Asset Purchase Agreement
among
Key Four Corners, Inc.
Four Corners Drilling Company
and
X. X. Xxxxx and W. E. Lang
February ___, 1998
Asset Purchase Agreement
This Asset Purchase Agreement (this "Agreement") is entered into as of February
__, 1998 among Key Four Corners, Inc., a Delaware corporation ("Buyer"), Four
Corners Drilling Company, a New Mexico corporation ("Seller"), and X. X. Xxxxx
and W. E. Lang (collectively, the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Seller desires to sell substantially all of its assets, and Buyer
desires to acquire such assets.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements, and subject to the terms
and conditions herein contained, the parties hereto hereby agree as follows:
ARTICLE 1
Purchase and Sale of Assets
1.1 Purchase and Sale of the Assets. Subject to the terms and conditions set
forth in this Agreement, the Seller hereby agrees to sell, convey, transfer,
assign and deliver to Buyer (effective as of 12:01 A.M. New Mexico time on the
date of execution hereof) all of the assets owned by Seller existing on the date
of Closing other than the Excluded Assets (defined below), whether real,
personal, tangible or intangible, including, without limitation, the following
assets owned by Seller relating to or used or useful in the operation of the
business as conducted by the Seller on and before the date hereof (the
"Business") (all such assets being sold hereunder are referred to collectively
herein as the "Assets"):
(a) all tangible personal property owned by Seller (such as machinery,
equipment, leasehold improvements, furniture and fixtures, and vehicles),
including, without limitation, that which is more fully described on
Schedule 1.1(a) hereto (collectively, the "Tangible Personal Property");
(b) all of the inventory owned by Seller, including without limitation, that
which is more fully described on Schedule 1.1(b) hereto (collectively, the
"Inventories");
(c) all of the Seller's intangible assets (the "Intangibles"), including
without limitation, (i) all of the Seller's rights to the name under which
it is incorporated or under which it currently does business, (ii) all of
the Seller's rights to any patents, patent applications, trademarks and
service marks (including registrations and applications therefor), trade
names, and copyrights and written know-how, trade secrets, licenses and
sublicenses and all other similar proprietary data and the goodwill
associated therewith (collectively, the "Intellectual Property") used or
held in connection with the Business, including without limitation, that
which is more fully described on Schedule 1.1(c) hereto (the "Seller
Intellectual Property"), (iii) the Seller's telephone numbers, (iv) the
sales and promotional literature, computer software, customer and supplier
lists, drilling reports, historical bit records and tour sheets and all
other records of the Seller relating to the Assets or the Business
("Retained Records"), excluding the corporate minute books, accounting
records, files, tax returns and other financial data on whatever media,
relating to the Seller or the Shareholders or the Excluded Assets. Buyer
shall allow Seller reasonable access to the Retained Records for any
reasonable purpose. Buyer agrees to retain the Retained Records for a
period of five (5) years from the date of Closing;
(d) those leases, subleases, contracts, contract rights, and agreements
relating to the Assets or the operation of the Business specifically listed
on Schedule 1.1(d) hereto (collectively, the "Contracts");
(e) all of the permits, authorizations, certificates, approvals, registrations,
variances, waivers, exemptions, rights-of-way, franchises, ordinances,
orders, licenses and other rights of every kind and character
(collectively, the "Permits") relating principally to all or any of the
Assets or to the operation of the Business, including, but not limited to,
those that are more fully described on Schedule 1.1(e) hereto
(collectively, the "Seller Permits");
(f) the goodwill and going concern value of the Business;
(g) the buildings and other improvements located on the real estate described
in Schedule 3.5 hereto; and
(h) all other or additional privileges, rights, interests, properties and
assets of the Seller of every kind and description and wherever located
that are used in the Business or intended for use in the Business in
connection with, or that are necessary for the continued conduct of, the
Business.
The Assets shall not include the following (collectively, the "Excluded
Assets"): (i) the real property described in Schedule 1.1 hereto owned by the
Seller and not being conveyed to Buyer concurrently herewith, (ii) all of the
Seller's accounts receivable and all other rights of the Seller to payment for
services rendered by the Seller before Closing, it being understood that all of
Seller's customers shall be billed on the date of Closing for services or
materials provided through that date and that Buyer will forward any payment on
such accounts received by it to Seller within one (1) business day of receipt;
(iii) all cash accounts of the Seller and all xxxxx cash of the Seller kept on
hand for use in the Business; (iv) all other receivables and prepaid expenses,
including all right, title and interest of the Seller in and to all prepaid
rentals, other prepaid expenses, bonds, deposits and financial assurance
requirements, and other current assets relating to any of the Assets or the
Business; (v) all assets in possession of the Seller but owned by third parties
or Shareholders; (vi) the corporate charter, related organizational documents
and minute books of the Seller, financial books and records and tax returns;
(vii) the cash consideration paid or payable by Buyer to Seller pursuant to
Section 1.2 hereof; and (viii) the net deferred tax assets of Seller
representing tax benefits available from operating loss carry forwards, pension
plan assets of Seller representing excess contributions to the defined benefit
pension plan, all buildings owned by Seller or Shareholders (other than those
buildings referred to in Section 1.1(g) hereof), and any other assets described
in Schedule 1.1 attached hereto as Excluded Assets.
