<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: (Date of earliest event reported): June 25, 1997
KEY ENERGY GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MARYLAND 1-8038 04-2648081
(State of Incorporation) (Commission File Number) (IRS Employer Identification No.)
</TABLE>
TWO TOWER CENTER, TENTH FLOOR
EAST BRUNSWICK, NEW JERSEY 08816
(Address of Principal Executive Offices)
908/247-4822
(Registrant's telephone number, including area code)
(NOT APPLICABLE)
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 25, 1997, Yale E. Key, Inc., a wholly owned subsidiary of the
Key Energy Group, Inc. (the "Company"), acquired all of the issued and
outstanding capital stock of Well-Co Oil Service, Inc., a closely held Nevada
corporation. The assets owned by Well-Co Oil Service, Inc. consist of
equipment and vehicles utilized in working-over and servicing oil and gas wells
in West Texas and Eastern New Mexico. The consideration given by the Company
for the issued and outstanding capital stock of Well-Co Oil Service, Inc.
consists of cash in the amount of $17,575,816.46 (subject to post-closing
adjustment) and 240,000 shares of Company's common stock which had a trading
value as of June 25, 1997 of $16.875 per share. The amount of such
consideration was determined by negotiations between the Company and the
holders of all of the issued and outstanding capital stock of Well-Co Oil
Service, Inc. No material relationship exists between the selling shareholders
and the Company or any of its affiliates, any director or officer of the
Company or any associate of any such officer or director. The Company intends
for the assets of Well-Co Oil Service, Inc. to continue to be used in
working-over and servicing oil and gas wells.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
At the present time, it is impracticable to provide financial
statements specified in Rule 3-05(b) of Regulation S-X for the
business acquired. Such financial statements will be filed as soon as
practicable but no later than September 8, 1997.
(b) Pro Forma Financial Information.
At the present time, it is impracticable to provide pro forma
financial information required pursuant to Article 11 of Regulation
S-X. Such pro forma financial information will be filed as soon as
practicable but no later than September 8, 1997.
(c) Exhibits.
The following exhibits, from which schedules have been omitted and
will be furnished to the Commission upon its request, are filed with
this report on Form 8-K.
2.1 Stock Purchase Agreement Among Key Energy Group, Inc. and Mark
Duane Massingill and Claudia Lynn Massingill, dated as of June
25, 1997.
2
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: July 9, 1997 KEY ENERGY GROUP, INC.
By: /S/ FRANCIS D. JOHN
-----------------------------
Francis D. John, President
3
<PAGE> 4
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
2.1 Stock Purchase Agreement Among Key Energy Group, Inc. and Mark
Duane Massingill and Claudia Lynn Massingill, dated as of June
25, 1997.
<PAGE> 1
================================================================================
STOCK PURCHASE AGREEMENT
AMONG
KEY ENERGY GROUP, INC.
AND
MARK DUANE MASSINGILL AND
CLAUDIA LYNN MASSINGILL
DATED AS OF JUNE 25, 1997
================================================================================
<PAGE> 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
June 25, 1997 by and among Key Energy Group, Inc., a Maryland corporation
("Key"), and Mark Duane Massingill and Claudia Lynn Massingill(collectively,
the "Shareholders").
WITNESSETH:
WHEREAS, Key is a corporation duly organized and validly existing under
the laws of the State of Maryland, with its principal executive offices at Two
Tower Center, Tenth Floor, East Brunswick, New Jersey 08816; and
WHEREAS, Well-Co Oil Services, Inc. ("Well-Co") is a corporation duly
organized and validly existing under the laws of the State of Nevada, with its
principal executive offices at 1201 Stockton Street, Brownfield, Texas 79316;
and
WHEREAS, the Shareholders own 10,000 shares (the "Well-Co Shares") of
common stock, no par value , of Well-Co ("Well-Co Common Stock"), which
constitutes all of the issued and outstanding shares of capital stock of Well-
Co; and
WHEREAS, the Shareholders desire to sell to Key, and Key desires to
purchase from the Shareholders all of the issued and outstanding capital stock
of Well-Co.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto hereby agree as
follows:
ARTICLE 1
PURCHASE AND SALE
1.1. Purchase and Sale of Well-Co Shares. Subject to the terms and
conditions of this Agreement, on the date hereof, the Shareholders agree to
sell and convey to Key, free and clear of all Encumbrances (as defined in
Section 2.1.8.1 hereof), and Key agrees to purchase and accept from the
Shareholders, all of the Well-Co Shares. Subject to the provisions of Section
1.3 hereof, in consideration of the sale of the Well-Co Shares, Key shall (i)
pay to the Shareholders, on the date hereof, a total of $17,575,816.46 by wire
transfer of immediately available funds (which sum shall include $100,000.00
payable to each Shareholder for his or her agreement not to compete with Well-
Co as set forth in Section 3.1 hereof) and, (ii) issue to the Shareholders, in
accordance with Section 3.2 hereof, 240,000 shares (the "Key Shares") of common
stock, par value, $.10 per share, of Key ("Key Common Stock").
<PAGE> 3
1.2. Delivery of Well-Co Certificates. The Shareholders shall deliver
to Key, on the date hereof, duly and validly issued certificates representing
all of the Well-Co Shares, each such certificate having been duly endorsed in
blank and in good form for transfer or accompanied by stock powers duly
executed in blank, sufficient and in good form to properly transfer such shares
to Key (or its designee).
1.3 Adjustment of Purchase Price. Key shall cause to be prepared and
delivered to the Shareholders a balance sheet of Well-Co as of the date hereof
(the "Final Balance Sheet") within thirty (30) days after the date hereof on a
basis consistent with the 1/31 Balance Sheet (as such term is hereinafter
defined) which shall include provisions for those items listed on Schedule
2.1.8.16 hereto, but shall exclude any provision for worker's compensation
claims. Key and the Shareholders shall jointly review the Final Balance Sheet,
endeavor in good faith to resolve any disagreements regarding the entries
thereon and reach a final determination thereof within 60 days from the date
hereof. If the parties are unable to reach a final determination relative to
all disagreements regarding entries on the Final Balance Sheet within such 60
day period they shall submit the unresolved issue or issues to a "big six"
firm of independent certified public accountants selected by mutual agreement
(or if mutual agreement cannot be reached, by lot), whose decision on the
unresolved issue or issues shall be binding on all parties hereto. Within 10
days of reaching such final determination, the following adjusting payments
shall be made:
(1) If the Final Net Current Value of Well-Co (as defined in
Schedule 1.3 hereto) exceeds the 1/31 Net Current Value of
Well-Co (as defined in Schedule 1.3 hereto), Key shall pay
to the Shareholders the amount of such excess.
(2) If the Final Net Current Value of Well-Co is less than the
1/31 Net Current Value of Well-Co, the Shareholders shall
pay to Key the amount of such difference.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1. General Representations and Warranties of the Shareholders. The
express representations and warranties of the Shareholders contained in this
Article 2 and elsewhere in this Agreement and the Schedules hereto are
exclusive and are in lieu of all other representations and warranties, express,
implied or statutory or otherwise. Subject to the foregoing, each of the
Shareholders jointly and severally represents and warrants to Key as follows:
2.1.1. Organization and Standing. Well-Co is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Nevada, 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
2
<PAGE> 4
the business conducted by it would make such qualification or licensing
necessary, except where the failure to be so qualified or licensed would
not have a material adverse effect on its financial condition,
properties or business.
2.1.2. Agreement Authorized and its Effect on Other Obligations.
Each of the Shareholders is a resident of Texas, above the age of 18
years, and has the legal capacity and requisite power and authority to
enter into, and perform his or her obligations under this Agreement.
This Agreement is a valid and binding obligation of each of the
Shareholders enforceable against each of the Shareholders (subject to
normal equitable principles) in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
debtor relief or similar laws affecting the rights of creditors
generally. The execution, delivery and performance of this Agreement by
the Shareholders will not conflict with or result in a violation or
breach of any term or provision of, nor constitute a default under (i)
the Articles of Incorporation or Bylaws of Well-Co or (ii) any
obligation, indenture, mortgage, deed of trust, lease, contract or other
agreement to which Well-Co or either of the Shareholders is a party or
by which Well-Co or either of the Shareholders or their respective
properties are bound.
2.1.3. Capitalization. The authorized capitalization of Well-Co
consists of 10,000 shares of Well-Co Common Stock, of which, as of the
date hereof, 10,000 shares were issued and outstanding and held
beneficially and of record by the Shareholders. On the date hereof,
Well-Co does not have any outstanding options, warrants, calls or
commitments of any character relating to any of its authorized but
unissued shares of capital stock. All issued and outstanding shares of
Well-Co Common Stock are validly issued, fully paid and non-assessable
and are not subject to preemptive rights. None of the outstanding
shares of Well-Co Common Stock is subject to any voting trusts, voting
agreement or other agreement or understanding with respect to the voting
thereof, nor is any proxy in existence with respect thereto.
