1
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of September 14, 1996 (the
"Agreement") is by and among XXXXXX DRILLING COMPANY, a Delaware corporation
("Xxxxxx") and ENERGY VENTURES, INC., a Delaware corporation ("EVI"). Xxxxxx
and EVI are referred to collectively herein as the "Parties," and each
individually as a "Party." EXHIBIT A sets forth the definitions of certain
terms used herein.
RECITALS:
WHEREAS, EVI beneficially and of record owns all of the outstanding
capital stock of Mallard Bay Drilling, Inc., a Louisiana corporation
("Mallard"), which is engaged in the contract drilling business;
WHEREAS, subject to and in accordance with the terms of this
Agreement, Xxxxxx wishes to purchase from EVI, and EVI wishes to sell to
Xxxxxx, all of the outstanding shares of capital stock of Mallard; and
WHEREAS, the parties hereto desire to set forth certain
representations, warranties, and covenants made by each to the other as an
inducement to the consummation of the purchase and sale of the shares of the
capital stock of Mallard;
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. PURCHASE AND SALE OF MALLARD STOCK.
(a) BASIC TRANSACTION. On and subject to the terms and conditions
of this Agreement, Xxxxxx agrees to purchase from EVI, and EVI agrees to sell
to Xxxxxx, all of the issued and outstanding shares of capital stock of Mallard
for the consideration specified in this Section 1.
(b) PURCHASE PRICE. Xxxxxx agrees to deliver to EVI at the
Closing (as defined below) (i) the Estimated Amount (as defined below) in cash
by wire transfer into an account designated by EVI at least one business day
before Closing, and (ii) a number of shares of a newly created series of
preferred stock of Xxxxxx, par value $1.00 per share, which shall be designated
the "Xxxxxx Series D Convertible Preferred Stock" ("Series D Preferred Stock")
with a Market Value of $25,000,000. The form of certificate of designations of
the Series D Preferred Stock is attached hereto as EXHIBIT B. For purposes of
this Agreement, the "Market Value" of the Series D Preferred Stock shall equal
the average of the last reported sales price on the New York Stock Exchange
composite index for the common stock, par value $.16 2/3 per share, of Xxxxxx
("Xxxxxx Common Stock") for the ten trading days ending two Business Days
before the Closing Date (as defined below). The cash payment and shares of
Series D Preferred Stock to be delivered to EVI,
2
by Xxxxxx at the Closing pursuant to this Section 1(b) are referred to
collectively herein as the "Purchase Price." The "Estimated Amount" shall mean
$313,000,000 plus or minus the Estimated Adjustment. The "Estimated
Adjustment" shall be an amount equal to the difference between $161,901,000 and
the estimated Net Assets (as defined in Section 1(f)(1)) as of the Closing Date
based on the latest available balance sheet ("Pre-Closing Balance Sheet") for
the Contract Drilling Business (as defined below) prepared in accordance with
GAAP and on the same basis as the Most Recent Balance Sheet (as defined in
Section 2(e)(3)). EVI shall advise Xxxxxx of the amount of the Estimated
Amount no later than five Business Days prior to the Closing Date and shall
provide to Xxxxxx a copy of the Pre-Closing Financial Statements and the
calculations used by EVI in arriving at the Estimated Amount.
(c) THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Xxxxxx &
Xxxxxx L.L.P., Suite 2300, 0000 Xxxxxx, Xxxxxxx, Xxxxx 00000-0000, commencing
at 9:00 a.m. local time on the second Business Day following the satisfaction
or waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself) or such other date as
the Parties may mutually determine (the "Closing Date").
(d) DELIVERIES AT THE CLOSING. At the Closing, (i) EVI will
deliver to Xxxxxx the various certificates, instruments, and documents referred
to in Section 6(a), (ii) Xxxxxx will deliver to EVI the various certificates,
instruments, and documents referred to in Section 6(b), (iii) EVI will deliver
to Xxxxxx stock certificates representing all of the issued and outstanding
shares of capital stock of Mallard, endorsed in blank or accompanied by duly
executed stock powers, and (iv) Xxxxxx will deliver to EVI the consideration
specified in Section 1(b).
(e) TAKING OF NECESSARY ACTION; FURTHER ACTION. The Parties
hereto shall take all such reasonable and lawful action as may be necessary or
appropriate in order to effectuate the transactions contemplated hereby as
promptly as possible. If, at any time after the Closing Date, any such further
action is necessary to carry out the purposes of this Agreement, EVI shall, and
shall direct its representatives to, take all such lawful and necessary action.
(f) ADJUSTMENTS TO THE PURCHASE PRICE. Xxxxxx and EVI agree that
in the event that the Net Assets (as defined and subject to the adjustments
described below) attributable to the contract drilling business and related
operations of Mallard and the other subsidiaries of EVI on a combined basis
(the "Contract Drilling Business") as of the Closing Date are greater or lesser
than $161,901,000, the Purchase Price shall be increased or decreased, as the
case may be, by an amount equal to the difference between the actual Net Assets
and $161,901,000, in the manner set forth herein.
(1) On or before a date that is 90 days following the
Closing (or the next Business Day if such day is not a Business Day),
Xxxxxx will prepare and deliver to EVI a statement (the "Closing
Balance Sheet") showing the actual amount of assets and liabilities
attributable to the Contract Drilling Business as of the Closing Date,
prepared in accordance with GAAP and on the same basis as the Most
Recent Balance Sheet. For
-2-
3
purposes of this Agreement, "Net Assets" shall mean the difference
between (i) total assets excluding any intercompany receivables, and
(ii) total liabilities excluding any intercompany liabilities (other
than those for drill pipe, tubulars and related products purchased
after the date hereof in the Ordinary Course of Business at
arm's-length market prices) and deferred income tax liabilities, each
prepared in accordance with GAAP and on the same basis as the Most
Recent Balance Sheet; provided, however, that the following
adjustments shall be made in the calculation of Net Assets on the
Closing Balance Sheet: the amount of assets shall be decreased by the
book value of the upgrade to Rig 74 contemplated by Section 4(l)
hereof or funds advanced in respect thereof. In addition, the Parties
agree that to the extent the carrying value of the total assets is
overstated or the carrying value of the total liabilities is
understated on the Most Recent Balance Sheet, no adjustment to such
values shall be made in the Closing Balance Sheet unless the aggregate
value of such revisions to the carrying value of the assets and
liabilities on the Most Recent Balance Sheet exceeds $2,500,000, and
in such case only to the extent that such revisions exceed $2,500,000.
(2) Within 30 days following delivery of the Closing
Balance Sheet, EVI shall notify Xxxxxx whether it agrees with such
statement; provided, however, that if EVI shall fail to so notify
Xxxxxx within such 30-day period, EVI shall be deemed to have agreed
with such statements. If EVI disagrees with such statements, EVI and
Xxxxxx shall work in good faith to reach agreement on such statements;
but if they shall not agree within 10 days the matter will be referred
to one of the "Big Six" independent public accounting firms as EVI and
Xxxxxx may mutually agree, the costs of which shall be borne equally
by EVI and Xxxxxx. Such accountants shall examine the records of the
Contract Drilling Business and determine the disputed Closing Balance
Sheet items within 30 days following the date such matter is referred
to them, and such determination shall be final and binding on Xxxxxx
and EVI, and may be enforced by appropriate judicial or other
proceedings.
(3) If, as so determined, the Net Assets reflected on the
Closing Balance Sheet exceed $161,901,000, then Xxxxxx will within ten
Business Days of such determination make a cash payment to EVI in an
amount equal to the excess of the amount of the Net Assets over
$161,901,000, as an adjustment to the Purchase Price. If the Net
Assets as reflected on the Closing Balance Sheet are less than
$161,901,000, then EVI shall within ten Business Days of such
determination make a cash payment to Xxxxxx in an amount equal to the
excess of $161,901,000 over the Net Assets on such date, as an
adjustment to the Purchase Price. The amount of any Estimated
Adjustment paid shall be credited against any amount payable pursuant
to this paragraph (3).
2. REPRESENTATIONS AND WARRANTIES OF EVI. EVI represents and
warrants to Xxxxxx that the statements contained in this Section 2 are true,
correct and complete as of the date of this Agreement and will be true, correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Section 2, except for representations that are made effective as of a specific
date, which shall be true, correct and complete as of such date), except as set
forth in the Schedule applicable to such representation and warranty contained
in the disclosure schedule delivered by EVI to Xxxxxx on
-3-
4
the date hereof and attached hereto as EXHIBIT C (the "Disclosure Schedule")
and for such matters due to changes in facts from the date hereof required or
permitted by this Agreement.
(a) ORGANIZATION. EVI is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Except
as set forth in Schedule 2(a), Mallard is a corporation duly organized, validly
existing and in good standing under the laws of the State of Louisiana. Except
as set forth in Schedule 2(a), each subsidiary of Mallard that is a corporation
is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation.
(b) AUTHORIZATION OF TRANSACTION. EVI has all requisite power and
authority to execute and to deliver this Agreement and the Registration Rights
Agreement (as defined in Section 4(j)) and to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Registration
Rights Agreement by EVI and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
and no other corporate action on the part of EVI, including any action by the
stockholders of EVI, is necessary to authorize this Agreement or the
Registration Rights Agreement or to consummate the transactions contemplated
hereby and thereby. This Agreement has been duly executed and delivered by EVI
and constitutes the valid and legally binding obligation of EVI enforceable
against EVI in accordance with its terms, and the Registration Rights
Agreement, when executed and delivered by each party thereto, will constitute
the valid and legally binding obligation of EVI enforceable in accordance with
its terms. Except as set forth in Schedule 2(b), as required under the
Xxxx-Xxxxx-Xxxxxx Act or as otherwise provided herein, none of EVI, Mallard or
any subsidiary of Mallard is obligated to give any notice to, to make any
filing with, or to obtain any authorization, consent, or approval of any
Governmental Authority in order to consummate the transactions contemplated by
this Agreement other than those that the failure to obtain would not,
individually or in the aggregate, have a Material Adverse Effect.
(c) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Mallard and
its subsidiaries have all requisite corporate or other power and authority to
own, lease and operate their properties and to carry on their businesses as
currently conducted, and are duly qualified and in good standing to do business
in each jurisdiction in which the nature of the business conducted by them or
the ownership or leasing of their properties makes such qualification
necessary, except where the failure to be so qualified or in good standing
would not have a Material Adverse Effect. Mallard and its subsidiaries are in
possession of all certifications, franchises, authorizations, licenses,
permits, approvals and orders of any Governmental Authority (collectively,
"Permits") necessary to own, lease and operate their properties and to carry on
their businesses as currently conducted, except for such Permits the failure of
which to obtain would not, individually or in the aggregate, have a Material
Adverse Effect, and there is no action, proceeding or investigation pending, or
to the knowledge of EVI, threatened, regarding the suspension or cancellation
of any of the Permits, except for those actions, proceedings or investigations
that would not, individually or in the aggregate, have a Material Adverse
Effect. EVI has delivered to Xxxxxx correct and complete copies of the
charters and bylaws of Mallard and its subsidiaries, each as amended to date.
The minute books (containing the records of meetings of the stockholders, the
board of
-4-
5
directors, and any committees of the board of directors), the stock certificate
books, and the stock record books of Mallard and its subsidiaries are correct
and complete in all material respects. Schedule 2(c) lists the directors and
officers of Mallard and each of its subsidiaries.