1.2 Consideration for Assets. As consideration for the sale of the Assets to
Buyer and for the other covenants and agreements of the Seller and the
Shareholders contained herein, Buyer agrees to pay to the Seller, on the date
hereof, the amount of $9,106,380.00 by wire transfer of immediately available
funds to an account designated by the Seller or by delivery of immediately
available funds. Equipment purchases which have been made by Seller after
December 12, 1997, and approved by Buyer as of the date of this Agreement are
set forth in the attached Schedule 1.2 hereto, and shall be paid at Closing, or
within forty-eight (48) hours of Closing. In addition, within thirty (30) days
following the Closing, Buyer will pay Seller any additional amounts due for such
approved purchases of equipment.
1.3 Liabilities. Effective on the date of Closing, Buyer shall assume those, and
only those, liabilities and obligations of the Seller to perform the Contracts
to the extent that the Contracts have not been performed and are not in default
on the date hereof (the "Assumed Liabilities"). On and after the date hereof,
the Seller shall be responsible for any and all other liabilities and
obligations of the Seller other than the Assumed Liabilities, including, without
limitation, (a) any obligations arising from the Seller's employment of those
employees of the Seller listed on Schedule 3.2 hereto; (b) any liability arising
from or relating to Seller's failure to be duly qualified or licensed to do
business and in good standing as a foreign corporation authorized to do business
in all jurisdictions in which the character of the properties owned or the
nature of the business conducted by it would make such qualification or
licensing necessary; (c) any failure to pay any taxes owed by Seller which are
applicable to the period ending with the date hereof; and (d) any liabilities
arising out of any matters listed on Schedule 2.1.12 hereto (collectively, the
"Retained Liabilities").
1.4 Closing. The Closing of the purchase and sale provided for hereunder shall
take place on February ___, 1998, at the offices of Four Corners Drilling
Company, 0000 Xxxxxxx 00, Xxxxxxxxxx, Xxx Xxxxxx.
ARTICLE II
Representations and Warranties
2.1 Representations and Warranties.
2.1.1 Organization and Good Standing. The Seller and Shareholders represent and
warrant that Seller is a corporation duly organized, validly existing and in
good standing under the laws of the state of New Mexico, has full requisite
corporate power and authority to carry on its business as it is currently
conducted, and to own and operate the properties currently owned and operated by
it.
2.1.2 Agreements Authorized and their Effect on Other Obligations. The Seller
and Shareholders represent and warrant (a) that the execution and delivery of
this Agreement have been authorized by all necessary corporate, shareholder and
other action on the part of the Seller and each of the Shareholders, and (b)
this Agreement is the valid and binding obligation of the Seller and each of the
Shareholders enforceable (subject to normal equitable principals) against each
of such parties in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, debtor relief or similar laws
affecting the rights of creditors generally. Seller and Shareholders represent
and warrant that the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby, will not conflict with
or result in a violation or breach of any term or provision of, nor constitute a
default under (i) the charter or bylaws (or other organizational documents) of
the Seller, (ii) any obligation, indenture, mortgage, deed of trust, lease,
contract or other agreement to which the Seller or any of the Shareholders is a
party or by which the Seller or any of the Shareholders or their respective
properties are bound; or (iii) to the best of their knowledge, any provision of
any law, rule, regulation, order, permits, certificate, writ, judgment,
injunction, decree, determination, award or other decision of any court,
arbitrator or other governmental authority to which the Seller or any of the
Shareholders or any of their respective properties are subject.
2.1.3 Contracts. The Seller and Shareholders represent and warrant that Schedule
1.1(d) hereto sets forth a complete list of all contracts, including leases
under which the Seller is lessor or lessee, which relate to the Assets and are
to be performed in whole or in part after the date hereof. Seller and
Shareholders represent and warrant that: (a) all of the Contracts are in full
force and effect, and constitute valid and binding obligations of the Seller,
(b) the Seller is not, and no other party to any of the Contracts is, in default
thereunder, and no event has occurred which (with or without notice, lapse of
time, or the happening of any other event) would constitute a default
thereunder, (c) no Contract has been entered into on terms which could
reasonably be expected to have an adverse effect on the use of the Assets by
Buyer, (d) neither the Seller nor any of the Shareholders has received any
information which would cause any of such parties to conclude that any customer
of the Seller will (or is likely to) cease doing business with Buyer (or its
successors) as a result of the consummation of the transactions contemplated
hereby.
