PLAN AND AGREEMENT OF MERGER
AMONG
KEY ENERGY GROUP, INC.
WELLTECH EASTERN, INC.
XXXX OIL COMPANY
AND
XXXXXX WELL SERVICING, INC.
Dated as of November 22, 1996
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PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (this "Agreement") is entered into as
of November 22, 1996 among Key Energy Group, Inc., a Maryland corporation
("Key"), WellTech Eastern, Inc., a Delaware corporation and a wholly-owned
subsidiary of Key ("WellTech" or the "Surviving Corporation"), Xxxxxx Well
Servicing, Inc., a Texas corporation ("Xxxxxx"), and Xxxx Oil Company, a
Delaware corporation and the sole shareholder of Xxxxxx (the "Shareholder").
WellTech and Xxxxxx are sometimes collectively referred to herein as the
"Merging Corporations."
WITNESSETH :
WHEREAS, Key is a corporation duly organized and validly existing under
the laws of the State of Maryland, with its principal executive offices at Xxx
Xxxxx Xxxxxx, Xxxxx Xxxxx, Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000; and
WHEREAS, the capitalization of Key consists of 25,000,000 shares of
common stock, par value $.10 per share ("Key Common Stock"), of which as of the
date hereof, 10,549,582 shares are issued and outstanding, 913,334 shares are
reserved for issuance pursuant to stock options, 825,000 shares are reserved for
issuance pursuant to outstanding warrants, and 5,333,333 shares are reserved for
issuance upon conversion of Key's $52,000,000 7% Convertible Subordinated
Debentures due 2003 (the "Convertible Debentures"); and
WHEREAS, WellTech is a corporation duly organized and validly existing
under the laws of the State of Delaware, with its principal executive offices at
Xxx Xxxxx Xxxxxx, Xxxxx Xxxxx, Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000; and
WHEREAS, Key owns 100 shares of common stock, par value $.01 per share,
of WellTech (the "WellTech Common Stock"), which constitutes all of the issued
and outstanding shares of capital stock of WellTech; and
WHEREAS, Xxxxxx is a corporation duly organized and validly existing
under the laws of the State of Texas, with its principal executive offices at
0000 Xxxxxxx 000 Xxxxx, Xxxxxxx, Xxxxx 00000; and
WHEREAS, the authorized capital stock of Xxxxxx consists of 1,002
shares of common stock, par value $1.00 per share (the "Xxxxxx Common Stock"),
of which on the date hereof 167 shares are issued and outstanding, and 835
shares are held in treasury (the "Xxxxxx Treasury Shares"); and
WHEREAS, the Shareholder is a corporation duly organized and validly
existing under the laws of the State of Delaware, with its principal executive
offices at 0000 Xxxx Xxxxxx, Xxxxxx, Xxxxx 00000; and
WHEREAS, the Shareholder owns all 167 issued and outstanding shares of
Xxxxxx Common
Stock; and
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WHEREAS, (i) the board of directors of Key, (ii) Key (in its capacity
as WellTech's sole shareholder) and the board of directors of WellTech and (iii)
the Shareholder (in its capacity as the sole shareholder of Xxxxxx) and the
board of directors of Xxxxxx desire to merge Xxxxxx with and into WellTech in
accordance with the provisions of Section 252 of the Delaware General
Corporation Law (the "DGCL") and Article 5.01 of the Texas Business Corporation
Act (the "TBCA") pursuant to the terms and provisions of this Agreement, and
have approved such merger (the "Merger") and the other terms and provisions of
this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, and to prescribe the terms and
conditions of the Merger contemplated hereby, the mode of carrying the same into
effect, the manner and basis of converting the presently outstanding shares of
Xxxxxx Common Stock into the right to receive the Merger Consideration described
in Section 1.11 hereof, and such other details and provisions as are deemed
necessary or proper, the parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1. Surviving Corporation. Xxxxxx shall be, upon the Effective Date
(defined below), merged with and into WellTech, with WellTech being the
surviving corporation (the "Surviving Corporation"), which shall continue its
corporate existence and remain a Delaware corporation governed by and subject to
the laws of that State.
1.2. Effective Date. The Merger shall become effective upon the last to
occur of (i) the filing of the Certificate of Merger with the Secretary of State
of Delaware following its execution in accordance with Sections 252 and 103 of
the DGCL and (ii) the filing of the Articles of Merger with the Secretary of
State of Texas following its execution in accordance with Article 5.04 of the
TBCA. The Merger, subject to the satisfaction of all of the terms and conditions
of this Agreement, shall take place on December 3, 1996, or as soon as
practicable thereafter. The date upon which the Merger becomes effective is
referred to in this Agreement as the "Effective Date."
1.3. Name and Continued Corporate Existence of Surviving Corporation.
On the Effective Date, the identity, existence, purposes, powers, objects,
franchises, rights, and immunities of WellTech shall continue unaffected and
unimpaired by the Merger, and the corporate identity, existence, purposes,
powers, objects, franchises, rights, and immunities of Xxxxxx shall be wholly
merged into WellTech and WellTech shall be fully vested therewith. Accordingly,
on the Effective Date, the separate existence of Xxxxxx, except insofar as
continued by statute, shall cease.
1.4. Governing Law and Articles of Incorporation of Surviving
Corporation. The laws of Delaware shall continue to govern the Surviving
Corporation. On and after the Effective Date, the Certificate of Incorporation
of WellTech shall be the Certificate of Incorporation of the Surviving
Corporation until further amended in the manner provided by law.
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1.5. Bylaws of Surviving Corporation. On the Effective Date, the Bylaws
of WellTech shall be the Bylaws of the Surviving Corporation until altered,
amended, or repealed, or until new bylaws shall be adopted in accordance with
the provisions of law, the Certificate of Incorporation of WellTech, and the
Bylaws of WellTech.
1.6. Directors of Surviving Corporation. The incumbent directors of
WellTech immediately before the Effective Date shall continue to constitute the
board of directors of the Surviving Corporation from and after the Effective
Date, and such persons shall remain directors of the Surviving Corporation until
their successors are duly elected and qualify in accordance with the Certificate
of Incorporation and the Bylaws of the Surviving Corporation.
1.7. Officers of Surviving Corporation. The incumbent officers of
WellTech immediately before the Effective Date shall continue to hold their
respective offices of the Surviving Corporation from and after the Effective
Date and until their successors are duly elected and qualify in accordance with
the Certificate of Incorporation and the Bylaws of the Surviving Corporation.
1.8. Vacancies. If on or after the Effective Date, a vacancy shall for any
reason exist in the board of directors or in any of the offices of the Surviving
Corporation, such vacancy shall be filled in the manner provided in the
Certificate of Incorporation and Bylaws of the Surviving Corporation.
1.9. Capital Stock of Surviving Corporation. The authorized number of
shares of capital stock of the Surviving Corporation, and the par value,
designations, preferences, rights, limitations thereof, and the express terms,
shall be as set forth in the Certificate of Incorporation of the Surviving
Corporation.
1.10. Distributions. Before the Effective Date, the Shareholder shall
cause Xxxxxx to apply or distribute all of its cash and cash equivalents held as
of the Allocation Date (as defined in Section 7.3) as follows: (i) first, to the
payment and discharge of the leases described in Schedule 1.10, (ii) second, to
the payment of any intercompany accounts or indebtedness owed by Xxxxxx to the
Shareholder, and (iii) third, to the payment of a dividend to the Shareholder.
The amount of any intercompany accounts or indebtedness owed by Xxxxxx to the
Shareholder not discharged pursuant to clause (ii) above (the "Excess Account")
shall be deemed paid and discharged in consideration of the amounts, if any, to
be received by the Shareholder pursuant to Section 7.3. In addition, before the
Effective Date, the Shareholder shall cause Xxxxxx to declare a dividend payable
to the Shareholder (as the record holder of the Xxxxxx Shares before the
Effective Date) in an amount equal to the Excess Receivables (as defined in
Section 7.3) remaining, if any, after the discharge of the Excess Account
pursuant to clause (ii) of this Section 1.10 and Section 7.3.
1.11. Conversion of Securities Upon Merger.
1.11.1. Conversion of Xxxxxx Common Stock. On the Effective Date, the 167
issued and outstanding shares of Xxxxxx Common Stock, all of which are held by
the Shareholder (the "Xxxxxx Shares"), without any action on the part of the
Shareholder, shall automatically
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become and be converted into the right to receive from Key 1,000,000 shares
of Key Common Stock, or such greater or lesser number of shares of Key Common
Stock determined as provided in Section 1.11.2 (the "Merger Consideration"). The
Xxxxxx Treasury Shares shall be canceled.
1.11.2.
1.11.2.1. Key Common Stock Closing Price Adjustments.
If the average closing price of the Key Common Stock on the
American Stock Exchange for the 10 trading days immediately
preceding the day before the Effective Date (the "Average
Closing Price") is less than $8.00, then the number of shares
of Key Common Stock to be issued in the Merger will be
adjusted to equal an amount determined by taking the product
of 100,000 shares multiplied times the percentage by which the
Average Closing Price is less than $8.00 but greater than or
equal to $6.00, and adding such product to 1,000,000 shares.
If the Average Closing Price is greater than $10.00, then the
number of shares of Key Common Stock to be issued in the
Merger will be adjusted to equal an amount determined by
taking the product of 100,000 shares multiplied times the
percentage by which the Average Closing Price is greater than
$10.00 but less than or equal to $12.00, and subtracting such
product from 1,000,000 shares. In any event, however, the
maximum adjustment to the purchase price shall not be greater
than 100,000 shares. A list showing the range of possible
adjustments is attached as Schedule 1.11.2.1.
1.11.2.2. Adjustments for Environmental Liabilities.
If as a result of the environmental assessments conducted by
Xxxxxx pursuant to Section 5.2.7 Key reasonably determines
that restoration activities on any real property owned by
Xxxxxx is required, then Xxxxxx may, at its option, either
conduct appropriate restoration activities on such property at
its own expense or remove such property from those being
acquired by Key in the Merger. If any real property is removed
from the properties that otherwise would be acquired by Key in
the Merger, then the Merger Consideration will be adjusted by
an amount of Key Shares with a fair market value, based on the
Average Closing Price, as is equal to the fair market value of
such property, with such fair market value to be determined by
an independent appraiser mutually satisfactory to the
Shareholder and Key. The fees and expenses of such appraiser
shall be borne by the Shareholder.
1.11.2.3. No Fractional Shares. If any adjustment to the number of Key
Shares issuable pursuant to this Section 1.11.2. results in a fractional share,
then the number of Key Shares issuable as the Merger Consideration shall be
rounded up to the next whole share.
1.12. Surrender of Xxxxxx Certificates. On the Effective Date, the
Shareholder will surrender all the certificates representing the Xxxxxx Shares
(the "Xxxxxx Certificates"). On the
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Effective Date, Key will cancel the Xxxxxx Certificates, and the Shareholder
will receive the Merger Consideration.
1.13. Xxxxxx' Transfer Books Closed. Upon the Effective Date, the stock
transfer books of Xxxxxx shall be closed, and no transfer of any shares of
capital stock of Xxxxxx shall thereafter be made or consummated.
1.14. Assets and Liabilities of Merging Corporations Become Those of
Surviving Corporation. On the Effective Date, all rights, privileges, powers,
and franchises of each of the Merging Corporations, and all property, real,
personal, and mixed, and all debts due on whatever account, as well as stock
subscriptions and all other things in action of or belonging to either of the
Merging Corporations, shall be taken by and deemed to be transferred to and
shall be vested in the Surviving Corporation without further act or deed, and
all such rights, privileges, powers, and franchises, property, debts, or things
in action, and all and every other interest of each of the Merging Corporations
shall be thereafter as effectively the property of the Surviving Corporation as
they were of the respective Merging Corporations, and the title to any real
property, whether vested by deed or otherwise, in either of the Merging
Corporations, shall not revert or be in any way impaired by reason of the
Merger; provided however, that all rights of creditors and all liens upon any
properties of each of the Merging Corporations shall be preserved unimpaired,
and all debts, liabilities and duties of the Merging Corporations shall
thenceforth attach to the Surviving Corporation and may be enforced against and
by it to the same extent as if such debts, liabilities and duties had been
incurred or contracted by it. Any action or proceeding pending by or against
either of the Merging Corporations may be prosecuted to judgment as if the
Merger had not taken place, or the Surviving Corporation may be substituted in
place of either of the Merging Corporations.
1.15. Federal Income Tax Treatment. The Merger is intended to qualify
as a tax-free reorganization described in ss.368(a)(1)(a) by virtue of ss.
