UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8038
KEY ENERGY GROUP, INC.
(Exact name of registrant as specified in its charter)
Maryland 04-2648081
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two Tower Center, Twentieth Floor, East Brunswick, NJ 08816
(Address of Principal executive offices) (ZIP Code)
Registrant's telephone number including area code: (732) 247-4822
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark whether the registrant has filed documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court since there was a distribution of securities under a plan
confirmed by a court. Yes X No
Common Shares outstanding at November 14, 1997: 18,148,056
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KEY ENERGY GROUP, INC. AND SUBSIDIARIES
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 19
Item 2. Changes in Securities and Use of Proceeds. 19
Item 3. Defaults Upon Senior Securities. 19
Item 4. Submission of Matters to a Vote of Security Holders. 19
Item 6. Exhibits and Reports on Form 8-K. 19
Signatures. 22
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Key Energy Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(unaudited)
September 30, June 30,
(Thousands, except share and per share data) 1997 1997
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ASSETS
Current Assets:
Cash $49,276 $41,704
Accounts receivable, net of allowance for
doubtful accounts 64,909 45,230
Inventories 6,421 5,171
Prepaid expenses and other current assets 995 1,228
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Total Current Assets 121,601 93,333
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Oilfield service equipment 301,313 176,326
Oil and gas well drilling equipment 6,658 6,319
Motor vehicles 11,848 10,569
Oil and gas properties and other related equipment, successful
efforts method 25,680 23,622
Furniture and equipment 1,980 1,661
Buildings and land 10,059 8,758
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354,538 227,255
Accumulated depreciation & depletion (23,890) (19,069)
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Net Property and Equipment 330,648 208,186
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Other Assets 45,979 18,576
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Total Assets $501,228 $320,095
==============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $17,149 $15,339
Other accrued liabilities 20,947 12,507
Accrued interest 273 2,102
Accrued income taxes 3,943 1,664
Deferred tax liability 126 126
Current portion of long-term debt 1,270 1,404
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Total Current Liabilities 43,708 33,142
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Long-term debt, less current portion 263,712 172,763
Non-current accrued expenses 4,015 4,017
Deferred tax liability 61,957 35,738
Minority interest - 1,256
Commitments and contingencies
Stockholders' equity:
Common stock, $.10 par value; 25,000,000 shares
authorized, 17,954,672 and 12,297,752 shares issued
and outstanding at September 30, 1997 and June 30,
1997, respectively 1,795 1,230
Additional paid-in capital 104,185 55,031
Retained earnings 21,856 16,918
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Total Stockholders' Equity 127,836 73,179
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Total Liabilities and Stockholders' Equity $501,228 $320,095
==============================================================================
See the accompanying notes which are an integral part of these
Consolidated financial statements.
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Key Energy Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(unaudited)
Three Months Ended
September 30,
(Thousands, except per share data) 1997 1996
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REVENUES:
Oilfield services $69,498 $27,311
Oil and gas 2,154 1,525
Oil and gas well drilling 2,823 2,324
Other, net 1,081 302
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75,556 31,462
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COSTS AND EXPENSES:
Oilfield services 48,239 19,700
Oil and gas 937 513
Oil and gas well drilling 2,263 1,881
Depreciation, depletion and amortization 5,147 2,095
General and administrative 7,701 3,527
Interest 3,438 1,350
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67,725 29,066
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Income before income taxes and minority interest 7,831 2,396
Income tax expense 2,893 784
Minority interest in net income - 58
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NET INCOME $4,938 $1,554
==============================================================================
EARNINGS PER SHARE :
Primary:
Net income $0.32 $0.14
Assuming full dilution:
Net income $0.25 $0.13
==============================================================================
WEIGHTED AVERAGE OUTSTANDING:
Primary 15,665 10,894
Assuming full dilution 20,161 16,974
==============================================================================
See the accompanying notes which are an integral part of these consolidated
financial statements.
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Key Energy Group, Inc. and Subsidiaries
Consolidated Statements of Cash
Flows
Three Months Ended
(unaudited)
September 30,
(Thousands) 1997 1996
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Net income $4,938 $1,554
Adjustments to reconcile income from operations to
net cash provided by operations:
Depreciation, depletion and amortization 5,147 2,095
Deferred income taxes 2,893 784
Minority interest in net income - 58
Change in assets and liabilities net of effects
from the acquisitions:
Increase in accounts receivable (6,224) (1,912)
Increase (decrease) in other current assets 1,400 (449)
Decrease in accounts payable and accrued expenses (972) 853
Increase (decrease) in accrued interest (1,829) 664
Other assets and liabilities (1,293) (631)
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Net cash provided by operating activities 4,060 3,016
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures - Well service operations (6,694) (2,900)
Capital expenditures - Oil and gas operations (2,058) (41)
Capital expenditures - Oil and gas well
drilling operations (339) (323)
Cash received in acquisitions 2,903 -
Acquisitions - well service operations -
net of cash acquired (107,630) -
Acquisitions - oil and gas well drilling operations (14,610) -
Acquisitions - minority partnership interests (3,426) -
Expenditures for oil and gas properties - (281)
- ------------------------------------------------------------------------------
Net cash used in investing activities (131,854) (3,545)
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CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on debt (318) (899)
Repayment of long-term debt (197,000) (35,413)
Borrowings (payments) under line-of-credit 134,000 939
Proceeds from stock options exercised - 58
Proceeds from warrants exercised 4,123 -
Proceeds from long-term debenture - net - 50,440
Proceeds from long-term commercial paper debt - net 194,500 -
Proceeds from other long-term debt 61 -
- ------------------------------------------------------------------------------
Net cash provided by financing activities 135,366 15,125
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Net increase in cash 7,572 14,596
Cash at beginning of period 41,704 4,211
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Cash at end of period $49,276 $18,807
==============================================================================
See the accompanying notes which are an integral part of these
consolidated financial statements.
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Key Energy Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company The consolidated financial information in this report includes
the accounts of Key Energy Group, Inc. (the "Company" or "Key") and its
wholly-owned subsidiaries and was prepared in conformity with accounting
policies used in the Annual Report on Form 10-K furnished for the preceding
fiscal year.
As of November 14, 1997, the Company operated a fleet of approximately 775
well service rigs, 608 fluid hauling and other trucks, and 27 drilling rigs
(including 17 workover rigs, 14 trucks, and six drilling rigs in Argentina). The
Company believes that, as of November 14, 1997, Key's well service and workover
rig fleet and fluid hauling and other truck fleet were the largest active fleets
onshore in the continental United States and the second largest fleet in
Argentina. The Company operates in most onshore oil and natural gas producing
regions of the continental United States and provides a full range of
maintenance and workover services to major and independent oil and gas companies
in all its operating regions. In addition to maintenance and workover services,
Key also provides services which include the completion of newly drilled wells,
the re-completion of existing wells (including horizontal recompletions) and the
plugging and abandonment of wells at the end of their useful lives. Other
services include oil field fluid transportation, storage and disposal services,
frac tank rentals, fishing and rental tools, wire-line services, air drilling
and hot oiling. In addition, the Company is engaged in contract drilling in West
Texas and Argentina and owns and produces oil and natural gas in the Permian
Basin.
The Company conducts its domestic operations primarily through six
wholly-owned subsidiaries: Yale E. Key, Inc. ("Yale E. Key"); WellTech Eastern,
Inc. ("WellTech Eastern"); Key Four Corners, Inc. ("Key Four Corners"); Key
Rocky Mountain, Inc. ("Key Rocky Mountain"); Odessa Exploration Incorporated
("Odessa Exploration"); and Key Energy Drilling, Inc. ("Key Energy Drilling").
In addition, Key operates in Argentina through its indirect wholly-owned
subsidiaries, Servicios WellTech S.A. ("Servicios") and Kenting Drilling
(Argentina) S.A. ("Kenting"). WellTech Eastern operates through three divisions:
WellTech Mid-Continent Division, WellTech Eastern Division and Brooks Well
Servicing Division. Yale E. Key, WellTech Eastern, Key Four Corners, Key Rocky
Mountain, Servicios and Kenting provide oil and gas well services. Odessa
Exploration is engaged in the production of oil and gas, and Key Energy
Drilling, Servicious, Kenting, Brooks Well Servicing Division and Key Four
Corners provide contract oil and gas well drilling services.
Odessa Exploration utilizes the successful efforts method of accounting for
its oil and gas properties. Under this method, all costs associated with
productive wells and nonproductive development wells are capitalized, while
nonproductive exploration costs and geological and geophysical costs (if any),
are expensed. Capitalized costs relating to proved properties are depleted using
the unit-of-production method based on proved reserves expressed as net
equivalent barrels as reviewed by independent petroleum engineers. The carrying
amounts of properties sold or otherwise disposed of and the related allowance
for depletion are eliminated from the accounts and any gain/loss is included in
results of operations. Odessa Exploration's aggregate oil and gas properties are
stated at cost, not in excess of total estimated future net revenues net of
related income tax effects.
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Key Energy Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(unaudited)
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all normal recurring adjustments
necessary to present fairly the financial position as of September 30, 1997, the
statement of cash flows for the three months ended September 30, 1997 and 1996,
and the results of operations for the three month period then ended.
2. BUSINESS AND PROPERTY ACQUISITIONS
Acquisitions Completed after September 30, 1997
The following described acquisitions have been completed since September
30, 1997. The results of operations from these acquisitions are not included in
the Company's results of operations for the three months ended September 30,
1997.
GSI Trucking Company, Inc., Kahlden Production Services, Inc. and McCurdy
Well Service, Inc.
On October 3, 1997, the Company acquired certain assets of GSI Trucking
Company, Inc., Kahlden Production Services, Inc. and McCurdy Well Service, Inc.
("GSI, Kahlden and McCurdy") for approximately $1.6 million in cash. GSI,
Kahlden and McCurdy operate 12 fluid hauling trucks. Upon completion of the
acquisition, the GSI, Kahlden and McCurdy assets are operated by the Brooks Well
Servicing Division of Welltech Eastern out of Bryan, Texas. The acquisition was
accounted for using the purchase method.
Big A Well Service Co., Sunco Trucking Co. and Justis Supply Co., Inc.
Effective October 1, 1997, the Company completed the acquisition of
substantially all of the assets of Big A Well Service Co., Sunco Trucking Co.
and Justis Supply Co., Inc. (collectively "Big A/Sunco") for approximately $28
million in cash and 125,000 shares of the Company's comon stock. Big A/Sunco
operates 29 well service rigs, four drilling rigs, 75 fluid hauling and other
trucks, related equipment and a machine shop/supply store in the four corners
region of the Southwestern United States. The acquired Big A/Sunco assets are
operated by Key Four Corners primarily out of Farmington, New Mexico. The
acquisition was accounted for using the purchase method.
Acquisitions Completed During the Three Months Ended September 30, 1997
The following described acquisitions have been completed during the three
months ended September 30, 1997. Except as noted below, the results of
operations from these acquisitions are included in the Company's results of
operations for the three months ended September 30, 1997 (effective as of the
date of completion of the acquisition unless otherwise noted).
Frontier Well Service, Inc.
Effective as of September 30, 1997, the Company completed the acquisition
of Frontier Well Service, Inc. ("Frontier") for approximately $3.5 million in
cash. Frontier operates 12 well service rigs and related equipment in Wyoming.
Frontier is operated by Key Rocky Mountain and is based in Casper, Wyoming. The
operating results of Frontier will be included in the Company's results of
operations effective as of October 1, 1997. The acquisition was accounted for
using the purchase method.
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Key Energy Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(unaudited)
Dunbar Well Service, Inc.
Effective as of September 29, 1997, the Company completed the acquisition
of Dunbar Well Service, Inc. ("Dunbar") for approximately $11.8 million in cash.
Dunbar operates 38 well service rigs and related equipment in Wyoming. Dunbar is
operated by Key Rocky Mountain and is based in Casper, Wyoming. The operating
results of Dunbar will be included in the Company's results of operations
effective as of October 1, 1997. The acquisition was accounted for using the
purchase method.
BRW Drilling, Inc.
Effective as of September 25, 1997, the Company completed its acquisition
of BRW Drilling, Inc. ("BRW") for approximately $14.6 million in cash. BRW
operates seven drilling rigs and related equipment in the Permian Basin. The
Company plans to combine the BRW operations with the Key Energy Drilling
operations in the Permian Basin to form a thirteen rig shallow drilling
operation. The operating results of BRW will be included in the Company's
results of operations effective as of October 1, 1997. The acquisition was
accounted for using the purchase method.
Waco Oil & Gas Co., Inc.
Effective as of September 1, 1997, the Company completed its acquisition of
certain assets of Waco Oil & Gas Co., Inc. ("Waco") for approximately $7.0
million in cash. The Waco assets included 12 well service rigs, three drilling
rigs, 33 fluid hauling trucks and other trucks operated out of Glenville, West
Virginia. Following the consummation of the acquisition, the three drilling rigs
acquired from Waco were sold to an independent third party for $2.3 million in
cash. No gain or loss was recognized in this transaction. The Waco assets are
operated by the WellTech Eastern Division of WellTech Eastern. The operating
results of Waco are included in the Company's results of operations effective
September 23, 1997. The acquisition was accounted for using the purchase method.
Landmark Fishing & Rental, Inc.
Effective as of September 16, 1997, the Company completed the acquisition
of Landmark Fishing & Rental, Inc. ("Landmark") for approximately $3.3 million
in cash. Landmark operates a rental tool business in Western Oklahoma and the
Texas Panhandle. Landmark is operated by the WellTech Mid-Continent Division of
WellTech Eastern. The operating results of Landmark are included in the
Company's results of operations effective September 16, 1997. The acquisition
was accounted for using the purchase method.
Ram Oil Well Service, Inc. and Rowland Trucking Co., Inc.
Effective as of September 1, 1997, the Company completed the acquisition of
Ram Oil Well Service, Inc. and Rowland Trucking Co., Inc. ("Ram/Rowland") for
$21.5 million in cash. Ram/Rowland operates 17 well service rigs, 93 fluid
hauling and other trucks, 290 frac tanks, three disposal and brine wells, and
dirt construction equipment in West Texas and Southeast New Mexico. Ram/Rowland
is operated by Company's by Yale E. Key, Inc. The operating results of
Ram/Rowland are included in the Company's results of operations effective
September 1, 1997. The acquisition was accounted for using the purchase method.
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Key Energy Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(unaudited)
Mosley Well Service, Inc.
Effective as of August 22, 1997, the Company completed the acquisition of
Mosley Well Service, Inc., ("Mosley") which operates thirty-six well service
rigs and related equipment in East Texas, Northern Louisiana and Arkansas for
approximately $16.2 million in cash. The Company plans to integrate the Mosley
operations with the Brooks Well Servicing Division of WellTech Eastern. The
operating results of Mosley are included in the Company's results of operations
effective September 1, 1997. The acquisition was accounted for using the
purchase method.
Kenting Holdings (Argentina) S.A.
Effective as of July 30, 1997, the Company completed the acquisition of
Kenting Holdings (Argentina) S.A. ("Kenting") for approximately $10.1 million in
cash. Kenting is the sole shareholder of Kenting Driling (Argentina) S.A. which
operates six well service rigs, three drilling rigs and related equipment in
Argentina. The operating results of Kenting are included in the Company's
results of operations effective August 1, 1997. The acquisition was accounted
for using the purchase method.
Patrick Well Service, Inc.
Effective as of July 17, 1997, the Company completed the acquisition of
Patrick Well Service, Inc. ("Patrick") for $7.0 million in cash. Patrick
operates 29 well service rigs and related equipment in Southwest Kansas,
Oklahoma and Southeast Colorado. Patrick is operated by the WellTech
Mid-Continent Division of WellTech Eastern. The operating results of Patrick are
included in the Company's results of operations effective August 1, 1997. The
acquisition was accounted for using the purchase method.
Servicios WellTech S.A. Minority Interest
Effective as of July 1, 1997, the Company purchased the remaining 37%
interest in Servicios from two unrelated parties for approximately $3.4 million
in cash. As a result of the purchase, the Company now owns 100% of Servicios.
Pending Acquisition
J.W. Gibson Well Service Company
Effective as of July 31, 1997, the Company entered into a definitive
agreement for the acquisition of J.W. Gibson Well Service Company ("Gibson") for
cash, stock and warrants with an estimated value at that time of approximately
$25.0 million. Gibson operates 74 well service rigs and related equipment in
eight states. Since July 31, 1997, the Company, through Key Rocky Mountain, has
managed the operations of Gibson pursuant to an interim operations agreement
under which Key Rocky Mountain receives a management fee equal to the net income
from Gibson's operations less $25,000 per month. In addition, Key Rocky Mountain
received a one-time management fee of $300,000 for the three months ended
September 30, 1997. These management fees are included in the Company's results
of operations for the three months ended September 30, 1997. On October 10,
1997, the Company entered into an amendment to the definative agreement, which
amendment provided for, among other things, an extension of the closing and the
interim operating agreement to January 1998.
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Key Energy Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(unaudited)
3. LONG-TERM DEBT
As of September 30, 1997, the Company had three major components of
long-term debt which are more fully described below.
7% Convertible Subordinated Debentures
In July 1996, the Company completed the offering of $52,000,000 of 7%
Convertible Subordinated Debentures due 2003 (the"7% Debentures"). The offering
was a private offering pursuant to Rule 144A under the Securities Act. As the
result of the conversion of a significant portion of the 7% Debentures into the
Company's common stock as more fully described below, the remaining principal
balance at September 30, 1997 was $4,600,000. The remaining 7% Debentures mature
on July 1, 2003 and remain convertible at any time before maturity, unless
previously redeemed, into shares of the Company's common stock at a conversion
price of $9 3/4 per share, subject to adjustment in certain events. In addition,
the remaining holders of the Debentures who convert prior to July 1, 1999 will
be entitled to receive, in addition to the Company's common stock, a payment
equal to 50% of the interest otherwise payable on the converted Debentures from
the date of conversion through July 1, 1999, payable in cash or common stock, at
the Company's option. Interest on the remaining 7% Debentures is payable
semi-annually on January 1 and July 1 of each year. The Company has made
interest payments on the 7% Debentures on January 1, 1996 and July 1, 1997.
As of September 30, 1997, $47,400,000 in principal amount of the 7%
Debentures had been converted into the Company's common stock. The conversion
was at the option of the holders. The Debentures converted into 5,062,369 shares
of the Company's common stock. The conversion included 200,831 shares in excess
of the number of shares issuable at the conversion price of $9.75 per share.
Such additional consideration will be accounted for as an increase to the
Company's equity. In addition, the proportional amount of debt issuance costs
associated with the converted Debentures will be accounted for as a decrease to
the Company's equity.
PNC Credit Agreement
On June 6, 1997, the Company entered into an agreement (the"PNC Credit
Agreement") with PNC Bank, N.A., as administrative agent, Norwest Bank Texas,
N.A. , as collateral agent, Lehman Commercial Paper, Inc., as advisor, arranger
and syndication agent and the lenders named therein pursuant to which the
lenders provided a $255 million credit facility, consisting of a $120 million
seven-year term loan and a $135 million five-year revolver. The interest rate on
the term loan was LIBOR plus 2.75 percent. The interest rate on the revolver
varied based on the LIBOR and the level of the Company's indebtedness and at
September 30, 1997 was LIBOR plus 2.25 percent. The credit facility contained
certain restrictive covenants and requires the Company to maintain certain
financial ratios. At September 30, 1997, the principal balance of the PNC Credit
Agreement revolver was $57 million and there was approximately $78 million in
unused credit line facilities.
On September 25, 1997, the Company repaid the term loan and a portion of
the amount then outstanding under the revolver using the proceeds from the
initial closing of the Company's private placement of the 5% Notes, (discussed
below). On October 7, 1997, the Company again prepaid a portion of the amount
then outstanding under the revolver using the proceeds from the second closing
of the Company's private placement of the 5% Notes (discussed below). Effective
as of November 6, 1997, the Company completed the re-negotiation of the
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Key Energy Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(unaudited)
PNC Credit Agreement by entering into an amended and restated PNC Credit
Agreement providing for, among other things, an increase in borrowing
availability under the revolver from $135 million to $200 million and a decrease
in the revolver's interest rate from LIBOR plus 2.25 percent to LIBOR plus 1.25
percent.
5% Subordinated Notes
On September 25, 1997, the Company completed an initial closing of its
private placement of $200 million of 5% Convertible Subordinated Notes due 2004
(the "5% Notes"). On October 7, 1997, the Company completed a second closing of
its private placement of an additional $16 million of the 5% Notes pursuant to
the exercise of the remaining portion of an over-allotment option granted to the
initial purchasers of the 5% Notes. The placement was a private offering
pursuant to Rule 144A under the Securities Act. The 5% Notes bear interest at a
5% coupon rate and are convertible into shares of the Company's common stock at
a conversion price of $38.50 per share at the holder's option on the earlier of
(i) the date that the registration statement on Form S-3 required to be filed
with the Securities and Exchange Commission (the "Commission") covering resales
of the 5% Notes and the underlying common stock by the holders thereof is
declared effective by the Commission and (ii) 270 days from the date of
issuance. Interest is payable on March 15 and September 15, commencing March 15,
1998. The 5% Notes are redeemable at the Company's option on or after September
15, 2000, in whole or part, together with accrued and unpaid interest. Proceeds
from the private placement of the 5% Notes were used to repay the outstanding
balances under the Company's revolving credit facility and term loan facility
(see above).
4. RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 128 - Earnings per Share
Statement of Financial Accounting Standards No. 128 ("SFAS 128") - Earnings
per Share, is effective for periods ending on or after December 15, 1997. SFAS
128 replaces the presentation of primary earnings per share ("EPS") with the
presentation of basic EPS, which excludes dilution and is computed by dividing
income available to common shareholders by the weighted-average number of common
shares outstanding for the period. SFAS 128 also requires dual presentation of
basic EPS and diluted EPS on the face of the income statement and requires a
reconciliation of the numerators and denominators of basic EPS and diluted EPS.
Management believes the adoption of SFAS 128 will not have a material effect on
its financial position or results of operations of the Company.
Statement of Financial Accounting Standards No. 130 - Reporting
Comprehensive Income
Statement of Financial Accounting Standards No. 130 ("SFAS 130") -
Reporting Comprehensive Income, is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. The Company will adopt SFAS 130
for the fiscal year ended June 30, 1999. Management believes the adoption of
SFAS 130 will not have a material effect on its financial position or results of
operations of the Company.
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Key Energy Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(unaudited)
Statement of Financial Accounting Standards No. 131 - Disclosures about
Segments of an Enterprise and Related Information
Statement of Financial Accounting Standards No. 131 ("SFAS 131") -
Disclosures about Segments of an Enterprise and Related Information, is
effective for financial statements for periods beginning after December 15,
1997. SFAS 131 need not be applied to interim financial statements in the
initial year of its application. However, comparative information for interim
periods in the initial year of application is to be reported in the financial
statements for interim periods in the second year of application. The Company
will adopt SFAS 131 for the fiscal year ended June 30, 1999. Management believes
the adoption of SFAS 131 will not have a material effect on its financial
position or results of operations of the Company.
5. COMMITMENTS AND CONTINGENCIES
Various suits and claims arising in the ordinary course of business are
pending against the Company. Management does not believe that the disposition of
any of these items will result in a material adverse impact to the consolidated
financial position of the Company.
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KEY ENERGY GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.
The following discussion and analysis should be read in conjunction with
the Company's audited Form 10-K for the year ended June 30, 1997.
Current and Subsequent Events
During the three month interval beginning July 1, 1997, and ending
September 30, 1997, the Company purchased the remaining 37% interest in
Servicios WellTech Argentina and completed the acquisition of six well servicing
and trucking companies: Patrick Well Service, Kenting Holdings (Argentina) S.A.,
Mosley Well Service, Ram/Rowland Oil Well Service, Landmark Fishing and Rental
and Waco Oil and Gas. These acquisitions, (which are more fully described in
Note 2), collectively operate 97 well service rigs (including six in Argentina),
108 fluid hauling and other trucks and six drilling rigs, including three in
Argentina.
Subsequent to September 30, 1997, the Company has announced or completed
the acquisition of six well service companies and two contract drilling
companies which, collectively, operate 164 well service rigs, 17 drilling rigs
and 118 fluid hauling and other trucks. These eight announced or completed
acquisitions, (which are more fully described in Note 2), have allowed the
Company to expand its operating presence into markets it previously did not
serve, including the Rocky Mountains and the Four Corners area. Assuming
completion of the pending acquisitions, Key's operations will include 790 well
service and workover rigs, 623 fluid hauling and other trucks, 33 drilling rigs
and numerous ancillary operations. Based upon the number of active well service
rigs and fluid hauling and other trucks that the Company would operate assuming
the completion of all announced acquisitions, the Company believes that Key
Energy Group, Inc. will be the largest onshore well service provider within the
continental United States and the second largest well service provider in
Argentina.
Future Growth Strategy
Historically, the domestic well service rig and production service industry
has been highly fragmented, characterized by a large number of smaller companies
which have competed effectively on a local basis in terms of pricing and the
quality of services offered. In recent years, however, many major and
independent oil and gas companies have placed increasing emphasis upon not only
pricing, but also on safety records and quality management systems of, and the
breadth of services offered by, their vendors, including well servicing
contractors. This market environment, which requires significant expenditures by
smaller companies to meet these increasingly rigorous standards, has forced many
smaller well servicing companies to sell their operations to larger competitors.
As a result, the industry has seen high levels of consolidation among the
competing contractors.
Over the past eighteen months, Key has been the leading consolidator of
this industry, completing twenty-six acquisitions of well servicing operations
(32, including pending transactions and transaction completed subsequent
to September 30, 1997). This consolidation has led to reduced fragmentation in
the market and has led to more predictable demand for well services for the
Company and its competitors. Key's management structure is decentralized, which
allows for rapid integration of acquisitions and the retention of strong local
identities of many of the acquired businesses. As a result of these and other
factors, the Company has developed a growth strategy to: (i) identify, negotiate
and consummate additional acquisitions of complementary well servicing
operations, including rigs, trucking and
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<PAGE>
other ancillary services; (ii) fully-integrate acquisitions into the
Company's decentralized organizational structure and thereby attempt to maximize
operating margins; (iii) expand business lines and services offered by the
Company in existing areas of operations; and (iv) extend the geographic scope
and operating environments for the Company's operations.
RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 1997 VERSUS QUARTER ENDED SEPTEMBER 30, 1996
The following discussion provides information to assist in the
understanding of the Company's financial condition and results of operations. It
should be read in conjunction with the financial statements and related notes
appearing elsewhere in this report.
Operating Income
The Company
Revenues of the Company for the quarter ended September 30, 1997 increased
$44,094,000, or 140%, from $31,462,000 for the quarter ended September 30, 1996
to $75,556,000 for the current quarter. Net income for the quarter ended
increased $3,384,000, or 218%, from $1,554,000 for the quarter ended September
30, 1996 to $4,938,000 for the current quarter. The increase in revenues and net
income was primarily due to the completed acquisitions of well service
operations (see Note 2), increased oil and gas revenues from Odessa Exploration,
and a general increase in oil-well service equipment utilization.
Oilfield Services
Oilfield service revenues increased $42,187,000, or 154%, from $27,311,000
for the quarter ended September 30, 1996, to $69,498,000 for the current
quarter. The increase in revenues is primarily attributable to acquisitions as
well as higher equipment use and pricing resulting from an increase in demand
for oilfield services.
Oil and Natural Gas Exploration and Production
Revenues from oil and gas activities increased $629,000, or 41%, from
$1,525,000 for the quarter ended September 30, 1996, to $2,154,000 for the
current quarter. The increase in revenues was primarily the result of increased
production of oil and natural gas as several oil and natural gas wells, which
were drilled during fiscal 1997 began production and higher oil and natural gas
prices for the current period. Of the total $2,154,000 of revenues for the
quarter ended September 30, 1997, approximately $1,852,000 was from the sale of
oil and natural gas with the remainder of $302,000 representing primarily
administrative fee income.
Oil and Natural Gas Well Drilling
Oil and natural gas well drilling revenues increased $499,000, or 22%, from
$2,324,000 for the quarter ended September 30, 1996 to $2,823,000 for the
current quarter. The increase in revenues is primarily attributable to higher
equipment utilization and an increase in pricing.
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<PAGE>
Operating Expenses
Oilfield Services
Oilfield service expenses increased $28,539,000, or 145%, from $19,700,000
for the quarter ended September 30, 1996 to $48,239,000 for the current quarter.
The increase was due primarily to acquisitions and the increased demand for
oilfield services. In addition, the Company has continued to expand its
services, offering ancillary services and equipment such as well fishing tools,
blow-out preventers and well frac tanks.
Oil and natural Gas Exploration and Production
Expenses related to oil and gas activities increased $424,000, or 83%, from
$513,000 for the quarter ended September 30, 1996 to $937,000 for current
quarter. The increase in expenses was primarily the result of increased
production of oil and natural gas as several oil and natural gas wells, which
were drilled during fiscal 1997, began production during the quarter.
Oil and Natural Gas Well Drilling
Expenses related to oil and natural gas well drilling activities increased
$382,000, or 20%, from $1,881,000 for the quarter ended September 30, 1996
$2,263,000 for current quarter. The increase in expenses is attributable to
higher equipment utilization and increased revenues.
Depreciation, Depletion and Amortization Expense
Depreciation, depletion and amortization expense increased $3,052,000, or
146%, from $2,095,000 for the quarter ended September 30, 1996 to $5,147,000 for
the current quarter. The increase is primarily due to oilfield service
depreciation expense, which is the result of increased oilfield service capital
expenditures for the current period versus the prior period and the acquisitions
of oilfield service assets.
General and Administrative Expenses
General and administrative expenses increased $4,174,000, or 118%, from
$3,527,000 for the quarter ended September 30, 1996 to $7,701,000 for the
current quarter. The increase was primarily attributable to the Company's recent
acquisitions and expanded services.
Interest Expense
Interest expense increased $2,088,000, or 155%, from $1,350,000 for the
quarter ended September 30, 1996 to $3,438,000 for the current quarter. The
increase was primarily the result of increased indebtedness as a result of the
Company's acquisition program.
Income Taxes
Income tax expense increased $2,109,000, or 269%, from $784,000 for the
quarter ended September 30, 1996, to $2,893,000 for the current quarter. The
increase in income taxes is primarily due to the increases in operating income
and a higher effective tax rate. However, the Company does not expect to be
required to remit the total amount of the $2,893,000 in total federal income tax
expense for the quarter ended September 30, 1997, because of the availability of
net operating loss carryforwards, accelerated tax depreciation and oil and
natural gas drilling tax attributes.
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<PAGE>
Cash Flow
Net cash provided by operating activities increased $1,044,000, or 35%,
from $3,016,000 during the quarter ended September 30, 1996, to $4,060,000 for
the current quarter. The increase is attributable primarily to increases in net
income and depreciation, depletion and amortization which was largely off-set by
a decrease in accounts receivable.
Net cash used in investing activities increased $128,309,000, or 362%, from
$3,545,000 during the quarter ended September 30, 1996, $131,854,000 for the
current quarter. The increase is primarily the result of increased capital
expenditures for well service operations as well as the Company's recent
acquisitions.
Net cash provided by financing activities increased $120,241,000, or 795%,
from $15,125,000 during the quarter ended September 30, 1996, to $135,366,000
for the current quarter. The increase is primarily the result of the proceeds
from long-term commercial paper and borrowings under line-of-credit, and the
issuance of the Company's 5% Notes (see Note 2) which are partially off-set by
the repayment of long-term debt.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash increased by $7.6 million for the quarter ended
September 30, 1997 from $41.7 as of June 30, 1997 to $49.3 million.
The Company has projected $40 million for capital expenditures for fiscal
1998, as compared to $24.8 million for fiscal 1997. Oilfield service capital
expenditures for the three months ended September 30, 1997 were $6.7 million
compared to $2.9 million during the same quarter last year. Of the total $40.0
million in capital expenditures the Company is projecting for fiscal 1998,
approximately $30 million is expected to be attributable to oilfield service
operations. Capital expenditures are expected to be primarily capitalized
improvement costs to existing equipment and machinery. The Company expects to
finance these capital expenditures utilizing the operating cash flows of the
Company.
The Company's oil and natural gas exploration and development operations
are forecasting outlays of approximately $8.0 million in development costs for
fiscal 1998, as compared to $8.2 million during fiscal 1997. For the quarter
ended September 30, 1997, these outlays totaled $2.1 million as compared to none
for the quarter ended September 30, 1996. Financing is expected to come from
operations and available credit facilities.
The Company's oil and natural gas well drilling operations have forecast
approximately $2.0 million in oil and natural gas drilling capital expenditures
for fiscal 1998, as compared to $1.5 million during fiscal 1997. Capital
expenditures are primarily for improvements to existing equipment and machinery.
For the quarter ended September 30, 1997, capital expenditures totaled $339,000
as compared to $323,000 for the quarter ended September 30, 1996. Financing is
expected to come from existing cash flow.
Debt
7% Convertible Subordinated Debentures
In July 1996, the Company completed the offering of $52,000,000 of 7%
Convertible Subordinated Debentures due 2003 (the "7% Debentures"). The offering
was a private offering pursuant to Rule 144A under the Securities Act. As the
result of the conversion of a significant portion of the 7% Debentures into the
Company's common stock as more fully described below, the remaining principal
balance at September 30,
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<PAGE>
Key Energy Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(unaudited)
1997 was $4,600,000. The remaining 7% Debentures mature on July 1, 2003 and
remain convertible at any time before maturity, unless previously redeemed, into
shares of the Company's common stock at a conversion price of $9 3/4 per share,
subject to adjustment in certain events. In addition, the remaining holders of
the Debentures who convert prior to July 1, 1999 will be entitled to receive, in
addition to the Company's common stock, a payment equal to 50% of the interest
otherwise payable on the converted Debentures from the date of conversion
through July 1, 1999, payable in cash or common stock, at the Company's option.
Interest on the remaining 7% Debentures is payable semi-annually on January 1
and July 1 of each year. The Company has made interest payments on the 7%
Debentures on January 1, 1996 and July 1, 1997.
As of September 30, 1997, $47,400,000 in principal amount of the 7%
Debentures had been converted into the Company's common stock. The conversion
was at the option of the holders. The Debentures converted into 5,062,369 shares
of the Company's common stock. The conversion included 200,831 shares in excess
of the number of shares issuable at the conversion price of $9.75 per share.
Such additional consideration will be accounted for as an increase to the
Company's equity. In addition, the proportional amount of debt issuance costs
associated with the converted Debentures will be accounted for as a decrease to
the Company's equity.
PNC Credit Agreement
On June 6, 1997, the Company entered into an agreement (the "PNC Credit
Agreement") with PNC Bank, N.A., as administrative agent, Norwest Bank Texas,
N.A. , as collateral agent, Lehman Commercial Paper, Inc., as advisor, arranger
and syndication agent and the lenders named therein pursuant to which the
lenders provided a $255 million credit facility, consisting of a $120 million
seven-year term loan and a $135 million five-year revolver. The interest rate on
the term loan was LIBOR plus 2.75 percent. The interest rate on the revolver
varied based on the LIBOR and the level of the Company's indebtedness and at
September 30, 1997 was LIBOR plus 2.25 percent. The credit facility contained
certain restrictive covenants and requires the Company to maintain certain
financial ratios. At September 30, 1997, the principal balance of the PNC Credit
Agreement revolver was $57 million and there was approximately $78 million in
unused credit line facilities.
On September 25, 1997, the Company repaid the term loan and a portion of
the amount then outstanding under the revolver using the proceeds from the
initial closing of the Company's private placement of the 5% Notes, (discussed
below). On October 7, 1997, the Company again prepaid a portion of the amount
then outstanding under the revolver using the proceeds from the second closing
of the Company's private placement of the 5% Notes (discussed below). Effective
as of November 6, 1997, the Company completed the re-negotiation of the PNC
Credit Agreement by entering into an amended and restated PNC Credit Agreement
providing for, among other things, an increase in borrowing availability under
the revolver from $135 million to $200 million and a decrease in the revolver's
interest rate from LIBOR plus 2.25 percent to LIBOR plus 1.25 percent.
5% Subordinated Notes
On September 25, 1997, the Company completed an initial closing of its
private placement of $200 million of 5% Convertible Subordinated Notes due 2004
(the "5% Notes"). On October 7, 1997, the Company completed a second closing of
its private placement of an additional $16 million of the 5% Notes pursuant to
the exercise of the remaining portion of an over-allotment option granted to the
initial purchasers of the 5% Notes. The placement was a private offering
pursuant to Rule 144A under the Securities Act. The 5% Notes bear interest
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<PAGE>
Key Energy Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(unaudited)
at a 5% coupon rate and are convertible into shares of the Company's common
stock at a conversion price of $38.50 per share at the holder's option on the
earlier of (i) the date that the registration statement on Form S-3 required to
be filed with the Securities and Exchange Commission (the "Commission") covering
resales of the 5% Notes and the underlying common stock by the holders thereof
is declared effective by the Commission and (ii) 270 days from the date of
issuance. Interest is payable on March 15 and September 15, commencing March 15,
1998. The 5% Notes are redeemable at the Company's option on or after September
15, 2000, in whole or part, together with accrued and unpaid interest. Proceeds
from the private placement of the 5% Notes were used to repay the outstanding
balances under the Company's revolving credit facility and term loan facility
(see above).
Impact of Recently Issued Accounting Standards
Statement of Financial Accounting Standards No. 128 - Earnings per Share
Statement of Financial Accounting Standards No. 128 ("SFAS 128") - Earnings
per Share, is effective for periods ending on or after December 15, 1997. SFAS
128 replaces the presentation of primary earnings per share ("EPS") with the
presentation of basic EPS, which excludes dilution and is computed by dividing
income available to common shareholders by the weighted-average number of common
shares outstanding for the period. SFAS 128 also requires dual presentation of
basic EPS and diluted EPS on the face of the income statement and requires a
reconciliation of the numerators and denominators of basic EPS and diluted EPS.
Management believes the adoption of SFAS 128 will not have a material effect on
its financial position or results of operations of the Company.
Statement of Financial Accounting Standards No. 130 - Reporting
Comprehensive Income
Statement of Financial Accounting Standards No. 130 ("SFAS 130") -
Reporting Comprehensive Income, is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. The Company will adopt SFAS 130
for the fiscal year ended June 30, 1999. Management believes the adoption of
SFAS 130 will not have a material effect on its financial position or results of
operations of the Company
Statement of Financial Accounting Standards No. 131 - Disclosures about
Segments of an Enterprise and Related Information
Statement of Financial Accounting Standards No. 131 ("SFAS 131") -
Disclosures about Segments of an Enterprise and Related Information, is
effective for financial statements for periods beginning after December 15,
1997. SFAS 131 need not be applied to interim financial statements in the
initial year of its application. However, comparative information for interim
periods in the initial year of application is to be reported in the financial
statements for interim periods in the second year of application. The Company
will adopt SFAS 131 for the fiscal year ended June 30, 1999. Management believes
the adoption of SFAS 131 will not have a material effect on its financial
position or results of operations of the Company Impact of Inflation on
Operations
Although in our complex environment it is extremely difficult to make an
accurate assessment of the impact of inflation on the Company's operations,
management is of the opinion that inflation has not had a significant impact on
its business.
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<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities and Use of Proceeds.
(c) Recent Sales of Unregistered Securities:
The Company effected the following unregistered sales of its securities
during the three months ended September 30, 1997. Each of the following
issuance's by the Company of the securities sold in the transactions referred to
below were not registered under the Securities Act of 1933, as amended, pursuant
to the exemption provided under Section 4(2) thereof for transactions not
involving a public offering:
Effective as of September 25, 1997, the Company issued $200 million of its
5% Convertible Subordinated Notes due 2004 to McMahan Securities Co. LP. and
Lehman Brothers Inc., as intitial purchasers, in connection with the Company's
private placement of the 5% Notes.
Effective as of October 7, 1997, the Company issued $16 million of its 5%
Convertible Subordinated Notes due 2004 to McMahan Securities Co. LP. and Lehman
Brothers Inc., as intitial purchasers, in connection with the Company's private
placement of the 5% Notes.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as a part of the Form 10-Q:
Number Description
10(a) Stock Purchase Agreement between WellTech
Eastern, Inc. and Monty D.
Elmore dated as of July 17, 1997.
10(b) Stock Purchase Agreement between WellTech Eastern,
Inc. and Kenting
Energy Services, Inc. dated as of July 30, 1997.
10(c) Stock Purchase Agreement by and among Nabors
Acquisition Corp. IV,
as Seller, Key Rocky Mountain, Inc., as Buyer, and
Key Energy Group, Inc. dated as of
July 31, 1997.("Gibson Stock Purchase Agreement")
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<PAGE>
10(d) Amendment One to the Gibson Stock Purchase Agreement
Stock Purchase Agreement dated
as of October 10, 1997.
10(e) Stock Purchase Agreement among WellTech
Eastern, Inc., Robert E.
Mosley, Jr., Thelma Scoggin Mosley, Thomas A. Mosley,
Nancy Evans Mosley, James R.
Mosley, Dennis W. Mosley and Melanie Ostrum Mosley
dated as of August 22, 1997.
10(f) Stock Purchase Agreement (Ram Oil Well Service, Inc.)
by and among, Yale E. Key, Inc. and Robert D. Calhoon
dated as of September 1, 1997 (ncorporated by
reference to Exhibit 2.2 of the Company's Report on
Form 8-K dated September 1, 1997, File No. 1-8038).
10(g) Stock Purchase Agreement (Rowland Trucking
Co.) by and among, Yale
E. Key, Inc. and Robert D. Calhoon dated as of
September 1, 1997 (incorporated by
reference to Exhibit 2.1 of the Company's
Report on Form 8-K dated September 1, 1997,
File No. 1-8038).
10(h) Asset Purchase Agreement among WellTech
Eastern, Inc., Waco Oil &
Gas Co., Inc. and I.L. Morris dated as of
September 1, 1997.
10(i) Asset Purchase Agreement among Key Four
Corners, Inc., Key Energy
Group,Inc., Coleman Oil & Gas Co., Big A Well
Service Co., Sunco Trucking Co.,
Justis Supply Co., Inc. and George E.
Coleman dated as of September 2, 1997
(incorporated by reference to Exhibit 2.1 of the
Company's Report on Form 8-K dated
October 1, 1997, File No. 1-8038).
10(j) Stock Purchase Agreement between WellTech
Eastern, Inc. and William
Gregory Wines dated as of September 16, 1997.
10(k) Stock Purchase Agreement among, Key Energy
Drilling, Inc. and S.K.
Rogers, Joe Dee Brooks, Lynn E. Waters
and Donnie Roberts dated as of September 25, 1997.
10(l) Indenture dated as of September 25, 1997, among
Key Energy Group, Inc.
and American Stock Transfer and Trust Company.
10(m) Stock Purchase Agreement among Key Rocky
Mountain, Inc., Joseph R.Dunbar and Janice N.
Dunbar dated as of September 29, 1997.
10(n) Stock Purchase Agreement among Key Rocky
Mountain, Inc., Bruce L.
Bummer, Jack Hartnett, Diane Hartnett
and Bruce Bummer 7/14/82 Family Trust
dated as of September 30, 1997.
11(a) Statement - Computation of per share earnings.
27(a) Statement - Financial Data Schedule
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<PAGE>
(b) The following reports on Form 8-K were filed during the
quarter ended September 30, 1997:
The Company's Report on Form 8-K dated June 25, 1997, File No. 1-8038, as
amended by the Company's report on Form 8-K/A dated June 25, 1997, File No.
1-8038. The Report on Form 8-K concerned the Company's acquisition of Well-Co.
The Company's Report on Form 8-K dated September 1, 1997, File No. 1-8038.
The Report on Form 8-K concerned the Company's acquisition of Ram Oil Well
Service, Inc. and Rowland Trucking Co., Inc.
The Company's Report on Form 8-K dated September 25, 1997, File No. 1-8038,
as amended by the Company's report on Form 8-K/A dated September 25, 1997, File
No. 1-8038. The Report on Form 8-K concerned the private placement of the
Company's 5% Notes.
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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 thereunto duly authorized.
KEY ENERGY GROUP, INC.
(Registrant)
By /s/ Francis D. John
Dated: November 14, 1997 President and Chief Executive Officer
By /s/ Stephen E. McGregor
Dated: November 14, 1997 Chief Financial Officer
By /s/ Danny R. Evatt
Dated: November 14, 1997 Chief Accounting Officer
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<PAGE>
Stock Purchase Agreement
between
WellTech Eastern, Inc.
and
Monty D. Elmore
Dated as of July 17, 1997
C:\WELLTECH\STOCKPUR\PATRICK
13
Stock Purchase Agreement
This Stock Purchase Agreement (this AAgreement@) is entered into as of July
17, 1997, by and among WellTech Eastern, Inc., a Delaware corporation (ABuyer@),
and Monty D. Elmore (the AShareholder@).
WITNESSETH:
Whereas, Buyer is a corporation duly organized and validly existing under
the laws of the State of Delaware, with its principal executive offices at Two
Tower Center, Tenth Floor, East Brunswick, New Jersey 08816; and
Whereas, Patrick Well Service, Inc. (the ACompany@) is a corporation duly
organized and validly existing under the laws of the State of Kansas, with its
principal executive offices at 2007 W. 7th Street, Liberal, Kansas; and
Whereas, the Shareholder owns 82 shares (the ACompany Shares@) of common
stock, par value $10 per share, of the Company (the ACompany Common Stock@),
which constitutes all of the issued and outstanding shares of capital stock of
the Company; and
Whereas, the Shareholder desires to sell to Buyer, and Buyer desires to
purchase from the Shareholder all of the issued and outstanding capital stock of
the Company.
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 the Company Shares. Subject to the terms and
conditions of this Agreement, on the date hereof, the Shareholder agree to sell
and convey to Buyer, free and clear of all Encumbrances (as defined in Section
2.1.8.1 hereof), and Buyer agrees to purchase and accept from the Shareholder,
all of the Company Shares. In consideration of the sale of the Company Shares,
Buyer shall pay to the Shareholder $7,000,000 in cash by wire transfer of
immediately available funds, and the Cash Adjustment Payment (as defined in
Section 1.3 hereof), if any, in accordance with Section 1.3 hereof.
1.2. Delivery of the Company Certificates. The Shareholder shall deliver to
Buyer on the date hereof duly and validly issued certificate(s) representing all
of the Company 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 Buyer.
1.3. Adjustment of Purchase Price. Buyers shall cause to be prepared and
delivered to the Shareholder a balance sheet of the Company in accordance with
generally accepted accounting principles (except for use of accelerated
depreciation method) as of the date hereof (the AFinal Balance Sheet@) within
sixty (60) days after the date hereof . Buyer and the Shareholder shall jointly
review the Final Balance Sheet and such supplemental report, endeavor in good
faith to resolve all disagreements regarding the entries thereon and reach a
final determination thereof within 90 days from the date hereof. Within 10 days
of reaching such final determination, the following adjusting payments shall be
made:
(1) If the sum of (A) Final Net Current Value of the Company (defined
below) plus (B) (the ACapital Expenditure Allowance@), which is the amount of
approved capital equipment purchases since 3/31 shown on Schedule 2.1.3.,
exceeds the 3/31 Net Current Value of the Company (defined below) Buyer shall
pay to the Shareholder the amount of such excess (the ACash Adjustment
Payment@).
(2) If the sum of (A) the Final Net Current Value of the Company plus (B)
the Capital Expenditure Allowance, is less than the 3/31 Net Current Value of
the Company, the Shareholder shall pay to Buyer the amount of such difference.
The term AFinal Net Current Value of the Company@ means the dollar value of
the amount by which (i) the ATotal Current Assets@ plus the ATotal Other Assets@
as recorded on the Final Balance Sheet exceeds (ii) the ATotal Liabilities@ as
recorded on the Final Balance Sheet. The term A3/31 Net Current Value of the
Company@ means the dollar value of the amount by which (i) the ATotal Current
Assets@ plus the ATotal Other Assets@ as recorded on the 3/31 Balance Sheet (as
defined in Section 2.1.6 hereof) exceeds (ii) the ATotal Liabilities@ as
recorded on the 3/31 Balance Sheet.
ARTICLE 2
Representations and Warranties
2.1. Representations and Warranties of the Shareholder. The Shareholder
represents and warrants to Buyer as follows:
2.1.1. Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Kansas, 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.
2.1.2. Agreement Authorized and its Effect on Other Obligations. The
Shareholder is a resident of Kansas, 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 the Shareholder enforceable against each of the Shareholder
(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 Shareholder will
not conflict with or result in a violation or breach of any term or provision
of, nor constitute a default under (i) the Certificate of Incorporation or
Bylaws of the Company or (ii) any obligation, indenture, mortgage, deed of
trust, lease, contract or other agreement to which the Company or the
Shareholder is a party or by which the Company or any of the Shareholder or
their respective properties are bound.
2.1.3. Capitalization. The authorized capitalization of the Company
consists of 25,000 shares of Company Common Stock, of which, as of the date
hereof, 82 shares were issued and outstanding and held beneficially and of
record by the Shareholder. On the date hereof, the Company 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 Company Common Stock are validly issued, fully paid and
non-assessable and are not subject to preemptive rights. None of the outstanding
shares of Company 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 the Company Shares. The Shareholder holds good and
valid title to all of the Company Shares, free and clear of all Encumbrances.
The Shareholder possesses full authority and legal right to sell, transfer and
assign to Buyer the Company Shares, free and clear of all Encumbrances. Upon
transfer to Buyer by the Shareholder of the Company Shares, Buyer will own the
Company Shares free and clear of all Encumbrances. There are no claims pending
or, to the knowledge of the Shareholder, threatened, against the Company or any
of the Shareholder that concern or affect title to the Company Shares, or that
seek to compel the issuance of capital stock or other securities of the Company.
2.1.5. No Subsidiaries. There is no corporation, partnership, joint
venture, business trust or other legal entity in which the Company, either
directly or indirectly through one or more intermediaries, owns or holds
beneficial or record ownership of at least a majority of the outstanding voting
securities.
2.1.6. Financial Statements. The Company has delivered to Buyer copies of
the Company=s unaudited balance sheet, a copy of which is attached hereto as
Schedule 2.1.6 (the A3/31 Balance Sheet@), and related statements of income,
retained earnings and cash flow (collectively, the "3/31 Financial Statements")
as at and for the 3 months ended March 31, 1997 (the ABalance Sheet Date@). The
3/31 Financial Statements are complete in all material respects. The 3/31
Financial Statements presents fairly the financial condition of the Company as
at the dates and for the periods indicated. The 3/31 Financial Statements have
been prepared in accordance with generally accepted accounting principles
(except for use of accelerated depreciation method) applied on a consistent
basis. The accounts receivable reflected in the 3/31 Balance Sheet, or which
have been thereafter acquired by the Company, have been collected or are
believed to be collectible.
2.1.7. Liabilities. Except as disclosed on Schedule 2.1.7 hereto, the
Shareholder has no knowledge of any liabilities or obligations or potential
liabilities or obligations, other than those (i) reflected or reserved against
in the 3/31 Balance Sheet, or (ii) incurred in the ordinary course of business
since the Balance Sheet Date that would not materially adversely affect the
value and conduct of the business of the Company.
2.1.8. Additional Company Information. Attached as Schedule 2.1.8 hereto
are true, complete and correct lists to the best of Shareholder=s knowledge 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
the Company, with a description of the nature and amount of any Encumbrances
(defined below) thereon. The term AEncumbrances@ 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;
2.1.8.2. Machinery, Equipment and Supplies. All rigs, carriers, rig
equipment, machinery, transportation equipment, supplies, tools, equipment,
furnishings, and fixtures owned, leased or subject to a contract of purchase and
sale, or lease commitment, by the Company with a description of the nature and
amount of any Encumbrances thereon;
2.1.8.3. Receivables. All accounts and notes receivable of the Company.
2.1.8.4. Payables. All accounts payable of the Company;
2.1.8.5. Insurance. All insurance policies or bonds currently maintained by
the Company, including title insurance policies, with respect to the Company,
including those covering the Company=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;
2.1.8.6. Contracts. All contracts which are to be performed in whole or in
part after the date hereof;
2.1.8.7. 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 the Company or any employee benefit plan
maintained by the Company (collectively, AEmployee Plans@), together with copies
of the most recent reports with respect to such Employee Plans, arrangements, or
trust agreements filed with any governmental agency and all Internal Revenue
Service determination letters and other correspondence from governmental
entities that have been received with respect to such plans, arrangements or
agreements.
2.1.8.8. Employee Lists and Salaries. The names and salary rates of all
present employees of the Company, and, to the extent existing on the date of
this Agreement, all arrangements with respect to any bonuses to be paid to them
from and after the date of this Agreement;
2.1.8.9. Bank Accounts. The name of each bank in which The Company has an
account and the names of all persons authorized to draw thereon;
2.1.8.10. Employee Agreements. Any collective bargaining agreements of the
Company 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 the Company;
2.1.8.11. Intellectual Property. All patents, patent applications,
trademarks and service marks (including registrations and applications
therefor), copyrights and written know-how, trade secrets and all other similar
proprietary data and the goodwill associated therewith (collectively, the
AIntellectual Property@) used by the Company;
2.1.8.12. Trade Names. All trade names, assumed names and fictitious names
used or held by the Company, whether and where such names are registered and
where used;
2.1.8.13. Licenses and Permits. 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 APermits@) of the Company under which it conducts its
business.
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 the Company relating thereto or with respect to collateral
securing the same;
2.1.8.15. Guaranties. All indebtedness, liabilities and commitments of
others and as to which the Company is a guarantor, endorser, co-maker, surety,
or accommodation maker, or is contingently liable therefor (other than
indemnification provisions in master service agreements) 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 in the 3/31 Balance Sheet;
2.1.8.17. Leases. All leases to which the Company is a party;
2.1.8.18. Environment. All environmental permits, approvals,
certifications, licenses, registrations, orders and decrees applicable to
current operations conducted by the Company and all environmental audits,
assessments, investigations and reviews conducted by the Company within the last
five years or otherwise in the Company=s possession on any property owned,
leased or used by the Company.
