate power and authority to carry on
their business as it is currently conducted and to own and operate the
properties currently used and operated by them, and are duly qualified to do
business and are in good standing as foreign corporations in the State of Texas;
(iii) all corporate proceedings required to be taken by or on the part of Key
and the Parent to authorize the execution of this Agreement and the
implementation of the transactions contemplated hereby have been taken; and (iv)
this Agreement has been duly executed and delivered by, and is the legal, valid
and binding obligation of Key and the Parent and is enforceable against Key and
the Parent in accordance with its terms, except as 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 (i) certificates of public officials and of officers of Key and the Parent
as to matters of fact and (ii) the opinion or opinions of other counsel, which
opinions shall be reasonably satisfactory to the Shareholders, as to matters
other than federal or Texas law.
4.2. Conditions Precedent to Obligations of Key and the Parent. The obligation
of Key and the Parent to consummate and effect the transactions contemplated
hereunder shall be subject to the satisfaction of the following conditions, or
to the waiver thereof by Key and the Parent before the Closing Date.
4.2.1. Representations and Warranties of Shareholders True at the Effective Time
and the Closing Date. The representations and warranties of the Shareholders
herein contained shall be, in all material respects, true as of and at the
Effective Time and the Closing Date with the same effect as though made at such
dates, except as affected by transactions permitted or contemplated by this
Agreement; Xxxxxx and the Shareholders shall have performed and complied in all
material respects, with all covenants required by this Agreement to be performed
or complied with by them before the Effective Time and the Closing Date; and
Xxxxxx and the Shareholders each shall have delivered to Key and the Parent a
certificate, dated the Closing Date and signed by each of the Shareholders and
by Xxxxxx'x president, chief financial or accounting officer, and secretary, as
the case may be, to such effects.
4.2.2. No Litigation. Except as described on Schedule 2.1.16 hereto, no suit,
action or other proceeding shall be pending, or to the Shareholders= knowledge,
threatened, before any court or governmental agency in which it will be, or it
is, sought to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby or which might result in an adverse change in the value of
the assets and business of Xxxxxx.
4.2.3. Opinion of Shareholders' Counsel. Key and the Parent shall have received
a favorable opinion, dated the Closing Date, from Xxxxxxxx, Field, Krier,
Manning, Xxxxx & Xxxxx, P.C., counsel to the Shareholders, in form and substance
satisfactory to Key and the Parent, to the effect that (i) Xxxxxx has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the State of Texas; (ii) has full requite 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 licenses
to do business and is in good standing as a foreign corporation in New Mexico
and in each other state in which the nature of the business requires such
qualification; (iii) all outstanding shares of the Xxxxxx Common Stock have been
validly issued and are fully paid and nonassessable; and (iv) 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 (i)
certificates of public officials and of officers of Xxxxxx or the Shareholders
as to matters of fact and (ii) on the opinion or opinions of other counsel,
which opinions shall be reasonably satisfactory to Key and the Parent, as to
matters other than federal or Texas law.
4.2.4. Payment of Liabilities and Prepayments. The Shareholders shall have
caused Xxxxxx to (the "Pay-Off Condition") (i) pay or otherwise discharge all
Liabilities of Xxxxxx at the Effective Time other than those for which the
Shareholders had not received an invoice on or before December 29, 1997 or of
which the Shareholders had not been notified or otherwise become aware on or
before December 29, 1997 or that had not been incurred on or before December 29,
1997 and (ii) make the prepayments referred to in Section 1.5 hereof. Key shall
have received (x) an executed copy of the Assignment and Assumption Agreement in
a form reasonably satisfactory to it; and (y) evidence reasonably satisfactory
to it that the Pay-Off Condition had been met.
4.2.5. Encumbrances Removed. Key shall receive evidence reasonably satisfactory
to it that Xxxxxx owns all of its assets free and clear of all Encumbrances.
ARTICLE 5
Termination and Abandonment
5.1. Termination. Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated and the purchase and sale
contemplated hereby abandoned at any time before the Closing Date:
5.1.1. By Mutual Consent. By mutual consent of Key, the Parent and the
Shareholders.
5.1.2. By Key and the Parent Because of Failure to Perform Agreements or
Conditions Precedent. By Key and the Parent, if the Shareholders have failed to
perform any material agreement set forth in Sections 3.1 or 3.2, or if any
material condition set forth in Section 4.2 hereof has not been met, and such
condition has not been waived.