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code"). The
parties hereto acknowledge that this Agreement constitutes a "plan of
reorganization" among the Shareholder, Xxxxxx, Key and WellTech within the
meaning of Treas.Reg. ss. 1.368-2(g).
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDER AND XXXXXX
2.1. Representations and Warranties of the Shareholder and Xxxxxx.
The Shareholder
and Xxxxxx each represent and warrant to Key and WellTech as follows:
2.1.1. Organization and Good Standing. Each of the Shareholder
and Xxxxxx is a corporation duly organized, validly existing and in
good standing under the laws of the state of its organization, 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
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foreign corporation authorized to do business in all jurisdictions in
which the character of the properties owned or the nature of the
business conducted by it would make such qualification or licensing
necessary, except where the failure to be so qualified or licensed
would not have a material adverse effect on the respective businesses
or operations of the Shareholder or Xxxxxx.
2.1.2. Agreement Authorized and its Effect on Other
Obligations. The execution and delivery of this Agreement has been
authorized by the board of directors of Xxxxxx and by the Shareholder
in its capacity as the sole shareholder of Xxxxxx, and has been
authorized by the board of directors of the Shareholder in its
individual capacity. The consummation of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate
action on the part of Xxxxxx and the Shareholder, and this Agreement is
a valid and binding obligation of Xxxxxx and the Shareholder
enforceable against Xxxxxx and the Shareholder in accordance with its
terms. The execution, delivery and performance of this Agreement and
the consummation of the Merger contemplated by this Agreement will not
conflict with or result in a violation or breach of any term or
provision of, nor constitute a default under (i) the Certificate or
Articles of Incorporation, as applicable, or Bylaws of Xxxxxx or the
Shareholder, or (ii) any obligation, indenture, mortgage, deed of
trust, lease, contract or other agreement to which Xxxxxx or the
Shareholder is a party or by which Xxxxxx or the Shareholder or their
respective properties are bound, which in the case of either (i) or
(ii), would have a material adverse effect on the business or
operations of the Shareholder or Xxxxxx.
2.1.3. Capitalization. The authorized capitalization of Xxxxxx
consists of 1,002 shares of Xxxxxx Common Stock, of which, as of the
date hereof 167 shares were issued and outstanding and held
beneficially and of record by the Shareholder and 835 of which are
Xxxxxx Treasury Shares. 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 is
subject to any voting trust, 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. The Shareholder holds good
and valid title to all of the Xxxxxx Shares, free and clear of all
Encumbrances. The term "Encumbrances" means all liens, security
interests, pledges, mortgages, deeds 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. There are no claims pending or, to
the Shareholder's knowledge, threatened, against Xxxxxx or the
Shareholder that concern or affect title to the Xxxxxx Shares, or that
seek to compel the issuance of capital stock or other securities of
Xxxxxx.
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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. Xxxxxx has delivered to Key and
WellTech its unaudited balance sheet and related statements of income,
retained earnings and cash flows as of and for Xxxxxx' fiscal year
ended December 31, 1995, and also has delivered to Key and WellTech
copies of its unaudited balance sheet (the "Unaudited Balance Sheet")
and related statements of income, retained earnings and cash flows as
of and for the nine months ended September 30, 1996. Such financial
statements are complete in all material respects (except for the
omission of notes and schedules), present fairly the financial
condition of Xxxxxx as at the dates indicated, and the results of
operations for the respective periods indicated, and have been prepared
in accordance with generally accepted accounting principles applied on
a consistent basis, except as noted therein and subject, in the case of
interim financial statements, to normal year-end adjustments and other
adjustments described therein; in addition, such financial statements
as of and for the nine months ended September 30, 1996, though
unaudited, include all adjustments which Xxxxxx considers necessary for
a fair presentation, in all material respects, of its results for that
period.
2.1.7. Liabilities. Except as disclosed on Schedule 2.1.7,
Xxxxxx does not have any liabilities or obligations, either accrued,
absolute or contingent, nor does the Shareholder have any knowledge of
any potential liabilities or obligations, which would be required to be
reflected on the Unaudited Balance Sheet prepared under generally
accepted accounting principles and that would materially adversely
affect the value and conduct of the business of Xxxxxx, other than
those (i) reflected or reserved against in the Unaudited Balance Sheet
or (ii) incurred in the ordinary course of business since September 30,
1996.
2.1.8. Additional Information. Attached as Schedule 2.1.8
hereto are true, complete
and correct lists, as of October 28, 1996, 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.
2.1.8.2. Machinery and Equipment. All rigs, carriers, rig equipment,
machinery, transportation equipment, tools, equipment, furnishings, and fixtures
owned, leased or subject to a contract of purchase and sale, or lease
commitment, by Xxxxxx, with a description of the nature and amount of any
Encumbrances thereon;
2.1.8.3. Inventory. All inventory items or groups of inventory items owned
by Xxxxxx that are valued on the Unaudited Balance Sheet, together with the
amount of any Encumbrances thereon;
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2.1.8.4. Insurance. All insurance policies or bonds
currently maintained by Xxxxxx, including title insurance
policies, with respect to Xxxxxx, 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;
2.1.8.5. Contracts. All well service contracts
(limited to contracts pursuant to which services currently are
being provided by Xxxxxx and any "master agreements" to which
they relate), and all other contracts to which Xxxxxx is a
party, including leases under which Xxxxxx is lessor or
lessee, which are to be performed in whole or in part after
the date hereof;
2.1.8.6. Employee Compensation Plans. All bonus,
incentive compensation, deferred compensation, profit-sharing,
retirement, pension, welfare, group insurance, death benefit,
or other fringe benefit plans, arrangements or trust
agreements of Xxxxxx, together with copies of the most recent
reports with respect to such plans, arrangements, or trust
agreements filed with any governmental agency, and all
Internal Revenue Service determination letters that have been
received with respect to such plans;
2.1.8.7. Certain Salaries. The names and salary rates of all present
employees of Xxxxxx who have salaries in excess of $50,000, and, to the extent
existing on the date of this Agreement, all arrangements with respect to any
bonuses to be paid to them from and after the date of this Agreement;
2.1.8.8. 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;
2.1.8.9. Employee Agreements. Any collective
bargaining agreements of Xxxxxx with any labor union or other representative of
employees, including amendments, supplements, and written or oral
understandings, and all employment and consulting and severance agreements of
Xxxxxx;
2.1.8.10. Intellectual Property. All patents, trademarks, copyrights and
other intellectual property rights owned, licensed, or used by Xxxxxx;
2.1.8.11.
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;
2.1.8.12.
Promissory Notes. All long-term and short-term promissory notes, installment
contracts, loan agreements, credit agreements, and any other agreements of
Xxxxxx relating thereto or with respect to collateral securing the same;
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2.1.8.13. Guaranties. All indebtedness, liabilities and commitments of
others as to which Xxxxxx is a guarantor, endorser, co-maker, surety, or
accommodation maker, or is contingently liable therefor and all letters of
credit, whether stand-by or documentary, issued by any third party;
2.1.8.14. Leases. All leases to which Xxxxxx is a party; and
2.1.8.15. Environment. 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 on any
property owned or used by Xxxxxx.
2.1.9. No Defaults. Except as is specified in Schedule 2.1.8
(as such Schedule has been limited pursuant to Section 2.1.8.5), Xxxxxx
is not a party to, or bound by, any contract or arrangement of any kind
to be performed after the Effective Date, nor is Xxxxxx in default in
any material respect in any obligation or covenant on its part to be
performed under any obligation, lease, contract, order, plan or other
arrangement.
2.1.10. Absence of Certain Changes and Events. Except as set forth in
Schedule 2.1.10, other than as a result of the transactions contemplated by this
Agreement, since September 30, 1996, there has not been:
2.1.10.1. Financial Change. Any material adverse change in the financial
condition, backlog, operations, assets, liabilities or business of Xxxxxx;
2.1.10.2. Property Damage. Any material 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;
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 dispute; or
2.1.10.6. Other Material Changes. Any other event or condition known to
Xxxxxx or the Shareholder particularly pertaining to and adversely affecting the
operations, assets or business of Xxxxxx which would constitute a material
adverse change, as such term is defined in Section 4.1.6.
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2.1.11. Taxes.
2.1.11.1. Tax Returns. Except as provided on Schedule
2.1.11, 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 required to be filed
on or before the Effective Date have been filed with
appropriate governmental agencies, domestic and foreign, by
Xxxxxx 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) or extensions to the filing of
such returns have been timely requested by Xxxxxx to the
filing thereof and all taxes shown by such returns to be
payable have been paid other than those being contested in
good faith by Xxxxxx, except for tax return filings or tax
payments the failure to file or pay, as the case may be, do
not have a material adverse effect on Xxxxxx.
2.1.11.2. Statutes of Limitation. Except as provided
on Schedule 2.1.11, no waiver of any statute of limitations
executed by Xxxxxx with respect to any income or other tax is
in effect for any period or extensions to the filing of such
returns have been timely requested by Xxxxxx to the filing
thereof.
2.1.11.3. Audits. Except as provided on Schedule 2.1.11, the income tax
returns of Xxxxxx are not being examined by the Internal Revenue Service or the
taxing authorities of any other jurisdiction and no proposed assessments of tax
are pending.
2.1.11.4. Tax Liens. There are no tax liens on any assets of Xxxxxx except
for taxes not yet currently due.
2.1.11.5. Tax-Sharing Agreements. Except as provided on Schedule 2.1.11,
Xxxxxx does not owe any amount under any tax-sharing or allocation
agreement.
2.1.11.6. Distributions. Except for regular normal
dividends and as provided in Section 1.10 and Section 7.3,
Xxxxxx has not made any payments to dissenters or payments to
the Shareholder other than for expenses or repayment of
liability in the ordinary course of business, or other
redemptions or distributions to the Shareholder other than in
the ordinary course of business within the 12 months before
the Effective Date.
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representation, the Xxxxxx Shares exchanged for cash or other
property, surrendered by dissenters or exchanged for cash in
lieu of fractional shares of Key Common Stock will be treated
as outstanding shares of Xxxxxx on the date of the Merger.
Moreover, shares of Xxxxxx and Key Common Stock held by the
Shareholder and otherwise sold, redeemed or disposed of before
or after the Merger will be considered in making this
representation.
2.1.11.8. Liabilities. The liabilities of Xxxxxx assumed by WellTech and
the liabilities to which the transferred assets of Xxxxxx are subject were
incurred by Xxxxxx in the ordinary course of business.
2.1.11.9. Expenses. Except as provided in Section 7.3, Xxxxxx and the
Shareholder will pay their respective expenses, if any, incurred in
connection with the Merger.
2.1.11.10. Bankruptcy. Xxxxxx is not under the jurisdiction of a court
in a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of
the Internal Revenue Code.
2.1.11.11. Investment Companies. Xxxxxx is not an investment
company as defined in Section 368(a)(2)(F)(iii) and (iv) of the
Internal Revenue Code.
2.1.12. Intellectual Property. Xxxxxx owns or possesses
licenses to use all patents, patent applications, trademarks and
service marks (including registrations and applications therefor),
trade names, copyrights and written know-how, trade secrets and all
other similar proprietary data and the goodwill associated therewith
(collectively, the "Intellectual Property") that are either material to
the business of Xxxxxx or that are necessary for the rendering of any
services rendered by Xxxxxx and the use or sale of any equipment or
products used or sold by Xxxxxx, including all such Intellectual
Property listed in Schedule 2.1.8. The Intellectual Property is owned
or licensed by Xxxxxx free and clear of any Encumbrance. Xxxxxx has not
granted to any other person any license to use any Intellectual
Property. Xxxxxx has not received any notice of infringement,
misappropriation, or conflict with the intellectual property rights of
others in connection with the use by Xxxxxx of the Intellectual
Property or otherwise in connection with Xxxxxx' operation of its
business.
2.1.13. Title to and Condition of Assets. Xxxxxx has good,
indefeasible and marketable title to all its properties, interests in
properties and assets, real and personal, reflected in the Unaudited
Balance Sheet or in Schedule 2.1.8, free and clear of any Encumbrance
of any nature whatsoever, except (i) Encumbrances reflected in the
Unaudited Balance Sheet or in Schedule 2.1.8, (ii) liens for current
taxes not yet due and payable, and (iii) such imperfections of title,
easements and Encumbrances, if any, as are not substantial in
character, amount, or extent and do not and will not materially detract
from the value, or interfere with the present use, of the property
subject thereto or affected thereby, or otherwise materially impair
Xxxxxx' business operations. All leases pursuant to which Xxxxxx leases
(whether as lessee or lessor) any substantial amount of real or
personal property are in good
::ODMA\PCDOCS\DOCS\97107\2
11
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.
