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ASSET PURCHASE AGREEMENT
AMONG
KEY FOUR CORNERS, INC.
KEY ENERGY GROUP, INC.
XXXXXXX OIL & GAS CO.
BIG A WELL SERVICE CO.
SUNCO TRUCKING CO.
XXXXXX SUPPLY CO., INC.
AND
XXXXXX X. XXXXXXX
SEPTEMBER 2, 1997
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TABLE OF CONTENTS
Page
Article 1
PURCHASE AND SALE OF ASSETS..................................................v
1.1. Purchase and Sale of the Assets.....................................v
1.2. Consideration for Assets............................................3
1.3. Post-Closing Adjustment with Respect to Sellers' Net Value..........3
1.4. Assumption of Liabilities...........................................4
1.5. Time and Place of Closing...........................................4
Article 2
REPRESENTATIONS AND WARRANTIES...............................................4
2.1. Representations and Warranties of the Sellers, COG and Xxxxxxx......4
2.1.1. Organization and Good Standing.............................4
2.1.2. Agreements Authorized and their Effect on Other
Obligations................................................4
2.1.3. Subsidiaries...............................................5
2.1.4. Liabilities................................................5
2.1.5. Contracts..................................................5
2.1.6. Title to and Condition of Assets...........................5
2.1.7. Licenses and Permits......................................6
2.1.8. Intellectual Property......................................6
2.1.9. Financial Statements.......................................6
2.1.10. Additional Information............................7
2.1.11. Absence of Certain Changes and Events.............8
2.1.12. Assets; Necessary Consents........................9
2.1.13. Environmental Matters.......................................9
2.1.14. Employee Benefit Plans; Labor Issues.............10
2.1.15. Investigations; Litigation.......................11
2.1.16. Absence of Certain Businesses Practices..........11
2.1.17. Solvency.........................................11
2.1.18. Untrue Statements................................11
2.1.19. Transactions with Management.....................11
2.1.20. Compliance with Other Laws.......................12
2.1.21. Taxes............................................12
2.1.22. Finder's Fee.....................................12
2.2. Investment Representations.........................................12
2.2.1. Sellers' Investment Suitability and Related Matters.......12
2.2.2. Key Shares Not Registered................................13
2.2.3. Reliance on Representations...............................13
2.2.4. Investment Intent.........................................13
2.2.5. Permitted Resale..........................................13
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2.2.6. Investor Sophistication...................................13
2.2.7. Availability of Information...............................13
2.2.8. Restrictive Legends......................................13
2.3. Representations and Warranties of Buyer............................14
2.3.1. Organization and Good Standing.............................14
2.3.2. Agreement Authorized and its Effect on Other Obligations...14
2.3.3. Necessary Consents.........................................14
2.3.4. Investigations.............................................14
2.4. Representations and Warranties of Key..............................14
2.4.1. Organization and Standing.................................15
2.4.2. Agreement Authorized and its Effect on Other Obligations..15
2.4.3. Capitalization............................................15
2.4.4. Reports and Financial Statements..........................16
2.4.5. Absence of Certain Changes and Events.....................16
2.4.6. Compliance with Other Laws...............................17
2.4.7. Necessary Consents........................................17
2.4.8. Investigations; Litigation.......................17
Article 3
OBLIGATIONS PENDING CLOSING DATE............................................17
3.1. Agreements of the Sellers, COG and Xxxxxxx............................17
3.1.1. Maintenance of Present Business...................17
3.1.2. Maintenance of Properties.........................17
3.1.4. Compliance with Law..............................18
3.1.5. Prohibition of Certain Contracts.................18
3.1.6. Prohibition of Loans.............................18
3.1.7. Prohibition of Certain Commitments...............18
3.1.8. Disposal of Assets...............................18
3.1.9. Maintenance of Insurance.........................18
3.1.10. No Amendment to Charter Documents and
Related Matters..................................18
3.1.11. No Issuance, Sale, or Purchase of Securities.....18
3.1.12. Prohibition on Dividends.........................18
3.1.13. Notice of Material Developments..................18
3.1.14. Acquisition Proposals.....................................19
3.2. HSR Compliance.....................................................19
Article 4
CONDITIONS PRECEDENT TO OBLIGATIONS.........................................19
4.1. Conditions Precedent to Obligations of Sellers, COG and Xxxxxxx.......19
4.1.1. Representations and Warranties of Buyer and Key True
at Closing Date............................................19
4.1.2. No Material Litigation.....................................19
4.1.3. Opinion of Buyer's and Key's Counsel.......................20
4.1.4. HSR.......................................................20
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4.1.5. Listing of Key Shares.....................................20
4.1.6. Consent of Certain Parties in Privity With Buyer...........20
4.2. Conditions Precedent to Obligations of Buyer and Key..................20
4.2.1. Representations and Warranties of the Sellers, COG
and Xxxxxxx True at Closing Date...........................20
4.2.2. No Material Litigation.....................................21
4.2.3. Opinion of Counsel.........................................21
4.2.4. HSR........................................................21
4.2.5. Consent of Certain Parties in Privity with the Sellers,
COG or Xxxxxxx.............................................21
4.2.6. Assignment of Contracts and Issuance of Permits..21
4.2.7. Environmental Assessments..................................21
4.2.8. Real Estate Transaction...................................22
4.2.9. Employment and Non-Competition Agreement..................22
4.2.10. Leases...........................................22
Article 5
TERMINATION AND ABANDONMENT.................................................22
5.1. Termination...........................................................22
5.1.1. By Mutual Consent..........................................22
5.1.2. By Buyer Because of Failure to Perform Agreements or
Conditions Precedent.............................22
5.1.3. By the Sellers Because of Failure to Perform Agreements or
Conditions Precedent.............................22
5.1.4. By Buyer or by the Sellers Because of Legal Proceedings....22
5.1.5. By Buyer Because of a Material Adverse Effect..............23
5.1.6. By Buyer or by the Sellers if No Closing by
November 1, 1997...........................................23
5.2. Effect of Termination.................................................23
5.3. Waiver of Conditions..................................................23
5.4. Expense on Termination................................................23
Article 6
ADDITIONAL AGREEMENTS.......................................................23
6.1. Noncompetition.....................................................23
6.2. Employees..........................................................24
6.3. Allocation of Purchase Price.......................................24
6.4. Name Change........................................................25
6.5. Further Assurances Relating to the Real Estate.....................25
6.6. Further Assurances.................................................25
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Article 7
INDEMNIFICATION.............................................................25
7.1. Indemnification by the Sellers, COG and Xxxxxxx....................25
7.2. Indemnification by Buyer and Key...................................26
7.3. Indemnification Procedure..........................................26
7.4. Limitation on Indemnification......................................27
Article 8
MISCELLANEOUS...............................................................27
8.1. Materiality........................................................27
8.2. Survival of Representations, Warranties and Covenants..............27
8.3. Entirety...........................................................28
8.4. Counterparts.......................................................28
8.5. Notices and Waivers................................................28
8.6. Captions...........................................................28
8.7. Successors and Assigns.............................................28
8.8. Severability.......................................................29
8.9. Applicable Law.....................................................29
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of
September 2, 1997 among, Key Four Corners, Inc., a Delaware corporation
("BUYER"); Key Energy Group, Inc., a Maryland corporation ("KEY"); Big A Well
Service Co. ("BIG A"), Sunco Trucking Co. ("SUNCO"), and Xxxxxx Supply Co., Inc.
("XXXXXX"), each of which is a New Mexico corporation and all of which are
collectively referred to in this Agreement as the "SELLERS;" Xxxxxxx Oil & Gas
Co., a New Mexico corporation and sole shareholder of each of the Sellers
("COG"); and Xxxxxx X. Xxxxxxx, a resident of Farmington, New Mexico, and
principal shareholder of COG ("XXXXXXX").