(d) CAPITALIZATION; SUBSIDIARIES.
(1) The entire authorized capital stock of Mallard consists of
100,000 shares of common stock, par value $.01 per share ("Mallard Common
Stock"), of which 33,000 shares are issued and outstanding. All of the issued
and outstanding shares of Mallard Common Stock have been duly authorized and
are validly issued, fully paid and nonassessable. Except as set forth in
Schedule 2(d), all outstanding shares of Mallard Common Stock are owned by EVI,
and are free and clear of any Security Interests, options, warrants, calls,
purchase rights, conversion rights, exchange rights, trusts, voting trusts or
other contracts or commitments relating to any capital stock or other security
of Mallard (other than this Agreement). There are no outstanding or authorized
options, warrants, purchase rights, conversion rights, exchange rights, trusts,
voting trusts or other contracts or commitments that could require Mallard to
issue, sell, or otherwise cause to become outstanding any shares of its capital
stock. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights with respect to Mallard's
capital stock, and there are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of Mallard's capital stock.
(2) Schedule 2(d) lists (i) each subsidiary of Mallard, (ii) the
authorized and issued and outstanding capital stock of each subsidiary of
Mallard ("Mallard Subsidiary Common Stock") and (iii) each other entity in
which Mallard owns an equity interest, including the nature and amount of such
interest ("Other Equity Interests"). All of the issued and outstanding shares
of Mallard Subsidiary Common Stock have been duly authorized and are validly
issued, fully paid and nonassessable. Except as set forth in Schedule 2(d),
all outstanding shares of Mallard Subsidiary Common Stock and all Other Equity
Interests are owned, directly or indirectly, by Mallard, and are free and clear
of Security Interests, options, warrants, calls, purchase rights, conversion
rights, exchange rights, trusts, voting trusts or other contracts or
commitments relating to any capital stock or other security of such subsidiary.
There are no outstanding or authorized options, warrants, purchase rights,
conversion rights, exchange rights, trusts, voting trusts or other contracts or
commitments that could require any subsidiary of Mallard to issue, sell, or
otherwise cause to become outstanding any of shares of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to the capital stock of
any subsidiary of Mallard and there are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the capital stock of
any subsidiary of Mallard.
(e) COMMISSION FILINGS; FINANCIAL STATEMENTS.
(1) EVI has filed all reports, proxy statements, registration
statements and other documents, together with any amendments required to be
made with respect thereto, required to be filed with the Securities and
Exchange Commission (the "Commission") under the Exchange Act. All such
reports, proxy statements, registration statements and other documents
(including
-5-
6
all exhibits thereto and all documents incorporated by reference therein) filed
by EVI with the Commission since January 1, 1995, together with any amendments
thereto, are referred to herein as the "EVI Commission Filings." EVI has
delivered to Xxxxxx copies of the EVI Commission Filings. As of the respective
dates of their filing with the Commission, the EVI Commission Filings complied
in all material respects with the Exchange Act and the rules and regulations of
the Commission thereunder, and 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 light of the circumstances under
which they were made, not misleading; provided, however, that EVI makes no
representation or warranty as to misstatements or omissions in the EVI
Commission Filings that relate solely to businesses other than the Contract
Drilling Business and would be immaterial to a purchaser of the Contract
Drilling Business.
(2) All of the consolidated financial statements included in the
EVI Commission Filings (including any related notes or schedules) were prepared
in accordance with GAAP applied on a consistent basis (except as may be noted
therein) and complied in all material respects with all applicable rules of the
Commission. Such consolidated financial statements fairly present the
consolidated financial position of EVI and its subsidiaries as of the dates
thereof and the results of operations, cash flows and changes in stockholders'
equity for the periods then ended (subject in the case of interim financial
statements to normal year-end audit adjustments on a basis comparable with past
periods).
(3) Set forth in Schedule 2(e) are the following unaudited
consolidated financial statements of the Contract Drilling Business presented
on a combined basis (the "Mallard Unaudited Financial Statements"): (i)
unaudited balance sheets and income statement as of and for each of the years
ended December 31, 1991, 1992, 1993, 1994 and 1995; (ii) an unaudited balance
sheet and income statement as of and for the six months ended June 30, 1996 and
(iii) an unaudited balance sheet as of July 31, 1996 (the "Most Recent Balance
Sheet"). The Mallard Unaudited Financial Statements were prepared in
accordance with GAAP applied on a consistent basis for financial statements of
an operating division of EVI (except as noted therein) and fairly present in
all material respects the financial position of the Contract Drilling Business
as of the dates thereof and the results of operations for the periods then
ended (subject to the qualifications described therein). The "intercompany
debt" line item on the Most Recent Balance Sheet includes all intercompany
accounts payable or other amounts owing to EVI or any of its affiliates,
including accounts payable with respect to the purchase of drill pipe, tubulars
or other oilfield equipment or services.
(f) EVENTS SUBSEQUENT TO MOST RECENT QUARTER END. Except as set
forth on Schedule 2(f), since June 30, 1996 there has not been any change in
the conduct of the ongoing business operations of the Contract Drilling
Business that would, individually or in the aggregate, have a Material Adverse
Effect (other than those changes affecting the oil and gas industry or the
drilling and workover segment thereof in general). Without limiting the
generality of the foregoing, except as set forth in Schedule 2(f), since that
date to the date hereof, Mallard and the other subsidiaries of EVI with respect
to their operations constituting a part of the Contract Drilling Business have
not:
-6-
7
(1) sold, leased, transferred, imposed any Security
Interest or assigned any assets, tangible or intangible, with a book
value of $100,000 or more, or assets with an aggregate book value of
$250,000 or more, or assets with an aggregate purchase price of
$250,000 or more;
(2) entered into any agreement, contract, lease or
license outside the Ordinary Course of Business, or entered into any
drilling contract on a turnkey or footage basis, or entered into any
vessel or rig charter other than with an affiliate of Mallard or for a
term less than one month entered into in the Ordinary Course of
Business;
(3) made any declaration, setting aside or payment of
dividends or distributions in respect of shares of Mallard Common
Stock or any redemption, purchase or other acquisition of any other
securities of Mallard or its subsidiaries;
(4) amended their respective certificates of
incorporation, bylaws or other organizational documents;
(5) issued, delivered, sold, pledged or encumbered any
shares of their capital stock or any securities convertible into, or
exchangeable or exercisable for, shares of their capital stock;
(6) except for borrowings under existing credit
facilities in the Ordinary Course of Business, (i) incurred any
obligation for borrowed money or purchase money indebtedness, or (ii)
made any loan, advance, guarantee, capital contribution or investment
in any Person other than a direct or indirect wholly owned subsidiary
of Mallard;
(7) made any change in their accounting methods,
principles or practices other than as required by GAAP;
(8) waived the benefits of, or agreed to modify, any
material confidentiality, standstill or similar agreement;
(9) except for changes made in the Ordinary Course of
Business not involving officers or key employees of Mallard or its
subsidiaries, increased or otherwise modified the compensation of
their employees, including salaries, bonus or other employee benefits
or severance payments or obligations, or entered into or modified the
terms of any employment, severance or collective bargaining agreement;
(10) made any capital expenditures outside the Ordinary
Course of Business or in an amount in excess of $250,000 for any one
expenditure or $1,000,000 in the aggregate for all unscheduled
expenditures;
(11) experienced any damage, destruction, or loss (whether
or not covered by insurance) to their property, other than ordinary
wear and tear or damage, destruction or loss in an aggregate amount
not in excess of $250,000;
-7-
8
(12) paid, discharged, reserved against, or satisfied
claims, liabilities or obligations in an amount in excess of $250,000
in the aggregate or written off or reduced the carrying value of
assets by more than $250,000 in the aggregate, other than as reflected
or reserved against in the Most Recent Balance Sheet (as defined in
Section 2(h) hereof) or in the Ordinary Course of Business; or
(13) committed to do any of the foregoing.
(g) LEGAL COMPLIANCE; NONCONTRAVENTION. Except as set forth in
Schedule 2(g), Mallard and its subsidiaries have complied with and are not in
violation of or default under (i) any Law applicable to them or their
properties or (ii) any Permits, except for such events of noncompliance,
violation or default that would not, individually or in the aggregate, have a
Material Adverse Effect. No action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice alleging any failure so to comply
has been filed or commenced against Mallard or its subsidiaries and, to the
knowledge of EVI, no such action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been threatened and no event
which may reasonably be expected to result in such an event has occurred,
except as would not, individually or in the aggregate, have a Material Adverse
Effect. Except as set forth in Schedule 2(g), the execution and delivery of
this Agreement by EVI does not, and the consummation of the transactions
contemplated hereby will not, (x) conflict with or violate the charter or
bylaws of either EVI, Mallard or the subsidiaries of Mallard, (y) conflict with
or violate any Law, or (z) result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or require payment under, or result in the creation of a
Security Interest on any properties or assets of Mallard or its subsidiaries
pursuant to any note, bond, mortgage, indenture, contract, agreement, lease,
Permit or other instrument or obligation to which Mallard or any of its
subsidiaries is a party or by which Mallard or any of its subsidiaries or their
properties are bound or subject to, except in the case of clauses (y) and (z)
for conflicts, violations, breaches, defaults, events, rights of termination,
amendment, acceleration or cancellation, payment obligations or Security
Interests that would not, individually or in the aggregate, have a Material
Adverse Effect.
(h) TITLE TO PROPERTIES. Except as disclosed in the Financial
Statements or on Schedule 2(h), Mallard and its subsidiaries have good and
indefeasible title to, or a valid leasehold interest in, the properties and
assets used by them, located on their premises, or shown on the Most Recent
Balance Sheet or acquired after the date thereof, free and clear of all
Security Interests, except for properties and assets disposed of in the
Ordinary Course of Business since the date of the Most Recent Balance Sheet and
except for such other liens or imperfections in title that will not,
individually or in the aggregate, have a Material Adverse Effect.
(i) INTELLECTUAL PROPERTY. Mallard and EVI's other subsidiaries
own or hold licenses under such patents, trademarks, trade names, and
copyrights as necessary for the conduct of the Contract Drilling Business as
now being conducted. Neither EVI nor Mallard and its subsidiaries have
received any notice of infringement or notice of conflict with the asserted
rights of others in such patents, trademarks, trade names, and copyrights; nor
are EVI or Mallard and its subsidiaries
-8-
9
otherwise aware of any such infringement or conflict, or of any infringement
by, or conflict on the part of, others with respect to patents, trademarks,
trade names, or copyrights of Mallard and its subsidiaries.
(j) TANGIBLE ASSETS. Schedule 2(j) lists and describes all of the
drilling rigs currently used in the Contract Drilling Business and the book
value of each such rig as of July 31, 1996. Except for the rigs used in Peru,
which are owned and subject to the agreements and partnership arrangements
described in Schedule 2(h), all such rigs will be owned at Closing by Mallard
or one or more of its subsidiaries. With the exception of such rigs that are
listed on Schedule 2(j) as "stacked," the rigs owned by Mallard, EVI or any of
their respective subsidiaries are being operated or maintained in a manner
consistent with past practice and such rigs are in operating condition. Except
as set forth in Schedule 2(j), at Closing Mallard or one or more of its
subsidiaries will own all of the machinery, equipment, vessels, rigs and other
tangible assets currently utilized by EVI, Mallard or any of their respective
subsidiaries in connection with the Contract Drilling Business (other than any
assets currently under lease by EVI, Mallard or any of their respective
subsidiaries in which case Mallard or its subsidiaries, at Closing, will hold a
valid and legally binding leasehold interest in such leased assets).