2.1.9. No Defaults. The Company is not in default in any obligation or
covenant on its part to be performed under any obligation, lease, contract,
order, plan or other arrangement to the best of Shareholder=s knowledge.
2.1.10. Absence of Certain Changes and Events. Other than as a result of
the transactions contemplated by this Agreement, since the Balance Sheet Date,
there has not been to Shareholder=s knowledge:
2.1.10.1. Financial Change. Any material adverse change in the financial
condition, backlog, operations, assets, liabilities or business of the Company;
2.1.10.2. Property Damage. Any material damage, destruction, or loss to the
business or properties of the Company (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 Company Common Stock, or any
direct or indirect redemption, purchase or any other acquisition by the Company
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 the Company=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; or
2.1.10.6. Other Material Changes. Any other material event or condition
known to the Shareholder particularly pertaining to and adversely affecting the
operations, assets or business of the Company.
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 the
Company 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 such returns are true and correct; the Company has only done business in
Texas, Kansas, Oklahoma and Colorado; all taxes shown by such returns to be
payable and any other taxes due and payable have been paid other than those
being contested in good faith by the Company; and the tax provision reflected in
the 3/31 Balance Sheet is adequate, in accordance with generally accepted
accounting principles (except for use of accelerated depreciation method), to
cover liabilities of the Company at the date thereof for all taxes, including
any assessed interest, assessed penalties and additions to taxes of any
character whatsoever applicable to the Company or its assets or business. No
waiver of any statute of limitations executed by the Company with respect to any
income or other tax is in effect for any period. Other than as disclosed on
Schedule 2.1.11 hereto, the income tax returns of the Company have never been
examined by the Internal Revenue Service or the taxing authority of any other
jurisdiction. There are no tax liens on any assets of The Company except for
taxes not yet currently due. The Company is not subject to any tax-sharing or
allocation agreement. The Company is not, nor has it ever attempted to become a
Subchapter S-Corporation under the Internal Revenue Code of 1986, as amended.
The Company is not and never has been, a member of a consolidated group subject
to Treasury Regulation 1.1502-6 or any similar provision.
2.1.12. Intellectual Property. The Company owns or possesses licenses to
use all Intellectual Property that is either material to the business of the
Company or that is necessary for the rendering of any services rendered by the
Company and the use or sale of any equipment or products used or sold by the
Company, including all such Intellectual Property listed in Schedule 2.1.8
hereto (the ARequired Intellectual Property@). The Required Intellectual
Property is owned or licensed by the Company free and clear of any Encumbrance.
The Company has not granted to any other person any license to use any Required
Intellectual Property. The Company has not received any notice of infringement,
misappropriation, or conflict with, the Intellectual Property rights of others
in connection with the use by the Company of the Required Intellectual Property
or otherwise in connection with the Company=s operation of its business.
2.1.13. Title to and Condition of Assets. Except as disclosed on Schedule
2.1.13 hereto, the Company has good, indefeasible and marketable title to all
its properties, interests in properties and assets, real and personal, reflected
in the 3/31 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
3/31 Balance Sheet or in Schedule 2.1.8 hereto, (ii) liens for current taxes not
yet due and payable, and (iii) such imperfections of title, easements and
Encumbrances, if any, as are not substantial in character, amount or extent and
do not and will not materially detract from the value, or interfere with the
present use, of the property subject thereto or affected thereby, or otherwise
materially impair business operations. To Shareholder=s knowledge, all leases
pursuant to which the Company 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 the Company and in respect to which the Company has not
taken adequate steps to prevent a default from occurring. To Shareholder=s
knowledge, the buildings and premises of the Company that are used in its
business are in good operating condition and repair, subject only to ordinary
wear and tear. To Shareholder=s knowledge, all rigs, rig equipment, machinery,
transportation equipment, tools and other major items of equipment of the
Company are in good operating condition and in a state of reasonable 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 Shareholder=s knowledge, all such assets conform to all
applicable laws governing their use. To Shareholder=s knowledge, no notice of
any violation of any law, statute, ordinance, or regulation relating to any such
assets has been received by the Company or any of the Shareholder, except such
as have been fully complied with.
2.1.14. Contracts. To Shareholder=s knowledge, all contracts, leases, plans
or other arrangements to which the Company 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 the Company. To the knowledge of the
Shareholder, 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 Shareholder knows will have an adverse effect on the Company. The
Shareholder has no knowledge that any customer of the Company is going to cease
doing business with the Company (or its successors) as a result of the
consummation of the transactions contemplated hereby.
2.1.15. Licenses and Permits. To Shareholder=s knowledge, the Company
possesses all Permits necessary under law or otherwise for the Company 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, including all such Permits listed in
Schedule 2.1.8 hereto (collectively, the ARequired Permits@); each of the
Required Permits and the Company=s rights with respect thereto is valid and
subsisting, in full force and effect, and enforceable by the Company subject to
administrative powers of regulatory agencies having jurisdiction; the Company is
in compliance in all respects with the terms of each of the Required Permits;
and none of the Required Permits have been, or to the knowledge the Shareholder,
is threatened to be, revoked, canceled, suspended or modified.
2.1.16. Litigation. To Shareholder=s knowledge, except as set forth in
Schedule 2.1.16 hereto, there is no suit, action, or legal, administrative,
arbitration, or other proceeding or governmental investigation pending or
threatened to which the Company is a party which particularly affects the
Company or its assets, nor is any change in the zoning or building ordinances
directly affecting the real property or leasehold interests of the Company.
2.1.17. Environmental Compliance.
2.1.17.1. Environmental Conditions. There are no environmental conditions
or circumstances, including, without limitation, the presence or release of any
Substance of Environmental Concern, on any property presently or previously
owned, leased or operated by the Company, or on any property to which any
Substance of Environmental Concern or waste generated by the Company=s
operations or use of its assets were disposed of, which would have a result a
material adverse effect on the business or business prospects of the Company.
The term ASubstance of Environmental Concern@ means (a) 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 (as
defined in Section 2.1.17.3 hereof), that is regulated pursuant to or could give
rise to liability under any Environmental Law;
2.1.17.2. Permits, etc. The Company has, and within the period of all
applicable statute of limitations has had, in full force and effect all
environmental Permits required to conduct its operations, and is, within the
period of all applicable statutes of limitations has been, operating in
compliance thereunder;
2.1.17.3. Compliance. The Company=s operations and use of its assets are,
and within the period of all applicable statutes of limitations, have been in
compliance with applicable Environmental Law. AEnvironmental Law@ as used herein
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 environmental or of human health, or employee health and safety as from
time to time has been or is now in effect.
2.1.17.4. Environmental Claims. No notice has been received by the Company
or the Shareholder from any entity, governmental agency or individual regarding
any existing, pending or threatened investigation, inquiry, enforcement action.
litigation, or liability, including, without limitation any claim for remedial
obligations, response costs or contribution, relating to any Environmental Law;
2.1.17.5. Enforcement. Neither the Company nor any predecessor of the
Company or other party acting on behalf of the Company, 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;
2.1.17.6. Liabilities. The Company 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, other than master service agreements,
leases, or other contracts made available to Buyer.
2.1.17.7. Renewals. The Shareholder does not know of any reason the Company
(or its successors) would not be able to renew without material expense any of
the permits, licenses, or other authorizations required pursuant to any of the
Environmental Law to conduct and use any of the Company=s current or planned
operations; and
2.1.17.8. Asbestos and PCBs. To Shareholder=s knowledge, no material
amounts of friable asbestos currently exist on any property owned or operated by
the Company, nor do polychlorinated biphenyls exist in concentrations of 50
parts per million or more in electrical equipment owned or being used by the
Company in its operations or on its properties.
2.1.18. Compliance with Other Laws. To Shareholder=s knowledge, the Company
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. ''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.
2.1.19. Employee Plans and Labor Issues. To Shareholder's knowledge, all
Employee Plans (as defined in Section 2.1.8.7) covering active, former or
retired employees of the Company are listed on Schedule 2.1.8.7. Solely for
purposes of the representations in this Section 2.1.19, the term ACompany@ means
Patrick Well Service, Inc., as well as any other entity which is considered one
employer with Patrick Well Service, Inc., under Sections 414(b), (c), (m) and
(o) of the Internal Revenue Code of 1986, as amended (the ACode@). The Company
has made available to Buyer a copy of each Employee Plan, any related trust
agreement and annuity or insurance contract, and each plan=s most recent annual
report (Form 5500 series) filed with the Internal Revenue Service, if
applicable. The only Employee Plan that the Company maintains, or that the
Company or any predecessor thereto has ever maintained, that is intended to be
qualified under Section 401(a) of the Code is the Patrick Well Service, Inc.,
Profit Sharing Plan (the "Profit Sharing Plan") and, without limitation, no
pension plan or multiemployer plan subject to Title IV (Plan Termination
Insurance) of the Employee Retirement Income Security Act 1974, as amended
("ERISA") or the minimum funding requirements of Section 412 of the Code has
ever been maintained. Each Employee Plan has been maintained and administered,
in all material respects, in compliance with its terms and with the requirements
prescribed by any applicable statutes, orders, rules and regulations, including
the Code and ERISA, and (i) all required Forms 5500 for the Employee Plans have
been timely filed with the Internal Revenue Service or an extension of the
filing due date has been granted by the Internal Revenue Service; (ii) the
Profit Sharing Plan has received a current favorable determination letter from
the Internal Revenue Service to the effect that the Profit Sharing Plan is
qualified under Section 401(a) of the Code, and nothing has occurred since the
effective date of such determination letter to adversely affect, or cause the
appropriate governmental agency or authority to revoke, such qualification or
approval; (iii) there are no pending or anticipated claims against or otherwise
involving any of the Employee Plans, and no suit, action or other litigation
(excluding claims for benefits incurred in the ordinary course of Employee Plan
activities) has been brought against or with respect to any Employee Plan; (iv)
all contributions, reserves or premium payments required to be made to the
Employee Plans have either been made or properly accrued on the Company's
financial statements; (v) the Company does not have any obligations for retiree
health and life benefits under any Employee Plan, (vi) there are no restrictions
on the rights of the Company to amend or terminate any Employee Plan without
incurring any liability thereunder; and (vii) none of the Employee Plans provide
for additional or accelerated payments or benefits to employees or shareholders
of the Company upon a change of control or ownership of the Company.
The Company is not obligated to pay any severance or benefits to any
employee or former employee of the Company as the result of any change in the
ownership or control of the Company. The Company has not engaged in any unfair
labor practices which could reasonably be expected to result in an adverse
effect on its operations or assets. The Company does not have any dispute with
any of its existing or former employees. There are no labor disputes or, to the
knowledge of any of the Shareholder, any disputes threatened by current or
former employees of the Company. 2.1.20. Investigations; Litigation. To
Shareholder=s knowledge, no investigation or review by any governmental entity
with respect to the Company or any of the transactions contemplated by this
Agreement is pending or threatened, nor has any governmental entity indicated to
the Company an intention to conduct the same, and there is no action, suit or
proceeding pending or, to the knowledge of the Shareholder, threatened against
or affecting the Company 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 the Company.
2.1.21. Absence of Certain Business Practices. To Shareholder=s knowledge,
neither the Company nor any officer, employee or agent of the Company, nor any
other person acting on its behalf, has, directly or indirectly, within the past
five years, given or agreed to give any gift or similar benefit to any customer,
supplier, government employee or other person who is or may be in a position to
help or hinder the business of the Company (or to assist the Company in
connection with any actual or proposed transaction) which (i) might subject the
Company 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 the Company as
reflected in the 3/31 Financial Statements, or (iii) if not continued in the
future, might materially adversely effect the assets, business operations or
prospects of the Company or which might subject the Company to suit or penalty
in a private or governmental litigation or proceeding.
2.1.22. Copies of Documents - No Untrue Statements. The Shareholder has
made available to Buyer true, complete and correct copies of all contracts,
documents concerning all litigation and administrative proceedings, licenses,
permits, insurance policies, lists of suppliers and customers, and records
relating principally to the Company=s assets and business, and such information
covers all commitments and liabilities of the Company relating to its business
or the assets. This Agreement and the agreements and instruments to be entered
into in connection herewith do not include any untrue statement of a material
fact or omit to state any known material fact necessary to make the statements
made herein and therein not misleading in any material respect.
2.1.23. Consents and Approvals. No consent, approval or authorization of,
or filing or registration with, any governmental or regulatory authority, or any
other person or entity other than the Shareholder, is required to be made or
obtained by the Company or of the Shareholder in connection with the execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.
2.1.24. Finder=s Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by the Shareholder and
their counsel directly with Buyer and its counsel, without the intervention of
any other person in such manner as to give rise to any valid claim against any
of the parties hereto for a brokerage commission, finder=s fee or any similar
payments.
ARTICLE 3
Additional Agreements
3.1. Noncompetition. Except as otherwise consented to or approved in
writing by Buyer, the Shareholder agrees that for a period of 60 months from the
date hereof, 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 well servicing business or businesses conducted by the Company, on the date
hereof, or in any service business the services of which are provided and
marketed by the Company, on the date hereof in any area of the state of the
United States, or any foreign country in which the Company, transacts business
on the date hereof; (ii) request any present customers or suppliers of the
Company to curtail or cancel their business with Buyer or any affiliate of
Buyer; (iii) disclose to any person, firm or corporation any trade, technical or
technological secrets of the Company, Buyer or any affiliate of Buyer or any
details of their organization or business affairs or (iv) induce or actively
attempt to influence any employee of the Company, Buyer or any affiliate of
Buyer to terminate his employment; provided, however, that the Shareholder shall
be able to buy, sell, build and overhaul well servicing rigs, and to work on any
rig on Shareholder's own production. Shareholder 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. The obligations
expressed in this Section 3.1 are in addition to any other obligations that the
Shareholder may have under the laws of the states in which he does business
requiring an employee of a business or a shareholder who sells his stock in a
corporation (including a disposition in a merger) to limit his activities so
that the goodwill and business relations of his employer and of the corporation
whose stock he has sold (and any successor corporation) will not be materially
impaired. The Shareholder further agrees and acknowledges that the Company,
Buyer 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 the
Company, Buyer or any affiliate of Buyer 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. The Shareholder 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 Buyer contained in this
Agreement, and for other good and valuable consideration, receipt of which is
hereby acknowledged.
3.2. Release of Shareholder from Guaranty. Within 30 days, Buyers shall
obtain a complete release of the personal guaranty of Shareholder and his wife
from NationsBank, Liberal, Kansas, and indemnify Shareholder and his wife during
that period of time should the guaranty be invoked by NationsBank.
3.3. Further Assurances. From time to time, as and when requested by any
party hereto, any other party hereto shall execute and deliver, or cause to be
executed and delivered, such documents and instruments and shall take, or cause
to be taken, such further or other actions as may be reasonably necessary to
effectuate the transactions contemplated hereby.
ARTICLE 4
Indemnification
4.1. Indemnification by and Remedies Against the Shareholder. In addition
to any other remedies available to Buyer under this Agreement, or at law or in
equity, the Shareholder shall indemnify, defend and hold harmless the Company,
Buyer and their affiliates and their respective officers, directors, employees,
agents and stockholders (collectively, the ABuyer Indemnified Parties@), against
and with respect to any and all claims, costs, damages, losses, expenses,
obligations, liabilities, recoveries, suits, causes of action and deficiencies,
including interest, penalties and reasonable fees and expenses of attorneys,
consultants and experts (collectively, the ADamages@) in excess of $150,000 in
the aggregate that the Buyer Indemnified Parties shall incur or suffer, which
arise, result from or relate to any breach by the Shareholder of (or the failure
of the Shareholder to perform) his respective representations, warranties,
covenants or agreements in this Agreement or in any schedule, certificate,
exhibit or other instrument furnished or delivered to Buyer by the Shareholder
under this Agreement or provided, however, that the Shareholder shall not be
required to so indemnify, defend and hold harmless Buyer Indemnified Parties
against and with respect to any Damages incurred as a result of a breach by the
Shareholder of his representations and warranties in this Agreement or in any
schedule, certificate, exhibit or other instrument furnished or delivered to
Buyer by the Shareholder under this Agreement for which Buyer fails to provide
written notice of a claim for such Damages to the Shareholder on or before the
expiration of the survival period (as specified in Section 5.1 hereof) of the
specific representation or warranty alleged to have been breached.
4.2. Indemnification by and Remedies Against Buyer. In addition to any
other remedies available to the Shareholder under this Agreement or at law or in
equity, Buyer shall indemnify and hold harmless the Shareholder, his wife,
children, agents, representatives, attorneys, successors, heirs, executors and
administrators (collectively the AShareholder Indemnified Parties@) from any
Damages that the Shareholder Indemnified Parties shall incur or suffer, which
arise, result from or relate to (i) any breach of or failure by Buyer to perform
any of its representations, warranties, covenants or agreements in this
Agreement or in any schedule, certificate, exhibit or other instrument furnished
or delivered to the Shareholder by or on behalf of Buyer under this Agreement or
(ii) the conduct of the Company=s business on or after the date hereof,
provided, however, that Buyer shall not be required to so indemnify, defend and
hold harmless the Shareholder Indemnified Parties as a result of a breach by
Buyer of any of its representations and warranties in this Agreement or in any
schedule, certificate, exhibit or other instrument furnished or delivered to the
Shareholder by Buyer under this Agreement for which the Shareholder fails to
provide written notice of the claim for such damages to Buyer on or before the
expiration of the survival period (as specified in Section 5.1 hereof) of the
specific representation or warranty alleged to have been breached.
4.2. Indemnification Procedure. In the event that any party hereto
discovers or otherwise becomes aware of an indemnification claim arising under
Section 4.1 or 4.2 of this Agreement, such indemnified party shall give written
notice to the indemnifying party, specifying such claim, and may thereafter
exercise any remedies available to such party under this Agreement; provided,
however, that the failure of 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 Section 4.1 or 4.2 hereof, such
indemnified party shall, if a claim in respect thereof is to be made against any
indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of any
obligations hereunder, to the extent the indemnifying party is not materially
prejudiced thereby. In case any such action is brought against an indemnified
party, the indemnifying party shall be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified, to the extent that it may wish, with counsel reasonably satisfactory
to such indemnified party, and after such notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof unless the indemnifying party has failed to assume the defense
of such claim and to employ counsel reasonably satisfactory to such indemnified
person. An indemnifying party who elects not to assume the defense of a claim
shall not be liable for the fees and expenses of more than one counsel in any
single jurisdiction for all parties indemnified by such indemnifying party with
respect to such claim or with respect to claims separate but similar or related
in the same jurisdiction arising out of the same general allegations.
Notwithstanding any of the foregoing to the contrary, the indemnified party will
be entitled to select its own counsel and assume the defense of any action
brought against it if the indemnifying party fails to select counsel reasonably
satisfactory to the indemnified party, the expenses of such defense to be paid
by the indemnifying party. No indemnifying party shall consent to entry of any
judgment or enter into any settlement with respect to a claim without the
consent of the indemnified party, which consent shall not be unreasonably
withheld, or unless such judgment or settlement includes as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability with respect to such claim. No indemnified party
shall consent to entry of any judgment or enter into any settlement of any such
action, the defense of which has been assumed by an indemnifying party, without
the consent of such indemnifying party, which consent shall not be unreasonably
withheld or delayed.
ARTICLE 5
Miscellaneous
5.1. Survival of Representations, Warranties and Covenants. All
representations and warranties made by the parties hereto shall survive for a
period of 24 months from the date hereof, notwithstanding any investigation made
by or on behalf of any of the parties hereto; provided, however, that the
representations and warranties contained in Section 2.1.11 hereof shall survive
until the expiration of the applicable statute of limitations associated with
the taxes at issue. All statements contained in any certificate, schedule,
exhibit or other instrument delivered pursuant to this Agreement shall be deemed
to have been representations and warranties by the respective party or parties,
as the case may be, and shall also survive for a period of 24 months from the
date hereof despite any investigation made by any party hereto or on its behalf.
All covenants and agreements contained herein shall survive as provided herein.
5.2. Entirety. This Agreement embodies the entire agreement among the
parties with respect to the subject matter hereof, and all prior agreements
between the parties with respect thereto are hereby superseded in their
entirety.
5.3. Counterparts. Any number of counterparts of this Agreement may be
executed and each such counterpart shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one instrument.
5.4. Notices and Waivers. Any notice or waiver to be given to any party
hereto shall be in writing and shall be delivered by courier, sent by facsimile
transmission or first class registered or certified mail, postage prepaid,
return receipt requested:
If to Buyer
Addressed to: With a copy to:
WellTech Eastern, Inc. Porter & Hedges, L.L.P.
Two Tower Center, Tenth Floor 700 Louisiana, 35th Floor
East Brunswick, New Jersey 08816 Houston, Texas 77210-4744
Attn: General Counsel Attn: Samuel N. Allen
Facsimile: (908) 247-5148 Facsimile: (713) 228-1331
If to Shareholder
Addressed to: With a copy to:
Monty D. Elmore Gene H. Sharp, Esq.
2133 Sierra Sharp, McQueen, McKinley, Dreiling, Morain & Tate, P.A.
Liberal, Kansas 67901 419 N. Kansas - P. O. Box 2619
Liberal, Kansas 67905-2619
Facsimile: (316) 624-9163
Rex A. Sharp, Esq.
Husch & Eppenberger
1200 Main Street, Suite 1700
Kansas City, Missouri 64105-2100
Facsimile: (816) 421-0596
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.
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. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the successors and assigns of the
parties hereto.
5.7. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
5.8. Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the applicable laws of the State of Kansas.
IN WITNESS WHEREOF, the Shareholder has executed this Agreement and the
other parties hereto have caused this Agreement to be signed in their respective
corporate names by their respective duly authorized representatives, all as of
the day and year first above written.
WELLTECH EASTERN, INC.
By: _____________________
Name: Bill Bixler
Title: Vice President
SHAREHOLDER
________________________
Monty D. Elmore
EXECUTION COPY
Stock Purchase Agreement
Between
WellTech Eastern, Inc.
and
Kenting Energy Services Inc.
Dated as of July 30, 1997
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Stock Purchase Agreement
This Stock Purchase Agreement (this "Agreement") is entered into as of July
30, 1997 by and between WellTech Eastern, Inc., a Delaware corporation
("Buyer"), and Kenting Energy Services Inc., an Alberta corporation (the
"Shareholder").
WITNESSETH :
Whereas, Buyer is a corporation duly organized and validly existing under
the laws of the State of Delaware, with its principal executive offices at Two
Tower Center, Tenth Floor, East Brunswick, New Jersey 08816; and
Whereas, Kenting Holdings (Argentina) S.A. (the "Company") is a corporation
duly organized and validly existing under the laws of the republic of Argentina,
with its principal executive offices at Uruguay 1134-Piso 3, (1016) Buenos
Aires, Argentina; and
Whereas, Kenting Drilling (Argentina) S.A. (the "Company Subsidiary") is a
subsidiary of the Company and is a corporation duly organized and validly
existing under the laws of the republic of Argentina, with its principal
executive offices at Uruguay 1134-Piso 3, (1016) Buenos Aires, Argentina; and
Whereas, the Shareholder owns 15,300,000 shares (the "Company Shares") of
common stock, par value $1.00 per share, of the Company ("Company Common
Stock"), which constitutes all of the issued and outstanding shares of capital
stock of the Company
Whereas, the Company owns 24,545,362 shares (the "Company-Owned Subsidiary
Shares") of common stock, par value $1.00 per share, of the Company Subsidiary
("Subsidiary Common Stock"), and the Shareholder owns 37,386 shares (the
"Shareholder-Owned Subsidiary Shares") of Subsidiary Common Stock, which
constitutes all of the issued and outstanding shares of capital stock of the
Company Subsidiary; and
Whereas, the Shareholder desires to sell to Buyer, and Buyer desires to
purchase from the Shareholder all of the issued and outstanding capital stock of
the Company and all of the shares of capital stock of the Company Subsidiary
owned by the Shareholder.
Now, Therefore, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto hereby agree as
follows:
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i
ARTICLE 1
Purchase and Sale
1.1. Purchase and Sale of the Company Shares. Subject to the terms and
conditions of this Agreement, on the date hereof, the Shareholder agrees to sell
and convey to Buyer, free and clear of all Encumbrances (defined below) and
Buyer agrees to purchase and accept from the Shareholder, all of the Company
Shares and all of the Shareholder-Owned Subsidiary Shares. In consideration of
the sale of the Company Shares and the Shareholder-Owned Subsidiary Shares,
Buyer shall pay to the Shareholder $9,575,000 in cash by wire transfer of
immediately available funds, and the Cash Adjustment Payment (as defined in
Section 1.3 hereof), if any, in accordance with Section 1.3 hereof. In addition,
on the date hereof Buyer shall pay to the Shareholder $525,000 in satisfaction
of all debts remaining due to the Shareholder or irs affiliates on the date
hereof. 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.
1.2. Recording the Transfer of Shares. The parties hereto acknowledge that
the Company Shares are currently held of record as follows: 15,299,988 shares
(the "KID Company Shares") by Kenting Drilling International, Inc., a
predecessor (by amalgamation) to the Shareholder ("KID") and 12 shares (the
"KESL Company Shares") by Kenting Energy Services Ltd, a predecessor (by
amalgamation) to the Shareholder ("KESL"). The parties hereto acknowledge that
the Shareholder- Owned Subsidiary Shares are currently held of record by KID.
The Shareholder represents and warrants to Buyer that it has validly acquired
the KID Company Shares, the KESL Company Shares and the Shareholder-Owned
Subsidiary Shares by means of an amalgamation of various affiliated corporate
entities and a subsequent liquidation of the resulting entity without having
such acquisitions (the "Shareholder Stock Acquisitions") formally recorded in
the appropriate stock records of the Company and the Company Subsidiary. On the
date hereof, the Shareholder shall caused to be filed in the appropriate stock
records of the Company and the Company Subsidiary those transfer documents
necessary to properly record the Shareholder Stock Acquisitions in accordance
with Argentina law (the "Delinquent Filings") and those transfer documents
necessary to properly record the transfer of the Company Shares and the
Shareholder-Owned Shares hereunder in accordance with Argentina law such that,
as a result of such filings, the Buyer (and its designees) will become the
record and beneficial owners of the Company Shares and the Shareholder-Owned
Subsidiary Shares.
1.3 Adjustment of Purchase Price. Buyer shall cause to be prepared and
delivered to the Shareholder a consolidated balance sheet of the Company as of
the date hereof (the "Final Balance Sheet") within sixty (60) days after the
date hereof, which balance sheet will be prepared in accordance with Canadian
generally accepted accounting principles, consistently applied in all respects
(which shall not include any reserve or accruals for employee termination
costs). Buyer and the Shareholder shall jointly review the Final Balance Sheet,
and endeavor in good faith to resolve all disagreements regarding the entries
thereon and reach a final determination thereof within 90 days
C:\DOCUMENT\KENTSTAG.07
2
from the date hereof. In the event that the parties cannot agree on the
entries to be placed on the Final Balance Sheet, the dispute will be resolved by
an independent accounting firm mutually agreed to by the Shareholder and Buyer
(such agreement not to be unreasonably withheld or delayed) whose resolution
shall be binding on and enforceable against the parties hereto. Within 10 days
of reaching such final determination, the following adjusting payments shall be
made:
(1) If the sum of (A) the Final Net Current Value of the Company (defined
below) plus (B) $100,056 (the"Capital Expenditure Amount") exceeds the 4/30 Net
Current Value of the Company (defined below), Buyer shall pay to the Shareholder
the amount of such excess (the "Cash Adjustment Payment").
(2) If the sum of (A) the Final Net Current Value of the Company plus the
Capital Expenditure Amount is less than the 4/30 Net Current Value of the
Company, the Shareholder shall pay to Buyer the amount of such difference.
The term "Final Net Current Value of the Company" means the dollar value of
the amount by which (i) the "Total Current Assets" (excluding any prepaid job
costs relating to the assets referred to in Schedule 2.1.8 hereto (the "Excluded
Assets") transferred from the Company to the Shareholder or an associated
company of the Shareholder in anticipation of the consummation of the
transactions contemplated hereby but including the book value of any
"Inventories" included in the Excluded Assets) plus the "Other Assets" minus the
"Due from Kenting Group" as recorded on the Final Balance Sheet exceeds (ii) the
'Total Current Liabilities" plus the " Term Debt" plus the "Deferred Income
Taxes" minus the "Due to Kenting Group" as recorded on the Final Balance Sheet.
The term"4/30 Net Current Value of the Company" means the dollar value of the
amount by which (i) the "Total Current Assets" (excluding any prepaid job costs
relating to the Excluded Assets but including the book value of any
"Inventories" included in the Excluded Assets) plus the "Other Assets" minus the
"Due from Kenting Group" as recorded on the 4/30 Balance Sheet (as defined in
Section 2.1.6 hereof) exceeds (ii) the "Total Current Liabilities" plus the
"Term Debt" plus the"Deferred Income Taxes" minus the "Due to Kenting Group" as
recorded on the 4/30 Balance Sheet.
ARTICLE 2
Representations and Warranties
2.1. Representations and Warranties of the Shareholder. The Shareholder
represents and warrants to Buyer as follows:
2.1.1. Organization and Standing. Each of the Company, the Company
Subsidiary and the Shareholder is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization, has
full requisite corporate power and authority to carry on its business as it is
currently conducted, and to own and operate the properties currently owned and
operated by it, and is duly qualified or licensed to do business
C:\DOCUMENT\KENTSTAG.07
3
and is in good standing and is 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 an adverse effect on its financial condition, properties or business.
2.1.2. Agreement Authorized and its Effect on Other Obligations. The
execution and delivery of this Agreement have been authorized by all of
necessary corporate action on the part of the Shareholder, and the Shareholder
has the legal capacity and requisite power and authority to enter into, and
perform its obligations under this Agreement. This Agreement is a valid and
binding obligation of the Shareholder enforceable against the Shareholder
(subject to normal equitable principles) in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, debtor relief or similar laws affecting the rights of creditors
generally. The execution, delivery and performance of this Agreement by the
Shareholder will not conflict with or result in a violation or breach of any
term or provision of, nor constitute a default under (i) any of the
organizational or other documents of the Company or the Company Subsidiary or
(ii) any obligation, indenture, mortgage, deed of trust, lease, contract or
other agreement to which the Company, the Company Subsidiary or the Shareholder
is a party or by which the Company, the Company Subsidiary or the Shareholder or
their respective properties are bound.
2.1.3. Capitalization. The authorized capitalization of the Company
consists of 15,300,000 shares of Company Common Stock, of which, as of the date
hereof, 15,300,000 shares were issued and outstanding and, following the
recording of the Delinquent Filings, are held beneficially and of record by the
Shareholder. On the date hereof, the Company 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 Company Common Stock are validly issued, fully paid and non-
assessable and are not subject to preemptive rights. None of the outstanding
shares of Company 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. The authorized capitalization of
the Company Subsidiary consists of 24,582,748 shares of Subsidiary Common Stock,
all of which shares were issued and outstanding as of the date hereof, with
24,545,362 shares held beneficially and of record by the Company (following the
recording of the Delinquent Filings) and 37,386 shares held beneficially and of
record by the Shareholder (following the recording of the Delinquent Filings).
On the date hereof, the Company Subsidiary 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 Subsidiary Common Stock are validly issued, fully paid and
non-assessable and are not subject to preemptive rights. None of the outstanding
shares of Subsidiary Common Stock is subject to any voting
C:\DOCUMENT\KENTSTAG.07
4
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 the Company Shares. Following the recording of the
Delinquent Filings, the Shareholder holds good and valid title to all of the
Company Shares and the Shareholder-Owned Subsidiary Shares, free and clear of
all Encumbrances. Following the recording of the Delinquent Filings, the
Shareholder possesses full authority and legal right to sell, transfer and
assign to Buyer the Company Shares and the Shareholder-Owned Subsidiary Shares,
free and clear of all Encumbrances. Upon transfer to Buyer by the Shareholder of
the Company Shares and the Shareholder-Owned Subsidiary Shares, Buyer will own
the Company Shares and the Shareholder-Owned Subsidiary Shares free and clear of
all Encumbrances. There are no claims pending or, to the knowledge of the
Shareholder, threatened, against the Company or the Shareholder that concern or
affect title to the Company Shares or the Shareholder-Owned Subsidiary Shares,
or that seek to compel the issuance of capital stock or other securities of
either the Company or the Company Subsidiary.
2.1.5. No Subsidiaries. Other than the Company Subsidiary, there is no
corporation, partnership, joint venture, business trust or other legal entity in
which the Company, either directly or indirectly through one or more
intermediaries, owns or holds beneficial or record ownership of at least a
majority of the outstanding voting securities.
2.1.6. Financial Statements. The Company has delivered to Buyer copies of
the unaudited consolidated balance sheet of the Company and the Company
Subsidiary (the "4/30 Balance Sheet") and related consolidated statements of
income, copies of which are attached hereto as Schedule 2.1.6 (collectively, the
"4/30 Financial Statements"), as at and for the four months ended April 30, 1997
(the "Balance Sheet Date"). The 4/30 Financial Statements are complete in all
material respects. The 4/30 Financial Statements presents fairly in all material
respects the consolidated financial condition of the Company as at the dates and
for the periods indicated. The 4/30 Financial Statements have been prepared in
accordance with Canadian generally accepted accounting principles applied on a
consistent basis.
2.1.7. Liabilities. Except as provided in Schedule 2.1.7 hereto, to the
knowledge of any of (i) the directors and officers of the Company, (ii) the
directors and officers of the Company Subsidiary, (iii) Gary Meier and (iv)
Ricardo Lopez Olaciregui (collectively, the "Company Management"), neither the
Company nor the Company Subsidiary has any liabilities or obligations, either
accrued, absolute or contingent, nor are any of the foregoing persons aware of
any potential liabilities or obligations (including, without limitation,
liabilities related to non-performance of contracts, non-payment of taxes,
infringement of the intellectual property rights of others, violations of
applicable laws, current or pending litigation, environmental conditions or
labor disputes) that could materially adversely affect the value and conduct of
the business of the Company and the Company Subsidiary, taken
C:\DOCUMENT\KENTSTAG.07
5
as a whole, other than those required to be reflected or properly reserved
against in the 4/30 Balance Sheet and the Final Balance Sheet (and which will be
reflected in an accurate calculation of the 4/30 Net Current Value of the
Company and the Final Net Current Value of the Company).
2.1.8. Absence of Certain Changes and Events. The Shareholder has caused
the Company and the Company Subsidiary to make those fixed asset transfers and
those balance sheet adjustments referred to in Schedule 2.1.8 hereto. To the
knowledge of Company Management, other than the transactions specified in
Schedule 2.1.8 hereto, since the Balance Sheet Date, there has not been any
material reduction in the value of the fixed assets of the Company or the
Company Subsidiary or the occurrence of any other transaction or event that
could materially adversely affect the value and conduct of the business of the
Company and the Company Subsidiary, taken as a whole, other than those that will
be reflected in an accurate calculation of the Final Net Current Value of the
Company.
2.1.9. Title to and Condition of Assets. Except as disclosed on Schedule
2.1.9 hereto, the Company and the Company Subsidiary have good title to all
their assets reflected in the 4/30 Balance Sheet, including, without limitation,
all of the Company-Owned Subsidiary Shares, free and clear of any Encumbrance of
any nature whatsoever, except (i) Encumbrances reflected in the 4/30 Balance
Sheet, (ii) liens for current taxes not yet due and payable, and (iii) such
imperfections of title, easements and Encumbrances, if any, as are not
substantial in character, amount, or extent and do not and will not materially
detract from the value, or interfere with the present use, of the property
subject thereto or affected thereby, or otherwise materially impair business
operations.
2.1.10. Consents and Approvals. All consents, approvals and authorizations
required to be made or obtained by the Company, the Company Subsidiary or the
Shareholder in connection with the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby have been
obtained.
2.1.11. Finder's Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by the Shareholder and its
counsel directly with Buyer and its counsel, without the intervention of any
other person in such manner as to give rise to any valid claim against any of
the parties hereto for a brokerage commission, finder's fee or any similar
payments.
2.2. Representations and Warranties of Buyer. Buyer represents and warrants
to the Shareholder as follows:
2.2.1. Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has full requisite corporate power and authority to carry on its
business as it is currently conducted, and to own and operate the properties
currently owned and operated by it, and is duly
C:\DOCUMENT\KENTSTAG.07 6
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 an adverse effect on its financial
condition, properties or business.
2.2.2. Agreement Authorized and its Effect on Other Obligations. The
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Buyer, and this
Agreement is a valid and binding obligation of Buyer enforceable (subject to
normal equitable principles) in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, debtor
relief or similar laws affecting the rights of creditors generally. The
execution, delivery and performance of this Agreement by Buyer will not conflict
with or result in a violation or breach of any term or provision of, or
constitute a default under (a) the Certificate of Incorporation or Bylaws of
Buyer or (b) any obligation, indenture, mortgage, deed of trust, lease, contract
or other agreement to which Buyer or any of its property is bound.
2.2.3. Consents and Approvals. No consent, approval or authorization of, or
filing of a registration with, any governmental or regulatory authority, or any
other person or entity is required to be made or obtained by Buyer in connection
with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
2.2.4. Finder's Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Buyer and its counsel
directly with the Company, the Company Subsidiary and the Shareholder and its
counsel, without the intervention by any other person as the result of any act
of Buyer in such a manner as to give rise to any valid claim against any of the
parties hereto for any brokerage commission, finder's fee or any similar
payments.
ARTICLE 3
Additional Agreements
3.1. Noncompetition. Except as otherwise consented to or approved in
writing by Buyer, the Shareholder agrees that for a period of 42 months from the
date hereof, it will not (and will cause its affiliates not to), 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 any businesses involved in providing well servicing or
shallow/moderate depth drilling services within the country of Argentina; (ii)
request any present customers or suppliers of the Company or the Company
Subsidiary to curtail or cancel their business with the Company, the Company
Subsidiary, Buyer or
C:\DOCUMENT\KENTSTAG.07
7
any affiliate of Buyer; (iii) disclose to any person, firm or corporation
any trade, technical or technological secrets of the Company, the Company
Subsidiary, Buyer or any affiliate of Buyer or any details of their organization
or business affairs or (iv) induce or actively attempt to influence any employee
of the Company, the Company Subsidiary, Buyer or any affiliate of Buyer to
terminate his employment. The Shareholder 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. The obligations
expressed in this Section 3.1 are in addition to any other obligations that the
Shareholder may have under the laws of any jurisdiction in which they do
business requiring an employee of a business or a shareholder who sells his
stock in a corporation (including a disposition in a merger) to limit his
activities so that the goodwill and business relations of his employer and of
the corporation whose stock he has sold (and any successor corporation) will not
be materially impaired. Each of the Shareholder further agrees and acknowledges
that the Company, the Company Subsidiary, Buyer and its affiliates do not have
any adequate remedy at law for the breach or threatened breach by the
Shareholder of this covenant, and agree that the Company, the Company
Subsidiary, Buyer or any affiliate of Buyer may, in addition to the other
remedies which may be available to it hereunder, file a suit in equity to enjoin
the 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. The Shareholder 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 Buyer contained in this
Agreement, and for other good and valuable consideration, receipt of which is
hereby acknowledged.
3.2. Employee Matters. From the date hereof, the Company and the Company
Subsidiary shall remain responsible for all costs associated with the
termination of any of their employees terminated after the date hereof;
provided, however, that the Shareholder shall be solely responsible for any and
all liabilities, costs and expenses associated with the termination of Gary
Meier by either the Company or the Company Subsidiary, regardless of whether he
is terminated before, on or after the date hereof (the "Meier Termination").
3.3. 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. Without limiting the generality
of the foregoing, the Shareholder shall take those actions reasonably requested
by Buyer to (i) properly record the transfer of the Company Shares and the
Shareholder-Owned Subsidiary Shares in accordance with Section 1.2 hereof and
(ii) resolve the title exceptions described in Schedule 2.1.9 hereto.
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ARTICLE 4
Indemnification
4.1. Indemnification by the Shareholder. In addition to any other remedies
available to Buyer under this Agreement, or at law or in equity, the Shareholder
shall indemnify, defend and hold harmless the Company, the Company Subsidiary,
Buyer and their affiliates and their respective officers, directors, employees,
agents and stockholders (collectively, the "Buyer Indemnified Parties"), against
and with respect to any and all claims, costs, damages, losses, expenses, obliga
tions, liabilities, recoveries, suits, causes of action and deficiencies,
including interest, penalties and reasonable fees and expenses of attorneys,
consultants and experts (collectively, the "Damages") that the Buyer Indemnified
Parties shall incur or suffer, which arise, result from or relate to (i) any
breach by the Shareholder of (or the failure of the Shareholder to perform) its
respective representations, warranties, covenants or agreements in this
Agreement or in any schedule, certificate, exhibit or other instrument furnished
or delivered to Buyer by the Shareholder under this Agreement or (ii) the Meier
Termination.
4.2. Indemnification by Buyer. In addition to any other remedies available
to the Shareholder under this Agreement, or at law or in equity, Buyer shall
indemnify, defend and hold harmless the Shareholder against and with respect to
any and all Damages that such indemnitees shall incur or suffer, which arise,
result from or relate to any breach of, or failure by Buyer to perform, any of
its representations, warranties, covenants or agreements in this Agreement or in
any schedule, certificate, exhibit or other instrument furnished or delivered to
the Shareholder by or on behalf of Buyer under this Agreement.
4.3. Indemnification Procedure. In the event that any party hereto
discovers or otherwise becomes aware of an indemnification claim arising under
Section 4.1 or 4.2 of this Agreement, such indemnified party shall give written
notice to the indemnifying party, specifying such claim, and may thereafter
exercise any remedies available to such party under this Agreement; provided,
however, that the failure of 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 Section 4.1 or 4.2 hereof, such
indemnified party shall, if a claim in respect thereof is to be made against any
indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of any
obligations hereunder, to the extent the indemnifying party is not materially
prejudiced thereby. In case any such action is brought against an indemnified
party, the indemnifying party shall be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified, to the extent that it may wish, with counsel reasonably satisfactory
to such indemnified party, and after such notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party
C:\DOCUMENT\KENTSTAG.07
9
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof unless the indemnifying party has failed to
assume the defense of such claim and to employ counsel reasonably satisfactory
to such indemnified person. An indemnifying party who elects not to assume the
defense of a claim shall not be liable for the fees and expenses of more than
one counsel in any single jurisdiction for all parties indemnified by such
indemnifying party with respect to such claim or with respect to claims separate
but similar or related in the same jurisdiction arising out of the same general
allegations. Notwithstanding any of the foregoing to the contrary, the
indemnified party will be entitled to select its own counsel and assume the
defense of any action brought against it if the indemnifying party fails to
select counsel reasonably satisfactory to the indemnified party, the expenses of
such defense to be paid by the indemnifying party. No indemnifying party shall
consent to entry of any judgment or enter into any settlement with respect to a
claim without the consent of the indemnified party, which consent shall not be
unreasonably withheld, or unless such judgment or settlement includes as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability with respect to such claim. No
indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action, the defense of which has been assumed by an
indemnifying party, without the consent of such indemnifying party, which
consent shall not be unreasonably withheld or delayed.
ARTICLE 5
Miscellaneous
5.1. Survival of Representations, Warranties and Covenants. All
representations, warranties, covenants and agreements made by the parties hereto
shall survive indefinitely without limitation, notwithstanding any investigation
made by or on behalf of any of the parties hereto. 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
indefinitely despite any investigation made by any party hereto or on its
behalf.
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:
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10
If to Buyer
Addressed to: With a copy to:
WellTech Eastern, Inc. Porter & Hedges, L.L.P.
Two Tower Center, Tenth Floor 700 Louisiana, 35th Floor
East Brunswick, New Jersey 08816 Houston, Texas 77210-4744
Attn: General Counsel Attn: Samuel N. Allen
Facsimile: (908) 247-5148 Facsimile: (713) 228-1331
If to any Shareholder
Addressed to: With a copy to:
Kenting Energy Services Inc. Howard Mackie
Suite 700, 112 - 4th Ave. S.W. 1000 Canterra Tower
Calgary, Alberta T2P0H3 400 Third Ave. S.W.
Attn: Chief Operating Officer Calgary, Alberta T2P0H3
Facsimile: (403) 264-0251 Attn: Brian Roberts
Facsimile: (403) 266-1395
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.
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. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the successors and assigns of the
parties hereto.
5.7. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
5.8. Applicable Law. While the parties hereto acknowledge and agree that
the transfer of the Company Shares and the Shareholder-Owned Subsidiary Shares
hereunder shall be effected and
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11
recorded in accordance with Argentina law, this Agreement shall be governed
by and construed and enforced in accordance with the applicable laws of the
Province of Alberta.
5.9. Fees, Expenses. All legal and other fees and expenses incurred by the
parties hereto in connection with the negotiation of this Agreement and the
consummation of the transactions contemplated hereby shall be borne solely by
the party incurring such fee or expense. Without limiting the generality of the
foregoing, any fees and expenses incurred by the Shareholder's counsel in
connection with updating the stock records of the Company and the Company
Subsidiary as required to properly record the transfer of the shares hereunder
shall not be the obligation of the Company or the Company Subsidiary. All
out-of-pocket expenses incurred by Buyer, the Company or the Company Subsidiary
in connection with resolving the title exceptions described in Schedule 2.1.9
hereto shall be reimbursed by the Shareholder promptly upon written request
accompanied by written evidence of such expense.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the 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.
WELLTECH EASTERN, INC.
By:
Name:
Title:
KENTING ENERGY SERVICES INC.
By:
Name:
Title
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13
Schedule 2.1.6 - 4/30 Financial Statements
See the financial statements attached hereto
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Schedule 2.1.7 - Liabilities
See the listing attached hereto
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Schedule 2.1.8 - Material Pre-Closing Transactions
Excluded Assets:
Since the Balance Sheet date and in anticipation of the consummation of the
transactions contemplated by this Agreement, the Company Subsidiary has
transferred to P.D. Technical Services Inc. the following assets referred to in
the attached Bill of Sale (the "Excluded Assets"):
Balance Sheet Adjustments:
The amounts payable from the Company or the Company Subsidiary to the
Shareholder or its affiliates in excess of the amounts payable to the Company or
the Company Subsidiary from the Shareholder or its affiliates shall be satisfied
as follows:
$3,000,000 US will be canceled in consideration for the transfer of the
Excluded Assets with the remaining $525,000 US to be paid by the Buyer on the
date hereof.
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Schedule 2.1.9 - Title Exceptions
1. The Argentina real property records do not currently show that the
Company Subsidiary is the owner of the parcel of real property located in Las
Heres, Argentina and the two parcels of real property located in Comodoro
Rivadavia, Argentina (the "Company Property") that valid purchase documents in
the possession of the Company Subsidiary indicate it as owning. The Shareholder
represents and warrants that (i) the Company Subsidiary is the owner in fee
simple of the Company Property (with no material Encumbrances thereon), (ii) no
other party has claimed or can validly claim title to any portion of the Company
Property and (iii) it has (or will cause to be) delivered all documents
necessary to file in the appropriate real property records to reflect that the
Company Subsidiary owns the Company Property in fee simple, free from any
material Encumbrances.
2. Some of the certificates of title covering the thirty-seven (37)
automobiles and light pickup trucks owned by the Company Subsidiary (the
"Company Vehicles") either do not properly reflect the Company Subsidiary as the
owner thereof or indicate that such automobile is subject to a third part lien.
The Shareholder represents and warrants that Company Vehicles are owned outright
by the Company Subsidiary subject to no Encumbrances, (ii) no other party has
claimed or can validly claim title to any of the Company Vehicles and (iii) it
has (or will cause to be) delivered to Buyer all documents necessary to file
with the appropriate governmental agency to enable the Company Subsidiary to
obtain a clear certificate of title to each Company Vehicle.
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33
STOCK PURCHASE AGREEMENT
by and among
NABORS ACQUISITION CORP. IV, as Seller,
KEY ROCKY MOUNTAIN, INC., as Buyer
and
KEY ENERGY GROUP, INC.
Dated as of July 31, 1997
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS......................................................1
ARTICLE 2. PURCHASE OF STOCK OF THE COMPANY.................................4
2.1 Purchase and Sale of Stock...............................................4
2.2 Purchase Price...........................................................4
2.3 Additional Purchase Price Adjustments and Procedures.....................5
2.4 The Closing..............................................................6
2.5 Deliveries at the Closing................................................6
2.6 Other Agreements.........................................................6
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE COMPANY.....7
3.1 Organization and Good Standing...........................................7
3.2 Authorization of Transaction.............................................7
3.3 Capital Structure........................................................7
3.4 Subsidiaries and Non-Subsidiary Equity Investments.......................8
3.5 Title to Company Stock...................................................8
3.6 Noncontravention.........................................................8
3.7 Brokers' Fees............................................................8
3.8 Permits..................................................................8
3.9 Financial Information....................................................8
3.10 No Undisclosed Liabilities..............................................9
3.11 Absence of Certain Changes..............................................9
3.12 No Defaults.............................................................9
3.13 Tax Matters.............................................................9
3.14 Real Property...........................................................9
3.15 Intellectual Property...................................................10
3.16 Contracts...............................................................10
3.17 Insurance...............................................................10
3.18 Litigation..............................................................10
3.19 Employees...............................................................11
3.20 Employee Benefit Plans..................................................11
3.21 Powers of Attorney......................................................12
3.22 Guarantees..............................................................12
3.23 No Implied Representations or Warranties................................12
3.24 Accredited Investor; Investment Intent..................................13
3.25 Drilling and Workover Rigs..............................................13
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND KEY ENERGY.......13
4.1 Organization and Good Standing...........................................13
4.2 Authorization of Transaction.............................................13
4.3 Noncontravention.........................................................14
4.4 Brokers' Fees............................................................14
4.5 Financial Capability; No Financing Condition.............................14
4.6 Litigation...............................................................14
4.7 Accredited Investor; Investment Intent...................................14
4.8 Capitalization of Key Energy.............................................14
4.9 SEC Filings of Key Energy................................................15
4.10 Material Adverse Effect.................................................15
ARTICLE 5. COVENANTS........................................................15
5.1 General..................................................................15
5.2 Notices and Consents.....................................................15
5.3 Operation of Business....................................................16
5.4 Preservation of Business, Operations, Properties and Assets oftheCompany.16
5.5 Access; Confidentiality; Etc.............................................16
5.6 Notice of Developments...................................................16
5.7 Insurance................................................................16
5.8 Employee Matters.........................................................16
5.9 Further Assurances.......................................................18
5.10 Litigation Support......................................................18
5.11 Tax Matters.............................................................18
5.12 Inspections.............................................................20
5.13 Acquisition Proposals...................................................20
5.14 Registration Rights.....................................................20
5.15 Books and Records.......................................................25
ARTICLE 6. CONDITIONS TO OBLIGATION TO CLOSE................................25
6.1 Conditions to Obligations of the Buyer and Key Energy....................25
6.2 Conditions to Obligations of the Seller..................................26
ARTICLE 7. TERMINATION......................................................28
7.1 Termination of Agreement.................................................28
7.2 Effect of Termination....................................................28
ARTICLE 8. REMEDIES FOR BREACHES OF THIS AGREEMENT..........................28
8.1 Investigations; Survival of Representations, Warranties and Covenants....28
8.2 Indemnification Provisions for Benefit of the Buyer.....................28
8.3 Indemnification Provisions for Benefit of the Seller....................29
8.4 Matters Involving Third Parties.........................................29
8.5 Matters Involving the Parties...........................................30
8.6 Limitations on Indemnification..........................................30
8.7 Environmental Claims....................................................30
ARTICLE 9. MISCELLANEOUS...................................................31
9.1 Press Releases and Public Announcements.................................31
9.2 No Third-Party Beneficiaries............................................31
9.3 Entire Agreement........................................................31
9.4 Succession and Assignment...............................................31
9.5 Counterparts............................................................31
9.6 Headings................................................................31
9.7 Notices.................................................................31
9.8 Governing Law...........................................................32
9.9 Amendments and Waivers..................................................32
9.10 Severability...........................................................32
9.11 Expenses...............................................................32
9.12 Construction...........................................................32
9.13 Specific Performance...................................................33
9.14 Submission to Jurisdiction.............................................33
EXHIBITS
EXHIBIT A FORM OF WARRANT..........................................A-1
EXHIBIT B NABORS INDUSTRIES, INC. GUARANTEE........................B-1
EXHIBIT C OPERATING AGREEMENT......................................C-1
EXHIBIT D ESCROW AGREEMENT.........................................D-1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of July 31,
1997, is entered into by and among Nabors Acquisition Corp. IV, a Delaware
corporation (the "Seller"), Key Rocky Mountain, Inc., a Delaware corporation
(the "Buyer"), and Key Energy Group, Inc., a Maryland corporation and the parent
corporation of Buyer ("Key Energy").
WHEREAS, the Seller owns all of the issued and outstanding shares of
capital stock of J.W. Gibson Well Service Company, a Delaware corporation (the
"Company"); and
WHEREAS, the Seller desires to sell to the Buyer all of the issued and
outstanding shares of capital stock of the Company, and the Buyer desires to
purchase such shares from the Seller, upon the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS, in connection with such purchase and sale, the Seller, the Buyer
and Key Energy desire to make certain representations, warranties, covenants and
agreements and to prescribe various conditions to such purchase and sale;
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained herein, and upon the terms and subject to the
conditions hereinafter set forth, the parties hereto agree as follows:
ARTICLE 1. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes (including any Tax on any
indemnity payments), liens, losses, expenses and fees, including court costs and
reasonable attorneys' fees and expenses, in each case after taking into account
the benefits, if any, to the Seller or the Buyer, as the case may be, from the
net tax consequences of the matter as to which it is indemnified.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
"Buyer" has the meaning specified in the first paragraph of this Agreement.