W I T N E S S E T H:
WHEREAS, the respective Sellers are engaged in the business of (i)
providing oil and gas well services, including workovers, plugging and
abandonment and completion, (ii) oil field fluid sales, (iii) providing oil
field fluid services, including transportation, storage and disposal, (iv)
providing oil field equipment transportation and storage services, (v) oil
field, industrial and mining equipment and supplies sales, (vi) operating a
fabrication, repair and machine shop and (vii) conducting oil and gas well
drilling operations (collectively the "BUSINESSES");
WHEREAS, COG is the owner of certain real property and improvements
located at 815 and 000 Xxxx Xxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx (the "REAL
ESTATE"), and as of the date hereof, COG and the Buyer have entered into a Real
Estate Purchase and Sale Agreement (the "REAL ESTATE CONTRACT") with respect to
the acquisition by Buyer of the Real Estate; and
WHEREAS, Sellers desire to sell to the Buyer, and Buyer desires to
purchase from Sellers, substantially all of the assets of each of the Sellers on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and agreements, and subject to the terms and
conditions herein contained, the parties hereto hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1. Purchase and Sale of the Assets. Subject to the terms and
conditions set forth in this Agreement, the Sellers hereby agree to sell,
convey, transfer, assign and deliver to Buyer all of the assets of the Sellers
other than the Excluded Assets (defined below), whether real, personal, tangible
or intangible, including, without limitation, the following assets of the
Sellers relating to or used or useful in the operation of the Businesses, except
for additions or deletions thereto which occur between the date hereof and the
Closing Date in the ordinary course of Sellers' businesses and are disclosed to
Buyer on or before the Closing Date:
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(a) all tangible personal property of the Sellers (such as
machinery, equipment, leasehold improvements, furniture and fixtures,
and vehicles), including, without limitation, that which is more fully
described on Schedule 1.1(a) hereto (collectively, the "TANGIBLE
PERSONAL PROPERTY");
(b) all of the inventory of Sellers, including without
limitation, that which is more fully described on Schedule 1.1(b)
hereto (collectively, the "INVENTORIES");
(c) all of the Sellers' intangible assets, including without
limitation, (i) all of the Sellers' rights to the names under which
they are incorporated or under which they currently conduct their
respective Businesses, (ii) all of the Sellers' rights to any patents,
patent applications, trademarks and service marks (including
registrations and applications therefor), trade names, and copyrights
and written know-how, trade secrets, licenses and sublicenses and all
other similar proprietary data and the goodwill associated therewith
(collectively, the "INTELLECTUAL PROPERTY") used or held in connection
with the Businesses, including without limitation, that which is more
fully described on Schedule 1.1(c) hereto (the "SELLERS' INTELLECTUAL
PROPERTY") and (iii) the Sellers' phone numbers and all of their
account ledgers, sales and promotional literature, computer software,
books, records, files and data (including customer and supplier lists),
and all other records of the Sellers relating to the Assets or the
Business (collectively, the "INTANGIBLES");
(d) those leases, subleases, contracts, contract rights, and
agreements of the Sellers relating to the Assets or the operation of
the Businesses specifically listed on Schedule 1.1(d) hereto
(collectively, the "CONTRACTS");
(e) all of the permits, authorizations, certificates,
approvals, registrations, variances, waivers, exemptions,
rights-of-way, franchises, ordinances, orders, licenses and other
rights of every kind and character (collectively, the "PERMITS") of the
Sellers relating principally to all or any of the Assets or to the
operation of the Businesses, including, but not limited to, those that
are more fully described on Schedule 1.1(e) hereto (collectively, the
"SELLERS' PERMITS");
(f) the goodwill and going concern values of the Sellers
relating to the Businesses;
(g) the working capital of the Sellers as described on
Schedule 1.1(g); and
(h) all other or additional privileges, rights, interests,
properties and assets of the Sellers of every kind and description and
wherever located that are used in the Businesses or intended for use in
the Businesses in connection with, or that are necessary for the
continued conduct of, the Businesses.
The purchased assets shall not include the following (collectively, the
"EXCLUDED ASSETS"): (i) all assets in possession of the Sellers but owned by
third parties; (ii) the assets listed
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on Schedule 1.1(a)-2; (iii) the corporate charter, related organizational
documents and minute books of the Sellers; and (iv) the consideration paid or
payable by Buyer to Sellers pursuant to Section 1.2 hereof. The assets
purchased and sold pursuant to this Agreement are collectively referred to
herein as the "ASSETS."
1.2. Consideration for Assets. As consideration for the sale of the
Assets and for the other covenants and agreements of COG, Sellers and Xxxxxxx
contained herein and subject to adjustments pursuant to Section 1.3, Buyer
agrees to pay to Sellers on the Closing Date, an aggregate purchase price (the
"PURCHASE PRICE") of (i) $26,993,000 ($28,000,000 less cash paid for Real
Estate) in immediately available funds to accounts designated by the Sellers
(the "CASH CONSIDERATION") and (ii) 125,000 shares of the common stock, par
value $.10 per share, of Key (the "KEY SHARES"), subject to appropriate
adjustment for any share split or combination in the common stock of Key during
the period between the date hereof and the Closing Date.
The aggregate Purchase Price payable hereunder shall be paid among the
Sellers in accordance with Schedule 1.2, provided that the Cash Consideration
portion of the Purchase Price shall be adjusted pursuant to Section 1.3.
1.3. Post-Closing Adjustment with Respect to Sellers' Net Value. Within
45 days after the Closing Date, Buyer shall provide to Sellers a schedule
setting forth the Sellers' Net Value (as hereinafter defined) as of the Closing
Date. If Sellers' Net Value is greater than $6,901,449, then Buyer shall
reimburse Sellers in cash the amount which equals the Sellers' Net Value at the
Closing Date less $6,901,449. If the Sellers' Net Value at the Closing Date is
less than $6,901,449, then Sellers, COG and Xxxxxxx jointly and severally agree
to pay to Buyer an aggregate amount in cash equal to $6,901,449 minus the
Sellers' Net Value at the Closing Date. Sellers shall have 30 days after receipt
of the schedule setting forth the Sellers' Net Value calculation to object to
the same; if no such objection is made, such net value calculation by Buyer
shall be deemed accepted by each of the Sellers, and the required payment shall
be made within ten days thereafter. If any of the Sellers object to the Sellers'
Net Value calculation, then the parties agree to mutually cooperate in reaching
agreement with respect thereto. If no such agreement can be reached within 90
days after the Closing Date, then the parties agree that either party may submit
the dispute to an independent accounting firm mutually acceptable to Buyer and
the Sellers, whose determination shall be made not later than 120 days after the
Closing Date and whose determination shall be binding on all the parties hereto.
All charges of such accounting firm and other expenses directly incurred in
making such determination shall be borne 50% by the Buyer and 50% by the
Sellers.
For purposes hereof, the Sellers' Net Value shall mean with respect to
a given date (i) the sum of (1) the amount by which (A) the total current assets
plus the other assets (less amounts due from affiliates or officers) exceeds (B)
the total current liabilities plus the total long-term liabilities (less accrued
or deferred income taxes and amounts due affiliates or officers), plus (2) total
funds expended for the purchase of capital equipment during the period between
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March 31, 1997 and the Closing Date in accordance with Section 3.1.7. Schedule
3.1 hereto shows the computation of Sellers' Net Value as of March 31, 1997,
based on the information contained in the Sellers' Financial Statements.
Any amount payable to Sellers under this Section 1.3 shall be paid
among the Sellers in accordance with the ratio which (i) the portion of the Cash
Consideration allocated to each Seller under Section 1.2 bears to (ii) the total
amount of the Cash Consideration.
1.4. Assumption of Liabilities. On the Closing Date, Buyer shall assume
those, and only those, liabilities and obligations of the Sellers hereinafter
listed and defined as the "ASSUMED LIABILITIES." For purposes of this Agreement,
"Assumed Liabilities" means (i) all items comprising each account balance under
the captions "Current Liabilities" or "Long Term Liabilities" on the March 31,
1997 unaudited balance sheet and (ii) liabilities incurred by the Sellers in the
ordinary course of business subsequent to the Balance Sheet Date for the account
or benefit of Buyer or, of the property, other assets and businesses of the
Sellers to be transferred to Buyer pursuant to this Agreement; provided,
however, the Assumed Liabilities shall not include any Excluded Liabilities. As
used herein, the term "EXCLUDED LIABILITIES" means (a) all liabilities of any of
the Sellers which are not "Assumed Liabilities," (b) any and all federal and
state income tax liability of any of the Sellers, COG or Xxxxxxx (c) any and all
intercompany accounts and (d) all attorneys' and accountants' fees and expenses
and any other fees and expenses incurred by the Sellers, COG or Xxxxxxx in
connection with transactions contemplated hereby.
1.5. Time and Place of Closing. The closing of the transactions
contemplated by this Agreement (the "CLOSING") shall be at the offices of
Xxxxxx, Lieuwen, Tucker, Pick & Heer, P.A. located at 0000 Xxxxxx Xxxxxxxxx,
Xxxxxxxxx, Xxxxx 000 West, Albuquerque, New Mexico 87110, on the second business
day following the satisfaction by all parties hereto of all of the conditions to
the Closing or as soon as practicable thereafter (the "CLOSING DATE").
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of the Sellers, COG and Xxxxxxx.
Except as disclosed on Schedule 2.1 (which shall identify the applicable Section
reference of this Agreement to which such disclosure relates), each of the
Sellers, COG and Xxxxxxx, jointly and severally, represent and warrant to Buyer
as follows:
2.1.1. Organization and Good Standing. Each of COG and the
Sellers are corporations duly organized, validly existing and in good
standing under the laws of their respective states of organization,
have full requisite corporate power and authority to carry on their
businesses as they are currently conducted, and to own and operate the
properties currently owned and operated by them, and are duly qualified
or licensed to do business and are in good standing as foreign
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corporations authorized to do business in all jurisdictions in which
the character of the properties owned or the nature of the businesses
conducted by them would make such qualification or licensing necessary.
2.1.2. Agreements Authorized and their Effect on Other
Obligations. The execution and delivery of this Agreement have been
authorized by all necessary corporate, shareholder and other action
on the part of each of COG and the Sellers, and this Agreement is the
valid and binding obligation of each of COG, the Sellers and Xxxxxxx
enforceable against each of such parties in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, debtor relief or similar laws affecting rights of
creditors generally and subject to normal equitable principles. The
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, will not conflict
with or result in a violation or breach of any term or provision of,
nor constitute a default under (i) the charter or bylaws (or other
organizational documents) of any of COG, the Sellers or Xxxxxxx, (ii)
any obligation, indenture, mortgage, deed of trust, lease, contract or
other agreement to which any of COG, the Sellers or Xxxxxxx is a party
or by which any of COG, the Sellers or Xxxxxxx or their respective
properties are bound; or (iii) any provision of any law, rule,
regulation, order, permit, certificate, writ, judgment, injunction,
decree, determination, award or other decision of any court,
arbitrator, or other governmental authority to which any of COG or the
Sellers or any of their respective properties are subject.