2.1.4 Title to Assets. The Seller and Shareholders represent and warrant that
the Seller has good, indefeasible and marketable title to all of the Assets,
free and clear of any Encumbrances (defined below), except as set forth on
Schedule 2.1.4 hereto. Except as noted on Schedule 2.1.4 hereto (but
specifically excluding those Assets listed under the heading "Stacked" on
Schedule 2.1.4 hereto), the Seller and Shareholders represent and warrant that
all of the Assets (a) are in a state of good repair, ordinary wear and tear
excepted, (b) free from any known defects except as may be repaired by routine
maintenance and such minor defects as do not substantially interfere with the
continued use thereof in the conduct of normal operations and (c) conform to all
applicable laws governing their use. As to those Assets listed under the heading
"Stacked on Schedule 2.1.4 hereto, the Seller and Shareholders represent and
warrant that such Schedule includes a listing of all known defects thereto. The
Seller and Shareholders represent that no notice of any violation of any law,
statute, ordinance, or regulation relating to any of the Assets has been
received by the Seller or any of the Shareholders, except such as have been
fully complied with. The term "Encumbrances" means all liens, security
interests, pledges, mortgages, deeds of trust, claims, rights of first refusal,
options, charges, restrictions or conditions to transfer or assignment,
liabilities, obligations, privileges, equities, easements, rights of way,
limitations, reservations, restrictions, and other encumbrances of any kind or
nature.
2.1.5 Licenses and Permits. The Seller and Shareholders represent and warrant
that, to the best of their knowledge: (a) Schedule 1.1(e) hereto sets forth a
complete list of all Permits necessary under law or otherwise for the operation,
maintenance and use of the Assets in the manner in which they are now being
operated, maintained and used; (b) each of the Seller Permits and the Seller's
rights with respect thereto is valid and subsisting, in full force and effect,
and enforceable by the Seller subject to administrative powers of regulatory
agencies having jurisdiction; (c) the Seller is in compliance in all material
respects with the terms of each of the Seller Permits; (d) none of the Seller
Permits have been, or to the knowledge of the Seller or either of the
Shareholders, are threatened to be, revoked, canceled, suspended or modified.
2.1.6 Intellectual Property. The Seller and Shareholders represent and warrant
that: (a) Schedule 1.1(c) hereto sets forth a complete list of all Intellectual
Property material or necessary for the continued use of the Assets; (b) the
Seller Intellectual Property is owned or licensed by the Seller free and clear
of any Encumbrances; (c) the Seller has not granted to any other person any
license to use any Seller Intellectual Property and, (d) to the best of Seller's
knowledge, use of the Seller Intellectual Property will not, and the conduct of
the Business did not, infringe, misappropriate or conflict with the Intellectual
Property rights of others. The Seller and Shareholders represent and warrant
that neither the Seller nor the Shareholders has received any notice of
infringement, misappropriation, or conflict with the Intellectual Property
rights of others in connection with the use by Seller of the Seller Intellectual
Property.
2.1.7 Financial Statements. The Seller and the Shareholders represent and
warrant that the Seller has delivered to Buyer copies of Seller's unaudited
Statement of Income for the four (4) month period ended October 31, 1997, a copy
of which is attached hereto as Schedule 2.1.7 (the "Seller's Statement of
Income"). The Seller and the Shareholders represent and warrant that (a) the
Seller's Statement of Income is true, correct and complete in all material
respects and presents fairly and fully the income and expenses of the Seller as
at the dates and for the periods indicated thereon, and has been prepared in
accordance with generally accepted accounting principles as promulgated by the
American Institute of Certified Public Accountants ("GAAP") applied on a
consistent basis, except as noted therein; and (b) the Seller's Statement of
Income includes all adjustments which are necessary for a fair presentation of
the applicable Seller's income and expenses for the periods indicated.
2.1.8 Absence of Certain Changes and Events. The Seller and the Shareholders
represent and warrant that since October 31, 1997, there has not been:
(g) Financial Change. Any adverse change in the Assets, the Business or the
financial condition, operations, liabilities or prospects of the Seller;
(h) Property Damage. Any damage, destruction, or loss to any of the Assets or
the Business (whether or not covered by insurance);
(i) Waiver. Any waiver or release of a material right of or claim held by the
Seller;
(j) Change in Assets. Any acquisition, disposition, transfer, encumbrance,
mortgage, pledge or other encumbrance of any asset of the Seller other than
in the ordinary course of business;
(k) Labor Disputes. Any labor disputes between the Seller and its employees; or
(l) Other Changes. Any other event or condition known to the Seller or the
Shareholders that particularly pertains to and has or might have an adverse
effect on the Assets, the operations of the Business or the financial
condition or prospects of the Seller.