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. Except as otherwise provided on Schedule 2.1.8, all rigs, rig
equipment, machinery, transportation equipment, tools and other major
items of equipment of Xxxxxx are in a state of good operating condition
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 Xxxxxx' normal operations. All such assets
conform, in all material respects, 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 the Shareholder, except such as have been fully complied with.
2.1.14. Contracts. All material 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. Xxxxxx is not, and
no other party to any such contract, lease, plan or other arrangement
is, in material 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 material default thereunder.
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 own, operate, maintain and use
its assets in the manner in which they are now being operated,
maintained and used. Each of such Permits and Xxxxxx' 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 such Permits. None of such Permits have
been, or to the knowledge of Xxxxxx or the Shareholder, are threatened
to be, revoked, canceled, suspended or modified.
2.1.16. Litigation. Except as set forth on Schedule 2.1.16,
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 the Shareholder, might become a
party or which particularly 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 Xxxxxx or
the Shareholder, threatened.
2.1.17. Environmental Compliance. The provisions of this Section
2.1.17 shall not be applicable to any environmental condition or issue
which is shown on Schedule 2.1.17.1. Notwithstanding anything
contained herein to the contrary, this Section 2.1.17 contains the
::ODMA\PCDOCS\DOCS\97107\2
12
exclusive representations and warranties of the Shareholder and
Xxxxxx regarding environmental matters.
2.1.17.1. Environmental Conditions. There are no
environmental conditions or circumstances, including, without
limitation, the presence or release of any hazardous
substance, on any property presently or previously owned by
Xxxxxx, or on any property to which hazardous substances or
waste generated by Xxxxxx' operations or use of its assets
were disposed of, which would result in a material adverse
change in the business or business prospects of Xxxxxx;
2.1.17.2. Permits, etc. Xxxxxx has in full force and
effect all environmental permits, licenses, approvals and
other authorizations required to conduct its operations, other
than those that are not material to the business or operations
of Xxxxxx, and is operating in compliance thereunder;
2.1.17.3. Compliance. Xxxxxx'x operations and use of its assets
do not, in any material respect, violate any applicable federal, state
or local law, statute, ordinance, rule, regulation, order or notice
requirement pertaining to (a) the condition or protection of air,
groundwater, surface water, soil, or other environmental media, (b)
the environment, including natural resources or any activity which
affects the environment, or (c) the regulation of any pollutants,
contaminants, waste or substances (whether or not hazardous or toxic),
including, without limitation, the Comprehensive Environmental
Response Compensation and Liability Act (42 U.S.C. ss. 9601 et seq.),
the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss. 1609
et seq.), the Clean Water Act (33 U.S.C. 1251 et seq.), the Clean Air
Act (42 U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (17
U.S.C. ss. 2601 et seq.), the Federal Insecticide Fungicide and
Rodenticide Act (7 U.S.C. ss. 136 et seq.), the Safe Drinking Water
Act (42 U.S.C. ss. 201 and ss. 300f et seq.), the Rivers and Harbors
Act (33 U.S.C. ss. 401 et seq.), the Oil Pollution Act (33 U.S.C. ss.
2701 et seq.) and analogous federal, interstate, state and local
requirements, as any of the foregoing may have been amended or
supplemented from time to time (collectively the "Applicable
Environmental Laws");
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 a violation of any of the Applicable
Environmental Laws, other than violations which have been
remedied or cured and which will not in the aggregate have a
material adverse effect on the future business or operations
of Xxxxxx;
2.1.17.5. Environmental Claims. Except as set forth
on Schedule 2.1.17.5, during the five year period ended on the
date hereof, no notice has been served on Xxxxxx or the
Shareholder from any entity, governmental agency or individual
regarding any existing, pending or threatened investigation,
inquiry, enforcement action or litigation related to alleged
violations under any Applicable Environmental
::ODMA\PCDOCS\DOCS\97107\2
13
Laws, or regarding any claims for remedial obligations,
response costs or contribution under any Applicable
Environmental Laws;
2.1.17.6. Renewals. The Shareholder and Xxxxxx know of no reason
WellTech would not be able to renew any of the permits, licenses, or
other authorizations required pursuant to any of the Applicable
Environmental Laws to operate and use any of Xxxxxx' assets for their
current purposes and uses; and
2.1.17.7. Asbestos and PCBs. No 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 its properties.
2.1.18. Compliance with Other Laws. Except as provided in
Sections 2.1.17 and 2.1.19, 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. ss.ss.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 which
would have a material adverse effect upon its financial condition,
properties or business.
2.1.19. No ERISA Plans or Labor Issues.
2.1.19.1. Exclusive Representation. The provisions of
this Section 2.1.19 shall not be applicable to any issue
relating to the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") which is shown on
Schedule 2.1.19. Notwithstanding anything contained herein to
the contrary, this Section 2.1.19 contains the exclusive
representations and warranties of the Shareholder and Xxxxxx
regarding ERISA matters.
2.1.19.2. Status of ERISA Plans and Labor Relations.
Except as set forth on Schedule 2.1.16, 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
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. Except as set
forth on Schedule 2.1.16, Xxxxxx does not have any dispute
with any of its existing or former employees. There are no
labor disputes or, to the knowledge of Xxxxxx or the
Shareholder, any disputes threatened by current or former
employees of Xxxxxx.
2.1.20. Investigations; Litigation. Except as set forth on Schedule 2.1.20,
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
best of Xxxxxx' or the Shareholder's knowledge, threatened, nor has any
governmental entity indicated to Xxxxxx
::ODMA\PCDOCS\DOCS\97107\2
14
or the Shareholder an intention to conduct the same, and there is no
action, suit or proceeding pending or, to the best of Xxxxxx or the
Shareholder's knowledge, 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 any material adverse change in the financial
condition, properties or business of Xxxxxx.
2.1.21. Absence of Certain Business Practices. Neither Xxxxxx
nor any officer, employee or agent of Xxxxxx, nor any other person
acting on its behalf (including the Shareholder or any officer,
employee or agent of the Shareholder), has, directly or indirectly,
within the past five years, given or agreed to give any gift or similar
benefit to any customer, supplier, government employee or other person
who is or may be in a position to help or hinder the business of Xxxxxx
(or to assist Xxxxxx in connection with any actual or proposed
transaction) which might subject Xxxxxx to any material damage or
penalty in any civil, criminal or governmental litigation or
proceeding.
2.1.22. Consents and Approvals. Other than the filing of
Articles of Merger with the Secretary of State of the State of Texas,
no consent, approval or authorization of, or filing or registration
with, any governmental or regulatory authority, or any other person or
entity is required to be made or obtained by Xxxxxx or the Shareholder
in connection with the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby.
2.1.23. Finder's Fee. The Shareholder has engaged Howard,
Weil, Labouisse, Xxxxxxxxxx Incorporated ("Xxxxxx Xxxx") as its
financial advisor in connection with the sale of Xxxxxx. The fees and
expenses payable to Xxxxxx Xxxx will be paid by the Shareholder and not
out of the assets of Xxxxxx. Other than engaging Xxxxxx Xxxx as its
financial advisor, all negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Xxxxxx and the
Shareholder and their counsel directly with Key and WellTech and their
counsel, without the intervention of any other person in such manner as
to give rise to any valid claim against any of the parties hereto for a
brokerage commission, finder's fee or any similar payment.
2.2. Investment Representations of the Shareholder. The Shareholder
acknowledges, represents and agrees that:
2.2.1. Shareholder Investment Suitability and Related Matters.
(i) Key has made available to the Shareholder the information and
documents described in Section 3.1.4., (ii) the Shareholder is aware of
the risks associated with ownership of Key Common Stock, and (iii) the
Shareholder is capable of bearing the financial risks associated with
such ownership.
2.2.2. Key Shares Not Registered. The issuance of the Key Shares has not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or registered or qualified under any applicable state securities laws;
::ODMA\PCDOCS\DOCS\97107\2
15
2.2.3. Reliance on Representations. The Key Shares are being
issued to the Shareholder in reliance upon exemptions from such
registration or qualification requirements, and the availability of
such exemptions depends in part upon the Shareholder's bona fide
investment intent with respect to the Key Shares;
2.2.4. Investment Intent. The Shareholder's acquisition of the Key Shares
is solely for its own account for investment, and the Shareholder is not
acquiring the Key Shares for the account of any other person or with a view
toward resale, assignment, fractionalization, or distribution thereof.
2.2.5. Permitted Resale. The Shareholder shall not offer for
sale, sell, transfer, pledge, hypothecate or otherwise dispose of any
of the Key Shares except in accordance with the registration
requirements of the Securities Act and applicable state securities laws
or upon delivery to Key of an opinion of legal counsel reasonably
satisfactory to Key that an exemption from registration is available;
2.2.6. Restrictive Legend. In addition to any other legends required by law
or the other agreements entered into in connection herewith, the certificate
evidencing the Key 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.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
KEY AND WELLTECH
3.1. Representations and Warranties of Key. Key represents and warrants to
Xxxxxx and the Shareholder as follows:
3.1.1. Organization and Standing. Key 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
::ODMA\PCDOCS\DOCS\97107\2
16
business in all jurisdictions in which the character of the properties
owned or the nature of the business conducted by it would make such
qualification or licensing necessary, except where the failure to be so
qualified or licensed would not have a material adverse effect on the
business or operations of Key. Copies of the Certificate of
Incorporation and Bylaws of Key have heretofore been delivered to
Shareholder, and such copies are accurate and complete as of the date
hereof.
3.1.2. 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 against Key in accordance with its terms.
The execution and delivery of this Agreement has been authorized by the
board of directors of WellTech and Key in its capacity as the sole
shareholder of WellTech, and has been authorized by the board of
directors of Key in its individual capacity. The execution, delivery
and performance of this Agreement and the consummation of the Merger
contemplated by this Agreement will not conflict with or result in a
violation or breach of any term or provision of, nor 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 subsidiaries is
a party or by which Key or its subsidiaries, or their respective
parties are bound, which in the case of either (i) or (ii), would have
a material adverse effect on the business or operations of Key.
3.1.3. Capitalization. The capitalization of Key consists of
25,000,000 shares of Key Common Stock, of which as of the date hereof,
10,549,582 shares are issued and outstanding, 913,334 shares are
reserved for issuance pursuant to stock options, 825,000 shares are
reserved for issuance pursuant to outstanding warrants and 5,333,333
shares are reserved for issuance upon conversion of Key's Convertible
Debentures. Pursuant to Key's Certificate of Incorporation, Key's board
of directors has the authority, without further shareholder action, to
redesignate all of the authorized and unissued shares of Key Common
Stock into one or more series of preferred stock. As of the date
hereof, no shares have been so designated or issued. Except as set
forth in this Section 3.1.3., there are outstanding as of the date
hereof (i) no securities of Key or any other person convertible into or
exchangeable or exercisable for shares of capital stock or other voting
securities of Key, and (ii) except as set forth on Schedule 3.1.3, no
subscriptions, options, warrants, calls, rights obligating Key to
issue, deliver, sell, purchase, redeem or acquire shares of capital
stock or other voting securities of Key. All of the outstanding Key
Common Stock is, and (when issued) the Key Shares will be, validly
issued, fully paid and nonassessable and not subject to any preemptive
right. As of the date hereof there is no, and at the Effective Date
there will not be any, stockholder agreement, voting trust, or other
agreement or understanding to which Key is a party or by which it is
bound relating to the voting of any shares of capital stock of Key.
3.1.4. Reports and Financial Statements. Key has previously
furnished to the Shareholder true and complete copies of (i) Key's
annual report filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities and Exchange Act of 1934 (the
"Exchange Act") for Key's fiscal year ended June 30, 1996; (ii) Key's
quarterly
::ODMA\PCDOCS\DOCS\97107\2
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and other reports filed with the Commission since Key's fiscal year
ended June 30, 1996; (iii) all definitive proxy solicitation materials
filed with the Commission since December 31, 1995; (iv) any
registration statements (other than those relating to employee benefit
plans) declared effective by the Commission since December 30, 1995;
and (v) Key's Private Offering Memorandum dated June 28, 1996, relating
to the Convertible Debentures. All of the foregoing items are listed on
Schedule 3.1.4 (collectively, the "Key SEC Documents"). The
consolidated financial statements of Key and its consolidated
subsidiaries included in Key's most recent report on Form 10-K and most
recent report on Form 10-Q were prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the
periods involved and fairly present the consolidated financial position
of Key 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. Since June 30, 1994, Key has filed with the
Commission all material reports, registration statements and other
material filings required to be filed with the Commission under the
rules and regulations of the Commission.