5.1.3. By the Shareholders Because of Key or the Parent's Failure to Perform
Agreements or Conditions Precedent. By the Shareholders, if Key or the Parent
has failed to perform any material condition set forth in Section 4.1 hereof has
not been met, and such condition has not been waived.
5.1.4. By Key, the Parent or by the Shareholders Because of Legal Proceedings.
By either Key, the Parent or the Shareholders if any suit, action, or other
proceeding shall be pending or threatened by the federal or a state government
before any court or governmental agency, in which it is sought to restrain,
prohibit, or otherwise affect the consummation of the transactions contemplated
hereby.
5.1.5. By Key or the Parent Because of a Material Adverse Change. By Key or the
Parent if there has been a material adverse change in the financial condition or
business of Xxxxxx since the Balance Sheet Date.
5.1.6. By Key or by the Shareholders if No Closing by January 15, 1998. By
either Key or the Shareholders, if the closing of the purchase and sale
contemplated hereby shall not have been consummated on or before January 15,
1998 through no fault of any party hereto; provided, however, that this
Agreement may not be terminated by any party hereto if the transactions
contemplated hereby have not occurred due to the breach of any provision of this
Agreement by the party desiring to terminate this Agreement.
5.2. Effect of Termination. In the event of the termination and abandonment of
this Agreement pursuant to and in accordance with the provisions of Section 5.1
hereof, this Agreement shall become void and have no effect, without any
liability on the part of any party hereto (or its stockholders or controlling
persons or directors or officers), except as otherwise provided in this
Agreement; provided, however, that a termination of this Agreement shall not
relieve any party hereto from any liability for damages incurred as a result of
a breach by such party of its representations, warranties, covenants,
agreements, or other obligations hereunder, occurring before such termination.
5.3. Waiver of Conditions. Subject to the requirements of any applicable law,
any of the terms or conditions of this Agreement may be waived at any time by
the party which is entitled to the benefit thereof.
5.4. Expense on Termination. If the transactions contemplated hereby are
abandoned pursuant to and in accordance with the provisions of Section 5.1
hereof, all expenses will be paid by the party incurring them.
ARTICLE 6
Additional Agreements
6.1. Noncompetition. Except as otherwise consented to or approved in writing by
Key and the Parent, each of the Shareholders agrees that for a period of 60
months from the Closing Date, such Shareholder 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 competition with the business or businesses conducted by Xxxxxx, Key, the
Parent or any affiliate of Key or the Parent on or before the date of this
Agreement in Texas or New Mexico; (ii) request any present customers or
suppliers of Xxxxxx to curtail or cancel their business with Key, the Parent,
Xxxxxx or any of their affiliates; (iii) disclose to any person, firm or
corporation any trade, technical or technological secrets of Xxxxxx, Key, the
Parent or any of their affiliates or any details of their organization or
business affairs or (iv) induce or actively attempt to influence any employee of
Xxxxxx, Key, the Parent or any of their affiliates to terminate his employment.
Each of the Shareholders agrees that if either the length of time or
geographical area set forth in this Section 6.1 is deemed too restrictive in any
court proceeding, the court may reduce such restrictions to those which it deems
reasonable under the circumstances. Each of the Shareholders further agrees and
acknowledges that Key, the Parent and their affiliates do not have any adequate
remedy at law for the breach or threatened breach by such Shareholder of this
covenant, and agree that Key, the Parent or any affiliate of Key or the Parent
may, in addition to the other remedies which may be available to it hereunder,
file a suit in equity to enjoin such Shareholder from such breach or threatened
breach. If any provisions of this Section 6.1 are held to be invalid or against
public policy, the remaining provisions shall not be affected thereby. Each of
the Shareholders acknowledges that the covenants set forth in this Section 6.1
are being executed and delivered by such Shareholder in consideration of the
covenants of Key and the Parent contained in this Agreement, an agreed upon
allocation of $100,000 of the purchase price being paid by Key to such
Shareholder pursuant to Section 1.1 hereof and for other good and valuable
consideration, receipt of which is hereby acknowledged.
6.2. Issuance of Key Shares. On the date hereof, the Parent shall file a listing
application with the American Stock Exchange requesting the listing of the Key
Energy Shares. On the date the Parent receives notice of approval of such
request, the Parent shall send written instructions to its transfer agent and
registrar to issue, countersign and register a total of twenty (20)
certificates, each representing 5,000 of the Key Energy Shares, with each
Shareholder being named as the record holder of ten (10) of such Certificates.