(k) CONTRACTS. Schedule 2(k) lists the following contracts and
other agreements (written and oral) to which Mallard or its subsidiaries are a
party in effect as of the date hereof:
(1) any agreement (or group of related agreements) for
the purchase or sale of raw materials, commodities, equipment,
supplies, products, or other personal property, or any agreement (or
group of related agreements) for the lease of personal property (other
than under a drilling contract) to or from any Person providing for
lease payments in excess of $250,000 per year;
(2) all domestic drilling contracts as of September 9,
1996, and all international drilling contracts (other than contracts
relating to land rigs used in Peru);
(3) any agreement concerning a partnership or joint
venture or agency relationships;
(4) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease obligation,
in excess of $100,000 or under which it has imposed a Security
Interest on any of its assets, tangible or intangible;
(5) any material agreement concerning confidentiality or
noncompetition;
(6) any collective bargaining agreement or other contract
with any labor union;
(7) any separate agreement for the employment of any
individual on a full-time, part-time, consulting, or other basis
providing annual compensation in excess of $75,000
-9-
10
or any agreement or document providing severance benefits outside
EVI's customary severance policy;
(8) any agreement under which it has advanced or loaned
any amount to any of its directors, officers, and employees outside
the Ordinary Course of Business;
(9) any agreement under which the consequences of a
default or termination would have a Material Adverse Effect;
(10) any acquisition or disposition agreement involving
consideration in excess of $500,000 under which Mallard or its
subsidiaries have any material ongoing obligations, including
indemnification obligations; or
(11) any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $500,000.
With respect to each such agreement, except as set forth on Schedule 2(k) or as
would otherwise not have a Material Adverse Effect: (A) the agreement is
legal, valid and binding and in full force and effect; (B) to EVI's knowledge,
no party is in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration under the agreement; (C) the agreement will
continue to be legal, valid and binding, and in full force and effect following
the consummation of the transactions contemplated herein; and (D) no party has
repudiated any material provision of the agreement.
(l) INSURANCE. Schedule 2(l) sets forth information as of the
date hereof with respect to each insurance policy (including policies providing
property, casualty, liability, and workers' compensation coverage, and bond and
surety arrangements) to which Mallard or any of its subsidiaries is a party, a
named insured, or otherwise a named beneficiary of coverage (excluding
policies maintained by unaffiliated third parties for the benefit of Mallard or
any of its subsidiaries). With respect to each such insurance policy, and
except as set forth on Schedule 2(l): (A) the policy is in full force and
effect; (B) to the knowledge of EVI, neither Mallard nor its subsidiaries is in
breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse
of time, would constitute such a breach or default, or permit termination,
modification, or acceleration under the policy; and (C) no party to the policy
has repudiated any provision thereof. Mallard and its subsidiaries have not
reached or exceeded their respective policy limits for any insurance policies
in effect at any time during the past five years.
(m) LITIGATION. Schedule 2(m) sets forth a brief description of
all matters existing on the date hereof in which Mallard or any of its
subsidiaries or their properties (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge, or (ii) is a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any Governmental
Authority or before any arbitrator and seeking a judgment or award against the
Mallard or any of its subsidiaries, in each case described in (i) and (ii)
above, in an amount in excess of $250,000 and each instance in which, to the
knowledge of EVI, any such actions described in (i) and (ii) above are
threatened
-10-
11
against Mallard or any of its subsidiaries or their properties or in which EVI
has provided notice to its insurance carriers of the existence of any potential
claim or action.
(n) EMPLOYEE BENEFIT MATTERS.
(1) Schedule 2(n) provides a description of each of the following
that is currently sponsored, maintained or contributed to by Mallard or any of
its affiliates for the benefit of the employees of Mallard or any of its
subsidiaries:
(A) each "employee benefit plan," as such term is defined
in Section 3(3) of ERISA, (including, but not limited to, employee
benefit plans, such as foreign plans, which are not subject to the
provisions of ERISA), ("Plan");
(B) each stock option plan, collective bargaining
agreement, bonus plan or arrangement, incentive award plan or
arrangement, severance pay plan, policy or agreement, deferred
compensation agreement or arrangement, executive compensation or
supplemental income arrangement, consulting and employment agreement
("Benefit Program or Agreement").
Mallard and its subsidiaries have no outstanding liability other than accrued
as a current liability on the Most Recent Balance Sheet with respect to any of
the items described in clauses (A) and (B) above that are not currently
sponsored, maintained or contributed to by Mallard or any of its subsidiaries,
but were so sponsored, maintained or contributed to by Mallard or any of its
subsidiaries within the past six years.
(2) True, correct and complete copies of each of the Plans,
Benefit Programs or Agreements and related trusts, as in effect on the date
hereof, have been furnished to Xxxxxx.
(3) Neither Mallard nor any of its subsidiaries contribute to or
have an obligation to contribute to, nor have Mallard or any of its
subsidiaries at any time within six years prior to the Closing Date contributed
to or had an obligation to contribute to, any employee benefit plan that is
subject to Title IV of ERISA, including, without limitation, a multiemployer
plan within the meaning of Section 3(37) of ERISA.
(4) Except as otherwise set forth on Schedule 2(n) or as to other
matters as would not have a Material Adverse Effect,
(A) Mallard and each of its subsidiaries have
substantially performed all obligations, whether arising by operation
of law or by contract, required to be performed by it in connection
with the Plans and the Benefit Programs or Agreements, and there have
been no defaults or violations by any other party to the Plans or
Benefit Programs or Agreements;
-11-
12
(B) Each Plan and each Benefit Program or Agreement has
been administered and operated in substantial compliance with its
governing documents and applicable law (including, where applicable,
ERISA and the Code);
(C) Each of the Plans intended to be qualified under
Section 401 of the Code satisfies the requirements of such Section and
has received a favorable determination letter from the Internal
Revenue Service regarding such qualified status and has not, since
receipt of the most recent favorable determination letter, been
amended or operated in a way which would adversely affect such
qualified status;
(D) There are no actions, suits or claims pending (other
than routine claims for benefits) or threatened against, or with
respect to, any of the Plans or Benefit Programs or Agreements or
their assets, and there is no matter pending (other than routine
qualification determination filings) with respect to any of the Plans
or Benefit Programs or Agreements before any governmental agency or
authority;
(E) All contributions required to be made to the Plans
pursuant to their terms and provisions have been made timely;
(F) As to any Plan intended to be qualified under Section
401 of the Code, there has been no termination or partial termination
of the Plan within the meaning of Section 411(d)(3) of the Code;
(G) No act, omission or transaction has occurred which
would result in imposition on Mallard or any of its subsidiaries of
(A) breach of fiduciary duty liability damages under Section 409 of
ERISA, (B) a civil penalty assessed pursuant to subsections (c), (i)
or (l) of Section 502 of ERISA or (C) a tax imposed pursuant to
Chapter 43 of Subtitle D of the Code;
(H) Each trust funding a Plan, which trust is intended to
be exempt from federal income taxation pursuant to Section 501(c)(9)
of the Code, satisfies the requirements of such section and has
received a favorable determination letter from the Internal Revenue
Service regarding such exempt status and has not, since receipt of the
most recent favorable determination letter, been amended or operated
in a way which would adversely affect such exempt status;
(I) With respect to any employee benefit plan, within the
meaning of Section 3(3) of ERISA, which is not listed in Schedule 2(n)
of the Disclosure Schedule but which is sponsored, maintained or
contributed to, or has been sponsored, maintained or contributed to
within six years prior to the Closing Date, by any corporation, trade,
business or entity under common control with Mallard or any of its
subsidiaries, within the meaning of Section 414(b), (c), (m) or (o) of
the Code or Section 4001 of ERISA ("Commonly Controlled Entity"), (A)
no withdrawal liability, within the meaning of Section 4201 of ERISA,
has been incurred, which withdrawal liability has not been satisfied,
(B) no liability to the Pension Benefit Guaranty Corporation has been
incurred
-12-
13
by any Commonly Controlled Entity, which liability has not been
satisfied, (C) no accumulated funding deficiency, whether or not
waived, within the meaning of Section 302 of ERISA or Section 412 of
the Code has been incurred, (D) all contributions (including
installments) to such plan required by Section 302 of ERISA and
Section 412 of the Code have been timely made and (E) neither Mallard
nor any of its subsidiaries has provided security to such Plan under
section 401(a)(29) of the Code; and
(J) the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not (A)
require Mallard or any of its subsidiaries to make a larger
contribution to, or pay greater benefits under, any Plan or Benefit
Program or Agreement than it otherwise would or (B) except as
contemplated in Section 4(f) of this Agreement, create or give rise to
any additional vested rights or service credits under any Plan or
Benefit Program or Agreement.
(5) Except as otherwise set forth in Schedule 2(n), neither
Mallard nor any of its subsidiaries is a party to any agreement, nor have
Mallard or any of its subsidiaries established any policy or practice,
requiring it to make a payment or provide any other form of compensation or
benefit to any person performing services for such entity upon termination of
such services which would not be payable or provided in the absence of the
consummation of the transactions contemplated by this Agreement.
(6) In connection with the consummation of the transactions
contemplated by this Agreement, no payments have or will be made hereunder or
under the Plans or Benefit Programs or Agreements which, in the aggregate,
would result in imposition of the sanctions imposed under Sections 280G and
4999 of the Code on Xxxxxx, Xxxxxxx or their respective subsidiaries.
(7) Each Plan which is an "employee welfare benefit plan," as such
term is defined in Section 3(1) of ERISA, may be unilaterally amended or
terminated in its entirety without liability except as to benefits accrued
thereunder prior to such amendment or termination and except for obligations of
the Mallard and its subsidiaries under COBRA.
(8) None of the U.S. employees of Mallard or any of its
subsidiaries are subject to union or collective bargaining agreements. Except
as otherwise set forth in Schedule 2(n) or as would otherwise not have a
Material Adverse Effect, Mallard and its subsidiaries have not at any time
during the past four years had or been threatened with any work stoppages or
other labor disputes or controversies with respect to their employees.
(o) TAX MATTERS.
(1) Except as set forth in Schedule 2(o), (i) all Tax Returns of
or with respect to any Tax that are required to be filed on or before the
Closing Date by or with respect to Mallard, any subsidiary of Mallard or any
affiliated group of corporations of which Mallard or any subsidiary of Mallard
was a member at any time during the five year period ending on the Closing Date
(a "Seller Affiliated Group") have been or will be duly and timely filed, (ii)
all items of income, gain, loss, deduction and credit or other items required
to be included in each such Tax Return
-13-
14
have been or will be so included and all information provided in each such Tax
Return is true, correct and complete in all material respects, (iii) all Taxes
which have become or will become due with respect to the period covered by each
such Tax Return have been or will be timely paid in full, (iv) all withholding
Tax requirements imposed on or with respect to Mallard or any subsidiary of
Mallard have been or will be satisfied in full, and (v) no penalty, interest or
other charge is or will become due with respect to the late filing of any such
Tax Return or late payment of any such Tax.