3.1.5.1. Financial Change. Any adverse change in the financial condition,
backlog, operations, assets, liabilities or business of Key, or
3.1.5.2. Other Material Changes. Any other event or
condition known to Key particularly pertaining to and
adversely affecting the operations, assets or business of Key,
other than events or conditions which are of a general or
industry-wide nature and of general public knowledge, or which
have been disclosed in writing to the Shareholder.
3.1.6. Key's Compliance with Other Laws. Key is not in
violation of or in default with respect to, or in alleged violation of
or alleged default with respect to, any 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 which
would have a material adverse affect upon its financial condition,
properties or business.
3.1.7. Consents and Approvals. Except as set forth on Schedule
3.1.7, no consent, approval or authorization of, or filing a
registration with any governmental or regulatory authority, or any
other person or entity is required to be made or obtained by Key in
connection with the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby.
::ODMA\PCDOCS\DOCS\97107\2
18
3.1.8. Finder's Fee. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on
by Key and its counsel directly with Xxxxxx and the Shareholder and
their counsel, without the intervention by any other person as the
result of any act of Key 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.
3.1.9. Investigations; Litigation. No investigation or review
by any governmental entity with respect to Key in connection with any
of the transactions contemplated by this Agreement is pending or, to
the best of Key's knowledge, threatened, nor has any governmental
entity indicated to Key an intention to conduct the same. There is no
action, suit or proceeding pending or, to the best of Key's knowledge,
threatened against or affecting Key by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, which either individually or in the aggregate, does or
is likely to result in any material adverse change in the financial
condition, properties or businesses of Key.
3.1.10. Retention of Xxxxxx' Employees. On the Effective Date,
the Surviving Corporation will continue the employment of the Xxxxxx
employees except for the Xxxxxx employees listed on Schedule 3.1.10.
All such employees hired by the Surviving Corporation shall become
participants in Key's employee benefit plans, including Key's medical
plan, and shall receive full credit thereunder for all purposes for
their years of service at Xxxxxx. With respect to any preexisting
condition, limitations or similar provisions contained in Key's medical
plan, service with Xxxxxx shall be treated as service with Key, and for
the purpose of determining deductibles, copayments and out-of-pocket
maximums under Key's plans for 1996, such former Xxxxxx employees shall
be given credit under Key's medical plan for any deductibles or
copayments made by a former Xxxxxx employee or his or her dependents
with respect to coverage under the medical plan sponsored by
Shareholder during 1996.
3.2. Representations and Warranties of WellTech. WellTech represents and
warrants to Xxxxxx and the Shareholder as follows:
3.2.1. Organization and Standing. WellTech is a corporation
duly organized, validly existing, and in good standing under the laws
of Delaware, has full requisite corporate power and authority to carry
on its business as it is currently conducted, and to own and operate
the properties currently owned and operated by it, and is duly
qualified or licensed to do business and is in good standing as a
foreign corporation authorized to do business in all jurisdictions in
which the character of the properties owned or the nature of the
business conducted by it would make such qualification or licensing
necessary, except when the failure to be so qualified or licensed would
not have a material adverse effect on the business or operations of
WellTech.
3.2.2. Agreement Authorized and its Effect on Other Obligations. The
execution and delivery of this Agreement has been authorized by the board of
directors and the holder of all of the capital stock of WellTech, the
consummation of the transactions contemplated
::ODMA\PCDOCS\DOCS\97107\2
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hereby have been duly and validly authorized by all necessary corporate
action on the part of WellTech, and this Agreement is a valid and
binding obligation of WellTech enforceable against WellTech in
accordance with its terms. The execution, delivery and performance of
this Agreement and the consummation of the Merger contemplated by this
Agreement will not conflict with or result in a violation or breach of
any term or provision of, nor constitute a default under (i) the
Certificate of Incorporation or Bylaws of WellTech or (ii) any
obligation, indenture, mortgage, deed of trust, lease, contract or
other agreement to which WellTech is a party or by which WellTech or
its respective properties are bound, which in the case of either (i) or
(ii), would have a material adverse effect on the business or
operations of WellTech.
3.2.3. Capitalization. The authorized capital stock of WellTech consists of
3,000 shares of WellTech Common Stock, of which at the date hereof, 100 shares
were issued and outstanding and held beneficially and of record by Key.
3.2.4. Consents and Approvals. Except for the filing of a
Certificate of Merger with the Secretary of State of Delaware, no
consent, approval or authorization of, or filing a registration with
any governmental or regulatory authority, or any person or entity is
required to be made or obtained by WellTech in connection with the
execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby.
3.2.5. Finder's Fee. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on
by WellTech and its counsel and Xxxxxx and the Shareholder and their
counsel, without the intervention of any other person as the result of
any act of WellTech 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.
3.3. Other Representations and Warranties of Key and WellTech.
3.3.1. Control Prior to Merger. Prior to the Merger, Key will be in control
of WellTech within the meaning of Section 368(c) of the Internal Revenue Code.
3.3.2. Control Following Merger. Following the Merger, WellTech will not issue
additional shares of its stock that would result in Key losing control of
WellTech within the meaning of Section 368(c) of the Internal Revenue Code.
3.3.3. No Plan to Reacquire. Key has no plan or intention to reacquire any of
its stock issued in the Merger.
3.3.4. No Plan to Dispose. Key has no plan or intention to
liquidate WellTech; to merge WellTech with and into another
corporation; to sell or otherwise dispose of the stock of WellTech; or
to cause WellTech to sell or otherwise dispose of any of the assets of
Xxxxxx acquired in the Merger, except for dispositions made in the
ordinary course of business or transfers described in Section
368(a)(2)(C) of the Internal Revenue Code.
::ODMA\PCDOCS\DOCS\97107\2
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3.3.5. Expenses. Key and WellTech will pay their respective expenses, if
any, incurred in connection with the Merger.
3.3.6. Intercorporate Indebtedness.
There is no intercorporate indebtedness existing between Key and Xxxxxx or
between WellTech and Xxxxxx that was issued, acquired, or will be settled at a
discount.
3.3.7. Investment Companies. Key and WellTech are not investment
companies as defined in Section 368(a)(2)(F)(iii) and (iv) of the Internal
Revenue Code.
3.3.8. WellTech Stock. No stock of WellTech will be issued in the
Merger.
ARTICLE 4
OBLIGATIONS PENDING EFFECTIVE DATE
4.1. Agreements of Key and Xxxxxx. Except as contemplated by Section
1.10, each of Key and Xxxxxx agrees that from the date hereof until the
Effective Date, it will (and unless otherwise indicated by the context, since
September 30, 1996, it has):
4.1.1. Maintenance of Present Business. Other than as
contemplated by this Agreement, 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;
4.1.2. Maintenance of Properties. At its expense, maintain all of its
property and assets in customary repair, order, and condition, reasonable wear
and tear excepted;
4.1.3. 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;
4.1.4. Compliance with Law. Duly comply in all material respects with all laws
applicable to it and to the conduct of its business; and
4.1.5. Inspection of Each Merging Corporation. Permit the
other party hereto, and their officers and authorized representatives,
during normal business hours, to inspect its records and to consult
with its officers, employees, attorneys, and agents for the purpose of
determining the accuracy of the representations and warranties
hereinabove made and the compliance with covenants contained in this
Agreement. Key, Xxxxxx and the Shareholder each agrees that it and its
officers and representatives shall hold all data and information
obtained with respect to the other party hereto in confidence and each
further agrees that it
::ODMA\PCDOCS\DOCS\97107\2
21
will not use such data or information or disclose the same to others,
except to the extent such data or information either are, or become,
published or a matter of public knowledge through no fault of such
party.
4.1.6. Notice of Material Developments. Each of Key and Xxxxxx
will promptly notify the other party in writing of any "material
adverse change" in, or any changes which, in the aggregate, could
result in a "material adverse change" in, the consolidated financial
condition, business or affairs of such party, whether or not occurring
in the ordinary course of business. As used in this Agreement, the term
"material adverse change" means any change, event, circumstance or
condition (collectively, a "Change") which when considered with all
other Changes would reasonably be expected to result in a "loss" having
the effect of so fundamentally adversely affecting the business or
financial prospects of Key or Xxxxxx, as the case may be, that the
benefits reasonably expected to be obtained by such party as a result
of the Merger contemplated by this Agreement would be jeopardized with
relative certainty. In no event shall a change in the trading price of
the Key Common Stock on the American Stock Exchange between the date
hereof and the Effective Date, in and of itself, constitute a material
adverse change. The term "loss" shall mean any and all direct or
indirect payments, obligations, assessments, losses, loss of income,
liabilities, fines, penalties, costs and expenses paid or incurred or
more likely than not to be paid or incurred, or diminutions in value of
any kind or character (whether known or unknown, conditional or
unconditional, xxxxxx or inchoate, liquidated or unliquidated, secured
or unsecured, accrued, absolute, contingent or otherwise) that are more
likely than not to occur, including without limitation penalties,
interest on any amount payable to a third party as a result of the
foregoing and any legal or other expenses reasonably incurred or more
likely than not to be incurred in connection with investigating or
defending any demands, claims, actions or causes of action that, if
adversely determined, would likely result in losses, and all amounts
paid in settlement of claims or actions; provided, that losses shall be
net of any insurance proceeds entitled to be received from a
nonaffiliated insurance company on account of such losses (after taking
into account any costs incurred in obtaining such proceeds and any
increase in insurance premiums as a result of a claim with respect to
such proceeds);
4.2. Additional Agreements of Xxxxxx. Except as contemplated by Section
1.10, Xxxxxx agrees that from September 30, 1996 it has not, and from the date
hereof to the Effective Date, it will:
4.2.1. Prohibition of Certain Employment
Contracts. Not 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;
4.2.2. Prohibition of Certain Loans. Not incur any borrowings which
would exceed $50,000, in the aggregate, for any purpose except (i) the refunding
of indebtedness now outstanding, (ii) the prepayment by customers of amounts due
or to become due for services rendered or to be rendered in the future, or (iii)
as is otherwise agreed to in writing by Key;
::ODMA\PCDOCS\DOCS\97107\2
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4.2.3. Prohibition of Certain Commitments. Not enter into
commitments of a capital expenditure nature or incur any contingent
liability which would exceed $10,000 in the aggregate except (i) as may
be necessary for the maintenance of existing facilities, machinery and
equipment in good operating condition and repair in the ordinary course
of business, or (ii) as is otherwise agreed to in writing by Key;
4.2.4. Disposal of Assets. Not sell, dispose of, or encumber, any property
or assets, except (i) in the usual and ordinary course of business or (ii) as
may be approved in writing by Key;
4.2.5. Maintenance of Insurance. Maintain the insurance set
forth on Schedule 2.1.8; provided, that if during the period from the
date hereof to and including the Effective Date any of its property or
assets are damaged or destroyed by fire or other casualty, the
obligations of Key, Xxxxxx and the Shareholder under this Agreement
shall not be effected thereby, and upon the Effective 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 the Surviving
Corporation.
4.2.6. Acquisition Proposals. Not directly or indirectly (i)
solicit, initiate or encourage any inquiries or Acquisition Proposals
at any time before termination of this Agreement pursuant to Article 6
hereof from any person or (ii) participate in any discussions or
negotiations regarding, or furnish to any person other than Key or its
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
and WellTech contemplated by this Agreement. Xxxxxx shall promptly
communicate to Key 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.
4.2.7. No Amendment to Articles of Incorporation. Except as
contemplated by this Agreement, not 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.
4.2.8. No Issuance, Sale, or Purchase of Securities. Not 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;
4.2.9. Prohibition on Dividends. Except as set forth in Section 1.10, not
declare or pay any dividend on shares of Xxxxxx Common Stock or make any other
distribution of assets to the holders thereof;
::ODMA\PCDOCS\DOCS\97107\2
23
4.2.10. Xxxxxx' Employees. Xxxxxx will use its reasonable best
efforts to make all of its employees, other than those listed on
Schedule 3.1.10, available for hire by Key as of the Effective Date.