"Closing" has the meaning set forth in Section 2.4.
"Closing Date" has the meaning set forth in Section 2.4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the U.S. Securities and Exchange Commission or any
successor entity.
"Company" has the meaning specified in the second paragraph of this
Agreement.
"Company Common Stock" has the meaning set forth in Section 3.3.
"Company Stock" means all of the issued and outstanding shares of capital
stock of the Company.
"Disclosure Schedule" has the meaning set forth in the first paragraph of
Section 3.
"Employee Benefit Plans" has the meaning set forth in Section 3.20.
"Environmental Claims" means any Adverse Consequences attributable to the
Company or any successor arising under any Environmental Law.
"Environmental Law" means laws, rules, regulations, statutes, ordinances
and codes of the United States, or any State, local, municipal or other
governmental authority, regulating, relating to or imposing liability or
standards of conduct concerning protection of the environment as now in effect.
"Equity Securities" of any Person means the capital or voting stock of such
Person and all other securities convertible into, or exchangeable for, any
shares of such capital or voting stock, all rights to subscribe for or to
purchase, all options and warrants for the purchase of, and all calls,
commitments or claims of any character relating to, any shares of such capital
or voting stock, all equity equivalents, interests in the ownership or earnings
or other similar rights of, or with respect to, such Person, and any securities
convertible into or exchangeable or exercisable for any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any trade or business, whether or not incorporated,
which together with the Company would be deemed or treated as a "single
employer" within the meaning of Code Section 414 or ERISA Section 4001.
"Estimated Working Capital" has the meaning set forth in Section 2.2(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Final Determination Date" has the meaning set forth in Section 2.3(a).
"Guarantee " means the Guarantee of Nabors Industries, Inc. attached hereto
as Exhibit B.
"Indemnified Party" has the meaning set forth in Section 8.4(a).
"Indemnifying Party" has the meaning set forth in Section 8.4(a).
"Industry Material Adverse Event" means the date on which both of the
following events shall occur: if (a) the average of the West Texas Intermediate
crude oil spot market daily closing prices as reported by the New York
Mercantile Exchange for the 45-day period prior to the date is below $15.00 per
barrel and (b) the average of the natural gas prices at Henry Hub, Louisiana as
reported by the New York Mercantile Exchange for the 45-day period prior to the
date is below $1.60 per mmbtu.
"Intellectual Property" has the meaning set forth in Section 3.15.
"July 31 Balance Sheet" has the meaning set forth in Section 2.3.
"Key Energy" has the meaning specified in the first paragraph of this
Agreement.
"Key Energy Common Stock" means the Common Stock, par value $.10 per share,
of Key Energy.
"Key Energy Financial Statements" has the meaning set forth in Section 4.9.
"Key Energy Reports" has the meaning set forth in Section 4.9.
"Knowledge" means the actual knowledge of any director or executive officer
of the named entity, after due inquiry.
"Liability" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, whether due or to become due and whether
based on contract, tort (including negligence), strict liability or other
basis), including any liability for Taxes.
"Material Adverse Effect" means any event that has or is reasonably
expected to have a material adverse effect on the business, operations or
financial condition of the applicable party. If quantifiable, an event of series
of events shall be considered to have a Material Adverse Effect for purposes of
this Agreement if it involves amounts in excess of $1,250,000. A Material
Adverse Effect on the business, operations or financial condition of a party is
sometimes referred to as a "[Name of Party] Material Adverse Effect".
"Operating Agreement" means the Operating Agreement to be entered into by
the Seller, Key Energy and the Buyer with respect to the Company, effective on
or after the date the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, has terminated or been waived, in
substantially the form of Exhibit C, with such changes thereto as the parties
executing the same may mutually agree.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.
"Oxy" means Occidental Oil and Gas Corporation, a California corporation.
"Oxy Purchase Agreement" means the Stock Purchase Agreement between Nabors
Industries, Inc. and Oxy dated as of March 8, 1996.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization
or a governmental entity (or any department, agency or political subdivision
thereof).
"Permits" has the meaning set forth in Section 3.8.
"Proceedings" has the meaning set forth in Section 5.11(b).
"Purchase Price" has the meaning set forth in Section 2.2(a).
"Registered Securities" has the meaning specified in Section 5.14(a).
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
claim or other security interest of any kind or nature whatsoever, other than
(a) mechanic's, materialmen's and similar liens; (b) liens for Taxes not yet due
and payable or for Taxes that the taxpayer is contesting in good faith through
appropriate proceedings; and (c) purchase money liens and liens securing rental
payments under capital lease arrangements.
"Seller" has the meaning specified in the first paragraph of this
Agreement.
"Shelf Registration Statement" has the mean specified in Section 5.14(a).
"State Tax Detriment" has the meaning specified in Section 2.3(d).
"Tax" means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including Taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated or other tax of any kind whatsoever, including any interest, penalty
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8.4(a).
"Unaudited Balance Sheet" means the unaudited balance sheet of the Company
as of March 31, 1997 as described in Section 3.9.
"Warrants" means warrants, dated the Closing Date and expiring on the
Warrant Expiration Date, to acquire 265,000 shares of Key Energy Common Stock,
subject to adjustment, at the Warrant Exercise Price in the form set forth in
Exhibit A to this Agreement.
"Warrant Exercise Price" means $18 per share.
"Warrant Expiration Date" means the seventh anniversary of the Closing
Date.
"Warrant Shares" means 265,000 shares of the Key Energy Common Stock, as
adjusted pursuant to the provisions of Section 2.2(d).
"Working Capital" means the difference between total current assets and
total current liabilities of the Company as of the July 31, 1997, as set forth
on the July 31 Balance Sheet.
ARTICLE 2. PURCHASE OF STOCK OF THE COMPANY.
2.1 Purchase and Sale of Stock. Upon the terms and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Seller, and
the Seller agrees to sell, transfer, convey and deliver to the Buyer, the
Company Stock at the Closing for the Purchase Price.
2.2 Purchase Price.
(a) The aggregate purchase price to be paid for the Company Stock shall be
(i) an amount in cash equal to the sum of (x) $20,000,000 plus (y) the Working
Capital of the Company, plus (ii) 100,000 shares of Key Energy Common Stock,
plus (iii) the Warrants (collectively the "Purchase Price"). On the date the
Operating Agreement becomes effective, the Buyer shall deposit the remaining
$20,000,000 cash portion of the Purchase Price and $3,900,000 Estimated Working
Capital into an escrow account, as specified in the Escrow Agreement attached
hereto as Exhibit D.
(b) On the Closing Date, the Buyer shall pay or cause to be paid to the
Seller an amount equal to the sum of $20,000,000, plus interest, if any, since
the date of deposit of such funds in the escrow account, as specified in the
Escrow Agreement attached hereto as Exhibit D, plus Estimated Working Capital in
cash by wire transfer or delivery of other immediately available funds to an
account or accounts to be designated by the Seller in writing at least one
business day prior to the Closing Date. "Estimated Working Capital" means the
difference between total current assets and total current liabilities of the
Company as shown on a balance sheet of the Company prepared by the Seller in
good faith as of July 31, 1997. The cash portion of the Purchase Price,
including the Estimated Working Capital, shall be subject to post-Closing
adjustment in accordance with Section 2.3.
(c) At the Closing, Key Energy will issue to the Seller 100,000 shares of
Key Energy Common Stock, subject to adjustment as provided below. The number of
the shares shall be adjusted in the event of any change in the Key Energy Common
Stock by reason of stock or other non-cash dividends, extraordinary cash
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchange of shares or the like after the date of this Agreement and
on or before the Closing Date, such that, in each case, the Seller shall receive
the number and class of shares or other securities or property that would have
been received in respect of a share of the Key Energy Common Stock if the
Closing Date had occurred immediately prior to such event, or the record date
therefor, as applicable.
(d) At the Closing, Key Energy will issue to the Seller the Warrants, with
the Warrant Exercise Price, the Warrant Expiration Date and the Warrant Shares
calculated or determined pursuant to the provisions of this Agreement duly
inserted in the appropriate places thereon. The number of the Warrant Shares
shall be adjusted in the event of any change in the Key Energy Common Stock by
reason of stock or other non-cash dividends, extraordinary cash dividends,
split-ups, mergers, recapitalizations, combinations, subdivisions, conversions,
exchange of shares or the like after the date of this Agreement and on or before
the Closing Date, such that, in each case, the Seller shall receive upon the
payment of the Warrant Exercise Price the number and class of shares or other
securities or property that would have been received in respect of a share of
the Key Energy Common Stock if the Closing Date had occurred immediately prior
to such event, or the record date therefor, as applicable.
2.3 Additional Purchase Price Adjustments and Procedures.
(a) On the Closing Date, the Buyer will prepare and deliver to the Seller a
balance sheet of the Company as of July 31, 1997 (the "July 31 Balance Sheet").
The July 31 Balance Sheet shall include all information necessary to compute the
Working Capital of the Company. The Buyer shall make available to the Seller all
information which may be in the possession of the Buyer or the Company which the
Seller requests in order to verify the accuracy of the July 31 Balance Sheet.
Within 60 days following delivery of the July 31 Balance Sheet, the Seller shall
notify the Buyer whether it agrees with the July 31 Balance Sheet. In the event
that the Seller disagrees with the July 31 Balance Sheet, the Seller shall
provide the Buyer with a written notice specifying the basis for the Seller's
disagreement, and the Seller and the Buyer shall work in good faith to reach
agreement on the composition of the July 31 Balance Sheet, but, in the event
that they shall not agree within 30 days following the date of such written
notice, the matter will be referred to a "Big Six" independent public accounting
firm mutually agreed to by the Buyer and the Seller. The fees and disbursements
of such accounting firm shall be borne equally by the Buyer and the Seller. Such
accounting firm shall examine the records of the Company, and, within 30 days
following the date upon which such matter shall be referred to such accounting
firm, such accounting firm shall determine the disposition of any dispute with
respect to the July 31 Balance Sheet (the date on which the determination is
made, whether by the accounting firm or by agreement of the parties, is referred
to as the "Final Determination Date"). Any such determination shall be final and
binding on the parties, and may be enforced by appropriate judicial or other
proceedings.
(b) In the event that the Working Capital of the Company is less than the
Estimated Working Capital, then the amount of such difference shall be paid by
the Seller to the Buyer within two business days of the Final Determination
Date, plus interest of 8% per annum payable from July 31, 1997 to the Final
Determination Date. In the event that the Working Capital of the Company is more
than the Estimated Working Capital, then the amount of such difference shall be
paid by the Buyer to the Seller within two business days of the Final
Determination Date, plus interest of 8% per annum payable from July 31, 1997 to
the Final Determination Date.
(c) The July 31 Balance Sheet shall be prepared in accordance with
generally accepted accounting principles applied in a manner consistent with the
Company's historical accounting policies and practices; except that all
intercompany balances will be eliminated.
(d) On or prior to 90 days from the Closing Date, the Seller will prepare
and deliver to the Buyer a calculation of the State Tax Detriment (as defined
below) resulting from the sale of the Company, showing all necessary information
for such calculation. The Seller shall make available to the Buyer all
information which may be in the possession of the Seller which the Buyer
reasonable requests in order to verify the accuracy of the State Tax Detriment
calculation. Within 30 days following delivery of the calculation of the State
Tax Detriment, the Buyer shall notify the Seller whether it disagrees with such
calculation and the Buyer shall be deemed to agree with such calculation if no
notice of disagreement is received within such time period. In the event that
the Buyer disagrees with such calculation, the Buyer shall attach to its notice
of disagreement or incorporate therein a written notice specifying the basis for
the Buyer's disagreement, and the Seller and the Buyer shall work in good faith
to reach agreement on the calculation but, in the event that they shall not
agree within 30 days following the date of such written notice, the matter will
be referred to a nationally recognized independent public accounting firm
mutually agreed to by the Buyer and the Seller. The fees and the disbursements
of such accounting firm shall be borne equally by the Buyer and the Seller. Such
accounting firm shall examine the records of the Seller and the Company, and,
within 30 days following the date upon which such matter shall be referred to
such accounting firm, such accounting firm shall determine the disposition of
any dispute with respect to the calculation. Any such determination shall be
final and binding on the parties, and may be enforced by appropriate judicial or
other proceedings. Payment of the amount of the State Tax Detriment shall be
made by the Buyer to the Seller no later than five business days after the date
agreement is reached between the Buyer and the Seller or the decision of the
accounting firm is made. The "State Tax Detriment" equals the difference between
(A) the state Taxes payable by the Seller or any related party as a result of
making the Section 338(h)(10) election contemplated by Section 5.11(c) of this
Agreement and (B) the state Taxes that would have been payable as a result of
the sale pursuant to this Agreement had such a Section 338(h)(10) election not
been made, such calculation to be grossed up for any additional state or other
Taxes payable as a result of the payment to the Seller under this provision.
2.4 The Closing. Except as otherwise set forth herein, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of the Seller in Houston, Texas, commencing at 10:00 a.m., local
time, on (a) the later to occur of (i) a date between October 1 and October 15,
1997 or (ii) the fifth business day following the satisfaction or waiver of all
conditions to the obligations of the parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective parties will take at the Closing itself) or (b) such earlier date as
the Seller may reasonably request and the parties may mutually agree, which
agreement shall not be unreasonably withheld (the "Closing Date").
2.5 Deliveries at the Closing. At the Closing, (a) the Seller will deliver
or cause to be delivered to the Buyer certificates representing the Company
Stock and the various certificates, instruments and documents referred to in
Section 6.1; (b) the Buyer and Key Energy will deliver or cause to be delivered
to the Seller the various certificates, instruments and documents referred to in
Section 6.2; and (c) the Buyer will deliver or cause to be delivered to the
Seller the Purchase Price.
2.6 Other Agreements. Concurrently herewith, (a) Nabors Industries, Inc. is
entering into the Guarantee, (b) the Seller, the Buyer and Key Energy are
entering into the Operating Agreement and (c) the Seller, the Buyer, Key Energy
and the escrow agent named therein are entering into the Escrow Agreement.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE COMPANY.
The Seller and the Company represent and warrant to the Buyer and Key
Energy that the statements contained in this Article 3 are correct and complete
as of the date of this Agreement, except as set forth in the disclosure schedule
accompanying this Agreement (the "Disclosure Schedule"). The Disclosure Schedule
has been arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this Article 3.
3.1 Organization and Good Standing. Each of the Company and the Seller is a
corporation duly organized, validly existing and in good standing under the laws
of its state of organization, has full, requisite corporate power and authority
to carry on its business as it is currently conducted and to own and operate the
properties currently owned and operated by it, and is duly qualified or licensed
to do business and is in good standing as a foreign corporation authorized to do
business in all jurisdictions in which the character of the properties owned or
the nature of the business conducted by it would make such qualification or
licensing necessary, except where the failure to be so qualified or licensed
would not have a Material Adverse Effect on the Seller or the Company,
respectively.
3.2 Authorization of Transaction. Each of the Seller and the Company has
full power and authority (including corporate power and authority) to execute
and deliver this Agreement and the Exhibits to which it is a party and to
perform its obligations hereunder and thereunder. Without limiting the
generality of the foregoing, the Board of Directors of the Seller and the
Company and, if required by applicable law, the stockholders of the Seller, have
duly authorized the execution, delivery and performance of this Agreement and
such Exhibits by the Seller and the Company, respectively. This Agreement
constitutes the valid and legally binding obligation of the Seller and the
Company, and each Exhibit to which the Seller is a party constitutes the valid
and legally binding obligation of the Seller, in each case enforceable against
such party in accordance with its terms and conditions, subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights and to general principles of equity.
3.3 Capital Structure.
(a) The authorized capital stock of the Company consists of 1,000 shares of
common stock, $1.00 par value per share ("Company Common Stock"). There are
1,000 shares of Company Common Stock which are issued and outstanding and all of
such shares are held by the Seller. All outstanding shares of capital stock of
the Company have been duly authorized and are validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are no bonds,
debentures, notes or other indebtedness of the Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of the Company may vote.
(b) Except for this Agreement, there are no outstanding securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which either the Seller or the Company is a party or
by which either of them is bound obligating either the Seller to cause the
Company or the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of its capital stock or other voting
securities of the Company or obligating either the Seller to cause the Company
or the Company to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. There
are no outstanding contractual obligations of the Company to repurchase, redeem
or otherwise acquire any shares of capital stock of the Company.
3.4 Subsidiaries and Non-Subsidiary Equity Investments. The Company has no
subsidiaries and does not own, directly or indirectly, any voting securities,
other equity interests or partnership interests in any other Person.
3.5 Title to Company Stock. The Seller has good and valid title to the
Company Stock, free and clear of any Security Interest other than claims of the
Buyer pursuant to this Agreement. Upon delivery of the Company Stock hereunder
and payment of the Purchase Price as herein contemplated, the Buyer will receive
good and valid title to the Company Stock, free and clear of any Security
Interest.
3.6 Noncontravention. Except, in each case, where such violations
individually or in the aggregate would not have a Material Adverse Effect on the
applicable party, neither the execution and the delivery of this Agreement and
the Exhibits hereto to which the Seller is a party, nor the consummation of the
transactions contemplated hereby, will (a) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge or other
restriction of any government, governmental agency or court to which either the
Seller or the Company is subject or any provision of the charter or bylaws of
the Seller or the Company or (b) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel, or require any notice
under any agreement, contract, lease, license, instrument or other arrangement
to which either the Seller or the Company is a party or by which either of them
is bound or to which any of their respective assets or properties is subject (or
result in the imposition of any Security Interest upon any of the assets or
properties of the Company or the Company Stock). Except for any required filings
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the
Company does not need to give any notice to, make any filing with or obtain any
authorization, consent or approval of any government or governmental agency in
order for the parties to consummate the transactions contemplated by this
Agreement.
3.7 Brokers' Fees. Neither the Seller nor the Company has any liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement.
3.8 Permits. The Disclosure Schedule sets forth all material licenses,
permits and authorizations of the Company necessary for the Company to own, use,
operate and maintain its assets and properties (collectively, the "Permits").
The Company has full corporate power and authority to operate its business
pursuant to such Permits, except where the failure to have such Permits,
individually or in the aggregate, would not have a Company Material Adverse
Effect. All of such Permits are in full force and effect and, except for Permits
required to be obtained by the Buyer, as owner of the Company or where the
failure to be or to continue to be in full force and effect would not have a
Company Material Adverse Effect, and assuming the Company is operated in the
same manner after the Closing as before the Closing, then immediately following
the Closing, such Permits will continue to be in full force and effect in
accordance with their respective terms. The Company is in substantial compliance
with all such Permits and with all orders, judgments or decrees applicable to
the ownership, use, maintenance or operation of its assets and properties,
except, in each case, where the failure to be in compliance would not have a
Company Material Adverse Effect.
3.9 Financial Information. Copies of the Company's unaudited balance sheets
dated September 30, 1996, December 31, 1996 and March 31, 1997 together with its
unaudited statements of operations for the five months ended September 30, 1996,
the three months ended December 31, 1996 and the three months ended March 31,
1997 are included in the Disclosure Schedule. Such financial statements are true
and complete in all material respects (except for the omission of notes and
schedules), present fairly the financial condition of the Company as at the
dates indicated, and the results of operations for the respective periods
indicated, and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis, except as noted therein and
subject, in the case of interim financial statements, to normal year-end
adjustments and other adjustments described therein. In addition, such financial
statements, though unaudited, include all adjustments which the Seller and the
Company consider necessary for fair presentation, in all material respects, of
the Company's results of operations for each such periods.
3.10 No Undisclosed Liabilities. The Company does not have any liabilities
or obligations, absolute or contingent, nor does the Seller or the Company have
any Knowledge of any potential liabilities or obligations of the Company, which
would be required to be reflected on the Unaudited Balance Sheet in accordance
with generally accepted accounting principles and that would reasonably be
expected to have a Company Material Adverse Effect, other than those (i)
reflected or reserved against in the Unaudited Balance Sheet or (ii) incurred in
the Ordinary Course of Business since March 31, 1997.
3.11 Absence of Certain Changes. Since March 31, 1997, no event has
occurred, or condition exists, which would constitute or cause, individually or
in the aggregate, a Company Material Adverse Effect.
3.12 No Defaults. The Company is not in default under, and no event has
occurred which with notice, lapse of time or, to the Knowledge of the Seller and
the Company, action by a third party could result in a default under, (a) any
outstanding indenture, material contract or agreement to which the Company is a
party or to which it or its assets may be subject, except where such default or
potential default would not have a Company Material Adverse Effect or (ii) under
any provision of the Company's Certificate of Incorporation.
3.13 Tax Matters.
(a) The Seller and the Company have caused, or will have caused by the
Closing Date, to be timely filed with the appropriate federal, foreign, state,
local and other governmental authorities all Tax Returns required to be filed on
or before the Closing Date by or with respect to the Company for any taxable
period ending on or before the Closing Date. The Seller and the Company have
paid, or will have paid by the Closing Date, all Taxes shown to be due from the
Seller on such returns or reports. All Tax Returns filed by or on behalf of the
Company are true and correct. The Company has no direct or indirect liability
for any Taxes of any Affiliate, or any other member of a consolidated group in
which the Company is or, since April 30, 1996 has been, a member, particularly
pursuant to Treasury Regulation Section 1.1502-6.
(b) No Tax Liabilities exist with respect to the Company, except for
Liabilities imposed by law and incurred in the Ordinary Course of Business for
obligations not yet due and except as may relate to the purchase and sale of
Company Stock contemplated hereby. Tax Liabilities not yet due and payable
(except as relates to this transaction) will be fully reserved on the July 31
Balance Sheet to the extent not paid by the Seller.
(c) There are no claims for Taxes presently being asserted in writing for
which the Company may be liable. No extension has been granted by or on behalf
of the Company to any Tax authority of the limitation period during which any
Tax Liability may be asserted. The Company has not received any written notice
of an increase in the assessed value of any of the Company's properties for Tax
purposes.
(d) The Disclosure Schedule includes a copy of the Form 8023-A that was
filed with the Internal Revenue Service in a timely manner following the
acquisition of the Company pursuant to the Oxy Purchase Agreement on April 30,
1996.
3.14 Real Property. The Disclosure Schedule lists and describes briefly all
real property owned, leased or subleased to the Company and all Security
Interests thereon. The Disclosure Schedule also identifies the owned, leased or
subleased properties for which title insurance policies have been procured. Each
lease and sublease listed in the Disclosure Schedule is in full force and
effect, subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights and to general principles of equity.
3.15 Intellectual Property. The Company holds no patents, patent
applications, trademarks (whether registered or not), trademark applications,
service marks, trade names, trade secrets, computer software, copyright
registrations or applications, or patent or know-how licenses (collectively,
"Intellectual Property") relating to or used in connection with its business or
operations, other than computer software and other non-proprietary Intellectual
Property necessary to operate business systems generally, drilling know-how,
patents on equipment used by the Company and the name "J.W. Gibson Well Service
Company" .
3.16 Contracts. The Disclosure Schedule lists all contracts and other
agreements to which the Company is a party that involve amounts in excess of
$250,000 or that continue for a term in excess of six months. Each such
agreement is in full force and effect, subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
and to general principles of equity. The Company is not, and to the Knowledge of
the Company and the Seller, no other party to any such agreement is, in material
default thereunder and no event has occurred which (with or without notice,
lapse of time or, to the Knowledge of the Company and the Seller, action by a
third party) would constitute a material default thereunder.
3.17 Insurance. The Disclosure Schedule sets forth the following
information with respect to each insurance policy of the Seller, the Company or
any Affiliate thereof (including policies providing property, casualty,
liability and workers' compensation coverage and bond and surety arrangements)
to which the Company has been a party, a named insured or otherwise the
beneficiary of coverage at any time since April 1, 1995 that covers, affects or
relates to the business, operations, assets or properties of the Company:
(a) the name, address and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder and the name of
each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the coverage was on a
claims made, occurrence or other basis) and amount (including a description of
how deductibles and ceilings are calculated and operate) of coverage; and
(e) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
Each such insurance policy is or was in full force and effect for the
period specified therefor in the Disclosure Statement, subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights and to general principles of equity and, since April 30, 1996
the assets, properties and personnel of the Company have been covered under one
or more of such policies as noted therein. The Disclosure Schedule describes any
self-insurance arrangements covering, affecting or relating to the business,
operations, assets or properties of the Company.
3.18 Litigation. The Disclosure Schedule sets forth all suits, actions or
legal, administrative or other proceedings or governmental investigations
pending to which the Company is a party. There is no suit, action or legal,
administrative, arbitration or other proceeding or governmental investigation
pending to which the Company is a party that may reasonably be expected to have
a Company Material Adverse Effect. The Company is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge. There are no actions,
suits, proceedings or governmental investigations pending or, to the Knowledge
of the Seller or the Company, threatened, which seek to question, delay or
prevent the consummation of, or would materially impair the ability of the
parties hereto to consummate, the transactions contemplated hereby.
3.19 Employees.
(a) The Disclosure Schedule lists all employees of the Company, the rates
of pay for each such employee and any and all commission, bonus or other
compensation arrangements between the Company and any of such employees.
(b) The Disclosure Schedule lists each management or employment contract or
contract for personal services and a brief description of any understanding or
commitment between the Company and any officer, consultant, director, employee
or independent contractor of the Company.
(c) A copy of each written management or employment contract or contract
for personal services between the Company and any officer, consultant, director,
employee or independent contractor of the Company has been provided to the
Buyer.
(d) The Company is not a party to or bound by any collective bargaining
agreement nor, to the Knowledge of the Seller and the Company, is there any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Company.
3.20 Employee Benefit Plans.
(a) The Disclosure Schedule sets forth a brief description of each bonus,
pension, profit sharing, retirement, severance, termination pay, stock purchase,
incentive or deferred compensation, stock option, medical, hospitalization,
disability, life insurance, accident, insurance or similar plan or practice
(collectively, "Employee Benefit Plans") in effect with respect to the Company's
directors, officers and employees.
(b) With respect to each of the Company's Employee Benefit Plans, the
Seller has made available to the Buyer true and complete copies of: (i) all plan
documents, including any related trust agreements, insurance contracts or other
funding arrangements; (ii) the most recent determination letter received from
the Internal Revenue Service (where applicable); (iii) the most recent IRS
Series 5500 Form, including, where applicable, the most recent financial
statement; and (iv) the most recent summary plan description.
(c) The Company does not maintain, contribute to or have any Liability
under any funded or unfunded medical, health, disability, long-term care or life
insurance plan or arrangement for present or future retirees from the Company,
except as required by the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
(d) The Company does not maintain or contribute to a trust, organization or
association described in any of Section 501(c)(9), 501(c)(17) or 501(c)(20) of
the Code.
(e) Favorable determination letters have been received from the Internal
Revenue Service with respect to each of the Company's Employee Benefit Plans
that is intended to comply with the provisions of Section 401(a) of the Code,
evidencing compliance with the relevant provisions of the Tax Equity and Fiscal
Responsibility Act of 1982, the Tax Reform Act of 1984, the Retirement Equity
Act of 1984 and the Tax Reform Act of 1986. To the Knowledge of the Seller and
the Company, nothing has occurred since the date of such determination letters
that would adversely affect the qualified status of each such Employee Benefit
Plan or the tax-exempt status of any related trust.
(f) Each of the Company's Employee Benefit Plans that is, or since April
30, 1996 has been, subject to Section 412 of the Code, Section 302 of ERISA or
Title IV of ERISA has been terminated and its assets distributed, and the
Company does not maintain or contribute to any such plan.
(g) Since April 30, 1996, neither the Company nor any ERISA Affiliate of
the Company has maintained, contributed to or had any Liability (including
current or potential withdrawal liability) with respect to any "multiemployer
plan" as such term is defined in Section 3(37) of ERISA.
(h) The Company is not a party to any employment agreement, whether written
or oral, or any of the Company's Employee Benefit Plans which contains any
provision relating to change in control of the Company.
(i) The Company has not made or become obligated to make, or will, as a
result of any event connected with the acquisition of the Company Stock by the
Buyer or any other transaction contemplated herein, make or become obligated to
make, any "excess parachute payment" as defined in section 280G of the Code
(without regard to subsection (b)(4) thereof).
(j) There has been no act or omission by the Company, or by any current
Affiliate of the Company, that would impair in any material respect the right or
ability of the Company to amend or terminate unilaterally any of the Company's
Employee Benefit Plans or to terminate unilaterally, as of the Closing Date, the
accrual of any benefits after the Closing Date with respect to employees or
former employees of the Company.
(k) The J.W. Gibson Well Service Company Profit Sharing Plan does not fail
to meet the requirements of a "qualified plan" under Section 401 of the Code as
a result of any action, or omission, by the Company prior to the Closing.
(l) Each of the Company's Employee Benefit Plans is, in all material
respects, in compliance, and has been administered, maintained and funded in all
material respects in accordance, with the applicable provisions of ERISA and the
Code and all other applicable laws, rules and regulations. All reports and
information required to be filed or distributed in accordance with ERISA or the
Code with respect to each Employee Benefit Plan have been timely and properly
filed and distributed including, without limitation, IRS Forms 5500.
(m) All contributions or premiums which are or were due between April 30,
1996 and on or prior to the Closing Date with respect to the Employee Benefit
Plans have been or will be timely paid by Company on or prior to the Closing
Date.
(n) Nothing in this Agreement, express or implied, shall be construed to
prevent the Buyer from terminating or modifying to any extent or in any respect
whatsoever any employee benefit or fringe benefit plan, policy or program that
the Buyer sponsors, assumes or maintains, or to which the Buyer may contribute
or have an obligation to contribute.
3.21 Powers of Attorney. There are no outstanding powers of attorney
executed by or on behalf of the Company.
3.22 Guarantees. The Company is not a guarantor or otherwise liable for any
Liability or obligation (including indebtedness) of any other Person.
3.23 No Implied Representations or Warranties. Notwithstanding anything
contained in this Article 3 or any other provisions of this Agreement, it is the
explicit intent of each party hereto that neither the Seller nor the Company is
making any representation or warranty whatsoever beyond those expressly given in
this Agreement. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE ASSETS OF
THE COMPANY WHICH THE BUYER IS INDIRECTLY ACQUIRING THROUGH THE PURCHASE OF THE
COMPANY STOCK ARE BEING ACQUIRED "AS IS, WHERE IS, WITH ALL FAULTS" AND WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND BY OR ON BEHALF OF THE SELLER OR THE
COMPANY, EXPRESS, IMPLIED OR OTHERWISE, EXCEPT AS OTHERWISE CONTAINED IN THIS
SECTION 3. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, NEITHER THE SELLER
NOR THE COMPANY MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED OR
OTHERWISE, AS TO THE CONDITION, MERCHANTABILITY, SUITABILITY, HABITABILITY,
FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES WITH RESPECT
TO ANY OF THE ASSETS OF THE COMPANY, INCLUDING ANY REPRESENTATIONS OR WARRANTIES
THAT MAY ARISE FROM USAGE OF TRADE OR COURSE OF DEALING.
3.24 Accredited Investor; Investment Intent. The Seller is an "accredited
investor," as such term is defined in Regulation D promulgated under the
Securities Act of 1933, as amended. The Seller is acquiring the shares of Key
Energy Common Stock and the Warrants comprising a portion of the Purchase Price
for investment purposes only and not with a view towards resale or distribution.
3.25 Drilling and Workover Rigs. The Disclosure Schedule lists all of the
drilling and workover rigs owned or leased by the Company and sets forth the
location of such rigs on the date thereof. The Company has good and marketable
title to all rigs owned by it, free and clear of all Security Interests.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND KEY ENERGY.
The Buyer and Key Energy represent and warrant to the Seller that the
statements contained in this Article 4 are correct and complete as of the date
of this Agreement, except as set forth in the Disclosure Schedule. The
Disclosure Schedule will be arranged in paragraphs corresponding to the numbered
and lettered paragraphs contained in this Article 4.
4.1 Organization and Good Standing. Each of the Buyer and Key Energy is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its organization, has full, requisite corporate power and
authority to carry on its business as it is currently conducted and to own and
operate the properties currently owned and operated by it, and is duly qualified
or licensed to do business and is in good standing as a foreign corporation
authorized to do business in all jurisdictions in which the character of the
properties owned or the nature of the business conducted by it would make such
qualification or licensing necessary, except where the failure to be so
qualified or licensed would not have a Material Adverse Effect on the Buyer or
Key Energy, respectively.
4.2 Authorization of Transaction. Each of the Buyer and Key Energy has full
power and authority (including full corporate power and authority) to execute
and deliver this Agreement and each Exhibit to which it is a party and Key
Energy has full power and authority (including full corporate power and
authority) to execute and deliver the Warrants and the Key Energy Common Stock
to be delivered hereunder and thereunder and to perform its obligations
thereunder. Without limiting the generality of the foregoing, the respective
boards of directors of the Buyer and Key Energy and, if required by applicable
law, the stockholders of the Buyer and Key Energy, have duly authorized the
execution, delivery and performance of this Agreement and each Exhibit to which
the Buyer or Key Energy is a party by the Buyer and Key Energy, respectively.
This Agreement and each Exhibit to which the Buyer or Key Energy is a party
constitutes the valid and legally binding obligation of the Buyer and/or Key
Energy, enforceable against the Buyer and/or Key Energy, respectively, in
accordance with its terms and conditions, subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
and to general principles of equity. The Warrants, when executed and delivered
by Key Energy, will constitute the legally valid and binding obligations of Key
Energy, enforceable against Key Energy in accordance with their terms, except as
enforceability is limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and equitable
principles.
4.3 Noncontravention. Except, in each case, where such violations
individually or in the aggregate would not have a Material Adverse Effect on the
applicable party, neither the execution and the delivery of this Agreement, the
Exhibits hereto and the Warrants, nor the consummation of the transactions
contemplated hereby and thereby, will (a) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge or other
restriction of any government, governmental agency or court to which the Buyer
or Key Energy is subject or any provision of their respective charter or bylaws
or (b) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice under any agreement, contract, lease,
license, instrument or other arrangement to which the Buyer or Key Energy is a
party or by which it is bound or to which any of its assets is subject. Except
for (i) any required filings under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and (ii) filings with federal or state securities
commissions in connection with the transactions contemplated in the Warrants and
the registration rights contemplated in Section 5.14, neither the Buyer nor Key
Energy needs to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any government or governmental agency in
order for the parties to consummate the transactions contemplated by this
Agreement or the Warrants.
4.4 Brokers' Fees. The Buyer has no Liability or obligation to pay any fees
or commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
4.5 Financial Capability; No Financing Condition. The Buyer will have
available on the Closing Date, funds sufficient to pay the Purchase Price. Key
Energy has available and will have available on the Closing Date, and has
reserved for issuance, a sufficient number of shares of Key Energy Common Stock
to pay the stock portion of the Purchase Price and to issue the Warrant Shares
on conversion of the Warrants. Each of the Buyer and Key Energy acknowledges and
understands that its obligations to effect the transactions contemplated hereby
are not subject to the availability to the Buyer or Key Energy of financing
sufficient to pay the Purchase Price.
4.6 Litigation. There are no actions, suits, proceedings or government
investigations pending or, to the Knowledge of the Buyer and Key Energy,
threatened, which seek to question, delay or prevent the consummation of, or
would materially impair the ability of the parties hereto to consummate, the
transactions contemplated hereby.
4.7 Accredited Investor; Investment Intent. The Buyer is an "accredited
investor," as such term is defined in Regulation D promulgated under the
Securities Act. The Buyer is purchasing the Company Stock for investment
purposes only and not with a view towards resale or distribution.
4.8 Capitalization of Key Energy. As of the date hereof, the authorized
capital stock of Key Energy consists solely of 25,000,000 shares of the Key
Energy Common Stock. Other than the Key Energy Common Stock, Key Energy has no
class or series of Equity Securities authorized, issued or outstanding. As of
July 15, 1997, 12,422,964 shares of the Key Energy Common Stock were issued and
outstanding. As of the date hereof, (i) 265,000 shares of the Key Energy Common
Stock were reserved for issuance upon the exercise of Warrants and (ii)
8,177,246 shares of Key Energy Common Stock shares are issuable upon the
conversion of outstanding convertible securities of Key Energy. Pursuant to Key
Energy's Certificate of Incorporation, the board of directors of Key Energy has
the authority, without further shareholder action, to redesignate all of the
authorized and unissued shares of Key Energy Common Stock into one or more
series of preferred stock. No shares of authorized and unissued Key Energy
Common Stock have been so designated or issued. All of the issued and
outstanding shares of the capital stock of Key Energy have been duly authorized
and are validly issued, fully paid and nonassessable, and no shares of the
capital stock of Key Energy are subject to, nor have they been issued in
violation of, preemptive rights. The shares of Key Energy Common Stock
constituting a portion of the Purchase Price when issued and delivered by Key
Energy, the Warrants, when executed and delivered by Key Energy, and the Warrant
Shares, when issued on conversion of the Warrants, will have been duly
authorized and validly issued and will not be subject to, nor issued in
violation of, preemptive rights. Except as referred to above, there are
outstanding (a) no Equity Securities of Key Energy, and (b), except for the
obligations of (1) the parties pursuant to this Agreement, and (2) Key Energy
pursuant to the Warrants, no options or other rights to acquire from Key Energy,
and no obligations of Key Energy to issue or sell, any Equity Securities of Key
Energy. Except as set forth in the Key Energy Reports, there are no outstanding
obligations of Key Energy to repurchase, redeem or otherwise acquire any shares
of its capital stock. Except as set forth in the Key Energy Reports, there is no
agreement or arrangement restricting the voting or transfer of any of the Equity
Securities of Key Energy. Except as described in the Key Energy Reports or as
contemplated hereby and by the Warrants and the registration rights contemplated
in Section 5.14, there are no agreements or arrangements to which Key Energy is
a party pursuant to which Key Energy is or could be required to register shares
of the Key Energy Common Stock under the Securities Act.
4.9 SEC Filings of Key Energy. Key Energy has delivered to the Seller
accurate and complete copies (without exhibits) of (i) the Annual Report on Form
10-K of Key Energy for the fiscal year ended June 30, 1996, (ii) its Quarterly
Reports on Form 10-Q for the quarterly periods ended September 30, 1996,
December 31, 1996 and March 31, 1997, (iii) its Proxy Statement for its last
Annual Meeting of Shareholders, (iv) its Current Reports on Form 8-K as filed
since June 30, 1996, in each case in the form filed by Key Energy with the
Commission and (v) its Registration Statements on Form 8-A dated May 21, 1981,
as amended, and June 6, 1997 (collectively, the "Key Energy Reports"). The Key
Energy Reports are the only reports, schedules, forms, statements and other
documents required by the Exchange Act to be filed by Key Energy with the
Commission since June 30, 1996. None of the Key Energy Reports, including,
without limitation, any financial statements or schedules included therein, at
the time filed, contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary in order to
make the statements contained therein, in light of the circumstances under which
they were made, not misleading. The audited consolidated financial statements
and unaudited consolidated interim financial statements of Key Energy
(collectively, "Key Energy Financial Statements") included in such reports
present fairly, in conformity in all material respects with generally accepted
accounting principles (except as may be indicated in the notes thereto and
except that certain information and disclosure normally included in notes to
consolidated financial statements have been condensed or omitted from the
unaudited consolidated interim financial statements pursuant to rules and
regulations of the Commission, but any resultant disclosures are in accordance
with generally accepted accounting principles as they apply to interim
reporting), the consolidated financial position of Key Energy as of the dates
thereof and its consolidated results of operations and cash flows for the
periods then ended (subject to normal year-end audit adjustments in the case of
any unaudited interim financial statements).
4.10 Material Adverse Effect. Since March 31, 1997, other than as described
in the Key Energy Reports, no event has occurred, or condition exists, which
would constitute or cause, individually or in the aggregate, a Material Adverse
Effect with respect to Key Energy.
ARTICLE 5. COVENANTS.
The parties agree as follows:
5.1 General. Each of the parties will use its respective reasonable best
efforts to take all action and to do all things necessary, proper or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in Article 6).
5.2 Notices and Consents. The Company will give any required notices to
third parties, and the Company will use its best efforts to obtain any third
party consents required in connection with the matters referred to in Section
3.6. Each of the parties will give any notices to, make any filings with, and
use its best efforts to obtain any authorizations, consents and approvals of
governments and governmental agencies in connection with the matters referred to
in Section 3.6 and Section 4.3.
5.3 Operation of Business. Until the earlier of the Closing or the date of
the Operating Agreement, the Buyer, Key Energy, the Seller and the Company agree
to cooperate with each other to effect an orderly transition of the ongoing
operations of the Company. The Company will operate in the Ordinary Course of
Business.
5.4 Preservation of Business, Operations, Properties and Assets of the
Company. The Seller will, and will cause the Company to, use commercially
reasonable efforts to preserve, maintain and protect the business, operations,
properties and assets of the Company. The Seller will not, and will cause the
Company not to, intentionally take any action to affect in an adverse manner the
present business, operations, assets or properties of the Company or its
relationships with vendors, suppliers, customers and employees related thereto.
5.5 Access; Confidentiality; Etc.. The Seller will, and will cause the
Company to, permit representatives of the Buyer and Key Energy to have
reasonable access from time to time during regular business hours of all
premises, properties, personnel, books, records, contracts and documents of or
pertaining to the Company, as the Buyer or Key Energy may from time to time
reasonably request upon at least two business days notice. Until the Closing
Date and, in the event that this Agreement is terminated, for a period of three
years from the date of this Agreement, each of the Buyer and Key Energy agrees
that it and its Affiliates will treat confidentially and not disclose in any
manner whatsoever any information regarding the Company or the Seller which the
Company or the Seller or any of their officers, directors, employees, agents or
representatives furnish to the Buyer, Key Energy or any person acting on behalf
of the Buyer or Key Energy, except as required by applicable law. Key Energy
will furnish to the Seller, promptly after filing, copies of all annual reports,
quarterly reports and current reports filed by Key Energy with the Securities
and Exchange Commission until the first anniversary of the Closing Date.
5.6 Notice of Developments. Each party will give prompt written notice to
the other parties of the occurrence of any event that has or may reasonably be
expected to have a Material Adverse Effect on such party or any event causing a
breach of any of its own representations and warranties in Article 3 and Article
4.
5.7 Insurance. The Seller will, or will cause the Company to, maintain
appropriate insurance relative to the Company's business operations, assets and
properties, consistent with past practice, from the date hereof through the
Closing Date.
5.8 Employee Matters.
(a) As of the Closing, the Buyer shall, except as otherwise agreed to by
the Seller, or shall cause the Company to, continue the employment of employees
of the Company and shall provide all of the Company's employees with such
benefit plans and arrangements which shall be in effect on the Closing Date with
respect to comparable employees of the Buyer located in the same geographic
region.
(b) Each of the employees of the Company on the Closing Date who are
eligible to participate in the Buyer's Employee Benefit Plans or the Company's
Employee Benefit Plans shall be entitled to participate in such plans as of and
from the Closing Date.
(c) The Buyer shall recognize, or cause the Company to recognize, all
service credited for each of the employees on the Company's records for purposes
of eligibility for participation and vesting under the Buyer's Employee Benefit
Plans or the Company's Employee Benefit Plans and the level of benefits under
such plans but specifically excluding any benefit accrual under any Employee
Benefit Plan of Buyer that is a defined benefit plan.
(d) From and after the Closing, the salaried employees of the Company shall
be entitled to retain and take any paid vacation days accrued but not taken
under the Company's vacation policies prior to the Closing, provided that such
vacation days are taken, or paid in lieu of being taken, on or before December
31, 1997. Such employees shall only accrue vacation under the Buyer's vacation
policies from and after the Closing Date.
(e) The Buyer, the Company and the Seller agree to furnish each other with
appropriate records for each of the employees of the Company as may be necessary
to assist in proper benefit administration.
(f) Nothing expressed or implied in this Agreement shall confer upon any
employee of the Company, or any legal representative thereof, any rights or
remedies, including any right to employment or continued employment for any
specified period, of any nature or kind whatsoever or make such Person third
party beneficiaries of this Agreement. Nothing in this Agreement, express or
implied, shall be construed to prevent the Buyer from terminating, amending or
modifying to any extent any Employee Benefit Plan or other arrangement that the
Buyer may establish or maintain or to which it may contribute or have an
obligation to contribute.
(g) The Buyer, to the extent set forth in Article 8, shall indemnify and
hold the Seller harmless (i) from all claims by any employee of the Company who
shall continue employment with the Company, the Buyer or any of its Affiliates
after the Closing but whom the Buyer or any member of its affiliated group shall
thereafter terminate, or by any spouse, dependent, estate or other beneficiary
or representative of such employee, and (ii) from any claims or charges by, or
relating to, any such employee concerning Employee Benefit Plans of the Company,
wrongful termination, discrimination or harassment, or violation of any law,
including (1) the Fair Labor Standards Act, (2) the Labor Management Relations
Act, (3) the Workers Adjustment and Retraining Notification Act, (4) the
Americans With Disabilities Act, (5) ERISA, (6) the Consolidated Omnibus Budget
Reconciliation Act of 1985, (7) the National Labor Relations Act, (8) the Family
and Medical Leave Act and (9) Title VII of the Civil Rights Act of 1964, all as
attributable to the conduct of the Buyer or any member of its affiliated group
with respect to such employee occurring subsequent to the date hereof.
(h) The Seller, to the extent set forth in Article 8, shall indemnify and
hold the Buyer and its Affiliates harmless, (i) from all claims (other than
those with respect to the Consolidated Budget Reconciliation Act of 1985, as
amended) by any employee or former employee terminated by the Company prior to
the Closing, or by any spouse, dependent, estate or other beneficiary or
representative of such employee or former employee, and (ii) from any claims or
charges by, or relating to, any such employee or former employee concerning
wrongful termination, discrimination or harassment, or violation of any law
(other than the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended), including, without limitation, (1) the Fair Labor Standards Act, (2)
the Labor Management Relations Act, (3) the Workers Adjustment and Retraining
Notification Act, (4) the Americans With Disabilities Act, (5) ERISA, (6) the
National Labor Relations Act, (7) the Family and Medical Leave Act, and (8)
Title VII of the Civil Rights Act of 1964, all as attributable to the conduct of
the Company or any member of its affiliated group with respect to the employees
or former employees of the Company occurring prior to the date hereof.
(i) Notwithstanding anything in this Agreement to the contrary, on and
after the Closing Date, the Buyer and the Company shall be responsible for and
shall assume, indemnify, defend and hold harmless the Seller, Nabors Industries,
Inc. and their ERISA Affiliates and their employees, former employees, agents
and representatives from and against any and all Liabilities (including, without
limitation, disbursements and reasonable legal fees incurred in connection
therewith and in seeking indemnification therefor and any amounts or expenses
required to be paid or incurred in connection with any action, suit, proceeding,
claim, appeal, demand, assessment or judgment) under the Consolidated Omnibus
Reconciliation Act of 1985, as amended (e.g., Code Section 4980B, ERISA Section
601-8 and 502(c)(1)(A) and any predecessors or successors), regarding the
Company and its employees and former employees and their qualified beneficiaries
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended,
regardless of whether such Liabilities were omissions, conditions, occurrences,
facts or circumstances for all periods prior to April 30, 1996 and for all
periods on or after the Closing Date, including but not limited to, the
responsibility of the Buyer and the Company to provide any necessary health
coverages to and otherwise satisfy the requirements of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, on and after the Closing Date
with respect to employees and former employees of the Company and their
qualified beneficiaries under the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended. The Seller shall similarly indemnify, defend and hold
harmless the Buyer, the Company and their ERISA Affiliates, and their employees,
former employees, agents and representatives with respect to such matters for
the period from April 30, 1996 to the date hereof.
5.9 Further Assurances. In case at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, each of the
parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other party reasonably may
request (including any request as may be required to be made by the Seller on
behalf of Oxy pursuant to the Oxy Purchase Agreement), all at the sole cost and
expense of the requesting party (unless the requesting party is entitled to
indemnification therefor under Article 8 or unless the party subject to the
request is otherwise obligated to take such action pursuant to the terms of this
Agreement). To the extent necessary for Tax, accounting, collection of
receivables assigned to Oxy pursuant to Section 5(b) of the Oxy Purchase
Agreement, benefits administration or other reasonable business purposes
(including as may be required under the Oxy Purchase Agreement), the Buyer shall
provide to the Seller (and, at the Seller's request, Oxy, to the extent provided
in the Oxy Purchase Agreement) access at reasonable times during business hours
to the records of the Company.
5.10 Litigation Support. In the event and for so long as any party (or Oxy,
pursuant to the Oxy Purchase Agreement) actively is contesting or defending
against any action, suit, proceeding, hearing, investigation, charge, complaint,
claim or demand in connection with (a) any transaction contemplated under this
Agreement or (b) any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act or
transaction on or prior to the Closing Date involving the Company, the other
party will cooperate with the contesting or defending party (or Oxy, as
applicable) and its counsel in the contest or defense, make available its
personnel, and provide such testimony and access to its books and records as
shall be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending party (or Oxy, as applicable)
(unless the contesting or defending party is entitled to indemnification
therefor under Article 8).
5.11 Tax Matters.
(a) The Buyer shall pay all transfer Taxes, including sales, use, excise,
stamp, documentary, filing, recording, permit, license, authorization or other
similar Taxes and filing fees and similar charges resulting from this Agreement
or the transactions contemplated hereby (including, if applicable, an election
under Section 338(h)(10) of the Code), regardless of upon whom such transfer Tax
is levied or imposed by law. The Seller shall be liable for all Taxes relating
to the Company for taxable periods ending on or before the Closing Date. The
Buyer shall be liable for all Taxes imposed with respect to the Company which
are attributable to any taxable periods after the Closing Date. In the event the
Tax year of the Company does not end on the Closing Date for one or more Taxes,
the Seller shall pay such Taxes as are attributable to the period before
Closing, as if such Tax year had ended on the Closing Date. The Seller shall be
responsible for filing, or causing to be filed, all income or franchise Tax
Returns which are required to include the income, deduction and credits, etc. of
the Company for any tax period ending before, on or with the Closing Date. After
the Closing Date, the parties shall cooperate with each other (and, to the
extent required in Section 5(g) of the Oxy Purchase Agreement, with Oxy) in the
preparation of any pre-closing or post-closing Tax Returns.
(b) In the case of any audit, examination or other proceeding
("Proceedings") with respect to Taxes for which the Seller is or may be liable
pursuant to this Agreement, the Buyer shall promptly inform the Seller, and
shall afford the Seller, at the Seller's expense, the opportunity to control the
conduct of such Proceeding. The Buyer shall execute or cause to be executed
powers of attorney or other documents necessary to enable the Seller to take all
actions desired by the Seller with respect to such Proceeding to the extent such
Proceeding may affect amount of Taxes for which the Seller is liable pursuant to
this Agreement. The Seller shall have the right to control any such Proceedings,
and, if there is substantial authority thereof, to initiate any claim for
refund, file any amended return or take any other action which it deems
appropriate with respect to such Taxes. Any Proceeding with respect to Taxes for
a period which includes but does not end on the Closing Date shall be controlled
jointly by the Seller and the Buyer.
Notwithstanding the foregoing, the Seller shall not agree to any settlement
concerning Taxes for any taxable period ending on or before the Closing Date
which may result in a material increase in Taxes for any taxable period ending
after the Closing Date without the prior written consent of the Buyer.
(c) The Seller, the Company and their Affiliates, as of the Closing Date,
shall terminate all Tax allocation agreements or other Tax sharing arrangements
with respect to the Company, shall cause such agreements or arrangements to be
of no further force and effect as regards the Company on and after the Closing
Date and there shall be no further liability of the Company thereunder from and
after the Closing Date.
(d) The Buyer and the Seller shall join in an election to have the
provisions of Section 338(h)(10) of the Code and similar provisions of federal,
state, local or foreign law (where permissible) apply to the acquisition by the
Buyer of the Company Stock whereby (i) the Company will be treated as having
sold all of its assets in a single transaction as of the close of business on
the Closing Date while a member of the Seller's consolidated Tax group and (ii)
no gain or loss will be recognized by the Seller or the Company with respect to
the sale of Company Stock by the Seller. The election will include the execution
and subsequent filing of Internal Revenue Service Form 8023-A pursuant to the
requirements as stated therein. The Buyer shall, within 60 days of the Closing
Date, provide to the Seller an allocation of the deemed purchase price among the
assets of the Company in accordance with Code Sections 338 and 1060 and any
comparable provisions of state, local or foreign law, as appropriate. Such
allocation shall be deemed acceptable to the Seller unless it notifies the Buyer
of any objections within 30 days of receipt of such allocation. If the Seller
and the Buyer are unable to agree on such allocation within 120 days of the
Closing Date, then an independent accounting firm mutually acceptable to the
parties hereto shall make a binding determination with respect to such
allocation, the fees and expenses of which shall the paid equally by the Seller
and the Buyer.
(e) The Buyer, Key Energy and the Seller shall preserve all information,
returns, books, records and documents relating to any liabilities for Taxes of
the Company with respect to a taxable period until the later of expiration of
all applicable statutes of limitation and extensions thereof or a final
determination with respect to Taxes of the Company for such period.
5.12 Inspections. EACH OF THE BUYER AND KEY ENERGY ACKNOWLEDGES AND AFFIRMS
THAT IT HAS HAD THE OPPORTUNITY TO COMPLETE ITS OWN INDEPENDENT INVESTIGATION,
ANALYSIS AND EVALUATION OF THE COMPANY AND ITS ASSETS, THAT IT HAS BEEN AFFORDED
THE OPPORTUNITY TO INSPECT AND HAS INSPECTED THE COMPANY AND ITS ASSETS, THAT IN
MAKING ITS DECISION TO ENTER IN TO THIS AGREEMENT AND TO CONSUMMATE THE
TRANSACTIONS CONTEMPLATED HEREBY IT HAS RELIED SOLELY ON (a) ITS INDEPENDENT
INVESTIGATION, ANALYSIS AND EVALUATION OF THE COMPANY AND ITS ASSETS AND (b) THE
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER AND THE COMPANY
CONTAINED IN THIS AGREEMENT, AND THAT IT HAS MADE ALL SUCH REVIEWS AND
INSPECTIONS OF THE FOREGOING AS ITS HAS DEEMED NECESSARY OR APPROPRIATE. Nothing
in this Section 5.12 shall relieve the Seller or the Company of any liability or
responsibility for its representations, warranties and covenants in this
Agreement.