(2) All Tax Returns of, or with respect to Mallard, any subsidiary
of Mallard or any Seller Affiliated Group have been audited by the applicable
governmental authority, or the applicable statute of limitations has expired,
for all periods up to and including the periods set forth in Schedule 2(o).
(3) There is no claim against Mallard, any subsidiary of Mallard,
or any Seller Affiliated Group for any Taxes, and no assessment, deficiency or
adjustment has been asserted or proposed with respect to any Tax Return of or
with respect to Mallard, any subsidiary of Mallard or any Seller Affiliated
Group, other than those disclosed (and to which are attached true and complete
copies of all audit or similar reports) in Schedule 2(o).
(4) Except as set forth in Schedule 2(o), there is not in force
any extension of time with respect to the due date for the filing of any Tax
Return of or with respect to Mallard, any subsidiary of Mallard, or any Seller
Affiliated Group or any waiver or agreement for any extension of time for the
assessment or payment of any Tax of or with respect to Mallard, any subsidiary
of Mallard or any Seller Affiliated Group.
(5) Schedule 2(o) contains a true and complete copy of each
written Tax allocation or sharing agreement and a true and complete description
of each unwritten Tax allocation or sharing arrangement affecting Mallard or
any subsidiary of Mallard. All such agreements shall be terminated prior to
the Closing Date and no payments are due or will become due by Mallard or any
subsidiary of Mallard on or after the Closing Date pursuant to any such
agreement or arrangement.
(6) Except as set forth in Schedule 2(o), none of the property of
Mallard or any subsidiary of Mallard is held in an arrangement that could be
classified as a partnership for Tax purposes, and neither Mallard nor any
subsidiary of Mallard own any interest in any controlled foreign corporation
(as defined in section 957 of the Code), passive foreign investment company (as
defined in section 1296 of the Code) or other entity the income of which is
required to be included in the income of Mallard or any subsidiary of Mallard.
(7) Except as set forth in Schedule 2(o), none of the property of
Mallard or any subsidiary of Mallard is subject to a safe-harbor lease
(pursuant to section 168(f)(8) of the Internal Revenue Code of 1954 as in
effect after the Economic Recovery Tax Act of 1981 and before the Tax Reform
Act of 1986) or is "tax-exempt use property" (within the meaning of section
168(h) of the Code) or "tax-exempt bond financed property" (within the meaning
of section 168(g)(5) of the Code).
-14-
15
(8) Except as set forth in Schedule 2(o), neither Mallard nor any
subsidiary of Mallard will be required to include any amount in income for any
taxable period beginning the Closing Date as a result of a change in accounting
method for any taxable period ending on or before the Closing Date or pursuant
to any agreement with any Tax authority with respect to any such taxable
period.
(9) Neither Mallard nor any subsidiary of Mallard has consented to
have the provisions of section 341(f)(2) of the Code apply with respect to a
sale of its stock.
(p) BROKERS' FEES. EVI, Mallard and its subsidiaries do not have
any liability to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which
Xxxxxx or Xxxxxxx could be liable or obligated after Closing.
(q) REAL PROPERTY. Schedule 2(q) lists and describes briefly all
real property owned by Mallard and its subsidiaries. With respect to each such
parcel of owned real property:
(1) the identified owner has good and indefeasible title
to, and quiet enjoyment of, the parcel of real property, free and
clear of any Security Interest, easement, covenant, or other
restriction, except for installments of special assessments not yet
delinquent, recorded easements, covenants, and other restrictions, and
utility easements, building restrictions, zoning restrictions, and
other easements and restrictions existing generally with respect to
properties of a similar character that do not affect materially and
adversely the current use, occupancy, or value of the property subject
thereto;
(2) there are no pending or, to the knowledge of EVI,
threatened condemnation proceedings, lawsuits, or administrative
actions relating to the property or other matters affecting materially
and adversely the current use, occupancy, or value thereof;
(3) there are no leases, subleases, licenses,
concessions, or other agreements, written or oral, granting to any
party or parties the right of use or occupancy of any portion of the
parcel or real property; and
(4) there are no outstanding options or rights of first
refusal to purchase the parcel of real property, or any portion
thereof or interest therein.
(r) LEASES. Schedule 2(r) lists and describes briefly all real
property leased or subleased by Mallard and its subsidiaries. EVI has made
available to Xxxxxx or its representatives correct and complete copies of the
leases and subleases listed in Schedule 2(r). With respect to each lease and
sublease listed in Schedule 2(r), except for such matters that would not have a
Material Adverse Effect:
(1) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect in all material respects;
-15-
16
(2) no party to the lease or sublease is in material
breach or default, and no event has occurred which, with notice or
lapse of time, would constitute a material breach or default or permit
termination, modification, or acceleration thereunder;
(3) no party to the lease or sublease has repudiated any
material provision thereof;
(4) there are no material disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(5) Mallard and its subsidiaries have not assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold or subleasehold;
(6) all facilities leased or subleased thereunder have
received all approvals of Governmental Authorities (including material
Permits) required in connection with the operation thereof; and
(7) the lease or sublease will continue to be in full
force and effect following the consummation of the transaction
contemplated herein and no consents are required under such lease or
sublease in connection with the transactions contemplated hereby.
(s) ENVIRONMENTAL MATTERS. Except as disclosed on Schedule 2(s):
(1) Mallard and its subsidiaries are not in violation of any
Environmental Laws or any order or requirement of any Governmental Authority to
the extent pertaining to health or the environment, nor are there any
conditions existing on or resulting from operation of the businesses or
properties of Mallard and its subsidiaries that may give rise to any on-site or
off-site remedial obligations under any Environmental Law, except for such
violations or conditions as will not have a Material Adverse Effect;
(2) Without limitation of clause (1) above, Mallard and its
subsidiaries and their properties are not subject to any existing, pending or,
to the knowledge of EVI, threatened action, suit, investigation, inquiry or
proceeding by or before any Governmental Authority under any Environmental Law;
(3) All notices, permits, licenses or similar authorizations, if
any, required to be obtained or filed by Mallard and its subsidiaries under any
Environmental Law, including without limitation those relating to the
treatment, storage, disposal or release of a hazardous substance or solid waste
into the environment, have been duly obtained or filed, and Mallard and its
subsidiaries are in compliance with the terms and conditions of all such
notices, permits, licenses and similar authorizations, except as would
otherwise not have a Material Adverse Effect;
(4) Except where such failure would not have a Material Advance
Effect, since the effective date of the relevant requirements of the Resource
Conservation and Recovery Act of 1976 ("RCRA"), as amended, or other applicable
Environmental Laws, all hazardous substances or
-16-
17
solid wastes generated by Mallard and its subsidiaries or at any properties of
Mallard and its subsidiaries and requiring disposal have been transported only
by carriers maintaining valid authorizations under RCRA and any other
Environmental Laws and treated and disposed of only at treatment, storage and
disposal facilities maintaining valid authorizations under RCRA and any other
Environmental Law, and, to the knowledge of EVI, such carriers and facilities
have been and are operating in compliance with such authorizations and are not
the subject of any existing, pending or overtly threatened action,
investigation or inquiry by any Governmental Authority in connection with any
Environmental Laws, except as would not otherwise have a Material Adverse
Effect;
(5) There are no asbestos-containing materials or naturally
occurring radioactive materials on or in any of the properties of Mallard and
its subsidiaries, and there are no storage tanks, open or closed pits, sumps,
or other containers on or under any of the properties of Mallard and its
subsidiaries from which hazardous substances, petroleum, petroleum products,
oil and gas exploration and production wastes, or other contaminants may be
released into the surrounding environment, except as would otherwise not have a
Material Adverse Effect; and
(6) Without limiting the foregoing, there is no material liability
to any non-governmental third party in tort in connection with any release or
threatened release of any hazardous substances, solid wastes, petroleum,
petroleum products, and oil and gas exploration and production wastes into the
environment as a result of or with respect to the properties or businesses of
Mallard and its subsidiaries, except as would otherwise not have a Material
Adverse Effect.
(t) RECEIVABLES. Schedule 2(t) sets forth an accurate aging of
the receivables of Mallard and its subsidiaries as of July 31, 1996, and write
offs of bad debt by Mallard or its subsidiaries from January 1, 1993 to July
31, 1996. All of the receivables reflected on the Most Recent Balance Sheet or
incurred since the date of the Most Recent Balance Sheet through the date
hereof have arisen only from bonafide transactions entered into in the Ordinary
Course of Business.
(u) INVESTMENT INTENT. EVI is acquiring the shares of Series D
Preferred Stock for investment purposes only and not with a view to or in
connection with any distribution thereof within the meaning of the Securities
Act. EVI acknowledges that the sale of such shares has not been registered
under the Securities Act in reliance upon an exemption therefrom and that such
shares will be "restricted securities" as defined in Rule 144 under the
Securities Act, cannot be offered, sold or otherwise disposed of except
pursuant to registration under the Securities Act or an applicable exemption
from registration and will bear a restrictive legend to this effect.
3. REPRESENTATIONS AND WARRANTIES OF XXXXXX. Xxxxxx represents
and warrants to EVI that the statements contained in this Section 3 are true,
correct and complete as of the date of this Agreement and will be true, correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Section 3).
-17-
18
(a) ORGANIZATION. Xxxxxx is a corporation duly organized, validly
existing, and in good standing under the laws of Delaware.
(b) AUTHORIZATION OF TRANSACTION. Xxxxxx has all requisite power
and authority to execute and to deliver this Agreement and the Registration
Rights Agreement and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Registration Rights Agreement by Xxxxxx and
the consummation of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action and no other corporate action
on the part of Xxxxxx, including any action by the stockholders of Xxxxxx, is
necessary to authorize this Agreement or the Registration Rights Agreement or
to consummate the transactions contemplated hereby and thereby (other than
adoption by the Board of Directors of Xxxxxx of the Certificate of Designations
for the Series D Convertible Preferred Stock and the filing of such Certificate
of Designations with the Delaware Secretary of State). This Agreement has been
duly executed and delivered by Xxxxxx and constitutes the valid and legally
binding obligation of Xxxxxx, enforceable in accordance with its terms, and the
Registration Rights Agreement, when executed and delivered by each party
thereto, will constitute the valid and legal binding obligation of Xxxxxx
enforceable in accordance with its terms. Except as required under the
Xxxx-Xxxxx-Xxxxxx Act or as otherwise provided herein, Xxxxxx need not give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any Governmental Authority in order to consummate the transactions
contemplated by this Agreement other than those that the failure to obtain
would not, individually or in the aggregate, have a Material Adverse Effect.
(c) POWER AND AUTHORITY. Xxxxxx has all requisite corporate or
other power and authority to own, lease and operate its properties and to carry
on its business as each is now being conducted.
(d) CAPITALIZATION. The entire authorized capital stock of Xxxxxx
consists of 70,000,000 shares of Xxxxxx Common Stock and 1,942,000 shares of
preferred stock, par value $1.00 per share ("Xxxxxx Preferred Stock"). As of
the date hereof there are 65,334,528 shares of Xxxxxx Common Stock outstanding
and no shares of Xxxxxx Preferred Stock outstanding. The shares of Series D
Preferred Stock to be issued to EVI on the Closing Date pursuant to the
transactions contemplated hereby will be validly issued, fully paid and
nonassessable.