4.3. Additional Agreements of Key. Key agrees it will:
4.3.1. Issuance of Key Common Stock. Take all action it deems
reasonably necessary to insure that the issuance of Key Common Stock to
the Shareholder in connection with the Merger will be made pursuant to
an exemption from registration under the Securities Act. Key also shall
take any action reasonably required to be taken under state blue sky or
securities laws in connection with the issuance of the Key Common Stock
pursuant to the Merger;
4.3.2. Listing of Key Stock. Take such steps as are required to accomplish,
as of the Effective Date, the listing on the American Stock Exchange of the
shares of Key Common Stock to be issued pursuant to this Agreement;
4.3.3. No
Amendment to Articles of Incorporation. Not amend its Articles of Incorporation
or merge into any other corporation or change in any manner the rights of the
Key Common Stock; and
4.3.4. Notice of Material Developments. Promptly furnish to
the Shareholder copies of all Key communications to its stockholders
and all reports filed by it with the Commission and the American Stock
Exchange, and relating to periodic or other material developments
concerning Key's financial condition, business, or affairs.
4.3.5. Employee Benefits Plans. Key understands that on or
before the Effective Date, the Shareholder will cause Xxxxxx to
withdraw from any and all employee benefit plans sponsored by the
Shareholder in which Xxxxxx participates. Key will cause the Surviving
Corporation to pay to the Fidelity Thrift Plan, within three business
days following receipt of notice from the Shareholder of the amount
due, all contributions to the Fidelity Thrift Plan due but not yet paid
as of the Effective Date with respect to Xxxxxx employees and former
employees for employment with Xxxxxx before the Effective Date. Key
also will cause the Surviving Corporation to satisfy all continuation
coverage obligations imposed pursuant to Sections 601 through 608 of
ERISA, and Section 4980B of the Internal Revenue Code of 1986, as
amended, with respect to any person in the employ of Xxxxxx (and his or
her dependents) on or after the Effective Date.
4.3.6. Continuation of Historic Business of Xxxxxx. WellTech
will continue the historic business of Xxxxxx or use a significant
portion of Brook's business assets in a business for at least a period
of 12 months after the Effective Date of the Merger.
::ODMA\PCDOCS\DOCS\97107\2
24
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS
5.1. Conditions Precedent to Obligations of Xxxxxx. The obligations of
Xxxxxx to consummate and effect the Merger hereunder shall be subject to the
satisfaction of the following conditions, or to the waiver thereof by Xxxxxx
before the Effective Date:
5.1.1. Representations and Warranties of Key and WellTech True
at Effective Date. The representations and warranties of Key and
WellTech herein contained shall be, in all material respects, true as
of and at the Effective Date with the same effect as though made at
such date, except as affected by transactions permitted or contemplated
by this Agreement; Key and WellTech shall have performed and complied,
in all material respects, with all covenants required by this Agreement
to be performed or complied with by Key and WellTech before the
Effective Date; and Key and WellTech shall have delivered to Xxxxxx
certificates, dated the Effective Date and signed by their respective
presidents, and by their chief financial or accounting officers, and
their secretaries, to both such effects.
5.1.2. No Material Litigation. No suit, action, or other
proceeding shall be pending, or to Key's or WellTech's 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 Merger contemplated hereby or which might result in a material
adverse change in the value of the consolidated assets and business of
Key.
5.1.3. Opinion of Key Counsel. Xxxxxx shall have received a
favorable opinion, dated as of the Effective Date, from Xxxxxx &
Xxxxxx, L.L.P., counsel for Key and WellTech, in form and substance
satisfactory to Xxxxxx, to the effect that (i) Key and WellTech have
been duly incorporated and are validly existing as corporations in good
standing under the laws of their states of organization; (ii) all
corporate proceedings required to be taken by or on the part of Key and
WellTech to authorize the execution of this Agreement and the
implementation of the Merger contemplated hereby have been taken; (iii)
the shares of Key Common Stock which are to be delivered in accordance
with this Agreement will, when issued, be validly issued, fully paid
and nonassessable outstanding securities of Key; and (iv) this
Agreement has duly executed and delivered by, and is the legal, valid
and binding obligation of Key and WellTech and is enforceable against
Key and WellTech 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. No opinion
need be expressed as to the enforceability of any indemnification
provisions of this Agreement or on the provisions of Section 7.1. In
rendering such opinion, such counsel may rely upon (i) certificates of
public officials and of officers of Key and WellTech as to matters of
fact and (ii) the opinion or opinions of other counsel,
::ODMA\PCDOCS\DOCS\97107\2
25
which opinions shall be reasonably satisfactory to Xxxxxx, as to
matters other than federal or Texas law.
5.1.4. Listing of Key Common Stock. The American Stock
Exchange shall have agreed that on the Effective Date it will list the
shares of Key Common Stock issuable at the Effective Date of this
Agreement.
5.1.5. Consent of Certain Parties in Privity With Key and
WellTech. The holders of any material indebtedness of Key or WellTech,
the lessors of any material property leased by Key or WellTech, and the
other parties to any other material agreements to which Key or WellTech
are a party shall, when and to the extent necessary in the reasonable
opinion of Xxxxxx, have consented to the Merger contemplated hereby.
5.2. Conditions Precedent to Obligations of Key and WellTech. The
obligations of Key and WellTech to consummate and effect the Merger hereunder
shall be subject to the satisfaction of the following conditions, or to the
waiver thereof by Key and WellTech before the Effective Date.
5.2.1. Representations and Warranties of Xxxxxx True at
Effective Date. The representations and warranties of Xxxxxx and the
Shareholder herein contained shall be, in all material respects, true
as of and at the Effective Date with the same effect as though made at
such date, except as affected by transactions permitted or contemplated
by this Agreement; Xxxxxx and the Shareholder 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
Date; and Xxxxxx and the Shareholder shall have delivered to Key and
WellTech a certificate, dated the Effective Date and signed by their
respective chairman of the board or presidents, and by their respective
chief financial or accounting officers, and by their respective
secretaries, to both such effects.
5.2.2. No Material Litigation. No suit, action, or other
proceeding shall be pending, or to Xxxxxx' or the Shareholder's
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 merger contemplated hereby or which might result in
a material adverse change in the value of the assets and business of
Xxxxxx.
5.2.3. Opinion of Counsel. Key shall have received a favorable
opinion, dated the Effective Date, from Xxxx X. Xxxxx, General Counsel
to the Shareholder, in form and substance satisfactory to Key, to the
effect that (i) Xxxxxx and the Shareholder each have been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its state of incorporation; (ii) all outstanding
shares of the Xxxxxx Common Stock have been validly issued and are
fully paid and nonassessable; (iii) all corporate or other proceedings
required to be taken by or on the part of Xxxxxx and the Shareholder to
::ODMA\PCDOCS\DOCS\97107\2
26
authorize the execution of this Agreement and the implementation of the
Merger 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 Xxxxxx and the Shareholder and is enforceable
against Xxxxxx and the Shareholder 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. No opinion need be expressed as to the enforceability of any
indemnification provisions of this Agreement or on the provisions of
Section 7.1. In rendering such opinion, such counsel may rely upon (i)
certificates of public officials and of officers of Xxxxxx or the
Shareholder as to matters of fact and (ii) on the opinion or opinions
of other counsel, which opinions shall be reasonably satisfactory to
Key, as to matters other than federal or Texas law.
5.2.4. Consent of Certain Parties in Privity with Xxxxxx or
the Shareholder. The holders of any material indebtedness of Xxxxxx or
the Shareholder, the lessors of any material property leased by Xxxxxx
or the Shareholder, and the other parties to any other material
agreements to which Xxxxxx or the Shareholder is a party shall, when
and to the extent necessary in the reasonable opinion of Key, have
consented to the Merger contemplated hereby.
5.2.5. Termination of Certain Employees. Xxxxxx shall have
terminated the employees listed on Schedule 3.1.10 (the "Terminated
Employees") effective before the Effective Date and shall have paid the
Terminated Employees all wages and other compensation owed them through
the date of termination.
5.2.6. Environmental Assessments. The Shareholder shall have
completed, Phase I environmental assessments with respect to the real
property listed on Schedule 2.1.8. In addition, at Key's request, no
later than 10 days before the Effective Date, the Shareholder also
shall have completed Phase II environmental assessments with respect to
any of such real property where Phase II assessments are reasonably
determined by Key to be appropriate. All of such Phase I and Phase II
environmental assessments shall be at the Shareholder's expense and not
out of the assets of Xxxxxx. To the extent that such environmental
assessments indicate that liabilities exist for environmental cleanup
on a particular property, the Shareholder shall, no later than five
days before the Effective Date, indicate to Key whether the Shareholder
will conduct appropriate restoration activities at its expense on such
property or whether such property shall be removed from those being
acquired by Key pursuant to the Merger. To the extent the Shareholder
has determined to remove a property from those being acquired by Key,
then the Shareholder and Key shall have agreed to the adjustment to the
Merger Consideration to be delivered pursuant to Section 1.11.2 to
reflect the removal of such property from the assets of Xxxxxx as of
the Effective Date.
ARTICLE 6
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27
TERMINATION AND ABANDONMENT
6.1. Termination. Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated and the Merger contemplated
hereby abandoned at any time before the Effective Date:
6.1.1. By Mutual Consent. By mutual consent of Key, WellTech, the
Shareholder and Xxxxxx.
6.1.2. By Key or WellTech Because of Failure to Perform
Agreements or Conditions Precedent. By Key or WellTech, if Xxxxxx or
the Shareholder has failed to perform any material agreement set forth
in Sections 4.1 or 4.2, or if any material condition set forth in
Section 5.2 hereof has not been met, and such condition has not been
waived.
6.1.3. By Xxxxxx or the Shareholder Because of Failure to
Perform Agreements or Conditions Precedent. By Xxxxxx or the
Shareholder, if Key or WellTech has failed to perform any material
agreement set forth in Sections 4.1 or 4.3 hereof, or if any material
condition set forth in Section 5.1 hereof has not been met, and such
condition has not been waived.
6.1.4. By Key or WellTech or by the Shareholder or Xxxxxx,
Because of Legal Proceedings. By either Key or WellTech, or by the
Shareholder or Xxxxxx, 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 Merger
contemplated hereby.
6.1.5. By Key or WellTech Because of a Material Adverse
Change. By Key or WellTech if there has been a material adverse change
in the financial condition or business of Xxxxxx since the date of the
most recent financial statements referred to in Section 2.1.6.
6.1.6. By the Shareholder or Xxxxxx Because of a Material Adverse Change.
By the Shareholder or Xxxxxx if there has been a material adverse change in the
financial condition or business of Key since September 30, 1996.
6.1.7. By Key or WellTech, or by the Shareholder or Xxxxxx, if
Merger not Effective by December 31, 1996. By either Key or WellTech,
or by the Shareholder or Xxxxxx, if the Merger shall not have become
effective on or before December 31, 1996; provided, however, that this
Agreement may not be terminated by any party hereto if the Merger has
not become effective on or before December 31, 1996, due to the breach
of any provision of this Agreement by the party desiring to terminate
the Agreement.
6.2. Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to and in accordance with the provisions of Section
6.1 hereof, this Agreement shall become void and have no effect, without any
liability on the part of any party hereto (or its
::ODMA\PCDOCS\DOCS\97107\2
28
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.
6.3. 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.
6.4. Expense on Termination. If the Merger contemplated hereby is abandoned
pursuant to and in accordance with the provisions of Section 6.1 hereof, all
expenses will be paid by the party incurring them.