2.1.9 Necessary Consents. The Seller and the Shareholders represent and warrant
that the Seller has obtained and delivered to Buyer all consents to assignment
or waivers thereof required to be obtained from any governmental authority or
from any other third party in order to validly transfer the Assets hereunder
other than (a) the Contracts listed on Schedule 1.1(d) and (b) the Permits
listed on Schedule 1.1(e) as being non-assignable.
2.1.10 Environmental Matters. The Seller and the Shareholders represent and
warrant that (a) none of the current or past operations of the Business or any
of the Assets is being or has been conducted or used in such a manner as to
constitute a violation of any Environmental Law (defined below); (b) neither the
Seller nor either of the Shareholders has received any notice (whether formal or
informal, written or oral) from any entity, governmental agency or individual
regarding any existing, pending or threatened investigation or inquiry related
to violations of any Environmental Law or regarding any claims for remedial
obligations or contribution for removal costs or damages under any Environmental
Law; (c) there are no writs, injunction decrees, orders or judgments
outstanding, or lawsuits, claims, proceedings or investigations pending or, to
the knowledge of the Seller or either of the Shareholders, threatened relating
to the ownership, use, maintenance or operation of the Assets or the conduct of
the Business, nor, to the knowledge of the Seller or either of the Shareholders,
is there any basis for any of the foregoing; (d) except for the Discharge Plan
which was approved by the State of New Mexico - Energy, Minerals and Natural
Resources Department, OCD on April 18, 1994, Buyer is not required to obtain any
permits, licenses or similar authorizations pursuant to any Environmental Law in
effect as of the date hereof to operate and use any of the Assets for their
current or proposed purposes and uses; (e) to the knowledge of the Seller or
either of the Shareholders, the Assets include all environmental and pollution
control equipment necessary for compliance with applicable Environmental Law;
(f) no Hazardous Materials (defined below) have been or are currently being used
by the Seller in the operation of the Assets; (g) no Hazardous Materials are or
have ever been situated on or under any of the Seller's properties, whether
owned or leased, or incorporated into any of the Assets; (h) to the knowledge of
the Seller or either of the Shareholders, there are no, and, except for the
three (3) underground storage tanks properly removed in 1990 and 1992 by Seller
(as shown by documentation furnished by Seller to Buyer) there have never been
any, underground storage tanks (as defined under Environmental Law) located
under any of the Seller's properties, whether owned or leased; and (i) there are
no environmental conditions or circumstances, including the presence or release
of any Hazardous Materials, on any property presently or previously owned or
leased by the Seller, or on any property on which Hazardous Materials generated
by the Seller's operations or the use of the Assets were disposed of, which
would result in an adverse change in the Business or business prospects of the
Seller. The term "Environmental Law" means any and all laws, rules, orders,
regulations, statutes, ordinances, codes, decrees, and other legally enforceable
requirements (including, without limitation, common law) of the United states,
or any state, regional, city, local, municipal or other governmental authority
or quasi-governmental authority, regulating, relating to, or imposing
environmental standards of conduct concerning protection of the environment or
human health, or employee health and safety as from time to time has been or is
now in effect. The term "Hazardous Materials" means (x) asbestos,
polychlorinated biphenyls, urea formaldehyde, lead based paint, radon gas,
petroleum, oil, solid waste, pollutants and contaminants, and (y) any chemicals,
materials, wastes or substances that are defined, regulated, determined or
identified as toxic or hazardous in any Environmental Law. Seller acknowledges
that the Environmental Report prepared for Seller has not been prepared by or
approved by Buyer Indemnified Parties (as defined in section 4.1 hereof).
2.1.11 No ERISA Plans or Labor Issues. The Seller and Shareholders represent and
warrant that: (a) no employee benefit plan of the Seller, whether or not subject
to any provisions of the Employee Retirement Income Security Act of 1974, as
amended, will by its terms or applicable law, become binding upon or an
obligation of Buyer; (b) the Seller has not engaged in any unfair labor
practices which could reasonably be expected to result in an adverse effect on
the Assets; (c) the Seller does not have any dispute with any of its existing or
former employees, and (d) there are no labor disputes or, to the knowledge of
the Seller or any of the Shareholders, any disputes threatened by current or
former employees of the Seller.
2.1.12 Investigations; Litigation. The Seller and Shareholders represent and
warrant that: (a) to the best of their knowledge, no investigation or review by
any governmental entity with respect to the Seller or any of the transactions
contemplated by this Agreement is pending or threatened, nor has any
governmental entity indicated to the Seller or any of the Shareholders an
intention to conduct the same; and (b) there is no suit, action, or legal,
administrative, arbitration or other proceeding or governmental investigation
pending to which the Seller or any of the Shareholders is a party or, to the
knowledge of the Seller or either of the Shareholders, might become a party or
which would adversely affect the Assets or the Buyer's future conduct of the
Business, except as set forth on the Schedule 2.1.12 hereto.