2.1.4. Ownership of Well-Co Shares. Each Shareholder holds good
and valid title to 5,000 of the Well-Co Shares, free and clear of all
Encumbrances. The Shareholders possess full authority and legal right
to sell, transfer and assign to Key the Well-Co Shares, free and clear
of all Encumbrances. Upon transfer to Key by the Shareholders of the
Well-Co Shares, Key will own the Well-Co Shares free and clear of all
Encumbrances. There are no claims pending or, to the knowledge of
either of the Shareholders, threatened, against Well-Co or either of the
Shareholders that concern or affect title to either the Well-Co Shares,
or that seek to compel the issuance of capital stock or other securities
of Well-Co.
2.1.5. No Subsidiaries. Except as set forth in Schedule 2.1.5
hereto, there is no corporation, partnership, joint venture, business
trust or other legal entity in which Well-Co, either directly or
indirectly through one or more intermediaries, owns or holds beneficial
or record ownership of at least a majority of the outstanding voting
securities.
3
<PAGE> 5
2.1.6. Financial Statements. The Shareholders have delivered to
Key copies of Well-Co's unaudited balance sheet and statement of income,
as of and for the 12 months ended December 31, 1996 (collectively, the
"Annual Financial Statements"). The Shareholders have also delivered to
Key copies of Well-Co's unaudited balance sheet, a copy of which is
attached hereto as Schedule 2.1.6 (the "1/31 Balance Sheet"), and
statement of income (collectively, the "1/31 Financial Statements"), as
at and for the one month ended January 31, 1997 (the "Balance Sheet
Date"). The Annual Financial Statements and the 1/31 Financial
Statements are complete in all material respects. The Annual Financial
Statements and the 1/31 Financial Statements present fairly the
financial condition of Well-Co in accordance with accounting practices
used for Federal income tax purposes applied on a consistent basis as at
the dates and for the periods indicated. The Annual Financial
Statements and the 1/31 Financial Statements have been prepared in
accordance with accounting practices used for Federal income tax
purposes applied on a consistent basis. The accounts receivable
reflected in the 1/31 Balance Sheet, or which have been thereafter
acquired by Well-Co, have been collected or are collectible at the
aggregate recorded amounts thereof less applicable reserves, which
reserves are adequate. The inventories of Well-Co reflected in the 1/31
Balance Sheet, or which have thereafter been acquired by it, consist of
items of a quality usable and salable in the normal course of Well-Co's
business.
2.1.7. Liabilities. Except as disclosed on Schedule 2.1.7
hereto, Well-Co does not have any liabilities or obligations, either
accrued, absolute or contingent, nor do either of the Shareholders have
any knowledge of any potential liabilities or obligations , other than
those (i) incurred in the ordinary course of business since the Balance
Sheet Date that will not materially adversely affect the value and
conduct of the business of Well-Co or (ii) reflected or reserved against
in the 1/31 Balance Sheet
2.1.8. Additional Well-Co Information. Attached as Schedule
2.1.8 hereto are true, complete and correct lists of the following
items:
2.1.8.1. Real Estate. All real property and structures
thereon owned, leased or subject to a contract of purchase and
sale, or lease commitment, by Well-Co, with a description of the
nature and amount of any Encumbrances thereon, except such
imperfections of title, easements and Encumbrances, if any, as
are not substantial in character, amount, or extent and do not
and will not materially detract from the value, or interfere with
the present use, of the property subject thereto or affected
thereby, or otherwise materially impair the business operations
of Well-Co. The term "Encumbrances" means all liens, security
interests, pledges, mortgages, deed of trust, claims, rights of
first refusal, options, charges, restrictions or conditions to
transfer or assignment, liabilities, obligations, privileges,
equities, easements, rights-of-way, limitations, reservations,
restrictions and other encumbrances of any kind or nature, except
liens for current taxes not yet due and payable;
4
<PAGE> 6
2.1.8.2. Machinery and Equipment. All vehicles, rigs,
carriers, rig equipment, machinery and transportation equipment,
and all significant tools, equipment, furnishings and fixtures
owned, leased or subject to a contract of purchase and sale, or
lease commitment, by Well-Co with a description of the nature and
amount of any Encumbrances thereon, except (i) Encumbrances
disclosed on Schedule 2.1.8.2 hereto and (ii) such imperfections
of title, easements and Encumbrances, if any, as are not
substantial in character, amount, or extent and do not and will
not materially detract from the value, or interfere with the
present use, of the property subject thereto or affected thereby,
or otherwise materially impair the business operations of Well-
Co;
2.1.8.3. Inventory. All inventory items or groups of
inventory items owned by Well-Co, excluding raw materials and
work in process, which raw materials and work in process are
valued on the 1/31 Balance Sheet, together with the amount of any
Encumbrances thereon;
2.1.8.4. Receivables. All accounts and notes receivable
of Well-Co, together with (i) aging schedules by invoice date and
due date, (ii) the amounts provided for as an allowance for bad
debts, (iii) the identity and location of any asset in which
Well-Co holds a security interest to secure payment of the
underlying indebtedness, and (iv) a description of the nature and
amount of any Encumbrances on such accounts and notes receivable;
2.1.8.5. Payables. All accounts and notes payable of
Well-Co, together with an appropriate aging schedule;
2.1.8.6. Insurance. All insurance policies or bonds
currently maintained by Well-Co, including title insurance
policies, including those covering Well-Co's properties, rigs,
machinery, equipment, fixtures, employees and operations, as well
as a listing of any premiums, audit adjustments or retroactive
adjustments due or pending on such policies or any predecessor
policies;
2.1.8.7. Contracts. All material contracts, including
leases under which Well-Co is lessor or lessee, which are to be
performed in whole or in part after the date hereof;
2.1.8.8. Employee Compensation Plans. All bonus,
incentive compensation, deferred compensation, profit-sharing,
retirement, pension, welfare, group insurance, death benefit, or
other employee benefit or fringe benefit plans, arrangements or
trust agreements of Well-Co or any employee benefit plan
maintained or adopted by Well-Co (collectively, the "Employee
Plans"), together with copies of the most recent reports or
returns with respect to each such Employee Plan, filed with any
governmental agency and all Internal Revenue Service
determination letters and all
5
<PAGE> 7
other correspondence from governmental entities that would bring
into question the continued qualification or validity of any such
Employee Plan;
2.1.8.9. Certain Salaries. The names and salary rates of
all present employees of Well-Co, and, to the extent existing on
the date of this Agreement, all arrangements with respect to any
bonuses to be paid to them from and after the date of the
Agreement;
2.1.8.10. Bank Accounts. The name of each bank in which
Well-Co has an account, the account numbers of each account and
the names of all persons authorized to draw thereon;
2.1.8.11. Employee Agreements. Any collective bargaining
agreements of Well-Co with any labor union or other
representative of employees, including amendments, supplements,
and written or oral understandings, and all employment and
consulting and severance agreements of Well-Co;
2.1.8.12. Intellectual Property. All patents, patent
applications, trademarks and service marks (including
registrations and applications therefor), trade names, copyrights
and other intellectual property rights owned, leased or used by
Well-Co (collectively, the "Intellectual Property") ;
2.1.8.13. Trade Names. All trade names, assumed names
and fictitious names used or held by Well-Co, whether and where
such names are registered and where used;
2.1.8.14. Promissory Notes. All long-term and short-term
promissory notes, installment contracts, loan agreements, credit
agreements, and any other agreements of Well-Co relating thereto
and a description of the collateral securing the same;
2.1.8.15. Guaranties. All indebtedness, liabilities and
commitments of others and as to which Well-Co is a guarantor,
endorser, co-maker, surety, or accommodation maker, or is
contingently liable therefor and all letters of credit, whether
stand-by or documentary, issued by any third party;
2.1.8.16. Reserves and Accruals. All accounting reserves
and accruals maintained as of March 31, 1997;
2.1.8.17. Leases. All leases to which Well-Co is a party
(whether as lessor or lessee); and
2.1.8.18. Environmental. All environmental permits,
approvals, certifications, licenses, registrations, orders and
decrees applicable to current
6
<PAGE> 8
operations conducted by Well-Co and all environmental audits,
assessments, investigations and reviews conducted by Well-Co
within the last five years (or otherwise within the possession of
Well-Co) on any property owned or used by it.
2.1.9. No Defaults. Well-Co is not in default in any material
obligation or covenant on its part to be performed under any obligation,
lease, contract, order, plan or other arrangement other than any such
default that is not material to the business or operations of Well-Co.
2.1.10. Absence of Certain Changes and Events. Except as
disclosed on Schedule 2.1.10 hereto, and other than as a result of the
transactions contemplated by this Agreement, since the Balance Sheet
Date, there has not been:
2.1.10.1. Financial Change. Any material adverse change
in the financial condition, backlog, operations, assets,
liabilities or business of Well-Co;
2.1.10.2. Property Damage. Any material damage,
destruction, or loss to the business or properties of Well-Co
(whether or not covered by insurance);
2.1.10.3. Dividends. Any declaration, setting aside, or
payment of any dividend or other distribution in respect of the
Well-Co Common Stock, or any direct or indirect redemption,
purchase or any other acquisition by Well-Co of any such stock;
2.1.10.4. Capitalization Change. Any change in the
capital stock or in the number of shares or classes of Well-Co's
authorized or outstanding capital stock as described in Section
2.1.3 hereof;
2.1.10.5. Labor Disputes. Any labor or employment
dispute of whatever nature involving Well-Co; or
2.1.10.6. Other Material Changes. Any other event or
condition known to either of the Shareholders particularly
pertaining to and adversely affecting the operations, assets or
business of Well-Co which would constitute a material adverse
change.