5.13 Acquisition Proposals. The Seller will not, and will cause the Company
not to, directly or indirectly at any time before termination of this Agreement
(i) solicit, initiate or encourage any inquiries or proposal for a merger,
consolidation or other business combination involving the Company or for the
acquisition or purchase of any equity interest in, or a material portion of the
assets of, the Company, from any Person (other than the transactions with the
Buyer and Key Energy contemplated by this Agreement) or (ii) participate in any
discussions or negotiations regarding, or furnish to any Person, other than the
Buyer, Key Energy or their representatives, any information with respect to, or
otherwise, facilitate or encourage any such proposal by any other Person; it
being understood that proposals relating to a merger, consolidation, business
combination or sale of equity interests or assets involving the Seller or any
Affiliate (other than the Company) shall not be prohibited hereby nor require
notice to the Buyer or Key Energy so long as such proposals permit the
consummation of the transactions contemplated by this Agreement.
5.14 Registration Rights.
(a) Agreement to Register Resales. Key Energy agrees that no later than 90
days following the Closing Date, it will file with the Commission on Form S-3,
or if Form S-3 is not available to Key Energy, on Form S-1, a shelf registration
statement pursuant to Rule 415 of the Securities Act (the "Shelf Registration
Statement") covering the offer and resale by the Seller of (i) the shares of Key
Energy Common Stock delivered to the Seller pursuant to Section 2.2(a)(ii), and
(ii) the Warrant Shares (collectively, the "Registered Securities"), and will
use its best efforts to cause the Shelf Registration Statement to be declared
effective promptly by the Commission, and in any event within 90 days after the
initial filing thereof.
(b) Effectiveness of Shelf Registration Statement. Key Energy agrees to
maintain the Shelf Registration Statement in effect for the maximum period
allowable under the regulations promulgated by the Commission; provided that if
such maximum period is less than two years from the Closing Date and if as of
the end of such maximum period not all of the Registered Securities registered
under the Shelf Registration Statement have been sold or are capable of being
sold under Rule 144 of the Securities Act without application of the volume,
manner of sale or notice restrictions, then within 10 days after the end of such
maximum period Key Energy 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 Seller of all Registered Securities not
previously sold, and Key Energy will use its best efforts to cause the same to
be declared effective promptly by the Commission, and in any event within 90
days after the initial filing thereof.
(c) Blue Sky Qualification. Key Energy will use its best efforts to effect
any qualification and compliance as may be required and as would permit or
facilitate the resale of such Registered Securities, including, without
limitation, registration under the Securities Act, appropriate qualifications
under applicable blue sky or other state securities laws and, appropriate
compliance with any other governmental requirements.
(d) Registration Expenses. All expenses (except for any legal fees for the
Seller's counsel) relating to the registration of the Registered Securities
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
Registered Securities to the public in connection with such registration) will
be paid by Key Energy.
(e) Preparation; Reasonable Investigation. Key Energy will give the Seller
the opportunity to participate in the preparation of the Shelf Registration
Statement, each prospectus included therein or filed with the Commission, and
each amendment thereof or supplement thereto, and will give the Seller such
access to its books and records and such opportunities to discuss the business
of Key Energy with its officers and the independent public accountants who have
certified its financial statements as shall be reasonably necessary, in the
Seller's judgment, to conduct a reasonable investigation within the meaning of
the Securities Act.
(f) Transfer of Registration Rights. The registration rights provided by
this Section 5.14 are transferable to any Affiliate of the Seller to which the
Registered Securities may be transferred and to any single purchaser of all (but
not less than all) of the Registrable Securities, provided, in each case, that
the Affiliate or the purchaser agrees (in a writing that names the Company as an
explicit third party beneficiary) to be bound by all the terms and provisions of
this Section 5.14.
(g) Undertaking to File Reports and Cooperate in Rule 144 and Rule 145
Transactions. For as long as the Seller is subject to Rule 144 of the Securities
Act with respect to the Registered Securities, Key Energy will use its best
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
Seller proposes to sell any Registered Securities pursuant to Rule 144, Key
Energy shall cooperate with the Seller so as to enable such sales to be made in
accordance with applicable laws, rules and regulations, the requirements of Key
Energy'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 Energy shall, upon request, furnish with respect to each such
sale (i) a written statement certifying that Key Energy has complied with the
public information requirements of Rule 144 and (ii) an opinion of Key Energy's
counsel regarding such matters as Key Energy's transfer agent or such
stockholder's broker may reasonably desire to confirm.
(h) Additional Undertakings with Respect to Registration Rights. In
connection with its registration obligations under this Section 5.14, Key Energy
shall:
(i) Delivery of Shelf Registration Statement of Prospectus. Furnish to the
Seller 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 Seller may reasonably request
in order to facilitate the disposition of the Registered Securities.
(ii) Notice to the Seller. Promptly notify the Seller and (if requested
confirm such notice in writing (A) when a prospectus or any prospectus
supplement or post-effective amendment has been filed and, with respect to the
Shelf Registration Statement or any post-effective amendment, when the same has
become effective, (B) of the issuance by any state securities or other
regulatory authority of any other regulatory authority of any order suspending
the qualification or exemption from qualification of any of the Registered
Securities under state securities or blue sky laws or the initiation of any
proceedings for that purpose, and (C) of the happening of any event that makes
any statement made in the Shelf Registration Statement or related prospectus
untrue or which requires the making of any changes in such Shelf Registration
Statement, prospectus or documents so that they will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and,
as promptly as practicable thereafter, prepare and file with the Commission and
furnish a supplement or amendment to such prospectus so that, as thereafter
deliverable to the purchasers of such Registered Securities, 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.
(iii) Incorporation of Information. If requested by the Seller, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the Seller reasonably requests to be included therein, including,
without limitation, with respect to the Registered Securities being sold by the
Seller, and promptly make all required filings of such prospectus supplement or
post-effective amendment.
(iv) Delivery of Documents Incorporated by Reference. As promptly as
practicable after filing with the Commission of any document that is
incorporated by reference into the Shelf Registration Statement (in the form in
which it was incorporated), deliver a copy of each such document to the Seller.
(v) Listing. Cause the Registered Securities to be (A) listed on each
securities exchange, if any, on which similar securities issued by Key Energy
are then listed, or (B) authorized to be quoted and/or listed (to the extent
applicable) on the National Association of Securities Dealers, Inc. Automated
Quotation or the NASDAQ National Market System if the Key Energy Common Stock so
qualifies.
(vi) 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.
(vii) Requests for Information by the Commission. Notify the Seller
promptly of any request by the Commission for the amending or supplementing of
such Shelf Registration Statement or prospectus or for additional information.
(viii) Notice of Stop Orders. Advise the Seller, 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 5.14(h), the "Seller" shall include any
Affiliate of the Seller or other Person to which the Registered Securities and
registration rights with respect thereto are transferred. Also for purposes of
this Section 5.14(h), Registered Securities shall refer to any capital stock of
Key Energy or its successors into which Key Energy shares may be exchanged or
converted.
(i) Indemnification.
(i) Key Energy will, and hereby does, indemnify and hold harmless, to the
extent permitted by applicable law, the Seller, its officers and directors, if
any, and each Person, if any, who controls the Seller within the meaning of
Section 15 of the Securities Act, and their respective successors, against all
losses, claims, damages, liabilities (or proceedings in respect thereof) and
expenses, including legal fees incurred in investigating or defending any such
loss, claim, damage or liability (under the Securities Act or common law or
otherwise) arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Shelf Registration Statement or
prospectus (and as amended or supplemented if Key Energy shall have furnished
any amendments or supplements thereto), covering the Registrable Securities or
any preliminary prospectus or other document incident thereto or arising out of
or based upon 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, except insofar as such losses, claims, damages, liabilities (or
proceedings in respect thereof) or expenses arise out of or are based upon any
untrue statement or alleged untrue statement contained in or by any omission or
alleged omission from information furnished in writing to Key Energy by the
Seller expressly for use therein. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Seller, its
officers, directors or any Person, if any, who controls the Seller as aforesaid,
and shall survive the transfer of such securities by the Seller.
(ii) The Seller will and hereby does indemnify and hold harmless, to the
extent permitted by applicable law, Key Energy, its officers and directors and
each Person, if any, who controls Key Energy within the meaning of Section 15 of
the Securities Act, and their respective successors, against all losses, claims,
damages, liabilities (or proceedings in respect thereof) and expenses, including
legal fees incurred in investigating or defending any such loss, claim, damage
or liability (under the Securities Act or common law or otherwise) arising out
of or based upon any untrue statement or alleged untrue statement of a material
fact or any omission or alleged omission of a material fact required to be state
in any Shelf Registration Statement or prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or other document incident thereto
or arising out of or based upon any omission or alleged omission to state
therein a material fact, or necessary to make the statements therein by the
Seller not misleading, but only to the extent that such untrue statement is
contained in, or such omission is in, information furnished in a writing by the
Seller expressly for use therein, provided that the Seller's obligations
hereunder shall be limited to an amount equal to the proceeds to the Seller of
the Registrable Securities sold pursuant to such registration statement.
(iii) Any Person entitled to indemnification under the provisions of this
Section 5.14(i) shall (A) give prompt notice to the indemnifying Person of any
claim with respect to which it seeks indemnification and (B) unless in such
indemnified Person's reasonably judgment a conflict of interest between such
indemnified and indemnifying Persons may exist in respect to such claim, permit
such indemnifying Person to assume the defense of such claim, with counsel
reasonably satisfactory to the indemnified Person; and, if such defense is so
assumed, such indemnifying Person shall not enter into any settlement without
the consent of the indemnified Person if such settlement attributes liability to
the indemnified Person and such indemnified Person shall not be subject to any
liability for any settlement made without such consent (which shall not be
unreasonably withheld). In the event that an indemnifying Person shall not be
entitled, or elects not, to assume the defense of a claim, such indemnifying
Person shall not be obligated to pay the fees and expenses of more than one
counsel or firm of counsel for all parties indemnified by such indemnifying
Person in respect of such claim, unless, in the reasonable judgment of any such
indemnified Person, a conflict of interest may exist between such indemnified
Person and any other of such indemnified Persons in respect of such claim.
(iv) If for any reason the foregoing indemnity is unavailable, then,
subject to the proviso in Section 5.14(i)(ii) in the case of the Seller, the
indemnifying Person shall contribute to the amount paid or payable by the
indemnified Person as a result of such losses, claims, damages, liabilities or
expenses (A) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying Person on the one hand and the indemnified
Person on the other or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits received by the indemnifying Person on the one hand
and the indemnified Person on the other but also the relative fault or the
indemnifying Person and the indemnified Person as well as any other relevant
equitable considerations. The relative fault of the indemnifying Person on the
one hand and of the indemnified Person on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying Person or by the indemnified
Person and by the Persons' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a Person as a result of the losses, claims, damages, liabilities and
expenses shall be deemed to include any legal or other fees or expenses
reasonably incurred by the Person in connection with investigating or defending
any action or claim. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(v) An indemnifying Person shall make payments of all amounts required to
be made pursuant to the foregoing provisions of this Section 5.14(i) to or for
the account of the indemnified Person from time to time promptly upon receipt of
bills or invoices relating thereto or when otherwise due or payable.
(j) Suspension of Resales. Key Energy shall be entitled to require that the
Seller refrain from effecting any public sales or distributions of the
Registered Securities, pursuant to the Shelf Registration Statement that has
been declared effective by the Commission, if the board of directors of Key
Energy in good faith determines that such public sales or distributions would
interfere in any material respect with any transaction involving Key Energy that
is material to Key Energy. The board of directors shall, as promptly as
practicable, give the Seller written notice of any such development, which
notice also shall contain a general statement of the reasons for such
restriction on use and an estimate of the anticipated length of the period of
the restriction. In the event of a request by the board of directors that the
Seller refrain from effecting any public sales or distributions of the
Registered Securities, Key Energy shall be required to lift such restrictions
regarding effecting public sales or distributions of the Registered Securities
as soon as reasonably practicable after the board of directors shall determine
that public sales or distributions by the Seller of the Registered Securities
shall not interfere with such transaction; provided, that in any event no
requirement that the Seller refrain from effecting public sales or distributions
in the Registered Securities shall extend for more than 15 days at any one time
or more than 30 days over the entire period the Shelf Registration Statement is
required to be in effect.
5.15 Books and Records. Until April 30, 2001 (or for such longer period as
may be required by law), no party or any of its Affiliates shall destroy or give
up possession of an original or any copy of the books and records relative to
any matter for which a party or its Affiliates shall have any continuing
responsibility under this Agreement or the Oxy Purchase Agreement without first
offering the other parties the opportunity, at their expense, to obtain such
original or copy thereof.
ARTICLE 6. CONDITIONS TO OBLIGATION TO CLOSE.
6.1 Conditions to Obligations of the Buyer and Key Energy. The obligation
of the Buyer and Key Energy to consummate the transactions to be performed by
them in connection with the Closing is subject to satisfaction of the following
conditions:
(a) the representations and warranties set forth in Article 3 shall be true
and correct in all material respects at and as of the Closing Date (except for
those representations and warranties that are made as of a date other than the
date of this Agreement shall continue as of such date to be so true and correct
and except as may be modified in the Operating Agreement);
(b) the Seller shall have performed and complied, in all material respects,
with all of its covenants hereunder, except as may be modified in the Operating
Agreement;
(c) no order of any court or administrative agency shall be in effect which
restrains or prohibits the Seller from consummating the transactions
contemplated hereby;
(d) the Seller shall have received all material authorizations, consents
and approvals of governments and governmental agencies required for the Seller
to consummate the transactions contemplated by this Agreement;
(e) the Seller shall have delivered to the Buyer and Key Energy a
certificate to the effect that each of the conditions specified above in
Section 6.1(a)-(d) is satisfied and the Company shall have delivered to the
Buyer and Key Energy a certificate to the effect that the condition specified in
Section 6.1(a) is satisfied with respect to the Company;
(f) the Seller shall have delivered to the Buyer and Key Energy all
certificates representing the Company Stock, duly endorsed for transfer;
(g) from the date this Agreement there shall not have occurred (i) any
suspension or material limitation of trading of any securities on the American
Stock Exchange, (ii) any suspension of trading of any securities by Key Energy,
including the Key Energy Common Stock, by the Commission or (iii) any banking
moratorium which shall have been declared by federal or New York authorities;
(h) the Buyer and Key Energy shall have received a favorable opinion, dated
as of the Closing Date, from Baker & McKenzie, counsel to the Seller, in form
and substance satisfactory to Buyer and Key Energy, to the effect that (i) the
Company and the Seller each has been duly incorporated and is validly existing
as a corporation in good standing under the laws of its state of incorporation;
(ii) the Company Stock is validly issued, fully paid and is nonassessable and is
not subject to any statutory preemptive rights; (iii) all corporate action
required to be taken by or on the part of the Seller, the Company or any
Affiliate of the Seller, the Company and Nabors Industries, Inc., as applicable,
to authorize the execution of this Agreement, the Operating Agreement and the
Guarantee and the implementation of the transactions contemplated hereby have
been taken; and (iv) each of this Agreement, the Operating Agreement and the
Guarantee have been duly executed and delivered by, and is the legal, valid and
binding obligation of the Seller, the Company and Nabors Industries, Inc., as
applicable, and is enforceable against the Seller, the Company and/or such
Affiliate, as applicable, in accordance with its terms, except as enforceability
may be limited by (a) equitable principles of general applicability or (b)
bankruptcy, insolvency, reorganization, fraudulent conveyance or similar laws
affecting the rights of creditors generally (whether applied in a court of law
or equity). No opinion need be expressed as to the enforceability of any
indemnification provisions of this Agreement or of the Guarantee. In rendering
such opinion, such counsel may rely upon (i) certificates of public officials
and of officers of the Company or the Seller as to matters of fact and (ii) on
the opinion or opinions of other counsel, which opinions shall be reasonably
satisfactory to the Buyer and Key Energy, as to matters other than federal,
Texas or Delaware corporate law; and
(i) the Seller shall have delivered to the Buyer and Key Energy evidence of
the release of the Seller from the obligations set forth in Schedule 3.6 to the
Disclosure Schedule;
provided, however, that if any representation or warranty set forth in
Article 3 or any covenant of the Seller set forth herein is not true and correct
at and as of the Closing Date due to any action or failure to act of Key Energy
or its Affiliates taken pursuant to the Operating Agreement, then the accuracy
of such representation, warranty or covenant shall not be a condition to the
obligation of Buyer and Key Energy to consummate the transactions contemplated
by this Agreement, nor shall any indemnity obligations of the Seller arise
pursuant to Section 8.2 as a result of any action or failure to act on the part
of Key Energy or its Affiliates from and after the date of the Operating
Agreement.
6.2 Conditions to Obligations of the Seller. The obligation of the Seller
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Article 4 shall be true
and correct in all material respects at and as of the Closing Date (except for
those representations and warranties that are made as of a date other than the
date of this Agreement shall continue as of such date to be so true and
correct);
(b) the Buyer and Key Energy shall have performed and complied, in all
material respects, with all of its covenants under this Agreement, except as may
be modified in the Operating Agreement;
(c) no order of any court or administrative agency shall be in effect which
restrains or prohibits the Buyer or Key Energy from consummating the
transactions contemplated by this Agreement or affect adversely the right of the
Seller to own the stock portion of the Purchase Price or the Warrants;
(d) the Buyer and Key Energy shall have received all material
authorizations, consents and approvals of governments and governmental agencies
required for the Buyer and Key Energy to consummate the transactions
contemplated by this Agreement;
(e) the Buyer shall have delivered to the Seller a certificate to the
effect that each of the conditions specified in Section 6.2(a)-(d) is satisfied;
(f) the Buyer and Key Energy shall have delivered or caused to be delivered
to the Seller the remaining cash portion of the Purchase Price, plus interest,
if any, plus the Estimated Working Capital Amount, duly executed certificates
representing the stock portion of the Purchase Price and the Warrants in the
form of Exhibit A , duly executed by an authorized officer of Key Energy;
(g) from the date this Agreement there shall not have occurred (i) any
suspension or material limitation of trading of any securities on the American
Stock Exchange, (ii) any suspension of trading of any securities by Key Energy,
including the Key Energy Common Stock, by the Commission or (iii) any banking
moratorium which shall have been declared by federal or New York authorities;
(h) each of (i) the Key Energy Common Stock issued as part of the Purchase
Price and (ii) the Warrant Shares shall have been authorized for listing on the
American Stock Exchange, subject to official notice of issuance; and
(i) the Seller shall have received a favorable opinion, dated as of the
Closing Date, from Porter & Hedges, L.L.P., counsel for the Buyer and Key
Energy, in form and substance satisfactory to the Seller, to the effect that (i)
each of the Buyer and Key Energy has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its states of
organization; (ii) all corporate proceedings required to be taken by or on the
part of the Buyer or Key Energy to authorize the execution of this Agreement,
the Warrants and the Operating Agreement and the implementation of the
transactions contemplated hereby and thereby have been taken; (iii) this
Agreement, the Warrants and the Operating Agreement have been duly executed and
delivery by, and each is the legal, valid and binding obligations of each of the
Buyer and Key Energy, as applicable, and each is enforceable against each of the
Buyer and Key Energy, as applicable, in accordance with its terms, except as
enforceability may be limited by (a) equitable principles of general
applicability or (b) bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the rights of creditors generally; and (iv)
(A) the authorized capital stock of Key Energy consists solely of 25,000,000
shares of the Key Energy Common Stock and (B) as of the date of such opinion
265,000 shares of Key Energy Common Stock were reserved for issuance upon the
exercise of the Warrants; and (C) the shares of Key Energy Common Stock
constituting a portion of the Purchase Price, the Warrants and the Warrant
Shares, when issued upon conversion of the Warrants have been duly authorized
and are or will be validly issued and are not subject to, nor have they been
issued in violation of, preemptive rights. No opinion need be expressed as to
the enforceability of any indemnification provisions of this Agreement. In
rendering such opinions, such counsel may rely upon (i) certificates of public
officials and of officers of the Buyer or Key Energy as to matters of fact and
(ii) the opinion or opinions of other counsel, which opinions shall be
reasonably satisfactory to the Seller, as to matters other than federal or Texas
law.
ARTICLE 7. TERMINATION.
7.1 Termination of Agreement. The parties may terminate this Agreement as
provided below:
(a) the Buyer, Key Energy and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(b) the Buyer or Key Energy may terminate this Agreement by giving written
notice to the Seller if the Closing shall not have occurred on or before
December 31, 1997 and as a result of the failure of any condition precedent
under Section 6.1; provided that the Buyer or Key Energy gave written notice of
the failure to Seller and the Seller has not cured such failure within ten
business days of such written notice (and provided further that the failure does
not result primarily from the Buyer or Key Energy breaching any representation,
warranty or covenant applicable to them contained in this Agreement);
(c) the Seller may terminate this Agreement by giving written notice to the
Buyer and Key Energy if the Closing shall not have occurred on or before
December 31, 1997 and as a result of the failure of any condition precedent
under Section 6.2; provided that the Seller gave written notice of the failure
to Buyer and Key Energy and they have not cured such failure within ten business
days of such written notice (and provided further that the failure does not
result primarily from the Seller breaching any representation, warranty or
covenant applicable to it contained in this Agreement); or
(d) the Buyer and Key Energy may elect to terminate this Agreement at any
time within two days following the occurrence of an Industry Material Adverse
Event; provided, however that irrevocable instructions are issued to the escrow
agent under the Escrow Agreement to transfer $5,000,000 in immediately available
funds from the amount deposited under the Escrow Agreement to a bank account
designated by the Seller. Such $5,000,000 payment shall be as liquidated
damages, and not as a penalty, and shall be the Seller's exclusive remedy for
such termination, notwithstanding the provisions of Section 7.2.
7.2 Effect of Termination. In the event of a termination of this Agreement
as a result Section 7.1(b) or (c), at the sole election of the nonbreaching
party, (i) the nonbreaching party shall be entitled to an aggregate of $500,000
in cash from the breaching party or parties; or (ii) the nonbreaching party may
exercise any other right or remedy it may have at law, in equity or pursuant to
this Agreement, including rights to sue for damages or required specific
performance. If the nonbreaching party elects the former remedy, such remedy
shall be exclusive, and shall constitute liquidated damages (and not a penalty)
for all claims the nonbreaching party may have with respect to such breach.
ARTICLE 8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
8.1 Investigations; Survival of Representations, Warranties and Covenants.
Each and every representation, warranty and covenant in this Agreement, other
than the representations and warranties in Section 3.13 and the covenants
contained in Sections 5.8, 5.9, 5.10, 5.11 and 5.14 and in Article 8, shall
expire, and shall be terminated and extinguished, by the second anniversary of
the Closing Date and thereafter neither the Seller, the Buyer nor Key Energy
shall be under any liability whatsoever with respect to any such representation,
warranty or covenant. The representations and warranties in Section 3.13 and the
covenants in Sections 5.8, 5.9, 5.10 and 5.11 shall expire upon expiration of
the applicable statute of limitation periods therefor and the covenants in
Section 5.14 and Article 8 shall continue indefinitely (unless any provision
thereof is sooner terminated by its terms).
8.2 Indemnification Provisions for Benefit of the Buyer. In the event the
Seller breaches any of its representations, warranties and covenants contained
in this Agreement, if there is an applicable survival period pursuant to Section
8.1, and provided that the Buyer makes a written claim for indemnification
against the Seller pursuant to Section 9.7 within such survival period, then the
Seller agrees to indemnify, defend and hold harmless the Buyer from and against
any Adverse Consequences the Buyer may suffer through and after the date of the
claim for indemnification (including any Adverse Consequences the Buyer may
suffer after the end of any applicable survival period) resulting from, arising
out of, relating to, in the nature of or caused by the breach; upon the terms
and conditions set forth herein.
8.3 Indemnification Provisions for Benefit of the Seller.
(a) In the event the Buyer or Key Energy breaches any of its
representations, warranties or covenants contained in this Agreement, if there
is an applicable survival period pursuant to Section 8.1, and provided that the
Seller makes a written claim for indemnification against the Buyer or Key Energy
pursuant to Section 9.7 within such survival period, then the Buyer and Key
Energy, jointly and severally, agree to indemnify, defend and hold harmless the
Seller from and against any Adverse Consequences the Seller may suffer through
and after the date of the claim for indemnification (including any Adverse
Consequences the Seller may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the nature of or caused
by the breach, upon the terms and subject to the conditions set forth herein.
(b) Each of the Buyer and Key Energy agrees to indemnify, defend and hold
harmless the Seller from and against the entirety of any Adverse Consequences
the Seller may suffer resulting from, arising out of, relating to, in the nature
of or caused by the business, operations, assets, properties, employees or
Employee Benefit Plans of the Company and that occurs after the Closing.
8.4 Matters Involving Third Parties.
(a) If any third party shall notify any Party (the "Indemnified Party")
with respect to any matter (a "Third Party Claim") which may give rise to a
claim for indemnification against any other Party (the "Indemnifying Party")
under this Article 8, then the Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing; provided that no delay on the part of the
Indemnifying Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder.
(b) Any Indemnifying Party will have the right to assume the defense of the
Third Party Claim with counsel of its choice reasonably satisfactory to the
Indemnified Party at any time within 30 days after the Indemnified Party has
given notice of the Third Party Claim; provided, however, that the Indemnifying
Party must conduct the defense of the Third Party Claim actively and diligently
thereafter in order to preserve its rights in this regard; and provided further
that the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim.
(d) So long as the Indemnifying Party has assumed and is conducting the
defense of the Third Party Claim in accordance with Section 8.4(b), (i) the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be withheld unreasonably) unless the
judgment or proposed settlement involves only the payment of money damages by
one or more of the Indemnifying Parties and does not impose an injunction or
other equitable relief upon the Indemnified Party and (ii) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably).
8.5 Matters Involving the Parties. In the event an Indemnified Party should
have a claim against an Indemnifying Party hereunder that does not involve a
Third Party Claim, the Indemnified Party shall transmit to the Indemnifying
Party a written notice describing in reasonable detail the nature of the claim,
an estimate of the amount of damages attributable to such claim and the basis of
the Indemnified Party's request for indemnification under this Agreement. If the
Indemnifying Party does not notify the Indemnified Party within 30 days of its
receipt of such notice that the Indemnifying Party disputes such claim, the
claim shall be deemed a Liability of the Indemnifying Party hereunder and shall
be paid within 30 days of the expiration of the initial 30-day period. If the
Indemnifying Party has timely disputed such claim as provided above, such
dispute shall be resolved by litigation as provided herein.
8.6 Limitations on Indemnification.
(a) No party shall be entitled to indemnification hereunder unless and
until the aggregate of all amounts for which indemnity would otherwise be due to
such party exceeds $100,000, in which case such other parties shall be
responsible for all amounts of such liability excluding such threshold amount;
provided that (i) the Seller shall be indemnified for the full amount of any
Adverse Consequences pursuant to Section 8.3(b) and (ii) each party shall be
indemnified for the full amount of any Taxes for which the other party is liable
pursuant to Section 5.11, in each case without regard to any such threshold
amount.
(b) Notwithstanding anything to the contrary, no party shall be liable for
Adverse Consequences pursuant to this Article 8 in excess of the Purchase Price
(with stock and warrants valued at the Closing Date) except for liabilities for
Adverse Consequences pursuant to Section 8.3(b) and Taxes pursuant to Section
5.11.
8.7 Environmental Claims.
Notwithstanding anything in this Agreement to the contrary, and
notwithstanding the fact that any representation, warranty or covenant in this
Agreement might be interpreted to cover the same, this Section 8.7 shall be the
sole and exclusive provision of this Agreement, and represents the Buyer's and
Key Energy's sole and exclusive remedy against the Seller or any of its current
Affiliates with respect to Environmental Claims. To the extent the Seller or any
of its current Affiliates is (i) an indemnified party for Environmental Claims
under the Oxy Purchase Agreement and (ii) actually receives payment from Oxy
after following the reasonable instructions of the Buyer to prosecute such
Environmental Claims, at the sole expense of the Buyer, in accordance with the
provisions of the Oxy Purchase Agreement, the Seller shall remit any amounts
recovered, less unrecovered costs to prosecute any Environmental Claim, to the
Buyer in full payment for such Environmental Claim. In the event (1) the Seller
or any of its current Affiliates (A) is not an indemnified party for
Environmental Claims under the Oxy Purchase Agreement or (B) is unable to
recover any amount thereunder or (2) any Environmental Claim arises with respect
to the period between April 30, 1996 and the Closing Date, the Buyer and Key
Energy will have no recourse against the Seller or its Affiliates, and shall
indemnify, defend and hold the Seller and its Affiliates harmless therefor.
ARTICLE 9. MISCELLANEOUS.
9.1 Press Releases and Public Announcements. Neither the Buyer nor Key
Energy shall issue any press release or make any public announcement relating to
the subject matter of this Agreement without the prior written approval of the
Seller; provided, however, that the foregoing shall not apply to any
announcement or written statement which, upon written advice of counsel provided
to the Seller, is required by law to be made.
9.2 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
9.3 Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes any prior understandings, agreements or
representations by or between the parties, written or oral, to the extent they
related in any way to the subject matter hereof, including the J.W. Gibson Well
Service Company Descriptive Memorandum dated April 1997 prepared by Simmons &
Company International.
9.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their respective successors
and permitted assigns. No party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other party.
9.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. Delivery of a fully signed
counterpart by facsimile to all other Parties shall constitute delivery to such
Parties of a signed original of this Agreement.
9.6 Headings67. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.7 Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing and addressed to the Buyer, Key
Energy or the Seller as set forth below:
If to the Buyer or Key Energy
c/o Key Energy Group, Inc.
Two Tower Center, Tenth Floor
East Brunswick, New Jersey 08816
Attention: Jack D. Loftis, Jr., General Counsel
Facsimile No.: (908) 247-5148
with a copy to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77210-4744
Attention: Samuel N. Allen
Facsimile No.: (713) 228-1331
If to the Seller:
Nabors Acquisition Corp. IV
515 West Greens Road, Suite 1200
Houston, Texas 77067
Attention: President
Facsimile No.: (281) 775-8002
with a copy to:
Nabors Corporate Services, Inc. Baker & McKenzie
515 West Greens Road, Suite 1200 805 Third Avenue
Houston, Texas 77067 andNew York, New York 10022
Attention: Legal Department Attention: Howard M. Berkower
Facsimile No.: (281) 775-8431 Facsimile No.: (212) 759-9133
Notice to a "copy to" address shall be provided as a courtesy, but shall
not be deemed to be actual notice received by a party for any purpose. Any party
may send any notice, request, demand, claim or other communication hereunder to
the intended recipient at the address set forth above using registered or
certified mail or any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail or electronic mail),
but no such notice, request, demand, claim or other communication shall be
deemed to have been duly given unless and until it actually is received by the
intended recipient. Any party may change the address to which notices, requests,
demands, claims and other communications hereunder are to be delivered by giving
the other party notice in the manner herein set forth.
9.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO ANY
CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF TEXAS OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF TEXAS.
9.9 Amendments and Waivers. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by the Buyer, Key
Energy and the Seller. No waiver by any party of any default, misrepresentation
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
9.10 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.11 Expenses. Each of the Buyer, Key Energy and the Seller will bear its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
9.12 Construction. THE PARTIES HAVE PARTICIPATED JOINTLY IN THE NEGOTIATION
AND DRAFTING OF THIS AGREEMENT. IN THE EVENT AN AMBIGUITY OR QUESTION OF INTENT
OR INTERPRETATION ARISES, THIS AGREEMENT SHALL BE CONSTRUED AS IF DRAFTED
JOINTLY BY THE PARTIES AND NO PRESUMPTION OR BURDEN OF PROOF SHALL ARISE
FAVORING OR DISFAVORING ANY PARTY BY VIRTUE OF THE AUTHORSHIP OF ANY OF THE
PROVISIONS OF THIS AGREEMENT. Each Disclosure Schedule and each document
referred to in such Disclosure Schedule is incorporated by reference in the
representation and warranty to which such schedule relates. No representation or
warranty of a party contained in this Agreement shall be deemed to be untrue or
breached if (a) the inclusion of specific information in the Disclosure Schedule
relating to such representation or warranty or breach would have cured such
representation or warranty or breach and (b) such information is set forth in
the Disclosure Schedule relating to another representation or warranty. As used
in this Agreement, the term "day" means a calendar day, unless otherwise
specified, and the term "including" means including without limitation. All
references herein to Articles, Sections or Exhibits shall be to Articles,
Sections and Exhibits of this Agreement, unless the context requires otherwise.
9.13 Specific Performance. Each of the parties acknowledges and agrees that
the other parties would be damaged irreparably in the event that any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the parties agrees that
the other parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
parties and the matter, in addition to any other remedy to which it may be
entitled, at law or in equity.
9.14 Submission to Jurisdiction. Each of the parties submits to the
jurisdiction of any state or federal court sitting in Houston, Texas in any
action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each party also agrees not to bring any action or
proceeding arising out or relating to this Agreement in any other court. Each of
the parties waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, security, or other security
that might be required of any other party with respect thereto. Each party
agrees that a final judgment in any action or proceeding so brought shall be
conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or in equity.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
NABORS ACQUISITION CORP. IV
By:
Thomas C. Goetzinger
Vice President
KEY ROCKY MOUNTAIN, INC.
By:
Francis D. John
President
KEY ENERGY GROUP, INC.
By:
Francis D. John
President
The undersigned hereby enters into this Agreement for the purpose of making
the representations and warranties of the Company set forth in Article 3 hereof
and the covenant of the Company set forth in Section 6.1(d) hereof.
J.W. GIBSON WELL SERVICE COMPANY
By:
Daniel McLachlin
Vice President and Secretary
k:\word\transact\stocksal\cards\stockag7.doc
DRAFT: 11/11/97
AMENDMENT ONE TO STOCK PURCHASE AGREEMENT
This Amendment One to Stock Purchase Agreement, dated as of October 10,
1997, amends the Stock Purchase Agreement (the "Stock Purchase Agreement") dated
as of July 31, 1997 among Nabors Acquisition Corp. IV (the "Seller"), Key Rocky
Mountain, Inc. (the "Buyer") and Key Energy Group, Inc. ("Key Energy") with
respect to Seller's sale of all the issued and outstanding capital stock of J.W.
Gibson Well Service Company (the "Company"). Capitalized terms used but not
defined herein are used as defined in the Stock Purchase Agreement.
WHEREAS, the parties desire to amend the Stock Purchase Agreement to change
the Closing Date, to make certain other changes related thereto and to clarify
certain other conditions and provisions thereof; and
WHEREAS, the parties are concurrently amending the Operating Agreement and
Escrow Agreement to give effect to the changes made hereby and to enter into
certain other agreements;
NOW, THEREFORE, in consideration of the above recitals and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Seller, the Buyer and Key Energy agree to make certain
amendments to the Stock Purchase Agreement as follows:
1. From and after effectiveness of this Amendment and the amendments to the
Operating Agreement and the Escrow Agreement, the terms "Agreement", "Operating
Agreement" and "Escrow Agreement" used in the Stock Purchase Agreement shall be
deemed to refer to each such agreement as amended on the date hereof or as may
be amended from time to time. 2. Section 2.3 is hereby amended to read in its
entirety as follows:
2.3 Additional Purchase Price Adjustments and Procedures.ts and Procedures
(a) On the date hereof, the Buyer has delivered to the Seller a balance
sheet of the Company as of July 31, 1997 (the "July 31 Balance Sheet"). The July
31 Balance Sheet shall have included all information necessary to compute the
Working Capital of the Company. The Buyer shall make available to the Seller all
information which may be in the possession of the Buyer or the Company which the
Seller requests in order to verify the accuracy of the July 31 Balance Sheet.
Within 60 days from the date hereof, the Seller shall notify the Buyer whether
it agrees with the July 31 Balance Sheet. In the event that the Seller disagrees
with the July 31 Balance Sheet, the Seller shall provide the Buyer with a
written notice specifying the basis for the Seller's disagreement, and the
Seller and the Buyer shall work in good faith to reach agreement on the
composition of the July 31 Balance Sheet, but, in the event that they shall not
agree within 30 days following the date of such written notice, the matter will
be referred to a "Big Six" independent public accounting firm mutually agreed to
by the Buyer and the Seller. The fees and disbursements of such accounting firm
shall be borne equally by the Buyer and the Seller. Such accounting firm shall
examine the records of the Company, and, within 30 days following the date upon
which such matter shall be referred to such accounting firm, such accounting
firm shall determine the disposition of any dispute with respect to the July 31
Balance Sheet (the date on which the determination is made, whether by the
accounting firm or by agreement of the parties, is referred to as the "Final
Determination Date"). Any such determination shall be final and binding on the
parties, and may be enforced by appropriate judicial or other proceedings.
(b) (i) In the event that the Working Capital of the Company is less than
the Estimated Working Capital, then the amount of such difference shall be paid
by the Seller to the Buyer within two business days of the Final Determination
Date, plus interest of 8% per annum payable from July 31, 1997 to the Final
Determination Date. If the Final Determination Date occurs at least three
business days prior to the Closing Date, and the Seller is required to make a
payment to the Buyer in accordance with the first sentence of this Section
2.3(b)(i), the additional amount due shall be disbursed to the Buyer from the
funds deposited with the escrow agent under the Escrow Agreement.
(ii) In the event that the Working Capital of the Company is more than the
Estimated Working Capital, then the amount of such difference shall be paid by
the Buyer to the Seller within two business days of the Final Determination
Date, plus interest of 8% per annum payable from July 31, 1997 to the Final
Determination Date. If the Final Determination Date occurs at least three
business days prior to the Closing Date, and the Buyer is required to make a
payment to the Seller in accordance with the third sentence of this Section
2.3(b), the Buyer shall deposit the additional amount due with the escrow agent
under the Escrow Agreement.
(iii) Each of the Seller, the Buyer and Key Energy agrees to provide such
notices as may be required under the Escrow Agreement to carry out the purposes
and intents of this Section 2.3(b).
(c) The July 31 Balance Sheet shall have been prepared in accordance with
generally accepted accounting principles applied in a manner consistent with the
Company's historical accounting policies and practices; except that all
intercompany balances will be eliminated. Each party agrees to use reasonable
efforts to arrive at a final determination of the Purchase Price adjustment on
or before the Closing Date.
(d) On or prior to 90 days from the Closing Date, the Seller will prepare
and deliver to the Buyer a calculation of the State Tax Detriment (as defined
below) resulting from the sale of the Company, showing all necessary information
for such calculation. The Seller shall make available to the Buyer all
information which may be in the possession of the Seller which the Buyer
reasonable requests in order to verify the accuracy of the State Tax Detriment
calculation. Within 30 days following delivery of the calculation of the State
Tax Detriment, the Buyer shall notify the Seller whether it disagrees with such
calculation and the Buyer shall be deemed to agree with such calculation if no
notice of disagreement is received within such time period. In the event that
the Buyer disagrees with such calculation, the Buyer shall attach to its notice
of disagreement or incorporate therein a written notice specifying the basis for
the Buyer's disagreement, and the Seller and the Buyer shall work in good faith
to reach agreement on the calculation but, in the event that they shall not
agree within 30 days following the date of such written notice, the matter will
be referred to a nationally recognized independent public accounting firm
mutually agreed to by the Buyer and the Seller. The fees and the disbursements
of such accounting firm shall be borne equally by the Buyer and the Seller. Such
accounting firm shall examine the records of the Seller and the Company, and,
within 30 days following the date upon which such matter shall be referred to
such accounting firm, such accounting firm shall determine the disposition of
any dispute with respect to the calculation. Any such determination shall be
final and binding on the parties, and may be enforced by appropriate judicial or
other proceedings. Payment of the amount of the State Tax Detriment shall be
made by the Buyer to the Seller no later than five business days after the date
agreement is reached between the Buyer and the Seller or the decision of the
accounting firm is made. The "State Tax Detriment" equals the difference between
(A) the state Taxes payable by the Seller or any related party as a result of
making the Section 338(h)(10) election contemplated by Section 5.11(c) of this
Agreement and (B) the state Taxes that would have been payable as a result of
the sale pursuant to this Agreement had such a Section 338(h)(10) election not
been made, such calculation to be grossed up for any additional state or other
Taxes payable as a result of the payment to the Seller under this provision."
3. Section 2.4, clause (a) of the Stock Purchase Agreement is hereby
amended to read in its entirety as follows: "(a) a date between January 2, 1998
and January 15, 1998 or". 4. Sections 7.1 (b) and (c) are hereby amended by
changing the date therein from "December 31, 1997" to "January 31, 1998". 5. The
Loan Agreement referenced in Schedule 3.6 to the Disclosure Schedule was
terminated on September 10, 1997, and UCC-3 termination statements have been
filed with respect thereto, all as evidenced on Attachment 1 hereto. The Seller
represents and warrants to the Buyer and Key Energy that there are no
encumbrances arising under such Loan Agreement on the Company or its property at
the date hereof and agrees that it will perform all acts reasonably requested by
the Buyer to remove any such encumbrances in the event the foregoing
representation is not true. The execution and delivery of this Amendment
satisfies the closing condition set forth in Section 6.1(i) of the Stock
Purchase Agreement. 6. The parties hereby agree that, notwithstanding footnote 2
to Schedule 3.14 of the Disclosure Schedule, as promptly as practicable after
the date hereof an affiliate of the Seller will convey to the Company the yard
in Gillette, Wyoming referenced in such Schedule 3.14, and the Company will
convey to an affiliate of the Seller the yard in Rock Springs, Wyoming
referenced in such Schedule 3.14. Such conveyances will be in substantially the
forms attached hereto as Attachment 2.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
date first written above.
NABORS ACQUISITION CORP. IV
By:
Larry P. Heidt
Executive Vice President
KEY ROCKY MOUNTAIN, INC.
By:
Stephen E. McGregor
Executive Vice President
KEY ENERGY GROUP, INC.
By:
Stephen E. McGregor
Vice President
k:\word\transact\stocksal\cards\sideag-5.doc
DRAFT: 11/11/97
AMENDMENT ONE TO STOCK PURCHASE AGREEMENT
This Amendment One to Stock Purchase Agreement, dated as of October 10,
1997, amends the Stock Purchase Agreement (the "Stock Purchase Agreement") dated
as of July 31, 1997 among Nabors Acquisition Corp. IV (the "Seller"), Key Rocky
Mountain, Inc. (the "Buyer") and Key Energy Group, Inc. ("Key Energy") with
respect to Seller's sale of all the issued and outstanding capital stock of J.W.
Gibson Well Service Company (the "Company"). Capitalized terms used but not
defined herein are used as defined in the Stock Purchase Agreement.
WHEREAS, the parties desire to amend the Stock Purchase Agreement to change
the Closing Date, to make certain other changes related thereto and to clarify
certain other conditions and provisions thereof; and
WHEREAS, the parties are concurrently amending the Operating Agreement and
Escrow Agreement to give effect to the changes made hereby and to enter into
certain other agreements;
NOW, THEREFORE, in consideration of the above recitals and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Seller, the Buyer and Key Energy agree to make certain
amendments to the Stock Purchase Agreement as follows:
1. From and after effectiveness of this Amendment and the amendments to the
Operating Agreement and the Escrow Agreement, the terms "Agreement", "Operating
Agreement" and "Escrow Agreement" used in the Stock Purchase Agreement shall be
deemed to refer to each such agreement as amended on the date hereof or as may
be amended from time to time. 2. Section 2.3 is hereby amended to read in its
entirety as follows:
2.3 Additional Purchase Price Adjustments and Procedures.ts and Procedures
(a) On the date hereof, the Buyer has delivered to the Seller a balance
sheet of the Company as of July 31, 1997 (the "July 31 Balance Sheet"). The July
31 Balance Sheet shall have included all information necessary to compute the
Working Capital of the Company. The Buyer shall make available to the Seller all
information which may be in the possession of the Buyer or the Company which the
Seller requests in order to verify the accuracy of the July 31 Balance Sheet.
Within 60 days from the date hereof, the Seller shall notify the Buyer whether
it agrees with the July 31 Balance Sheet. In the event that the Seller disagrees
with the July 31 Balance Sheet, the Seller shall provide the Buyer with a
written notice specifying the basis for the Seller's disagreement, and the
Seller and the Buyer shall work in good faith to reach agreement on the
composition of the July 31 Balance Sheet, but, in the event that they shall not
agree within 30 days following the date of such written notice, the matter will
be referred to a "Big Six" independent public accounting firm mutually agreed to
by the Buyer and the Seller. The fees and disbursements of such accounting firm
shall be borne equally by the Buyer and the Seller. Such accounting firm shall
examine the records of the Company, and, within 30 days following the date upon
which such matter shall be referred to such accounting firm, such accounting
firm shall determine the disposition of any dispute with respect to the July 31
Balance Sheet (the date on which the determination is made, whether by the
accounting firm or by agreement of the parties, is referred to as the "Final
Determination Date"). Any such determination shall be final and binding on the
parties, and may be enforced by appropriate judicial or other proceedings.
(b) (i) In the event that the Working Capital of the Company is less than
the Estimated Working Capital, then the amount of such difference shall be paid
by the Seller to the Buyer within two business days of the Final Determination
Date, plus interest of 8% per annum payable from July 31, 1997 to the Final
Determination Date. If the Final Determination Date occurs at least three
business days prior to the Closing Date, and the Seller is required to make a
payment to the Buyer in accordance with the first sentence of this Section
2.3(b)(i), the additional amount due shall be disbursed to the Buyer from the
funds deposited with the escrow agent under the Escrow Agreement.
(ii) In the event that the Working Capital of the Company is more than the
Estimated Working Capital, then the amount of such difference shall be paid by
the Buyer to the Seller within two business days of the Final Determination
Date, plus interest of 8% per annum payable from July 31, 1997 to the Final
Determination Date. If the Final Determination Date occurs at least three
business days prior to the Closing Date, and the Buyer is required to make a
payment to the Seller in accordance with the third sentence of this Section
2.3(b), the Buyer shall deposit the additional amount due with the escrow agent
under the Escrow Agreement.
(iii) Each of the Seller, the Buyer and Key Energy agrees to provide such
notices as may be required under the Escrow Agreement to carry out the purposes
and intents of this Section 2.3(b).
(c) The July 31 Balance Sheet shall have been prepared in accordance with
generally accepted accounting principles applied in a manner consistent with the
Company's historical accounting policies and practices; except that all
intercompany balances will be eliminated. Each party agrees to use reasonable
efforts to arrive at a final determination of the Purchase Price adjustment on
or before the Closing Date.
(d) On or prior to 90 days from the Closing Date, the Seller will prepare
and deliver to the Buyer a calculation of the State Tax Detriment (as defined
below) resulting from the sale of the Company, showing all necessary information
for such calculation. The Seller shall make available to the Buyer all
information which may be in the possession of the Seller which the Buyer
reasonable requests in order to verify the accuracy of the State Tax Detriment
calculation. Within 30 days following delivery of the calculation of the State
Tax Detriment, the Buyer shall notify the Seller whether it disagrees with such
calculation and the Buyer shall be deemed to agree with such calculation if no
notice of disagreement is received within such time period. In the event that
the Buyer disagrees with such calculation, the Buyer shall attach to its notice
of disagreement or incorporate therein a written notice specifying the basis for
the Buyer's disagreement, and the Seller and the Buyer shall work in good faith
to reach agreement on the calculation but, in the event that they shall not
agree within 30 days following the date of such written notice, the matter will
be referred to a nationally recognized independent public accounting firm
mutually agreed to by the Buyer and the Seller. The fees and the disbursements
of such accounting firm shall be borne equally by the Buyer and the Seller. Such
accounting firm shall examine the records of the Seller and the Company, and,
within 30 days following the date upon which such matter shall be referred to
such accounting firm, such accounting firm shall determine the disposition of
any dispute with respect to the calculation. Any such determination shall be
final and binding on the parties, and may be enforced by appropriate judicial or
other proceedings. Payment of the amount of the State Tax Detriment shall be
made by the Buyer to the Seller no later than five business days after the date
agreement is reached between the Buyer and the Seller or the decision of the
accounting firm is made. The "State Tax Detriment" equals the difference between
(A) the state Taxes payable by the Seller or any related party as a result of
making the Section 338(h)(10) election contemplated by Section 5.11(c) of this
Agreement and (B) the state Taxes that would have been payable as a result of
the sale pursuant to this Agreement had such a Section 338(h)(10) election not
been made, such calculation to be grossed up for any additional state or other
Taxes payable as a result of the payment to the Seller under this provision."
3. Section 2.4, clause (a) of the Stock Purchase Agreement is hereby
amended to read in its entirety as follows: "(a) a date between January 2, 1998
and January 15, 1998 or". 4. Sections 7.1 (b) and (c) are hereby amended by
changing the date therein from "December 31, 1997" to "January 31, 1998". 5. The
Loan Agreement referenced in Schedule 3.6 to the Disclosure Schedule was
terminated on September 10, 1997, and UCC-3 termination statements have been
filed with respect thereto, all as evidenced on Attachment 1 hereto. The Seller
represents and warrants to the Buyer and Key Energy that there are no
encumbrances arising under such Loan Agreement on the Company or its property at
the date hereof and agrees that it will perform all acts reasonably requested by
the Buyer to remove any such encumbrances in the event the foregoing
representation is not true. The execution and delivery of this Amendment
satisfies the closing condition set forth in Section 6.1(i) of the Stock
Purchase Agreement. 6. The parties hereby agree that, notwithstanding footnote 2
to Schedule 3.14 of the Disclosure Schedule, as promptly as practicable after
the date hereof an affiliate of the Seller will convey to the Company the yard
in Gillette, Wyoming referenced in such Schedule 3.14, and the Company will
convey to an affiliate of the Seller the yard in Rock Springs, Wyoming
referenced in such Schedule 3.14. Such conveyances will be in substantially the
forms attached hereto as Attachment 2.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
date first written above.
NABORS ACQUISITION CORP. IV
By:
Larry P. Heidt
Executive Vice President
KEY ROCKY MOUNTAIN, INC.
By:
Stephen E. McGregor
Executive Vice President
KEY ENERGY GROUP, INC.
By:
Stephen E. McGregor
Vice President
k:\word\transact\stocksal\cards\sideag-5.doc
A:\WACASSAG.04
EXECUTION COPY
Asset Purchase Agreement
among
WellTech Eastern, Inc.
Waco Oil & Gas Co., Inc.
and
I. L. Morris
September 1, 1997
Asset Purchase Agreement
This Asset Purchase Agreement (this AAgreement@) is entered into as of
September 1, 1997 among WellTech Eastern, Inc., a Delaware corporation
(ABuyer@), Waco Oil & Gas Co., Inc., a West Virginia corporation (the ASeller@),
and I. L. Morris (the AShareholder@).
W I T N E S S E T H:
WHEREAS, in addition to other lines of business, the Seller is engaged in
the business of providing wireline services, oil field trucking services, water
hauling services, drilling and completing wells, tank rentals, pipe hauling and
sales, pipeline construction, environmental remediation work and site
preparation (the AAcquired Business@); and
WHEREAS, the Seller desires to sell all of the assets owned by the Seller
and used principally in the Acquired Business, and Buyer desires to acquire such
assets.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements, and subject to the terms
and conditions herein contained, the parties hereto hereby agree as follows:
65535rt65535cle I
Purchase and Sale of Assets W I T N E S S E T H:WHEREAS, in addition to
other lines of business, the Seller is engaged in the business of providing
wireline services, oil field trucking services, water hauling services, drilling
and completing wells, tank rentals, pipe hauling and sales, pipeline
construction, environmental remediation work and site preparation (the AAcquired
Business@); and WHEREAS, the Seller desires to sell all of the assets owned by
the Seller and used principally in the Acquired Business, and Buyer desires to
acquire such assets.NOW, THEREFORE, in consideration of the premises and of the
mutual representations, warranties, covenants and agreements, and subject to the
terms and conditions herein contained, the parties hereto hereby agree as
follows: 65535rt65535cle IPurchase and Sale of Assets
I.1 Purchase and Sale of the AssetsI.1 Purchase and Sale of the Assets.