2.1.13 Absence of Certain Business Practices. The Seller and Shareholders
represent and warrant that, to the best of their knowledge, neither the Seller,
the Shareholders, nor any officer, employee or agent of the Seller, or any other
person acting on behalf of the Seller or either of the Shareholders, has,
directly or indirectly, within the past five years, given or agreed to give any
gift or similar benefit to any customer, supplier, government employee or other
person who is or may be in a position to help or hinder the profitable conduct
of the Business or the profitable use of the Assets (or to assist the Seller in
connection with any actual or proposed transaction) which if not given in the
past, might have had an adverse effect on the profitable conduct of the Business
or the profitable use of the Assets, or if not continued in the future, might
adversely affect the profitable conduct of the Business or the profitable use of
the Assets.
2.1.14 Solvency. The Seller and Shareholders represent and warrant that the
Seller is not presently insolvent, nor will the Seller be rendered insolvent by
the occurrence of the transactions contemplated by this Agreement. The term
"insolvent" with respect to the Seller, means that the sum of the present fair
and saleable value of the Seller's assets does not and will not exceed its debts
and other probable liabilities, and the term "debts" includes any legal
liability whether matured or unmatured, liquidated or unliquidated, absolute
fixed or contingent, disputed or undisputed or secured or unsecured.
2.1.15. Finder's Fee. The Seller and Shareholder represent and warrant that all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried on by the Seller, the Shareholders and their counsel directly
with Buyer and its counsel, without the intervention of any other person in such
manner as to give rise to any valid claim against any of the parties hereto for
a brokerage commission, finder's fee or any similar payment.
2.2 Representations and Warranties of Buyer. Buyer represents and warrants to
the Seller and each of the Shareholders as follows:
2.2.1 Organization and Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
has full requisite corporate power and authority to carry on its business as it
is currently conducted, and to own and operate the properties currently owned
and operated by it, and is duly qualified or licensed to do business and is in
good standing as a foreign corporation authorized to do business in all
jurisdictions in which the character of the properties owned or the nature of
the business conducted by it would make such qualification or licensing
necessary.
2.2.2 Agreement Authorized and its Effect on Other Obligations. The consummation
of the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of Buyer, and this Agreement is a
valid and binding obligation of Buyer enforceable (subject to normal equitable
principles) in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, debtor relief or similar laws
affecting the rights of creditors generally. The execution, delivery and
performance of this Agreement by Buyer will not conflict with or result in a
violation or breach of any term or provision of, or constitute a default under
(a) the Certificate of Incorporation or Bylaws of Buyer or (b) any obligation,
indenture, mortgage, deed of trust, lease, contract or other agreement to which
Buyer or any of its property is bound.
2.2.3 Consents and Approvals. No consent, approval or authorization of, or
filing of a registration with, any governmental or regulatory authority, or any
other person or entity is required to be made or obtained by Buyer in connection
with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
2.2.4 Finder's Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Buyer and its counsel
directly with the Seller and the Shareholders and their counsel, without the
intervention by any other person as the result of any act of Buyer in such a
manner as to give rise to any valid claim against any of the parties hereto for
any brokerage commission, finder's fee or any similar payments.
ARTICLE III
Additional Agreements
3.1 Noncompetition. Except as set forth below or as otherwise consented to or
approved in writing by Buyer, the Seller and each of the Shareholders agree that
for a period of 60 months following the date hereof, such party will not,
directly or indirectly, acting alone or as a member of a partnership or a holder
of, or investor in as much as 5% of any security of any class of any corporation
or other business entity (a) engage in any business in competition with the
business or businesses conducted by the Seller on or before the date hereof or
by Buyer (or Buyer=s affiliates) on or after the date hereof, or in any service
business the services of which were provided and marketed by the Seller on or
before the date hereof or by Buyer (or Buyer=s affiliates) on or after the date
hereof in any state of the United States, or any foreign country in which the
Seller transacted business on or before the date hereof or in which Buyer (or
Buyer=s affiliates) transact business on or after the date hereof; (b) request
any present customers or suppliers of the Seller or any customers of Buyer (or
Buyer=s affiliates) to curtail or cancel their business with Buyer (or Buyer=s
affiliates); (c) disclose to any person, firm or corporation any trade,
technical or technological secrets of Buyer (or Buyer=s affiliates) or of the
Seller or any details of their organization or business affairs or (d) induce or
actively attempt to influence any employee of Buyer (or Buyer=s affiliates) to
terminate his employment. The Seller and each of the Shareholders agree that if
either the length of time or geographical area as set forth in this Section 3.1
is deemed too restrictive in any court proceeding, the court may reduce such
restrictions to those which it deems reasonable under the circumstances. The
obligations expressed in this Section 3.1 are in addition to any other
obligations that the Seller and the Shareholders may have under the laws of any
state requiring a corporation selling its assets (or a shareholders of such
corporation) to limit its activities so that the goodwill and business relations
being transferred with such assets will not be materially impaired. The Seller
and each of the Shareholders further agree and acknowledge that Buyer does not
have any adequate remedy at law for the breach or threatened breach by the
Seller or either of the Shareholders of the covenants contained in this Section
3.1, and agree that Buyer may, in addition to the other remedies which may be
available to it hereunder, file a suit in equity to enjoin the Seller or either
of the Shareholders from such breach or threatened breach. If any provisions of
this Section 3.1 are held to be invalid or against public policy, the remaining
provisions shall not be affected thereby. The Seller and each of the
Shareholders acknowledge that the covenants set forth in this Section 3.1 are
being executed and delivered by such party in consideration of (i) the covenants
of Buyer contained in this Agreement, (ii) additional consideration in the
amount of $300,000 payable by Buyer on the date hereof by wire transfer of
immediately available funds to those parties, in those amounts and to those
accounts specified in Schedule 3.1 hereto and (iii) for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged.