(e) COMMISSION FILINGS; FINANCIAL STATEMENTS.
(1) Xxxxxx has filed all reports, proxy statements, registration
statements and other documents, together with any amendments required to be
made with respect thereto, required to be filed with the Commission under the
Exchange Act. All such reports, proxy statements, registration statements and
other documents (including all exhibits thereto and all documents incorporated
by reference therein) filed by Xxxxxx with the Commission since January 1,
1995, together with any amendments thereto, are referred to herein as the
"Xxxxxx Commission Filings." Xxxxxx has delivered to EVI copies of the Xxxxxx
Commission Filings. As of the respective dates of their filing with the
Commission, the Xxxxxx Commission Filings complied in all material respects
with the Exchange Act, the Securities Act and the rules and regulations of the
-18-
19
Commission thereunder, and 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 light of the circumstances under
which they were made, not misleading.
(2) All of the consolidated financial statements included in the
Xxxxxx Commission Filings (including any related notes or schedules) were
prepared in accordance with GAAP applied on a consistent basis (except as may
be noted therein) and complied in all material respects with all applicable
rules of the Commission. Such consolidated financial statements fairly present
the consolidated financial position of Xxxxxx and its subsidiaries as of the
dates thereof and the results of operations, cash flows and changes in
shareholders' equity for the periods then ended (subject in the case of interim
financial statements to normal year-end audit adjustments on a basis comparable
with past periods).
(f) EVENTS SUBSEQUENT TO MOST RECENT QUARTER END. Since June 30,
1996 there has not been any change in the conduct of the ongoing business
operations of Xxxxxx and its subsidiaries that would, individually or in the
aggregate, have a Material Adverse Effect (other than changes affecting the oil
and gas industry or the drilling and workover segment thereof in general).
(g) LEGAL COMPLIANCE; NONCONTRAVENTION. The execution and
delivery of this Agreement and the Registration Rights Agreement by Xxxxxx does
not, and the consummation of the transactions contemplated hereby and thereby
(including the issuance and redemption of the Series D Preferred Stock under
the terms thereof) will not, (i) conflict with or violate the certificate of
incorporation or bylaws of Xxxxxx, (ii) conflict with or violate any Law, or
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
or require payment under, or result in the creation of a Security Interest on
any properties or assets of Xxxxxx pursuant to any note, bond, mortgage,
indenture, contract, agreement, lease, Permit or other instrument or obligation
to which Xxxxxx or any of its subsidiaries is a party or by which Xxxxxx or any
of its subsidiaries or their properties are bound or subject to, except that
consummation of the transactions will require consents under Xxxxxx'x bank
credit facilities and except for breaches, defaults, events, rights of
termination, amendment, acceleration or cancellation, payment obligations or
Security Interests that would not, individually or in the aggregate, have a
Material Adverse Effect or affect the validity or prohibit the issuance of the
Series D Preferred Stock.
(h) BROKERS' FEES. Xxxxxx shall not have any liability to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which EVI could become liable
or obligated.
(i) INVESTMENT INTENT. Xxxxxx is acquiring the shares of Mallard
Common Stock for investment purposes only and not with a view to or for sale in
connection with any distribution thereof within the meaning of the Securities
Act.
-19-
20
(j) CITIZENSHIP. Xxxxxx is a citizen of the United States within
the meaning of Section 2 of the Shipping Xxx 0000, as amended.
4. PRE-CLOSING COVENANTS. The Parties agree as follows with
respect to the period between the execution of this Agreement and the Closing:
(a) GENERAL. Each of the Parties will use all reasonable efforts
to take all action and to do all things necessary, proper, or advisable in
order to consummate and to make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions
set forth in Section 6).
(b) NOTICES AND CONSENTS. EVI and Xxxxxx will give any notices to
third parties, and will use all reasonable efforts to obtain all third-party
consents, that are required for the consummation of the transactions
contemplated hereby or that Xxxxxx may reasonably request in connection with
the matters referred to in Sections 2(k) and 2(r). Xxxxxx will use reasonable
efforts to cooperate with EVI in obtaining the releases described in Schedule
6(b) of the Disclosure Schedule. Each of the Parties will (and EVI will cause
Mallard and its subsidiaries to) give any notices to, make any filings with,
and use all reasonable efforts to obtain any authorizations, consents, and
approvals of Governmental Authorities in connection with the matters referred
to in Sections 2(b) and 3(b). Without limiting the generality of the
foregoing, each of the Parties will file any Notification and Report Forms and
related material that it may be required to file with the Federal Trade
Commission and the Antitrust Division of the United States Department of
Justice under the Xxxx-Xxxxx-Xxxxxx Act, will use all reasonable efforts to
obtain an early termination of the applicable waiting period, and will make any
further filings pursuant thereto that may be necessary, proper, or advisable in
connection therewith.
(c) OPERATION OF BUSINESS. EVI covenants and agrees that unless
otherwise expressly contemplated by this Agreement or consented to in writing
by Xxxxxx, (x) Mallard and its subsidiaries will:
(1) operate their businesses only in the Ordinary Course
of Business;
(2) use reasonable efforts to preserve their businesses
and properties, including their present operations, physical
facilities, working conditions and relationships with lessors,
licensors, suppliers, customers and employees; and
(3) subject to the availability of the same on
commercially reasonable terms, keep in full force and effect insurance
and bonds comparable in amount and scope of coverage to that currently
maintained;
and (y) Mallard and its subsidiaries will not, except as contemplated herein:
(1) sell, lease, transfer, impose any Security Interest
or assign any assets, tangible or intangible, except for immaterial
transactions with sales prices not in excess of $1,000,000 in the
aggregate;
-20-
21
(2) enter into any agreement, contract, lease or license
outside the Ordinary Course of Business, or enter into any drilling
contract on a turnkey or footage basis, or enter into any vessel or
rig charter other than with an affiliate of Mallard or for a term less
than one month entered into in the Ordinary Course of Business;
(3) make any declaration, setting aside or payment of
dividends or distributions in respect of shares of Mallard Common
Stock or any redemption, purchase or other acquisition of any other
securities of Mallard or its subsidiaries;
(4) amend their respective certificates of incorporation,
bylaws or other organizational documents;
(5) issue, deliver, sell, pledge or otherwise encumber
any shares of their capital stock or any securities convertible into,
or exchangeable or exercisable for, shares of their capital stock;
(6) except for borrowings under existing credit
facilities in the Ordinary Course of Business, (i) incur any
obligation for borrowed money or purchase money indebtedness, or (ii)
make any loan, advance, guarantee, capital contribution or investment
in any Person other than a direct or indirect wholly owned subsidiary
of Mallard;
(7) make any change in their accounting methods,
principles or practices other than as required by GAAP;
(8) waive the benefits of, or agree to modify, any
material confidentiality, standstill or similar agreement;
(9) except for changes made in the Ordinary Course of
Business not involving officers or key employees of Mallard, increase
or otherwise modify (except as contemplated by this Agreement) the
compensation of their employees, including salaries, bonus and other
employee benefits, or severance payments or obligations, or enter into
or modify the terms of any employment, severance or collective
bargaining agreement;
(10) except for existing commitments and capital
expenditures as may be necessary to perform obligations under existing
contracts or maintain the assets in the event of damage thereto, make
any capital expenditure outside the Ordinary Course of Business or in
an amount in excess of $250,000;
(11) modify, terminate or establish any new (except as
contemplated by this Agreement and those adopted by EVI for
substantially all the employees of its subsidiaries) Plans or Benefit
Programs or Agreements;
(12) pay, discharge, reserve against or satisfy any
material claims, liabilities or obligations or write off or reduce the
carrying value of any assets, other than as reflected or reserved
against in the Most Recent Balance or as may be required under the
terms
-21-
22
thereof or in the Ordinary Course of Business (including the
settlement of litigation in accordance with past practice); or
(13) authorize, commit or agree to take any of the
foregoing actions.
(d) FULL ACCESS. Subject to the terms of the Confidentiality
Agreement dated September 9, 1996 (the "Confidentiality Agreement"), EVI will
permit representatives of Xxxxxx to have full access to Mallard and its
subsidiaries at reasonable times during normal business hours, in a manner that
will not interfere with the normal business operations of Mallard and its
subsidiaries, and to all premises, properties, personnel, books, records
(including Tax records), environmental reports or surveys, contracts, and
documents of or pertaining to Mallard and its subsidiaries.
(e) NOTICE OF DEVELOPMENTS. Each Party will give prompt written
notice to the other of any material adverse development causing a breach of any
of its representations and warranties under this Agreement.
(f) BENEFIT PLANS. At or prior to the Closing, but effective as
of the Closing Date, EVI shall, at its sole expense and with no adverse tax or
other consequences to Mallard, Parker or their respective subsidiaries, (i)
cause Mallard and its subsidiaries to cease to be adopting employers under all
Plans and Benefit Programs or Agreements and (ii) cause one or more designees
of EVI (other than Mallard or any of its subsidiaries) to assume all past,
present and future obligations and liabilities of Mallard and its subsidiaries
with respect to the Plans and Benefit Programs or Agreements. On or before the
Closing Date, and effective as of such date, EVI will cause each employee of
Mallard and its subsidiaries to have a fully vested and nonforfeitable interest
in his or her account balance under the 401(k) Plan and the Executive Deferred
Compensation Plan. With respect to employees of Mallard and its subsidiaries
as of the Closing Date, Xxxxxx will permit such employees to participate in its
group health plan without exclusion for pre-existing conditions (other than
such exclusions currently in effect under any group health plan for employees
of Mallard and its subsidiaries).
(g) NO SOLICITATION. From and after the date of this Agreement
until the termination of this Agreement in accordance with its terms, neither
EVI nor any of its subsidiaries, nor any officer, director, employee, agent or
representative of EVI or any of its subsidiaries, shall, directly or
indirectly, solicit or encourage, including by way of furnishing information,
the initiation of any inquiries or proposals regarding, or engage in or
continue any discussions or enter into any agreements regarding, any merger,
tender offer, sale of shares of capital stock or similar business combination
transactions involving any or all of the Contract Drilling Business, or any
sale of all or substantially all the assets of the Contract Drilling Business,
other than in connection with the transaction with Xxxxxx contemplated herein;
provided, however, that EVI or its officers, directors, employees, agents or
representatives may furnish information with respect to the Contract Drilling
Business in connection with any inquiry or proposal or discussions relating to
a merger, tender offer, sale of shares of capital stock or similar business
combination transaction involving EVI, or any sale of all or substantially all
of the assets of EVI, provided that no such discussions or agreements resulting
therefrom shall in any manner conflict with the terms of this Agreement and
-22-
23
that EVI or such person acting on behalf of EVI shall provide advance written
notice to each other party to such discussions that EVI is party to a valid and
legally binding agreement with Xxxxxx with respect to the Contract Drilling
Business.
(h) INSURANCE MATTERS. EVI shall use its reasonable efforts to
obtain an endorsement on the insurance policies for Mallard and its
subsidiaries naming Xxxxxx and its subsidiaries and affiliates as additional
named insureds effective on the Closing Date as long as Xxxxxx utilizes EVI's
current insurance broker.