ARTICLE 7
ADDITIONAL AGREEMENTS
7.1. Noncompetition. Except as otherwise consented to or approved in
writing by WellTech and Key, the Shareholder agrees that for a period of 60
months following the Effective Date, it will not, directly or indirectly, acting
alone or as a member of a partnership or a holder of, or investor of any
security of any class of any corporation or other business entity (i) engage in
any business providing well services, anchoring services or swabbing services in
those territories specified on Schedule 7.1 hereto; (ii) request any present
customers or suppliers of Xxxxxx to curtail or cancel their business with
WellTech or Key; (iii) disclose to any person, firm or corporation any trade,
technical or technological secrets of Xxxxxx, WellTech or Key or any details of
their organization or business affairs or (iv) induce or actively attempt to
influence any employee of WellTech or Key to terminate his employment; provided,
however, that the provisions of this Section 7.1 shall not apply to (a) any
investment in any security of any class of a corporation or other business
entity where such investment is passive in nature, (b) the acquisition of well
service assets where such acquisition is ancillary to and not a material part of
the acquisition by the Shareholder (or any affiliate thereof) of another
business entity that is not primarily engaged in this well service business or
(c) the Shareholder's (or any affiliate thereof) investment in Xxxxxx
Industries, Inc., provided that such investment shall not exceed ownership of
more than 10% of the voting stock of Xxxxxx Industries, Inc. nor shall more than
one person associated with the Shareholder (or any affiliate thereof) serve on
the board of directors of Xxxxxx Industries, Inc., and, provided further that
nothing in this Section 7.1 shall prohibit the Shareholder from altering its
current business relationship with Xxxxxx. The Shareholder agrees that if either
the length of time or geographical area set forth in this Section 7.1 is deemed
too restrictive in any court proceeding, the court may reduce such restrictions
to those which it deems reasonable under the circumstances. The obligations
expressed in this Section 7.1 are in addition to any other obligations that the
Shareholder may have under the laws of the State of Texas requiring an employee
of a business or a shareholder who sells his stock in a corporation (including a
disposition in a merger) to limit his activities so that the goodwill and
business relations of his employer and of the corporation whose stock he has
sold (and any successor
::ODMA\PCDOCS\DOCS\97107\2
29
corporation) will not be materially impaired. The Shareholder further agrees and
acknowledges that WellTech and Key do not have any adequate remedy at law for
the breach or threatened breach by the Shareholder of this covenant, and agree
that WellTech or Key may, in addition to the other remedies which may be
available to them hereunder, file a suit in equity to enjoin the Shareholder
from such breach or threatened breach. If any provisions of this Section 7.1 are
held to be invalid or against public policy, the remaining provisions shall not
be affected thereby. The Shareholder acknowledges that the covenants set forth
in this Section 7.1 are being executed and delivered by the Shareholder in
consideration of the covenants of WellTech and Key contained in this Agreement,
and for other good and valuable consideration, receipt of which is hereby
acknowledged.
7.2. Registration Rights.
7.2.1. Agreement to Register Resales. Key agrees that no later
than April 3, 1997, it will file with the Commission on Form S-3, or if
Form S-3 is not available to Key, on Form S-1, a shelf registration
statement pursuant to Rule 415 of the Securities Act (the "Shelf
Registration Statement") covering the offer and resale by the
Shareholder of all the Key Shares and will use its best efforts to
cause the Shelf Registration Statement to be declared effective
promptly by the Commission. Key will not file a registration statement
with the Commission (other than on Form S-8) before Key files the Shelf
Registration Statement. The Shelf Registration Statement will not
relate to any shares of Key Common Stock other than the Key Shares.
7.2.2. Effectiveness of Shelf Registration Statement. Key
agrees to maintain the Shelf Registration Statement in effect for the
maximum period allowable under the regulations promulgated by the
Commission; provided that if such maximum period is less than three
years from the Effective Date and if as of the end of such maximum
period not all of the Key Shares registered under the Shelf
Registration Statement have been sold, then within 10 days after the
end of such maximum period Key shall file either a post-effective
amendment to the existing Shelf Registration Statement or a new Shelf
Registration Statement covering the offer and resale by the Shareholder
of all Key Shares not previously sold, and Key will use its best
efforts to cause the same to be declared effective promptly by the
Commission and will maintain such Shelf Registration Statement in
effect until the third anniversary of the Effective Date. In addition,
Key shall amend the Shelf Registration Statement and supplement the
prospectus included therein as and when required by Form S-3 or Form
S-1, as applicable, or by the Securities Act.
7.2.3. Blue Sky Qualification. In any offering pursuant to
this Section, Key will use its best efforts to effect any such
registration and use its best efforts to effect such qualification and
compliance as may be required and as would permit or facilitate the
resale of such Shares, including, without limitation, registration
under the Securities Act, appropriate qualifications under applicable
blue-sky or other state securities laws and, appropriate compliance
with any other governmental requirements.
7.2.4. Registration Expenses. All expenses (except for any legal fees for
the Shareholder's counsel) relating to the registration of the Key Shares
pursuant to this
::ODMA\PCDOCS\DOCS\97107\2
30
Agreement (including, but not limited to, the expenses of any
qualifications under the blue- sky or other state securities laws and
compliance with governmental requirements of preparing and filing any
post-effective amendments or prospectus supplements required for the
lawful distribution of the Key Shares to the public in connection with
such registration) will be paid by Key.
7.2.5. Preparation; Reasonable Investigation. In connection
with the preparation and filing of any Shelf Registration Statement
under the Securities Act pursuant to this Agreement, Key will give the
Shareholder the opportunity to participate in the preparation of such
Shelf Registration Statement, each prospectus included therein or filed
with the Commission, and each amendment thereof or supplement thereto,
and will give the Shareholder such access to its books and records and
such opportunities to discuss the business of Key with its officers and
the independent public accountants who have certified its financial
statements as shall be necessary to conduct a reasonable investigation
within the meaning of the Securities Act.
7.2.6. Rights Non-Transferable. The registration rights
provided by this Section 7.2 are for the sole benefit of the
Shareholder, are personal in nature, and shall not be available to any
subsequent holder of the Key Shares; provided, however, that such
registration rights are transferable to any affiliate of the
Shareholder to which the Key Shares may be transferred.
7.2.7. Undertaking to File Reports and Cooperate in Rule 144
and Rule 145 Transactions. For as long as the Shareholder is subject to
Rule 144 or Rule 145 of the Securities Act with respect to the Key
Shares, Key will use reasonable commercial efforts to timely file all
annual, quarterly and other reports required to be filed by it under
Section 13 or 15(d) of the Exchange Act and the rules and regulations
of the Commission thereunder, as amended from time to time. If the
Shareholder proposes to sell any Key Shares pursuant to Rule 144 and
145, Key shall cooperate with the Shareholder so as to enable such
sales to be made in accordance with applicable laws, rules and
regulations, the requirements of Key's transfer agent, and the
reasonable requirements of the broker through which the sales are
proposed to be executed. Without limiting the generality of the
foregoing, Key shall, upon request, furnish with respect to each such
sale (i) a written statement certifying that Key has complied with the
public information requirements of Rule 144 and 145 and (ii) an opinion
of Key's counsel regarding such matters as Key's transfer agent or such
stockholder's broker may reasonably desire to confirm.
7.2.8. Additional Undertakings with Respect to Registration Rights. In
connection with its registration obligations under this Section 7.2, Key shall:
7.2.8.1. Delivery of Shelf Registration Statement and Prospectus. Furnish
to the Shareholder such number of copies of the Shelf Registration Statement,
each amendment and supplement thereto, the prospectus included in such Shelf
Registration Statement (including each preliminary prospectus), any documents
::ODMA\PCDOCS\DOCS\97107\2
31
incorporated by reference therein and such other documents as
the Shareholder may reasonably request in order to facilitate
the disposition of the Key Shares.
7.2.8.2. Notice to the Shareholder. Promptly notify
the Shareholder and (if requested by any such person) confirm
such notice in writing (i) when a prospectus or any prospectus
supplement or post-effective amendment has been filed and,
with respect to a Shelf Registration Statement or any
post-effective amendment, when the same has become effective,
(ii) of the issuance by any state securities or other
regulatory authority of any order suspending the qualification
or exemption from qualification of any of the Key Shares under
state securities or "blue sky" laws or the initiation of any
proceedings for that purpose, and (iii) of the happening of
any event which makes any statement made in a Shelf
Registration Statement or related prospectus untrue or which
requires the making of any changes in such Shelf Registration
Statement, prospectus or documents so that they will not
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and,
as promptly as practicable thereafter, prepare and file with
the Commission and furnish a supplement or amendment to such
prospectus so that, as thereafter deliverable to the
purchasers of such Key Shares, such prospectus will not
contain any untrue statement of a material fact or omit a
material fact necessary to make the statement therein, in
light of the circumstances under which they were made, not
misleading.
7.2.8.3. Incorporation of Information. If requested
by the Shareholder, promptly incorporate in a prospectus
supplement or post-effective amendment such information as the
Shareholder reasonably requests to be included therein,
including, without limitation, with respect to the Key Shares
being sold by the Shareholder, and promptly make all required
filings of such prospectus supplement or post-effective
amendment.
7.2.8.4. Delivery of Documents Incorporated by
Reference. As promptly as practicable after filing with the
Commission of any document which is incorporated by reference
into a Shelf Registration Statement (in the form in which it
was incorporated), deliver a copy of each such document to the
Shareholder.
7.2.8.5. Listing. Cause the Key Shares included in
any Shelf Registration Statement to be (i) listed on each
securities exchange, if any, on which similar securities
issued by Key are then listed, or (ii) authorized to be quoted
and/or listed (to the extent applicable) on the National
Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") or the NASDAQ National Market System if the Key
Shares so qualify.
7.2.8.6. Filing of Exchange Act Reports. During the
period when a prospectus is required to be delivered under the
Securities Act, promptly file all documents required to be
filed with the Commission pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act.
::ODMA\PCDOCS\DOCS\97107\2
32
7.2.8.7. Requests for Information by the Commission.
Notify the Shareholder promptly of any request by the
Commission for the amending or supplementing of such Shelf
Registration Statement or prospectus or for additional
information.
7.2.8.8. Notes of Stop Orders. Advise the Shareholder
of such Key Shares, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by
the Commission suspending the effectiveness of such Shelf
Registration Statement or the initiation or threatening of any
proceeding for such purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order
should be issued.
For purposes of this Section 7.2.8, the Shareholder shall include any affiliate
to which the Key Shares are transferred. Also for purposes of this Section
7.2.8., Key Shares shall refer to any capital stock of Key or its successors
into which Key shares may be exchanged or converted.
7.3. Settling of Accounts.
7.3.1. Allocation of Accounts. To the extent not otherwise
applied or distributed pursuant to Section 1.10, Key shall cause the
Surviving Corporation to pay to the Shareholder an amount equal to the
amount by which (i) Xxxxxx' accounts receivable collected by the
Surviving Corporation that are attributable to work performed by Xxxxxx
before the close of business as of the end of the month immediately
before the month in which the Effective Date occurs (the "Allocation
Date") exceed (ii) the amount of Xxxxxx' trade payables accrued as of
the Allocation Date plus amounts paid by the Surviving Corporation
pursuant to the second sentence of Section 4.3.5 (the "Excess
Receivables"). Key shall cause the Surviving Corporation to use all
commercially reasonable efforts to collect such accounts receivable
within 90 days of the Effective Date. The amount of Excess Receivables
shall be applied (a) first, to the payment of the Excess Amount and (b)
second, as a dividend in respect of the Excess Dividend Amount. The
payment of any Excess Receivables under this Section 7.3 shall be made
90 days following the Effective Date. Before such payment date, Key
shall keep the Shareholder timely informed as to the amounts of all
accounts receivable collected by the Surviving Corporation and the
amounts of all trade payables. Within 30 days after such 90 day period,
Key shall cause the Surviving Corporation to have its controller
present to the Shareholder and Key an audit of the amounts payable to
the Shareholder under this Section 7.3. If there is disagreement among
the parties as to the correctness of such audit, an independent auditor
reasonably satisfactory to both Key and the Shareholder shall conduct a
separate audit, the fees and expenses of which shall be paid by the
Shareholder unless the amounts payable determined by the controller is
more than 5% greater than the amount determined by the independent
auditor, in which case such fees and expenses shall be paid by Key. Any
accounts receivable attributable to work performed before the
Allocation Date which remain outstanding after the audit performed by
the comptroller shall be assigned by the Surviving Corporation to the
Shareholder.
::ODMA\PCDOCS\DOCS\97107\2
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7.3.2. Welfare Benefits; Long-Term Disability. The Shareholder
agrees that any claims for welfare benefits arising on or before the
Allocation Date with respect to any employees or former employees of
Xxxxxx (or their covered dependents or beneficiaries) shall be the
responsibility of the Shareholder or insurers of the Shareholder's
welfare plans, and Key and WellTech agree that any claims for welfare
benefits and worker's compensation arising after the Allocation Date
with respect to any employees (or their covered dependents or
beneficiaries) shall be the responsibility of the Surviving Corporation
and the companies or the insurers of Key or WellTech's Welfare Plans.
Except as otherwise provided below, a claim is deemed to have arisen
when services relating to the condition that is the subject of the
claim were performed. In the case of an individual who is hospitalized
or on long-term disability on the Allocation Date, all claims relating
to such hospitalization (including, without limitation, hospital
charges and physician fees) shall be deemed to be claims arising on or
before the Allocation Date. With respect to worker's compensation
claims which are single - accident specific, a claim is deemed to have
arisen on the date of occurrence. With respect to all other worker's
compensation claims, a claim is deemed to have arisen on the date the
worker's compensation award is made. With respect to life insurance or
other death- related benefits, a claim is deemed to have arisen when
the death of the employee or covered dependent occurred.