Notwithstanding anything to the contrary stated in this paragraph 3.1, (i) the
conduct by the business entities listed in Schedule 3.1 hereto of the activities
set forth opposite such entities' names (the "Permitted Businesses") shall not
be a violation of clause (a) of this Section 3.1 and (ii) the solicitation by
the business entities listed in Schedule 3.1 hereto of any present customer or
supplier of the Seller or any customers of Buyer (or Buyer's Affiliates) in
connection with the conduct of their Permitted Businesses, but only their
Permitted Businesses and not the businesses sold hereunder, shall not be a
violation of clause (b) of this paragraph 3.1. Seller and Shareholders shall be
permitted to engage in those businesses or activities set forth on Schedule 3.1
hereto and to solicit any customer of Seller or Buyer (or Buyer's affiliates) in
connection with such business or activities.
3.2 Hiring Employees. Schedule 3.2 hereto is a complete and accurate listing of
all employees of the Seller who devote their full time in the operation of the
Assets and the conduct of the Business (the "Employees"). Effective as of the
date of Closing, all of the Employees shall be offered employment by Buyer,
subject to such Employees meeting Buyer=s standard employment eligibility
requirements. Buyer shall have no liability or obligation with respect to any
employee benefits of any Employee except those benefits that accrue pursuant to
such Employees= employment with Buyer on or after the date hereof. The Seller
and each of the Shareholders shall cooperate with Buyer in connection with any
offer of employment from Buyer to the employees and use its best efforts to
cause the acceptance of any and all such offers.
3.3 Allocation of Purchase Price. The parties hereto agree to allocate the
purchase price paid by Buyer for the Assets hereunder as set forth on Schedule
3.3 hereto, and shall report this transaction for federal income tax purposes in
accordance with the allocation so agreed upon. The parties hereto for themselves
and for their respective successors and assigns covenant and agree that they
will file coordinating Form 8594's in accordance with Section 1060 of the
Internal Revenue Code of 1986, as amended, with their respective income tax
returns for the taxable year that includes the date hereof.
3.4 Name Change. The Seller and each of the Shareholders shall, within ten (10)
days from the date of Closing, cause to be filed (i) with the New Mexico
Corporation Commission an amendment to the Articles of Incorporation of the
Seller changing the name of the Seller from its current name to a name that is
not similar to such name, and (ii) with the appropriate authorities of New
Mexico and any other states such documents as are required to effect such name
change, including without limitation, amendments or withdrawals of certificates
of authority to do business and assumed name filings. The Seller and each of the
Shareholders shall, within five (5) days from the date of its receipt of
confirmation of such filings from the applicable state authorities, cause to be
delivered to Buyer copies of all such confirmations.
3.5 Real Estate Purchase. Concurrent with the execution and delivery hereof,
Blue Horizons Partnership and W.E.L., a New Mexico general partnership and Buyer
shall have entered into (and consummated the transactions contemplated by) a
binding agreement pursuant to which such partnerships will have conveyed to
Buyer the real property described in Schedule 3.5 hereto. The consummation of
the transactions contemplated by this Agreement are expressly conditioned upon
the consummation of the purchase and sale of the real estate pursuant to the
agreement contemplated by this Section 3.5.