Such certificates shall be delivered to the Shareholders at the address
specified in Section 9.4 hereof.
6.3. 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, including, without limitation,
assistance from the Shareholders in auditing the financial statements of Xxxxxx.
6.4. 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 7
Indemnification
7.1. Indemnification by Shareholders. On the terms and conditions and subject to
the limitations provided in this Article 7, each of the Shareholders shall
indemnify, defend and hold harmless Xxxxxx, Key, the Parent, their affiliates
and subsidiaries and their respective officers, directors, employees, agents and
stockholders (collectively, the "Key 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 attorneys' fees (collectively, the "Damages") that such
indemnitees shall incur or suffer, which arise, result from or relate to (i) any
breach of, or failure by, the Shareholders to perform, their respective
representations, warranties, covenants or agreements in this Agreement or in any
schedule, certificate, exhibit or other instrument furnished or delivered by Key
or the Parent to the Shareholders under this Agreement to the extent such
Damages exceed $100,000 in the aggregate or (ii) the Liabilities of Xxxxxx at
the Effective Time; provided, however, that the Shareholders shall not be
required to so indemnify, defend and hold harmless the Key Indemnified Parties
against and with respect to any Damages incurred as a result of a breach by
either of the Shareholders of their respective representations and warranties in
this Agreement or in any schedule, certificate, exhibit or other instrument
furnished or delivered to Key by either of the Shareholders under this Agreement
for which a Key Indemnified Party fails to provide written notice of a claim for
such Damages to the Shareholders on or before the expiration of the survival
period (as specified in Section 8.1 hereof) of the specific representation or
warranty alleged to have been breached.
7.2. Indemnification by Key. On the terms and conditions and subject to the
limitations provided in this Article 7, Key shall indemnify, defend and hold
harmless each of the Shareholders against and with respect to any and all
Damages in excess of $100,000 in the aggregate that such indemnitees shall incur
or suffer, which arise, result from or relate to any breach of, or failure by
Key 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 Key under this
Agreement; provided, however, that Key shall not be required to so indemnify,
defend and hold harmless the Shareholders against and with respect to any
Damages incurred as a result of a breach by Key of any of its representations
and warranties in this Agreement or in any schedule, certificate, exhibit or
other instrument furnished or delivered to Shareholders by Key under this
Agreement for which the Shareholders fail to provide written notice of a claim
for such Damages to Key on or before the expiration of the survival period (as
specified in Section 8.1 hereof) of the specific representation or warranty
alleged to have been breached.
7.3. Indemnification Procedure. If any party hereto discovers or otherwise
becomes aware of an indemnification claim arising under Section 7.1 or Section
7.2 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 this Article 7, 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. Any 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.
ARTICLE 8
Miscellaneous
8.1 Survival of Representations, Warranties and Covenants. All representations,
warranties and covenants made by the parties hereto shall survive until three
(3) years after the Closing Date, notwithstanding any investigation made on the
part of the parties hereto; provided, however, that the representations and
warranties made in Section 2.1.11 hereof shall survive until the expiration of
the applicable statute of limitations associates 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,
warranties and covenants by the respective party or parties, as the case may be,
and shall also survive until three (3) years after the Closing Date despite any
investigation made by any party hereto or on its behalf. All covenants and
agreements contained herein shall survive as provided herein.
8.2. 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.
8.3. 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.
8.4. 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 Key or the Parent
--------------------------------------------------------------------------------
Addressed to: With a copy to:
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Key Energy Group, Inc. Key Energy Drilling, Inc.
Two Tower Center, Tenth Floor 0 Xxxxx Xxxxx, Xxxxx 0000
Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000 Xxxxxxx, Xxxxx 00000
Attn: General Counsel Attn: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
and
Xxxxx, Xxxxxxxx & Xxxxx, P.C.
000 X. Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxx
Facsimile: (000) 000-0000
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If to a Shareholder
---------------------------------------------------------------------------
Addressed to: With a copy to:
---------------------------------------------------------------------------
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Xx. Xxxxxx X. Xxxxxx Xxxxxxxx, Field, Krier, Manning, Xxxxx &
Xx. Xxxxx X. Xxxxxx Stone, P.C.
0000 Xxxxxxxxx Xxxxx 0000 Xxxxxxx
P. O. Xxx 00000 Xxxxxxx, Xxxxx 00000
Lubbock Texas 79464-5158 Attn: Xxxxxx Xxxxxxx
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.