(i) CONTRIBUTED ASSETS. Prior to the Closing, EVI shall take all
necessary action to provide that all of the assets owned by EVI or its
subsidiaries used primarily in connection with or otherwise integral to the
Contract Drilling Business are owned directly or indirectly by Mallard,
including the contribution of certain assets described on Schedule 4(i) (the
"Contributed Assets"); provided, however, the foregoing shall not include (i)
the historical tax, accounting or financial records of EVI, (ii) the accounting
and management information systems and software of EVI used in connection with
the business of Mallard, (iii) the subsidiaries of EVI whose assets may be
transferred to Mallard or its subsidiaries pursuant to this section, or (iv)
the assets described in Schedule 2(j) of the Disclosure Schedule as being
retained by EVI or its subsidiaries other than Mallard and its subsidiaries.
After the Closing, EVI will provide Xxxxxx with access to such historical
accounting and other records relating to the business of Mallard and its
subsidiaries prior to Closing to the extent reasonably necessary to assist
Xxxxxx in making its tax, regulatory, Exchange Act and related filings.
(j) REGISTRATION RIGHTS. At the Closing, Xxxxxx and EVI shall
enter into a registration rights agreement in substantially the form attached
hereto as EXHIBIT D ("Registration Rights Agreement").
(k) AUDITED FINANCIAL STATEMENTS. EVI shall use its best efforts
to deliver to Xxxxxx within 20 days after the date hereof, and shall in any
event deliver to Xxxxxx within 30 days after the date hereof, audited financial
statements for Mallard and its consolidated subsidiaries, together with the
Contributed Assets, accompanied by a report of EVI's independent public
accountants, consisting of balance sheets and statements of income, cash flows
and stockholders' equity as of and for each of the years ended December 31,
1993, 1994 and 1995 (the "Mallard Audited Financial Statements"). The Mallard
Audited Financial Statements will be prepared in accordance with GAAP applied
on a consistent basis (except as may be noted therein) and will fairly present
the consolidated financial position of Mallard and its subsidiaries as of the
dates thereof and the results of operations, cash flows and changes in
stockholders' equity for the periods then ended.
(l) RIG UPGRADE. Prior to Closing, EVI shall complete the rig
modification and upgrade to Rig 74 as described on Schedule 4(l) (the "Rig
Upgrade").
-23-
24
(m) ACTION OF XXXXXX REGARDING FINANCING.
(1) Xxxxxx shall promptly after the date of this Agreement
initiate and diligently pursue action to obtain financing in an amount
necessary to permit Xxxxxx to pay the cash portion of the Purchase Price. In
such connection, Xxxxxx plans to effect a private placement of debt and Xxxxxx
agrees to use its commercially reasonable efforts to complete such placement.
(2) Xxxxxx shall keep EVI informed from time to time as to the
status of the financing contemplated by subsection (1) of this Section 4(m) and
in any event shall inform EVI upon pricing of the securities. Xxxxxx shall
also provide EVI with copies of all preliminary and final offering memorandums.
(n) PREFERRED STOCK. Prior to Closing, the Board of Directors of
Xxxxxx shall approve and adopt the Certificate of Designations for the Xxxxxx
Series D Convertible Preferred Stock in substantially the form attached hereto
as Exhibit B and cause such Certificate of Designations to be filed with the
Secretary of State of Delaware.
(o) INTERCOMPANY DEBT. All debt and other obligations of Mallard
or any of its subsidiaries as of the Closing Date shall be cancelled
immediately prior to the Closing (other than debt related to purchases of drill
pipe, tubulars and related products from Grant Prideco, Inc. after the date
hereof).
5. POST-CLOSING COVENANTS. The Parties agree as follows with
respect to the period following the Closing.
(a) GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as the other Party
reasonably may request; provided, however, that this Section 5(a) shall not be
deemed to require either party to expend funds or to incur obligations not
otherwise expressly required pursuant to the Agreement.
(b) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving Mallard and its subsidiaries, each of the other
Parties will cooperate with it and its counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their books
and records as shall be necessary in connection with the contest or defense,
all at the sole cost and expense of the contesting or defending Party (unless
the contesting or defending Party is entitled to indemnification therefor under
Section 7).
-24-
25
(c) LISTING OF SHARES. Promptly after the Closing, Xxxxxx shall
effect the listing on the New York Stock Exchange of the shares of Xxxxxx
Common Stock issuable upon conversion of the Series D Preferred Stock.
(d) AUTHORIZATION OF COMMON STOCK. Xxxxxx agrees that at its next
annual meeting of stockholders, and in any event at a meeting to be held prior
to January 31, 1997, it will propose an amendment to its Restated Certificate
of Incorporation to increase the number of authorized shares of Xxxxxx Common
Stock to at least 80,000,000 shares. The Board of Directors of Xxxxxx will
recommend to Xxxxxx'x stockholders that they vote in favor of any such proposal
to increase Xxxxxx'x authorized shares, and Xxxxxx will use its best efforts to
solicit proxies in favor of such proposal.
(e) VOTING OF SERIES D PREFERRED STOCK. If the Closing shall have
occurred prior to the stockholders meeting to approve the increase in the
authorized shares of Common Stock, EVI agrees to vote the shares of Series D
Preferred Stock in favor of the proposal.
6. CLOSING CONDITIONS.
(a) CONDITIONS TO OBLIGATION OF XXXXXX. The obligation of Xxxxxx
to consummate the transactions contemplated hereby is subject to satisfaction
of the following conditions:
(1) the representations and warranties of EVI set forth
in Section 2 shall be true and correct in all material respects at and
as of the Closing Date;
(2) EVI shall have performed and complied with all of its
covenants and agreements hereunder in all material respects through
the Closing;
(3) the Parties shall have procured all material third
party consents specified in Section 4(b);
(4) no action, suit, or proceeding shall be pending
before any Governmental Authority by any person (other than a party to
this Agreement or any affiliate thereof) which would reasonably be
expected to result in a permanent injunction, judgment, order, decree
or ruling that would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect materially and adversely the right of Xxxxxx
to own Mallard Common Stock and the capital stock of Mallard's
subsidiaries, or (D) affect materially and adversely the right of
Mallard and its subsidiaries to own their assets and to operate their
businesses in the manner currently owned and operated (and no such
injunction, judgment, order or decree or ruling shall be in effect);
(5) there shall have not occurred any events or
developments, individually or in the aggregate, resulting in a
Material Adverse Effect with respect to Mallard and its subsidiaries;
-25-
26
(6) EVI shall have delivered to Xxxxxx a certificate to
the effect that each of the conditions specified above in Section
6(a)(1)-(5) is satisfied in all respects;
(7) all applicable waiting periods (and any extensions
thereof) under the Xxxx-Xxxxx-Xxxxxx Act shall have expired or
otherwise been terminated;
(8) Xxxxxx shall have received the opinion of Fulbright &
Xxxxxxxx L.L.P., dated as of the Closing Date, in substantially the
form attached hereto as EXHIBIT E;
(9) the guarantees by Mallard and each of its
subsidiaries with respect to the obligations of EVI under EVI's 10.25%
Senior Notes due 2004 and under EVI's bank credit facility shall be
terminated in all respects effective as of the Closing and all
Security Interests on the stock of Mallard and its subsidiaries shall
have been released;
(10) EVI shall have caused Mallard to have completed the
Rig Upgrade or advanced funds sufficient to complete the Rig Upgrade,
which funds shall not be treated as assets for purposes of the
purchase price adjustment pursuant to Section 1(f) hereof;
(11) Xxxxxx shall have arranged the financing necessary,
and received sufficient proceeds, to pay the cash portion of the
Purchase Price; and
(12) EVI shall have complied with the requirements of
Section 8(a) of this Agreement.
At or prior to the Closing, Xxxxxx may waive in writing any condition specified
in this Section 6(a), to the extent permitted by law.
(b) CONDITIONS TO OBLIGATION OF EVI. The obligations of EVI to
consummate the transactions contemplated hereby are subject to satisfaction of
the following conditions:
(1) the representations and warranties of Xxxxxx set
forth in Section 3 shall be true and correct in all material respects
at and as of the Closing Date;
(2) Xxxxxx shall have performed and complied with all of
their respective covenants hereunder in all material respects through
the Closing;
(3) the Parties shall have procured all material third
party consents specified in Section 4(b);
(4) no action, suit, or proceeding shall be pending
before any Governmental Authority by any person (other than a party to
this Agreement or any affiliate thereof) which would reasonably be
expected to result in a permanent injunction, judgment, order, decree
or ruling that would (A) prevent consummation of any of the
transactions contemplated by this
-26-
27
Agreement, or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such
injunction, judgment, order, decree or ruling shall be in effect);
(5) there shall not have occurred any events or
developments, individually or in the aggregate, resulting in a
Material Adverse Effect with respect to Xxxxxx and its subsidiaries;
(6) Xxxxxx shall have delivered to Mallard and its
subsidiaries a certificate to the effect that each of the conditions
specified above in Section 6(b)(1)-(5) is satisfied in all respects;
(7) all applicable waiting periods (and any extensions
hereof) under the Xxxx-Xxxxx-Xxxxxx Act shall have expired or
otherwise been terminated; and
(8) EVI shall have received the opinion of Xxxxxx &
Xxxxxx L.L.P., dated as of the Closing Date, in substantially the form
attached hereto as EXHIBIT F.
At or prior to the Closing, EVI may waive in writing any condition specified in
this Section 6(b), to the extent permitted by law.
7. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties herein shall survive the Closing, except (i)
the representations and warranties in Section 2(s) shall survive for one year
after the Closing Date, (ii) the representations and warranties in Sections
2(d), 2(u), 3(d) and 3(i) shall survive without limitation of time, and (iii)
the representations and warranties in Sections 2(n), 2(o), 2(p) and 3(h) shall
survive until 10 days after the end of the applicable statute of limitations
period with respect to the matters addressed therein. The survival periods
specified in the foregoing sentence are referred to herein as the "Survival
Periods."
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF XXXXXX. EVI shall
defend, indemnify and hold Xxxxxx harmless from and against any and all Adverse
Consequences resulting from or arising out of (i) any breach or nonperformance,
either partial or total, of any representation, warranty, covenant or agreement
of EVI in this Agreement (provided, however, that EVI shall have no obligation
to indemnify, defend or hold Xxxxxx harmless with respect to any Adverse
Consequence resulting from or arising out of a breach of any representation or
warranty of EVI in this Agreement unless EVI receives notice of such Adverse
Consequence within the applicable Survival Period), (ii) violations or alleged
violations by EVI, Mallard or their respective subsidiaries of the Export
Administration Act, the International Economic Emergency Powers Act or other
applicable U.S. export control or economic sanction laws, orders or
regulations, and (iii) the matters described on Schedule 7(b).
(c) INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF EVI. Xxxxxx
shall defend, indemnify and hold EVI harmless from and against any and all
Adverse Consequences resulting
-27-
28
from or arising out of (i) the breach or non-performance, either partial or
total, of any representation, warranty, covenant, or agreement of Xxxxxx in
this Agreement, or (ii) any cost, expense, obligation or liability relating to
guarantees of debt of Mallard or any of its subsidiaries by EVI or performance
bonds or performance guarantees issued by EVI and relating to the Contract
Drilling Business, in each case as described on Schedule 6(b) or otherwise
identified to Xxxxxx five Business Days prior to the Closing Date; provided,
however, that Xxxxxx shall have no obligation to indemnify, defend or hold EVI
harmless with respect to any Adverse Consequences resulting from or arising out
of a breach of any representation or warranty of Xxxxxx in this Agreement
unless Xxxxxx receives notice of such Adverse Consequence within the applicable
Survival Period.