3.6 Lease Agreement and Option Agreement. Concurrent with the execution and
delivery hereof, Andes, Lang & Andes, a New Mexico partnership, shall have
entered into a binding lease agreement pursuant to which such partnerships will
have leased to Buyer the real property and improvements described in Schedule
3.6 hereto and Blue Horizons Partnership and W.E.L., a New Mexico general
partnership, shall have agreed by supplemental letter to enter in the future,
after the property to be subject to the proposed option agreement is subdivided,
into a binding option agreement pursuant to which such partnerships shall grant
Buyer the option to purchase up to an additional twenty-nine (29) acres, more or
less, of land from such partnerships pursuant to terms and conditions therein
set forth. The consummation of the transactions contemplated by this Agreement
are expressly conditioned upon the execution of the lease agreement and
execution of the supplemental letter relating to above.
3.7 Further Assurances. From time to time, as and when requested by any party
hereto, any other party hereto shall execute and deliver, or cause to be
executed and delivered, such documents and instruments and shall take, or cause
to be taken, such further or other actions as may be reasonably necessary to
effect the transactions contemplated hereby.
ARTICLE IV
Indemnification
4.1 Indemnification by the Seller and the Shareholders. In addition to any other
remedies available to Buyer under this Agreement, or at law or in equity, the
Seller and each of the Shareholders shall, jointly and severally, indemnify,
defend and hold harmless Buyer and its officers, directors, employees, agents
and stockholders (the "Buyer Indemnified Parties"), against and with respect to
any and all claims, costs, damages, losses, expenses, obligations, liabilities,
recoveries, suits, causes of action and deficiencies, including interest,
penalties and reasonable attorneys= fees and expenses (collectively, the
"Damages") that such indemnitee shall incur or suffer, which arise, result from
or relate to (a) any material breach of, or failure by the Seller or any of the
Shareholders to perform, their respective representations, warranties, covenants
or agreements in this Agreement or in any schedule, certificate, exhibit or
other instrument furnished or delivered to Buyer by the Seller or any of the
Shareholders under this Agreement; and (b) the Retained Liabilities. Except for
Section 2.1.7, for purposes of this Agreement, a breach or failure of
performance shall not be material under this Agreement unless it has a financial
consequence of $10,000.00 or more to the non-breaching party; provided, however,
such threshold shall not apply to damages resulting to Buyer from the Retained
Liabilities.
4.2 Indemnification by Buyer. In addition to any other remedies available to the
Shareholders under this Agreement, or at law or in equity, Buyer shall
indemnify, defend and hold harmless the Seller and its officers, directors,
employees, agents and stockholders and each of the Shareholders against and with
respect to any and all Damages that such indemnitees shall incur or suffer,
which arise, result from or relate to (a) any material breach of, or failure by
Buyer to perform, any of its representations, warranties, covenants or
agreements in this Agreement or in any schedule, certificate, exhibit or other
instrument furnished or delivered to the Seller or any of the Shareholders by or
on behalf of Buyer under this Agreement and (b) the Assumed Liabilities. Except
for Section 2.1.7, for purposes of this Agreement, a breach or failure of
performance shall not be material under this Agreement unless it has a financial
consequence of greater than $10,000.00 or more to the non-breaching party.
4.3 Indemnification Procedure. If any party hereto discovers or otherwise
becomes aware of an indemnification claim arising under Section 4.1 or 4.2 of
this Agreement, such indemnified party shall give written notice to the
indemnifying party, specifying such claim, and may thereafter exercise any
remedies available to such party under this Agreement; provided, however, that
the failure of an indemnified party to give notice as provided herein shall not
relieve the indemnifying party of any obligation hereunder to the extent the
indemnifying party is not materially prejudiced thereby. Further, promptly after
receipt by an indemnified party hereunder of written notice of the commencement
of any action or proceeding with respect to which a claim for indemnification
may be made pursuant to this Article IV, such indemnified party shall, if a
claim in respect thereof is to be made against any indemnifying party, give
written notice to the latter of the commencement of such action; provided,
however, that the failure of an indemnified party to give notice as provided
herein shall not relieve the indemnifying party of any obligation hereunder to
the extent the indemnifying party is not materially prejudiced thereby. In case
any such action is brought against an indemnified party, the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified, to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
such notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof unless the
indemnifying party has failed to assume the defense of such claim and to employ
counsel reasonably satisfactory to such indemnified person. An indemnifying
party who elects not to assume the defense of a claim shall not be liable for
the fees and expenses of more than one counsel in any single jurisdiction for
all parties indemnified by such indemnifying party with respect to such claim or
with respect to claims separate but similar or related in the same jurisdiction
arising out of the same general allegations. Notwithstanding any of the
foregoing to the contrary, the indemnified party will be entitled to select its
own counsel and assume the defense of any action brought against it if the
indemnifying party fails to select counsel reasonably satisfactory to the
indemnified party, the expenses of such defense to be paid by the indemnifying
party. No indemnifying party shall consent to entry of any judgment or enter
into any settlement with respect to a claim without the consent of the
indemnified party, which consent shall not be unreasonably withheld, or unless
such judgment or settlement includes as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability with respect to such claim. No indemnified party shall consent to
entry of any judgment or enter into any settlement of any such action, the
defense of which has been assumed by an indemnifying party, without the consent
of such indemnifying party, which consent shall not be unreasonably withheld or
delayed.