2.1.11. Taxes. All federal, state and local income, value
added, sales, use, franchise, gross revenue, turnover, excise, payroll,
property, employment, customs, duties and any and all other tax returns,
reports, and estimates have been filed with appropriate governmental
agencies, domestic and foreign, by Well-Co for each period for which any
such returns, reports, or estimates were due (taking into account any
extensions of time to file before the date hereof); all taxes shown by
such returns to be payable have been paid other than those being
contested in good faith by Well-Co; and the tax provision reflected in
the 1/31 Balance
7
<PAGE> 9
Sheet is adequate, in accordance with accounting practices utilized for
federal income tax purposes to cover liabilities of Well-Co at the date
thereof for all taxes, including any assessed interest, assessed
penalties and additions to taxes of any character whatsoever applicable
to Well-Co or its assets or business. No waiver of any statute of
limitations executed by Well-Co with respect to any income or other tax
is in effect for any period. The income tax returns of Well-Co have not
been examined by the Internal Revenue Service or the taxing authorities
of any other jurisdiction for the time period commencing January 1, 1993
up to and including the date of this Agreement, and to the best
knowledge of the Shareholders, for any period prior to January 1, 1993
and there are no current or pending audits by the Internal Revenue
Service. There are no tax liens on any assets of Well-Co except for
taxes not yet currently due. Except as disclosed on Schedule 2.1.11
hereto, Well-Co is not subject to any tax-sharing or allocation
agreement. Well-Co is not, nor has it ever attempted to become, a
Subchapter S-Corporation under the Internal Revenue Code of 1986, as
amended.
2.1.12. Intellectual Property. Well-Co owns or has the right to
use all Intellectual Property that is either material to its business or
that are necessary for the rendering of any services rendered by Well-Co
and the use or sale of any equipment or products used or sold by it
(collectively, the "Well-Co Intellectual Property"), including all such
Intellectual Property listed in Schedule 2.1.8 hereto. The Well-Co
Intellectual Property is owned or licensed by Well-Co free and clear of
any Encumbrance on a non-exclusive basis. Well-Co has not granted to
any other person any license to use any Well-Co Intellectual Property.
Well-Co has not received any notice of infringement, misappropriation,
or conflict with, the intellectual property rights of others in
connection with the use by it of the Well-Co Intellectual Property or
otherwise in connection with the operation of its business.
2.1.13. Title to and Condition of Assets. Except as reflected on
Schedule 2.1.8 hereto,_Well-Co has good, indefeasible and marketable
title to all its properties, interests in properties and assets, real
and personal, reflected in the 1/31 Balance Sheet or in Schedule 2.1.8
hereto, free and clear of any Encumbrance of any nature whatsoever,
except (i) Encumbrances reflected in the 1/31 Balance Sheet or in
Schedule 2.1.8 hereto, and (ii) such imperfections of title, easements
and Encumbrances, if any, as are not substantial in character, amount,
or extent and do not and will not materially detract from the value, or
interfere with the present use, of the property subject thereto or
affected thereby, or otherwise materially impair the business operations
of Well-Co. All leases pursuant to which Well-Co leases (whether as
lessee or lessor) any substantial amount of real or personal property
are in good standing, valid, and effective; and there is not, under any
such leases, any existing default or event of default or event which
with notice or lapse of time, or both, would constitute a default by
Well-Co and in respect to which Well-Co has not taken adequate steps to
prevent a default from occurring. The buildings and premises of Well-Co
that are used in its business are in good operating condition and
repair, subject only to ordinary wear and tear. All rigs, rig
equipment, machinery, transportation equipment, tools and other major
items of equipment of Well-Co are in good operating condition and in a
state of reasonable
8
<PAGE> 10
maintenance and repair, ordinary wear and tear excepted, and are free
from any known defects except as may be repaired by routine maintenance
and such minor defects as to not substantially interfere with the
continued use thereof in the conduct of normal operations. To the best
of each Shareholder's knowledge, all such assets conform to all
applicable laws governing their use. Except as disclosed on Schedule
2.1.17 hereto, no notice of any violation of any law, statute,
ordinance, or regulation relating to any such assets has been received
by Well-Co or any of the Shareholders, except such as have been fully
complied with.
2.1.14. Contracts. All contracts, leases, plans or other
arrangements to which Well-Co is a party, by which it is bound or to
which it or its assets are subject are in full force and effect, and
constitute valid and binding obligations of Well-Co and the other
parties thereto. Well-Co is not, and to the knowledge of either of the
Shareholders, no other party to any such contract, lease, plan or other
arrangement is, in default thereunder, and no event has occurred which
(with or without notice, lapse of time, or the happening of any other
event) would constitute a default thereunder. No contract has been
entered into on terms which could reasonably be expected to have a
material adverse effect on Well-Co. Neither of the Shareholders has
received any information which would cause such Shareholder to conclude
that any customer of Well-Co will (or is likely to) cease doing business
with Well-Co (or its successors) as a result of the consummation of the
transactions contemplated hereby.
2.1.15. Licenses and Permits. Except as set forth on Schedule
2.1.15 hereto, Well-Co possesses all permits, authorizations,
certificates, approvals, registrations, variances, waivers, exemptions,
rights-of-way, franchises, ordinances, licenses and other rights of
every kind and character (collectively, the "Permits") necessary under
law or otherwise for Well-Co to conduct its business as now being
conducted and to construct, own, operate, maintain and use its assets in
the manner in which they are now being constructed, operated, maintained
and used (collectively, the "Well-Co Permits"). Each of the Well-Co
Permits and Well-Co's rights with respect thereto is valid and
subsisting, in full force and effect, and enforceable by Well-Co subject
to administrative powers of regulatory agencies having jurisdiction.
Well-Co is in compliance in all material respects with the terms of each
of the Well-Co Permits. None of the Well-Co Permits has been, or to the
knowledge of any of the Shareholders, is threatened to be, revoked,
canceled, suspended or modified.
2.1.16. Litigation. Except as disclosed on Schedule 2.1.16
hereto, there is no suit, action, or legal, administrative, arbitration,
or other proceeding or governmental investigation pending to which Well-
Co is a party or, to the knowledge of any of the Shareholders, might
become a party or which particularly affects Well-Co, nor is any change
in the zoning or building ordinances directly affecting the real
property or leasehold interests of Well-Co, pending or, to the knowledge
of any of the Shareholders, threatened.
9
<PAGE> 11
2.1.17. Environmental Compliance.
2.1.17.1. Environmental Conditions. Except as set forth
on Schedule 2.1.17 hereto, there are no environmental conditions
or circumstances, including, without limitation, the presence or
release of any Substance of Environmental Concern (defined
below), on any property presently or previously owned, leased or
operated by Well-Co, or on any property to which Substances of
Environmental Concern or waste generated by Well-Co's operations
or use of its assets was disposed of, which would have a material
adverse effect on the business or business prospects of Well-Co.
The term "Substance of Environmental Concern" means any gasoline,
petroleum (including crude oil or any fraction thereof),
petroleum product, polychlorinated biphenyls, urea-formaldehyde
insulation, asbestos, pollutant, contaminant, radiation, and any
other substance of any kind, whether or not any such substance is
defined as toxic or hazardous under any Environmental Law
(defined below), that is regulated pursuant to or could give rise
to liability under any Environmental Law;
2.1.17.2. Permits, etc. Except as set forth on Schedule
2.1.17 hereto, Well-Co has, and within the period of all
applicable statutes of limitations has had in full force and
effect all environmental permits, licenses, approvals and other
authorizations required to conduct its operations, other than
those that are not material to its business or operations and is
and within the period of all applicable statute of limitations
has been operating in substantial compliance thereunder;
2.1.17.3. Compliance. Except as set forth on Schedule
2.1.17 hereto, the operations of Well-Co and the use of its
assets are, and within the period of all applicable statutes of
limitation have been, in compliance with all applicable
Environmental Laws other than such non compliance that in the
aggregate is not material to the business or operations of Well-
Co. "Environmental Law" means any and all laws, rules, orders,
regulations, statutes, ordinances, codes, decrees, and other
legally enforceable requirements (including, without limitation,
common law) of the United States, or any State, local, municipal
or other governmental authority or quasi-governmental authority,
regulating, relating to, or imposing liability or standards of
conduct concerning protection of the environment or of human
health, or employee health and safety as is now in effect;
2.1.17.4. Past Compliance. Except as set forth in
Schedule 2.1.17 hereto, none of the operations or assets of Well-
Co has ever been conducted or used in such a manner as to
constitute violation of any of the Applicable Environmental Laws,
other than violations that in the aggregate would not be material
to the business or operations of Well-Co;
2.1.17.5. Environmental Claims. Except as listed on
Schedule 2.1.17 hereto, no notice has been served on Well-Co or
any of the Shareholders from any entity,
10
<PAGE> 12
governmental agency or individual regarding any existing, pending
or threatened investigation, inquiry, enforcement action or
litigation or liability, including without limitation any claims
for remedial obligations, response costs or contribution,
relating to any Environmental Law;
2.1.17.6. Enforcement. Except as disclosed on Schedule
2.1.17 hereto, Well-Co, and to either Shareholder's knowledge, no
predecessor of Well-Co, nor any other party acting on behalf of
Well-Co, has entered into or agreed to any consent decree, order,
settlement or other agreement, nor is subject to any judgment,
decree, order or other agreement, in any judicial administrative,
arbitral, or other forum, relating to compliance with or
liability under any Environmental Law;
2.1.17.7. Liabilities. Well-Co has not assumed or
retained, by contract or operation of law, any liabilities of any
kind, fixed or contingent, known or unknown, under any
Environmental Law;
2.1.17.8. Renewals. Neither of the Shareholders knows
of any reason Well-Co (or its successors) would not be able to
renew without material expense any of the permits, licenses, or
other authorizations required pursuant to any Environmental Law
in connection with any of Well-Co's current operations; and
2.1.17.9. Asbestos and PCBs. Except as may be described
in Schedule 2.1.17, no known material amounts of friable asbestos
currently exist on any property owned or operated by Well-Co, nor
do polychlorinated biphenyls exist in concentrations of 50 parts
per million or more in electrical equipment owned or being used
by Well-Co in its operations or on the properties of Well-Co.