8.5. 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.
8.6. Binding Effect; Assignment; No Third Party Benefit. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, express or implied,
is intended to or shall confer upon any person other than Key, the Parent and
the Shareholders, any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
8.7. 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.
8.8. 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.
8.9. Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the applicable laws of the State of Texas.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Shareholders have executed this Agreement and Key has
caused this Agreement to be signed in its corporate name by its duly authorized
representative, all as of the day and year first above written.
KEY ENERGY GROUP, INC. KEY ENERGY DRILLING, INC.
By:_____________________________ By:
Xxxxxxx X. Xxxxxxx, Executive Xxxxxxx X. Xxxxxxx, Vice President
Vice President
SHAREHOLDERS
____________________________________
Xxxxxx X. Xxxxxx
____________________________________
Xxxxx X. Xxxxxx
TABLE OF CONTENTS
ARTICLE 1Purchase and Sale.....................................................1
1.1. Purchase and Sale of Xxxxxx Share.....................................1
1.2. Time and Place of Closing.............................................2
1.3. Delivery of Xxxxxx Certificates.......................................2
1.4. Distribution of Current Assets and Assumption of Liabilities..........2
1.5. Required Payments.....................................................3
1.6. Retention of Receivables; Payment of Payables;
Post-Closing Adjusting Payments.....................................3
ARTICLE 2 Representations and Warranties...............................4
2.1. General Representations and Warranties of the Shareholders............4
2.1.1. Organization and Standing.............................................4
2.1.2. Agreement Authorized and its Effect on Other Obligations..............4
2.1.3. Capitalization........................................................4
2.1.4. Ownership of Xxxxxx Shares............................................5
2.1.5. No Subsidiaries.......................................................5
2.1.6. Financial Statements..................................................5
2.1.7. Liabilities...........................................................5
2.1.8. Additional Xxxxxx Information.........................................5
2.1.8.1. Real Estate...........................................................5
2.1.8.2. Machinery and Equipment...............................................6
2.1.8.3. Inventory.............................................................6
2.1.8.4. Receivables...........................................................6
2.1.8.5. Payables..............................................................6
2.1.8.6. Insurance.............................................................6
2.1.8.7. Leases; Contracts.....................................................6
2.1.8.8. Employee Compensation Plans...........................................6
2.1.8.9 Certain Salaries......................................................7
0.0.0.00.Xxxx Accounts.........................................................7
2.1.8.11.Employee Agreements...................................................7
2.1.8.12.Intellectual Property.................................................7
0.0.0.00.Xxxxx Names...........................................................7
2.1.8.14.Promissory Notes......................................................7
2.1.8.15.Guaranties............................................................7
2.1.8.16.Reserves and Accruals.................................................8
2.1.8.17.Environmental.........................................................8
2.1.9. No Defaults...........................................................8
2.1.10. Absence of Certain Changes and Events.................................8
0.0.00.0.Xxxxxxxxx Change......................................................8
0.0.00.0.Xxxxxxxx Damage.......................................................8
2.1.10.3.Dividends.............................................................8
2.1.10.4.Capitalization Change.................................................8
2.1.10.5.Labor Disputes........................................................8
2.1.10.6.Other Adverse Changes.................................................8
2.1.11. Taxes.................................................................8
2.1.12. Intellectual Property.................................................9
2.1.13. Title to and Condition of Assets......................................9
2.1.14. Contracts............................................................10
2.1.15. Licenses and Permits.................................................10
2.1.16. Litigation...........................................................10
2.1.17.1.Environmental Conditions.............................................11
2.1.17.2.Permits, etc.........................................................11
2.1.17.3.Compliance...........................................................11
2.1.17.4. Past Compliance.....................................................11
2.1.17.5. Environmental Claims................................................12
2.1.17.6. Enforcement.........................................................12
2.1.17.7. Liabilities.........................................................12
2.1.17.8. Renewals............................................................12
2.1.17.9. Asbestos and PCBs...................................................12
2.1.18. Compliance with Other Laws..........................................12
2.1.19. No ERISA Plans or Labor Issues......................................12
2.1.20. Investigations; Litigation..........................................13
2.1.21. Absence of Certain Business Practices...............................13
2.1.22 Consents and Approvals..............................................13
2.1.23 Broker or Financial Advisors Fee....................................13
2.2. Investment Representations of the Shareholders......................13