2.1.3. Subsidiaries. None of the Sellers has any subsidiary
corporations or any interest in any other organization, incorporated
or unincorporated, partnership or any other entity of any type.
2.1.4. Liabilities. The Sellers do not have any liabilities or
obligations, either accrued, absolute, contingent, or otherwise, or
have any knowledge of any potential liabilities or obligations that
would materially and adversely affect the value and conduct of the
Businesses by the Buyer or the Assets, other than those (i) reflected
or reserved against in the March 31, 1997 unaudited balance sheet of
the Sellers or (ii) incurred in the ordinary course of business since
March 31, 1997.
2.1.5. Contracts. Schedule 1.1(d) hereto sets forth a true,
complete and accurate list of all material Contracts of the Sellers,
including leases under which the Sellers are lessor or lessee, which
relate to the Assets or the Businesses and are to be performed in whole
or in part after the date hereof. All of the material Contracts are in
full force and effect, and constitute valid and binding obligations of
the Sellers. The Sellers are not, and no other party to any of the
Contracts is, in default thereunder, and no event has occurred which
(with or without notice, lapse of time, or the happening of any other
event) would constitute a default thereunder. No material Contract has
been entered into on terms that could reasonably be expected to have an
adverse effect on the use of the Assets or the Businesses by Buyer.
None of COG, the Sellers or Xxxxxxx has received any information which
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would cause any of such parties to conclude that any customer of the
Sellers will (or is likely to) cease doing business with Buyer (or its
successors) as a result of the consummation of the transactions
contemplated hereby. All of the Contracts set forth on Schedule 1.1(d),
other than the leases to be entered into pursuant to Section 4.2.10,
are assignable (and as of the Closing Date will be validly assigned) to
Buyer without the consent of any other party thereto, other than
consents obtained no later than the Closing Date.
2.1.6. Title to and Condition of Assets. The Sellers have
good, indefeasible and marketable title to all of the Assets, free
and clear of any Encumbrances (defined below). All of the
Assets 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 normal operations. All of the Assets
materially conform to all applicable laws governing their use. No
notice of any violation of any law, statute, ordinance, or regulation
relating to any of the Assets has been received by any of the Sellers,
COG or Xxxxxxx, except such as have been fully complied with. For
purposes of this Agreement, 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.
2.1.7. Licenses and Permits. Schedule 1.1(e) hereto sets forth
a true, complete and accurate list of all Permits material to the
Businesses and the operation, maintenance and use of the Assets in the
manner in which they are now being operated, maintained and used. Each
of the Sellers' Permits and the Sellers' rights with respect thereto is
valid and subsisting, in full force and effect, and enforceable by the
respective Sellers subject to administrative powers of regulatory
agencies having jurisdiction. Each of the Sellers is in material
compliance in all respects with the terms of each of the Sellers'
Permits. None of the Sellers' Permits have been, or to the knowledge of
any of the Sellers, COG or Xxxxxxx, are threatened to be, revoked,
canceled, suspended or modified. Upon consummation of the transactions
contemplated hereby, all of the Sellers' Permits that are assignable
without the consent of any governmental or other agency shall be
assigned to the Buyer, and Buyer's rights with respect thereto will be
valid and subsisting in full force and effect, and enforceable by Buyer
subject only to the administrative powers of regulatory agencies having
jurisdiction over the assigned Sellers' Permits.
2.1.8. Intellectual Property. Schedule 1.1(c) hereto sets
forth a true, complete and accurate list of all Intellectual Property
material to the continued conduct of the Businesses. The Sellers'
Intellectual Property is owned or licensed by the Sellers free and
clear of any Encumbrances. The Sellers have not granted to any other
person any license to use any Sellers' Intellectual Property. Neither
the Sellers, COG nor Xxxxxxx has received any notice of infringement,
misappropriation, or conflict with the intellectual property rights of
others in connection with the use by the Sellers of the Sellers'
Intellectual Property.
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2.1.9. Financial Statements. The Sellers have delivered to
Buyer copies of certain unaudited financial statements of the Sellers,
copies of which are attached hereto as Schedule 2.1.9 (collectively,
the "SELLERS' FINANCIAL STATEMENTS") as of and for the five months
ended March 31, 1997 (the "BALANCE SHEET DATE"). The Sellers' Financial
Statements are true, correct and complete in all material respects and
present fairly and fully the financial condition of the Sellers as of
the dates and for the periods indicated thereon, and have been prepared
in accordance with generally accepted accounting principles as
promulgated by the American Institute of Certified Public Accountants
("GAAP") applied on a consistent basis, except as noted therein. Each
of the Sellers' Financial Statements include all adjustments
which are necessary for a fair presentation of the applicable Seller's
results for that period. The inventories of the Sellers reflected in
the Sellers' Financial Statements, or which have thereafter been
acquired by the Sellers, consist of items of a quality and quantity
salable in the normal course of the applicable business. The values at
which such inventories are carried are in accordance with GAAP applied
on a consistent basis, and are consistent with the normal inventory
level and practices of the Sellers with respect to the Businesses.
2.1.10. Additional Information. Attached as Schedule
2.1.10.1 through and including Schedule 2.1.10.13 are true, complete
and correct lists of the following items (such schedule
may refer to the disclosures contained in the schedules delivered
pursuant to Section 1.1):
2.1.10.1. Real Estate. All real property and
structures thereon currently owned or leased or subject to a
contract of purchase and sale, or lease commitment,
by any of the Sellers, with a description of the nature and
amount of any Encumbrance thereto;
2.1.10.2. Machinery and Equipment. All machinery,
transportation equipment, tools, equipment, furnishings and
fixtures (excluding such items as did not have a cost basis of
$500 or more at their respective dates of acquisition by any
of the Sellers) owned, leased or subject to a contract of
purchase and sale, or lease commitment, by any of the Sellers,
with a description of the nature and amount of any
Encumbrances thereon;
2.1.10.3. Inventory. All inventory items or groups
of inventory items owned by any of the Sellers, together
with the amount of any Encumbrances thereon;
2.1.10.4. Receivables. All accounts and notes
receivable of the Sellers, together with (i) an appropriate
invoice date and due date aging schedule, (ii) the amounts
provided for as an allowance for bad debts, (iii) the identity
and location of any asset in which any of the Sellers holds a
security interest to secure payment of the underlying
indebtedness and (iv) a description of the nature and amount
of any Encumbrances on such accounts and notes receivable;
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2.1.10.5. Payables. All accounts and notes payable
of the Sellers, together with an appropriate aging schedule;
2.1.10.6. Insurance. All insurance policies or
bonds, including title insurance policies, with respect to
the Sellers, including those covering its properties
(real or personal), buildings, machinery, equipment,
fixtures, employees and operations;
2.1.10.7. 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 any of the Sellers (collectively, the "EMPLOYEE
PLANS");
2.1.10.8. Bank Accounts. The name of each
bank in which any of the Sellers has an account, the names of
all persons authorized to draw thereon, the account balances
and the account numbers for each such account;
2.1.10.9. Employee Agreements. Any collective
bargaining agreements of any of the Sellers with employees,
including amendments, supplements, and written or oral
understandings, and all employment, compensation or
consulting agreements, whether written or oral, of any of the
Sellers with any person;
2.1.10.10. Trade Names. All trade names and
fictitious names used or held by any of the Sellers,
whether and where such names are registered and where
such names are used;
2.1.10.11. Promissory Notes and Indebtedness. All
long-term and short-term promissory notes, installment
contracts, loan agreements, credit agreements and
any other agreements of any of the Sellers relating thereto
or with respect to collateral securing the same;
2.1.10.12. Guaranties. All indebtedness, liabilities
and commitments of others and as to which any of the
Sellers is a guarantor, endorser, co-maker, surety,
or accommodation maker, or is contingently liable therefor
(excluding liabilities as an endorser of checks and the like
in the ordinary course of business) and all letters
of credit, whether stand-by or documentary, issued by any
third party; and
2.1.10.13. Financial Statements. Unaudited financial
statements for each of the Sellers as of October 31, 1995
and 1996.
Schedule 2.1.10.1 - 2.1.10.13 shall be true, complete and
correct as of the date hereof, except for items 2.1.10.3, 2.1.10.4 and
2.1.10.5 which are true, complete and correct as of March 31, 1997 and
2.1.10.13 which are true and correct as of and for the periods
indicated.
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2.1.11. Absence of Certain Changes and Events. Other than
as a result of the transactions contemplated by this Agreement
or as set forth on Schedule 2.1.11, since the Balance Sheet Date,
there has not been:
2.1.11.1. Financial Change. Any material adverse
change in the Assets, the Business or the financial
condition, operations, liabilities or prospects of the Sellers
taken as a whole;
2.1.11.2. Property Damage. Any material damage,
destruction, or loss to any of the Assets or the Business of
any of the Sellers (whether or not covered by insurance);
2.1.11.3. Waiver. Any waiver or release of a
material right of or claim held by any of the Sellers;
2.1.11.4. Change in Assets. Any acquisition,
disposition, transfer, dividend, encumbrance, mortgage, pledge
or other encumbrance of any asset of the Sellers other than
in the ordinary course of business;
2.1.11.5. Labor Disputes. Any labor disputes between
any of the Sellers and their respective employees;
2.1.11.6. Capitalization Change. Any change in the
capital stock or in the number of shares or classes
of any of the Sellers' or COG's capital stock as described
in Section 2.1.3;
2.1.11.7. Employment Arrangements. Any change in
the duration or level of compensation, bonus or severance
payable under any employment or contractor arrangement
with any of the Sellers (whether by amendment to any existing
arrangement or by the entering into a new arrangement); or
2.1.11.8. Other Material Changes. Any other event
or condition known to any of the Sellers, COG or Xxxxxxx
which would or may, more likely than not, have a Material
Adverse Effect on the Sellers.