2.1.18. Compliance with Other Laws. Except as set forth on
Schedule 2.1.17 hereto, Well-Co is not in violation of or in default
with respect to, or in alleged violation of or alleged default with
respect to, the Occupational Safety and Health Act (29 U.S.C. Sections
651 et seq.) as amended, or any other applicable law or any applicable
rule, regulation, or any writ or decree of any court or any governmental
commission, board, bureau, agency, or instrumentality, or delinquent
with respect to any report required to be filed with any governmental
commission, board, bureau, agency or instrumentality, other than
violations that in the aggregate are not material to the business or
operations of Well-Co.
2.1.19. ERISA Plans or Labor Issues. Except as reflected in
Schedule 2.1.8.8 hereto, Well-Co does not currently sponsor, maintain or
contribute to and has not at any time sponsored, maintained or
contributed to any employee benefit plan which is or was subject to any
provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). Well-Co has not engaged in any unfair labor
practices which could reasonably be expected to result in a material
adverse effect on its operations or assets. Except as reflected on
Schedule 2.1.16 hereto, to the knowledge of each Shareholder, Well-Co
does not
11
<PAGE> 13
have any dispute with any of its existing or former employees. There
are no labor disputes or, to the knowledge of any of the Shareholders,
any disputes threatened by current or former employees of Well-Co. As to
each Employee Plan:
(i) For purposes of this Section 2.1.19, all references
to Well-Co shall be deemed to refer to Well-Co and any trade or
business, whether or not incorporated, which together with Well-
Co would be deemed or treated as a "single employer" with the
meaning of Code Section 414 or ERISA Section 4001. None of the
Employee Plans (i) is subject to Title IV of ERISA or the minimum
funding requirements of Section 412 of the Code of Section 302 of
ERISA, (ii) is a plan of the type described in Section 4063 of
ERISA or Section 413(c) of the Code, (iii) is a "multiemployer
plan" (as defined in Section 3(37) of ERISA), (iv) provides for
medical, life or other types of insurance benefits to current or
future retired or former employees (other than Billy D.
Massingill and Maureen McCutchin, former shareholders of Well-Co)
of Well-Co (other than as required for COBRA continuation
coverage under Code Section 4980B or similar state law), (v)
obligates Well-Co to pay any severance or similar benefits solely
as a result of a change in control or ownership of Well-Co, or
(vi) is a "voluntary employees' beneficiary association" with the
meaning of Code Section 501(c)(9).
(ii) Each Employee Plan complies with and has been
administered in form and in operation in compliance with all
applicable laws including, without limitation, ERISA, the
Internal Revenue Code of 1986, as amended (the "Code), and the
Consolidated Omnibus Reconciliation Act of 1985, as amended
("COBRA"), and neither of the Shareholders has received any
notice from any governmental authority questioning or challenging
such compliance;
(iii) Well-Co's administration and operation of the
Employee Plans has not been conducted in such a manner as would
give rise to any material fines, penalties, taxes, claims or
charges against Well-Co by a governmental entity or any third
party or otherwise, result in a material adverse effect on Well-
Co's financial condition;
(iv) funding of Well-Co's profit sharing plan (the
"Well-Co Profit Sharing Plan") is in the sole discretion of Well-
Co regardless of past funding practices, and the Well-Co Profit
Sharing Plan may be terminated at any time without liability to
Well-Co other than the obligation to distribute the funds held by
the Well-Co Profit Sharing Plan in accordance with the provisions
thereof;
(v) there has been no event or condition which presents
a material risk of termination of any Employee Plan of Well-Co;
and
12
<PAGE> 14
(vi) the execution, delivery and performance of this
Agreement will not cause any Employee Plan of Well-Co to be
terminated or otherwise adversely affect the administration or
operation thereof. Well-Co's administration of the Employee Plans
of Well-Co following the date hereof in the same manner as such
plans were administered by Well-Co prior to the Closing will not
violate any applicable laws or otherwise result in a material
adverse effect on the financial condition of Well-Co.
(vii) Except as would cause a material adverse effect,
each Employee Plan which is intended to be qualified under Code
Section 401(a), (i) has been timely amended to reflect all
requirements of the Tax Reform Act of 1986 and all subsequent
federal legislation which is required to be adopted prior to the
date hereof and (ii) has received from the Internal Revenue
Service a favorable determination letter which considers the
terms of the Employee Plan as amended for such tax law changes,
or is within the remedial amendment period for seeking such
favorable determination letter. Northing has occurred since the
date of the most recent determination letter that would adversely
affect the qualified status of each such Employee Plan or the
tax-exempt status of any related trust.
(viii) During the five years preceding the Closing Date
(i) no under-funded pension plan subject to Title IV of ERISA or
the minimum funding requirements of Code Section 412 or ERISA
Section 302 has been transferred out of Well-Co and (ii) Well-Co
has not participated in or contributed to, or had an obligation
to participate in or contribute to, any multiemployer plan (as
defined in ERISA Section 3(37)).
(ix) Well-Co has not incurred, and has no reason to
expect that it will incur, any liability to the Internal Revenue
Service, the Department of Labor, the Pension Benefit Guaranty
Corporation (PBGC), any multiemployer plan, or otherwise under
Title IV of ERISA (including any withdrawal liability), or under
the Code, with respect to any Employee Plan that Well-Co
maintains or contributes to, or had an obligation to contribute
to.
(x) Nothing in this Section 2.1.19, express or implied,
shall confer upon any employee or former employee of Well-Co, or
their dependents and beneficiaries, any rights or remedies of any
nature or kind, including but not limited to, any right to
employment or continued employment for a specified period, or
make any such person a third party beneficiary of this Agreement.
Well-Co may amend or terminate any Employee Plan at any time
without the consent of any participant therein or any other
person.
2.1.20. Investigations; Litigation. No investigation or review
by any governmental entity with respect to Well-Co or any of the
transactions contemplated by this Agreement is pending or, to the
knowledge of any of the Shareholders, threatened, nor has any
governmental entity indicated to Well-Co an intention to conduct the
same. Except as
13
<PAGE> 15
disclosed on Schedule 2.1.17 hereto, there is no action, suit or
proceeding pending or, to the knowledge of any of the Shareholders,
threatened against or affecting Well-Co at law or in equity, or before
any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, that either
individually or in the aggregate, does or is likely to result in any
material adverse change in the financial condition, properties or
business of Well-Co.
2.1.21. Absence of Certain Business Practices. Neither Well-Co
nor any officer of Well-Co, nor, to the knowledge of either of the
Shareholders, any employee or agent of Well-Co or any other person
acting on behalf of Well-Co, has, directly or indirectly, within the
past five years, given or agreed to give any gift or similar benefit of
greater than nominal value to any customer, supplier, government
employee or other person who is or may be in a position to help or
hinder the business of Well-Co (or to assist Well-Co in connection with
any actual or proposed transaction) which (i) might subject Well-Co to
any damage or penalty in any civil, criminal or governmental litigation
or proceeding, (ii) if not given in the past, might have had a material
adverse effect on the assets, business or operations of Well-Co, or
(iii) if not continued in the future, might materially adversely affect
the assets, business operations or prospects of Well-Co or which might
subject Well-Co to suit or penalty in a private or governmental
litigation or proceeding.
2.1.22 Consents and Approvals. No consents, approvals or
authorizations of, or filing or registration with, any governmental or
regulatory authority, or any other person are required to be made or
obtained by the Shareholders or Well-Co in connection with the
consummation of the transactions contemplated hereby.
2.1.23 Broker or Financial Advisors Fee. Neither the
Shareholders nor Well-Co have retained any broker, agent or finder or
agreed to pay any financial broker, agent or finder on account of this
Agreement in such manner as to give rise to any valid claim against Key
for a brokerage commission, finder's fee or any similar payments.