(d) MATTERS INVOLVING THIRD PARTIES.
(1) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") that may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall promptly notify
the Indemnifying Party thereof in writing; provided, however, that no delay on
the part of the Indemnified Party in notifying the Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party is prejudiced thereby. For
purposes of this Section 7(d), matters relating to Taxes that are addressed in
Section 8 shall not be deemed to be a Third Party Claim.
(2) The Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the
Indemnifying Party notifies the Indemnified Party in writing within 30 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim; and (B) the Indemnifying Party conducts the defense of the Third
Party Claim actively and diligently.
(3) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 7(d)(2), (A) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (B) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party; and (C) the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party (which
consent will not be withheld unreasonably).
(4) In the event any of the conditions in Section 7(d)(2) is or
becomes unsatisfied, however, (A) the Indemnified Party may defend against the
Third Party Claim in any manner it reasonably may deem appropriate; provided,
however, that the Indemnified Party shall not consent to the entry of any
judgment or enter into any settlement or agreement to settle a Third Party
Claim without the prior written consent of the Indemnifying Party which consent
shall not be
-28-
29
unreasonably withheld; (B) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the costs of defending against
the Third Party Claim (including reasonable attorneys' fees and expenses); and
(C) the Indemnifying Party will remain responsible for any Adverse Consequences
the Indemnified Party actually suffers resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim to the fullest extent
provided in this Section 7.
(e) EXPRESS NEGLIGENCE. THE INDEMNIFICATION AGREEMENTS OF THE
PARTIES HEREIN SHALL APPLY NOTWITHSTANDING THE CIRCUMSTANCES RELATING TO SUCH
INDEMNITY MAY RELATE TO THE ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE, GROSS
NEGLIGENCE, WILLFUL MISCONDUCT OR VIOLATION OF LAW BY ANY INDEMNIFIED PARTY,
ITS SUBSIDIARIES, OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS.
8. TAX MATTERS. The Parties agree as follows with respect to the
period following the Closing:
(a) SECTION 338(H)(10) ELECTIONS. EVI agrees that, if requested
by Xxxxxx prior to the Closing, EVI, as the common parent of the affiliated
group of corporations filing a consolidated federal income Tax Return which
includes Mallard and its subsidiaries (the "EVI Group"), shall join Xxxxxx in
making an election under section 338(h)(10) of the Code and a similar election
under any applicable state income Tax law (collectively, the "Section
338(h)(10) elections") with respect to Xxxxxx'x purchase of the Mallard Common
Stock. If Xxxxxx determines prior to the Closing to make the Section
338(h)(10) elections with respect to its purchase of the Mallard Common Stock,
on or before the Closing Date Xxxxxx and EVI shall cause Internal Revenue
Service Form 8023A and any similar forms under applicable state income Tax law
(the "Forms") with respect to Xxxxxx'x purchase of the Mallard Common Stock to
be duly executed by an authorized person for Xxxxxx and EVI, respectively.
Xxxxxx and EVI shall cooperate in good faith with each other in completing the
Forms and schedules required to be attached thereto, and Xxxxxx shall provide a
copy of the executed Forms and schedules to EVI and Xxxxxx shall duly and
timely file the Forms as prescribed by Treasury Regulation Section
1.338(h)(10)-1 or the corresponding provision of applicable state income Tax
law as soon as practicable after the Closing and shall promptly thereafter
provide EVI with evidence of each such filing.
(b) PREPARATION AND FILING OF TAX RETURNS. (1) With respect to
each Tax Return covering a taxable period ending on or before the Closing Date
that is required to be filed after the Closing Date for, by or with respect to
Mallard or any subsidiary of Mallard (other than the Tax Returns described in
Section 8(a)(3)), EVI shall cause such Tax Return to be prepared, shall cause
to be included in such Tax Return all items of income, gain, loss, deduction
and credit or other items (collectively "Tax Items") required to be included
therein, and shall deliver the original of such Tax Return to Xxxxxx at least
30 days prior to the due date (including extensions) of such Tax Return. If
the amount of the Tax shown to be due on such Tax Return exceeds the amount
reflected as a current liability for such Tax on the Closing Balance Sheet, EVI
shall pay to Xxxxxx the amount of such excess not less than 5 days prior to the
due date of such Tax Return. Xxxxxx shall cause Mallard or the respective
subsidiary of Mallard to file timely such Tax Return with the appropriate
taxing authority and to pay the amount of Taxes shown to be due on such Tax
Return.
-29-
30
(2) With respect to each Tax Return covering (i) a taxable period
beginning on or before the Closing Date and ending after the Closing Date or,
(ii) a taxable period beginning after the Closing Date, that is required to be
filed after the Closing Date for, by or with respect to Mallard or any
subsidiary of Mallard (other than the Tax Returns described in Section
8(b)(3)), Xxxxxx shall cause such Tax Return to be prepared and shall cause to
be included in such Tax Return all Tax Items required to be included therein.
Xxxxxx shall determine (by an interim closing of the books as of the Closing
Date except for ad valorem Taxes and franchise Taxes based on capital which
shall be prorated on a daily basis) the portion, if any, of the Tax due with
respect to the period covered by such Tax Return which is attributable to
Mallard or the respective subsidiary of Mallard for a Pre-Closing Taxable
Period. At least 30 days prior to the due date (including extensions) of such
Tax Return, Xxxxxx shall deliver to EVI a copy of such Tax Return and of its
determinations. If the amount of Tax so determined to be attributable to the
Pre-Closing Taxable Period exceeds the amount reflected as a current liability
for such Tax on the Closing Balance Sheet, EVI shall pay to Xxxxxx the amount
of such excess Tax not less than 5 days prior to the due date of such Tax
Return. Xxxxxx shall cause Mallard or the respective subsidiary of Mallard to
file timely such Tax Return with the appropriate taxing authority and to pay
timely the amount of Taxes shown to be due on such Tax Return.
(3) EVI shall cause to be included in the consolidated federal
income Tax Returns (and the state income Tax Returns of any state that permits
consolidated, combined or unitary income Tax Returns, if any) of any group of
corporations that includes EVI and Mallard or any subsidiary of Mallard (the
"EVI Group") for all periods ending on or before or which include the Closing
Date, all Tax Items of Mallard and the subsidiaries of Mallard which are
required to be included therein, shall file timely all such Tax Returns with
the appropriate taxing authorities and shall pay timely all Taxes due with
respect to the periods covered by such Tax Returns.
(4) Any Tax Return to be prepared pursuant to the provisions of
this Section 8 shall be prepared in a manner consistent with practices followed
in prior years with respect to similar Tax Returns, except for changes required
by changes in law.
(c) ACCESS TO INFORMATION. (1) EVI and each member of the EVI
Group shall grant to Xxxxxx (or its designees) access at all reasonable times
to all of the information, books and records relating to Mallard and the
subsidiaries within the possession of EVI or any member of the EVI Group
(including workpapers and correspondence with taxing authorities), and shall
afford Xxxxxx (or its designees) the right (at Xxxxxx'x expense) to take
extracts therefrom and to make copies thereof, to the extent reasonably
necessary to permit Xxxxxx (or its designees) to prepare Tax Returns, to
conduct negotiations with Tax authorities, and to implement the provisions of,
or to investigate or defend any claims between the parties arising under, this
Agreement.
(2) Xxxxxx shall grant or cause Mallard and its subsidiaries to
grant to EVI (or its designees) access at all reasonable times to all of the
information, books and records relating to Mallard and its subsidiaries within
the possession of Xxxxxx, Xxxxxxx or the subsidiaries of Mallard (including
workpapers and correspondence with taxing authorities), and shall afford EVI
(or its designees) the right (at EVI's expense) to take extracts therefrom and
to make copies thereof, to
-30-
31
the extent reasonably necessary to permit EVI (or its designees) to prepare Tax
Returns, to conduct negotiations with Tax authorities, and to implement the
provisions of, or to investigate or defend any claims between the parties
arising under, this Agreement.
(3) Each of the parties hereto will preserve and retain all
schedules, workpapers and other documents relating to any Tax Returns of or
with respect to Mallard or any subsidiary of Mallard or to any claims, audits
or other proceedings affecting Mallard or any subsidiary of Mallard until the
expiration of the statute of limitations (including extensions) applicable to
the taxable period to which such documents relate or until the final
determination of any controversy with respect to such taxable period, and until
the final determination of any payments that may be required with respect to
such taxable period under this Agreement.
(d) INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF XXXXXX. EVI
hereby agrees to defend, indemnify and hold harmless Xxxxxx, Mallard and the
subsidiaries of Mallard from and against, and agrees to pay, all Taxes imposed
and all costs and expenses (including, without limitation, litigation costs and
reasonable attorneys' and accountants' fees and disbursements) incurred (all
herein referred to as "Tax Losses") as a result of:
(1) a claim, notice of deficiency, or assessment by, or any
obligation owing to, any taxing authority for:
(A) any Taxes of Mallard or any subsidiary of Mallard
attributable to any Pre-Closing Taxable Period in excess of Taxes
reflected as current liabilities on the Closing Balance Sheet;
(B) any Taxes of any corporation (other than Mallard and
any subsidiaries of Mallard) that is or was a member of a Seller
Affiliated Group prior to Closing; and
(C) any Taxes resulting from the Section 338(h)(10)
elections;
(D) any Taxes of EVI, Mallard or their subsidiaries
attributable to the transactions contemplated by this Agreement; and
(2) any breach of any representation, warranty or obligation of
EVI under Section 2(o) or Section 8 of this Agreement.
(e) INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF EVI. Xxxxxx
agrees to defend, indemnify and hold harmless EVI from and against, and agrees
to pay, all Tax Losses incurred as a result of:
(1) a claim, notice of deficiency, or assessment by, or
any obligation owing to, any taxing authority for any Taxes of Mallard
or any subsidiary of Mallard attributable to any Post-Closing Taxable
Period; and
-31-
32
(2) any breach of any representation, warranty or
obligation of Xxxxxx under Section 8 of this Agreement.
(f) INDEMNIFICATION PROCEDURES. (1) If a claim shall be made by
any taxing authority that, if successful, would result in the indemnification
of a party under this Agreement (referred to herein as the "Tax Indemnified
Party"), the Tax Indemnified Party shall promptly notify the party obligated
under this Agreement to so indemnify (referred to herein as the "Tax
Indemnifying Party") in writing; provided, however, that no delay on the part
of the Tax Indemnified Party in notifying the Tax Indemnifying Party shall
relieve the Tax Indemnifying Party from any obligation hereunder unless (and
then solely to the extent ) the Tax Indemnifying Party is prejudiced thereby.