2.1.12. Assets; Necessary Consents. The Assets constitute all
of the assets necessary to conduct the Business as historically
conducted by each of the Sellers (other than the Excluded Assets). As
of the Closing Date, each of the Sellers will have obtained and
delivered to Buyer all consents to assignment or waivers thereof
required to be obtained from any governmental authority or from any
other third party in order to validly transfer the Assets hereunder,
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including, without limitation, any consents required to assign the
Contracts and the Sellers' Permits.
2.1.13. Environmental Matters. None of the current or past
operations of the Businesses or any of the Assets is being or has been
conducted or used in such a manner as to constitute a violation of any
Environmental Law (defined below). None of the Sellers, COG or Xxxxxxx
has received any notice (whether formal or informal, written or oral)
from any entity, governmental agency or individual regarding any
existing, pending or threatened investigation or inquiry related to
violations of any Environmental Law or regarding any claims for
remedial obligations or contribution for removal costs or damages under
any Environmental Law. There are no writs, injunction decrees, orders
or judgments outstanding, or lawsuits, claims, proceedings or
investigations pending or, to the knowledge of any of the Sellers, COG
or Xxxxxxx, threatened, relating to the ownership, use, maintenance or
operation of the Assets or the conduct of the Business, nor, to the
knowledge of any of the Sellers, COG or Xxxxxxx, is there any basis for
any of the foregoing. Buyer will not be required to obtain any permits,
licenses or similar authorizations pursuant to any Environmental Law
after the Closing Date to operate and use any of the Assets for their
current or proposed purposes and uses, except for permits, licenses or
similar authorizations that would not have a Material Adverse Effect on
the Sellers. The Assets include all environmental and pollution control
equipment necessary for material compliance with
applicable Environmental Law. Except as disclosed on Schedule 2.1.13
(i) no Hazardous Materials (defined below) have been or are currently
being used by any of the Sellers in the operation of the Assets, (ii)
no Hazardous Materials are or have ever been situated on or under any
of the Sellers' properties, whether owned or leased, or incorporated
into any of the Assets, (iii) there are no, and there have never been
any, underground storage tanks (as defined under Environmental Law)
located under any of the Sellers' properties, whether owned or leased,
and (iv) there are no environmental conditions or circumstances,
including the presence or release of any Hazardous Materials, on any
property presently or previously owned or leased by any of the Sellers,
or on any property on which Hazardous Materials generated by any of the
Sellers' operations or the use of the Assets were disposed of. The term
"ENVIRONMENTAL LAW" means any and all laws, rules, orders, regulations,
statutes, ordinances, codes, decrees, and other legally enforceable
requirements (including, without limitation, common law) of the United
States, or any state, regional, city, local, municipal or other
governmental authority or quasi-governmental authority, regulating,
relating to, or imposing environmental standards of conduct concerning
protection of the environment or human health, or employee health and
safety as from time to time has been or is now in effect. The term
"HAZARDOUS MATERIALS" means (x) asbestos, polychlorinated biphenyls,
urea formaldehyde, lead based paint, radon gas, petroleum, oil, solid
waste, pollutants and contaminants, and (y) any chemicals, materials,
wastes or substances that are defined, regulated, determined or
identified as toxic or hazardous in any Environmental Law.
2.1.14. Employee Benefit Plans; Labor Issues. Upon request ,
each of the Sellers will deliver to the Buyer copies of the Employee
Plans and any other health, dental and life insurance plans, bonus,
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deferred compensation, pension, profit sharing and retirement plans and
all other employee benefit plans, programs or arrangements providing
benefits for employees of any of the Sellers (the "BENEFIT PLANS").
Each of the Benefit Plans has been administered and maintained in
material compliance with the requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and, if applicable,
the Internal Revenue Code of 1986, as amended (the "CODE"), and all
other applicable laws. There is no "ACCUMULATED FUNDING DEFICIENCY" (as
such term is defined in Section 302 of ERISA or Section 412 of the
Code) with respect to a Benefit Plan that is an "EMPLOYEE PENSION
BENEFIT PLAN" (as defined in Section 3(2) of ERISA), and there has been
no application for waiver of the minimum funding standards imposed by
Code Section 412 with respect to any such plan. There are no pending
or, to the knowledge of any of the Sellers, COG or Xxxxxxx, threatened
claims by or on behalf of the Benefit Plans, the United States
Department of Labor, the Internal Revenue Service, or by any current or
former employee of any of the Sellers or beneficiary of such current or
former employee alleging a breach of any fiduciary duties or a
violation of applicable state or federal law which could result in a
material liability on the part of any of the Sellers or a Benefit Plan
under ERISA or any other law (other than benefit claims and funding
obligations in the ordinary course of business). None of the Sellers
has suffered or otherwise caused a "complete withdrawal" or "partial
withdrawal," as such terms are respectively defined in Sections 4203
and 4205 of ERISA, from any Multiemployer Pension Plan, as such term is
defined in Section 3(37) of ERISA.
None of the Sellers have engaged in any unfair labor practices
which could reasonably be expected to result in an adverse effect on
the Business or the Assets. None of the Sellers have any dispute with
any of their existing or former employees, and there are no labor
disputes or, to the knowledge of any of the Sellers, COG or Xxxxxxx,
any disputes threatened by current or former employees of any of the
Sellers.
2.1.15. Investigations; Litigation. Except as required
pursuant to the Xxxx-Xxxxx- Xxxxxx Antitrust Improvements Act of 1978
and the rules and regulations promulgated thereunder (collectively,
"HSR"), no investigation or review by any governmental entity with
respect to any of the Sellers or any of the transactions contemplated
by this Agreement is pending or, to the knowledge of any of the
Sellers, COG or Xxxxxxx, threatened, nor has any governmental entity
indicated to any of the Sellers, COG or Xxxxxxx an intention to conduct
the same. Except as disclosed on Schedule 2.1.15, there is no suit,
action, or legal, administrative, arbitration, or other proceeding or
governmental investigation pending to which any of the Sellers, COG or
Xxxxxxx is a party or, to the knowledge of any of the Sellers, COG or
Xxxxxxx, might become a party.
2.1.16. Absence of Certain Businesses Practices. None of the
Sellers, COG or Xxxxxxx, nor any officer, employee or agent of any of
the Sellers or COG, nor any other person acting on behalf of any of the
Sellers, COG or Xxxxxxx, 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
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be in a position to help or hinder the profitable conduct of the
Businesses or the profitable use of the Assets (or to assist any of the
Sellers in connection with any actual or proposed transaction) which if
not given in the past, may more likely than not have had an adverse
effect on the profitable conduct of the Business or the profitable use
of the Assets, or if not continued in the future, may more likely than
not adversely affect the profitable conduct of the Businesses or the
profitable use of the Assets.
2.1.17. Solvency. None of the Sellers are presently insolvent,
nor will any of the Sellers be rendered insolvent by the occurrence of
the transactions contemplated by this Agreement. The term "INSOLVENT",
with respect to a particular Seller, means that the sum of the present
fair and saleable value of such Seller's assets does not and will not
exceed its debts and other probable liabilities, and the term "DEBTS"
includes any legal liability whether matured or unmatured, liquidated
or unliquidated, absolute fixed or contingent, disputed or undisputed
or secured or unsecured.
2.1.18. Untrue Statements. This Agreement and all other
agreements executed by any of the Sellers, COG or Xxxxxxx and delivered
to Buyer does 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 light of the circumstances
under which they were made, not misleading.
2.1.19. Transactions with Management. Except as set forth on
Schedule 2.1.19, none of the Sellers is a party to any contract, lease
or agreement with any of the officers or directors, any of the Sellers,
COG or Xxxxxxx or any of their affiliates or family members,
as applicable.
2.1.20. Compliance with Other Laws. None of the Sellers is in
material for violation of or in material 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. 651 et seq., as
amended), or 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.
2.1.21. Taxes. The federal income tax returns of the Sellers
for the years 1995 and 1996 have been provided to the Buyer prior to
the date hereof. Proper and accurate federal, state and local income,
sales, use, franchise, gross revenue, turnover, excise, payroll,
property, employment, customs duties and any and all other tax returns,
reports, and estimates have been filed with appropriate governmental
agencies, domestic and foreign, by each of the Sellers and COG for each
period for which any returns, reports, or estimates were due. All taxes
shown by such returns to be payable have been paid. All sales taxes
have been properly collected and accounted for through the date hereof
by each of the Sellers, and the Sellers have made all required deposits
of such taxes with all taxing authorities. The tax provision reflected
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in each of the Sellers' financial statements as of March 31, 1997 is
adequate to cover liabilities of each of the Sellers at the date
thereof for all taxes of any character whatsoever applicable to each of
the Sellers or its assets or business. No waiver of any statute of
limitations executed by any of the Sellers or by COG with respect to
federal or state income or other tax is in effect for any period. No
deficiencies for any taxes have been proposed, asserted or assessed
against any of the Sellers, COG, and no requests or waivers of the time
to assess any such tax are pending. The federal income tax returns of
the Sellers or COG have not been audited by the Internal Revenue
Service since 1990. No audit of any federal or state or other tax
return of any of the Sellers or COG is presently in process nor has an
appointment for or notice of any such audit been requested or given by
any taxing authority.