2.2. Investment Representations of the Shareholders. Each of the
Shareholders acknowledges, represents and agrees that:
2.2.1. Shareholders Investment Suitability and Related Matters.
(i) Key has made available to the Shareholders the information and
documents described in Section 2.3.4 hereof, (ii) such Shareholder
understands the risks associated with ownership of Key Common Stock, and
(iii) such Shareholder is capable of bearing the financial risks
associated with such ownership;
2.2.2. Key Shares Not Registered. The Key Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), or registered or qualified under any applicable state securities
laws;
14
<PAGE> 16
2.2.3. Reliance on Representations. The Key Shares are being
issued to such Shareholder in reliance upon exemptions from such
registration or qualification requirements, and the availability of such
exemptions depends in part upon such Shareholder's bona fide investment
intent with respect to the Key Shares;
2.2.4. Investment Intent. Except as contemplated by Schedule
3.2 and as permitted by applicable securities laws, such Shareholder's
acquisition of the Key Shares is solely for his or her own account for
investment, and such Shareholder is not acquiring the Key Shares for the
account of any other person or with a view toward resale, assignment,
fractionalization, or distribution thereof, except as permitted by
applicable securities laws;
2.2.5. Permitted Resale. Such Shareholder shall not offer for
sale, sell, transfer, pledge, hypothecate or otherwise dispose of any of
the Key Shares except in accordance with the registration requirements
of the Securities Act and applicable state securities laws or upon
delivery to Key of an opinion of legal counsel reasonably satisfactory
to Key that an exemption from registration is available;
2.2.6. Investor Sophistication. Such Shareholder has such
knowledge and experience in financial and business matters that he or
she is capable of evaluating the merits and risks of an investment in
the Key Shares, and to make an informed investment decision with respect
thereto;
2.2.7. Availability of Information. Such Shareholder has had
the opportunity to ask questions of, and receive answers from Key's
officers and directors concerning such Shareholder's acquisition of the
Key Shares and to obtain such other information concerning Key and the
Key Shares, to the extent Key's officers and directors possessed the
same or could acquire it without unreasonable effort or expense, as such
Shareholder deemed necessary in connection with making an informed
investment decision; and
2.2.8. Restrictive Legends. In addition to any other legends
required by law or the other agreements entered into in connection
herewith, each certificate evidencing the Key Shares will bear a
conspicuous restrictive legend substantially as follows:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS, AND THEY CANNOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE HYPOTHECATED EXCEPT
IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE ACT AND
SUCH OTHER STATE LAWS OR UPON DELIVERY TO THIS CORPORATION OF AN
OPINION OF LEGAL COUNSEL SATISFACTORY TO THE CORPORATION THAT AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
15
<PAGE> 17
2.3. General Representations of Key. Key represents and warrants to
each of the Shareholders as follows
2.3.1. Organization and Good Standing. Key is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Maryland, has full requisite corporate power and authority
to carry on its business as it is currently conducted, and to own and
operate the properties currently owned and operated by it, and is duly
qualified or licensed to do business and is in good standing as a
foreign corporation authorized to do business in all jurisdictions in
which the character of the properties owned or the nature of the
business conducted by it would make such qualification or licensing
necessary, except where the failure to be so qualified or licensed would
not have a material adverse effect on its financial condition,
properties or business.
2.3.2. Agreement Authorized and its Effect on Other Obligations.
The consummation of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of
Key, and this Agreement is a valid and binding obligation of Key
enforceable (subject to normal equitable principles) in accordance with
its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, debtor relief or similar laws affecting the
rights of creditors generally. The execution, delivery and performance
of this Agreement by Key will not conflict with or result in a violation
or breach of any term or provision of, or constitute a default under (i)
the Articles of Incorporation or Bylaws of Key or (ii) any obligation,
indenture, mortgage, deed of trust, lease, contract or other agreement
to which Key or any of its property is bound.
2.3.3. Capitalization. The capitalization of Key consists of
25,000,000 shares of Key Common Stock, of which as of the date hereof,
12,052,752 shares are issued and outstanding, and 7,568,803 shares are
reserved for issuance upon the exercise or conversion of outstanding
stock options, warrants and convertible subordinated debentures.
Pursuant to Key's Articles of Incorporation, Key's board of directors
has the authority, without further shareholder action, to redesignate
all of the authorized and unissued shares of Key Common Stock into one
or more series of preferred stock. As of the date hereof, no shares
have been so designated or issued.
2.3.4. Reports and Financial Statements. Key has previously
furnished to the Shareholders true and complete copies of (i) Key's
annual report filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), for Key's fiscal year ended June 30, 1996;
(ii) Key's quarterly 10-Q reports filed with the Commission since June
30, 1996; (iii) all definitive proxy solicitation materials filed with
the Commission since June 30, 1996; and (iv) any registration statement
(other than those relating to employee benefit plans or resales by
selling security holders on Form S-3) declared effective by the
Commission since June 30, 1996; and (v) Key's Private Offering
Memorandum dated June 28, 1996, relating to the
16
<PAGE> 18
Convertible Debentures (collectively, the "Key SEC Documents"). The
consolidated financial statements of Key and its consolidated
subsidiaries included in Key's most recent annual report on Form 10-K
and most recent quarterly reports on Form 10-Q were prepared in
accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved and fairly present the
consolidated financial position of Key and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations
and changes in financial position for the periods then ended; and this
Agreement, the agreements and instruments to be entered into in
connection herewith do not and the Key SEC Documents do not, as of the
date thereof, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading, other than those that are not material
to the business or prospects of Key.
2.3.5. Absence of Certain Changes and Events. Except as
disclosed on Schedule 2.3.5 hereto, and other than as a result of the
transactions contemplated by this Agreement, since March 31, 1997, there
has not been:
2.3.5.1. Financial Change. Any material adverse change
in the financial condition, backlog, operations, assets,
liabilities or business of Key;
2.3.5.2. Property Damage. Any material damage,
destruction, or loss to the business or properties of Key
(whether or not covered by insurance);
2.3.5.3. Dividends. Any declaration, setting aside, or
payment of any dividend or other distribution in respect of the
Key Common Stock, or any direct or indirect redemption, purchase
or any other acquisition by Key of any such stock;
2.3.5.4 Labor Disputes. Any material labor or employment
dispute of whatever nature involving Key; or
2.3.5.5. Other Material Changes. Any other event or
condition known to Key particularly pertaining to and adversely
affecting the operations, assets or business of Key which would
constitute a material adverse change.
2.3.6. Consents and Approvals. No consent, approval or
authorization of, or filing of a registration with, any governmental or
regulatory authority, or any other person or entity is required to be
made or obtained by Key in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby, other than what is required by the American Stock
Exchange for the listing of the Key Shares issuable hereunder.
2.3.7. Key's Access to Well-Co's Assets and Records. Key
acknowledges that it is actively engaged in the same business as Well-
Co, that it has been afforded an opportunity
17
<PAGE> 19
to examine the assets and records of Well-Co, discuss Well-Co's business
and operation with the Shareholders, and investigate the condition of
the assets of Well-Co and that Key is entering into this Agreement on
the basis of such investigation and the representations and warranties
of the Shareholders.
2.3.8. Broker or Financial Advisor's Fee. Key has not retained
any broker, agent or finder or agreed to pay any financial agent or
finder on account of this Agreement in such a manner as to give rise to
any valid claim against the Shareholders for any brokerage commission,
finder's fee or any similar payments.
ARTICLE 3
ADDITIONAL AGREEMENTS
3.1. Noncompetition. Except as otherwise consented to or approved in
writing by Key, each of the Shareholders agrees that for a period of 60 months
from the Effective Date, such Shareholder will not, directly or indirectly,
acting alone or as a member of a partnership or as an officer, director,
employee, consultant, representative, holder of, or investor in as much as 5%
of any security of any class of any corporation or other business entity (i)
engage in competition with the business or businesses conducted by Well-Co on
or before the date of this Agreement in Texas or New Mexico; (ii) request any
present customers or suppliers of Well-Co to curtail or cancel their business
with Key, Well-Co or any affiliate of Key; (iii) disclose to any person, firm
or corporation any trade, technical or technological secrets of Well-Co, Key or
any affiliate of Key or any details of their organization or business affairs
or (iv) induce or actively attempt to influence any employee of Well-Co, Key or
any affiliate of Key to terminate his employment. Each of the Shareholders
agrees that if either the length of time or geographical area 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. Each of the Shareholders further agrees and acknowledges that
Key and its affiliates do not have any adequate remedy at law for the breach or
threatened breach by such Shareholder of this covenant, and agree that Key or
any affiliate of Key may, in addition to the other remedies which may be
available to it hereunder, file a suit in equity to enjoin such Shareholder
from such breach or threatened breach. If any provisions of this Section 3.1
are held to be invalid or against public policy, the remaining provisions shall
not be affected thereby. Each of the Shareholders acknowledges that the
covenants set forth in this Section 3.1 are being executed and delivered by
such Shareholder in consideration of the covenants of Key contained in this
Agreement, an agreed upon allocation of $100,000 of the purchase price being
paid by Key to such Shareholder pursuant to Section 1.1 hereof and for other
good and valuable consideration, receipt of which is hereby acknowledged.