Subject to the terms and conditions set forth in this Agreement, the Seller
hereby agrees to sell, convey, transfer, assign and deliver to Buyer all of the
following assets of the Seller (all such assets being sold hereunder are
referred to collectively herein as the AAssets@):
(a) all tangible personal property of the Seller (such as machinery,
equipment, leasehold improvements, furniture and fixtures, and vehicles)
principally used in the Acquired Business, including, without limitation, that
which is more fully described on Schedule 1.1(a) hereto (collectively, the
ATangible Personal Property@);
(b) all of the inventory of Seller relating principally to the Acquired
Business, including without limitation, that which is more fully described on
Schedule 1.1(b) hereto (collectively, the AInventories@);
19 A:\WACASSAG.04
(c) all of the Seller=s intangible assets principally used in the Acquired
Business, including without limitation, (i) all of the Seller=s rights to any
patents, patent applications, copyrights and written know-how, trade secrets,
licenses and sublicenses and all other similar proprietary data and the goodwill
associated therewith (collectively, the AIntellectual Property@) used or held in
connection with operation of the Assets and the conduct of the Acquired Business
including without limitation, that which is more fully described on Schedule
1.1(c) hereto (the ASeller Intellectual Property@), but specifically excluding
the corporate name of the Seller and any other names under which the Seller
conducted the Acquired Business and (ii) all of the Seller=s account ledgers,
sales and promotional literature, computer software, books, records, files and
data (including customer and supplier lists), and all other records of the
Seller relating to the Assets or the Acquired Business (collectively, the
AIntangibles@);
(d) those leases, subleases, contracts, contract rights, and agreements
relating to the Assets or the operation of the Acquired Business specifically
listed on Schedule 1.1(d) hereto (collectively, the AContracts@);
(e) all permits, authorizations, certificates, approvals, registrations,
variances, waivers, exemptions, rights-of-way, franchises, ordinances, orders,
licenses and other rights of every kind and character (collectively, the
APermits@) relating principally to all or any of the Assets or to the operation
of the Acquired Business, including, but not limited to, that which is more
fully described on Schedule 1.1(e) hereto (collectively, the ASeller Permits@);
(f) the goodwill and going concern value of the Acquired Business; and
(g) all other or additional privileges, rights, interests, properties and
assets of the Seller of every kind and description and wherever located that are
principally used in the Acquired Business, intended for use in the Acquired
Business, or that are necessary for the continued conduct of the Acquired
Business;
provided, however, that the Assets shall not include the following
(collectively, the AExcluded Assets@): (i) all of the Seller=s accounts
receivable and all other rights of the Seller to payment for services rendered
by the Seller in connection with its conduct of the Acquired Business before the
date hereof; (ii) all cash accounts of the Seller and all petty cash of the
Seller kept on hand for use in the Acquired Business; (iii) all right, title and
interest of the Seller in and to all prepaid rentals, other prepaid expenses,
bonds, deposits and financial assurance requirements, and other current assets
relating to any of the Assets or the Acquired Business; (iv) all assets in
possession of the Seller but owned by third parties; (v) the corporate charter,
related organizational documents and minute books of the Seller; (vi) the cash
consideration paid or payable by Buyer to Seller pursuant to Section 1.2 hereof
and (vii) any and all assets of the Seller not principally used in the Acquired
Business.
I.2 Consideration for AssetsI.2 Consideration for Assets. As consideration
for the sale of the Assets to Buyer and for the other covenants and agreements
of the Seller and the Shareholder contained herein, Buyer agrees to pay to the
Seller, on the date hereof, the amount of $7,143,598.36 by wire transfer of
immediately available funds to an account designated by the Seller.
I.3 LiabilitiesI.3 Liabilities. Effective on the date hereof, Buyer shall
assume those, and only those, liabilities and obligations of the Seller to
perform the Contracts to the extent that the Contracts have not been performed
and are not in default on the date hereof (the AAssumed Liabilities@). On and
after the date hereof, the Seller shall be responsible for any and all other
liabilities and obligations of the Seller other than the Assumed Liabilities,
including, without limitation, any obligations arising from the Seller=s conduct
of the Acquired Business and operation of the Assets before the date hereof (the
ARetained Liabilities@).
65535rt65535cle II
Representations and Warranties
Representations and Warranties II.1 Representations and Warranties of the
Seller and the Shareholder. The Seller and the Shareholder jointly and severally
represent and warrant to Buyer as follows:
II.1.1. Organization and Good StandingII.1.1. Organization and Good
Standing. The Seller is a corporation duly organized, validly existing and in
good standing under the laws of its state of organization, has full requisite
corporate power and authority to carry on its business as it is currently
conducted, and to own and operate the properties currently owned and operated by
it, and is duly qualified or licensed to do business and is in good standing as
a 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.
II.1.2. Agreements Authorized and their Effect on Other
Obligations.Agreements Authorized and their Effect on Other Obligations. The
execution and delivery of this Agreement have been authorized by all necessary
corporate, shareholder and other action on the part of the Seller and the
Shareholder, and this Agreement is the valid and binding obligation of the
Seller and the Shareholder enforceable (subject to normal equitable principals)
against each of such parties in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, debtor
relief or similar laws affecting the rights of creditors generally. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby, will not conflict with or result in a
violation or breach of any term or provision of, nor constitute a default under
(i) the charter or bylaws (or other organizational documents) of the Seller or
the Shareholder, (ii) any obligation, indenture, mortgage, deed of trust, lease,
contract or other agreement to which the Seller or the Shareholder is a party or
by which the Seller or the Shareholder or their respective properties are bound;
or (iii) any provision of any law, rule, regulation, order, permits,
certificate, writ, judgment, injunction, decree, determination, award or other
decision of any court, arbitrator, or other governmental authority to which the
Seller or the Shareholder or any of their respective properties are subject.
II.1.3. ContractsII.1.3. Contracts. Schedule 1.1(d) hereto sets forth a
complete list of all contracts, including leases under which the Seller is
lessor or lessee, which relate to the Assets and are to be performed in whole or
in part after the date hereof. Neither the Seller nor the Shareholder has
received any information which would cause any of such parties to conclude that
any customer of the Seller will (or is likely to) cease doing business with
Buyer (or its successors) as a result of the consummation of the transactions
contemplated hereby.
II.1.4. Title to and Condition of AssetsII.1.4. Title to and Condition of
Assets. The Seller has good, indefeasible and marketable title to all of the
Assets, free and clear of any Encumbrances (defined below). Buyer acknowledges
and agrees that all equipment being transferred hereunder is used and is being
transferred AS IS, WHERE IS, except that the Seller and the Shareholder
expressly represent and warrant that (i) each piece of equipment being
transferred hereunder is operable as of the date hereof and (ii) the condition
of each such piece of equipment (including all known material defects) has been
accurately disclosed to Buyer in writing. All of the Assets conform to all
applicable laws governing their use. No notice of any violation of any law,
statute, ordinance, or regulation relating to any of the Assets has been
received by the Seller or the Shareholder, except such as have been fully
complied with. The term AEncumbrances@ means all liens, security interests,
pledges, mortgages, deeds of trust, claims, rights of first refusal, options,
charges, restrictions or conditions to transfer or assignment, liabilities,
obligations, privileges, equities, easements, rights of way, limitations,
reservations, restrictions, and other encumbrances of any kind or nature.
II.1.5. Licenses and PermitsII.1.5. Licenses and Permits. Schedule 1.1(e)
hereto sets forth a complete list of all Permits necessary under law or
otherwise for the operation, maintenance and use of the Assets in the manner in
which they are now being operated, maintained and used.
II.1.6. Intellectual Property. Schedule 1.1(c) hereto sets forth a complete
list of all Intellectual Property material to or necessary for the continued
conduct of the Acquired Business. The conduct of the Acquired Business did not,
infringe, misappropriate or conflict with the Intellectual Property rights of
others. Neither the Seller nor the Shareholder has received any notice of
infringement, misappropriation, or conflict with the Intellectual Property
rights of others in connection with the Seller=s operation of the assets or
conduct of the Acquired Business.
II.1.7. Necessary ConsentsII.1.7. Necessary Consents. The Seller has
obtained and delivered to Buyer all consents to assignment or waivers thereof
required to be obtained from any governmental authority or from any other third
party in order to validly transfer the Assets hereunder, including, without
limitation, any consents required to assign the Contracts and the Seller
Permits.
II.1.8. Environmental MattersII.1.8. Environmental Matters. Buyer will not
become liable as a result of the transactions contemplated hereby for any
violations of Environmental Law (defined below) by the Seller in connection with
the Seller=s operation of the Assets or conduct of the Acquired Business before
the date hereof. The term AEnvironmental Law@ means any and all laws, rules,
orders, regulations, statutes, ordinances, codes, decrees, and other legally
enforceable requirements (including, without limitation, common law) of the
United states, or any state, regional, city, local, municipal or other
governmental authority or quasi-governmental authority, regulating, relating to,
or imposing environmental standards of conduct concerning protection of the
environment or human health, or employee health and safety as from time to time
has been or is now in effect.
II.1.9. Investigations; LitigationII.1.9. Investigations; Litigation. No
investigation or review by any governmental entity with respect to the Seller or
any of the transactions contemplated by this Agreement is pending or, to the
knowledge of the Seller or the Shareholder, threatened, nor has any governmental
entity indicated to the Seller or any of the Shareholder an intention to conduct
the same. There is no suit, action, or legal, administrative, arbitration, or
other proceeding or governmental investigation pending to which the Seller or
the Shareholder is a party or, to the knowledge of the Seller or the
Shareholder, might become a party or which would adversely affect the Assets or
the Buyer=s future conduct of the Acquired Business.
II.1.10. SolvencyII.1.10. Solvency. The Seller is not presently insolvent,
nor will the Seller be rendered insolvent by the occurrence of the transactions
contemplated by this Agreement. The term Ainsolvent@, with respect to a
particular Seller, means that the sum of the present fair and saleable value of
such Seller=s assets does not and will not exceed its debts and other probable
liabilities, and the term Adebts@ includes any legal liability whether matured
or unmatured, liquidated or unliquidated, absolute fixed or contingent, disputed
or undisputed or secured or unsecured.
II.1.11. Untrue StatementsUntrue Statements. This Agreement and all other
agreements executed by the Seller or the Shareholder and delivered to Buyer does
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
Seller has also made available to Buyer true, complete and correct copies of all
contracts, documents concerning all litigation and administrative proceedings,
licenses, permits, insurance policies, lists of suppliers and customers, and
records relating principally to the Acquired Business and the Assets, and such
information covers all commitments and liabilities of Buyer relating principally
to the Acquired Business and the Assets.
II.1.12. Finder=s FeeII.1.12. Finder=s Fee. All negotiations relative to
this Agreement and the transactions contemplated hereby have been carried on by
the Seller, the Shareholder and their counsel directly with Buyer and its
counsel, without the intervention of any other person in such manner as to give
rise to any valid claim against any of the parties hereto for a brokerage
commission, finder=s fee or any similar payment.
II.1.13. Trade NamesII.1.13. Trade Names. Schedule 2.1.13 hereto lists (i)
all trade names, assumed names and other names under which the Seller has
conducted business other than AWaco Oil & Gas Co., Inc.@ and (ii) all states
other than West Virginia where the Assets are located.
II.2 Representations and Warranties of BuyerII.2 Representations and
Warranties of Buyer. Buyer represents and warrants to the Seller and the
Shareholder as follows
II.2.1. Organization and Good StandingII.2.1. Organization and Good
Standing. Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, has full requisite corporate
power and authority to carry on its business as it is currently conducted, and
to own and operate the properties currently owned and operated by it, and is
duly qualified or licensed to do business and is in good standing as a foreign
corporation authorized to do business in all jurisdictions in which the
character of the properties owned or the nature of the business conducted by it
would make such qualification or licensing necessary.
II.2.2. Agreement Authorized and its Effect on Other ObligationsII.2.2.
Agreement Authorized and its Effect on Other Obligations. The execution and
delivery of this Agreement have been authorized by all necessary corporate,
shareholder and other action on the part of Buyer, and this Agreement is the
valid and binding obligation of Buyer enforceable (subject to normal equitable
principals) against such party 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 and the consummation of
the transactions contemplated hereby, will not conflict with or result in a
violation or breach of any term or provision of, nor constitute a default under
(i) the charter or bylaws (or other organizational documents) of Buyer, (ii) any
obligation, indenture, mortgage, deed of trust, lease, contract or other
agreement to which Buyer is a party or by which Buyer or its properties are
bound; or (iii) any provision of any law, rule, regulation, order, permits,
certificate, writ, judgment, injunction, decree, determination, award or other
decision of any court, arbitrator, or other governmental authority to which
Buyer or its properties are subject.
II.2.3. Consents and Approvals II.2.3. Consents and Approvals. No consent,
approval or authorization of, or filing of a registration with, any governmental
or regulatory authority, or any other person or entity is required to be made or
obtained by Buyer in connection with the execution, delivery or performance of
this Agreement or the consummation of the transactions contemplated hereby.
II.2.4. Finder=s FeeII.2.4. Finder=s Fee. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on by Buyer
and its counsel directly with the Seller and the Shareholder and their counsel,
without the intervention by any other person as the result of any act of Buyer
in such a manner as to give rise to any valid claim against any of the parties
hereto for any brokerage commission, finder=s fee or any similar payments.
65535rt65535cle III
Additional Agreements
Additional Agreements III.1 Noncompetition.Noncompetition. Except as
otherwise consented to or approved in writing by Buyer, the Seller and the
Shareholder agree that for a period of 60 months following the date hereof, such
party will not (and will cause Douglas S. Morris not to), directly or
indirectly, acting alone or as a member of a partnership or a holder of, or
investor in as much as 5% of any security of any class of any corporation or
other business entity, (i) engage in the Acquired Business in the states of West
Virginia, Michigan , Indiana and any other state that directly borders West
Virginia; (ii) request any present customers or suppliers of the Seller to
curtail or cancel their business with Buyer (or Buyer=s affiliates); (iii)
disclose to any person, firm or corporation any trade, technical or
technological secrets of Buyer (or Buyer=s affiliates) or of the Seller or any
details of their organization or business affairs or (iv) induce or actively
attempt to influence any employee of Buyer (or Buyer=s affiliates) to terminate
his employment. The Seller and the Shareholder agree that if either the length
of time or geographical as set forth in this Section 3.1 is deemed too
restrictive in any court proceeding, the court may reduce such restrictions to
those which it deems reasonable under the circumstances. The obligations
expressed in this Section 3.1 are in addition to any other obligations that the
Seller and the Shareholder may have under the laws of any state requiring a
corporation selling its assets (or a shareholder of such corporation) to limit
its activities so that the goodwill and business relations being transferred
with such assets will not be materially impaired. The Seller and the Shareholder
further agree and acknowledge that Buyer does not have any adequate remedy at
law for the breach or threatened breach by the Seller or the Shareholder of the
covenants contained in this Section 3.1, and agree that Buyer may, in addition
to the other remedies which may be available to it hereunder, file a suit in
equity to enjoin the Seller or the 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. The
Seller and the Shareholder acknowledge that the covenants set forth in this
Section 3.1 are being executed and delivered by such party in consideration of
the covenants of Buyer contained in this Agreement, and for other good and
valuable consideration, the receipt of which is hereby acknowledged.
III.2 Hiring EmployeesIII.2 Hiring Employees. Schedule 3.2 hereto is a
complete and accurate listing of all employees of the Seller that devote their
full time and effort in the operation of the Assets and the conduct of the
Acquired Business (the AEmployees@). Except as provided in Schedule 3.2 hereto,
effective as of the date hereof, the Seller shall make all of the Employees
available for hire by Buyer, subject to such Employees meeting Buyer=s standard
employment eligibility requirements. Any Employee hired by Buyer in connection
herewith shall be deemed terminated by the Seller as of the date hereof. Buyer
shall have no liability or obligation with respect to any employee benefits of
any Employee except those benefits that accrue pursuant to such Employees=
employment with Buyer on or after the date hereof. The Seller and the
Shareholder shall cooperate with Buyer in connection with any offer of
employment from Buyer to the employees and use its best efforts to cause the
acceptance of any and all such offers. All Employees hired by Buyer shall be
at-will employees of Buyer.
III.3 Use of Facility; Facility Lease. The parties hereto agree to
negotiate in good faith the terms and provisions of, and execute and deliverto
each other, a lease agreement (the AFacility Lease@) covering the facility (the
AFacility@) from which the Acquired Business is currently conducted, which lease
agreement will be (i) effective as of the date hereof (including rent payment
obligations) and (ii) subject to the Buyer=s acceptance of a Phase I
environmental report covering the Facility. Until the earlier of (i) the
execution and delivery of the Facility Lease and (ii) 60 days from the date
hereof, Buyer shall have the exclusive right to store inventory and equipment in
the warehouse located on the Facility and shall have the right to ingress and
egress the Facility as necessary to use such warehouse. If the Facility Lease is
not executed and delivered by the parties hereto within such 60-day time period,
no rental or other payments shall be due to the Seller for such right, and Buyer
shall have removed all of its property from the warehouse by the end of such
60-day time period.
III.4 Further Assurances. From time to time, as and when requested by any
party hereto, any other party hereto shall execute and deliver, or cause to be
executed and delivered, such documents and instruments and shall take, or cause
to be taken, such further or other actions as may be reasonably necessary to
effect the transactions contemplated hereby.
65535rt65535cle IV
Indemnification
IV.1 Indemnification by the Seller and the Shareholder. In addition to any
other remedies available to Buyer under this Agreement, or at law or in equity,
the Seller and the Shareholder shall, jointly and severally, indemnify, defend
and hold harmless Buyer and its officers, directors, employees, agents and
stockholders, against and with respect to any and all claims, costs, damages,
losses, expenses, obligations, liabilities, recoveries, suits, causes of action
and deficiencies, including interest, penalties and reasonable attorneys= fees
and expenses (collectively, the ADamages@) that such indemnitee shall incur or
suffer, which arise, result from or relate to (i) any breach of, or failure by
the Seller or the Shareholder to perform, their respective representations,
warranties, covenants or agreements in this Agreement or in any schedule,
certificate, exhibit or other instrument furnished or delivered to Buyer by the
Seller or the Shareholder under this Agreement; and (ii) the Retained
Liabilities.
IV.2 Indemnification by BuyerIV.2 Indemnification by Buyer. In addition to
any other remedies available to the Seller and the Shareholder under this
Agreement, or at law or in equity, Buyer shall indemnify, defend and hold
harmless the Seller and its officers, directors, employees, agents and
stockholders and the Shareholder and his agents against and with respect to any
and all Damages that such indemnitees shall incur or suffer, which arise, result
from or relate to any breach of, or failure by Buyer to perform, any of its
representations, warranties, covenants or agreements in this Agreement or in any
schedule, certificate, exhibit or other instrument furnished or delivered to the
Seller or the Shareholder by or on behalf of Buyer under this Agreement.
IV.3 Indemnification Procedure. If any party hereto discovers or otherwise
becomes aware of an indemnification claim arising under Section 4.1 or 4.2 of
this Agreement, such indemnified party shall give written notice to the
indemnifying party, specifying such claim, and may thereafter exercise any
remedies available to such party under this Agreement; provided, however, that
the failure of 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 commencement of such action; provided, however, that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of any obligations hereunder, to the extent the
indemnifying party is not materially prejudiced thereby. In case any such action
is brought against an indemnified party, the indemnifying party shall be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified, to the extent that it may wish,
with counsel reasonably satisfactory to such indemnified party, and after such
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof unless the indemnifying party
has failed to assume the defense of such claim and to employ counsel reasonably
satisfactory to such indemnified person. An indemnifying party who elects not to
assume the defense of a claim shall not be liable for the fees and expenses of
more than one counsel in any single jurisdiction for all parties indemnified by
such indemnifying party with respect to such claim or with respect to claims
separate but similar or related in the same jurisdiction arising out of the same
general allegations. Notwithstanding any of the foregoing to the contrary, the
indemnified party will be entitled to select its own counsel and assume the
defense of any action brought against it if the indemnifying party fails to
select counsel reasonably satisfactory to the indemnified party, the expenses of
such defense to be paid by the indemnifying party. No indemnifying party shall
consent to entry of any judgment or enter into any settlement with respect to a
claim without the consent of the indemnified party, which consent shall not be
unreasonably withheld, or unless such judgment or settlement includes as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability with respect to such claim. No
indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action, the defense of which has been assumed by an
indemnifying party, without the consent of such indemnifying party, which
consent shall not be unreasonably withheld or delayed.
65535rt65535cle V
Miscellaneous V Miscellaneous V.1 Survival of Representations, Warranties
and CovenantsV.1 Survival of Representations, Warranties and Covenants. All
representations, and warranties made by the parties hereto shall for a period of
24 months from the date hereof, notwithstanding any investigation made by or on
behalf of any of the parties hereto; provided, however, that the representations
of the Seller and the Shareholder as to the operability and condition of the
Assets contained in clauses (i) and (ii) in the second sentence of Section 2.1.4
hereof shall survive for a period of 12 months from the date hereof
notwithstanding any investigation made by or on behalf of any of the parties
hereto. All statements contained in any certificate, schedule, exhibit or other
instrument delivered pursuant to this Agreement shall be deemed to have been
representations and warranties by the respective party or parties, as the case
may be, and shall also survive for a period of 24 months from the date hereof
despite any investigation made by any party hereto or on its behalf. All
covenants and agreements herein shall survive as provided herein. V.2
EntiretyV.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.
V.3 Counterparts.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.
V.4 Notices and Waivers.Notices and Waivers. Any notice or waiver to be
given to any party hereto shall be in writing and shall be delivered by courier,
sent by facsimile transmission or first class registered or certified mail,
postage prepaid, return receipt requested:
If to Buyer -----------------------------------------------------------
- --------------------------------------------------------
Addressed to: With a copy to:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
WellTech Eastern, Inc. Porter & Hedges, L.L.P.
Two Tower Center, Tenth Floor 700 Louisiana
East Brunswick, New Jersey 08816 Houston, Texas 77210-4744
Attn: General Counsel Attn: Samuel N. Allen
Facsimile: (908) 247-5148 Facsimile: (713) 228-1331
- -------------------------------------------------------------------------------
If to the Seller or the Shareholder
- ------------------------------------------------------------------------------
Addressed to: With a copy to:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Waco Oil and Gas, Inc. Bowles Rice McDavid Graff & Love
P.O. Box 397 600 Quarrier St.
1297 North Lewis St. Charleston, West Virginia 25301
Glenville, West Virginia 26351 Attn: Mark A. Monteleone
Facsimile: (304) 343-3058
- -------------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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.
V.5 Captions.Captions. The captions contained in this Agreement are solely
for convenient reference and shall not be deemed to affect the meaning or
interpretation of any article, section, or paragraph hereof.
V.6 Successors and Assigns.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. V.7 Severability.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.
V.8 Applicable Law.Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the applicable laws of the State of
West Virginia.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Shareholder has executed this Agreement and the
other parties hereto have caused this Agreement to be signed in their respective
corporate names by their respective duly authorized representatives, all as of
the day and year first above written.
BUYER:
WELLTECH EASTERN, INC.
By:
Name:
Title:
SELLER:
WACO OIL & GAS CO., INC.
By:
Name:
Title:
SHAREHOLDER:
__________________
I.L. Morris
Schedule 1.1(a) - Tangible Personal Property
See attached listing
Schedule 1.1(b) - Inventories
See attached listing
Schedule 1.1(c) - Seller Intellectual Property
None
Schedule 1.1(d) - Contracts
None
Schedule 1.1(e) - Seller Permits
None
Schedule 2.1.13 - Trade Names
None
Schedule 3.2 - Employees
See attached listing
1
Stock Purchase Agreement
Between
WellTech Eastern, Inc.,
and
William Gregory Wines
Dated as of September 16, 1997
18
Stock Purchase Agreement
This Stock Purchase Agreement (this AAgreement@) is entered into as of
September 16, 1997, by and between WellTech Eastern, Inc., a Delaware
corporation (ABuyer@), and William Gregory Wines (the AShareholder@).
WITNESSETH:
Whereas, Buyer is a corporation duly organized and validly existing under
the laws of the State of Delaware, with its principal executive offices at Two
Tower Center, Tenth Floor, East Brunswick, New Jersey 08816; and
Whereas, Landmark Fishing & Rental, Inc. (the ACompany@) is a corporation
duly organized and validly existing under the laws of the State of Oklahoma,
with its principal executive offices at 4009 Oklahoma Avenue, Woodward, Oklahoma
73801; and
Whereas, the Shareholder owns 500 shares (the ACompany Shares@) of common
stock, par value $1.00 per share, of the Company (the ACompany Common Stock@),
which constitutes all of the issued and outstanding shares of capital stock of
the Company; and
Whereas, the Shareholder desires to sell to Buyer, and Buyer desires to
purchase from the Shareholder all of the issued and outstanding capital stock of
the Company.
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 the Company Shares. Subject to the terms and
conditions of this Agreement, on the date hereof, the Shareholder agrees to sell
and convey to Buyer, free and clear of all Encumbrances (as defined in Section
2.1.8.1 hereof), and Buyer agrees to purchase and accept from the Shareholder,
all of the Company Shares. In consideration of the sale of the Company Shares,
Buyer shall pay to the Shareholder $3,836,489.03 in cash by wire transfer of
immediately available funds, and the Cash Adjustment Payment (as defined in
Section 1.4 hereof), if any, in accordance with Section 1.4 hereof.
1.2. Payment of Certain Receivables. On the date hereof, the Shareholder
shall cause to be paid to the Company (i) $552,889.32, which represents the
total amount due and owing to the Company in respect of those receivables
represented by the line items on the 6/30 Balance Sheet (as defined in Section
2.1.6. hereof) designated as Accounts Receivable Stockholder, Notes Receivable
G. Wines and Notes Receivable Stockholders; (ii) $60,000.00, which represents
the total amount of principal due and owing by Stockholder to the Company on a
promissory note executed between Shareholder and Company after June 30, 1997;
(iii) $24,855.87, which represents the additional amount of principal that
Stockholder has borrowed from Company against the account designated as Notes
Receivable Stockholder on the 6/30 balance sheet between June 30, 1997, and the
date hereof; and (iv) $33,599.71, which represents the total accrued, but
unpaid, interest due from Stockholder to Company upon the above-referenced
obligations.
1.3. Delivery of the Company Certificates. The Shareholder shall deliver to
Buyer on the date hereof duly and validly issued certificate(s) representing all
of the Company 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 Buyer.
1.4 Adjustment of Purchase Price. Seller shall cause to be prepared and
delivered to the Buyer a balance sheet of the Company as of the date hereof (the
AFinal Balance Sheet@) within 60 days after the date hereof. Buyer and the
Shareholder shall jointly review the Final Balance Sheet, endeavor in good faith
to resolve all disagreements regarding the entries thereon and reach a final
determination thereof within 90 days from the date hereof. Within 10 days of
reaching such final determination, the following adjusting payments shall be
made:
(1) If the sum of (A) the Final Net Current Value of the Company (defined
below) plus (B) $22,623.16, which represents the amount of funds expended by the
Company since June 30, 1997 for the purchase of capital equipment that the
parties hereto have agreed expands the capability of the Company=s business (the
ACapital Expenditure Amount@), exceeds the 6/30 Net Current Value of the Company
(defined below), Buyer shall pay to the Shareholder the amount of such excess
(the ACash Adjustment Payment@).
(2) If the sum of (A) the Final Net Current Value of the Company plus (B)
the Capital Expenditure Amount is less than the 6/30 Net Current Value of the
Company, the Shareholder shall pay to Buyer the amount of such difference.
The term AFinal Net Current Value of the Company@ means the dollar value of
the amount by which (i) the ATotal Current Assets@ plus the ATotal Other Assets@
as recorded on the Final Balance Sheet exceeds (ii) the ATotal Liabilities@ as
recorded on the Final Balance Sheet. The term A6/30 Net Current Value of the
Company@ means the dollar value of the amount by which (i) the ATotal Current
Assets@ plus the ATotal Other Assets@ as recorded on the 6/30 Balance Sheet
exceeds (ii) the ATotal Liabilities@ as recorded on the 6/30 Balance Sheet. The
$60,000.00 promissory note from Company to Shareholder shall be included on the
Final Balance Sheet as part of ATotal Current Assets@ with the designation ANote
Receivable-Greg Wines.@ Additionally, the amount of $24,855.87 should be
included as part of "Total Current Assets" with the designation "Note Receivable
Stockholder."
ARTICLE 2
Representations and Warranties
2.1. Representations and Warranties of the Shareholder. The Shareholder
represents and warrants to Buyer as follows:
2.1.1. Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Oklahoma, 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.
2.1.2. Agreement Authorized and its Effect on Other Obligations. The
Shareholder 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 the Shareholder enforceable against the Shareholder (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 Shareholder will
not conflict with or result in a violation or breach of any term or provision
of, nor constitute a default under (i) the charter or bylaws of the Company or
(ii) any obligation, indenture, mortgage, deed of trust, lease, contract or
other agreement to which the Company or the Shareholder is a party or by which
the Company or the Shareholder or their respective properties are bound.
2.1.3. Capitalization. The authorized capitalization of the Company
consists of 10,000 shares of Company Common Stock, of which, as of the date
hereof, 500 shares were issued and outstanding and held beneficially and of
record by the Shareholder. In addition to the 10,000 shares of Common Stock,
Landmark=s authorized capitalization includes 10,000 shares of preferred-voting
stock, $1.00 par value. These shares have never been issued. On the date hereof,
the Company 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 Company Common
Stock are validly issued, fully paid and non-assessable and are not subject to
preemptive rights. Except as above indicated, none of the outstanding shares of
Company 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 the Company Shares. The Shareholder holds good and
valid title to all of the Company Shares, free and clear of all Encumbrances.
The Shareholder possesses full authority and legal right to sell, transfer and
assign to Buyer the Company Shares, free and clear of all Encumbrances. Upon
transfer to Buyer by the Shareholder of the Company Shares, Buyer will own the
Company Shares free and clear of all Encumbrances. There are no claims pending
or, to the knowledge of the Shareholder, threatened, against the Company or the
Shareholder that concern or affect title to the Company Shares, or that seek to
compel the issuance of capital stock or other securities of either the Company.
2.1.5. No Subsidiaries. Except as specified in Schedule 2.1.5 hereto, there
is no corporation, partnership, joint venture, business trust or other legal
entity in which the Company, either directly or indirectly through one or more
intermediaries, owns or holds beneficial or record ownership of at least a
majority of the outstanding voting securities.
2.1.6. Financial Statements. The Company has delivered to Buyer copies of
the Company=s unaudited balance sheet (the A6/30 Balance Sheet@) and related
statement of income, copies of which are attached hereto as Schedule 2.1.6
(collectively, the A6/30 Financial Statements@), as at and for the 12 months
ended June 30, 1997 (the ABalance Sheet Date@). The 6/30 Financial Statements
are complete in all respects. The 6/30 Financial Statements present fairly the
financial condition of the Company as at the dates and for the periods
indicated. The 6/30 Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis. The
accounts receivable reflected in the 6/30 Balance Sheet, or which have been
thereafter acquired by the Company, have been collected or are collectible at
the aggregate recorded amounts thereof less applicable reserves, which reserves
are adequate. The inventories of the Company reflected in the 6/30 Balance
Sheet, or which have thereafter been acquired by it, consist of items of a
quality usable and salable in the normal course of the Company=s business.
2.1.7. Liabilities. Except as disclosed on Schedule 2.1.7 hereto, the
Company does not have any liabilities or obligations, either accrued, absolute
or contingent, nor does the Shareholder have any knowledge of any potential
liabilities or obligations, other than those (i) reflected or reserved against
in the 6/30 Balance Sheet or (ii) incurred in the ordinary course of business
since the Balance Sheet Date that would not adversely affect the value and
conduct of the business of the Company
2.1.8. Additional Company 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
the Company, with a description of the nature and amount of any Encumbrances
(defined below) thereon. The term AEncumbrances@ 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;
2.1.8.2. Machinery, Equipment and Inventory. All equipment, machinery,
transportation equipment, tools, equipment, furnishings, and fixtures owned,
leased or subject to a contract of purchase and sale, or lease commitment, by
the Company with a description of the nature and amount of any Encumbrances
thereon and all inventory items or groups of inventory items owned by the
Company, excluding raw materials and work in process, which raw materials and
work in process are valued on the 6/30 Balance Sheet, together with the amount
of any Encumbrances thereon;
2.1.8.3. Account and Note Receivables. All accounts and notes receivable of
the Company, 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 the Company 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;
2.1.8.4. Payables. All accounts payable of the Company, together with an
appropriate aging schedule.
2.1.8.5. Insurance. All insurance policies or bonds currently maintained by
the Company, including title insurance policies, with respect to the Company,
including those covering the Company=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;
2.1.8.6. Contracts. All contracts, including leases under which the Company
is lessor or lessee, which are to be performed in whole or in part after the
date hereof;
2.1.8.7. 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 the Company or any employee benefit plan
maintained by the Company (collectively, AEmployee Plans@), together with copies
of the most recent reports with respect to such plans, arrangements, or trust
agreements filed with any governmental agency and all Internal Revenue Service
determination letters and other correspondence from governmental entities that
have been received with respect to such plans, arrangements or agreements;
2.1.8.8. Certain Salaries. The names and salary rates of all present
employees of the Company, and, to the extent existing on the date of this
Agreement, all arrangements with respect to any bonuses to be paid to them from
and after the date of this Agreement;
2.1.8.9. Bank Accounts. The name of each bank in which the Company has an
account and the names of all persons authorized to draw thereon;
2.1.8.10. Employee Agreements. Any collective bargaining agreements of the
Company 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 the Company;
2.1.8.11. Intellectual Property. All patents, patent applications,
trademarks and service marks (including registrations and applications
therefor), trade names, copyrights and written know-how, trade secrets and all
other similar proprietary data and the goodwill associated therewith
(collectively, the AIntellectual Property@) used by the Company;
2.1.8.12. Trade Names. All trade names, assumed names and fictitious names
used or held by the Company, whether and where such names are registered and
where used;
2.1.8.13. Licenses and Permits. 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 APermits@) of the Company under which it conducts its
business.
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 the Company relating thereto or with respect to collateral
securing the same;
2.1.8.15. Guaranties. All indebtedness, liabilities and commitments of
others and as to which the Company 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
except those maintained in the 6/30 Balance Sheet;
2.1.8.17. Leases. All leases to which the Company is a party; and
2.1.8.18. Environment. All environmental permits, approvals,
certifications, licenses, registrations, orders and decrees applicable to
current operations conducted by the Company and all environmental audits,
assessments, investigations and reviews conducted by the Company within the last
five years or otherwise in the Company=s possession on any property owned,
leased or used by the Company.
2.1.9. No Defaults. The Company is not in default in any obligation or
covenant on its part to be performed under any obligation, lease, contract,
order, plan or other arrangement.
2.1.10. Absence of Certain Changes and Events. 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 adverse change in the financial condition,
backlog, operations, assets, liabilities or business of the Company;
2.1.10.2. Property Damage. Any damage, destruction, or loss to the business
or properties of the Company (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 Company Common Stock, or any
direct or indirect redemption, purchase or any other acquisition by the Company
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 the Company=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; or
2.1.10.6. Other Adverse Changes. Any other event or condition known to the
Shareholder particularly pertaining to and adversely affecting the operations,
assets or business of the Company.
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 the
Company 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 such returns are true and correct; the Company has only done business in
Oklahoma, Texas and Kansas; all taxes shown by such returns to be payable and
any other taxes due and payable have been paid other than those being contested
in good faith by the Company; and the tax provision reflected in the 6/30
Balance Sheet is adequate, in accordance with generally accepted accounting
principles, to cover liabilities of the Company at the date thereof for all
taxes, including any assessed interest, assessed penalties and additions to
taxes of any character whatsoever applicable to the Company or its assets or
business. No waiver of any statute of limitations executed by the Company with
respect to any income or other tax is in effect for any period. Except as
disclosed on Schedule 2.1.11. hereto, the income tax returns of the Company have
never been examined by the Internal Revenue Service or the taxing authorities of
any other jurisdiction. There are no tax liens on any assets of The Company
except for taxes not yet currently due. The Company is not subject to any
tax-sharing or allocation agreement. The Company is not, nor has it ever
attempted to become a Subchapter S-Corporation under the Internal Revenue Code
of 1986, as amended. The Company is not and never has been, a member of a
consolidated group subject to Treasury Regulation 1.1502-6 or any similar
provision.
2.1.12. Intellectual Property. The Company owns or possesses licenses to
use all Intellectual Property that is either material to the business of the
Company or that is necessary for the rendering of any services rendered by the
Company and the use or sale of any equipment or products used or sold by the
Company, including all such Intellectual Property listed in Schedule 2.1.8
hereto (the ARequired Intellectual Property@). The Required Intellectual
Property is owned or licensed by the Company free and clear of any Encumbrance.
The Company has not granted to any other person any license to use any Required
Intellectual Property. The Company has not received any notice of infringement,
misappropriation, or conflict with, the Intellectual Property rights of others
in connection with the use by the Company of the Required Intellectual Property
or otherwise in connection with the Company=s operation of its business.
2.1.13. Title to and Condition of Assets. Except as disclosed on Schedule
2.1.13 hereto, the Company has good, indefeasible and marketable title to all
its properties, interests in properties and assets, real and personal, reflected
in the 6/30 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
6/30 Balance Sheet or in Schedule 2.1.8 hereto, (ii) liens for current taxes not
yet due and payable, and (iii) such imperfections of title, easements and
Encumbrances, if any, as are not substantial in character, amount, or extent and
do not and will not materially detract from the value, or interfere with the
present use, of the property subject thereto or affected thereby, or otherwise
materially impair business operations. All leases pursuant to which the Company
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 the Company and in
respect to which the Company has not taken adequate steps to prevent a default
from occurring. The buildings and premises of the Company 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 the Company are in good operating
condition and in a state of reasonable 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 the Shareholder=s knowledge, all such assets conform to all applicable laws
governing their use. No notice of any violation of any law, statute, ordinance,
or regulation relating to any such assets has been received by the Company or
the Shareholder, except such as have been fully complied with.
2.1.14. Contracts. All contracts, leases, plans or other arrangements to
which the Company 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 the Company. The Company is not, and to the knowledge of any of
the Shareholder, 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 an adverse effect on the Company. The
Shareholder has not received any information which would cause the Shareholder
to conclude that any customer of the Company will (or is likely to) cease doing
business with the Company (or its successors) as a result of the consummation of
the transactions contemplated hereby.
2.1.15. Licenses and Permits. The Company possesses all Permits necessary
under law or otherwise for the Company 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,
including all such Permits listed in Schedule 2.1.8 hereto (collectively, the
ARequired Permits@). Each of the Required Permits and the Company=s rights with
respect thereto is valid and subsisting, in full force and effect, and
enforceable by the Company subject to administrative powers of regulatory
agencies having jurisdiction. The Company is in compliance in all respects with
the terms of each of the Required Permits. None of the Required Permits have
been, or to the knowledge of the Shareholder, is threatened to be, revoked,
canceled, suspended or modified.
2.1.16. Litigation. Except as set forth in Schedule 2.1.16 hereto, there is
no suit, action, or legal, administrative, arbitration, or other proceeding or
governmental investigation pending to which the Company is a party or, to the
knowledge of the Shareholder, might become a party or which particularly affects
the Company or its assets, nor is any change in the zoning or building
ordinances directly affecting the real property or leasehold interests of the
Company, pending or, to the knowledge of the Shareholder, threatened.
2.1.17. Environmental Compliance.
2.1.17.1. Environmental Conditions. Except as noted in Phase I
Environmental Site Assessment prepared contemporaneously with closing by
Advantage Environmental Service, Inc., there are no environmental conditions or
circumstances, including, without limitation, the presence or release of any
Substance of Environmental Concern, on any property presently or previously
owned, leased or operated by the Company, or on any property to which any
Substance of Environmental Concern or waste generated by the Company=s
operations or use of its assets were disposed of, which would have a material
adverse effect on the business or business prospects of the Company. The term
ASubstance of Environmental Concern@ means (a) 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 (as
defined in Section 2.1.17.3 hereof), that is regulated pursuant to or could give
rise to liability under any Environmental Law;
2.1.17.2. Permits, etc. The Company has, and within the period of all
applicable statute of limitations has had, in full force and effect all
environmental Permits required to conduct its operations, and is, within the
period of all applicable statutes of limitations has been, operating in
compliance thereunder;
2.1.17.3. Compliance. The Company=s operations and use of its assets are,
and within the period of all applicable statutes of limitations, have been in
compliance with applicable Environmental Law. AEnvironmental Law@ as used herein
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 environmental or of human health, or employee health and safety as from
time to time has been or is now in effect.
2.1.17.4. Environmental Claims. No notice has been received by the Company
or the Shareholder from any entity, governmental agency or individual regarding
any existing, pending or threatened investigation, inquiry, enforcement action.
litigation, or liability, including, without limitation any claim for remedial
obligations, response costs or contribution, relating to any Environmental Law;
2.1.17.5. Enforcement. The Company, and to the knowledge of the
Shareholder, no predecessor of the Company or other party acting on behalf of
the Company, 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;
2.1.17.6. Liabilities. The Company 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;
2.1.17.7. Renewals. The Shareholder does not know of any reason the Company
(or its successors) would not be able to renew without material expense any of
the permits, licenses, or other authorizations required pursuant to any of the
Environmental Law to conduct and use any of the Company=s current or planned
operations; and
2.1.17.8. Asbestos and PCBs. No material amounts of friable asbestos
currently exist on any property owned or operated by the Company, nor do
polychlorinated biphenyls exist in concentrations of 50 parts per million or
more in electrical equipment owned or being used by the Company in its
operations or on its properties.
2.1.18. Compliance with Other Laws. The Company 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. ''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.
2.1.19. Employee Plans and Labor Issues. Except as identified in Schedule
2.1.8., the Company does not currently sponsor, maintain or contribute to, and
has not at any time sponsored, maintained or contributed to any Employee Plan
(as defined in Section 2.1.8.7. hereof) or any other employee benefit plan which
is or was subject to any of the provisions of the Employee Retirement Income
Security Act 1974, as amended ("ERISA"), in which any of its employees are or
were participants (whether or not on an active or frozen basis). Each Employee
Plan set forth in Schedule 2.1.8. hereto complies currently, and has complied in
the past, in form and operation, with the applicable provisions of ERISA, the
Code and other applicable laws including, without limitation, all qualification
and reporting and disclosure requirements. Also, with respect to each Employee
Plan the company has not engaged in any prohibited transaction or any violation
of its fiduciary duties to such plan. All contributions required to be made to
each Employee Plan under the terms of such Employee Plan, ERISA or other
applicable law have been timely made and there are no delinquent contributions
as of the Closing Date. None of the Employee Plans (i) is a Amultiemployer plan@
(as defined in Section 3(37) of ERISA), (ii) is a defined benefit pension plan
subject to Title IV of ERISA, (iii) is a Avoluntary employees= beneficiary
association@ within the meaning of the Code Section 501(c)(9), (iv) provides for
medical or other insurance benefits to current or future retired employees or
former employees of the Company (other than as required for group health plan
continuation coverage under Code Section 4980B (ACOBRA@) or applicable state
law), or (v) obligates the Company to pay benefits solely as a result of a
change in control of the Company. During the six years preceding the Closing
Date, (i) no under-funded pension plan subject to Section 412 of the Code has
been transferred out of the Company and (ii) the Company has not participated in
or contributed to, or had an obligation to contribute to, any multiemployer plan
(as defined in ERISA Section 3(37)) and has no withdrawal liability with respect
to any multiemployer plan. There are no claims or lawsuits which have been
asserted, instituted or threatened against any Employee Plan by any fiduciary or
participant of such plan, except routine claims for benefits thereunder. The
Company has no collective bargaining agreements with any labor union or other
representative of employees. The Company has not engaged in any unfair labor
practices. The Company has no pending or threatened dispute with any of its
existing or former employees.
2.1.20. Investigations; Litigation. No investigation or review by any
governmental entity with respect to the Company or any of the transactions
contemplated by this Agreement is pending or, to the knowledge of the
Shareholder, threatened, nor has any governmental entity indicated to the
Company an intention to conduct the same, and there is no action, suit or
proceeding pending or, to the knowledge of the Shareholder, threatened against
or affecting the Company 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 the Company.
2.1.21. Absence of Certain Business Practices. Neither the Company nor any
officer, employee or agent of the Company, nor any other person acting on its
behalf, has, directly or indirectly, within the past five years, given or agreed
to give any gift or similar benefit to any customer, supplier, government
employee or other person who is or may be in a position to help or hinder the
business of the Company (or to assist the Company in connection with any actual
or proposed transaction) which (i) might subject the Company 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 the Company as reflected in the 6/30 Financial
Statements, or (iii) if not continued in the future, might materially adversely
effect the assets, business operations or prospects of the Company or which
might subject the Company to suit or penalty in a private or governmental
litigation or proceeding.
2.1.22. No Untrue Statements. The Company and the Shareholder have made
available to Buyer true, complete and correct copies of all contracts, documents
concerning all litigation and administrative proceedings, licenses, permits,
insurance policies, lists of suppliers and customers, and records relating
principally to the Company=s assets and business, and such information covers
all commitments and liabilities of the Company relating to its business or the
assets. This Agreement and the agreements and instruments to be entered into in
connection herewith do not include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements made herein and
therein not misleading in any material respect.
2.1.23. Consents and Approvals. No consent, approval or authorization of,
or filing or registration with, any governmental or regulatory authority, or any
other person or entity is required to be made or obtained by the Shareholder in
connection with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
2.1.24. Finder=s Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by the Shareholder and his
counsel directly with Buyer and its counsel, without the intervention of any
other person in such manner as to give rise to any valid claim against any of
the parties hereto for a brokerage commission, finder=s fee or any similar
payments.
2.2. Representations and Warranties of Buyer. Buyer represents and warrants
to the Shareholder as follows
2.2.1. Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has full requisite corporate power and authority to carry on its
business as it is currently conducted, and to own and operate the properties
currently owned and operated by it, and is duly qualified or licensed to do
business and is in good standing as a foreign corporation authorized to do
business in all jurisdictions in which the character of the properties owned or
the nature of the business conducted by it would make such qualification or
licensing necessary, except where the failure to be so qualified or licensed
would not have a material adverse effect on its financial condition, properties
or business.
2.2.2. Agreement Authorized and its Effect on Other Obligations. The
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Buyer, and this
Agreement is a valid and binding obligation of Buyer enforceable (subject to
normal equitable principles) in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, debtor
relief or similar laws affecting the rights of creditors generally. The
execution, delivery and performance of this Agreement by Buyer will not conflict
with or result in a violation or breach of any term or provision of, or
constitute a default under (a) the Certificate of Incorporation or Bylaws of
Buyer or (b) any obligation, indenture, mortgage, deed of trust, lease, contract
or other agreement to which Buyer or any of its property is bound.
2.2.3. Consents and Approvals. No consent, approval or authorization of, or
filing of a registration with, any governmental or regulatory authority, or any
other person or entity is required to be made or obtained by Buyer in connection
with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
2.2.4. Finder=s Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Buyer and its counsel
directly with the Company and the Shareholder and his counsel, without the
intervention by any other person as the result of any act of Buyer in such a
manner as to give rise to any valid claim against any of the parties hereto for
any brokerage commission, finder=s fee or any similar payments.
2.2.5. Buyer=s Assumption of Company Liabilities. Buyer hereby agrees and
promises to assume any and all obligations and liabilities that are reflected on
Schedules 2.1.8.4. and 2.1.8.14., said obligations and liabilities being
reflected on the 6/30 balance sheet. Buyer agrees, under the terms and
procedures provided for under Article 4 of the Agreement to indemnify and hold
harmless the Shareholder against and with respect to any and all guaranties,
obligations, liabilities, sums due or damages (as defined in Section 4.1.
hereof) that may arise from or out of the liabilities reflected on Schedules
2.1.8.4. and 2.1.8.14. Buyer further agrees to provide Shareholder with a
release from the creditors, or their respective assigns, identified on Schedule
2.1.8.14. within 30 days hereof.
ARTICLE 3
Additional Agreements
3.1. Noncompetition Agreement. The Shareholder hereby agrees to certain
restrictions with respect to his conduct of business after the date hereof
pursuant to the terms and provisions of that certain Noncompetition Agreement of
even date herewith by and between the Company and the Shareholder executed and
delivered in connection herewith.
3.2. Facility Lease. After the date hereof, the Shareholder hereby agrees
to lease to the Company its current Facility in Woodward, Oklahoma pursuant to
the terms and provisions of that certain Lease Agreement of even date herewith
by and between the Company and the Shareholder executed and delivered in
connection herewith.
3.3. Employment Agreement. After the date hereof , the Shareholder shall be
employed by the Company pursuant to the terms and provisions of that certain
Employment Agreement of even date herewith by and between the Company and the
Shareholder executed and delivered in connection herewith.
3.4. Further Assurances. From time to time, as and when requested by any
party hereto, any other party hereto shall execute and deliver, or cause to be
executed and delivered, such documents and instruments and shall take, or cause
to be taken, such further or other actions as may be reasonably necessary to
effectuate the transactions contemplated hereby.
ARTICLE 4
Indemnification
4.1. Indemnification by the Shareholder. In addition to any other remedies
available to Buyer under this Agreement, or at law or in equity, the Shareholder
shall indemnify, defend and hold harmless the Company, Buyer and their
affiliates and their respective officers, directors, employees, agents and
stockholders (collectively, the ABuyer Indemnified Parties@), against and with
respect to any and all claims, costs, damages, losses, expenses, obligations,
liabilities, recoveries, suits, causes of action and deficiencies, including
interest, penalties and reasonable fees and expenses of attorneys, consultants
and experts (collectively, the ADamages@) that the Buyer Indemnified Parties
shall incur or suffer, which arise, result from or relate to any breach by the
Shareholder of (or the failure of the Shareholder to perform) his
representations, warranties, covenants or agreements in this Agreement or in any
schedule, certificate, exhibit or other instrument furnished or delivered to
Buyer by the Shareholder under this Agreement.
4.2. Indemnification by Buyer. In addition to any other remedies available
to the Shareholder under this Agreement, or at law or in equity, Buyer shall
indemnify, defend and hold harmless the Shareholder against and with respect to
any and all Damages that Shareholder shall incur or suffer, which arise, result
from or relate to any breach of, or failure by Buyer to perform, any of its
representations, warranties, covenants or agreements in this Agreement or in any
schedule, certificate, exhibit or other instrument furnished or delivered to the
Shareholder by or on behalf of Buyer under this Agreement.
4.3. Indemnification Procedure. In the event that any party hereto
discovers or otherwise becomes aware of an indemnification claim arising under
Section 4.1 or 4.2 of this Agreement, such indemnified party shall give written
notice to the indemnifying party, specifying such claim, and may thereafter
exercise any remedies available to such party under this Agreement; provided,
however, that the failure of 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 Section 4.1 or 4.2 hereof, such
indemnified party shall, if a claim in respect thereof is to be made against any
indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of any
obligations hereunder, to the extent the indemnifying party is not materially
prejudiced thereby. In case any such action is brought against an indemnified
party, the indemnifying party shall be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified, to the extent that it may wish, with counsel reasonably satisfactory
to such indemnified party, and after such notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof unless the indemnifying party has failed to assume the defense
of such claim and to employ counsel reasonably satisfactory to such indemnified
person. An indemnifying party who elects not to assume the defense of a claim
shall not be liable for the fees and expenses of more than one counsel in any
single jurisdiction for all parties indemnified by such indemnifying party with
respect to such claim or with respect to claims separate but similar or related
in the same jurisdiction arising out of the same general allegations. Subject to
the following, 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. The
indemnified party is obligated to specify the basis of any determination that
counsel selected by the indemnifying party is unsatisfactory before the
indemnifying party shall be liable for attorney fees of counsel selected by the
indemnified party. The basis must be reasonable and well grounded before the
indemnifying party shall be liable for the expenses of counsel selected 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 without
the consent of such indemnifying party, which consent shall not be unreasonably
withheld or delayed, unless the indemnifying party has refused to provide a
defense against such claim or action. Likewise, no indemnified party shall
consent to entry of judgment or enter into any settlement of such claim where
the indemnifying party has refused to provide a defense against such claim or
action until the indemnified party has given the indemnifying party notice of
the terms of the judgment or settlement and an opportunity to continue with a
defense if the judgment or settlement is unsatisfactory.
ARTICLE 5
Miscellaneous
5.1. Survival of Representations, Warranties and Covenants. All
representations, warranties, covenants and agreements made by the parties hereto
shall survive indefinitely without limitation, notwithstanding any investigation
made by or on behalf of any of the parties hereto. 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
indefinitely despite any investigation made by any party hereto or on its
behalf.
5.2. Entirety. This Agreement embodies the entire agreement among the
parties with respect to the subject matter hereof, and all prior agreements
between the parties with respect thereto are hereby superseded in their
entirety.
5.3. Counterparts. Any number of counterparts of this Agreement may be
executed and each such counterpart shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one instrument.
5.4. Notices and Waivers. Any notice or waiver to be given to any party
hereto shall be in writing and shall be delivered by courier, sent by facsimile
transmission or first class registered or certified mail, postage prepaid,
return receipt requested:
If to Buyer
Addressed to: With a copy to:
WellTech Eastern, Inc. Porter & Hedges, L.L.P.
Two Tower Center, Tenth Floor 700 Louisiana, 35th Floor
East Brunswick, New Jersey 08816 Houston, Texas 77210-4744
Attn: General Counsel Attn: Samuel N. Allen
Facsimile: (908) 247-5148 Facsimile: (713) 228-1331
If to the Shareholder
Addressed to: With a copy to:
William Gregory Wines Cody B. Hodgden, Esq.
72 Possum Point Hodgden & Hallren
Possum Kingdom Lake P. O. Box 529
Grayford, Texas 76449 Woodward, Oklahoma 73802
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.
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. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the successors and assigns of the
parties hereto.
5.7. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
5.8. Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the applicable laws of the State of Oklahoma.
IN WITNESS WHEREOF, the Shareholder has executed this Agreement and Buyer
has caused this Agreement to be signed in its corporate names by its duly
authorized representative, all as of the day and year first above written.
WELLTECH EASTERN, INC.
By:
_________________________________________
Name:
______________________________________
Title:
_______________________________________
SHAREHOLDER
_________________________________________
William Gregory Wines
I:\PBOOKER\JMA\Key Energy Group\brw\924 Stock Purchase Agreement.wpd
Stock Purchase Agreement
among,
Key Energy Drilling, Inc.,
and
S. K. Rogers, Joe Dee Brooks,
Lynn E. Waters and Donnie Roberts
Dated as of September ___, 1997
Stock Purchase Agreement
This Stock Purchase Agreement (this "Agreement") is entered into as of
September ___, 1997 by and among Key Energy Drilling, Inc., a Delaware
corporation ("Buyer"), and S. K. Rogers, Joe Dee Brooks, Lynn E. Waters and
Donnie Roberts, each joined herein by their respective spouses (collectively,
the "Shareholders").