2.1.22. Finder's Fee. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on
by the Sellers, COG and Xxxxxxx and their respective counsel directly
with Buyer and its counsel, without the intervention of any other
person in such manner as to give rise to any valid claim against any of
the parties hereto for a brokerage commission, finder's fee or any
similar payment.
2.2. Investment Representations. Each of the Sellers acknowledges,
represents and agrees that:
2.2.1. Sellers' Investment Suitability and Related Matters.
(i) Key has made available to the Sellers and COG the information and
documents described in Section 2.4.3, (ii) the Sellers understand the
risks associated with ownership of Key Common Stock, and (iii) the
Sellers are capable of bearing the financial risks associated with such
ownership.
2.2.2. Key Shares Not Registered. The Key Shares have not
been registered under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), or registered or qualified under any applicable
state securities laws.
2.2.3. Reliance on Representations. The Key Shares are being
issued to the Sellers in reliance upon exemptions from such
registration or qualification requirements, and the availability of
such exemptions depends in part upon the Sellers' bona fide investment
intent with respect to the Key Shares.
2.2.4. Investment Intent. The Sellers' acquisition of the Key
Shares are solely for their respective own accounts for investment,
and the Sellers are not acquiring the Key Shares for the account of
any other person or with a view toward distribution thereof.
2.2.5. Permitted Resale. The Sellers 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
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delivery to Key of an opinion of legal counsel reasonably satisfactory
to Key that an exemption from registration is available.
2.2.6. Investor Sophistication. Each of the Sellers has such
knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of an investment in the
Key Shares, and to make an informed investment decision with
respect thereto.
2.2.7. Availability of Information. Each of the Sellers has
had the opportunity to ask questions of, and receive answers from Key's
officers and directors concerning the Seller's acquisition of the Key
Shares and to obtain such other information concerning Key and the Key
Shares, to the extent Key's officers and directors possessed the same
or could acquire it without unreasonable effort or expense, as the
Sellers deemed necessary in connection with making an informed
investment decision.
2.2.8. Restrictive Legends. In addition to any other
legends required by law or the other agreements entered into in
connection herewith, each certificate evidencing the Key Shares will
bear a conspicuous restrictive legend substantially as follows:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS, AND THEY CANNOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE HYPOTHECATED
EXCEPT IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE
ACT AND SUCH OTHER STATE LAWS OR UPON DELIVERY TO THIS
CORPORATION OF AN OPINION OF LEGAL COUNSEL SATISFACTORY TO THE
CORPORATION THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
2.3. Representations and Warranties of Buyer. Buyer represents and
warrants to each of the Sellers, COG and Xxxxxxx as follows:
2.3.1. Organization and Good Standing. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Delaware, has full requisite corporate power and authority
to carry on its business as it is currently conducted, and to own and
operate the properties currently owned and operated by it, and is duly
qualified or licensed to do business and is in good standing as a
foreign corporation authorized to do business in all jurisdictions in
which the character of the properties owned or the nature of the
business conducted by it would make such qualification or licensing
necessary, including the State of New Mexico.
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2.3.2. Agreement Authorized and its Effect on Other
Obligations. The execution and delivery of this Agreement has been
authorized by all necessary corporate, shareholder and other action on
the part of Buyer, and this Agreement is the valid and binding
obligation of Buyer enforceable against Buyer in accordance with its
terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, debtor relief or similar laws affecting
rights of creditors generally and subject to normal equitable
principles. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby, will not
conflict with or result in a violation or breach of any term or
provision of, nor constitute a default under (i) the charter or bylaws
(or other organizational documents) of Buyer, (ii) any obligation,
indenture, mortgage, deed of trust, lease, contract or other agreement
to which Buyer is a party or by which Buyer or its properties are
bound; or (iii) any provision of any law, rule, regulation, order,
permits, certificate, writ, judgment, injunction, decree,
determination, award or other decision of any court, arbitrator, or
other governmental authority to which Buyer or any of its properties
are subject, except, with respect to items (ii) and (iii), such
violations, breaches, or defaults as would not have a Material Adverse
Effect on Buyer, any Seller or the transactions contemplated by this
Agreement.
2.3.3. Necessary Consents. No consent, approval or
authorization of, or filing of a registration with, any governmental or
regulatory authority, or any other person or entity is required to be
made or obtained by Buyer in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby.
2.3.4. Investigations. Except as required pursuant to HSR, no
investigation or review by any governmental entity with respect to the
Buyer or any of the transactions contemplated by this Agreement is
pending, or to knowledge of Buyer, threatened, nor has any governmental
entity indicated to Buyer an intention to conduct the same.
2.4. Representations and Warranties of Key. Key represents and
warrants to each of the Sellers, COG and Xxxxxxx as follows:
2.4.1. 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 business in all jurisdictions in
which the character of the properties owned or the nature of the
business conducted by it would make such qualification or licensing
necessary.
2.4.2. Agreement Authorized and its Effect on Other
Obligations. The execution and delivery of this Agreement has been
authorized by all necessary corporate, shareholder and other action on
the part of Key, and this Agreement is the valid and binding obligation
of Key enforceable against Key in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
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reorganization, debtor relief or similar laws affecting rights of
creditors generally and subject to normal equitable principles. The
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, will not conflict
with or result in a violation or breach of any term or provision of,
nor constitute a default under (i) the charter or bylaws (or other
organizational documents) of Key, (ii) any obligation, indenture,
mortgage, deed of trust, lease, contract or other agreement to which
Key is a party or by which Key or its properties are bound; or (iii)
any provision of any law, rule, regulation, order, permits,
certificate, writ, judgment, injunction, decree, determination, award
or other decision of any court, arbitrator, or other governmental
authority to which Key or any of its properties are subject.
2.4.3. Capitalization. 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, 12,422,964 shares are
issued and outstanding, 8,177,246 shares are reserved for issuance
pursuant to stock options, warrants and other convertible securities.
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 2.4.3., 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) 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 Closing 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.
2.4.4. Reports and Financial Statements. Key has previously
furnished to the Sellers 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, as
amended (the "EXCHANGE ACT"), for Key's fiscal year ended June 30,
1996; (ii) Key's quarterly and other reports filed with the Commission
since June 30, 1996; (iii) all definitive proxy solicitation materials
filed with the Commission since June 30, 1996; (iv) any registration
statements (other than those relating to employee benefit plans)
declared effective by the Commission since June 30, 1996; and (v) Key's
Private Offering Memorandum dated June 28, 1996, relating to Key's 7%
Convertible Subordinated Debentures (collectively, the "DISCLOSURE
DOCUMENTS"). The Disclosure Documents contain all information required
to be disclosed under the Securities Act of 1933, as amended, the
Exchange Act and the rules and regulations of the Commission. The
consolidated financial statements of Key and its consolidated
subsidiaries included in Key's most recent report on Form 10-K were
prepared in accordance with GAAP applied on a consistent basis during
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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 Disclosure
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, 1997, 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.
2.4.5. Absence of Certain Changes and Events. Since June
30, 1997, there has not been:
2.4.5.1. Financial Change. Any material adverse
change in the Assets, the business or the financial
condition, operations, liabilities or prospects of Key;
2.4.5.2. Property Damage. Any damage, destruction,
or loss to any of the assets or the businesses of Key
(whether or not covered by insurance);
2.4.5.3. Waiver. Any waiver or release of a
material right of or claim held by Key;
2.4.5.4. Change in Assets. Any acquisition,
disposition, transfer, encumbrance, mortgage, pledge or
other encumbrance of any asset of Key other than in the
ordinary course of business;
2.4.5.5. Labor Disputes. Any labor disputes between
Key and its employees;
2.4.5.6. Capitalization Change. Any change in the
capital stock or in the number of shares of any classes
of Key's capital stock as described in Section 2.4.3; or
2.4.5.7. Other Material Changes. Any other event
or condition known to Key which may, more likely than
not, have a Material Adverse Effect on Key.
2.4.6. Compliance with Other Laws. Key is not in material
violation of or in material 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. 651 et seq., as amended), or 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.
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2.4.7. Necessary Consents. No consent, approval or
authorization of, or filing of a registration with, any governmental or
regulatory authority, or any other person or entity is required to be
made or obtained by Key in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby, other than what is required by the American Stock
Exchange for the listing of the Key Shares issuable hereunder.
2.4.8. Investigations; Litigation. Except as required pursuant
to HSR, 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. Except as set forth in the Disclosure
Documents, 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 may more likely than not, result in any
Material Adverse Effect on Key.