7.4. Future Tax Returns.
7.4.1. Filing of Tax Returns. The Shareholder shall prepare
and file in a timely fashion the federal income tax return for the
consolidated group, including Xxxxxx, for the period ending on the
Effective Date. The Shareholder shall prepare and file in a timely
fashion, any state, local, foreign or other tax returns of Xxxxxx due
for any period that includes the Effective Date. The Shareholder shall
directly pay or discharge any and all income taxes, assessments,
interest, penalties or deficiencies reflected on such return, including
the tax liability of any member or former member of a consolidated
group of which Xxxxxx was a member, however measured, for which Xxxxxx
may be held liable. Such payment shall be made on or before the date
any such payment finally determined to be due and payable (including
any applicable extensions or tolling of such payment obligation pending
the final determination of any contested tax issue ; provided, however,
that any such payment shall not be due and payable until the later to
occur of (i) the last date for payment, including any applicable
extensions, or (ii) in the case of a potential payment with respect to
a contested issue, the date such payment is finally determined to be
due and payable by the administrative agency or highest court of
competent jurisdiction before which the Shareholder has contested the
matter following a final non-appealable determination that such payment
is due or the expiration of the time for prosecution or appeal of the
issue to the next highest level of administrative or judicial review
with respect to such matter.
7.4.2. Tax Controversies. Each of Key and the Shareholder shall provide to
the other on a timely basis information concerning the commencement and status
of any and all tax controversies involving Xxxxxx or its business, as the case
may be as hereinafter provided. Except as otherwise provided in the last
sentence hereof, the Shareholder shall control the
::ODMA\PCDOCS\DOCS\97107\2
34
handling of all pre-Effective Date tax matters involving Xxxxxx or its
business for which Key may be directly or indirectly liable by
operation of law or by the terms of this Agreement, subject to
providing Key with any relevant information concerning these matters;
provided, however, that the Shareholder shall not be required to
provide to Key any details (beyond the overall status) concerning any
administrative or judicial proceedings involving the consolidated group
(or other members thereof) if Xxxxxx or its business is only involved
in and potentially liable for taxes, penalties and interest solely by
virtue of being a member of the consolidated group. Except as otherwise
provided in the last sentence hereof, Key shall control the handling of
all tax matters arising on or after the Effective Date involving the
business of Xxxxxx, subject to providing the Shareholder with any and
all information regarding tax controversies or matters for which the
Shareholder may be or become directly or indirectly liable by operation
of law or by the terms of this Agreement. Notwithstanding, the
foregoing sentences of this Section 7.4.2, if any tax matter or
controversy arises with respect to any federal or state tax authority
that challenges the non-taxable status of the Merger or the other
transactions contemplated by this Agreement, Key or the Shareholder, as
the case may be, shall contest any challenge to the non-taxable status
of these transactions, shall keep each other informed as to the status
of any such matter or controversy, shall mutually agree upon outside
counsel to handle such matter or controversy on behalf of both Key and
the Shareholder (or failing such agreement, cause their respective
outside counsels to choose a third outside counsel to handle the matter
of controversy on behalf of Key and the Shareholder), and shall
coordinate the handling, settlement and resolution with one another of
such tax matter or controversy in a reasonable manner.
7.5. Continuation of Employment of Certain Xxxxxx Personnel. The
Shareholder and Xxxxxx shall use their reasonable best efforts to encourage the
employees of Xxxxxx listed on Schedule 7.6 to have entered into employment
agreements with the Surviving Corporation in form and substance satisfactory to
Key.
7.6. 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.
ARTICLE 8
INDEMNIFICATION
8.1. Indemnification by the Shareholder. The Shareholder shall
indemnify, defend and hold harmless each of Key and WellTech, and their
respective officers, directors, employees, agents and stockholders, against and
with respect to any and all claims, costs, damages, losses, expenses, obliga
tions, liabilities, recoveries, suits, causes of action and deficiencies,
including interest, penalties and reasonable attorneys' fees and expenses
(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 Shareholder
to perform, its representations, warranties, covenants or agreements in this
Agreement or in any
::ODMA\PCDOCS\DOCS\97107\2
35
schedule, certificate, exhibit or other instrument furnished or delivered to
WellTech or Key by the Shareholder under this Agreement, (ii) Xxxxxx'x
relationship with any Terminated Employee, (iii)
any obligation of Key or Xxxxxx to contribute to the payment of any taxes
determined on a consolidated, combined or unitary basis with respect to a group
of corporations that includes or included Xxxxxx allocable to any period before
the Effective Date; and (iv) the Shareholder agrees to indemnify and hold
harmless WellTech and Key from any and all federal income tax liability
(including penalties and interest) that WellTech may incur or succeed to by
virtue of WellTech's receipt of the Xxxxxx' business pursuant to the Merger
solely as a result of a final adjudicated determination that the Merger failed
to qualify as a tax-free reorganization under Section 368(a) of the Code by
virtue of a determination that the Shareholder failed to maintain the requisite
post- Merger continuity of shareholder interest; provided, however, that this
indemnity shall be ineffective if and of no further force and effect if the
Shareholder continues to hold 50% or more the Key Shares received in the Merger
for a period of time equal to 365 days from the Effective Date, irrespective
whether the tax-free nature of the Merger is challenged on the grounds that the
Merger failed the continuity of interest requirement. For purposes of this
provision, a "final adjudicated determination" shall mean a determination by the
highest court of competent jurisdiction to which the Shareholder could appeal,
or the determination of a lower court or the Internal Revenue Service, as the
case may be, if the Shareholder has not filed a suit in a court of appropriate
jurisdiction before the expiration of the applicable statute of limitations or
the date for filing an appeal of an adverse decision has expired.
8.2. Indemnification by Key. Key shall indemnify, defend and hold
harmless the Shareholder and its officers, directors, employees and agents
against and with respect to any and all Damages that such indemnitees shall
incur or suffer, which arise, result from or relate to (i) any breach of, or
failure by WellTech or Key to perform any of their representations, warranties,
covenants or agreements in this Agreement or in any schedule, certificate,
exhibit or other instrument furnished or delivered to Xxxxxx or the Shareholder
by or on behalf of Key or WellTech under this Agreement and (ii) any obligation
of the Shareholder or its consolidated group of corporations to contribute to
the payment of any taxes determined on a consolidated, combined or unitary basis
with respect to a group of corporations that includes or included the Surviving
Corporation or the business of Xxxxxx allocable to any period on or after the
Effective Date. In addition, Key will indemnify, defend and hold harmless the
Shareholder and its officers, directors, employees and agents against any claims
to which the Shareholder may become subject under the Securities Act or
otherwise, insofar as such claims (or actions or proceedings whether commenced
or threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
Key will reimburse the Shareholder and each such controlling person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such claim (or action or proceeding in respect
thereof); provided that Key shall not be liable in any such case to the extent
that a claim (or action or proceeding in respect thereof) arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity
::ODMA\PCDOCS\DOCS\97107\2
36
with written information furnished to Key, in an instrument duly executed by the
President or Senior Vice President of Finance of Shareholder specifically
stating that it is for use in the preparation thereof.
8.3. Indemnification Procedure. If any party hereto discovers or
otherwise becomes aware of an indemnification claim arising under Section 8.1 or
Section 8.2 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; , 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 8, 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, 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 fees and expenses subsequently incurred by
the latter in connection with the defense thereof unless the indemnifying party
has failed to assume the defense of such claim and to employ counsel reasonably
satisfactory to such indemnified person. An indemnifying party who elects not to
assume the defense of a claim shall not be liable for the fees and expenses of
more than one counsel in any single jurisdiction for all parties indemnified by
such indemnifying party with respect to such claim or with respect to claims
separate but similar or related in the same jurisdiction arising out of the same
general allegations. Notwith standing 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.
8.4. Limitation on Damages. Notwithstanding anything in this Agreement
to the contrary, the Shareholder shall not be liable to Key and the Surviving
Corporation or any of their respective officers, directors, employees, agents or
stockholders, their successors or assigns, for any Damages suffered or incurred
by Key or the Surviving Corporation in excess of the Liability Exception
(hereinafter defined); provided, however, that to the extent there are Damages
suffered or incurred
::ODMA\PCDOCS\DOCS\97107\2
37
by Key or the Surviving Corporation arising out of, or attributable to, a single
occurrence or event that are equal to the Liability Exception, then, in such
event, Key or WellTech shall be entitled to indemnification by the Shareholder
for the total amount of such Damages. The aggregate amount of any Damages owed
by the Shareholder to Key or WellTech shall not exceed the value of the shares
received by Shareholder under Section 1.11.2.1, which for this purpose shall be
the number of Key Shares received multiplied by the Average Closing Price.
8.5. Liability Exception. For purposes of this Section, the term "Liability
Exception" shall mean $250,000; provided however, that the Liability Exception
shall not include Damages pursuant to Section 2.1.11 relating to Taxes.
8.6. Exclusive Remedy. From and after the Effective Date, the
indemnification provided in Sections 8.1 and 8.2 shall be the exclusive remedy
that may be asserted under this Agreement or in connection with the transactions
contemplated herein. Notwithstanding any provision to the contrary contained
herein, each of the parties to this Agreement hereby waives any right to recover
special, punitive or exemplary damages for any claim asserted against the other.
ARTICLE 9
MISCELLANEOUS
9.1. Survival of Representations, Warranties and Covenants. All
representations and warranties made by the parties hereto shall survive for a
period of 24 months from the Effective Date, notwithstanding any investigation
made by or on behalf of any of the parties hereto; provided, however, that the
representations and warranties contained in Section 2.1.11, 3.3 and 4.3.6 hereof
shall survive until the expiration of the applicable statute of limitations
associated with the taxes at issue. All statements contained in any certificate,
schedule, exhibit or other instrument delivered pursuant to this Agreement shall
be deemed to have been representations and warranties by the respective party or
parties, as the case may be, and shall also survive for a period of 24 months
from the Effective Date despite any investigation made by any party hereto or on
its behalf. All covenants and agreements contained herein shall survive
indefinitely without limitation, except as otherwise provided herein.
9.2. 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.
9.3. 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.
9.4. 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.
::ODMA\PCDOCS\DOCS\97107\2
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If to Key or WellTech
Addressed to: With a copy to:
Key Energy Group, Inc. Xxxxxx & Xxxxxx, L.L.P.
Two Tower Center, Tenth Floor 700 Louisiana, 00xx Xxxxx
Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000 Xxxxxxx, Xxxxx 00000-0000
Attn: Xxxxxxx X. Xxxx Attention: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
If to the Shareholder
Addressed to: With a copy to:
Xxxx Oil Company Xxxx Oil Company
0000 Xxxx Xxxxxx 0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000 Xxxxxx, Xxxxx 00000
Attn: Xxxx X. Xxxxxxx Attn: Xxxxxx X. Xxxxxxxxx, Xx.
Facsimile: (000) 000-0000 Senior Vice President-Finance
Facsimile: (000) 000-0000
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.
9.5. 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.
9.6. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the successors and assigns of the
parties hereto.
9.7. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void,
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
9.8. Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the applicable laws of the State of Texas.
::ODMA\PCDOCS\DOCS\97107\2
39
9.9. Public Announcements. The parties agree that before the Effective
Date they shall consult with each other before the making of any public
announcement regarding the existence of this Agreement, the contents hereof and
the transactions contemplated hereby, and to obtain the prior approval of the
other party as to the content of such announcement which approval shall not be
unreasonably withheld. However, the foregoing shall not apply to any
announcement or written statement which, upon written advice of counsel, is
required by law to be made.
9.10. Knowledge. As used in this Agreement, the words "to the knowledge
of " or other words of similar import shall mean (i) in the case of Key or
WellTech, to the actual knowledge of the directors and executive officers of Key
or WellTech, as the case may be, without regard to any investigation; (ii) in
the case of Xxxxxx, to the actual knowledge of the directors and executive
officers of Xxxxxx without regard to any investigation; and (iii) with respect
to the Shareholder, to the actual knowledge of the officers of the Shareholder
who serve as officers and directors of Xxxxxx or have substantial responsibility
over the business operations of Xxxxxx.
[SIGNATURE PAGE FOLLOWS]
::ODMA\PCDOCS\DOCS\97107\2
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IN WITNESS WHEREOF, the Shareholder has executed this Agreement and the
other parties hereto have caused this Agreement to be signed in their respective
corporate names by their respective duly authorized representatives, all as of
the day and year first above written.