WITNESSETH :
Whereas, Buyer is a corporation duly organized and validly existing under
the laws of the State of Delaware, with its principal executive offices at Two
Tower Center, Tenth Floor, East Brunswick, New Jersey 08816; and
Whereas, BRW Drilling, Inc. (the "Company") is a corporation duly organized
and validly existing under the laws of the state of Texas, with its principal
executive offices at 1001 8th Street, Levelland, Texas 79336; and
Whereas, the Shareholders own 100,000 shares (the "Company Shares") of
common stock, no par value, of the Company (the "Company Common Stock"), which
constitutes all of the issued and outstanding shares of capital stock of the
Company; and
Whereas, the Shareholders desire to sell to Buyer, and Buyer desires to
purchase from the Shareholders all of the issued and outstanding capital stock
of the Company.
Now, Therefore, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto hereby agree as
follows:
I. ARTICLE
Purchase and Sale
1.1. Purchase and Sale of the Company Shares. Subject to the terms and
conditions of this Agreement, on the date hereof, the Shareholders agree to sell
and convey to Buyer, free and clear of all Encumbrances (as defined in Section
2.1.8.1 hereof), and Buyer agrees to purchase and accept from the Shareholders,
all of the Company Shares. In consideration of the sale of the Company Shares,
Buyer shall pay to the Shareholders $14,610,000 (the net amount being determined
by a gross sales price of $15,000,000 less a $390,000 adjustment for the
unaccrued income taxes disclosed in Section 2.1.6 hereof) in cash by wire
transfer of immediately available funds, and the Cash Adjustment Payment (as
defined in Section 1.3 hereof), if any, in accordance with Section 1.3 hereof.
1.1. Delivery of the Company Certificates. The Shareholders shall deliver
to Buyer on the date hereof duly and validly issued certificates representing
all of the Company 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 Buyer.
1.3 Adjustment of Purchase Price. Buyer shall cause to be prepared and
delivered to the Shareholders a balance sheet of the Company as of the date
hereof (the "Final Balance Sheet") within sixty (60) days after the date hereof
. Buyer and the Shareholders shall jointly review the Final Balance Sheet,
endeavor in good faith to resolve all disagreements regarding the entries
thereon and reach a final determination thereof within 90 days from the date
hereof. Within 10 days of reaching such final determination, the following
adjusting payments shall be made:
(1) If (i) the sum of (A) the Final Net Current Value of the Company
(defined below) plus (B) the Capital Expenditure Allowance (defined below)
exceeds (ii) the 7/31 Net Current Value of the Company (defined below), Buyer
shall pay to the Shareholders the amount of such excess (the "Cash Adjustment
Payment").
(2) If (i) the sum of (A) the Final Net Current Value of the Company plus
(B) the Capital Expenditure Allowance is less than (ii) the 7/31 Net Current
Value of the Company, the Shareholders shall pay to Buyer the amount of such
difference.
' The term "Final Net Current Value of the Company" means the dollar value
of the amount by which (i) the "Total Current Assets" plus the "Other Assets" as
recorded on the Final Balance Sheet exceeds (ii) the "Total Liabilities" minus
the "Notes Payable - SKROS" as recorded on the Final Balance Sheet. The term
"7/31 Net Current Value of the Company" means negative $707,441.51. The term
"Capital Expenditure Allowance" means $_____________.
1 ARTICLE
Representations and Warranties
1.1. Representations and Warranties of the Shareholders. Each of the
Shareholders jointly and severally represents and warrants to Buyer as follows:
1.1.1. Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Texas, 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.
1.1.1. Agreement Authorized and its Effect on Other Obligations. Each of
the Shareholders is a resident of Hockley County, 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 the Company or (ii) any obligation,
indenture, mortgage, deed of trust, lease, contract or other agreement to which
the Company or any of the Shareholders is a party or by which the Company or any
of the Shareholders or their respective properties are bound.
1.1.1. Capitalization. The authorized capitalization of the Company
consists of 100,000 shares of Company Common Stock, of which, as of the date
hereof, 100,000 shares were issued and outstanding and held beneficially and of
record by the Shareholders. On the date hereof, the Company 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 Company Common Stock are validly issued, fully paid and
non-assessable and are not subject to preemptive rights. None of the outstanding
shares of Company 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.
1.1.1. Ownership of the Company Shares. The Shareholders hold good and
valid title to all of the Company Shares, free and clear of all Encumbrances.
The Shareholders possess full authority and legal right to sell, transfer and
assign to Buyer the Company Shares, free and clear of all Encumbrances. Upon
transfer to Buyer by the Shareholders of the Company Shares, Buyer will own the
Company Shares free and clear of all Encumbrances. There are no claims pending
or, to the knowledge of any of the Shareholders, threatened, against the Company
or any of the Shareholders that concern or affect title to the Company Shares,
or that seek to compel the issuance of capital stock or other securities of the
Company.
1.1.1. No Subsidiaries. There is no corporation, partnership, joint
venture, business trust or other legal entity in which the Company, 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.
1.1.1. Financial Statements. The Company has delivered to Buyer copies of
the Company's unaudited balance sheet (the "7/31 Balance Sheet") and related
statements of income, copies of which are attached hereto as Schedule 2.1.6
(collectively, the "7/31 Financial Statements"), as, at and for the seven months
ended July 31, 1997 (the "Balance Sheet Date"). The 7/31 Financial Statements
are complete in all material respects except that the Company's accrual for
Federal income taxes has been based solely on quarterly income tax estimates
which are based on the Company's total income tax paid for the calendar year
1996. The Shareholders estimate that according to Generally Accepted Accounting
Principles (GAAP), the income tax accrual should reflect an additional $390,000.
With the exception of the income taxes which have not been properly accrued, the
7/31 Financial Statements presents fairly the financial condition of the Company
as and at the dates and for the periods indicated. Except for the inadequate
accrual for income taxes (as noted above), the 7/31 Financial Statements have
been prepared in accordance with GAAP applied on a consistent basis. The
accounts receivable reflected in the 7/31 Balance Sheet, or which have been
thereafter acquired by the Company, have been collected or are collectible at
the aggregate recorded amounts thereof. The inventories of the Company reflected
in the 7/31 Balance Sheet, or which have thereafter been acquired by it, consist
of items of a quality usable and salable in the normal course of the Company's
business, and the values at which inventories are carried are at the lower of
cost or market.
1.1.1. Liabilities. Except as disclosed on Schedule 2.1.7 hereto, the
Company does not have any liabilities or obligations, either accrued, absolute
or contingent, nor do any of the Shareholders have any knowledge of any
potential liabilities or obligations, other than those (i) reflected or reserved
against in the 7/31 Balance Sheet or (ii) incurred in the ordinary course of
business since the Balance Sheet Date, none of which would materially adversely
affect the value and conduct of the business of the Company
1.1.1. Additional Company Information. Attached as Schedule hereto are
true, complete and correct lists of the following items:
1.1.1.1. Real Estate. All real property and structures thereon owned,
leased or subject to a contract of purchase and sale, or lease commitment, by
the Company, with a description of the nature and amount of any Encumbrances
(defined below) thereon. 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;
1.1.1.1. Machinery and Equipment. All rigs, carriers, rig equipment,
machinery, transportation equipment, tools, equipment, furnishings and fixtures
owned, leased or subject to a contract of purchase and sale, or lease
commitment, by the Company with a description of the nature and amount of any
Encumbrances thereon;
1.1.1.1. Inventory. All inventory items or groups of inventory items owned
by the Company, excluding raw materials and work in process, which raw materials
and work in process are valued on the 7/31 Balance Sheet, together with the
amount of any Encumbrances thereon;
1.1.1.1. Receivables. All accounts and notes receivable of the Company,
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 the Company 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;
1.1.1.1. Payables. All accounts and notes payable of the Company, together
with an appropriate aging schedule;
1.1.1.1. Insurance. All insurance policies or bonds currently maintained by
the Company, including title insurance policies and those covering the Company's
properties, rigs, carriers, rig equipment, machinery, transportation 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;
1.1.1.1. Contracts. All contracts, including leases under which the Company
is lessor or lessee, which are to be performed in whole or in part after the
date hereof;
1.1.1.1. 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 the Company or any employee benefit plan
maintained by the Company (collectively, the "Employee Plans"), together with
copies of the most recent reports with respect to such plans, arrangements, or
trust agreements filed with any governmental agency and all Internal Revenue
Service determination letters and other correspondence from governmental
entities that have been received with respect to such plans, arrangements or
agreements;
1.1.1.1. Certain Salaries. The names and salary rates of all present
employees of the Company, and, to the extent existing on the date of this
Agreement, all arrangements with respect to any bonuses to be paid to them from
and after the date of this Agreement;
1.1.1.1. Bank Accounts. The name of each bank in which the Company has an
account and the names of all persons authorized to draw thereon;
1.1.1.1. Labor Agreements. Any collective bargaining agreements of the
Company 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 the Company;
1.1.1.1. Intellectual Property. All patents, patent applications,
trademarks and service marks (including registrations and applications
therefor), trade names, copyrights and written know-how, trade secrets and all
other similar proprietary data and the goodwill associated therewith
(collectively, the "Intellectual Property") used by the Company;
1.1.1.1. Trade Names. All trade names, assumed names and fictitious names
used or held by the Company, whether and where such names are registered and
where used;
1.1.1.1. Licenses and Permits. 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") of the Company under which it conducts its
business.
1.1.1.1. Promissory Notes. All long-term and short-term promissory notes,
installment contracts, loan agreements, credit agreements, and any other
agreements of the Company relating thereto or with respect to collateral
securing the same;
1.1.1.1. Guaranties. All indebtedness, liabilities and commitments of
others and as to which the Company 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;
1.1.1.1. Reserves and Accruals. All accounting reserves and accruals
maintained in the 7/31 Balance Sheet;
1.1.1.1. Leases. All leases to which the Company is a party; and
1.1.1.1. Environment. All environmental permits, approvals, certifications,
licenses, registrations, orders and decrees applicable to current operations
conducted by the Company and all environmental audits, assessments,
investigations and reviews conducted by the Company within the last five years
or otherwise in the Company's possession on any property owned, leased or used
by the Company.
1.1.1. No Defaults. The Company is not a party to, or bound by, any
contract or arrangement of any kind to be performed after the date hereof
(except as provided in Schedule 2.1.8.7 hereto), nor is the Company in default
in any obligation or covenant on its part to be performed under any obligation,
lease, contract, order, plan or other arrangement.
1.1.1. Absence of Certain Changes and Events. Other than as specified in
Schedule 2.1.10 hereto, since the Balance Sheet Date, there has not been:
1.1.1.1. Financial Change. Any adverse change in the financial condition,
backlog, operations, assets, liabilities or business of the Company;
1.1.1.1. Property Damage. Any material damage, destruction, or loss to the
business or properties of the Company (whether or not covered by insurance);
1.1.1.1. Dividends. Any declaration, setting aside, or payment of any
dividend or other distribution in respect of the Company Common Stock, or any
direct or indirect redemption, purchase or any other acquisition by the Company
of any such stock;
1.1.1.1. Capitalization Change. Any change in the capital stock or in the
number of shares or classes of the Company's authorized or outstanding capital
stock as described in Section 2.1.3 hereof;
1.1.1.1. Labor Disputes. Any labor or employment dispute of whatever
nature; or
1.1.1.1. Other Adverse Changes. Any other event or condition known to any
of the Shareholders particularly pertaining to and adversely affecting the
operations, assets or business of the Company.
1.1.1. 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 the
Company 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 such returns are true and correct; the Company has only done business in the
State of Texas with the exception that the Company has qualified to do business
and has commenced doing business in the State of New Mexico as of September 3,
1997; all taxes shown by such returns to be payable and any other taxes due and
payable have been paid other than those being contested in good faith by the
Company; and the tax provision reflected in the 7/31 Balance Sheet is an
estimated $390,000 short in accordance with GAAP to cover liabilities of the
Company at the date thereof for all taxes, including any assessed interest,
assessed penalties and additions to taxes of any character whatsoever applicable
to the Company or its assets or business. No waiver of any statute of
limitations executed by the Company with respect to any income or other tax is
in effect for any period. The income tax returns of the Company have never been
examined by the Internal Revenue Service or the taxing authorities of any other
jurisdiction. There are no tax liens on any assets of The Company except for
taxes not yet currently due. The Company is not subject to any tax-sharing or
allocation agreement. The Company is not, nor has it ever attempted to become a
Subchapter S-Corporation under the Internal Revenue Code of 1986, as amended.
The Company is not and never has been, a member of a consolidated group subject
to Treasury Regulation 1.1502-6 or any similar provision.
1.1.1. Intellectual Property. The Company owns or possesses licenses to use
all Intellectual Property that is either material to the business of the Company
or that is necessary for the rendering of any services rendered by the Company
and the use or sale of any equipment or products used or sold by the Company,
including all such Intellectual Property listed in Schedule hereto (the
"Required Intellectual Property"). The Required Intellectual Property is owned
or licensed by the Company free and clear of any Encumbrance. The Company has
not granted to any other person any license to use any Required Intellectual
Property. The Company has not received any notice of infringement,
misappropriation, or conflict with, the Intellectual Property rights of others
in connection with the use by the Company of the Required Intellectual Property
or otherwise in connection with the Company's operation of its business.
1.1.1. Title to and Condition of Assets. The Company has good, indefeasible
and marketable title to all its properties, interests in properties and assets,
real and personal, reflected in the 7/31 Balance Sheet or in Schedule hereto,
free and clear of any Encumbrance of any nature whatsoever, except
(i)Encumbrances reflected in the 7/31 Balance Sheet or in Schedule hereto,
(ii)liens for current taxes not yet due and payable, and (iii)such
imperfections of title, easements and Encumbrances, if any, as are not
substantial in character, amount, or extent and do not and will not materially
detract from the value, or interfere with the present use, of the property
subject thereto or affected thereby, or otherwise materially impair business
operations. All leases pursuant to which the Company 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 the Company and in respect to which
the Company has not taken adequate steps to prevent a default from occurring.
The buildings and premises of the Company that are used in its business are in
good operating condition and repair, subject only to ordinary wear and tear. All
rigs, carriers, rig equipment, machinery, transportation equipment, tools and
other major items of equipment of the Company are in good operating condition
and in a state of reasonable 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. No notice of any violation of any law, statute, ordinance,
or regulation relating to any such assets has been received by the Company or
any of the Shareholders, except such as have been fully complied with.
1.1.1. Contracts. All contracts, leases, plans or other arrangements to
which the Company 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 the Company. The Company is not, and to the knowledge of any 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 an adverse effect on the Company.
None of the Shareholder has received any information which would cause such
Shareholder to conclude that any customer of the Company will (or is likely to)
cease doing business with the Company (or its successors) as a result of the
consummation of the transactions contemplated hereby.
1.1.1. Licenses and Permits. The Company possesses all Permits necessary
under law or otherwise for the Company 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,
including all such Permits listed in Schedule 2.1.8 hereto (collectively, the
"Required Permits"). Each of the Required Permits and the Company's rights with
respect thereto is valid and subsisting, in full force and effect, and
enforceable by the Company subject to administrative powers of regulatory
agencies having jurisdiction. The Company is in compliance in all respects with
the terms of each of the Required Permits. None of the Required Permits have
been, or to the knowledge of any of the Shareholders, is threatened to be,
revoked, canceled, suspended or modified.
1.1.1. Litigation. Except as set forth in Schedule 2.1.16 hereto, there is
no suit, action, or legal, administrative, arbitration, or other proceeding or
governmental investigation pending to which the Company is a party or, to the
knowledge of any of the Shareholders, might become a party or which particularly
affects the Company or its assets, nor is any change in the zoning or building
ordinances directly affecting the real property or leasehold interests of the
Company, pending or, to the knowledge of any of the Shareholders, threatened.
1.1.1. Environmental Compliance.
1.1.1.1. Environmental Conditions. Except as disclosed 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 on any property presently or previously owned, leased or operated by the
Company, or on any property to which any Substance of Environmental Concern or
waste generated by the Company's operations or use of its assets were disposed
of, which would have a material adverse effect on the business or business
prospects of the Company. The term "Substance of Environmental Concern" means
(a) 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 (as defined in Section 2.1.17.3 hereof), that is regulated
pursuant to or could give rise to liability under any Environmental Law;
1.1.1.1. Permits, etc. The Company has, and within the period of all
applicable statutes of limitations has had, in full force and effect all
Environmental Permits required to conduct its operations, and is, within the
period of all applicable statutes of limitations has been, operating in
compliance thereunder. "Environmental Permits" as used in this Agreement means
any and all permits, licenses, registrations, approvals, notifications ,
exemptions and any other authorizations required under Environmental Laws (as
defined in Section 2.1.17.3 hereof);
1.1.1.1. Compliance. The Company's operations and use of its assets are,
and within the period of all applicable statutes of limitations, have been in
compliance with applicable Environmental Law. "Environmental Law" as used in
this Agreement 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 environmental or of human health, or
employee health and safety as from time to time has been or is now in effect.
2.1.17.4. Environmental Claims. No notice has been received by the Company
or any of the Shareholders, or to the knowledge of the Company or any of the
Shareholders, by any predecessor of the Company or any Shareholder, from any
entity, governmental agency or individual regarding (nor is the Company or any
Shareholder otherwise aware of) any existing, pending or threatened
investigation, inquiry, enforcement action. litigation, or liability, including,
without limitation any claim for remedial obligations, response costs or
contribution, relating to any Environmental Law;
2.1.17.5. Enforcement. The Company, and to the knowledge of any of the
Shareholders, no predecessor of the Company or other party acting on behalf of
the Company, 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; 2.1.17.6.
Liabilities. The Company 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;
2.1.17.7. Renewals. Neither the Company nor any of the Shareholders knows
of any reason the Company (or its successors) would not be able to renew without
material expense any Environmental Permit required pursuant to any Environmental
Law to conduct and use any of the Company's current or planned operations; and
2.1.17.8. Asbestos and PCBs. No friable asbestos currently exists on any
property owned or operated by the Company, nor do polychlorinated biphenyls
exist in concentrations of 50 parts per million or more in electrical equipment
owned or being used by the Company in its operations or on its properties.
1.1.1. Compliance with Other Laws. The Company 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. ss651 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.
1.1.1. ERISA Plans and Labor Issues. Other than the Company's employee
health plan (the "Health Plan") described in Schedule 2.1.8.8 hereto, the
Company 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"). The Health Plan complies with and has been
administered in a 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 budget Reconciliation Act of
1985, as amended ("COBRA"), and none of the Shareholders have received any
notice from any governmental authority questioning or challenging such
compliance. The Health Plan has not been conducted in such a manner as would
give rise to any material fine, penalties, taxes, claims or charges against the
Company by a governmental entity or any third party or otherwise result in a
material adverse effect on the Company's financial condition. No claims, demands
or causes of action exist with respect to the Health Plan except routine claims
for benefits thereunder. All contributions required to be made to the Health
Plan have been timely made prior to the date hereof. The execution, delivery and
performance of this agreement will not cause the Health Plan to be terminated or
otherwise adversely affect the administration or operation thereof. The
Company's administration of its Health Plan following the closing in the same
manner as such Health Plan was administered by the Company prior to the closing
will not violate any applicable laws or otherwise result in any material adverse
effect on the financial condition of the Company. The Company does not maintain
any plan, program, policy, contract or other arrangement that provides
retirement, medical, dental, disability, life insurance or other benefits to any
current or former employees of the Company, including any retired employees, or
their beneficiaries or dependents. During the six years preceding the date
hereof (i) the Company has not participated in or contributed to or had any
obligation to contribute to any multiemployer plan (as defined in ERISA Section
3(7)) and has no withdrawal liability with respect to any multiemployer plan,
and (ii) has not maintained any pension plan subject to ERISA. The Company is
not obligated to pay any severance or benefits to any employee or former
employee of the Company as the result of any change in the ownership or control
of the Company. The Company has not engaged in any unfair labor practices which
could reasonably be expected to result in an adverse effect on its operations or
assets. The Company does not have any dispute with any of its existing or former
employees. The Company is not subject to any collective bargaining agreement
with any labor union or other representative of employees. There are no labor
disputes or, to the knowledge of any of the Shareholders, any disputes
threatened by current or former employees of the Company.
1.1.1. Investigations; Litigation. No investigation or review by any
governmental entity with respect to the Company 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 the
Company an intention to conduct the same, and there is no action, suit or
proceeding pending or, to the knowledge of any of the Shareholders, threatened
against or affecting the Company 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 the Company.
1.1.1. Absence of Certain Business Practices. Neither the Company nor any
officer, employee or agent of the Company, nor any other person acting on its
behalf, has, directly or indirectly, within the past five years, given or agreed
to give any gift or similar benefit to any customer, supplier, government
employee or other person who is or may be in a position to help or hinder the
business of the Company (or to assist the Company in connection with any actual
or proposed transaction) which (i) might subject the Company 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 the Company as reflected in the 7/31 Financial
Statements, or (iii) if not continued in the future, might materially adversely
effect the assets, business operations or prospects of the Company or which
might subject the Company to suit or penalty in a private or governmental
litigation or proceeding.
1.1.1. No Untrue Statements. The Company and each of the Shareholders have
made available to Buyer true, complete and correct copies of all contracts,
documents concerning all litigation and administrative proceedings, licenses,
permits, insurance policies, lists of suppliers and customers, and records
relating principally to the Company's assets and business, and such information
covers all commitments and liabilities of the Company relating to its business
or the assets. This Agreement and the agreements and instruments to be entered
into in connection herewith do not include any untrue statement of a material
fact or omit to state any material fact necessary to make the statements made
herein and therein not misleading in any material respect.
1.1.1. Consents and Approvals. No consent, approval or authorization of, or
filing or registration with, any governmental or regulatory authority, or any
other person or entity other than the Shareholders, is required to be made or
obtained by the Company or any of the Shareholders in connection with the
execution, delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.
1.1.1. Finder's Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by the Shareholders and
their counsel directly with Buyer and its counsel, without the intervention of
any other person in such manner as to give rise to any valid claim against any
of the parties hereto for a brokerage commission, finder's fee or any similar
payments.
1.1. Representations and Warranties of Buyer. Buyer represents and warrants
to each of the Shareholders as follows
1.1.1. Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has full requisite corporate power and authority to carry on its
business as it is currently conducted, and to own and operate the properties
currently owned and operated by it, and is duly qualified or licensed to do
business and is in good standing as a foreign corporation authorized to do
business in all jurisdictions in which the character of the properties owned or
the nature of the business conducted by it would make such qualification or
licensing necessary, except where the failure to be so qualified or licensed
would not have a material adverse effect on its financial condition, properties
or business.
1.1.1. Agreement Authorized and its Effect on Other Obligations. The
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Buyer, and this
Agreement is a valid and binding obligation of Buyer enforceable (subject to
normal equitable principles) in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, debtor
relief or similar laws affecting the rights of creditors generally. The
execution, delivery and performance of this Agreement by Buyer will not conflict
with or result in a violation or breach of any term or provision of, or
constitute a default under (a) the Certificate of Incorporation or Bylaws of
Buyer or (b) any obligation, indenture, mortgage, deed of trust, lease, contract
or other agreement to which Buyer or any of its property is bound.
1.1.1. Consents and Approvals. No consent, approval or authorization of, or
filing of a registration with, any governmental or regulatory authority, or any
other person or entity is required to be made or obtained by Buyer in connection
with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
1.1.1. Finder's Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Buyer and its counsel
directly with the Company and the Shareholders and their counsel, without the
intervention by any other person as the result of any act of Buyer in such a
manner as to give rise to any valid claim against any of the parties hereto for
any brokerage commission, finder's fee or any similar payments.
1 ARTICLE
Additional Agreements
1.1. Noncompetition. Except as otherwise consented to or approved in
writing by Buyer, each of the Shareholders agrees that for a period of 60 months
from the date hereof, 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 the Company, Buyer or
any affiliate of Buyer on the date hereof, or in any service business the
services of which are provided and marketed by the Company, Buyer or any
affiliate of Buyer on the date hereof in any state of the United States, or any
foreign country in which the Company, Buyer or any affiliate of Buyer transacts
business on the date hereof (provided, however, the foregoing shall not be
construed as preventing Shareholder Lynn E. Waters from performing any type of
activity in the oil and gas industry, including being an employee, consultant or
other representative of any other entity, regardless of whether said entity
competes against the Company, Buyer or any affiliate of Buyer, so long as Lynn
E. Waters does not own, vote or control as much as five percent (5%) of any
security of any class of said business entity); (ii) request any present
customers or suppliers of the Company, Buyer or any affiliate of Buyer to
curtail or cancel their business with the Company, Buyer or any affiliate of
Buyer; (iii) disclose to any person, firm or corporation any trade, technical or
technological secrets of the Company, Buyer or any affiliate of Buyer or any
details of their organization or business affairs or (iv) induce or actively
attempt to influence any employee of the Company, Buyer or any affiliate of
Buyer 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. The
obligations expressed in this Section 3.1 are in addition to any other
obligations that the Shareholders may have under the laws of the states in which
they do business requiring an employee of a business or a shareholder who sells
his stock in a corporation (including a disposition in a merger) to limit his
activities so that the goodwill and business relations of his employer and of
the corporation whose stock he has sold (and any successor corporation) will not
be materially impaired. Each of the Shareholders further agrees and acknowledges
that the Company, Buyer 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 the Company, Buyer or any affiliate of Buyer 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 Buyer
contained in this Agreement, and for other good and valuable consideration,
receipt of which is hereby acknowledged.
1.1. Employment Agreement. The parties hereto acknowledge the execution and
delivery of an employment agreement between Joe Dee Brooks and the Company
concurrently herewith.
1.1. 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.
3.4. Company's Stock Not Registered. The Company is a privately held
corporation and Buyer acknowledges such. The Company's stock has not been
registered under the Securities Act of 1933, as Amended (the "Act") or under any
applicable state securities laws, and the stock, therefore, cannot be offered
for sale, sold, transferred, pledged or otherwise hypothecated except in
accordance with the registration requirements of the Act and other such state
laws as may be applicable. Buyer acknowledges that Seller has made available to
it such information and documents, and that Buyer understands the risk
associated with ownership of the capital stock of the Company, and Buyer is
capable of bearing the financial risk associated therewith. The Company's shares
and the dealings with Buyer are proceeding in reliance on exceptions from
registration or qualification requirements pursuant to state law.
3.5. Opinion of Shareholders' Counsel. Buyer shall have received a
favorable opinion, dated as of the Closing Date, from Bradford L. Moore, counsel
to the Shareholders, in form and substance satisfactory to Buyer, to the effect
that (i) the Company has been duly incorporated and is validly existing as a
corporation and is in good standing under the laws of the State of Texas; (ii),
the Company has fully requisite corporate power and authority to carry on its
business as it is currently conducted and to own and operate the properties
currently used and operated by it, and is duly qualified to do business and is
in good standing as a foreign corporation and authorized to do business in the
State of New Mexico; (iii) all outstanding shares of the Company's common stock
have been validly issued and are fully paid and non-assessable; (iv) the
Shareholders hold good and valid title to all of the Company shares free and
clear of all Encumbrances; and (v) this Agreement has been duly executed and
delivered by, and is the legal, valid and binding obligation of the
Shareholders, and is enforceable against the Shareholders in accordance with its
terms, except as the enforceability may be limited by (a) equitable principles
of general applicability or (b) bankruptcy, insolvency, reorganization,
fraudulent conveyance or similar laws affecting the rights of creditors
generally. In rendering such opinion, such counsel may rely upon certificates of
public officials and of officers of Seller or the Shareholders as to matters of
fact.
3.6. Opinion of Buyer's Counsel. Shareholders shall have received a
favorable opinion, dated as of the Closing Date, from Lynch, Chappell & Alsup,
counsel for Buyer, in form and substance satisfactory to the Shareholders, to
the effect that (i) Buyer has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware and 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 the State of
Texas; (ii) all corporate proceedings required to be taken by or on the part of
Buyer to authorize the execution of this Agreement and the implementation of the
transactions contemplated hereby have been taken; (iii) this Agreement has been
duly executed and delivered by, and is the legal, valid and binding obligation
of Buyer and is enforceable against Buyer in accordance with its terms, except
as the enforceability may be limited by (a) equitable principles of general
applicability or (b) bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the rights of creditors generally. In
rendering such opinion, such counsel may rely upon certificates of public
officials and of officers of Buyer as to matters of fact.
3.7. Fees and Expenses. Except as otherwise expressly provided in this
Agreement, all fees and expenses, including fees and expenses of counsel,
financial advisors and accountants incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such fee or expense by or on the date hereof.
1 ARTICLE
Indemnification
1.1. Indemnification by the Shareholders. In addition to any other remedies
available to Buyer under this Agreement, or at law or in equity, each of the
Shareholders shall jointly and severally indemnify, defend and hold harmless the
Company, Buyer and their affiliates and their respective officers, directors,
employees, agents and stockholders (collectively, the "Buyer Indemnified
Parties"), against and with respect to any and all claims, costs, damages,
losses, expenses, obligations, liabilities, recoveries, suits, causes of action
and deficiencies, including interest, penalties and reasonable fees and expenses
of attorneys, consultants and experts (collectively, the "Damages") in excess of
$150,000 in the aggregate that the Buyer Indemnified Parties shall incur or
suffer, which arise, result from or relate to (i) any breach by any of the
Shareholders of (or the failure of any of the Shareholders to perform) their
respective representations, warranties, covenants or agreements in this
Agreement or in any schedule, certificate, exhibit or other instrument furnished
or delivered to Buyer by any of the Shareholders under this Agreement, (ii) the
Company's ownership and/or operation of those properties distributed to the
Shareholders prior to the date hereof referred to in Schedule 2.1.10 hereto,
(iii) the promissory note represented by the "Notes Payable - SKROS" line item
on the 7/31 Balance Sheet assumed by the Shareholders prior to the date hereof;
provided, however, that (iv) the Shareholders' aggregate obligations to
indemnify Buyer and the other parties identified above shall never exceed the
aggregate sum of $15,000,000.00; (v) the Shareholders shall not be required to
so indemnify, defend and hold harmless Buyer and its officers, directors,
employees, agents and stockholders, 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 of this Agreement, or in any schedule,
certificate, exhibit or other instrument furnished or delivered to Buyer by any
of the Shareholders under this Agreement for which Buyer 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 5.1 hereof) of the
specific representation or warranty alleged to have been breached; (vi) to the
extent the Buyer has actually recovered damages from a collateral source
including, but not limited to, a third party or insurance coverage, for which
Buyer is indemnified by the Shareholders pursuant to this Section 4.1, then
Buyer agrees not to enforce its right to indemnification under this Section 4.1
(and the Buyer agrees that it will, to the extent it can legally do so,
subrogate its right to collect any such damages from a collateral source to the
Shareholders to the extent the Shareholders have paid such indemnification to
the Buyer); and (vii) Buyer agrees it will not seek indemnification under this
Section 4.1 for any environmental remedial work on any of the Company's
properties unless the Company (or Buyer) is required to perform such work by a
third party or by a governmental entity or agency.
1.1. Indemnification by Buyer. In addition to any other remedies available
to the Shareholders under this Agreement, or at law or in equity, Buyer shall
indemnify, defend and hold harmless each of the Shareholders against and with
respect to any and all Damages in excess of $150,000 in the aggregate, that such
indemnitees shall incur or suffer, which arise, result from or relate to any
breach of, or failure by Buyer to perform, any of its representations,
warranties, covenants or agreements in this Agreement or in any schedule,
certificate, exhibit or other instrument furnished or delivered to any of the
Shareholders by or on behalf of Buyer under this Agreement; provided, however,
that (i) Buyer's aggregate obligation to indemnify the Shareholders shall never
exceed the sum of $15,000,000.00; (ii) Buyer 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 Buyer of 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 Buyer under this Agreement for which the Shareholders fail
to provide written notice of a claim for such damages to Buyer on or before the
expiration of the survival period (as is specified in Section 5.1 hereof) of the
specific representations or warranty alleged to have been breached; and (iii) to
the extent the Shareholders have actually recovered damages from a collateral
source, including, but not limited to a third party or insurance coverage for
which the Shareholders are indemnified by Buyer pursuant to this Section 4.2,
then the Shareholders agree not to enforce their right to indemnification under
this Section 4.2 (and the Shareholders agree that they will, to the extent they
can legally do so, subrogate their rights to collect any such damages from a
collateral source to the Buyer to the extent the Buyer has paid such
indemnification to the Shareholders.
1.1. Indemnification Procedure. In the event that any party hereto
discovers or otherwise becomes aware of an indemnification claim arising under
Article 4 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 Sections 4.1 or 4.2 hereof, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party, give written notice to the latter of the commencement of such action;
provided, however, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of any obligations
hereunder, to the extent the indemnifying party is not materially prejudiced
thereby. In case any such action is brought against an indemnified party, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after such notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof unless the indemnifying party has failed to assume the defense
of such claim and to employ counsel reasonably satisfactory to such indemnified
person. An indemnifying party who elects not to assume the defense of a claim
shall not be liable for the fees and expenses of more than one counsel in any
single jurisdiction for all parties indemnified by such indemnifying party with
respect to such claim or with respect to claims separate but similar or related
in the same jurisdiction arising out of the same general allegations.
Notwithstanding any of the foregoing to the contrary, the indemnified party will
be entitled to select its own counsel and assume the defense of any action
brought against it if the indemnifying party fails to select counsel reasonably
satisfactory to the indemnified party, the expenses of such defense to be paid
by the indemnifying party. No indemnifying party shall consent to entry of any
judgment or enter into any settlement with respect to a claim without the
consent of the indemnified party, which consent shall not be unreasonably
withheld, or unless such judgment or settlement includes as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability with respect to such claim. No indemnified party
shall consent to entry of any judgment or enter into any settlement of any such
action, the defense of which has been assumed by an indemnifying party, without
the consent of such indemnifying party, which consent shall not be unreasonably
withheld or delayed.
1 ARTICLE
Miscellaneous
1.1. Survival of Representations, Warranties and Covenants. All
representations and warranties made by the parties hereto shall survive for a
period of 24 months from the Closing Date, notwithstanding any investigation
made by or on behalf of any of the parties hereto; provided, however, that the
representations and warranties contained in Section 2.1.11 hereof shall survive
until the expiration of the applicable statute of limitations associated with
the taxes at issue. All statements contained in any certificate, schedule,
exhibit or other instrument delivered pursuant to this Agreement shall be deemed
to have been representations and warranties by the respective party or parties,
as the case may be, and shall also survive for a period of 24 months from the
Closing Date despite any investigation made by any party hereto or on its
behalf. All covenants and agreements contained herein shall survive as provided
herein.
1.1. 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.
1.1. 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.
1.1. Notices and Waivers. Any notice or waiver to be given to any party
hereto shall be in writing and shall be delivered by courier, sent by facsimile
transmission or first class registered or certified mail, postage prepaid,
return receipt requested:
If to Buyer
Addressed to: With a copy to:
Key Energy Drilling, Inc. Lynch, Chappell & Alsup
Two Tower Center, Tenth Floor 300 N. Marienfeld, Suite 700
East Brunswick, New Jersey 08816 Midland, Texas 79701
Attn: General Counsel Attn: James M. Alsup
Facsimile: (908) 247-5148 Facsimile: (915) 683-3351
If to any Shareholder
Addressed to: With a copy to:
Joe Dee Brooks Bradford L. Moore
2213 S. College Attorney at Law
Levelland, Texas 79336 P. O. Box 352
Brownfield, Texas 79316
Facsimile: (806) 637-3877
S. K. Rogers
1001 8th Street
Levelland, Texas 79336
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.
1.1. 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.
1.1. 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.
1.1. 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.
1.1. Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the applicable laws of the State of Texas.
5.9. Multiple Counterparts. This Agreement is executed in duplicate and
multiple originals and multiple signature pages. Each duplicate is considered an
original and has the same force and effect as if executed with an original
signature by all of the parties hereto.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the Shareholders have executed this Agreement and the
Buyer has caused this Agreement to be signed in its corporate name by its
respective duly authorized representative, all as of the day and year first
above written.
KEY ENERGY DRILLING, INC.
By:
Name:
Title:
i:\pbooker\jma\key\brw\924 stock purchase agreement
Key Energy Group, Inc.
$200,000,000 Principal Amount
of
5% Convertible Subordinated Notes due 2004
- --------------------------------------------------------------------------------
Indenture
- -------------------------------------------------------------------------------
Dated as of September 25, 1997
- --------------------------------------------------------------------------------
American Stock Transfer & Trust Company
Trustee
- -------------------------------------------------------------------------------
053113\1008\02764\979QGT85.OTH
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.1. Definitions.......................................... 1
Section 1.2 Other Definitions.................................... 7
Section 1.3 Incorporation by Reference of Trust Indenture Act.... 8
Section 1.4 Rules of Construction................................ 8
ARTICLE II
THE SECURITIES
Section 2.1. Form and Dating; Securities in Global Form........... 9
Section 2.2. Execution and Authentication......................... 10
Section 2.3. Registrar, Paying Agent, Depository and Securities
Custodian............................................ 10
Section 2.4. Paying Agent to Hold Money in Trust.................. 11
Section 2.5. Holder Lists......................................... 11
Section 2.6 Transfer and Exchange................................ 12
Section 2.7 Replacement Securities............................... 18
Section 2.8 Outstanding Securities............................... 18
Section 2.9 Treasury Securities.................................. 19
Section 2.10 Temporary Securities................................. 19
Section 2.11 Cancellation......................................... 19
Section 2.12 Defaulted Interest................................... 19
ARTICLE III
REDEMPTION
Section 3.1 Notices to Trustee.................................... 20
Section 3.2 Selection of Securities to be Redeemed................ 20
Section 3.3 Notice of Redemption.................................. 21
Section 3.4 Effect of Notice of Redemption........................ 21
Section 3.5 Deposit of Redemption Price........................... 22
Section 3.6 Securities Redeemed in Part........................... 22
Section 3.7 Optional Redemption................................... 22
ARTICLE IV
COVENANTS
Section 4.1 Payment of Securities................................ 23
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TABLE OF CONTENTS
(Continued)
Page
Section 4.2 Maintenance of Office or Agency...................... 23
Section 4.3 SEC Reports.......................................... 24
Section 4.4 Compliance Certificate............................... 24
Section 4.5 Compliance with Laws; Taxes.......................... 25
Section 4.6 Stay, Extension and Usury Laws....................... 25
Section 4.7 Corporate Existence.................................. 26
Section 4.8 Liquidation.......................................... 26
Section 4.9 Limitation on Dispositions of Assets................. 27
Section 4.10 Change in Control.................................... 27
Section 4.11 Rule 144A Information Requirement.................... 28
ARTICLE V
SUCCESSORS
Section 5.1 When the Company May Merge, etc...................... 28
Section 5.2 Successor Corporation Substituted.................... 29
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.1 Events of Default.................................... 29
Section 6.2 Acceleration........................................ 30
Section 6.3 Other Remedies....................................... 31
Section 6.4 Waiver of Past Defaults.............................. 31
Section 6.5 Control by Majority.................................. 31
Section 6.6 Limitation on Suits.................................. 32
Section 6.7 Rights of Holders to Receive Payment................. 32
Section 6.8 Collection Suit by Trustee........................... 32
Section 6.9 Trustee May File Proofs of Claim..................... 33
Section 6.10 Priorities........................................... 33
Section 6.11 Undertaking for Costs................................ 34
ARTICLE VII
TRUSTEE
Section 7.1 Duties of a Trustee.................................. 34
Section 7.2 Rights of Trustee.................................... 35
Section 7.3 Individual Rights of Trustee......................... 36
Section 7.4 Trustee's Disclaimer................................. 36
Section 7.5 Notice of Defaults.................................. 36
Section 7.6 Reports by Trustee to Holders........................ 36
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TABLE OF CONTENTS
(Continued)
Page
Section 7.7 Compensation and Indemnity........................... 37
Section 7.8 Replacement of Trustee................................ 37
Section 7.9 Successor Trustee by Merger, etc..................... 38
Section 7.10 Eligibility; Disqualification........................ 38
Section 7.11 Preferential Collection of Claims Against Company.... 39
Section 7.12 No Obligation of the Trustee......................... 39
ARTICLE VIII
DISCHARGE OF INDENTURE
Section 8.1 Termination of Company's Obligation.................. 40
Section 8.2 Application of Trust Money........................... 41
Section 8.3 Repayment to Company................................. 41
Section 8.4 Reinstatement........................................ 42
ARTICLE IX
AMENDMENTS
Section 9.1 Without Consent of Holders........................... 42
Section 9.2 With Consent of Holders.............................. 43
Section 9.3 Compliance with Trust Indenture Act.................. 44
Section 9.4 Revocation and Effect of Consents.................... 44
Section 9.5 Notation on or Exchange of Securities................ 44
Section 9.6 Trustee to Sign Amendments, etc...................... 45
ARTICLE X
CONVERSION
Section 10.1 Right to Convert.................................... 45
Section 10.2 Exercise of Conversion Privilege; Issuance of Common
Stock on Conversion; No Adjustment for Interest or
Dividends. ........................................ 46
Section 10.3 Cash Payments in Lieu of Fractional Shares.......... 47
Section 10.4 Conversion Price.................................... 47
Section 10.5 Adjustment of Conversion Price...................... 48
Section 10.6 Effect of Reclassification, Consolidation, Merger or
Sale................................................ 51
Section 10.7 Taxes on Shares Issued.............................. 51
Section 10.8 Reservation of Shares; Shares to be Fully Paid;
Compliance with Governmental Requirements; Listing of
Common Stock........................................ 52
Section 10.9 Responsibility of Trustee........................... 52
Section 10.10 Notice to Holders Before Certain Actions............ 53
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TABLE OF CONTENTS
(Continued)
Page
ARTICLE XI
SUBORDINATION
Section 11.1 Agreement to Subordinate............................ 54
Section 11.2 Certain Definitions................................. 54
Section 11.3 Liquidation; Dissolution; Bankruptcy................ 55
Section 11.4 Company Not to Make Payments with Respect to Securities
in Certain Circumstances............................ 55
Section 11.5 Acceleration of Securities.......................... 56
Section 11.6 When Distribution Must Be Paid Over................. 56
Section 11.7 Notice by Company................................... 56
Section 11.8 Subrogation......................................... 56
Section 11.9 Relative Rights..................................... 56
Section 11.10 Subordination May Not Be Impaired by Company........ 57
Section 11.11 Distribution or Notice to Representative............ 57
Section 11.12 Rights of Trustee and Paying Agent.................. 57
Section 11.13 Effectuation of Subordination by Trustee............ 58
ARTICLE XII
MISCELLANEOUS
Section 12.1 Trust Indenture Act Controls........................ 58
Section 12.2 Notices............................................. 59
Section 12.3 Communication to Holders with Other Holders......... 60
Section 12.4 Certificate and Opinion as to Conditions Precedent.. 60
Section 12.5 Statements Required in Certificate.................. 60
Section 12.6 Rules by Trustee and Agents......................... 61
Section 12.7 Additional Rights of Holders of Transfer Restricted
Securities........................................ 61
Section 12.8 Legal Holidays...................................... 61
Section 12.9 No Recourse Against Others.......................... 61
Section 12.10 Duplicate Originals................................. 61
Section 12.11 Governing Law....................................... 61
Section 12.12 No Adverse Interpretation of Other Agreements....... 62
Section 12.13 Successors......................................... 62
Section 12.14 Severability........................................ 62
Section 12.15 Counterpart Originals............................... 62
Section 12.16 Table of Contents, Headings, ....................... 62
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INDENTURE dated as of September 25, 1997, among KEY ENERGY GROUP, INC., a
Maryland corporation (the "Company"), and AMERICAN STOCK TRANSFER & TRUST
COMPANY, a New York corporation, as trustee (the "Trustee").
The Company and Trustee agree as follows for the benefit of each other and
for the equal and ratable benefit of the Holders of the Company's 5% Convertible
Subordinated Notes due 2004 (collectively, the "Securities"):
ARTICLE I
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.1. Definitions.
"144A Global Note" means the global note in the form of Exhibit A-1 hereto
deposited with and registered in the name of the Depository, or its nominee,
that will be issued in a denomination equal to the outstanding principal amount
of the Notes sold in reliance on Rule 144A.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person directly or indirectly,
whether through the ownership of Voting Stock, by agreement or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing; provided, however, that beneficial ownership of 10% or more of the
Voting Stock of a person shall be deemed control.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depository, Euroclear and Cedel Bank that apply to such transfer or exchange.
"Agent' means any Registrar (as defined in Section 2.3), Paying Agent (as
defined in Section 2.3) or co-Registrar.
"Board of Directors" means the Board of Directors of the Company, or any
authorized committee of the Board of Directors.
"Board Resolution" means a resolution of the Board of Directors of the
Company.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in the Borough of Manhattan, New
York, New York are authorized or obligated by law or executive order to close.
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"Capital Stock" means, with respect to any Person, any and all shares,
interests, participation or other equivalents (however designated) of corporate
stock, including each class of common stock and preferred stock of such Person
and any warrants, options or other rights to acquire such stock.
"Closing Price" means, for each Trading Day, the reported last sale price
regular way or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way, in either case
on the New York Stock Exchange (if shares of the Common Stock are listed for
trading on such exchange) or the American Stock Exchange (if shares of the
Common Stock are listed for trading on such exchange) or, if the Common Stock is
not listed or admitted to trading on either such exchange, on the principal
national securities exchange on which the Common Stock is listed or admitted to
trading or, if not listed or admitted to trading on any national securities
exchange, on the National Association of Securities Dealers Automated Quotations
systems ("NASDAQ") National Market System ("NASDAQ/NMS") or, if not listed or
admitted to trading on NASDAQ/NMS, on NASDAQ, or, if the Common Stock is not
listed or admitted to trading on any national securities exchange or NASDAQ/NMS
or quoted on NASDAQ, the average of the closing bid and asked prices in the
over-the-counter market as furnished by any National Association of Securities
Dealers, Inc. member firm selected from time to time by the Company for that
purpose.
"Common Stock" means, any stock of any class of the Company that has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company. Subject to the provisions
of Section 10.6, however, shares issuable on conversion of Securities shall
include only shares of the class or classes resulting that have no preference in
respect of dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company and which are
not subject to redemption by the Company, provided that if at any time there
shall be more than one such resulting class, the shares of each such class then
so issuable shall be substantially in the proportion which the total number of
shares of such class resulting from all such reclassifications bears to the
total number of shares of all such classes resulting from all such
reclassifications.
"Consolidated Net Worth" with respect to any Person means the amount by
which the assets of such Person and its Subsidiaries on a consolidated basis
exceed the sum of (i) the total liabilities of such Person and its Subsidiaries
on a consolidated basis, plus (ii) Disqualified Capital Stock of such Person or
Disqualified Capital Stock of any Subsidiary of such Person issued to any Person
other than such Person or another Wholly Owned Subsidiary of such Person, all as
determined on a consolidated basis and in accordance with GAAP.
"Conversion Price" has the meaning set forth in Section 10.4.
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"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.2 or such other address as the Trustee may give
by notice to the Company.
"Current Market Price" means, for each share of Common Stock, (a) in
respect of a conversion of the principal of any Notes into cash pursuant to
Section 10.1, the average of the daily Closing Prices for the five consecutive
Trading Days immediately preceding the conversion date, or (b) in all other
cases, on any date, the average of the daily Closing Prices for the five
consecutive Trading Days selected by the Company commencing not more than twenty
Trading Days before, and ending not later than, the earlier of the day in
question and the day before the "ex date" with respect to the issuance or
distribution requiring such computation.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Definitive Securities" means Securities that are in the form of the Note
attached hereto as Exhibit A that do not include the information called for by
footnotes 1 and 2 thereof.
"Depository" means, with respect to the Securities issuable or issued in
whole or in part in global form, the Person specified in Section 2.3 as the
Depository with respect to the Securities, until a successor shall have been
appointed and become such pursuant to the applicable provisions of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
"Disqualified Capital Stock" means any Capital Stock that, by its terms or
by the terms of any security into which, at the option of the holder, it is
convertible or exchangeable, is, or upon the happening of an event or the
passage of time would be, required to be redeemed or repurchased, including at
the option of the holder, in whole or in part, or has, or upon the happening of
an event or the passage of time would have, a redemption or similar payment due,
on or before the maturity date of the Securities.
"ex date" means, when used with respect to any issuance of distribution,
the first date on which the Common Stock trades regular way on an exchange or in
such market without the right to receive such issuance or distribution.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Debentures" means the 7% Convertible Subordinated Debentures Due
2003 issued under that certain Indenture dated July 3, 1996 among the Company,
the Trustee, and the Subsidiaries.
"GAAP" means generally accepted accounting principles as in effect in the
United States of America as of any date of determination.
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"Global Securities" means individually and collectively, the 144A Global
Note and the Regulation S Global Note, issued in accordance with the terms
hereof.
"Group of Persons" means any group of Persons or other entities acting in
concert as a partnership or other group within the meaning of Section 13(d) of
the Exchange Act.
"Holder" means a person in whose name a Security is registered in the
records of the Registrar.
"IAI" means an institutional "accredited investor" as defined in Rule
501(a)(1),(2),(3) or (7) under the Securities Act.
"Indebtedness" means, with respect to any Person, without duplication, (i)
any indebtedness of such Person for money borrowed or for the deferred purchase
price of property or services (other than any such balance that represents an
account payable or any other monetary obligation to a trade creditor created,
incurred, assumed or guaranteed by such Person in connection with obtaining
goods, materials or services and due within 12 months (or such longer period for
payment as is customarily extended by such trade creditor) of the incurrence
thereof, which account is not overdue by more than 120 days, according to the
original terms of sale, unless such account payable is being contested in good
faith or has otherwise been extended), (ii) all capitalized lease obligations,
(iii) any such indebtedness or obligation secured by any Lien on the assets of
such Person and (iv) any such indebtedness or obligation of others which such
Person has directly or indirectly guaranteed, endorsed with recourse (otherwise
than for collection, deposit or other similar transactions in the ordinary
course of business), agreed to purchase or repurchase or in respect of which
such Person has agreed contingently to supply or advance funds.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Issue Date" means the date on which the Notes are originally issued under
this Indenture.
"Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind whether or not
filed, recorded or otherwise perfected under applicable law (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell
in each case securing obligations of such Person and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statute or statutes) of any jurisdiction).
"Memorandum" means the Offering Memorandum, dated September 18, 1997, of
the Company relating to the Securities and the Offering.
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"Non-U.S. Person" means anyone who is not a U.S. Person.
"Notes" means the 5% Convertible Subordinated Notes due 2004 issued under
this Indenture.
"Obligations" means any principal, premium, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the sale of the Securities to the Purchasers.
"Officers" means the Chairman of the Board, the President, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, Controller, Secretary
or any Vice President of the Company.
"Officers' Certificate" means a certificate signed by two Officers, one of
whom must be the principal executive officer, principal financial officer or
principal accounting officer of the Company.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, trust, estate, unincorporated organization or government
or any agency or political subdivision thereof.
"Property" means with respect to any Person, any interest of such Person in
any kind of property or asset, whether real, personal or mixed, or tangible or
intangible, including, without limitation, Capital Stock in any other Person.
"Purchasers" means the initial purchasers of the Notes. "QIB" means a
"qualified institutional buyer" as defined in Rule 144A of the Securities Act.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the date hereof by and among the Company and the Purchasers, as such
agreement may be amended, modified or supplemented from time to time.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Note" means a global Note deposited with and
registered in the name of the Depository or its nominee that will be issued in a
denomination equal to
053113\1008\02764\979QGT85.OTH
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the outstanding principal amount of the Notes sold in reliance on
Regulation S, or a Regulation S Temporary Global Note or Regulation S Permanent
Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note in the
form of Exhibit A-1 hereto deposited with and registered in the name of the
Depository or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a single temporary global Note
in the form of Note attached hereto as Exhibit A-2 deposited with and registered
in the name of the Depository or its nominee that will be issued in a
denomination equal to the outstanding principal amount of the Notes sold in
reliance on Regulation S.
"Related Person" means (i) any Affiliate of the Company, (ii) any
individual or other Person who directly or indirectly holds 10% or more of any
class of Capital Stock of the Company, (iii) any relative of such individual by
blood, marriage or adoption not more remote than first cousin and (iv) any
officer or director of the Company.
"Restricted Period" means the period of 40 days commencing on the latest of
the commencement of the Offering and the Issue Date.
"Responsible Officer" when used with respect to the Trustee, means any
officer within the Corporate Trust Office (or any successor group of the
Trustee) including any President, Vice President, Secretary, Assistant Secretary
or any other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Notes issued pursuant to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the Person named in Section 2.3, as custodian
with respect to the Securities in global form, or any successor entity thereto.
"Senior Indebtedness" has the meaning provided in Section 11.2 hereof.
"Shelf Registration Statement" means a registration statement filed
pursuant to the Registration Rights Agreement with the SEC relating to the sale
by the holders thereof of Common Stock to be acquired upon conversion of the
Securities.
"Subsidiary" means any corporation or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the Board of Directors
053113\1008\02764\979QGT85.OTH
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or other Persons shall, at the time as of which any determination is being
made, be owned by the Company either directly or through Subsidiaries.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. SS 77aaa-77bbbb), as
amended by the Trust Indenture Reform Act of 1990, and as in effect on the date
on which this Indenture is qualified under the TIA.
"Trading Day" means, if shares of the Common Stock are listed for trading
on a national securities exchange, a day on which such securities exchange is
open for the transaction of business and if shares of the Common Stock are not
listed for trading on a national securities exchange, a day on which the NASDAQ
Stock Market is open for the transaction of business.
"Transfer Restricted Securities" means Securities that bear or are required
to bear the legend set forth in Section 2.6 hereof.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"U.S. Government Obligations" means direct obligations of the United States
of America, or any agency or instrumentality thereof for the payment of which
the full faith and credit of the United States of America is pledged.
"U.S. Person" means a U.S. Person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
Board of Directors or other governing body of such Person.