ARTICLE 3
OBLIGATIONS PENDING CLOSING DATE
3.1. Agreements of the Sellers, COG and Xxxxxxx. Except as expressly
contemplated elsewhere in this Agreement, the Sellers, COG and Xxxxxxx agree
that from the date hereof until the Closing Date, each of the Sellers will:
3.1.1. Maintenance of Present Businesses. Except 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, preserve
intact its present business organization, keep available the services
of its present officers and employees, and preserve its relationship
with customers, suppliers, jobbers, distributors and others having
business dealings with it;
3.1.2. Maintenance of Properties. At their expense, maintain
all of their property and Assets in customary repair, order, and
condition, reasonable wear and tear excepted;
3.1.3. Maintenance of Books and Records. Maintain its books
of account and records in the usual, regular, and ordinary manner, in
accordance with its customary accounting principles applied on a
consistent basis;
3.1.4. Compliance with Law. Comply with all laws applicable
to, and having a material effect on, it and to the conduct of its
business;
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3.1.5. Prohibition of Certain Contracts. Except for orders
made and contracts entered into in the ordinary course of business,
not enter into any contracts which involve the payment of more
than $25,000 each;
3.1.6. Prohibition of Loans. Not incur any obligations for
borrowed money, except for loans in the usual and ordinary
course of business;
3.1.7. Prohibition of Certain Commitments. Except for
orders made and contracts entered into in the ordinary course of
business, not enter into a commitment for expenditures or incur
any liability exceeding $10,000 in the aggregate, unless approved in
writing by Buyer;
3.1.8. Disposal of Assets. Not sell, dispose of, or
encumber any property or assets, except in the usual and ordinary
course of business;
3.1.9. Maintenance of Insurance. Maintain insurance upon all
its properties and with respect to the conduct of its business of such
kinds and in such amounts as is not less than that presently carried by
it, which is adequate for the business operated by it, which insurance
may be added to from time to time upon the written approval by Buyer;
3.1.10. No Amendment to Charter Documents and Related Matters.
Not amend its charter documents, or merge or consolidate with or into
any person, change in any manner the rights of its capital stock or
the character of its business;
3.1.11. 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 its capital stock, or subdivide or in any way
reclassify any shares of its capital stock, or acquire, or agree to
acquire, any shares of its capital stock;
3.1.12. Prohibition on Dividends. Except as otherwise
provided herein, not declare any dividend on shares of its capital
stock or make any other non-cash distribution of assets
to the holders thereof;
3.1.13. Notice of Material Developments. Promptly notify the
Buyer in writing of any Material Adverse Effect on such Seller; and
3.1.14. Acquisition Proposals. Not directly or indirectly (i)
solicit, initiate or encourage any inquiry or Acquisition Proposal from
any person or (ii) participate in any discussions or negotiations
regarding, or furnish to any person other than Buyer 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 any of the
Sellers or for the acquisition or purchase of any equity interest in,
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or a material portion of the assets of, any of the Sellers, other than
the transactions with Buyer contemplated by this Agreement. The
Sellers, COG and Xxxxxxx shall promptly communicate to Buyer the terms
of any such written Acquisition Proposals which they may receive or any
written inquiries made to them or any of their respective directors,
officers, representatives or agents.
3.2. HSR Compliance. Each of Key and COG shall file, not later than 15
days after the date of this Agreement, such materials as a required under HSR
and shall (a) cooperate with the other party to the extent necessary to assist
the other party in the preparation of such filings, and (b) request early
termination of the waiting period required by HSR.
ARTICLE 4
CONDITIONS PRECEDENT TO OBLIGATIONS
4.1. Conditions Precedent to Obligations of Sellers, COG and Xxxxxxx.
The obligation of Sellers to consummate and effect the transactions contemplated
hereunder shall be subject to the satisfaction of the following conditions, or
to the waiver thereof by the Sellers before the Closing Date:
4.1.1. Representations and Warranties of Buyer and Key True at
Closing Date. The representations and warranties of Buyer and Key
herein contained shall be, in all material respects, true as of and at
the Closing Date with the same effect as though made at such date,
except as affected by transactions permitted or contemplated by this
Agreement; Buyer and Key shall have performed and complied, in all
material respects, with all covenants required by this Agreement to be
performed or complied with by Buyer and Key before the Closing Date;
and Buyer and Key shall have delivered to the Sellers a certificate,
dated the Closing Date and signed by their respective vice presidents
and its secretaries, to such effect.
4.1.2. No Material Litigation. No suit, action, or other
proceeding shall be pending, or to Buyer's or Key'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
provide other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby.
4.1.3. Opinion of Buyer's and Key's Counsel. The Sellers shall
have received a favorable opinion, dated as of the Closing Date, from
Xxxxxx & Xxxxxx, L.L.P., counsel for Buyer and Key, in form and
substance satisfactory to the Sellers, to the effect that (i) Buyer and
Key have been duly incorporated and are validly existing as
corporations in good standing under the laws of their respective states
of organization; (ii) all corporate proceedings required to be taken by
or on the part of the Buyer and Key to authorize the execution of this
Agreement and the implementation of the transactions contemplated
hereby have been taken; (iii) the Key Shares that are to be delivered
in accordance with this Agreement will, when issued, be validly issued,
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fully paid and nonassessable outstanding shares of Key Common Stock;
and (iv) this Agreement has been duly executed and delivered by, and is
the legal, valid and binding obligation of Buyer and Key and is
enforceable against Buyer and Key in accordance with its terms, except
as enforceability may be limited by (a) equitable principles of general
applicability or (b) bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the rights of creditors generally.
In rendering such opinion, such counsel may rely upon (i) certificates
of public officials and of officers of Buyer and Key as to matters of
fact and (ii) the opinion or opinions of other counsel, which opinions
shall be reasonably satisfactory to the Sellers, as to matters other
than federal or Texas law.
4.1.4. HSR. All waiting periods required by HSR shall have
expired with respect to the transactions contemplated by this
Agreement, or early termination with respect thereto shall have been
obtained. In addition, any approvals required under any state laws
comparable to HSR shall have been obtained.
4.1.5. Listing of Key Shares. The American Stock Exchange
shall have agreed that on the Closing Date it will list the Key Shares
issuable pursuant to this Agreement.
4.1.6. Consent of Certain Parties in Privity With Buyer. The
holders of any material indebtedness of Buyer, the lessors of any
material property leased by Buyer, and the other parties to any other
material agreements to which Buyer is a party shall, when and to the
extent necessary in the reasonable opinion of the Sellers, have
consented to the transactions contemplated hereby.
4.2. Conditions Precedent to Obligations of Buyer and Key. The
obligation of Buyer to consummate and effect the transactions contemplated
hereunder shall be subject to the satisfaction of the following conditions, or
to the waiver thereof by Buyer before the Closing Date.
4.2.1. Representations and Warranties of the Sellers, COG and
Xxxxxxx True at Closing Date. The representations and warranties of the
Sellers, COG and Xxxxxxx herein contained shall be, in all material
respects, true as of and at the Closing Date with the same effect as
though made at such date, except as affected by transactions permitted
or contemplated by this Agreement; the Sellers, COG and Xxxxxxx 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 Closing Date; and the Sellers, COG and
Xxxxxxx each shall have delivered to Buyer a certificate, dated the
Closing Date and signed by each of them individually or by their
respective presidents, chief financial or accounting officers, and
secretaries, as applicable, to such effects.
4.2.2. No Material Litigation. No suit, action, or other
proceeding shall be pending, or to the Seller's, COG's or Xxxxxxx'x
knowledge, threatened, before any court or governmental agency in which
it will be, or it is, sought to restrain or prohibit or to obtain
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damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby.
4.2.3. Opinion of Counsel. The Sellers shall have received a
favorable opinion, dated the Closing Date, from Laflin, Lieuwen,
Tucker, Pick & Heer, P.A., counsel to Sellers, COG and Xxxxxxx, in form
and substance satisfactory to Buyer, to the effect that (i) each of the
Sellers and COG has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its state of
organization; (ii) this Agreement has been duly executed and delivered
by, and is the legal, valid and binding obligation of each of the
Sellers, COG and Xxxxxxx, and is enforceable against each of the them
in accordance with its terms, except as the enforceability may be
limited by (a) equitable principles of general applicability or (b)
bankruptcy, insolvency, reorganization, fraudulent conveyance or
similar laws affecting the rights of creditors generally. In rendering
such opinion, such counsel may rely upon (i) certificates of public
officials and of officers of the Sellers, COG and Xxxxxxx as to matters
of fact and (ii) on the opinion or opinions of other counsel, which
opinions shall be reasonably satisfactory to Buyer, as to matters other
than federal or New Mexico law.
4.2.4. HSR. All waiting periods required by HSR shall have
expired with respect to the transactions contemplated by this
Agreement, or early termination with respect thereto shall have been
obtained. In addition, any approvals required under any state laws
comparable to HSR shall have been obtained.
4.2.5. Consent of Certain Parties in Privity with the Sellers,
COG or Xxxxxxx. The holders of any material indebtedness of the
Sellers, COG or Xxxxxxx, the lessors of any material property leased by
the Sellers, COG or Xxxxxxx, and the other parties to any other
material agreements to which the Sellers, COG or Xxxxxxx are a party
shall, when and to the extent necessary in the reasonable opinion of
Buyer, have consented to the transaction contemplated hereby.
4.2.6. Assignment of Contracts and Issuance of Permits. All of
the material Contracts shall have been assigned to Buyer. Buyer shall
have received from the appropriate regulatory agencies all permits
necessary for the operation of the Businesses as such Businesses have
been conducted by the Sellers and COG, including permits of like tenor
of the Sellers' Permits, or the Sellers' Permits shall have been
assigned to the Buyer with the consent of the appropriate regulatory
agencies.