4.4 Limitation of Indemnity. To the extent, if at all, ' 56-7-1 XXXX 0000 would
apply to render any of the indemnification provisions herein void and
unenforceable, each such provision shall not extend to liability, claims,
damages, losses or expenses, including attorney fees, relating to the
construction, installation, alteration, modification, repair, maintenance,
servicing, demolition, excavation, drilling, reworking, grading, paving,
clearing, site preparation or development of any real property or of any
improvement on, above or under real property arising out of (i) the preparation
or approval of maps, drawings, opinions, reports, surveys, change orders,
designs, or specification by the indemnitee, or the agents or employees of the
indemnitee, or (ii) the giving of or the failure to give directions or
instructions by the indemnitee, or the agents or employees of the indemnitee,
where such giving or failure to give directions or instructions is the primary
cause of bodily injury to persons or damage to property.
4.5 Limitation of Liability. The maximum liability of the Buyer under this
Article IV and under the real estate purchase and sale agreement described in
Section 3.5 hereto shall be limited to $10,000,000. The combined maximum
liability of the Seller and the Shareholders under this Article IV and under the
real estate purchase and sale agreement described in Section 3.5 here to shall
be limited to $10,000,000.
ARTICLE V
Miscellaneous
5.1 Survival of Representations, Warranties and Covenants. All representations
and warranties made by the parties hereto shall survive for two years from the
Closing Date, notwithstanding any investigation made on the part of the parties
hereto. All statements contained in any certificate, schedule, exhibit or other
instrument delivered pursuant to this Agreement shall be deemed to have been
representations and warranties by the respective party or parties, as the case
may be, and shall also survive for two years after the Closing Date despite any
investigations made by any party hereto or on its behalf. All covenants and
agreements contained herein shall survive as provided herein.
5.2 Entirety. This Agreement embodies the entire agreement among the parties
with respect to the subject matter hereof, and all prior agreements between the
parties with respect thereto are hereby superseded in their entirety.
5.3 Counterparts. Any number of counterparts of this Agreement may be executed
and each such counterpart shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one instrument.
5.4 Notices and Waivers. Any notice or waiver to be given to any party hereto
shall be in writing and shall be delivered by courier, sent by facsimile
transmission or first class registered or certified mail, postage prepaid,
return receipt requested:
If to Buyer
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Addressed to: With a copy to:
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Key Four Corners, Inc. Xxxxx, Xxxxxxxx & Xxxxx, P.C.
Two Tower Center, Tenth Floor 000 X. Xxxxxxxxxx, Xxxxx 000
Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000 Xxxxxxx, Xxxxx 00000
Attn: General Counsel Attn: Xxxxx X. Xxxxx
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
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If to the Seller or any of the Shareholders
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Addressed to: With a copy to:
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Xx. X. X. Xxxxx Sutin, Thayer & Xxxxxx, P.C.
Four Corners Drilling Company Post Office Box 1945
P. O. Box 1067 Albuquerque, New Mexico 87103-1945
Xxxxxxxxxx, Xxx Xxxxxx 00000 Attn: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
Mr. W. E. Lang
Four Corners Drilling Company
P. X. Xxx 0000
Xxxxxxxxxx, Xxx Xxxxxx 00000
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Any communication so addressed and mailed by first-class registered or certified
mail, postage prepaid, with return receipt requested, shall be deemed to be
received on the fifth (5th) third business day after so mailed, and if delivered
by courier or facsimile to such address, upon delivery during normal business
hours on any business day.
5.5 Captions. The captions contained in this Agreement are solely for convenient
reference and shall not be deemed to affect the meaning or interpretation of any
article, section, or paragraph hereof.
5.6 Successors and Assigns. This Agreement shall be binding upon and shall inure
to the benefit of and be enforceable by the successors and assigns of the
parties hereto.
5.7 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
5.8 Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the applicable laws of the State of New Mexico.
IN WITNESS WHEREOF, the Shareholders have executed this Agreement and the other
parties hereto have caused this Agreement to be signed in their respective
corporate names by their respective duly authorized representatives, all as of
the day and year first above written.
BUYER:
KEY FOUR CORNERS, INC.
a Delaware corporation
By:
Xxxxxxx X. Xxxxxxx, Vice President
SELLER:
FOUR CORNERS DRILLING COMPANY
a New Mexico corporation
By:
X. X. Xxxxx, President
SHAREHOLDERS:
__________________________________________
X. X. Xxxxx
__________________________________________
W. E. Lang