"Wholly Owned Subsidiary" means a Subsidiary, all the Capital Stock (other
than directors' qualifying shares, if applicable) of which is owned by the
Company or another Wholly Owned Subsidiary.
Section 1.2 Other Definitions. Defined in Term Section
"Bankruptcy Law"............................................................6.1
"Cedel Bank" ..............................................................2.1
"Change in Control".........................................................4.10
"Change in Control Date"....................................................4.10
"Change in Control Offer"...................................................4.10
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"Change in Control Payment Date"............................................4.10
"Custodian".................................................................6.1
"Euroclear"................................................................2.1
"Event of Default"..........................................................6.1
"Expiration Time"..........................................................10.5
"Legal Holiday"............................................................12.8
"Paying Agent"............................................................2.3
"Purchased Shares".........................................................10.5
"Registrar"................................................................2.3
"Regulation S Temporary Global Note".......................................2.1
"Representative"..........................................................11.2
"Securities Register".................................................2.3
Section 1.3 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Securities means the Company and any successor obligor
upon the Securities.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
Section 1.4 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it
in accordance with GAAP;
(3) "or" is not exclusive;
053113\1008\02764\979QGT85.OTH
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(4) words in the singular include the plural, and in the plural include the
singular; and
(5) provisions apply to successive events and transactions.
ARTICLE II
THE SECURITIES
Section 2.1. Form and Dating; Securities in Global Form.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto, which is incorporated in and made
a part of this Indenture and shall be in an aggregate principal amount at
maturity of no greater than $216,000,000. The Securities may have notations,
legends or endorsements as required by law, stock exchange rule, agreements to
which the Company is subject or usage. Each Security shall be dated the date of
its authentication. The Securities shall be issued initially in denominations of
$1,000 and whole multiples thereof.
The terms and provisions contained in the Securities shall constitute, and
are hereby expressly made, a part of this Indenture. To the extent applicable,
the Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.
Except for Notes issued to an IAI, the Notes will initially be issued in
global form, substantially in the form of Exhibits A-1 and A-2. Such Global
Securities shall represent such of the outstanding Securities as shall be
specified therein and each shall provide that it shall represent the aggregate
amount of outstanding Securities from time to time endorsed thereon and that the
aggregate amount of outstanding Securities represented thereby may from time to
time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any adjustment on the books and records of the Depository or any
endorsement of a Global Security to reflect the amount of any increase or
decrease in the amount of outstanding Securities represented thereby shall be
made by the Trustee, or the Securities Custodian at the direction of the
Trustee, and in accordance with the standing instructions and procedures
existing between the Depository and the Securities Custodian, in each case in
accordance with instructions given by the Holder thereof.
Notes offered and sold in reliance on Regulation S shall be issued
initially in the form of the Regulation S Temporary Global Note (attached hereto
as Exhibit A-2), which shall be deposited on behalf of the purchasers of the
Notes represented thereby with the Trustee, at its New York office, as custodian
for the Depository, and registered in the name of the Depository or the nominee
of the Depository for the accounts of designated agents holding on behalf of the
Euroclear System ("Euroclear") or Cedel Bank N.A. ("Cedel Bank"), duly executed
by the Company and authenticated by the Trustee as hereinafter provided. The
Restricted Period shall be terminated upon the receipt by the Trustee of (i) a
written certificate from the Depository, together with copies of certificates
from Euroclear and Cedel
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Bank certifying that they have received certification of non-United States
beneficial ownership of 100% of the aggregate principal amount of the Regulation
S Temporary Global Note (except to the extent of any beneficial owners thereof
who acquired an interest therein during the Restricted Period pursuant to
another exemption from registration under the Securities Act and who will take
delivery of a beneficial ownership interest in a 144A Global Note), and (ii) an
Officers' Certificate from the Company. Following the termination of the
Restricted Period, beneficial interests in the Regulation S Temporary Global
Note shall be exchanged for beneficial interests in Regulation S Permanent
Global Notes pursuant to the Applicable Procedures. Simultaneously with the
authentication of Regulation S Permanent Global Notes, the Trustee shall cancel
the Regulation S Temporary Global Note. The aggregate principal amount of the
Regulation S Permanent Global Notes may from time to time be increased or
decreased by adjustments made on the records of the Trustee and the Depository
or its nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
The provisions of the "Operating Procedures of the Euroclear System" and
"Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be
applicable to interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by the agent members through
Euroclear or Cedel Bank.
Section 2.2. Execution and Authentication.
Officers of the Company shall sign and attest the Securities for the
Company by manual or facsimile signature. The Company's seal shall be reproduced
on the Securities.
If an Officer whose signature is on a Security no longer holds that office
at the time the Security is authenticated, the Security shall nevertheless be
valid.
A Security shall not be valid until authenticated by the manual signature
of the Trustee. The signature of the Trustee shall be conclusive evidence that
the Security has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Securities shall be
substantially as set forth in Exhibit A hereto.
The Trustee shall, upon receipt of an Officers' Certificate directing it to
do so, authenticate Securities for original issue up to an aggregate principal
amount stated in Section 2.1. The aggregate principal amount of Securities
outstanding at any time may not exceed such amount, except as provided in
Section 2.7.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Securities. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Securities whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with the Company or an Affiliate.
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Section 2.3. Registrar, Paying Agent, Depository and Securities Custodian.
The Company shall maintain (a) an office or agency where Securities may be
presented for registration of transfer or for exchange (the "Registrar") and (b)
an office or agency where Securities may be presented for payment (the "Paying
Agent"). The Registrar shall keep a register of the Securities and of their
transfer and exchange (the "Securities Register"). The Company may appoint one
or more co-Registrars and one or more additional Paying Agents. The term "Paying
Agent" includes any additional Paying Agent. The Company may change any Paying
Agent, Registrar, or co-Registrar without notice to any Holder. The Company
shall notify the Trustee and the Trustee shall notify the Holders of the name
and address of any Agent not a party to this Indenture. If the Company fails to
appoint or maintain another entity as Registrar or Paying Agent, the Trustee
shall act as such. The Company or any of its Subsidiaries may act as Paying
Agent, Registrar, or co-Registrar. The Company shall enter into an appropriate
agency agreement with any Agent not a party to this Indenture, which shall
incorporate the provisions of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall notify
the Trustee of the name and address of any such Agent. If the Company fails to
maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the
Trustee shall act as such, and shall be entitled to appropriate compensation in
accordance with Section 7.7 hereof.
The Company initially appoints the Trustee as Registrar, Paying Agent, and
agent for service of notices and demands in connection with the Securities.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depository with respect to the Global Securities.
The Company initially appoints Trustee to act as Securities Custodian with
respect to the Global Securities.
Section 2.4. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent in connection with the
exercise of a conversion right under Article 10, or for the payment of principal
or interest on the Securities, and will notify the Trustee of any default by the
Company in making any such payment. While any such default continues, the
Trustee may require a Paying Agent to pay all money held by it to the Trustee.
The Company at any time may require a Paying Agent to pay all money held by it
to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other
than the Company) shall have no further liability for the money delivered to the
Trustee. If the Company or any Subsidiary acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the Holders all
money held by it as Paying Agent.
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Section 2.5. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with TIA S312(a). If the Trustee is not the
Registrar, the Company shall furnish to the Trustee at least seven Business Days
before each interest payment date and at such other times as the Trustee may
request in writing a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Holders, including the
aggregate principal amount of Securities held by them, and the Company shall
otherwise comply with TIA S312(a).
Section 2.6 Transfer and Exchange.
(a) Transfer and Exchange of Definitive Securities. When Definitive
Securities are presented to the Registrar or co-Registrar with a request (x) to
register the transfer of the Definitive Securities; or (y) to exchange such
Definitive Securities for an equal principal amount of Definitive Securities of
other authorized denominations, the Registrar or co-Registrar shall register the
transfer or make the exchange as requested if its requirements for such
transactions are met; provided, however, that the Definitive Securities
presented or surrendered for registration of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar or co-Registrar, duly executed by
the Holder thereof or by his attorney, duly authorized in writing; and
(ii) in the case of Transfer Restricted Securities that are Definitive
Securities, shall be accompanied by the following additional information and
documents, as applicable:
(A) if such Transfer Restricted Security is being delivered to the
Registrar or co-Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to that effect; or
(B) if such Transfer Restricted Security is being transferred to a QIB in
accordance with Rule 144A under the Securities Act or pursuant to an exemption
from registration in accordance with Rules 144 or 145 or Regulation S or
pursuant to an effective registration statement under the Securities Act, a
certification to that effect from the transferee or transferor and an Opinion of
Counsel from the transferee or transferor reasonably acceptable to the Company
and to the Registrar or co-Registrar to the effect that such transfer is in
compliance with the Securities Act, or
(C) if such Transfer Restricted Security is being transferred in reliance
on another exemption from the registration requirements of the Securities Act, a
certification to that effect and an Opinion of Counsel reasonably acceptable
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to the Company and to the Registrar or co-Registrar to the effect that such
transfer is in compliance with the Securities Act.
(b) Restrictions on Transfer of a Definitive Security for a Beneficial
Interest in a Global Security. A Definitive Security may not be exchanged for a
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive
Security, duly endorsed or accompanied by appropriate instruments of transfer,
in form satisfactory to the Trustee, together with:
(A) if such Definitive Security is a Transfer Restricted Security,
certification in form and substance satisfactory to the Trustee that such
Definitive Security is being transferred to a QIB in accordance with Rule 144A
under the Securities Act or to a Non-U.S. Person in an offshore transaction in
accordance with Rule 904 under the Securities Act; and
(B) whether or not such Definitive Security is a Transfer Restricted
Security, written instructions directing the Trustee to make, or to direct the
Securities Custodian to make, an endorsement on the Global Security to reflect
an increase in the aggregate principal amount of the Securities represented by
the Global Security,
then the Trustee shall cancel such Definitive Security and cause, or direct
the Securities Custodian to cause, in accordance with the standing instructions
and procedures existing between the Depository and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased accordingly and shall credit or cause to be credited to the account
of the Person specified in such instructions a beneficial interest in the Global
Security equal to the principal amount of the Definitive Security so canceled.
If no Global Securities are then outstanding, the Company shall issue and the
Trustee shall authenticate a new Global Security in the appropriate principal
amount.
(c) Transfer and Exchange of Global Securities. (1) The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depository in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depository
therefor.
(i) Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (d) of this Section 2.6), a Global Security
may not be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(ii) A transferor of a beneficial interest in a Global Security shall
deliver to the Registrar a written order or instruction given in accordance with
the Depository's procedures and containing information regarding the account of
the Depository to be credited with a beneficial interest in the Global Security.
The Registrar shall, in accordance with such instructions, instruct the
Depository to credit to the account of the Person specified in such
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instruction a beneficial interest in the Global Security and to debit the
account of the transferor of the beneficial interest in the Global Security
being transferred. Notwithstanding the foregoing to the contrary, all transfers
of beneficial interests in Global Securities shall be done in accordance with
Applicable Procedures.
(d) Transfer of a Beneficial Interest in a Global Security for a Definitive
Security. Any Person having a beneficial interest in a Global Security may only
exchange such beneficial interest for a Definitive Security if:
(i) the Depository for the Securities notifies the Company that the
Depository is unwilling or unable to continue as Depository for the Global
Securities and a successor Depository for the Global Securities is not appointed
by the Company within 90 days after delivery of such notice;
(ii) the Company, at its sole discretion, notifies the Trustee in writing
that it elects to cause the issuance of Definitive Securities under this
Indenture, or
(iii) such exchange is made concurrently with the transfer of such Security
to an IAI; or
(iv) an Event of Default has occurred and is continuing.
Upon on the occurrence of any such event and upon receipt by the Trustee of
written instructions (or such other form of instructions as is customary for the
Depository) from the Depository or its nominee on behalf of any Person having a
beneficial interest in a Global Security and upon receipt by the Trustee of a
written order or such other form of instructions as is customary for the
Depository or the Person designated by the Depository as having such a
beneficial interest containing registration instructions and, in the case of a
beneficial interest in a Transfer Restricted Security only, the following
additional information and documents (all of which may be submitted by
facsimile):
(A) if such beneficial interest is being transferred to the Person
designated by the Depository as being the beneficial owner, a certification from
such Person to that effect; or
(B) if such beneficial interest is being transferred to a QIB in accordance
with Rule 144A under the Securities Act or pursuant to an exemption from
registration in accordance with Rules 144 or 145 or Regulation S or pursuant to
an effective registration statement under the Securities Act, a certification to
that effect from the transferee or transferor and an Opinion of Counsel from the
transferee or transferor reasonably acceptable to the Company and to the
Registrar or co-Registrar to the effect that such transfer is in compliance with
the Securities Act; or
(C) if such beneficial interest is being transferred in reliance on another
exemption from the registration requirements of the Securities Act, a
certification to that effect from the transferee or transferor and an Opinion of
Counsel from the
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transferee or transferor reasonably acceptable to the Company and to the
Registrar or co-Registrar to the effect that such transfer is in compliance with
the Securities Act,
then the Trustee or the Securities Custodian, at the direction of the
Trustee, will cause, in accordance with the standing instructions and procedures
existing between the Depository and the Securities Custodian, the aggregate
principal amount of the Global Security to be reduced (with appropriate
adjustments to the transferor's account) and, following such reduction, the
Company will execute and, upon receipt of an authentication order in the form of
an Officers' Certificate, the Trustee will authenticate and deliver to the
transferee, as the case may be, a Definitive Security.
(v) Definitive Securities issued in exchange for a beneficial interest in a
Global Security pursuant to this Section 2.6(d) shall be registered in such
names and in such authorized denominations as the Depository, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such Definitive Securities to
the Persons in whose names such Securities are so registered.
then the Company will execute, and the Trustee, upon receipt of an
Officer' Certificate requesting the authentication and delivery of Definitive
Securities, will authenticate and deliver Definitive Securities, in an aggregate
principal amount equal to the principal amount of the Global Securities, in
exchange for such Global Securities.
(e) Legends.
(i) Except as permitted by the following paragraph (ii), each Note
certificate evidencing the Global Securities and the Definitive Securities (and
all Notes issued in exchange therefor or substitution thereof) shall bear a
legend in substantially the following form:
THE NOTE EVIDENCED HEREBY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501 (a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THE NOTE EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT
IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED
HEREBY RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON
STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO KEY ENERGY GROUP, INC.
OR ANY SUBSIDIARY THEREOF,
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(B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES
TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, BEFORE SUCH TRANSFER, FURNISHES TO
AMERICAN STOCK TRANSFER & TRUST COMPANY, AS TRUSTEE (OR SUCCESSOR TRUSTEE, AS
APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE), (D) OUTSIDE THE UNITED
STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE
TIME OF SUCH TRANSFER); AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO
CLAUSE 2(F) ABOVE), A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED HEREBY WITHIN TWO YEARS AFTER
THE ORIGINAL ISSUANCE OF SUCH NOTE, (OTHER THAN A TRANSFER PURSUANT TO CLAUSE
2(E) ABOVE), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE
HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO
AMERICAN STOCK TRANSFER & TRUST COMPANY, AS TRUSTEE (OR SUCCESSOR TRUSTEE, AS
APPLICABLE). IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE 2(F) ABOVE, THE
HOLDER MUST, BEFORE SUCH TRANSFER, FURNISH TO AMERICAN STOCK TRANSFER & TRUST
COMPANY, AS TRUSTEE, (OR SUCCESSOR TRUSTEE AS APPLICABLE) SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE NOTE
EVIDENCED HEREBY PURSUANT TO CLAUSE 2(F) ABOVE OR THE EXPIRATION OF TWO YEARS
FROM THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES' AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
(ii) Upon any sale or transfer of a Transfer Restricted Security (including
any Transfer Restricted Security represented by a Global Security) pursuant to
an effective registration statement under the Securities Act or satisfying the
condition set forth in subclause (2)(E) of the legend set forth in the
immediately preceding paragraph:
(A) in the case of any Transfer Restricted Security that is a Definitive
Security, the Registrar or co-Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a Definitive Security that does
not bear the
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legend set forth above and rescind any restriction on the transfer of such
Transfer Restricted Security; and
(B) any such Transfer Restricted Security represented by a Global Security
shall not be subject to the provisions set forth in (i) above (such sale or
transfer being subject only to the provisions of Section 2.6(c) hereof);
provided, however, that with respect to any request for an exchange of a
Transfer Restricted Security that is represented by a Global Security for a
Definitive Security that does not bear a legend, which request is made in
reliance upon Rule 144 or 145, the Holder thereof shall certify in writing to
the Registrar or co-Registrar and shall provide an Opinion of Counsel to the
Registrar or co-Registrar that such request is being made pursuant to Rule 144
or 145.
(f) Cancellation or Adjustment of Global Security. At such time as all
beneficial interests in a Global Security have either been exchanged for
Definitive Securities, redeemed, repurchased or canceled, such Global Security
shall be returned to or retained and canceled by the Trustee. At any time before
such cancellation, if any beneficial interest in a Global Security is exchanged
for Definitive Securities, redeemed, repurchased or canceled, the principal
amount of Securities represented by such Global Security shall be reduced and an
adjustment shall be made on the books and records of, or an endorsement shall be
made on such Global Security by, the Trustee or the Securities Custodian, at the
direction of the Trustee, to reflect the reduction, all in accordance with the
standing instructions and procedures existing between the Depository and the
Securities Custodian.
(g) Obligations with respect to Transfers and Exchanges of Definitive
Securities.
(i) To permit registrations of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Definitive Securities and Global
Securities at the Registrar's or co-Registrar's request.
(ii) No service charge shall be made to a Holder for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental charge
payable upon exchanges or transfers pursuant to Sections 2.10, 3.6 and 9.5
hereof).
(iii) The Registrar or co-Registrar shall not be required to register the
transfer or exchange of any Definitive Security selected for redemption in whole
or in part, except the unredeemed portion of any Definitive Security being
redeemed in part.
(iv) All Definitive Securities and Global Securities issued upon any
registration of transfer or exchange of Definitive Securities or Global
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture as the Definitive
Securities or Global Securities surrendered upon such registration of transfer
or exchange.
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(v) The Company shall not be required:
(A) to issue, register the transfer of or exchange Securities during a
period beginning at the opening of business 15 days before the day of any
selection of Securities for redemption under Section 3.2 and ending at the close
of business of the day of selection, or
(B) to register the transfer or exchange of any Security so selected for
redemption in whole or in part, except the unredeemed portion of any Security
being redeemed in part.
(vi) Before due presentment for registration of transfer of any Security,
the Trustee, any Agent and the Company may deem and treat the Person in whose
name any Security is registered as the absolute owner of such Security for the
purpose of receiving payment of principal of and interest and premium, if any,
on such Security and for all other purposes whatsoever, whether or not such
Security is overdue, and neither the Trustee, any Agent, nor the Company shall
be affected by notice to the contrary.
Section 2.7 Replacement Securities.
If any mutilated Security is surrendered to the Trustee or the Company, or
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Security, the Company shall issue and the Trustee, upon the written
order of the Company signed by two Officers of the Company, shall authenticate a
replacement Security if the Trustee's requirements for replacements of
Securities are met. If required by the Trustee or the Company, an indemnity bond
must be supplied by the Holder that is sufficient in the judgment of the Trustee
and the Company to protect the Company, the Trustee, any Agent or any
authenticating agent from any loss that any of them may suffer if a Security is
replaced. The Company and the Trustee may charge for their expenses in replacing
a Security.
Every replacement Security is an additional obligation of the Company.
Section 2.8 Outstanding Securities.
The Securities outstanding at any time are all the Securities authenticated
by the Trustee except for those canceled by it, those delivered to it for
cancellation, and those reductions in the interests in a Global Security
effected by the Trustee hereunder, and those described in this Section 2.8 as
not outstanding.
If a Security is replaced pursuant to Section 2.7 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the principal amount of any Security is considered paid under Section
4.1 hereof, it ceases to be outstanding, and interest on it ceases to accrue.
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Except as set forth in Section 2.9 hereof, a Security does not cease to be
outstanding because the Company or an Affiliate of the Company holds the
Security.
Section 2.9 Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company or any Affiliate of the Company (whether directly or by or
through the Depository) shall be considered as though not outstanding, except
that for purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Securities that a
Responsible Officer knows to be so owned shall be so considered.
Section 2.10 Temporary Securities.
Until Definitive Securities are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Securities. Temporary Securities
shall be substantially in the form of Definitive Securities but may have
variations that the Company and the Trustee consider appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare and the
Trustee, upon receipt of an Officers' Certificate of the Company directing it to
do so, shall authenticate Definitive Securities in exchange for temporary
Securities. Until such exchange, temporary Securities shall be entitled to the
same rights, benefits and privileges as Definitive Securities.
Section 2.11 Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee shall cancel all Securities surrendered for registration of
transfer, exchange, payment, conversion, replacement or cancellation and shall
destroy canceled Securities and certification of their destruction shall be
delivered to the Company (subject to the record retention requirement of the
Exchange Act) unless by a written order, signed by two Officers of the Company,
the Company shall direct that canceled Securities be returned to it. The Company
may not issue new Securities to replace Securities that it has redeemed or paid,
converted or that have been delivered to the Trustee for cancellation.
Section 2.12 Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the persons who are
Holders on a subsequent special record date, which date shall be at the earliest
practicable date but in all events at least five Business Days before the
payment date, in each case at the rate provided in the Securities and in Section
4.1 hereof. The Company shall, with the consent of the Trustee, fix or cause to
be fixed each such special record date and payment date. At least 15 days before
the special record date, the Company (or the Trustee, in the name of and at the
expense of the Company) shall mail
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to Holders a notice that states the special record date, the related
payment date, and the amount of such interest to be paid.
ARTICLE III
REDEMPTION
Section 3.1 Notices to Trustee.
If the Company elects to redeem Securities pursuant to the optional
redemption provisions of Section 3.7 hereof, it shall furnish to the Trustee, at
least 60 days but not more than 90 days before a redemption date, an Officers'
Certificate setting forth the Section of this Indenture pursuant to which the
redemption shall occur, the redemption date, the principal amount of Securities
to be redeemed, and the redemption price.
If the Company is required to make an offer to redeem Securities pursuant
to a Change in Control, it shall furnish to the Trustee, within 60 days after a
Change in Control, an Officers' Certificate setting forth (a) the Section of
this Indenture pursuant to which the redemption shall occur, (b) the date of the
Change in Control, (c) the Change in Control Payment Date, (d) the principal
amount of the Securities offered to be redeemed, (e) a statement that a Change
in Control has occurred and a description thereof, and (f) a description of the
procedures to be followed by Holders in order to have their Securities
repurchased.
If the Company is required to increase the interest rate on the Securities
pursuant to the Registration Rights Agreement, it shall furnish to the Trustee
not more than 15 days before the date such interest is due to be paid an
Officers' Certificate setting forth the rate at which interest on the Securities
is to be paid. The Company, or the Trustee, at the expense of the Company, shall
notify the Holders of the change in interest rate by notice sent in accordance
with Section 10.10(e) of this Indenture. Notwithstanding any other provisions of
this Indenture, the Trustee shall have no duty to inquire as to whether the
interest rate on the Securities has increased and shall not be bound by the
terms and conditions of the Registration Rights Agreement or any other
agreements or documents between the Holders and the Company.
Section 3.2 Selection of Securities to be Redeemed.
If less than all of the Securities are to be redeemed, the Trustee shall
select the Securities to be redeemed among the Holders in accordance with any
method the Trustee considers fair and appropriate (and in such manner as
complies with applicable legal and stock exchange requirements, if any). In the
event of partial redemption by lot, the particular Securities to be redeemed
shall be selected, unless otherwise provided herein, not less than 15 nor more
than 60 days before the redemption date by the Trustee from the outstanding
Securities not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Securities
selected for redemption and, in the case of any Security selected for partial
redemption, the
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principal amount thereof to be redeemed. Securities and portions of them
selected shall be in amounts of $1,000 or whole multiples thereof. Provisions of
this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption.
Section 3.3 Notice of Redemption.
Subject to the provisions of Sections 4.10 and 4.11 hereof, at least 15
days but not more than 60 days before a redemption date, the Company shall mail
a notice of redemption to each Holder whose Securities are to be redeemed at its
registered address. The notice shall identify the Securities to be redeemed and
shall state:
(a) the redemption date and that the right to convert such Securities
pursuant to Article 10 hereof shall be terminated on such date;
(b) the redemption price;
(c) if any Security is being redeemed in part, the portion of the principal
amount of such Security to be redeemed and that, after the redemption date upon
surrender of such Security, a new Security of the same series of Securities in
principal amount equal to the unredeemed portion will be issued;
(d) the name and address of the Paying Agent;
(e) that Securities called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Securities called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Securities and Section of this Indenture pursuant
to which the Securities called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of the
CUSIP number, if any, listed in such notice or printed on the Securities.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 60 days prior to the redemption
date, an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph.
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Section 3.4 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.3 hereof,
Securities called for redemption become due and payable on the redemption date
at the redemption price. On and after the redemption date, unless the Company
defaults in the payment of the redemption price, interest shall cease to accrue
on the Securities or portions of them called for redemption and all rights of
Holders of such Securities shall terminate, including without limitation the
right to convert such Securities, except for the right to receive the redemption
price. Upon surrender to the Paying Agent, such Holders shall be paid the
redemption price plus accrued interest, if any, to the redemption date, but
interest installments whose maturity is on or before the redemption date shall
be payable to the Holder of record at the close of business on the relevant
record dates referred to in the Securities.
Section 3.5 Deposit of Redemption Price.
One Business Day before the redemption date, the Company shall deposit with
the Trustee or with the Paying Agent money sufficient to pay the redemption
price of and accrued interest on all Securities to be redeemed on that date. The
Trustee or the Paying Agent shall return to the Company any money deposited with
the Trustee or the Paying Agent by the Company in excess of the amounts
necessary to pay the redemption price of, and accrued interest on, all
Securities to be redeemed.
Interest on the Securities to be redeemed shall cease to accrue on the
applicable redemption date, whether or not such Securities are presented for
payment, if the Company provides money sufficient to pay the redemption price of
and accrued interest on all Securities to be redeemed on such date. If any
Security called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the
Securities and in Section 4.1 hereof.
Section 3.6 Securities Redeemed in Part.
Upon surrender of a Definitive Security that is redeemed in part, the
Company shall issue and the Trustee shall authenticate for the Holder at the
expense of the Company a new Security of the same series equal in principal
amount to the unredeemed portion of the Definitive Security surrendered.
Section 3.7 Optional Redemption.
The Company may redeem at any time on or after September 15, 2000, all or
any portion of the Securities outstanding at the following redemption prices
expressed as a percentage of the principal amount thereof, if the Securities are
redeemed during the 12- month period beginning September 15, of the following
years:
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Year Percentage
2000........................................................... 102.86%
2001........................................................... 102.14%
2002........................................................... 101.43%
2003........................................................... 100.71%
Any redemption pursuant to this Section 3.7 shall be made, to the extent
applicable, pursuant to the provisions of Sections 3.1 through 3.6 hereof.
ARTICLE IV
COVENANTS
Section 4.1 Payment of Securities.
The Company shall pay the principal of and interest on the Securities on
the dates and in the manner provided in the Securities. Principal and interest
shall be considered paid on the date due if the Paying Agent, if other than the
Company or a Subsidiary of the Company, holds at least one Business Day before
that date money deposited by the Company in immediately available funds and
designated for and sufficient to pay all principal and interest then due. Such
Paying Agent shall return to the Company, no later than five days following the
date of payment, any money (including accrued interest) that exceeds such amount
of principal and interest paid on the Securities.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Securities to
the extent lawful. The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest (without regard to any applicable grace period) at the same rate to the
extent lawful.
Section 4.2 Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, New York, New York,
an office or agency (which may be an office of the Trustee, Registrar or
co-Registrar) where Securities may be surrendered for registration of transfer
or exchange and where notices and demands to or upon the Company in respect of
the Securities and this Indenture may be served. The Company shall give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee.
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The Company also may from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, New York, New York for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.3.
Section 4.3 SEC Reports.
(a) So long as any of the Securities remain outstanding and the Company is
subject to the reporting requirements of the Exchange Act, the Company shall
file with the SEC and distribute to the Trustee for delivery to the Holders of
the Securities copies of the quarterly and annual reports required to be filed
with the SEC, and if the Company ceases to become subject to the reporting
requirements of the Exchange Act, the Company shall distribute to the Trustee
for delivery to the Holders of the Securities copies of the quarterly and annual
financial information that would have been required to be filed with the SEC
pursuant to the Exchange Act had the Company been subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act. All such financial
information shall include consolidated financial statements (including
footnotes) prepared in accordance with GAAP. Such annual financial information
shall also include an opinion thereon expressed by an independent accounting
firm of established national reputation. All such consolidated financial
statements shall be accompanied by a "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(b) The financial information to be distributed to Holders of Securities
shall be filed with the Trustee and shall be mailed by the Trustee to the
Holders at their addresses appearing in the register of Securities maintained by
the Registrar, within 15 days after receipt of such financial information. The
Company shall file such financial information with the Trustee within 15 days
after it is filed with the SEC, if required, but in no event later than 105 days
after the end of the Company's fiscal year or later than 60 days after the end
of each of the first three quarters of each such fiscal year, in the case of
quarterly reports; provided, however, that the Trustee's only obligation is to
mail the financial information that it receives from the Company to the Holders
and not to obtain such information from the Company.
(c) The Company shall make such financial information described in Section
4.3 (a) available to prospective purchasers of the Notes.
(d) The Company shall provide the Trustee with a sufficient number of
copies of all reports and other documents and information that the Trustee may
be required to deliver to the Holders under this Section 4.3.
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Section 4.4 Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 120 days after the end
of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company during the preceding fiscal year has been made under
the supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his knowledge the Company has kept, observed,
performed and fulfilled each and every covenant contained in this Indenture and
is not in default in the performance or observance of any of the terms,
provisions and conditions hereof (or, if a Default or Event of Default shall
have occurred, describing all such Defaults or Events of Default of which he may
have knowledge and what action is being taken or is proposed to be taken with
respect thereto) and that to the best of his knowledge no event has occurred and
remains in existence by reason of which payments on account of the principal of
or interest, if any, on the Securities are prohibited or if such event has
occurred, a description of the event and what action is being taken or proposed
to be taken with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the financial statements
delivered pursuant to Section 4.3 above shall be accompanied by a written
statement of the Company's independent public accountants (who shall be a firm
of established national reputation) that in making the examination necessary for
certification of such financial statements nothing has come to their attention
which would lead them to believe that the Company has violated any provisions of
Sections 4.1, 4.5, 4.7, 4.9, 4.10 or 4.11 hereof or of Article 5 of this
Indenture or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall not
be liable directly or indirectly to any person for any failure to obtain
knowledge of any such violation.
(c) The Company shall, so long as any of the Securities are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default or default in the performance of any covenant, agreement or
condition contained in this Indenture an Officers' Certificate specifying such
Default, Event of Default or default and what action the Company is taking or
proposes to take with respect thereto.
Section 4.5 Compliance with Laws; Taxes.
The Company shall, and shall cause each of its Subsidiaries to, comply with
all statutes, laws, ordinances or government rules and regulations to which it
is subject, noncompliance with which would materially adversely affect the
business, prospects, earnings, properties, assets or condition, financial or
otherwise, of the Company and its Subsidiaries taken as a whole.
The Company shall, and shall cause each of its Subsidiaries to, pay before
delinquency all material taxes, assessments, and governmental levies except as
contested in good faith and by appropriate proceedings.
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Section 4.6 Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
Section 4.7 Corporate Existence.
Subject to Sections 4.8 and Article 5 hereof, the Company shall do or cause
to be done all things necessary to preserve and keep in full force and effect
(a) its corporate existence in accordance with its organizational documents (as
the same may be amended from time to time) and (b) its rights (charter and
statutory), licenses and franchises; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, if the Board
of Directors of the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders.
Section 4.8 Liquidation.
The Board of Directors or the stockholders of the Company may not adopt a
plan of liquidation that provides for, contemplates or the effectuation of which
is preceded by (a) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company otherwise than substantially as
an entirety (Section 5.1 of this Indenture being the Section hereof that governs
any such sale, lease, conveyance or other disposition substantially as an
entirety) and (b) the distribution of all or substantially all of the proceeds
of such sale, lease, conveyance or other disposition and of the remaining assets
of the Company to the holders of Capital Stock of the Company, unless the
Company, before making any liquidating distribution pursuant to such plan, makes
provision for the satisfaction of the Company's Obligations hereunder and under
the Securities as to the payment of principal and premium thereon, if any, and
interest. The Company shall be deemed to make provision for such payments only
if (x) the Company delivers in trust to the Trustee or Paying Agent (other than
the Company or its Subsidiaries) money or U.S. Government Obligations maturing
as to principal and interest in such amounts and at such times as are sufficient
without consideration of any reinvestment of such interest to pay the principal
of and premium on, if any, and accrued interest on the Securities, or (y) there
is an express assumption and observance of all covenants and conditions to be
performed by the Company hereunder by the execution and delivery of a
supplemental indenture in form satisfactory to the Trustee by a Person that
acquires or will acquire (otherwise than pursuant to a lease) a portion of the
assets of the Company and which Person will have Consolidated Net Worth
(immediately after the acquisition) equal to or greater than the Consolidated
Net Worth of the
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Company immediately preceding the acquisition and which is organized and
existing under the laws of the United States, any State thereof or the District
of Columbia; provided, however, that the Company shall not make any liquidating
distribution until after the Company shall have certified to the Trustee
pursuant to an Officers' Certificate at least five days before the making of any
liquidating distribution that it has complied with the provisions of this
Section 4.8 and that no Default or Event of Default then exists or would occur
as a result of any such liquidating distribution.
Section 4.9 Limitation on Dispositions of Assets.
The Company shall not sell, transfer or otherwise dispose of all or
substantially all of its properties or assets (including by way of a sale and
leaseback) except in accordance with the provisions of Section 5.1 hereof.
Section 4.10 Change in Control.
If, at any time, (a) an event or series of events by which any Person or
Group of Persons shall, as a result of a tender or exchange offer, open market
purchase, privately negotiated purchase, merger, consolidation or otherwise,
have become the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of 50% or more of the combined voting power of the then
outstanding Voting Stock and warrants or options to acquire such Voting Stock,
calculated on a fully-diluted basis, of the Company, (b) the Company is merged
with or into another corporation with the effect that immediately after such
transaction the stockholders of the Company hold less than a majority of the
combined voting power of the then outstanding Voting Stock of the Person
surviving such transaction or, (c) the direct or indirect, sale, lease, exchange
or other transfer to any Person or Group of Persons of all or substantially all
of the assets of the Company (each a "Change in Control" and the time of such
Change in Control being referred to as the "Change in Control Date"), then the
Company shall notify the Holders in writing of such occurrence and shall make an
offer to purchase (as the same may be extended in accordance with applicable
law, the "Change in Control Offer") on a Business Day (the "Change in Control
Payment Date") not later than 60 days following each Change in Control Date all
then outstanding Securities at a purchase price equal to 100% of the principal
amount thereof plus accrued and unpaid interest thereon to the Change in Control
Payment Date, if any. The Change in Control Offer shall be mailed by the Company
not less than 30 days nor more than 45 days before any Change in Control Payment
Date to Holders of Securities at their last registered address with a copy to
the Trustee and the Paying Agent and shall set forth (w) notice that a Change in
Control has occurred and that each Holder of Securities then outstanding has the
right to require the Company to repurchase, for cash, all or any portion (which
is equal to $1,000 or a whole multiple thereof) of such Holder's Securities at
100% of the principal amount thereof plus accrued and unpaid interest thereon to
the Change in Control Payment Date, (x) the Change in Control Payment Date, (y)
a description of the Change in Control and (z) a description of the procedures
to be followed by such Holder in order to have its Securities repurchased. The
Change in Control Offer shall remain open for not less than 30 days, nor more
than 45 days, and until the close of business on any such Change in Control
Payment Date. If the Change in Control Payment Date is on or after an interest
payment record date and on or before the
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related Interest Payment Date, any accrued interest will be paid to the
person in whose name a Security is registered at the close of business on such
record date, and no additional interest will be payable to Holders who tender a
Security pursuant to the Change in Control Offer.
The Company shall comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that a Change in Control occurs and the
Company is required to repurchase the Securities pursuant to this Section 4.10.
On the Change in Control Payment Date, the Company shall (x) accept for
payment Securities or portions thereof tendered pursuant to the Change in
Control Offer, (y) deposit with the Paying Agent money sufficient to pay the
purchase price of all Securities or portions thereof so tendered and (z) deliver
to the Trustee Securities so accepted together with an Officers' Certificate
stating the Securities or portions thereof tendered to the Company. The Paying
Agent shall promptly mail to the Holders of Securities so accepted payment in an
amount equal to the purchase price, and the Trustee shall promptly authenticate
and mail to such Holders a new Security of the same series equal in principal
amount to any unpurchased portion of the Security surrendered.
Section 4.11 Rule 144A Information Requirement.
The Company has agreed to furnish to the Holders or beneficial holders of
Notes and prospective purchasers of Notes designated by the holders of Transfer
Restricted Securities, upon their request, the information required to be
delivered pursuant to Rule 144(d)(4) under the Securities Act unless and until
such time as the Company has registered the Notes for resale under the
Securities Act.
ARTICLE V
SUCCESSORS
Section 5.1 When the Company May Merge, etc.
The Company will not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of substantially all of its properties or assets
(determined on a consolidated basis for the Company and its Subsidiaries taken
as a whole), in one or more related transactions, to another Person or entity
(other than a merger between the Company and any Wholly Owned Subsidiary of the
Company) unless:
(a) the Company survives such merger or such Person is a corporation
organized and existing under the laws of the United States of America, one of
the states thereof or the District of Columbia, and expressly assumes by
supplemental indenture all of the obligations under the Securities, the
Indenture, the Registration Rights Agreement, and all other agreements
pertaining thereto,
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(b) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing, and
(c) immediately after giving effect to such transaction, the Consolidated
Net Worth of the resulting, surviving corporation is not less than that of the
Company immediately before the transaction.
The Company shall deliver to the Trustee before the consummation of the
proposed transaction an Officers' Certificate to the foregoing effect and an
Opinion of Counsel to the effect that such merger, sale, assignment, transfer,
lease, conveyance or other disposition and, if applicable, such Supplemental
Indenture, comply with this Indenture and all conditions precedent to such
merger, sale, assignment, transfer, lease, conveyance or other disposition have
been satisfied. The Trustee shall be entitled to rely conclusively upon such
Officers' Certificate and Opinion of Counsel.
Section 5.2 Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company in
accordance with Section 5.1 hereof, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which such sale,
lease, conveyance or other disposition is made shall succeed to, and be
substituted for, and may exercise every right and power of the Company under
this Indenture with the same effect as if such successor person had been named
as the Company, herein; provided, however, that the Company shall not be
released or discharged from the obligation to pay the principal of or interest
on the Securities.
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.1 Events of Default.
The following shall constitute an"Event of Default":
(a) default in the payment of principal of, or premium, if any, on, the
Securities when due at maturity, upon repurchase, upon acceleration or
otherwise, including failure of the Company to repurchase the Securities
following a Change in Control and failure to make any redemption payment when
due;
(b) default in the payment of any installment of interest on the Securities
when due (including any interest payable in connection with any redemption
payment) and continuance of such Default for more than 30 days;
(c) default on any other Indebtedness of the Company or any Subsidiary if
either (i) such default results from the failure to pay principal of, premium,
if any, or interest on any such Indebtedness when due in excess of $25,000,000,
or (ii) as a
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result of such default, the maturity of such Indebtedness has been
accelerated before its expected maturity, without such default and acceleration
having been rescinded or annulled within a period of 10 days, and the principal
amount of any other such Indebtedness in default, or the maturity of which has
been so accelerated, aggregates $25,000,000 or more;
(d) default by the Company or any Subsidiary in the performance, or the
breach, of any other covenant or warranty of the Company or such Subsidiary in
this Indenture and the failure to remedy such Default within a period of 60 days
after written notice thereof to the Company from the Trustee or to the Company
and the Trustee from the Holders of 25% in principal amount of the outstanding
Securities;
(e) the entry by a court of one or more judgments or orders against the
Company or any Subsidiary in an aggregate amount in excess of $25,000,000 that
are not covered by insurance written by third parties that has not been vacated,
discharged, satisfied or stayed pending appeal within 60 days after the entry
thereof;
(f) any act or acts by the Company or its Subsidiaries pursuant to or
within the meaning of any Bankruptcy Law:
(i) commencing a voluntary case,
(ii) consenting to the entry of an order for relief against it in an
involuntary case,
(iii) consenting to the appointment of a Custodian of it or for all or
substantially all of its property,
(iv) making a general assignment for the benefit of its creditors, or
(v) which results in the Company or its Subsidiaries generally not paying
its debts as they become due; or
(g) the entry of an order or decree by a court of competent jurisdiction
under any Bankruptcy Law that:
(i) is for relief against the Company or any Subsidiary in an involuntary
case,
(ii) appoints a Custodian of the Company or any Subsidiary or for all or
substantially all of the property of the Company or any Subsidiary, or
(iii) orders the liquidation of the Company or any Subsidiary,
in each case, if such order or decree remains unstayed and in effect for
120 consecutive days.
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The term "Bankruptcy Law" means title 11 of the United States Code or any
similar federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
Section 6.2 Acceleration.
If an Event of Default (other than an Event of Default specified in clause
(f) or (g) of Section 6.1) occurs and is continuing, the Trustee by notice to
the Company, or the Holders of at least 25% in principal amount of the then
outstanding Securities by notice to the Company and the Trustee, may declare the
unpaid principal of and any accrued interest on all the Securities to be due and
payable. Upon such declaration the principal and interest shall be due and
payable immediately. If an Event of Default specified in clause (f) or (g) of
Section 6.1 occurs, such an amount shall ipso facto become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any Holder. The Holders of a majority in principal amount of the then
outstanding Securities by written notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal or interest that has become due solely because of the acceleration)
have been cured or waived.
Section 6.3 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal or interest on the
Securities or to enforce the performance of any provision of the Securities or
this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy
occurring upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
Section 6.4 Waiver of Past Defaults.
Holders of a majority in principal amount of the then outstanding
Securities by notice to the Trustee may waive an existing Default or Event of
Default and its consequences, except a continuing Default or Event of Default in
the payment of the principal or interest on any Security held by a
non-consenting Holder. Upon any such waiver, such Default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured
for every purpose of this Indenture. No such waiver shall extend to any
subsequent or other Default or impair any right consequent on any subsequent or
other Default.
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Section 6.5 Control by Majority.
The Holders of a majority in principal amount of the outstanding Securities
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on such Trustee; provided that (a) such direction is not in
conflict with any rule of law or with this Indenture, (b) the Trustee may take
any other action it deems proper that is not inconsistent with such direction
and (c) such Holders have offered to the Trustee indemnity as provided in
Section 7.1(e).
Section 6.6 Limitation on Suits.
No Holder of any of the Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee or for any other remedy under this
Indenture, unless:
(a) such Holder has previously given notice to the Trustee of a continuing
Event of Default;
(b) the Holders of not less than 25% in principal amount of the outstanding
Securities have made written request to the Trustee to institute proceedings in
respect of such Event of Default in its own name as Trustee under this
Indenture;
(c) such Holder or Holders have offered to the Trustee reasonable indemnity
against the costs, expenses and liabilities to be incurred in compliance with
such request;
(d) the Trustee for 30 days after its receipt of such notice, request and
offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been given to
the Trustee during such 30-day period by the Holders of a majority in principal
amount of the outstanding Securities.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
Section 6.7 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal and interest on the
Security, on or after the respective due dates expressed in the Security, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of the Holder.
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Section 6.8 Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company or any other obligor for the
whole amount of principal and interest remaining unpaid on the Securities and
interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
Section 6.9 Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Securities), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and if the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section 7.7
hereof. To the extent that the payment of any such compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.7 hereof out of the estate in any such
proceeding, shall be denied for any reason, payment of the same shall be secured
by a Lien on, and shall be paid out of, any and all distributions, dividends,
money, securities and other properties that the Holders of the Securities may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 6.10 Priorities.
If the Trustee collects any money pursuant to this Article 6, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.7, including payment of all compensation, expense and liabilities
incurred, and all advances made, by the Trustee and the costs and expenses of
collection.
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Second: to Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for principal and
interest, respectively; and
Third: to the Company or to such party as a court of competent jurisdiction
shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders.
Section 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorney' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7,
or a suit by Holders of more than 10% in principal amount of the then
outstanding Securities.
ARTICLE VII
TRUSTEE
Section 7.1 Duties of a Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the express
provisions of this Indenture, and the Trustee undertakes to perform only those
duties that are specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture against the
Trustee.
(ii) In the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; provided, however, that the
Trustee shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
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(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section 7.1;
(ii) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.5.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to the provisions of
this Section 7.1.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee may refuse to perform any
duty or exercise any right or power unless it receives indemnity satisfactory to
it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
(g) The Trustee shall have no responsibility for making any calculations
hereunder, including, without limitation, the amount of interest owing on the
Securities under any of the provisions of the Registration Rights Agreement. The
Company shall deliver to the Trustee an Officers' Certificate specifying any
additional interest due under the Registration Rights Agreement on or before the
15th day prior to an interest payment date.
Section 7.2 Rights of Trustee.
(a) The Trustee may rely and shall be fully protected in relying upon any
document believed by it to be genuine and to have been signed or presented by
the proper Person. The Trustee need not investigate any fact or matter stated in
the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
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(c) The Trustee may act through agents and shall not be responsible for the
misconduct or negligence of any agent appointed and monitored with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
Section 7.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with the Company or any Affiliate
of the Company with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights; provided, however, the Trustee is
subject to Sections 7.10 and 7.11.
Section 7.4 Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of this
Indenture, the Securities or any documents relating to the Securities. It shall
not be accountable for the Company's use of the proceeds from the Securities or
any money paid to the Company or upon the Company's discretion under any
provision hereof. It shall not be responsible for the use or application of any
money received by any Paying Agent other than the Trustee and it shall not be
responsible for any statement or recital herein or any statement in the
Securities or any other document in connection with the sale of the Securities
or pursuant to this Indenture, other than its certificate of authentication.
Section 7.5 Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders a notice of the Default
or Event of Default within 90 days after it occurs. A Default or an Event of
Default shall not be considered known to the Trustee unless it is a Default or
Event of Default under Section 6.1(a) or (b) or the Trustee shall have received
notice thereof, in accordance with this Indenture, from the Company or from the
Holders of a majority in principal amount of the outstanding Securities, and in
the absence of such notice the Trustee may conclusively assume there is no
Default or Event of Default. Except in the case of a Default or Event of Default
in payment of principal or interest on any Security (including the failure to
make a mandatory redemption pursuant hereto), the Trustee may withhold the
notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of Holders.
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Section 7.6 Reports by Trustee to Holders.
Within 60 days after each August 1 beginning with the August 1 following
the date hereof, the Trustee shall mail to Holders a brief report dated as of
such reporting date that complies with TIA S 313(a) (but if no event described
in TIA S 313(a) has occurred within the 12 months preceding the reporting date,
no report need be transmitted). The Trustee also shall comply with TIA S 313(n).
The Trustee shall also transmit by mail all reports as required by TIA S 313(c).
At the time of its mailing to Holders, a copy of each report sent to
Holders shall be filed with the SEC and each stock exchange on which the
Securities are listed. The Company shall promptly notify the Trustee when the
Securities are listed on any stock exchange.
Section 7.7 Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable disbursements, advances and expenses incurred or made
by it. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, except as set
forth in the next paragraph. The Trustee shall notify the Company promptly of
any claim for which it may seek indemnity. The Company shall defend the claim,
and the Trustee shall cooperate in the defense. The Trustee may have separate
counsel, and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its consent,
which consent shall not be unreasonably withheld.
The Company need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee through its own negligence or bad faith.
To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien with priority over the Securities on all money or property
held or collected by the Trustee, except that held in trust to pay principal and
interest on particular Securities. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(f) or (g) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
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Section 7.8 Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Truste's acceptance of
appointment as provided in this Section 7.8.
The Trustee may resign at any time and be discharged from the trust hereby
created by so notifying the Company. The Holders of a majority in principal
amount of the then outstanding Securities may remove the Trustee by so notifying
the Trustee and the Company. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Securities may appoint
a successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee after written request by any Holder who had been a Holder
for at least six months fails to comply with Section 7.10, such Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all of the rights, powers and duties of the Trustee under this Indenture.
The successor Trustee shall mail a notice of its succession to the Holders. The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee, provided all sums owing to the Trustee hereunder have
been paid and subject to the Lien provided for in Section 7.7. Notwithstanding
replacement of the Trustee pursuant to this Section 7.8, the Company's
obligations under Section 7.7 hereof shall continue for the benefit of the
retiring Trustee.
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Section 7.9 Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
Section 7.10 Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that shall be a corporation
organized and doing business under the laws of the United States of America or
of any state thereof authorized under such laws to exercise corporate trustee
power, shall be subject to supervision or examination by federal or state
authority and shall have a combined capital and surplus of at least $10 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA S 310(a)(1). The Trustee is subject to TIA S 310(b), including the
optional provision permitted by the second sentence of TIA S 310(b)(9).
Section 7.11 Preferential Collection of Claims Against Company.
The Trustee is subject to TIA S 311(a), excluding any creditor relationship
listed in TIA S 311(b). A Trustee who has resigned or has been removed shall be
subject to TIA S 311(a) to the extent indicated therein.
Section 7.12 No Obligation of the Trustee.
(a) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security or a participant in the Depository or
other Person with respect to the accuracy of the records of the Depository or
its nominee or of any participant, with respect to any ownership interest in the
Securities or with respect to the delivery to any participant, member,
beneficial owner or other Person (other than the Depository) of any notice
(including any notice of redemption) or the payment of any amount, under or with
respect to such Securities. All notices and communications to be given to the
Holder and all payments to be made to Holders under the Securities shall be
given or made only to or upon the order of the registered Holders (which shall
be the Depository or its nominee in the case of a Global Security). The rights
of beneficial owners in any Global Security may only be exercised through the
Depository subject to the Applicable Procedures. The Trustee may rely and shall
be fully protected in relying upon information furnished by the Depository with
respect to its members, participants and any beneficial owners.
(b) The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under the
Indenture or under applicable law with respect to any transfer of any interest
in any security (including any transfers between or among Depository
participants, members or beneficial owners in any Global Security) other than to
require delivery of such certificates and other documentation or
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evidence as are expressly required by, and to do so if and when expressly
required by, the terms of the Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements hereof.
ARTICLE VIII
DISCHARGE OF INDENTURE
Section 8.1 Termination of Company's Obligation.
This Indenture shall cease to be of further effect (except that the
Company's obligations under Section 7.7 and 8.4, and the Company's, Trustee's
and Paying Agent's obligations under Section 8.3 shall survive) when all
outstanding Securities theretofore authenticated and issued have been delivered
(other than destroyed, lost or stolen Securities that have been replaced or
paid) to the Trustee for cancellation and the Company has paid all sums payable
by the Company under this Indenture. In addition, subject to the conditions
described below, at the Company's option, either (a) the Company will be deemed
to have been discharged from their obligations with respect to the Securities on
the 31st day after the applicable conditions set forth below have been satisfied
or (b) the Company shall cease to be under any obligation to comply with Article
4 of this Indenture, at any time after the conditions set forth below have been
satisfied:
(i) the Company has deposited or caused to be deposited irrevocably with
the Trustee as trust funds in trust, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders (A) money or (B) noncallable
U.S. Government Obligations, which through the payment of interest and principal
in respect thereof in accordance with their terms, will provide either (i)
payment in full of principal, premium on, if any, and interest on, the
outstanding Securities as of the date of such payment, or (II) (without any
reinvestment of such interest or principal), not later than one day before the
due date of any payment, money or (C) a combination of (A) and (B), in an amount
sufficient, in the opinion (with respect to (B) and (C)) of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee at or before the time of such
deposit, to pay and discharge each installment of principal of, premium on, if
any, and interest on, the outstanding Securities on the dates such installments
are due;
(ii) no Default or Event of Default has occurred and is continuing on the
date of such deposit or shall occur as a result of such deposit, and such
deposit shall not result in a breach or violation of, or constitute a Default
under, any other instrument to which the Company is a party to or is bound, as
evidenced to the Trustee in an Officers' Certificate delivered to the Trustee
concurrently with such deposit;
(iii) the Company has paid or duly provided for payment of all amounts then
due or to become due to the Trustee pursuant to Section 7.7 of the Indenture;
and
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(iv) the Company has delivered to the Trustee an Officers' Certificate,
stating that there has been compliance with all conditions precedent provided
for in the Indenture relating to the satisfaction and discharge of this
Indenture.
If the Company selects option (a) above, this Indenture shall cease to be
of further effect on the 31st day after the conditions set forth above have been
satisfied (except as provided in this paragraph), and the Trustee, on demand of
the Company, shall execute proper instruments acknowledging confirmation of and
discharge under this Indenture and the Securities; provided, however, the
Company's obligations in Sections 2.3, 2.4, 2.5, 2.6, 4.1, 4.6, 7.7, 7.8, 8.3
and 8.4, and the Trustee's and Paying Agent's obligations in Section 8.3 shall
survive until the Securities are no longer outstanding. Thereafter, only the
Company's obligations under Sections 7.7 and 8.4 and the Company's, Trustee's,
and Paying Agent's obligations under Section 8.3 shall survive. If the Company
elects option (b) above, the Company's obligations under Article 4 hereunder
shall terminate upon the satisfaction of the conditions, and all other
obligations shall survive until the Securities are no longer outstanding.
Thereafter, only the Company's obligations under Sections 7.7 and 8.4 and the
Company's, Trustee's and Paying Agent's obligations under Section 8.3 above
shall survive.
After such irrevocable deposit is made pursuant to this Section 8.1 and
satisfaction of the other conditions set forth herein, the Trustee, upon
request, shall acknowledge in writing the discharge of the Company's obligations
under this Indenture except for those surviving obligations specified above.