KEY ENERGY GROUP, INC.
By: /s/ XXXXXXX X. XXXX
Xxxxxxx X. Xxxx, President
WELLTECH EASTERN, INC.
By: /s/ XXXXXXX X. XXXX
Xxxxxxx X. Xxxx, President
XXXXXX WELL SERVICING, INC.
By: /s/ X.X. XXXXXXXXX
X. X. XxXxxxxxx, President
XXXX OIL COMPANY
By: /s/ XXXX X. XXXXXXX
Xxxx X. Xxxxxxx, President
::ODMA\PCDOCS\DOCS\97107\2
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TABLE OF CONTENTS
ARTICLE 1
THE MERGER....................................................................2
1.1. Surviving Corporation................................................2
1.2. Effective Date.......................................................2
1.3. Name and Continued Corporate Existence of Surviving Corporation......2
1.4. Governing Law and Articles of Incorporation of Surviving Corporation.2
1.5. Bylaws of Surviving Corporation..................................... 3
1.6. Directors of Surviving Corporation...................................3
1.7. Officers of Surviving Corporation....................................3
1.8. Vacancies............................................................3
1.9. Capital Stock of Surviving Corporation...............................3
1.10. Distributions........................................................3
1.11. Conversion of Securities Upon Merger.................................4
1.11.1. Conversion of Xxxxxx Common Stock..................4
1.11.2. Adjustments to Merger Consideration................4
1.11.2.1. Key Common Stock Closing Price Adjustments4
1.11.2.2. Adjustments for Environmental Liabilities.4
1.12. Surrender of Xxxxxx Certificates.....................................5
1.13. Xxxxxx' Transfer Books Closed........................................5
1.14. Assets and Liabilities of Merging Corporations Become Those of
Surviving Corporation.......................................5
1.15. Federal Income Tax Treatment.........................................5
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER AND XXXXXX..................6
2.1. Representations and Warranties of the Shareholder and Xxxxxx.........6
2.1.1. Organization and Good Standing..............................6
2.1.2. Agreement Authorized and its Effect on Other Obligations....6
2.1.3. Capitalization..............................................6
2.1.4. Ownership of Xxxxxx Shares..................................7
2.1.5. No Subsidiaries.............................................7
2.1.6. Financial Statements........................................7
2.1.7. Liabilities.................................................7
2.1.8. Additional Information......................................8
2.1.8.1. Real Estate...............................8
2.1.8.2. Machinery and Equipment...................8
2.1.8.3. Inventory.................................8
2.1.8.4. Insurance.................................8
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2.1.8.5. Contracts.................................8
2.1.8.6. Employee Compensation Plans...............8
2.1.8.7. Certain Salaries..........................8
2.1.8.8. Bank Accounts.............................9
2.1.8.9. Employee Agreements.......................9
2.1.8.10. Intellectual Property.....................9
2.1.8.11. Trade Names...............................9
2.1.8.12. Promissory Notes..........................9
2.1.8.13. Guaranties................................9
2.1.8.14. Leases....................................9
2.1.8.15. Environment...............................9
2.1.9. No Defaults.................................................9
2.1.10. Absence of Certain Changes and Events.......................9
2.1.10.1. Financial Change.........................10
2.1.10.2. Property Damage..........................10
2.1.10.3. Dividends................................10
2.1.10.4. Capitalization Change....................10
2.1.10.5. Labor Disputes...........................10
2.1.10.6. Other Material Changes...................10
2.1.11. Taxes......................................................10
2.1.11.1. Tax Returns..............................10
2.1.11.2. Statutes of Limitation...................10
2.1.11.3. Audits...................................10
2.1.11.4. Tax Liens................................11
2.1.11.5. Tax-Sharing Agreements...................11
2.1.11.6. Distributions. ..........................11
2.1.11.7. No Plan To Dispose.......................11
2.1.11.8. Liabilities..............................11
2.1.11.9. Expenses.................................11
2.1.11.10. Bankruptcy...............................11
2.1.11.11. Investment Companies.....................12
2.1.12. Intellectual Property......................................12
2.1.13. Title to and Condition of Assets...........................12
2.1.14. Contracts..................................................12
2.1.15. Licenses and Permits.......................................13
2.1.16. Litigation.................................................13
2.1.17. Environmental Compliance...................................13
2.1.17.1. Environmental Conditions........................13
2.1.17.2. Permits, etc....................................13
2.1.17.3. Compliance......................................13
2.1.17.4. Past Compliance.................................14
2.1.17.5. Environmental Claims............................14
2.1.17.6. Renewals........................................14
2.1.17.7. Asbestos and PCBs...............................14
2.1.18. Compliance with Other Laws.................................14
::ODMA\PCDOCS\DOCS\97107\2
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2.1.19. No ERISA Plans or Labor Issues.............................15
2.1.19.1. Exclusive Representation........................15
2.1.19.2. Status of ERISA Plans and Labor Relations.......15
2.1.20. Investigations; Litigation.................................15
2.1.21. Absence of Certain Business Practices......................15
2.1.22. Consents and Approvals.....................................16
2.1.23. Finder's Fee...............................................16
2.2. Investment Representations of the Shareholder..........................16
2.2.1. Shareholder Investment Suitability and Related Matters......16
2.2.2. Key Shares Not Registered...................................16
2.2.3. Reliance on Representations.................................16
2.2.4. Investment Intent...........................................16
2.2.5. Permitted Resale............................................17
2.2.6. Restrictive Legend..........................................17
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF KEY AND WELLTECH...........................17
3.1. Representations and Warranties of Key..................................17
3.1.1. Organization and Standing...................................17
3.1.2. Agreement Authorized and its Effect on Other Obligations....18
3.1.3. Capitalization..............................................18
3.1.4. Reports and Financial Statements............................18
3.1.5. Absence of Certain Changes and Events in Key................19
3.1.5.1. Financial Change.................................19
3.1.5.2. Other Material Changes...........................19
3.1.6. Key's Compliance with Other Laws............................19
3.1.7. Consents and Approvals......................................19
3.1.8. Finder's Fee................................................19
3.1.9. Investigations; Litigation..................................20
3.1.10. Retention of Xxxxxx' Employees.............................20
3.2. Representations and Warranties of WellTech.............................20
3.2.1. Organization and Standing...................................20
3.2.2. Agreement Authorized and its Effect on Other Obligations....20
3.2.3. Capitalization..............................................21
3.2.4. Consents and Approvals......................................21
3.2.5. Finder's Fee................................................21
3.3. Other Representations and Warranties of Key and WellTech...............21
3.3.1. Control Prior to Merger.....................................21
3.3.2. Control Following Merger....................................21
3.3.3. No Plan to Reacquire........................................21
3.3.4. No Plan to Dispose..........................................21
3.3.5. Expenses....................................................22
3.3.6. Intercorporate Indebtedness.................................22
3.3.7. Investment Companies........................................22
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3.3.8. WellTech Stock..............................................22
ARTICLE 4
OBLIGATIONS PENDING EFFECTIVE DATE...........................................22
4.1. Agreements of Key and Xxxxxx...........................................22
4.1.1. Maintenance of Present Business.............................22
4.1.2. Maintenance of Properties...................................22
4.1.3. Maintenance of Books and Records............................22
4.1.4. Compliance with Law.........................................22
4.1.5. Inspection of Each Merging Corporation......................22
4.1.6. Notice of Material Developments.............................23
4.2. Additional Agreements of Xxxxxx........................................23
4.2.1. Prohibition of Certain Employment Contracts.................23
4.2.2. Prohibition of Certain Loans................................24
4.2.3. Prohibition of Certain Commitments..........................24
4.2.4. Disposal of Assets..........................................24
4.2.5. Maintenance of Insurance....................................24
4.2.6. Acquisition Proposals.......................................24
4.2.7. No Amendment to Articles of Incorporation...................24
4.2.8. No Issuance, Sale, or Purchase of Securities................24
4.2.9. Prohibition on Dividends....................................25
4.2.10. Xxxxxx' Employees..........................................25
4.3. Additional Agreements of Key...........................................25
4.3.1. Issuance of Key Common Stock................................25
4.3.2. Listing of Key Stock........................................25
4.3.3. No Amendment to Articles of Incorporation...................25
4.3.4. Notice of Material Developments.............................25
4.3.5. Employee Benefits Plans.....................................25
4.3.6. Continuation of Historic Business of Xxxxxx.................26
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS..........................................26
5.1. Conditions Precedent to Obligations of Xxxxxx...........................26
5.1.1. Representations and Warranties of Key and WellTech True at
Effective Date..............................................26
5.1.2. No Material Litigation......................................26
5.1.3. Opinion of Key Counsel......................................26
5.1.4. Listing of Key Common Stock.................................27
5.1.5. Consent of Certain Parties in Privity With Key and WellTech.27
5.2. Conditions Precedent to Obligations of Key and WellTech................27
5.2.1. Representations and Warranties of Xxxxxx True at Effective
Date........................................................27
5.2.2. No Material Litigation......................................27
5.2.3. Opinion of Counsel..........................................28
5.2.4. Consent of Certain Parties in Privity with Xxxxxx or the
Shareholder.................................................28
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5.2.5. Termination of Certain Employees............................28
5.2.6. Environmental Assessments...................................28
ARTICLE 6
TERMINATION AND ABANDONMENT..................................................29
6.1. Termination............................................................29
6.1.1. By Mutual Consent...........................................29
6.1.2. By Key or WellTech Because of Failure to Perform Agreements or
Conditions Precedent........................................29
6.1.3. By Xxxxxx or the Shareholder Because of Failure to Perform
Agreements or Conditions Precedent..........................29
6.1.4. By Key or WellTech or by the Shareholder or Xxxxxx, Because of
Legal Proceedings.................................29
6.1.5. By Key or WellTech Because of a Material Adverse Change.....29
6.1.6. By the Shareholder or Xxxxxx Because of a Material Adverse
Change......................................................29
6.1.7. By Key or WellTech, or by the Shareholder or Xxxxxx, if Merger
not Effective December 31, 1996.............................30
6.2. Effect of Termination..................................................30
6.3. Waiver of Conditions...................................................30
6.4. Expense on Termination.................................................30
ARTICLE 7
ADDITIONAL AGREEMENTS .......................................................30
7.1. Noncompetition.........................................................30
7.2. Registration Rights....................................................31
7.2.1. Agreement to Register Resales...............................31
7.2.2. Effectiveness of Shelf Registration Statement...............31
7.2.3. Blue Sky Qualification......................................32
7.2.4. Registration Expenses.......................................32
7.2.5. Preparation; Reasonable Investigation.......................32
7.2.6. Rights Non-Transferable.....................................32
7.2.7. Undertaking to File Reports and Cooperate in Rule 144 and Rule
145 Transactions............................................32
7.2.8. Additional Undertakings with Respect to Registration Rights..........33
7.2.8.1. Delivery of Shelf Registration Statement and
Prospectus.....................................33
7.2.8.2. Notice to the Shareholder........................33
7.2.8.3. Incorporation of Information.....................33
7.2.8.4. Delivery of Documents Incorporated by Reference..34
7.2.8.5. Listing..........................................34
7.2.8.6. Filing of Exchange Act Reports...................34
7.2.8.7. Requests for Information by the Commission.......34
7.2.8.8. Notes of Stop Orders.............................34
7.3. Settling of Accounts................................................34
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7.3.1. Allocation of Accounts......................................34
7.3.2. Welfare Benefits; Long-Term Disability......................35
7.4. Future Tax Returns.....................................................35
7.4.1. Filing of Tax Returns.......................................35
7.4.2. Tax Controversies...........................................36
7.5. Continuation of Employment of Certain Xxxxxx Personnel.................37
7.6. Further Assurances.....................................................37
ARTICLE 8
INDEMNIFICATION..............................................................37
8.1. Indemnification by the Shareholder.....................................37
8.2. Indemnification by Key.................................................38
8.3. Indemnification Procedure..............................................38
8.4. Limitation on Damages..................................................39
8.5. Liability Exception....................................................39
8.6. Exclusive Remedy.......................................................39
ARTICLE 9
MISCELLANEOUS................................................................40
9.1. Survival of Representations, Warranties and Covenants..................40
9.2. Entirety...............................................................40
9.3. Counterparts...........................................................40
9.4. Notices and Waivers....................................................40
9.5. Table of Contents and Captions.........................................41
9.6. Successors and Assigns.................................................41
9.7. Severability...........................................................41
9.8. Applicable Law.........................................................41
9.9. Public Announcements...................................................41
9.10. Knowledge...........................................................39
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