4.2.7. Environmental Assessments. The Sellers or COG shall
have caused, at their sole expense, a Phase I Environmental Site
Assessment of all real property being transferred or leased
to the Buyer as contemplated by this Agreement and the Real
Estate Contract. Such Environmental Site Assessment will be conducted
in conformance with the scope and limitations of the ASTM Standard
Practice E1527 by an environmental surveyor approved by the Buyer. At
Buyer's reasonable request, the Sellers, COG or Xxxxxxx will cause, at
their sole expense, a Phase II environmental site assessment to be
conducted in conformance with the scope and limitations of the ASTM
Standard Practice E1527 by an environmental surveyor approved by Buyer.
The results of such Phase I and Phase II Environmental Site Assessments
shall have revealed no environmental condition that would result in a
Material Adverse Effect on the Sellers or materially reduce the value
of the Real Estate.
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4.2.8. Real Estate Transaction. Buyer and COG shall have
concurrently either closed the Real Estate Contract or shall have
entered into a lease with respect to the Real Estate as contemplated by
Section 6.5 of this Agreement.
4.2.9. Employment and Non-Competition Agreement. Xxxxxx
Xxxxxxxxx shall have entered into an employment and non-competition
agreement with Buyer.
4.2.10. Leases. COG, Xxxxxxx or their respective affiliates,
as applicable, shall have entered into lease agreements with Buyer
covering the real property and improvements currently used by any of
the Sellers in connection with the Businesses, other than the Real
Estate, on such terms and conditions as is mutually acceptable to such
party and Buyer.
ARTICLE 5
TERMINATION AND ABANDONMENT
5.1. Termination. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement may be terminated and the purchase
and sale contemplated hereby abandoned at any time before the Closing Date:
5.1.1. By Mutual Consent. By mutual consent of Buyer and
the Sellers.
5.1.2. By Buyer Because of Failure to Perform Agreements or
Conditions Precedent. By Buyer, if the Sellers, COG or Xxxxxxx have
failed to perform any material agreement set forth herein, or if any
material condition set forth in Section 4.2 hereof has not been met,
and such condition has not been waived.
5.1.3. By the Sellers Because of Failure to Perform Agreements
or Conditions Precedent. By the Sellers, if Buyer or Key has failed to
perform any material agreement set forth herein, or if any material
condition set forth in Section 4.1 hereof has not been met, and such
condition has not been waived.
5.1.4. By Buyer or by the Sellers Because of Legal
Proceedings. By either Buyer or the Sellers if any suit, action, or
other proceeding shall be pending or threatened by the federal or
a state government before any court or governmental agency, in which
it is sought to restrain, prohibit, or otherwise affect the
consummation of the transactions contemplated hereby.
5.1.5. By Buyer Because of a Material Adverse Effect. By
Buyer if there has been a Material Adverse Effect on Sellers since
the date hereof.
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5.1.6. By Buyer or by the Sellers if No Closing by November 1,
1997. By either Buyer or the Sellers, if the Closing of the purchase
and sale contemplated hereby shall not have been consummated on or
before November 1, 1997 through no fault of any party hereto; provided,
however, that this Agreement may not be terminated by any party hereto
if the transactions contemplated hereby have not occurred due to the
breach of any provision of this Agreement by the party desiring to
terminate this Agreement.
5.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to and in accordance with the provisions
of Section 5.1 hereof, this Agreement shall become void and have no effect,
without any liability on the part of any party hereto (or its stockholders or
controlling persons or directors or officers), except as otherwise provided in
this Agreement; provided, however, that a termination of this Agreement shall
not relieve any party hereto from any liability for damages incurred as a result
of a breach by such party of its representations, warranties, covenants,
agreements, or other obligations hereunder, occurring before such termination.
5.3. Waiver of Conditions. Subject to the requirements of any
applicable law, any of the terms or conditions of this Agreement may be waived
at any time by the party which is entitled to the benefit thereof.
5.4. Expense on Termination. If the transactions contemplated hereby
are abandoned pursuant to and in accordance with the provisions of Section 5.1
hereof, all expenses will be paid by the party incurring them.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1. Noncompetition. Except as otherwise consented to or approved in
writing by Buyer, each of the Sellers, COG and Xxxxxxx, and their respective
affiliates, officers and directors agree that for a period of 60 months
following the Closing Date, such party will not (and in the case of Xxxxxxx will
cause any members of his family not to), directly or indirectly, acting alone or
as a member of a partnership or a holder of, or investor in as much as 5% of any
security of any class of any corporation or other business entity (i) engage in
any business on or after the Closing Date in competition with the businesses
conducted by any of the Sellers on or before the Closing Date, or in any service
business the services of which were provided and marketed by any of the Sellers
on or before the Closing Date in any state of the United States, or any foreign
country in which any of the Sellers transacted business on or before the Closing
Date; provided, however, that nothing in this Agreement will restrict any of the
above persons from pursuing oil and gas exploration and
production operations; (ii) request any present customers or suppliers of any of
the Sellers to curtail or cancel their business with Buyer (or Buyer's
affiliates); (iii) disclose to any person, firm or corporation any trade,
technical or technological secrets of Buyer (or Buyer's affiliates) or of the
Sellers or any details of their organization or business affairs or (iv) induce
or actively attempt to influence any employee of Buyer (or Buyer's affiliates)
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to terminate his employment. The Sellers, COG and Xxxxxxx agree that if either
the length of time or geographical as set forth in this Section 6.1 is deemed
too restrictive in any court proceeding, the court may reduce such restrictions
to those which it deems reasonable under the circumstances, and such
restrictions as modified shall be enforceable hereunder. The obligations
expressed in this Section 6.1 are in addition to any other obligations that the
Sellers, COG and Xxxxxxx may have under the laws of any state requiring a
corporation selling its assets (or the shareholders of such corporation) to
limit its activities so that the goodwill and business relations being
transferred with such assets will not be materially impaired. The Sellers, COG
and Xxxxxxx further agree and acknowledge that Buyer does not have any adequate
remedy at law for the breach or threatened breach by the Sellers, COG or Xxxxxxx
of the covenants contained in this Section 6.1, and agree that Buyer may, in
addition to the other remedies which may be available to it hereunder, file a
suit in equity to enjoin the Sellers, COG or Xxxxxxx from such breach or
threatened breach. If any provisions of this Section 6.1 are held to be invalid
or against public policy, the remaining provisions shall not be affected
thereby. The Sellers, COG and Xxxxxxx acknowledge that the covenants set forth
in this Section 6.1 are being executed and delivered by such party in
consideration of the covenants of Buyer contained in this Agreement, and for
other good and valuable consideration, the receipt of which is hereby
acknowledged.
6.2. Employees. Schedule 6.2 hereto is a complete and accurate listing
of all employees of the Sellers that devote their full time and effort in the
operation of the Assets and the conduct of the Business (the "EMPLOYEES"). Each
of the Sellers, COG and Xxxxxxx will use their best efforts to make all of their
Employees available for hire by the Buyer or its affiliates, and the Buyer
agrees to hire all of such Employees on the Closing Date, subject to such
Employees meeting Buyer's standard employment eligibility requirements and
mutual agreement between such Employees and Buyer as to their compensation
levels. Buyer shall have no liability or obligation with respect to any employee
benefits of any Employee except those benefits that accrue pursuant to such
Employees' employment with Buyer on or after the Closing Date. The Sellers, COG
and Xxxxxxx shall cooperate with Buyer in connection with any offer of
employment from Buyer to the Employees and use their best efforts to cause the
acceptance of any and all such offers. Except as provided in Section 4.2.9, all
Employees hired by Buyer shall be at-will employees of Buyer. Notwithstanding
any other provisions of this Agreement, this Section 6.2 shall not be deemed to
create any right or claim for the benefit of, and shall not be enforceable by,
any person which is not a party to this Agreement.
6.3. Allocation of Purchase Price. The parties hereto agree to allocate
the purchase price paid by Buyer for the Assets hereunder as set forth on
Schedule 6.3 hereto, and shall report this transaction for federal income tax
purposes in accordance with the allocation so agreed upon. The parties hereto
for themselves and for their respective successors and assigns covenant and
agree that they will file coordinating Form 8594's in accordance with Section
1060 of the Internal Revenue Code of 1986, as amended, with their respective
income tax returns for the taxable year that includes the date hereof.
6.4. Name Change. The Sellers shall, within ten days from the Closing
Date, cause to be filed (i) with the applicable agency of the Sellers' states of
organization an amendment to their charters (or other applicable organization
documents) of the Sellers changing the name of the Sellers from their current
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names to names that are not similar to such names, and (ii) with the appropriate
authorities of the Sellers' states of organization and any other states such
documents as are required to effect such name change, including without
limitation, amendments or withdrawals of certificates of authority to do
business and assumed name filings. The Sellers shall, within five days from the
date of their receipt of confirmation of such filings from the applicable state
authorities, cause to be delivered to Buyer copies of all such confirmations.