(2) The Tax Indemnified Party shall take such action in connection
with contesting such claim as the Tax Indemnifying Party shall reasonably
request in writing from time to time, including the selection of counsel and
experts and the execution of powers of attorney, provided that (A) within 30
days after the notice described in Section 8(f)(1) has been delivered (or such
earlier date that any payment of Taxes is due by the Tax Indemnified Party but
in no event sooner than 5 days after the Tax Indemnifying Party's receipt of
such notice), the Tax Indemnifying Party requests that such claim be contested,
(B) the Tax Indemnifying Party shall have agreed to pay to the Tax Indemnified
Party all costs and expenses that the Tax Indemnified Party incurs in
connection with contesting such claim, including, without limitation,
reasonable attorneys' and accountants' fees and disbursements, and (C) if the
Tax Indemnified Party is requested by the Tax Indemnifying Party to pay the Tax
claimed and xxx for a refund, the Tax Indemnifying Party shall have advanced to
the Tax Indemnified Party, on an interest-free basis, the amount of such claim.
The Tax Indemnified Party shall not make any payment of such claim for at least
30 days (or such shorter period as may be required by applicable law) after the
giving of the notice required by Section 8(f)(1), shall give to the Tax
Indemnifying Party any information reasonably requested relating to such claim,
and otherwise shall cooperate with the Tax Indemnifying Party in good faith in
order to contest effectively any such claim.
(3) Subject to the provisions of Section 8(f)(2), the Tax
Indemnified Party shall enter into a settlement of such contest with the
applicable taxing authority or prosecute such contest to a determination in a
court or other tribunal of initial or appellate jurisdiction, all as the Tax
Indemnifying Party may request.
(4) If, after actual receipt by the Tax Indemnified Party of an
amount advanced by the Tax Indemnifying Party pursuant to Section 8(f)(2)(C),
the extent of the liability of the Tax Indemnified Party with respect to the
claim shall be established by the final judgment or decree of a court or other
tribunal or a final and binding settlement with an administrative agency having
jurisdiction thereof, the Tax Indemnified Party shall promptly repay to the Tax
Indemnifying Party the amount advanced to the extent of any refund received by
the Tax Indemnified Party with respect to the claim together with any interest
received thereon from the applicable taxing authority and any recovery of legal
fees from such taxing authority, net of any Taxes as are required to be paid by
the Tax Indemnified Party with respect to such refund, interest or legal fees
(calculated at the maximum applicable statutory rate of Tax without regard to
any other Tax Items). Notwithstanding the foregoing, the Tax Indemnified Party
shall not be required to make any
-32-
33
payment hereunder before such time as the Tax Indemnifying Party shall have
made all payments or indemnities then due with respect to the Tax Indemnified
Party pursuant to this Agreement.
(5) Promptly after a final determination the Tax Indemnifying
Party shall pay to the Tax Indemnified Party the amount of any Tax Losses to
which the Tax Indemnified Party may become entitled by reason of the provisions
of this Section 8.
(g) REFUNDS. (1) Any refund (whether by payment, credit, offset
or otherwise) of Taxes described in or covered by Section 8(d) (inclusive of
any interest thereon), regardless of whether such Taxes were paid before, on or
after the Closing Date, shall be the property of EVI and shall be retained by
EVI (or, if applicable, paid or caused to be paid by Xxxxxx to EVI, within 15
calendar days after receipt, if any such refund (or interest thereon) is
received by Xxxxxx, Xxxxxxx or any of the subsidiaries of Mallard, whether by
payment, credit, offset or otherwise). If there is an adjustment to any such
refund (or interest thereon), any payment or payments theretofore made between
the parties hereto with respect to such refund (or interest thereon) pursuant
to this Section 8(g)(1) shall be appropriately adjusted by means of a payment
from EVI to Xxxxxx or Xxxxxx to EVI, as the case may be, within 15 calendar
days after such adjustment.
(2) Any refund (whether by payment, credit, offset or otherwise)
of Taxes described in or covered by Section 8(e) (inclusive of any interest
thereon), regardless of whether such Taxes were paid before, on or after the
Closing Date, shall be the property of Xxxxxx and shall be retained by Xxxxxx
(or, if applicable, promptly paid or caused to be paid by EVI to Xxxxxx, within
15 calendar days after receipt, if any such refund (or interest thereon) is
received by EVI whether by payment, credit, offset or otherwise). If there is
an adjustment to any such refund (or interest thereon), any payment or payments
theretofore made between the parties hereto with respect to such refund (or
interest thereon) pursuant to this Section 8(g)(2) shall be appropriately
adjusted by means of a payment from EVI to Xxxxxx or Xxxxxx to EVI, as the case
may be, within 15 calendar days after such adjustment.
(h) NATURE OF PAYMENTS. Any payment from Xxxxxx to EVI pursuant
to this Section 8 shall be treated for Tax purposes as an increase in the
purchase price and any payment from EVI to Xxxxxx pursuant to this Section 8
shall be treated for Tax purposes as a reduction in the purchase price.
9. TERMINATION.
(a) TERMINATION OF AGREEMENT. The Parties may terminate this
Agreement as provided below:
(1) Xxxxxx and EVI may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(2) EVI may terminate this Agreement at any time after
January 31, 1997 if (A) Xxxxxx has not satisfied the condition
precedent set forth in Section 6(a)(11), and (B) each
-33-
34
other condition precedent set forth in Sections 6(a) (other than
certificates or opinions to be delivered at Closing) shall have been
satisfied.
(3) Xxxxxx may terminate this Agreement upon a material
breach of any representation, warranty, covenant or agreement on the
part of EVI set forth in this Agreement, or if any representation or
warranty of EVI shall have become untrue, in either case such that the
conditions set forth in Sections 6(a)(1) or Section 6(a)(2) herein, as
the case may be, would be incapable of being satisfied by February 28,
1997; provided, that in any case, a willful breach shall be deemed to
cause such conditions to be incapable of being satisfied for purposes
of this Section 9(a)(3).
(4) EVI may terminate this Agreement, upon a material
breach of any representation, warranty, covenant or agreement on the
part of Xxxxxx set forth in this Agreement, or if any representation
or warranty of Xxxxxx shall have become untrue, in either case such
that the conditions set forth in Section 6(b)(1) or Section 6(b)(2)
herein, as the case may be, would be incapable of being satisfied by
February 28, 1997; provided, that in any case, a willful breach shall
be deemed to cause such conditions to be incapable of being satisfied
for purposes of this Section 9(a)(4).
(5) Xxxxxx or EVI may terminate this Agreement, if there
shall be any order which is final and nonappealable preventing the
consummation of the transactions contemplated hereby, except if the
party relying on such order to terminate this Agreement has not
complied with its obligations under Section 4(b) herein.
(6) Xxxxxx or EVI may terminate this Agreement, if the
Closing shall not have been consummated before February 28, 1997.
(b) EFFECT OF TERMINATION. Except as provided in Section 9(c), if
any Party terminates this Agreement pursuant to Section 9(a), all rights and
obligations of the Parties hereunder shall terminate without any liability of
either Party to the other Party, except that nothing herein shall relieve any
party from liability for any breach of this Agreement and any termination shall
not be deemed to be a waiver of any applicable remedy for such breach.
(c) TERMINATION FOR FAILURE TO OBTAIN FINANCING. If EVI
terminates this Agreement in accordance with its rights under Section 9(a)(2),
Xxxxxx will pay EVI an amount equal to $6,250,000 in cash, by wire transfer,
within five Business Days of such termination.
10. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue
any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written
approval of Xxxxxx and EVI; provided, however, that either Party may make any
public disclosure it believes in good faith is required by applicable law or
any listing or trading agreement concerning its publicly traded securities (in
which case the disclosing Party will use all reasonable efforts to advise the
other Party prior to making the disclosure).
-34-
35
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations between the
Parties, written or oral, to the extent they related in any way to the subject
matter hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
heirs, successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder without the
prior written approval of the other Parties hereto; provided, however, that
Xxxxxx may assign its rights hereunder to any of its affiliates, but such
assignment shall not relieve Xxxxxx of any of its obligations hereunder.
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be sent by (i) personal delivery
(including courier service), (ii) telecopier during normal business hours to
the number indicated (followed promptly by mail), or (iii) registered or
certified mail, return receipt requested, postage prepaid, and addressed to the
intended recipient as set forth below (any communication shall be deemed given
upon receipt):
IF TO EVI:
Energy Ventures, Inc.
0 Xxxx Xxx Xxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Duroc-Xxxxxx
Telecopier No.: (000) 000-0000
WITH A COPY TO:
Fulbright & Xxxxxxxx L.L.P.
0000 XxXxxxxx Xx., Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxx
Telecopier No.: (000) 000-0000
-35-
36
IF TO XXXXXX:
Xxxxxx Drilling Company
Eight Xxxx Xxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx Xx.
Telecopier No.: (000) 000-0000
WITH A COPY TO:
Xxxxxx & Xxxxxx L.L.P.
0000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: T. Xxxx Xxxxx or Xxxxx X. Xxxxxxxxxxxx
Telecopier: (000) 000-0000
Any Party may change its telecopier number or its address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(g) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Texas without giving
effect to any choice or conflict of Law provision or rule (whether of the State
of Texas or any other jurisdiction) that would cause the application of the
Laws of any jurisdiction other than the State of Texas.
(h) AMENDMENTS AND WAIVERS. No amendments of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
each Party hereto. No waiver by either Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(i) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(j) EXPENSES. Except as otherwise provided in Section 9, each of
the Parties will bear its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
(k) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties, and no presumption or burden of proof
shall arise favoring or disfavoring either Party by virtue of the authorship of
any of the
-36-
37
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(l) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(m) SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement shall be specifically enforceable and the parties hereto hereby waive
any defense to such a proceeding in equity that monetary damages are
sufficient.
-37-
38
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
XXXXXX DRILLING COMPANY
By: /s/ XXXXXX X. XXXXXX
---------------------------------------
Name: Xxxxxx X. Xxxxxx
-------------------------------------
Title: Chairman
------------------------------------
ENERGY VENTURES, INC.
By: /s/ XXXXXXX X. DUROC-XXXXXX
---------------------------------------
Name: Xxxxxxx X. Duroc-Xxxxxx
-------------------------------------
Title: Chief Executive Officer
------------------------------------
-38-
39
As permitted by Item 601(b)(2) of Regulation S-K, the Company has not
filed any schedules or exhibits with this Exhibit No. 2.1. Listed below is a
brief description of the omitted exhibits and schedules. The Company agrees to
furnish supplementally a copy of any of such omitted exhibits and schedules to
the Commission upon request.
Schedules
2(a) Organization and Good Standings
2(b) Governmental Approvals Needed
2(c) List of Directors and Officers of Mallard and its subsidiaries
2(d) List of Mallard's Subsidiaries
2(e) Unaudited Consolidated Financial Statements of Mallard
2(f) Subsequent Events of Mallard
2(g) Legal Compliance
2(h) Title to Properties
2(j) Tangible Assets of Mallard
2(k) Mallard's Contracts
2(l) Insurance of Mallard
2(m) Litigation involving Mallard
2(n) Employee Benefit Matters
2(o) Tax Matters
2(q) Real Property owned by Mallard
2(r) Leases of Mallard
2(s) Environmental Matters
2(t) Receivables of Mallard
4(i) Contributed Assets to Mallard
4(l) Rig Upgrades
6(b) Releases of Guarantees and Obligations
7(b) Indemnification of Xxxxxx
Exhibits
A Definitions
B Form of Certificate of Designation of Series D Convertible Preferred
Stock
C Schedules
D Form of Registration Rights Agreement
E Form of Opinion of Fulbright & Xxxxxxxx L.L.P.
F Form of Opinion of Xxxxxx & Xxxxxx, L.L.P.