Notwithstanding the foregoing, Key acknowledges and agrees that the
Shareholders, through their ownership of LMB Farms (a Texas limited
partnership), R&M (a partnership), D&M (a partnership), Black Gold Properties
(a partnership) and Massingill Development, Inc., may continue to participate
in the businesses' activities specified on Schedule 3.1 hereto and that such
participation does not and will not contravene this Agreement.
18
<PAGE> 20
3.2. Issuance of Key Shares. On the date hereof, Key shall file an
additional listing application with the American Stock Exchange requesting the
listing of the Key Shares. On the date Key receives notice of approval of such
request, Key shall send written instructions to its transfer agent and
registrar to issue, countersign and register one or more certificates
representing the Key Shares in the names of the Shareholders or such other
parties as are identified on Schedule 3.2 hereof, all in accordance with the
written instructions signed by each of the Shareholders. Such certificate(s)
shall be delivered to the Shareholders and such other parties as are identified
on Schedule 3.2 hereto at the address specified in Section 6.4 hereof or
Schedule 3.2 hereto.
3.3. Registration Rights.
3.3.1. Agreement to Register Resales. Key agrees that no later
than September 30, 1997, it will file with the Commission on Form S-3,
or if Form S-3 is not available to Key, on Form S-1 or S-2, a shelf
registration statement pursuant to Rule 415 of the Securities Act (the
"Shelf Registration Statement") covering the offer and resale by the
Shareholder of all the Key Shares and will use its best efforts to cause
the Shelf Registration Statement to be declared effective by December
15, 1997 by the Commission. The Shelf Registration Statement will not
relate to any shares of Key Common Stock other than the Key Shares. Key
agrees that, if the Shelf Registration Statement is not declared
effective by December 15, 1997, Key shall repurchase any number of the
Key Shares, as requested in writing by Shareholders, at the previous
day's closing quote on the American Stock Exchange (as reported in the
Wall Street Journal), so long as such written request is delivered to
Key prior to December 31, 1997.
3.3.2. Effectiveness of Shelf Registration Statement. Subject to
Section 3.3.9 hereof, Key agrees to maintain the Shelf Registration
Statement in effect for that period of time (the "Effective Period")
beginning on the date the Shelf Registration Statement is declared
effective (the "Effective Date") and ending on the earlier of (i) the
date the Shareholders have sold all of the Key Shares and (ii) the date
on which the Shareholder may be entitled to sell the Key Shares pursuant
to Rule 144(k) under the Securities Act (or any similar provision then
in force). If the maximum period of time during which the Shelf
Registration Statement may be kept effective under applicable regulation
is less than the Effective Period and if as of the end of such maximum
period not all of the Key Shares registered under the Shelf Registration
Statement have been sold, then within 10 days after the end of such
maximum period Key shall file either a post-effective amendment to the
existing Shelf Registration Statement or a new Shelf Registration
Statement covering the offer and resale by the Shareholder of all Key
Shares not previously sold, and Key will use its best efforts to cause
the same to be declared effective promptly by the Commission and will
maintain such Shelf Registration Statement in effect until the end of
the Effective Period. In addition, Key shall amend the Shelf
Registration Statement and supplement the prospectus included therein as
and when required by Form S-3 or Form S-1 or S-2, as applicable, or by
the Securities Act.
19
<PAGE> 21
3.3.3 Blue Sky Qualification. Key will use its best efforts to
effect such qualification and compliance as may be required and as would
permit or facilitate the resale of the Key Shares, including, without
limitation, registration under the appropriate qualifications under
applicable blue-sky or other state securities laws and, appropriate
compliance with any other governmental requirements.
3.3.4. Registration Expenses. All expenses (except for any legal
fees for the Shareholder's counsel) relating to the registration of Key
Shares pursuant to this Agreement (including, but not limited to, the
expenses of any qualifications under the blue-sky or other state
securities laws and compliance with governmental requirements of
preparing and filing any post-effective amendments or prospectus
supplements required for the lawful distribution of the Key Shares to
the public in connection with such registration), will be paid by Key.
3.3.5. Preparation; Reasonable Investigation. In connection with
the preparation and filing of the Shelf Registration Statement under the
Securities Act pursuant to this Agreement, Key will give the
Shareholders the opportunity to participate in the preparation of such
Shelf Registration Statement, each prospectus included therein or filed
with the Commission, and each amendment thereof or supplement thereto,
and will give the Shareholders such access to its books and records and
such opportunities to discuss the business of Key with its officers and
the independent public accountants who have certified its financial
statements as shall be necessary to conduct a reasonable investigation
within the meaning of the Securities Act.
3.3.6. Rights Non-Transferable. The registration rights provided
by this Section 3.3 are for the sole benefit of the Shareholders and
those persons and entities listed on Schedule 3.2 hereto, are personal
in nature, and shall not be available to any subsequent holder of the
Key Shares.
3.3.7. Undertaking to File Reports and Cooperate in Rule 144 and
145 Transactions. For as long as the Shareholders are subject to Rule
144 or Rule 145, Key will use reasonable commercial efforts to timely
file all annual, quarterly and other reports required to be filed by it
under Section 13 or 15(d) of the Exchange Act and the rules and
regulations of the Commission thereunder, as amended from time to time.
If the Shareholder proposes to sell any Key Shares pursuant to Rule 144
and 145, Key shall cooperate with the Shareholder so as to enable such
sales to be made in accordance with applicable laws, rules and
regulations, the requirements of Key's transfer agent, and the
reasonable requirements of the broker through which the sales are
proposed to be executed. Without limiting the generality of the
foregoing, Key shall, upon request, furnish with respect to such sale
(i) a written statement certifying that Key has complied with the public
information requirements of Rule 144 and 145 and (ii) an opinion of
Key's counsel regarding such matters as Key's transfer agent or such
Shareholder's broker may reasonably desire to confirm.
20
<PAGE> 22
3.3.8. Additional undertakings with Respect to Registration
Rights. In connection with its registration obligations under this
Section 3.3, Key shall:
3.3.8.1. Delivery of Shelf Registration Statement and
Prospectus. Furnish to the Shareholders such number of copies of
the Shelf Registration Statement, each amendment and supplement
thereto, the prospectus included in such Shelf Registration
Statement (including each preliminary prospectus), any documents
incorporated by reference therein and such other documents as the
Shareholders may reasonably request in order to facilitate the
disposition of the Key Shares.
3.3.8.2. Notice to the Shareholders. Promptly notify
the Shareholders and (if requested by any such person) confirm
such notice in writing (i) when a prospectus or any prospectus
supplement or post-effective amendment has been filed and, with
respect to a Shelf Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of the
issuance by any state securities or other regulatory authority of
any order suspending the qualification or exemption from
qualification of any of the Key Shares under state securities or
"blue sky" laws or the initiation of any proceedings for that
purpose, and (iii) of the happening of any event that makes any
statement made in a Shelf Registration Statement or related
prospectus untrue or that requires the making of any changes in
such Shelf Registration Statement, prospectus or documents so
that they will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading, and, as, subject to Section 3.3.9 hereof, promptly as
practicable thereafter, prepare and file with the Commission and
furnish a supplement or amendment to such prospectus so that, as
thereafter deliverable to the purchasers of such Key Shares, such
prospectus will not contain any untrue statement of a material
fact or omit a material fact necessary to make the statement
therein, in light of the circumstances under which they were
made, not misleading.
3.3.8.3. Incorporation of Information. If requested by
the Shareholders, promptly incorporate in a prospectus supplement
or post-effective amendment such information as the Shareholders
reasonably request to be included therein, including, without
limitation, with respect to the Key Shares being sold by the
Shareholders, and promptly make all required filings of such
prospectus supplement or post-effective amendment.
3.3.8.4. Deliver of Documents Incorporated by Reference.
Upon receipt of written request, as promptly as practicable after
filing with the Commission of any document which is incorporated
by reference into a Shelf Registration Statement (in the form in
which it was incorporated), deliver a copy of each such document
to the Shareholders.
21
<PAGE> 23
3.3.8.5. Listing. Cause the Key Shares included in any
Shelf Registration Statement to be (i) listed on each securities
exchange, if any, on which similar securities issued by Key are
then listed, or (ii) authorized to be quoted and/or listed (to
the extent applicable) on the Nasdaq Stock Market if the Key
Shares so qualify.
3.3.8.6. Filing of Exchange Act Reports. During the
period when a prospectus is required to be delivered under the
Securities Act, promptly file all documents required to be filed
with the Commission pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act.
3.3.8.7. Requests for Information by the Commission.
Notify the Shareholders promptly of any request by the Commission
for the amending or supplementing of the Shelf Registration
Statement or prospectus or for additional information.
3.3.8.8. Notice of Stop Orders. Advise the
Shareholders, promptly after it shall receive notice or obtain
knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such Shelf
Registration Statement or the initiation or threatening of any
proceeding for such purpose and promptly use its best efforts to
prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order
should be issued.
For purposes of this Section 3.3.8, Key Shares shall refer to any securities of
Key or its successors, into which the Key Shares may be exchanged or converted.