6.5. Further Assurances Relating to the Real Estate. Buyer and COG
agree that if the Title Commitment (as defined in the Real Estate Contract)
contains any Material Encumbrance (as defined in the Real Estate Contract), then
Buyer and COG shall in good faith either (i) negotiate an adjustment to the
Purchase Price (as defined in the Real Estate Contract) to reflect the
diminution in value of the Real Estate caused by such Material Encumbrance;
provided however that the Buyer shall not be required to purchase the Real
Estate under any circumstances that would prohibit the Buyer from operating the
Real Estate, without interference of any third party, in the same manner as the
Real Estate was operated by COG or (ii) enter into a lease with respect to the
Real Estate pursuant to which Buyer shall obtain use of the Real Estate
sufficient to operate such Real Estate, without interference of any third party,
in the same manner as the Real Estate was operated by COG. The provisions of
this Section 6.5 shall not relieve COG of its obligation under the Real Estate
Contract to use its best efforts to cure or remove all Material Encumbrances (as
defined in the Real Estate Contract).
6.6. 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 effect the transactions contemplated hereby.
ARTICLE 7
INDEMNIFICATION
7.1. Indemnification by the Sellers, COG and Xxxxxxx. In addition to
any other remedies available to Buyer under this Agreement, or at law or in
equity, each of the Sellers, COG and Xxxxxxx shall, jointly and severally,
indemnify, defend and hold harmless Buyer and Key and their respective officers,
directors, employees, agents and stockholders, against and with respect to any
and all claims, costs, damages, losses, expenses, obligations, liabilities,
recoveries, suits, causes of action and deficiencies, including interest,
penalties and reasonable attorneys' fees and expenses (collectively, the
"DAMAGES") that such indemnitee shall incur or suffer, which arise, result from
or relate to (i) any breach of, or failure by the Sellers, COG or Xxxxxxx to
perform their respective representations, warranties, covenants or agreements in
this Agreement or in any schedule, certifi cate, exhibit or other instrument
furnished or delivered to Buyer by the Sellers, COG or Xxxxxxx under this
Agreement; and (ii) the Excluded Liabilities.
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7.2. Indemnification by Buyer and Key. In addition to any other
remedies available to the Sellers, COG and Xxxxxxx under this Agreement, or at
law or in equity, Buyer shall indemnify, defend and hold harmless the Sellers,
COG and Xxxxxxx 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 Buyer or Key to perform, any of their respective
representations, warranties, covenants or agreements in this Agreement or in any
schedule, certificate, exhibit or other instrument furnished or delivered to
Sellers, COG or Xxxxxxx by or on behalf of Buyer or Key under this Agreement;
and (ii) the Assumed Liabilities.
7.3. Indemnification Procedure. If any party hereto discovers or
otherwise becomes aware of an indemnification claim arising under Section 7.1 or
7.2 of this Agreement, such indemnified party shall give written notice to the
indemnifying party, specifying such claim, and may thereafter exercise any
remedies available to such party under this Agreement; provided, however, that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of any obligations hereunder, to the extent the
indemnifying party is not materially prejudiced thereby. Further, promptly after
receipt by an indemnified party hereunder of written notice of the commencement
of any action or proceeding with respect to which a claim for indemnification
may be made pursuant to this Article 7, such indemnified party shall, if a claim
in respect thereof is to be made against any indemnifying party, give written
notice to the latter of the commencement of such action; provided, however, that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of any obligations hereunder, to the extent the
indemnifying party is not materially prejudiced thereby. In case any such action
is brought against an indemnified party, the indemnifying party shall be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified, to the extent that it may wish,
with counsel reasonably satisfactory to such indemnified party, and after such
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof unless the indemnifying party
has failed to assume the defense of such claim and to employ counsel reasonably
satisfactory to such indemnified person. An indemnifying party who elects not to
assume the defense of a claim shall not be liable for the fees and expenses of
more than one counsel in any single jurisdiction for all parties indemnified by
such indemnifying party with respect to such claim or with respect to claims
separate but similar or related in the same jurisdiction arising out of the same
general allegations. Notwithstanding any of the foregoing to the contrary, the
indemnified party will be entitled to select its own counsel and assume the
defense of any action brought against it if the indemnifying party fails to
select counsel reasonably satisfactory to the indemnified party, the expenses of
such defense to be paid by the indemnifying party. No indemnifying party shall
consent to entry of any judgment or enter into any settlement with respect to a
claim without the consent of the indemnified party, which consent shall not be
unreasonably withheld, or unless such judgment or settlement includes as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability with respect to such claim. No
indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action, the defense of which has been assumed by an
indemnifying party, without the consent of such indemnifying party, which
consent shall not be unreasonably withheld or delayed.
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7.4. Limitation on Indemnification. The obligation of Sellers, COG and
Xxxxxxx to indemnify Buyer and Key for breach of a representation or warranty
pursuant to Section 7.1, and the obligation of Buyer and Key to indemnify the
Sellers, COG and Xxxxxxx for the breach of a representation or warranty pursuant
to Section 7.2, shall be limited as to amount as follows:
(i) the indemnifying party shall not be required to indemnify
the indemnified party for any Damages not related to environmental
matters (the "NON-ENVIRONMENTAL DAMAGES") except to the extent the
aggregate amount of all such Non-Environmental Damages exceeds
$250,000; and
(ii) neither the Sellers, COG, Xxxxxxx shall be required to
indemnify Buyer or Key for any Damages relating to the breach of a
representation or warranty contained in Section 2.1.14 (Environmental
Matters) (the "ENVIRONMENTAL DAMAGES") except to the extent the
aggregate amount of all such Environmental Damages exceeds $250,000.
(iii) for purposes of the indemnification obligations set
forth in this Section 7.4, all representations, warranties and
covenants set forth in this Agreement shall be assumed to be free of
qualifications with respect to materiality.
ARTICLE 8
MISCELLANEOUS
8.1. Materiality. "MATERIAL ADVERSE EFFECT" when used in this Agreement
shall mean any adverse effect on the business, operations, assets or financial
condition or results of operations of the party or parties at issue unless such
effect either can reasonably be expected to result in less than a $250,000
effect on the financial condition or results of operations, or the effect is due
to general changes in the economy or the general industry in which the party at
issue operates.
8.2. Survival of Representations, Warranties and Covenants. All
representations, warranties, covenants and agreements made by the parties hereto
shall survive indefinitely without limitation, notwithstanding any investigation
made by or on behalf of any of the parties hereto; provided, however, that all
representations and warranties of each party hereto shall terminate on the
second anniversary of the Closing Date except (i) as to representations and
warranties contained in Section 2.1.6 with respect to title to the Assets which
shall continue and survive indefinitely, and (ii) as to the representations and
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warranties contained in Section 2.1.21 (Taxes), which shall continue and survive
for the full period of the applicable statutes of limitation (giving effect to
any waiver or extension thereof). All claims for indemnification by any party
hereto with respect to a breach of a representation or warranty must be asserted
in writing with specificity prior to the expiration of the applicable survival
period. 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 subject to the limitations stated above despite
any investigation made by any party hereto or on its behalf.
8.3. Entirety. This Agreement embodies the entire agreement among
the parties with respect to the subject matter hereof, and all prior agreements
between the parties with respect thereto are hereby superseded in their
entirety.
8.4. Counterparts. Any number of counterparts of this Agreement
may be executed and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
instrument.
8.5. Notices and Waivers. Any notice or waiver to be given to any
party hereto shall be in writing and shall be delivered by courier, sent by
facsimile transmission or first class registered or certified mail, postage
prepaid, return receipt requested:
IF TO BUYER
Addressed to: With a copy to:
Key Four Corners, Inc. Xxxxxx & Xxxxxx, L.L.P.
Two Tower Center, Tenth Floor 000 Xxxxxxxxx
Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000 Xxxxxxx, Xxxxx 00000-0000
Attn: General Counsel Attn: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
IF TO ANY OF THE SELLERS, COG OR XXXXXXX
Addressed to: With a copy to:
Xxxxxx X. Xxxxxxx, President Xxxx X. Xxxxxxx
Xxxxxxx Oil & Gas Co. Laflin, Lieuwen, Tucker, Pick, & Heer, P.A.
0000 XxXxxxxx Xxxx X.X. Xxx 0000
Xxxxxxxxxx, Xxx Xxxxxx 00000 Xxxxxxxxxxx, Xxx Xxxxxx 00000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
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Any communication so addressed and mailed by first-class registered or
certified mail, postage prepaid, with return receipt requested, shall be deemed
to be received on the third business day after so mailed, and if delivered by
courier or facsimile to such address, upon delivery during normal businesses
hours on any business day.
8.6. Captions. The captions contained in this Agreement are solely
for convenient reference and shall not be deemed to affect the meaning or
interpretation of any article, section, or paragraph hereof.
8.7. Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of and be enforceable by the successors and
assigns of the parties hereto.
8.8. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void,
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
8.9. Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the applicable laws of the State of
New Mexico.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
in their individual names or their respective corporate names by their
respective duly authorized representatives, as applicable, all as of the day and
year first above written.
BUYER:
KEY FOUR CORNERS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
KEY:
KEY ENERGY GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
COG:
XXXXXXX OIL & GAS CO.
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: President
SELLERS:
BIG A WELL SERVICE CO.
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Chairman of the Board
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SUNCO TRUCKING CO.
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Chairman of the Board
XXXXXX SUPPLY CO., INC.
By: /s/ G. Xxxxx Xxxxxxx
Name: G. Xxxxx Xxxxxxx
Title: President
XXXXXXX:
/s/ Xxxxxx X. Xxxxxxx
------------------------
Xxxxxx X. Xxxxxxx
/s/ G. Xxxxxxxxxxx Xxxxxxx
--------------------------
G. Xxxxxxxxxxx Xxxxxxx
For purposes of Section 6.1 only
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