2.2.1. Shareholders Investment Suitability and Related Matters.............13
2.2.2. Key Energy Shares Not Registered....................................14
2.2.3. Reliance on Representations.........................................14
2.2.4. Investment Intent...................................................14
2.2.5. Permitted Resale....................................................14
2.2.6. Investor Sophistication.............................................14
2.2.7. Availability of Information.........................................14
2.2.8. Restrictive Legends.................................................14
2.3. General Representations of Key......................................15
2.3.1. Organization and Good Standing......................................15
2.3.2. Agreement Authorized and its Effect on Other Obligations............15
2.3.3. Broker or Financial Advisor's Fee...................................15
2.4. General Representations and Warranties of the Parent................15
2.4.1. Organization and Good Standing......................................15
2.4.2. Agreement Authorized and its Effect on Other Obligations............16
2.4.3. Reports and Financial Statements....................................16
2.5. Consents and Approvals..............................................17
2.6. Finder's Fee........................................................17
ARTICLE 3 OBLIGATIONS PENDING CLOSING DATE....................................17
3.1 Agreements of the Shareholders.......................................17
3.1.1 Maintenance of Present Business......................................17
3.1.2. Maintenance of Properties............................................17
3.1.3. Maintenance of Books and Records.....................................17
3.1.4. Compliance with Law..................................................17
3.1.5. Inspection...........................................................17
3.1.6. Notice of Material Developments......................................18
3.2. Additional Agreements of the Shareholders............................18
3.2.1. Prohibition of Certain Employment Contracts..........................18
3.2.2. Prohibition of Loans.................................................18
3.2.3. Prohibition of Certain Commitments...................................18
3.2.4. Disposal of Assets...................................................18
3.2.5. Maintenance of Insurance.............................................18
3.2.6. Acquisition Proposals................................................18
3.2.7. No Amendment to Articles of Incorporation............................19
3.2.8. No Issuance, Sale, or Purchase of Securities.........................19
3.2.9. Prohibition on Dividends.............................................19
ARTICLE 4
Conditions Precedent to Obligations...........................................19
4.1. Conditions Precedent to Obligations of Shareholders...................19
4.1.1. Representations and Warranties of Key and the Parent True at the
Effective Time and the Closing Date.............................19
4.1.2. No Material Litigation................................................19
4.1.3 Opinion of Key Counsel................................................20
4.2. Conditions Precedent to Obligations of Key and the Parent.............20
4.2.1. Representations and Warranties of Shareholders True at the Effective
Time and the Closing Date.............................................20
4.2.2. No Litigation.........................................................21
4.2.3. Opinion of Shareholders' Counsel......................................21
4.2.4. Payment of Liabilities and Prepayments................................21
4.2.5. Encumbrances Removed..................................................21
ARTICLE 5 Termination and Abandonment.........................................22
5.1. Termination.............................................................22
5.1.1. By Mutual Consent....................................................22
5.1.2. By Key and the Parent Because of Failure to Perform Agreements or
Conditions Precedent.................................................22
5.1.3. By the Shareholders Because of Key or the Parent's Failure to Perform
Agreements or Conditions Precedent...................................22
5.1.4. By Key, the Parent or by the Shareholders
Because of Legal Proceedings.........................................22
5.1.5. By Key or the Parent Because of a Material Adverse Change............22
5.1.6. By Key or by the Shareholders if No Closing by January 15, 1998......22
5.2. Effect of Termination................................................22
5.3. Waiver of Conditions.................................................23
5.4. Expense on Termination...............................................23
ARTICLE 6 Additional Agreements ..............................................23
6.1 Noncompetition.......................................................23
6.2 Issuance of Key Shares...............................................24
6.3. Further Assurances...................................................24
6.4. Fees and Expenses....................................................24
ARTICLE 7 Indemnification....................................................24
7.1 Indemnification by Shareholders......................................24
7.2 Indemnification by Key...............................................25
7.3 Indemnification Procedure............................................25
ARTICLE 8 Miscellaneous.......................................................26
8.1 Survival of Representations, Warranties and Covenants................26
8.2 Entirety.............................................................26
8.3 Counterparts.........................................................26
8.4 Notices and Waivers..................................................26
8.5 Table of Contents and Captions.......................................27
8.6. Binding Effect; Assignment; No Third Party Benefit...................27
8.7. Successors and Assigns...............................................28
8.8. Severability.........................................................28
8.9. Applicable Law.......................................................28