3.4. Employment; Stock Option Agreement. From the date hereof, Mark
Massingill will be employed by Well-Co at a salary of $8,000 per month. In
addition, on the date hereof, Mark Massingill shall be granted a stock option
authorizing him to purchase 50,000 shares of Key Common Stock at the price and
pursuant to the terms set out therein.
3.5. Further Assurances. From time to time, as and when requested by
any party hereto, any other party hereto shall execute and deliver, or cause to
be executed and delivered, such documents and instruments and shall take, or
cause to be taken, such further or other actions as may be reasonably necessary
to effectuate the transactions contemplated hereby, including, without
limitation, assistance from the Shareholders in auditing the financial
statements of Well-Co.
3.6. Material Adverse Change. As used in this Agreement, the term
"material adverse change" means any change, event, circumstance or condition
(collectively, a "Change") which when considered with all other Changes would
reasonably be expected to result in a "loss" having the effect of so
fundamentally adversely affecting the business or financial prospects of Key or
Well-Co, as the case may be, that the benefits reasonably expected to be
obtained by Key or Well-Co, as the case may be, as a result of the consummation
of the transactions contemplated by this Agreement would be jeopardized with
relative certainty. The term "loss" shall mean any and all direct or
22
<PAGE> 24
indirect payments, obligations, assessments, losses, loss of income,
liabilities, fines, penalties, costs and expenses paid or incurred or more
likely than not to be paid or incurred, or diminutions in value of any kind or
character (whether known or unknown, conditional or unconditional, choate or
inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute,
contingent or otherwise) that are more likely than not to occur, including
without limitation penalties, interest on any amounts payable to a third party
as a result of the foregoing and any legal or other expenses reasonably
incurred or more likely than not to be incurred in connection with
investigating or defending any demands, claims, actions or causes of action
that, if adversely determined, would likely result in losses, and all amounts
paid in settlement of claims of actions; provided, that losses shall be net of
any recoveries by Well-Co from third parties and any insurance proceeds Well-Co
is entitled to receive from a non-affiliated insurance company on account of
such losses (after taking into account any costs incurred in obtaining such
proceeds and any increase in insurance premiums as a result of a claim with
respect to such proceeds).
3.7. Consent to Transfer Key Shares. Key acknowledges and agrees that
in connection with execution of this Agreement each Shareholder will transfer
up to 50,000 shares of Key Common Stock to those parties identified on Schedule
3.2 hereto. Key Consents to such transfers conditioned upon receipt by Key
from said parties of investment representations similar to those made by
Shareholders in Section 2.2 hereof.
3.8. Use of the Levelland Property. The Shareholders agree to cause
Massingill Development, Inc. to allow Well-Co the rent free right to occupy and
use the Levelland Property (as hereinafter defined) until December 31, 1997 in
consideration for Key causing Well-Co to vacate the Levelland Property by
December 31, 1997.
3.9. Transfer of Gray County Litigation. Key acknowledges that prior
to the execution of this Agreement, Well-Co has assigned all of its interest in
the cause of action asserted in Curtis Well Servicing Co., Inc., et al v. Petro
Insurers General Agency, Inc., et al, Cause No. 29,355 in the 223rd Judicial
District Court of Gray County, Texas to Lyn-Mar Investments, Inc., a Texas
corporation owned by the Mark Duane Massingill and B. D. Massingill. From and
after the date hereof the Shareholders agree to cause Lynn-Mar Investments,
Inc., and Key agrees to cause Well-Co, to execute and deliver such other and
further instruments as may be required to reflect Lynn-Mar Investment, Inc.'s
ownership of such cause of action and that Well-Co has no further liability or
obligation thereunder.
ARTICLE 4
INDEMNIFICATION
4.1. Indemnification by Shareholders. On the terms and conditions and
subject to the limitations provided in this Article 4, each of the Shareholders
shall indemnify, defend and hold harmless Well-Co, Key, Key's affiliates and
subsidiaries and their respective officers, directors,
23
<PAGE> 25
employees, agents and stockholders (collectively, the "Key Indemnified
Parties"), against and with respect to any and all claims, costs, damages,
losses, expenses, obligations, liabilities, recoveries, suits, causes of action
and deficiencies ("Damages"), in excess of $150,000.00 in the aggregate that
such indemnitees shall incur or suffer, which arise, result from or relate to
any breach of, or failure by, the Shareholders to perform, their respective
representations, warranties, covenants or agreements in this Agreement or in
any schedule, certificate, exhibit or other instrument furnished or delivered
by Key to the Shareholders under this Agreement; provided, however, that (i)
the Shareholders' aggregate obligations to indemnify the Key Indemnified
Parties shall never exceed the aggregate sum of $21,520,816.46 (as adjusted
pursuant to the provisions of Section 1.3 hereof); (ii) the Shareholders shall
not be required to so indemnify, defend and hold harmless the Key Indemnified
Parties against and with respect to any Damages incurred as a result of a
breach by either of the Shareholders of their respective representations and
warranties in this Agreement or in any schedule, certificate, exhibit or other
instrument furnished or delivered to Key by either of the Shareholders under
this Agreement for which a Key Indemnified Party fails to provide written
notice of a claim for such Damages to the Shareholders on or before the
expiration of the survival period (as specified in Section 5 hereof) of the
specific representation or warranty alleged to have been breached; and (iii) in
the event that a Key Indemnified Party can recover Damages for which it is
indemnified by the Shareholders pursuant to this Section 4.1 from a collateral
source including, but not limited to, a third party or insurance coverage, and
does in fact collect all or a portion of such Damages from such collateral
source, then such Key Indemnified Party agrees not to enforce its right to
indemnification under this Section 4.1 to the extent of such third party
collections.
4.2. Indemnification by Key. On the terms and conditions and subject
to the limitations provided in this Article 4, Key shall indemnify, defend and
hold harmless each of the Shareholders against and with respect to any and all
Damages in excess of $150,000.00 in the aggregate that such indemnitees shall
incur or suffer, which arise, result from or relate to any breach of, or
failure by Key to perform, any of its representations, warranties, covenants or
agreements in this Agreement or in any schedule, certificate, exhibit or other
instrument furnished or delivered to the Shareholders by or on behalf of Key
under this Agreement; provided, however, that (i) Key's aggregate obligation
hereunder to indemnify the Shareholders shall not exceed the sum of
$21,520,816.46 (as adjusted pursuant to the provisions of Section 1.3 hereof);
(ii) Key shall not be required to so indemnify, defend and hold harmless the
Shareholders and their employees and agents against and with respect to any
Damages incurred as a result of a breach by Key or any of is representations
and warranties in this Agreement or in any schedule, certificate, exhibit or
other instrument furnished or delivered to the Shareholders by Key under this
Agreement for which the Shareholders fail to provide written notice of a claim
for such Damages to Key on or before the expiration of the survival period (as
is specified in Section 5 hereof) of the specific representations or warranty
alleged to have been breached; and (iii) in the event that the Shareholders can
recover Damages for which they are indemnified by Key pursuant to this Section
4.2 from a collateral source including, but not limited to, a third party or
insurance coverage, and does in fact collect all or a portion of such Damages
from such collateral source, then the Shareholders agree not to enforce their
right to indemnification under this Section 4.2 to the extent of such third
party collections.
24
<PAGE> 26
In addition, Key will indemnify, defend and hold harmless the Shareholders and
their employees and agents against any claims in excess of $150,000 in the
aggregate to which the Shareholders may become subject (i) which arise, result
from or relate to the conduct of the business of Well-Co before or after the
date of this Agreement, except to the extent that the Shareholders are required
to indemnify Key pursuant to Section 4.1 or Section 4.5 of this Agreement; and
(ii) under the Securities Act or otherwise, insofar as such claims, or actions
or proceedings (whether commenced or threatened), in respect thereof, arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and Key will reimburse the Shareholders and
each such employee and agent for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending any such claim
(or action or proceeding in respect thereof); provided that Key shall not be
liable in any such case to the extent that a claim (or action or proceeding in
respect thereof) arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to Key in an instrument duly executed by the
Shareholders specifically stating that it is for use in the preparation
thereof; provided however, that (i) Key's aggregate obligation hereunder to
indemnify the Shareholders shall never exceed $21,520,816.46 (as adjusted
pursuant to the provisions of Section 1.3 hereof); (ii) Key shall not be
required to so indemnify, defend and hold harmless the Shareholders and their
employees and agents against and with respect to any Damages incurred as a
result of a breach by Key or any of its representations and warranties in this
Agreement or in any schedule, certificate, exhibit or other instrument
furnished or delivered to the Shareholders by Key under this Agreement for
which the Shareholders fail to provide written notice of a claim for such
Damages to Key on or before the expiration of the survival period (as is
specified in Section 5 hereof) of the specific representations or warranty
alleged to have been breached; and (iii) in the event that the Shareholders can
recover Damages for which they are indemnified by Key pursuant to this Section
4.2 from a collateral source including, but not limited to, a third party or
insurance coverage, and does in fact collect all or a portion of such Damages
from such collateral source, then the Shareholders agree not to enforce their
right to indemnification under this Section 4.2 to the extent of such third
party collections.
4.3. Indemnification Procedure. If any party hereto discovers or
otherwise becomes aware of an indemnification claim arising under Section 4.1,
Section 4.2 or Section 4.5 of this Agreement, such indemnified party shall give
written notice to the indemnifying party, specifying such claim, and may
thereafter exercise any remedies available to such party under this Agreement;
provided, however, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of any obligations
hereunder, to the extent the indemnifying party is not materially prejudiced
thereby. Further, promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding with respect to
which a claim for indemnification may be made pursuant to this Article 4, 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
25
<PAGE> 27
commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of any obligations hereunder, to the extent the indemnifying
party is not materially prejudiced thereby. In case any such action is brought
against an indemnified party, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after such
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof unless the indemnifying party
has failed to assume the defense of such claim and to employ counsel reasonably
satisfactory to such indemnified person. Any indemnifying party who elects not
to assume the defense of a claim shall not be liable for the fees and expenses
of more than one counsel in any single jurisdiction for all parties indemnified
by such indemnifying party with respect to such claim or with respect to claims
separate but similar or related in the same jurisdiction arising out of the
same general allegations. Notwithstanding any of the foregoing to the
contrary, the indemnified party will be entitled to select its own counsel and
assume the defense of any action brought against it if the indemnifying party
fails to select counsel reasonably satisfactory to the indemnified party, the
expenses of such defense to be paid by the indemnifying party. No indemnifying
party shall consent to entry of any judgment or enter into any settlement with
respect to a claim without the consent of the indemnified party, which consent
shall not be unreasonably withheld, or unless such judgment or settlement
includes as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability with
respect to such claim. No indemnified party shall consent to entry of any
judgment or enter into any settlement of any such action, the defense of which
has been assumed by an indemnifying party, without the consent of such
indemnifying party, which consent shall not be unreasonably withheld.
4.4. [Reserved]
4.5. Special Environmental Indemnification. Notwithstanding anything
to the contrary in this Agreement, the obligations of the parties relating to
the property described in Schedule 4.5 hereto (the "Levelland Property") shall
be governed exclusively as set forth in this Section 4.5.
4.5.1. Each of the Shareholders shall jointly and severally
indemnify, defend and hold harmless the Key Indemnified Parties against
and with respect to any and all liability, costs, damages (including,
but not limited to, natural resources damages), losses, expenses,
obligations, recoveries, suits, causes of action and deficiencies,
including interest, penalties and reasonable attorneys', experts' and
consultants' fees, which arise out of, result from or relate to the
Levelland Property and/or the Motor Fuels Corporation Site (defined
below) including, without limitation, damages relating to pollution
releases and environmental conditions thereon (the "Levelland
Damages"), subject only to the following limitations:
4.5.1.1. The Shareholders agree to place 50,000 shares of
Key Common Stock in escrow to secure the obligation to pay the
Levelland Damages in accordance
26
<PAGE> 28
with the terms and conditions set forth in the Escrow Agreement
executed by the parties and delivered concurrently herewith.
4.5.1.2. The indemnification in favor of Key contained in
this Section 4.5 shall be expressly understood by Shareholders to
be unlimited as to duration and amount, except as limited by
Section 4.5.1.3 hereof.
4.5.1.3. The parties agree that if, subsequent to the
date of this Agreement, there is a change in control of the
capital stock of Key or Well-Co (other than a merger or
consolidation of Well-Co with (or a transfer of the Well-Co
shares to) a Key affiliate or subsidiary of Key), then upon such
change in control the following shall occur:
4.5.1.3.1. If the Escrow Agreement entered into
pursuant to Section 4.5.1.1 is then in effect, the Escrow
Agreement shall terminate and any shares of Key Common
Stock, or cash escrowed in substitution therefor, shall be
released from escrow and delivered to Shareholders.
4.5.1.3.2. The indemnification by Shareholders in
favor of the Key Indemnified Parties provided for in this
Section 4.5 shall terminate with respect to the successor
of the Key Indemnified Parties as a result of the change
in control after the passage of twenty-five (25) years
from the date of this Agreement. After such termination
Key, its successors and assigns, shall indemnify and hold
harmless Shareholders from and against any Levelland
Damages incurred by Shareholders solely in their capacity
as former Shareholders of Well-Co.
4.5.2. Key agrees that it will not seek indemnification under
the provisions of this Section 4.5 unless it has complied with the
Indemnification Procedures set out in Section 4.3 hereof.
4.5.3. Each Shareholder covenants not to sue Key, its
shareholders, subsidiaries or affiliates, or their respective officers,
directors, employees and agents, for any and all liability and response
costs incurred by Shareholders which arise out of or relate to Well-Co's
ownership or use of the Levelland Property prior to the date of this
Agreement, any relationship the Levelland Property may have or be
alleged to have in connection with the Motor Fuels Corporation Site, or
any release or threat of release from the Motor Fuels Corporation Site.
4.5.4. The "Motor Fuels Corporation Site" means the site
designated as Site No. TX0001093152 by the Texas Natural Resource
Conservation Commission and the U.S. Environmental Protection Agency,
including any site or area to which a hazardous substance therefrom has
migrated.
27
<PAGE> 29
4.6. Exclusive Remedy. From and after the date of this Agreement, the
indemnification provided in Sections 4.1 through 4.5 shall be the exclusive
remedy that may be asserted under this Agreement, in connection with the
transactions contemplated herein or in connection with the business or
operations of Well-co. Notwithstanding any provisions to the contrary
contained herein, each of the parties to this Agreement hereby waives any right
to recover special, punitive or exemplary damages for any claim asserted
against the other.
ARTICLE 5
MISCELLANEOUS
5.1. Survival of Representations, Warranties and Covenants. All
representations and warranties made by the parties hereto shall survive until
September 30, 1998, notwithstanding the preparation by Key of the Final
Balance Sheet or any investigation made by or on behalf of any of the parties
hereto; provided, however, that the representations and warranties contained in
Section 2.1.11 shall survive until the expiration of the applicable statute of
limitations associated with tax issues. All statements contained in any
certificate, schedule, exhibit or other instrument delivered pursuant to this
Agreement shall be deemed to have been representations and warranties by the
respective party or parties, as the case may be, and shall also survive until
September 30, 1998 despite any investigation made by any party hereto or on
its behalf. All covenants and agreements contained herein shall survive as
provided under this Agreement.
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.
28
<PAGE> 30
IF TO KEY
Addressed to: With a copy to:
Key Energy Group, Inc. Key Energy Group, Inc.
Two Tower Center, Tenth Floor 1501 E. Taylor
East Brunswick, New Jersey 08816 Midland, Texas 79701
Attn: General Counsel Attn: C. Ron Laidley
Facsimile: (908) 247-5148 Facsimile: (915) 570-8990
and
Lynch, Chappell & Alsup
300 N. Marienfeld, Suite 700
Midland, Texas 79701
Attn: James M. Alsup
Facsimile: (915) 683-2587
IF TO A SHAREHOLDER
Addressed to: With a copy to:
Mark Massingill Kendall Cowan
2122 Mustang Drive Robinson, Burdette, Martin & Cowan
Levelland, Texas 79336 13th Floor
First National Bank Bldg.
Lubbock, Texas 7740l
Facsimile: (806) 747-2106
and
Jenkens & Gilchrist
1445 Ross Avenue, Suite 3200
Dallas, Texas 75204
Attn: Wm. Vincent Murchison
Facsimile: (214) 855-4300
Any communication so addressed and mailed by first-class registered or
certified mail, postage prepaid, with return receipt requested, shall be deemed
to be received on the third business day after so mailed, and if delivered by
courier or facsimile to such address, upon delivery during normal business
hours on any business day.
29
<PAGE> 31
5.5. Table of Contents and Captions. The table of contents and
captions contained in this Agreement are solely for convenient reference and
shall not be deemed to affect the meaning or interpretation of any article,
section, or paragraph hereof.
5.6. Binding Effect; Assignment; No Third Party Benefit. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to or shall confer upon any person
other than Key and the Shareholders (and parties affiliated with them or, as to
the registration rights provided in Section 3.3 hereof, those parties listed on
Schedule 3.2 hereto), any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
5.7. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the successors and assigns
of the parties hereto.
5.8. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
void, or unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
5.9. Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the applicable laws of the State of
Texas.
5.10. Knowledge. Reference to "knowledge" contained in Sections 2.1.3,
2.1.17, 2.1.14, 2.1.16 and 2.1.20 hereof refer only to the actual knowledge of
each Shareholder. Reference to "knowledge", "known" or "knows" contained in
Sections 2.1.10, 2.1.11, 2.1.13, 2.1.15, 2.1.17, 2.1.17.7, 2.1.19 and 2.1.21
hereof refer to, in addition to the actual knowledge of each Shareholder, that
level of knowledge which a person in the same office, position and relationship
to Well-Co (and the same level of responsibility and authority over the
operations of Well-Co) as such Shareholder would be reasonably expected to
possess.
30
<PAGE> 32
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.
KEY ENERGY GROUP, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
SHAREHOLDERS
-------------------------------------
Mark Massingill
-------------------------------------
Lynn Massingill
31