In order to have money available on a payment date to pay principal of or
interest on the Securities, the U.S. Government Obligations shall be payable as
to principal or interest at least one Business Day before such payment date in
such amounts as will provide the necessary money. U.S. Government Obligations
shall not be callable at the issuer's option.
Section 8.2 Application of Trust Money.
The Trustee or a trustee satisfactory to the Trustee and the Company shall
hold in trust money or U.S. Government Obligations deposited with it pursuant to
Section 8.1. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal and interest on the Securities.
Section 8.3 Repayment to Company.
To the extent permitted by applicable law, the Trustee and the Paying Agent
shall promptly pay to the Company upon written request any excess money or
securities held by them at any time in excess of amounts required to pay
principal of or interest on the Securities.
The Trustee and the Paying Agent shall pay to the Company upon written
request any money held by them for the payment of principal or interest that
remains
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unclaimed for one year after the date upon which such payment shall have
become due; provided, however, that the Company shall have either caused notice
of such payment to be mailed to each Holder entitled thereto no less than 30
days before such repayment or within such period shall have published such
notice in a financial newspaper of widespread circulation published in New York,
New York. After payment to the Company, Holders entitled to the money must look
to the Company for payment as general creditors unless an applicable abandoned
property law designates another person, and all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
Section 8.4 Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 8.2 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to Section 8.1 until
such time as the Trustee or Paying Agent is permitted to apply all such money or
U.S. Government Obligations in accordance with Section 8.2; provided, however,
that if the Company has made any payment of interest on or principal of any
Securities because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent.
ARTICLE IX
AMENDMENTS
Section 9.1 Without Consent of Holders.
The Company and the Trustee may amend this Indenture and the Securities
without the consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Section 5.1;
(c) to provide for uncertificated Securities in addition to certificated
Securities;
(d) to make any change that does not adversely affect the legal rights
hereunder of any Holder; and
(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such Supplemental Indenture and upon
receipt by
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the Trustee of the documents described in Section 9.6 hereof, the Trustee
shall join with the Company in the execution of any Supplemental Indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations which may be therein contained, but the
Trustee shall not be obligated to enter into such Supplemental Indenture which
affects its own rights, duties or immunities under this Indenture or otherwise.
Section 9.2 With Consent of Holders.
Except as provided below in this Section 9.2, the Company and the Trustee
may amend this Indenture or the Securities with the written consent of the
Holders of at least a majority in principal amount of the then outstanding
Securities. The Holders of a majority in principal amount of the Securities then
outstanding may, or the Trustee with the written consent of the Holders of at
least a majority in principal amount of the then outstanding Securities may,
waive compliance in a particular instance by the Company with any provision of
this Indenture or the Securities.
Upon the request of the Company, accompanied by a resolution of its Board
of Directors authorizing the execution of any such Supplemental Indenture, and
upon the filing with the Trustee of evidence satisfactory to the Trustee of the
consent of the Holders as aforesaid, and upon receipt by the Trustee of the
documents described in Section 9.6 hereof, the Trustee shall join with the
Company in the execution of such Supplemental Indenture unless such Supplemental
Indenture affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such Supplemental Indenture.
It shall not be necessary for the consent of the Holders under this Section
to approve the particular form of any proposed amendment or waiver, but it shall
be sufficient if such consent approves the substance thereof.
After an amendment or waiver under this Section becomes effective, the
Company shall mail to the Holders of each Security affected thereby a notice
briefly describing the amendment or waiver. Any failure of the Company to mail
such notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such Supplemental Indenture or waiver. Subject to
Sections 6.4 and 6.7 hereof, the Holders of a majority in principal amount of
the Securities then outstanding may waive compliance in a particular instance by
the Company with any provision of this Indenture or the Securities, provided,
however, that without the consent of each Holder affected, an amendment or
waiver under this Section may not (with respect to any Securities held by a
non-consenting Holder):
(a) reduce the principal amount of Securities whose Holders must consent to
an amendment or waiver;
(b) reduce the rate of or change the time for payment of interest,
including default interest, on any Security;
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(c) reduce the principal of or change the fixed maturity of any Security or
alter the optional or mandatory redemption provisions or the price at which the
Company shall offer to purchase such Securities pursuant to Sections 3.7 and
4.10 hereof;
(d) make any Security payable in money other than that stated in the
Security;
(e) make any change in Section 6.4 or 6.7 hereof or in this sentence of
this Section 9.2; or
(f) waive a Default in the payment of principal of, premium or interest on,
or redemption payment with respect to, any Security.
Section 9.3 Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Securities shall be set forth in a
Supplemental Indenture that complies with the TIA as then in effect.
Section 9.4 Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to it by a Holder
of a Security is a continuing consent by the Holder and every subsequent Holder
of a Security or portion of a Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on any
Security; provided, however, that any such Holder or subsequent Holder may
revoke the consent as to his or her security if the Trustee receives written
notice of revocation before the date the waiver or amendment becomes effective.
An amendment or waiver becomes effective in accordance with its terms and
thereafter binds every Holder.
The Company may fix a record date for determining which Holders must
consent to such amendment or waiver. If the Company fixes a record date, the
record date shall be fixed at (a) the later of 30 days before the first
solicitation of such consent or the date of the most recent list of Holders
furnished to the Trustee before such solicitation pursuant to Section 2.05, or
(b) such other date as the Company shall designate.
Section 9.5 Notation on or Exchange of Securities.
The Trustee may place an appropriate notation about an amendment or waiver
on any Security thereafter authenticated. The Company in exchange for all
Securities may issue and the Trustee shall authenticate new Securities of the
same series that reflect the amendment or waiver.
Failure to make the appropriate notation or issue a new Security of the
same series shall not affect the validity and effect of such amendment or
waiver.
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Section 9.6 Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment or Supplemental Indenture authorized
pursuant to this Article 9 if the amendment does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing or refusing to sign such
amendment or Supplemental Indenture, the Trustee shall be entitled to receive,
and, subject to Section 7.1, shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel as conclusive evidence that such
amendment or Supplemental Indenture is authorized or permitted by this
Indenture, that it is not inconsistent herewith, and that it will be valid and
binding upon the Company in accordance with its terms. The Company may not sign
an amendment or Supplemental Indenture until the Board of Directors approves it.
ARTICLE X
CONVERSION
Section 10.1 Right to Convert.
(a) Subject to and upon compliance with the provisions of this Indenture,
at any time on or after 270 days after the Issue Date and on or before maturity,
each Holder shall have the right, at its option, to convert the principal amount
of any Security, or any portion of such principal amount which is $1,000 or a
whole multiple thereof, into, at the Company's option, either (i) cash, payable
by the Company to the Paying Agent for the benefit of such Holder in an amount
equal to the Current Market Price, as of the conversion date, of the Common
Stock to which the Securities would otherwise be converted, or (ii) that number
of fully paid and nonassessable shares of Common Stock (as such shares shall
then be constituted) obtained by dividing the principal amount of the Security
or portion thereof surrendered for conversion by the conversion price in effect
at such time, or (iii) a combination of cash and Common Stock in proportions
determined by the Company in its sole discretion; provided, however, that the
Company's option to convert Securities into cash under Section 10.1(a)(i) or
into a combination of cash and Common Stock under Section 10.1(a)(iii), shall
terminate at the close of business on the date the Company's charter is amended
to increase the number of shares of authorized Common Stock to at least that
number of shares sufficient to reserve for the conversion of all the Notes.
(b) Notwithstanding anything in this Section 10.1 to the contrary, the
right to convert with respect to any Security or portion of a Security that
shall be called for redemption or delivered for repurchase, shall terminate at
the close of business on the date fixed for redemption of such Security or
portion of a Security on the second trading day preceding a Change in Control
Payment Date, as the case may be, unless the Company shall default in payment
due upon redemption or repurchase thereof.
(c) A holder of Securities is not entitled to any rights of a holder of
Common Stock until such holder has converted his Securities to Common Stock, and
only to the extent such Securities are deemed to have been converted to Common
Stock under this Article 10.
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Section 10.2 Exercise of Conversion Privilege; Issuance of Common Stock on
Conversion; No Adjustment for Interest or Dividends.
In order to exercise the conversion privilege, the Holder of any Security
to be converted in whole or in part shall surrender such Security, duly
endorsed, at an office or agency maintained by the Company pursuant to Section
2.3, accompanied by the funds, if any, required by the last paragraph of this
Section 10.2, and shall give written notice of conversion in the form provided
on the Securities (or such other notice that is acceptable to the Company) to
the Company at such office or agency that the Holder elects to convert such
Security or the portion thereof specified in such notice, stating the name or
names (with address) in which the certificate or certificates for shares of
Common Stock, if any, that shall be issuable on such conversion shall be issued.
So long as the Company's option to convert Securities into cash or a combination
of cash and Common Stock exists, then within five business days after receipt of
such Holder's notice of conversion, the Company shall notify such Holder of the
Company's election to convert the Securities to cash or, Common Stock, or a
combination of cash and Common Stock. Holder shall then deliver to the Company
any transfer taxes required pursuant to Section 10.7. Each Security surrendered
for conversion shall, unless the shares issuable on conversion are to be issued
in the same name as the registration under such Security, be duly endorsed by,
or be accompanied by instruments of transfer in form satisfactory to the Company
duly executed by, the Holder or his duly authorized attorney. Holder may not
withdraw its conversion notice after receipt of the Company's notice of its
election regarding conversion.
As promptly as practicable after the surrender of such Security and the
receipt of such notice and funds, if any, as aforesaid, (a) if the conversion is
for Common Stock, the Company shall issue and shall deliver at such office or
agency to such Holder, or on his written order, (i) a certificate or
certificates for the number of full shares issuable upon the conversion of such
Security or portion thereof in accordance with the provisions of this Article,
and (ii) a check or cash in respect of any fractional interest in respect of a
share of Common Stock arising upon such conversion as provided in Section 10.3,
or (b) if the conversion is for cash or a combination of cash and Common Stock,
the Company shall, one business day after its notice to Holder of the Company's
election regarding conversion, deposit with Paying Agent money sufficient to pay
the conversion price for, and all accrued interest on, the Securities being
converted to cash. In case any Security of a denomination greater than $1,000
shall be surrendered for partial conversion, and subject to Article 2, the
Company shall execute and the Trustee shall authenticate and deliver to or upon
the written order of the holder of the Note so surrendered, without charge to
him, a new Security or Securities in authorized denominations in an aggregate
principal amount equal to the unconverted portion of the surrendered Security.
Each conversion shall be deemed to have been effected on the date on which
such Security shall have been surrendered (accompanied by the funds, if any,
required by the last paragraph of this Section 10.2) and such notice shall have
been received by the Company, as aforesaid, and, if the conversion is for Common
Stock, the person in whose name any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder of record of the shares represented thereby;
provided, however, that any such surrender on any date when the stock transfer
books of the Company shall be closed shall constitute the person in whose name
the certificates are to be
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issued as the record holder thereof for all purposes on the next day on
which such stock transfer books are open, but such conversion shall be at the
conversion price in effect on the date upon which such Security shall have been
surrendered.
Any Security or portion thereof surrendered for conversion during the
period from the close of business on the record date for any interest payment
date to the opening of business on such interest payment date shall (unless such
Security or portion thereof being converted shall have been called for
redemption on a date in such period) be accompanied by payment, in funds
acceptable to the Company, of an amount equal to the interest otherwise payable
on such interest payment date on the principal amount being converted; provided,
however, that no such payment need be made if there shall exist at the time of
conversion a default in the payment of interest on the Securities. An amount
equal to such payment shall be paid by the Company on such interest payment date
to the holder of such Security at the close of business on such record date;
provided, however, that if the Company shall default in the payment of interest
on such interest payment date, such amount shall be paid to the person who made
such required payment. Except as provided above in this Section 10.2, no
adjustment shall be made for interest accrued on any Security converted or for
dividends on any shares issued upon the conversion of such Security as provided
in this Article 10. If any Security or portion thereof which has been called for
redemption on a date during the period from the close of business on the record
date for any interest payment date to the opening of business on such interest
payment date is surrendered for conversion during such period, no interest shall
be payable to the holder of such Security on account of such Security or portion
thereof.
Section 10.3 Cash Payments in Lieu of Fractional Shares.
No fractional shares of Common Stock or scrip representing fractional
shares shall be issued upon conversion of Securities. If more than one Security
shall be surrendered for conversion at one time by the same holder, the number
of full shares which shall be issuable upon conversion shall be computed on the
basis of the aggregate principal amount of the Securities (or specified portions
thereof to the extent permitted hereby) so surrendered. If any fractional share
of Common Stock would be issuable upon the conversion of any Security or
Securities, the Company shall make an adjustment therefor in cash at the current
market value thereof. The current market value of a share of Common Stock shall
be the Closing Price on the day (that is not a Legal Holiday as defined in
Section 12.8) before the day on which the Securities (or specified portions
thereof) are deemed to have been converted and such Closing Price shall be
determined as provided in subsection (f) of Section 10.5.
Section 10.4 Conversion Price.
The conversion price shall be as specified in the form of Security
hereinabove set forth, subject to adjustment as provided in this Article.
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Section 10.5 Adjustment of Conversion Price.
(a) In case the Company shall (i) pay a dividend, or make a distribution,
in shares of its Common Stock on its Common Stock, (ii) subdivide its
outstanding Common Stock into a greater number of shares, or (iii) combine its
outstanding Common Stock into a smaller number of shares, the conversion price
in effect immediately prior thereto shall be adjusted so that the holder of any
Security thereafter surrendered for conversion shall be entitled to receive the
number of shares of Common Stock of the Company that he would have owned or have
been entitled to receive after the happening of any of the events described
above had such Security been converted immediately before the happening of such
event. An adjustment made pursuant to this subsection (a) shall become effective
immediately after the record date in the case of a dividend and shall become
effective immediately after the effective date in the case of subdivision or
combination.
(b) In case the Company shall issue rights or warrants to all holders of
its Common Stock entitling them (for a period expiring within 45 days after the
record date mentioned below) to subscribe for or purchase Common Stock at a
price per share less than the Current Market Price per share of Common Stock at
the record date for the determination of stockholders entitled to receive such
rights or warrants, except as provided in subsection (f) below, the conversion
price in effect immediately prior thereto shall be adjusted so that the same
shall equal the price determined by multiplying the conversion price in effect
immediately before the date of issuance of such rights or warrants by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
on the date of issuance of such rights or warrants plus the number of shares
which the aggregate offering price of the total number of shares so offered
would purchase at such Current Market Price (determined by multiplying the total
number of shares by the exercise price of such rights or warrants and dividing
the product so obtained by the Current Market Price), and of which the
denominator shall be the number of shares of Common Stock outstanding on the
date of issuance of such rights or warrants plus the number of additional shares
of Common Stock offered for subscription or purchase. Such adjustment shall be
made successively whenever any such rights or warrants are issued, and shall
become effective immediately after such record date. Except as provided in
subsection (f) below, in determining whether any rights or warrants entitle the
holders to subscribe for or purchase shares of Common Stock at less than such
Current Market Price, and in determining the aggregate offering price of such
shares of Common stock, there shall be taken into account any consideration
received by the Company for such rights or warrants, the value of such
consideration, if other than cash, to be determined by the Board of Directors of
the Company whose determination shall be conclusive and described in a
certificate filed with the Trustee. Upon the expiration of any right or warrant
to purchase Common Stock the issuance of which resulted in an adjustment in the
conversion price pursuant to this subsection (b), if any such right or warrant
shall expire and shall not have been exercised, the conversion price shall
immediately upon such expiration be recomputed to the conversion price which
would have been in effect had the adjustment of the conversion price made upon
the issuance of such rights or warrants been made on the basis of offering for
subscription or purchase only that number of shares of Common Stock actually
purchased upon the exercise of such rights or warrants actually exercised.
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(c) In case the Company shall distribute to all holders of its Common Stock
any shares of Capital Stock of the Company (other than Common Stock) or
evidences of its indebtedness or assets (excluding cash dividends or other
distributions to the extent paid from retained earnings of the Company) or
rights or warrants to subscribe for or purchase any of its securities (excluding
those referred to in subsection (b) above), then, except as provided in
subsection (f) below, in each such case the conversion price shall be adjusted
so that the same shall equal the price determined by multiplying the conversion
price in effect immediately before the date of such distribution by a fraction
of which the numerator shall be the Current Market Price per share (as defined
in subsection (f) below) of the Common Stock on the record date mentioned below
less the fair market value on such record date (as determined by the Board of
Directors of the Company, whose determination shall be conclusive, and described
in a certificate filed with the Trustee) of the portion of the Capital Stock or
assets or evidences of indebtedness so distributed or of such rights or warrants
applicable to one share of Common Stock, and the denominator shall be the market
price per share (as defined in subsection (f) below) of the Common Stock on such
record date. Such adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to received such
distribution, except as provided in subsection (f) below.
(d) In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock cash in an aggregate amount that, combined together
with (1) the aggregate amount of any other distributions to all holders of its
Common Stock made exclusively in cash within the 12 months preceding the date of
payment of such distribution and in respect of which no adjustment pursuant to
this paragraph (d) has been made and (2) the aggregate of any cash plus the fair
market value (as determined by the Board of Directors, whose determination shall
be conclusive and described in a Board Resolution) of consideration payable in
respect of any tender offer by the Company or any of its Subsidiaries for all or
any portion of the Common Stock concluded within the 12 months preceding the
date of payment of such distribution and in respect of which no adjustment
pursuant to paragraph (e) of this Section has been made, exceeds 10% of the
product of the Current Market Price per share of the Common Stock on the date
for the determination of holders of shares of Common Stock entitled to receive
such distribution times the number of shares of Common Stock outstanding on such
date, then, and in each such case, immediately after the close of business on
such date for determination, the conversion price shall be reduced so that the
same shall equal the price determined by multiplying the conversion price in
effect immediately before the close of business on the date fixed for
determination of the stockholders entitled to receive such distribution by a
fraction (i) the numerator of which shall be equal to the Current Market Price
per share of the Common Stock on the date fixed for such determination less an
amount equal to the quotient of (x) the excess of such combined amount over such
10% and (y) the number of shares of Common Stock outstanding on such date for
determination and (ii) the denominator of which shall be equal to the Current
Market Price per share of the Common Stock on such date for determination.
(e) In case a tender offer made by the Company or any Subsidiary for all or
any portion of the Common Stock shall expire and such tender offer (as amended
at the time of the expiration thereof) shall require the payment to stockholders
(based on the acceptance (up to any maximum specified in the terms of the tender
offer) of Purchase Shares (as defined below) of an aggregate consideration
having a fair market value (as determined by the Board of Directors,
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whose determination shall be conclusive and described in a Board
Resolution) that combined together with (1) the aggregate of the cash plus the
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution) as of the expiration of
such tender offer, of consideration payable in respect of any other tender
offer, by the Company or any Subsidiary for all or any portion of the Common
Stock expiring within the 12 months preceding the expiration of such tender
offer and in respect of which no adjustment pursuant to this paragraph (e) has
been made and (2) the aggregate amount of any distributions to all holders of
the Company's Common Stock made exclusively in cash within 12 months preceding
the expiration of such tender offer and in respect of which no adjustment
pursuant to paragraph (d) of this Section has been made, exceeds 10% of the
product of the Current Market Price per share of the Common Stock as of the last
time (the "Expiration Time") tenders could have been made pursuant to such
tender offer (as it may be amended) times the number of shares of Common Stock
outstanding (including any tendered shares) on the Expiration Time, then, and in
each such case, immediately before the opening of business on the day after the
date of the Expiration Time, the conversion price shall be adjusted so that the
same shall equal the price determined by multiplying the conversion price in
effect immediately before close of business on the date of the Expiration Time
by a fraction (i) the numerator of which shall be equal to (A) the product of
(1) the Current Market Price per share of the Common Stock on the date of the
Expiration Time and (2) the number of shares of Common Stock outstanding
(including any tendered shares) on the Expiration Time, less (B) the amount of
cash plus the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up to any maximum
specified in the terms of the tender offer) of Purchased Shares, and (ii) the
denominator of which shall be equal to the product of (A) the Current Market
Price per share of the Common Stock as of the Expiration Time and (B) the number
of shares of Common Stock outstanding (including any tendered shares) as of the
Expiration Time less the number of all shares validly tendered and not withdrawn
as of the Expiration Time (the shares deemed so accepted up to any such maximum,
being referred to as the "Purchased Shares").
(f) No adjustment in the conversion price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such price;
provided, however, that any adjustments which by reason of this subsection (f)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Article 10 shall be made
by the Company and shall be made to the nearest cent or to the nearest one
hundredth of a share, as the case may be. Anything in this Section 10.5 to the
contrary notwithstanding, the Company shall be entitled to make such reductions
in the conversion price, in addition to those required by this Section 10.5, as
it in its discretion shall determine to be advisable in order that any stock
dividends, subdivision of shares, distribution of rights to purchase stock or
securities, or a distribution of securities convertible into or exchangeable for
stock hereafter made by the Company to its stockholders shall not be taxable.
(g) Whenever the conversion price is adjusted as herein provided, the
Company shall promptly file with the Trustee and any conversion agent other than
the Trustee an Officers' Certificate setting forth the conversion price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment. Promptly after delivery of such certificate, the Company shall
prepare a notice of such adjustment of the conversion price setting forth the
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adjusted conversion price and the date on which such adjustment becomes
effective and shall mail or cause to be mailed such notice of such adjustment of
the conversion price to the Holder of each Security at his last address
appearing on the Security register provided for in Section 2.3 of this
Indenture.
(h) In any case in which this Section 10.5 provides that an adjustment
shall become effective immediately after a record date for an event, the Company
may defer until the occurrence of such event (i) issuing to the Holder of any
Security converted after such record date and before the occurrence of such
event the additional shares of Common Stock issuable upon such conversion by
reason of the adjustment required by such event over and above the Common Stock
issuable upon such conversion before giving effect to such adjustment and (ii)
paying to such Holder any amount in cash in lieu of any fraction pursuant to
Section 10.3.
Section 10.6 Effect of Reclassification, Consolidation, Merger or Sale.
If any of the following events occur, namely (i) any reclassification or
change of outstanding shares of Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation as a result of which
holders of Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock shall occur, then the Company or the successor or purchasing
corporation, as the case may be, shall execute with the Trustee a supplemental
indenture (which shall conform to the TIA as in force at the date of execution
of such supplemental indenture) providing that each Security shall be
convertible into the kind and amount of shares of stock and other securities or
property or assets (including cash) receivable upon such reclassification,
change, consolidation, merger, combination, sale or conveyance by a holder of a
number of shares of Common Stock issuable upon conversion of such Securities
immediately before such reclassification, change, consolidation, merger,
combination, sale or conveyance. Such supplemental indenture shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each Holder of Securities, at his address appearing on
the Security register provided for in Section 2.3 of this Indenture.
The above provisions of this Section 10.6 shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
Section 10.7 Taxes on Shares Issued.
The issue of stock certificates on conversions of Securities shall be made
without charge to the converting Holder of Securities for any tax in respect of
the issue thereof. The
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Company shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of stock in any
name other than that of the Holder of any Security converted, and the Company
shall not be required to issue or deliver any such stock certificate unless and
until the person or persons requesting the issue thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
Section 10.8 Reservation of Shares; Shares to be Fully Paid; Compliance
with Governmental Requirements; Listing of Common Stock.
The Company shall use its best efforts, including asking its stockholders
to authorize additional Common Stock to provide, free from preemptive rights,
out of its authorized but unissued shares or shares held in treasury, sufficient
shares of Common Stock to provide for the conversion of the Securities from time
to time as such Securities are presented for conversion.
Before taking any action which would cause an adjustment reducing the
conversion price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Securities, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted conversion price.
The Company covenants that all shares of Common Stock which may be issued
upon conversion of Securities will upon issue be fully paid and nonassessable by
the Company and free from all taxes, liens and charges with respect to the issue
thereof.
The Company covenants that if any shares of Common Stock to be provided for
the purpose of conversion of Securities hereunder require registration with or
approval of any governmental authority under any Federal or State law before
such shares may be validly issued upon conversion, the Company will in good
faith and as expeditiously as possible endeavor to secure such registration or
approval, as the case may be.
The Company further covenants that if at any time Common Stock shall be
listed on the American Stock Exchange or any other national securities exchange
the Company will, if permitted by the rules of such exchange, list and keep
listed so long as the Common Stock shall be so listed on such exchange, all
Common Stock issuable upon conversion of the Securities.
Section 10.9 Responsibility of Trustee.
The Trustee and any other conversion agent shall not at any time be under
any duty or responsibility to any Holder of Securities to determine whether any
facts exist which may require any adjustment of the conversion price or other
adjustment or with respect to the nature or extent or calculation of any such
adjustment when made, or with respect to the method employed, herein or in any
supplemental indenture provided to be employed, in making the same. The Trustee
and any other conversion agent shall not be accountable with respect to the
validity or value (or the kind or amount) of any shares of Common Stock, or of
any securities or
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property, which may at any time be issued or delivered upon the conversion
of any Security; and the Trustee and any other conversion agent make no
representations with respect thereto. Subject to the provisions of Section 7.1,
neither the Trustee nor any conversion agent shall be responsible for any
failure of the Company to issue, transfer or deliver any shares of Common Stock
or stock certificates or other securities or property or cash upon the surrender
of any Security for the purpose of conversion or to comply with any of the
duties, responsibilities or covenants of the Company contained in this
Article 10. Without limiting the generality of the foregoing, neither the
Trustee nor any conversion agent shall be under any responsibility to determine
the correctness of any provisions contained in any supplemental indenture
entered into pursuant to Section 10.6 relating either to the kind or amount of
shares of stock or securities or property (including cash) receivable by Holders
of Securities upon the conversion of their Securities after any event referred
to in Section 10.6 or to any adjustment to be made with respect thereto, but,
subject to the provisions of Section 7.1, may accept as conclusive evidence of
the correctness of any such provisions, and shall be protected in relying upon,
the Officers' Certificate (which the Company shall be obligated to file with the
Trustee before the execution of any such supplemental indenture) with respect
thereto.
Section 10.10 Notice to Holders Before Certain Actions.
In case:
(a) the Company shall declare a dividend (or any other distribution) on its
Common Stock (other than in cash out of retained earnings); or
(b) the Company shall authorize the granting to the holders of its Common
Stock of rights or warrants to subscribe for or purchase any share of any class
or any other rights or warrants; or
(c) of any reclassification of the Common Stock of the Company (other than
a subdivision or combination of its outstanding Common Stock, or a change in par
value, or from par value to no par value, or from no par value to par value), or
of any consolidation or merger to which the Company is a party and for which
approval of any shareholders of the Company is required, or of the sale or
transfer of all or substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or winding-up
of the Company; or
(e) of an increase in the interest rate on the Securities pursuant to the
Registration Rights Agreement,
the Company shall cause to be filed with the Trustee and to be mailed to
each Holder of Securities at his address appearing on the Securities Register
provided for in Section 2.3 of this Indenture, as promptly as possible but in
any event at least fifteen days before the applicable date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution or rights, or, if a record is not to
be taken, the date as of which the
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holders of Common Stock of record to be entitled to such dividend,
distribution or rights are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective or occurring and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up. Failure to give such notice, or any
defect therein, shall not affect the legality or validity of such dividend,
distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.
ARTICLE XI
SUBORDINATION
Section 11.1 Agreement to Subordinate.
The Company agrees, and each Holder by accepting a Security agrees, that
the indebtedness evidenced by the Securities, and any guarantee of that
indebtedness, is subordinated in right of payment, to the extent and in the
manner provided in this Article, to the prior payment in full of all Senior
Indebtedness, and that the subordination is for the benefit of the holders of
Senior Indebtedness.
Section 11.2 Certain Definitions.
"Senior Indebtedness" means:
(a) the principal of, interest (including, to the extent permitted by
applicable law, interest on or after the commencement of a proceeding referred
to in clauses (f) or (g) of Section 6.1 whether or not representing an allowed
claim in such proceeding) and premium, if any, on and any other amounts owing
with respect to (i)any indebtedness of the Company, now or hereafter
outstanding, in respect of borrowed money (other than the Securities and the
Existing Debentures), (ii)any indebtedness of the Company, now or hereafter
outstanding (other than the Securities and the Existing Debentures), evidenced
by a bond, note, debenture, capitalized lease, letter of credit or other similar
instrument, (iii)any other written obligation of the Company, now or hereafter
outstanding, to pay money issued or assumed as all or part of the consideration
for the acquisition of property, assets or securities, including without
limitation, interest rate swap agreements, currency hedging obligations, hedging
obligations with respect to the purchase or sale of oil and gas, and any other
hedging agreement entered into in the ordinary course of business and (iv)any
guaranty or endorsement (other than for collection or deposit in the ordinary
course of business) or discount with recourse of, or other agreement (contingent
or otherwise) to purchase, repurchase or otherwise acquire, to supply or advance
funds or to become liable with respect to (directly or indirectly), any
indebtedness or obligation of any person of the type referred to in the
preceding subclauses (i), (ii) and(iii) now or hereafter outstanding; and
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(b) any refundings, refinancings, renewals or extensions of any
indebtedness or other obligation described in clause (a) of this Section 11.2.
Notwithstanding the foregoing (i) if, by the terms of the instrument
creating or evidencing any indebtedness or obligation referred to in clauses (a)
or (b) above, it is expressly provided that such indebtedness or obligation is
not senior in right of payment to the Securities, such indebtedness or
obligation shall not be included as Senior Indebtedness, and (ii) the Notes
shall be, pari passu, in right of payment with the Existing Debentures, except
that the Existing Debentures have the benefit of guarantees by the Company's
Subsidiaries.
"Representative" means the indenture trustee or other trustee, agent or
representative for an issue of Senior Indebtedness.
Section 11.3 Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a liquidation,
dissolution or winding up of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property:
(1) holders of Senior Indebtedness shall be entitled to receive payment in
full, in cash or in a manner satisfactory to the holders of such Senior
Indebtedness, of all Senior Indebtedness before Holders shall be entitled to
receive, from the Company or from any guarantor of the Obligations under this
Indenture and the Notes, any payments of principal of or premium, if any, or
interest on Securities; and
(2) until the Senior Indebtedness is paid in full in cash or in a manner
satisfactory to the holders of such Senior Indebtedness, any distribution to
which Holders would be entitled but for this Article shall be made to holders of
Senior Indebtedness as their interest may appear, except that Holders may
receive securities that are subordinated to Senior Indebtedness to at least the
same extent as the Securities.
A distribution may consist of cash, securities or other property.
Section 11.4 Company Not to Make Payments with Respect to Securities in
Certain Circumstances.
(a) Upon the maturity of any Senior Indebtedness by lapse of time,
acceleration or otherwise, all principal thereof, premium, if any, and interest
thereon and any other amounts owing in respect thereof shall first be paid in
full, or such payment duly provided for in cash or in a manner satisfactory to
the holders of such Senior Indebtedness, before any payment is made on account
of the principal of or premium, if any, or interest on the Securities or to
acquire any of the Securities.
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(b) Upon the happening of an event of default (or if any event of default
would result upon any payment upon or with respect to the Securities) with
respect to any Senior Indebtedness as such event of default is defined therein
or in the instrument under which it is outstanding, permitting holders to
accelerate the maturity thereof, and, if the default is other than default in
payment of the principal of, premium, if any, or interest on or any other amount
owing in respect of such Senior Indebtedness, upon written notice thereof given
to the Company and the Trustee by the holders of Senior Indebtedness or their
Representative, then, unless such an event of default shall have been cured or
waived or shall have ceased to exist, no payment shall be made by the Company or
any guarantor with respect to the principal of or premium, if any, or interest
on the Securities or to acquire any of the Securities.
Section 11.5 Acceleration of Securities.
If payment of the Securities is accelerated because of an Event of Default,
the Company shall promptly notify holders of Senior Indebtedness of the
acceleration.
Section 11.6 When Distribution Must Be Paid Over.
If a distribution is made to Holders that, because of this Article 11,
should not have been made to them, the Holders who receive the distribution
shall hold it in trust for holders of Senior Indebtedness and pay it over to
them as their interests may appear.
Section 11.7 Notice by Company.
The Company shall promptly notify the Trustee and the Paying Agent of any
facts known to the Company that would cause a payment of principal of or
premium, if any, or interest on the Securities to violate this Article 11.
Section 11.8 Subrogation.
After all Senior Indebtedness is paid in full and until the Securities are
paid in full, Holders shall be subrogated to the rights of holders of Senior
Indebtedness to receive distributions applicable to Senior Indebtedness to the
extent that distributions otherwise payable to the Holders have been applied to
the payment of Senior Indebtedness. A distribution made under this Article 11 to
holders of Senior Indebtedness which otherwise would have been made to Holders
is not, as between the Company and Holders, a payment by the Company on Senior
Indebtedness.
Section 11.9 Relative Rights.
This Article 11 defines the relative rights of Holders and holders of
Senior Indebtedness. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders, the obligation of the
Company, which is absolute and unconditional, to pay principal of and premium,
if any, and interest on the Securities in accordance with their terms;
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(2) affect the relative rights of Holders and creditors of the Company,
other than holders of Senior Indebtedness and any guarantors of the Obligation
under this Indenture and the Notes; or
(3) prevent the Trustee or any Holder from exercising its available
remedies upon a Default, subject to the rights of holders of Senior Indebtedness
to receive distributions otherwise payable to Holders.
If the Company fails because of this Article 11 to pay principal of or
premium, if any, or interest on a Security on the due date, such failure shall
nevertheless be deemed a Default.
Section 11.10 Subordination May Not Be Impaired by Company.
No right of any holder of Senior Indebtedness to enforce the subordination
of the indebtedness evidenced by the Securities shall be impaired by any act or
failure to act by the Company or by its failure to comply with the terms of this
Indenture.
Section 11.11 Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Indebtedness, the distribution may be made and the notice given to their
Representative.
Section 11.12 Rights of Trustee and Paying Agent.
Notwithstanding any provisions of this Indenture to the contrary, the
Trustee and any Paying Agent may continue to make payments on the Securities and
shall not at any time be charged with knowledge of the existence of any facts
which would prohibit the making of such payments until it receives written
notice (received by a Responsible Officer, in the case of the Trustee)
reasonably satisfactory to it that payments may not be made under this
Article 11 and, before the receipt of any such notice, the Trustee, subject to
the provisions of Article 7, and any agent shall be entitled to assume
conclusively that no such facts exist. The Company, an Agent, a Representative
or a holder of Senior Indebtedness may give the notice. If an issue of Senior
Indebtedness has a Representative, only the Representative (or any
Representative, if more than one) may give the notice with respect to such
Senior Indebtedness.
The Trustee shall be entitled to rely on the delivery to it of a written
notice by a Person representing himself to be a holder of Senior Indebtedness
(or a Representative) to establish that such notice has been given by a holder
of Senior Indebtedness (or a Representative), and shall be entitled to rely on
any written notice by a Person representing himself to be a holder of Senior
Indebtedness to the effect that such issue of Senior Indebtedness has no
Representative.
Any deposit of moneys by the Company with the Trustee or any Paying Agent
(whether or not in trust) for the payment of the principal of or premium, if
any, or interest on, or payment on account of Change in Control, if any, of, any
Securities shall be subject to the
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provisions of this Article 11, except that if, at least three business days
before the date on which by the terms of this Indenture any such moneys may
become payable for any purpose (including, without limitation, the payment of
principal of or premium, if any, or interest on any Security), the Trustee shall
not have received with respect to such moneys the notice provided for in this
Section 11.12, then the Trustee shall have full power and authority to receive
such moneys and to apply the same to the purpose for which they were received
and shall not be affected by any notice to the contrary which may be received by
it within three business days before or on or after such date. This
Section 11.12 shall be construed solely for the benefit of the Trustee and
Paying Agent and shall not otherwise affect the rights of holders of Senior
Indebtedness. If the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article 11, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of the Senior
Indebtedness held by such Person, the extent to which such person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article 11, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive payment.
The Trustee shall not be deemed to owe any fiduciary duty to holders of
Senior Indebtedness by virtue of the provisions of this Article 11. The
Trustee's responsibilities to the holders of Senior Indebtedness are limited to
those set forth in this Article 11, and no implied covenants or obligations
shall be read into this Indenture. The Trustee shall not become liable to the
holders of Senior Indebtedness if it makes a payment prohibited by this
Article 11 in good faith.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. Any
agent may do the same with like rights.
Section 11.13 Effectuation of Subordination by Trustee.
Each Holder of Securities, by acceptance thereof, authorizes and directs
the Trustee on his behalf to take such action as may be necessary or appropriate
to effect the subordination provided in this Article 11 and appoints the Trustee
his attorney-in-fact for any and all such purposes.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA S318 (c), the imposed duties shall control.
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Section 12.2 Notices.
Any notice or communication by the Company or the Trustee to the others is
duly given if in writing and delivered in person or mailed by first-class mail
(registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the other's address:
If to the Company:
Key Energy Group, Inc.
Two Tower Center, Tenth Floor
East Brunswick, New Jersey 08816
Attention: Francis D. John
Telecopier No.: (732) 247-5148
With a copy to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002
Attention: Samuel N. Allen
Telecopier No.: (713) 228-1331
If to the Trustee:
American Stock Transfer & Trust Company
40 Wall Street
46th Floor
New York, New York 10005
Attention: Executive Vice President
Telecopier No.: (718) 236-4558
With a copy to:
Herbert J. Lemmer
American Stock Transfer & Trust Company
6201 15th Avenue, 3rd Floor
Brooklyn, New York 11219
Telecopier No.: (718) 331-1552
The Company or the Trustee by notice to the others may designate additional
or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered
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60
back, if telexed; when receipt acknowledged, if telecopied; and the next
Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first-class mail
to his address shown on the register kept by the Registrar. Failure to mail a
notice or communication to a Holder or any defect in it shall not affect its
sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee at the same time.
Section 12.3 Communication to Holders with Other Holders.
Holders may communicate pursuant to TIA S 312(b) with other Holders with
respect to their rights under this Indenture or the Securities. The Company, the
Trustee, the Registrar and any anyone else shall have the protection of TIA S
312(c).
Section 12.4 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall, upon request, furnish to the
Trustee an Officer's Certificate and Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee (which shall include the statements set
forth in Section 13.5) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with.
Section 12.5 Statements Required in Certificate.
Each certificate with respect to compliance with a condition or covenant
provided for in this Indenture (other than a certificate provided pursuant to
TIA S 314(a) (4)) shall include:
(a) a statement that the person making such certificate has read such
covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements contained in such certificate are based;
(c) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
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(d) a statement as to whether or not, in the opinion of such person, such
condition or covenant has been complied with.
Section 12.6 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.7 Additional Rights of Holders of Transfer Restricted
Securities.
In addition to the rights provided to Holders of Securities under this
Indenture, Holders of Transferred Restricted Securities shall have all the
rights set forth in the Registration Rights Agreement and certain other
agreements executed and delivered in connection herewith.
Section 12.8 Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in New York, New York, or at a place of payment are authorized or
obligated by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next day that is not a Legal Holiday, and no interest shall accrue for
the intervening period.
Section 12.9 No Recourse Against Others.
No past, present or future director, officer, employee, agent, manager,
stockholder or other Affiliate of the Company shall have any liability for any
obligations of the Company under the Securities, the Indenture, or for any claim
based on, in respect of or by reason of such obligations or their creation. Each
Holder by accepting a Security waives and releases all such liability.
Section 12.10 Duplicate Originals.
The parties may sign any number of copies of this Indenture. One signed
copy is enough to prove this Indenture.
Section 12.11 Governing Law.
This indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflict of law rules thereof.
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Section 12.12 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or its Subsidiaries. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
Section 12.13 Successors.
All agreements of the Company in this Indenture and the Securities shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successor.
Section 12.14 Severability.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 12.15 Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 12.16 Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof and shall in no way modify or
restrict any of the terms or provisions hereof.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have causes this Indenture to be
executed as of the day and year first above written.
Dated as of September 25, 1997 KEY ENERGY GROUP, INC.
By:
Its:
Attest:
(SEAL)
Dated as of September 25, 1997 AMERICAN STOCK TRANSFER
& TRUST COMPANY, as Trustee
By:
Its:
Attest:
(SEAL)
053113\1008\02764\979QGT85.OTH
Exhibit A-1
(Face of Security)
5% CONVERTIBLE SUBORDINATED NOTE
DUE 2004
No. $______
KEY ENERGY GROUP, INC.
promises to pay to
or its registered assigns, the principal sum of
Dollars on September 25, 2004.
Interest Payment Dates: September 15 and March 15, commencing March 15, 1998.
Record Dates: September 1 and March 1 (whether or not a Business Day).
KEY ENERGY GROUP, INC.
By:
Officer of the Company
(SEAL)
Attest:
This is one of the 5% Convertible Subordinated
Notes due 2004 referred to in the By:
within-mentioned Indenture: Officer of the Company
American Stock Transfer & Trust Company, as Trustee
By
Authorized Signature
Dated: ,
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053113\1008\02764\979QGT85.OTH
(Back of Security)
5% CONVERTIBLE SUBORDINATED NOTE
DUE 2004
[Unless and until it is exchanged in whole or in part for Securities in
definitive form, this Security may not be transferred except as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or by the Depository or any
such nominee to a successor Depository or a nominee of such successor
Depository. Unless this certificate is presented by an authorized representative
of The Depository Trust Company, 55 Water Street, New York, New York ("DTC"), to
the issuer or its agent for registration of transfer, exchange or payment, and
any certificate issued is registered in the name of Cede & Co. or such other
name as requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]1
THE NOTE EVIDENCED HEREBY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501 (a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THE NOTE EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT
IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED
HEREBY RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON
STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO KEY ENERGY GROUP, INC.
OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, BEFORE
SUCH TRANSFER, FURNISHES TO AMERICAN STOCK TRANSFER & TRUST COMPANY, AS TRUSTEE
(OR SUCCESSOR TRUSTEE, AS APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE
NOTE EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH
TRUSTEE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM -------- 1/ This paragraph is
to be included only if the Security is in global form.
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REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH
CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE
EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT
TO CLAUSE 2(F) ABOVE), A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED
HEREBY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF SUCH NOTE,
(OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(E) ABOVE), THE HOLDER
MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO AMERICAN STOCK TRANSFER & TRUST COMPANY, AS
TRUSTEE (OR SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE PROPOSED
TRANSFER IS PURSUANT TO CLAUSE 2(F) ABOVE, THE HOLDER MUST, BEFORE
SUCH TRANSFER, FURNISH TO AMERICAN STOCK TRANSFER & TRUST
COMPANY, AS TRUSTEE (OR SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING
MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF
THE NOTE EVIDENCED HEREBY PURSUANT TO CLAUSE 2(F) ABOVE OR THE
EXPIRATION OF TWO YEARS FROM THE ORIGINAL ISSUANCE OF THE NOTE
EVIDENCED HEREBY. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Section 1. Interest. Key Energy Group, Inc., a Maryland corporation (the
"Company"), promises to pay interest on the principal amount of this 5%
Convertible Subordinated Note due 2004 (the "Note") at the rate and in the
manner specified below.
The Company will pay interest semi-annually on September 15 and March 15 of
each year commencing March 15, 1998, or if any such day is not a Business Day,
on the next Business Day (each an "Interest Payment Date") to record holders of
Notes ("Holders") at the close of business on September 1 or March 1 immediately
preceding the applicable Interest Payment Date. A copy of the Indenture (defined
below), the Registration Rights Agreement and all other agreements affecting
this Note or the Holders may be obtained from the Company upon request.
Interest shall be computed on the basis of a 360-day year consisting of
twelve 30-day months. Interest shall accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of the
original issuance of this Note. To the extent lawful, the Company shall pay
interest on overdue principal at the rate of 1% per annum in excess of the then
applicable interest rate on this Note; it shall pay interest on overdue
installments of interest (without regard to any applicable grace periods) at the
same rate to the extent lawful.
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053113\1008\02764\979QGT85.OTH
Section 2. Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) to Holders at the close of business on the record
date next preceding the Interest Payment Date, even if such Notes are canceled
after such record date and on or before such Interest Payment Date. The Holder
hereof must surrender this Note to a Paying Agent (as defined in the Indenture)
to collect principal payments. The Company shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. The Company, however, may pay principal and
interest by check payable in such money. It may mail an interest check to a
Holder's registered address.
Section 3. Paying Agent and Registrar. Initially, the Trustee shall act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co- Registrar without notice to any Holder. The Company and any of its
Subsidiaries may act in any such capacity.
Section 4. Indenture. The Company issued the Notes under an Indenture,
dated as of September 25, 1997 (the "Indenture"), among the Company and American
Stock Transfer & Trust Company, as Trustee. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S. Code SS 77aaa-77bbbb), as amended by the
Trust Indenture Reform Act of 1990, and as in effect on the date of the
Indenture. The Notes are subject to all such terms, and Holders are referred to
the Indenture and such Act for a statement of such terms. The terms of the
Indenture shall govern any inconsistencies between the Indenture and the Notes.
Capitalized terms used herein that are not specifically defined herein shall
have the meanings set forth in the Indenture. The Notes are unsecured general
obligations of the Company limited to $216,000,000 in aggregate principal
amount.
Section 5. Optional Redemption. The Company may redeem at any time on or
after September 15, 2000, all or any portion of the Securities outstanding at
the following redemption prices expressed as a percentage of the principal
amount thereof, if the Securities are redeemed during the 12-month period
beginning September 15, of the following years:
Year Percentage
2000................................................ 102.86%
2001................................................ 102.14%
2002................................................ 101.43%
2003................................................ 100.71%
2004................................................ 100%
Section 6. Redemption or Repurchase at Option of Holder. If there is a
Change in Control (as defined in the Indenture), the Company will be required to
offer to
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053113\1008\02764\979QGT85.OTH
purchase on the Change in Control Payment Date (as defined in the
Indenture) all outstanding Notes at 100% of the principal amount thereof, plus
accrued and unpaid interest to the date of purchase. Holders whose Notes are
subject to an offer to purchase will receive an offer to purchase from the
Company prior to any related Change in Control Payment Date and may elect to
have their Notes purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
Section 7. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 45 days before the redemption date to each
Holder to be redeemed at its registered address. Notes may be redeemed in part
but only in whole multiples of $1,000, unless all of the Notes held by a Holder
are to be redeemed. On and after the redemption date, interest ceases to accrue
on Notes or portions of them called for redemption.
Section 8. Conversion. Subject to the provisions of the Indenture, the
Holder hereof has the right, at its option, at any time on or after 270 days
after the Issue Date and on or before the maturity, to convert the principal
hereof or any portion of such principal that is $1,000 or a multiple thereof,
into, at the Company's option, (a) cash in an amount equal to the Current Market
Price, as of the conversion date, of the Common Stock to which the principal
would otherwise be converted, or (b) that number of shares of the Company's
Common Stock (as such shares shall then be constituted) obtained by dividing the
principal amount of this Note or portion thereof to be converted by the
conversion price of $38.50, or such conversion price as adjusted from time to
time as provided in the Indenture or (c) a combination of cash and Common Stock
in proportions determined by the Company in its sole discretion; provided,
however, that the Company's option to convert the principal into cash or into a
combination of cash and Common Stock, shall terminate at the close of business
on the date the Company's charter is amended to increase the number of shares of
authorized Common Stock to at least that number of shares sufficient to reserve
for the conversion of all the Notes.
The right to convert with respect to any Security or portion of a Security
that shall be called for redemption or delivered for repurchase, shall terminate
at the close of business on the date fixed for redemption of such Security or
portion of a Security or the second trading day preceding a Change in Control
Payment Date, as the case may be, unless the Company shall default in payment
due upon redemption or repurchase thereof.
No adjustments in respect of interest or dividends will be made upon any
conversion; provided, however, that if the Note shall be surrendered for
conversion during the period from the close of business on any record date for
the payment of interest to the opening of business on the following interest
payment date, this Note (unless it or the portion being converted shall have
been called for redemption on a date in such period) must be accompanied by an
amount, in funds acceptable to the Company, equal to the interest payable on
such interest payment date on the principal amount being converted. No
fractional shares will be issued upon any conversion, but an adjustment in cash
shall be made, as provided in the Indenture, in respect of any fraction of a
share which would otherwise be issuable upon the surrender of any Note or Notes
for conversion. A holder of Notes is not entitled to any rights of a holder of
Common Stock until such holder has converted his Notes to Common
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053113\1008\02764\979QGT85.OTH
Stock, and only to the extent such Notes are to have been converted to
Common Stock under the Indenture.
The conversion price is subject to adjustment in accordance with Section
10.5 of the Indenture.
Section 9. Subordination. The Securities are subordinated to Senior
Indebtedness (as defined in the Indenture). To the extent provided in the
Indenture, Senior Indebtedness must be paid before the Securities may be paid
either by the Company or any guarantor of Obligations under this Indenture and
the Note. The Company agrees, and each Holder by accepting a Security agrees, to
the subordination provisions contained in the Indenture and authorizes the
Trustee to give effect to such provisions, and each Holder appoints the Trustee
his attorney-in-fact for any and all such purposes. This Note shall be pari
passu, in all respects, with the Existing Debentures (as defined in the
Indenture), except that the Existing Debentures have the benefit of guarantees
by the Company's Subsidiaries.
Section 10. Denominations, Transfer, Exchange. The Notes are initially
issued in global form. The global Note represents such of the outstanding
Securities as shall be specified therein or endorsed thereon in accordance with
the Indenture. The definitive Securities are in registered form without coupons
in denominations of $1,000 and whole multiples of $1,000. The transfer of Notes
may be registered and Notes may be exchanged as provided in the Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not exchange
or register the transfer of any Note or portion of an Note selected for
redemption. Also, it need not exchange or register the transfer of any Notes for
a period of 15 days before a selection of Notes to be redeemed.
Section 11. Persons Deemed Owners. Before due presentment to the Trustee
for registration of the transfer of this Note, the Trustee, any Agent and the
Company may deem and treat the person in whose name this Note is registered as
its absolute owner for the purpose of receiving payment of principal of and
interest on this Note and for all other purposes whatsoever, whether or not this
Note is overdue, and neither the Trustee, any Agent nor the Company shall be
affected by notice to the contrary. The registered holder of an Note shall be
treated as its owner for all purposes.
Section 12. Amendments and Waivers. Subject to certain exceptions, the
Indenture or the Securities may be amended with the consent of the Holders of at
least a majority in principal amount of the then outstanding Securities, and any
existing default (except a payment default) may be waived with the consent of
the holders of a majority in principal amount of the then outstanding
Securities. Without the consent of any Holder, the Indenture or the Securities
may be amended to cure any ambiguity, defect or inconsistency, to provide for
assumption of Company obligations to Holders, to make any change that does not
adversely affect the rights of any Holder, to provide for any uncertificated
Notes in addition to certificated Notes, or to comply with requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the TIA.
A1-6
053113\1008\02764\979QGT85.OTH
Section 13. Defaults and Remedies. Events of default include: default in
payment of interest on the Securities for 30 days; default in payment of
principal of or premium on the Securities when due; failure by the Company for
60 days after notice to it to comply with its agreements in the Indenture or the
Securities; defaults under and acceleration before express maturity of certain
other Indebtedness that aggregates $25,000,000 or more; certain final judgments
which remain undischarged if the aggregate of all such judgments exceeds
$25,000,000 or more; certain final judgments which remain undischarged if the
aggregate of all such judgments exceeds $25,000,000; and certain events of
bankruptcy or insolvency. If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Securities may declare all the Securities to be due and payable
immediately, except that in the case of an Event of Default arising from certain
events of bankruptcy or insolvency, all outstanding Securities become due and
payable immediately without further action or notice and all outstanding
Securities, and all Obligations and Claims with respect thereto, become
immediately due and payable. Holders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the Securities.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Securities may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders notice of any continuing default
(except a default in payment of principal or interest) if it determines that
withholding notice is in their interests. The Company must furnish an annual
compliance certificate to the Trustee.
Section 14. Trustee Dealings with Company. The Trustee under the Indenture,
in its individual or any other capacity, may make loans to, accept deposits
from, and perform services for the Company or its Affiliates, and may otherwise
deal with the Company or its Affiliates, as if it were not Trustee; provided,
however, that if the Trustee acquires any conflicting interest as described in
the Trust Indenture Act, it must eliminate such conflict or resign.
Section 15. No Recourse Against Others. No director, officer, employee,
agent, manager, stockholder or other Affiliates of the Company shall have any
liability for any obligations of the Company under the Securities, the
Indenture, or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
Section 16. Authentication. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
Section 17. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST = Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
Section 18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and has directed the Trustee to use
CUSIP
A1-7
053113\1008\02764\979QGT85.OTH
numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification number placed thereon.
Section 19. Additional Rights of Holders of Transfer Restricted Securities.
In addition to the rights provided to Holders of Securities under the Indenture,
Holders of Transferred Restricted Securities shall have all the rights set forth
in the Registration Rights Agreement referred to in the Indenture and certain
other agreements executed and delivered in connection therewith.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Request may be made to:
Key Energy Group, Inc.
Two Tower Center, Tenth Floor
East Brunswick, New Jersey 08816
Attn: Francis D. John
A1-8
053113\1008\02764\979QGT85.OTH
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
agent to transfer this Security on the books of the
Company. The agent may substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears
on the face of this Security)
Signature Guaranteed:
By:
(THE SIGNATURE(S) SHOULD BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(Banks, Stock Brokers, Savings and Loan Associations,
and Credit Unions) WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM PURSUANT TO S.E.C. RULE 17Ad-15.)
A1-9
053113\1008\02764\979QGT85.OTH
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Security purchased by
the Company pursuant to Section 4.10 of the Indenture (Change in Control), state
the amount you elect to have purchased (if all, write "ALL"):
$__________________________
Date:
Your Signature:
(Sign exactly as your name appears
on the face of this Security)
Signature Guaranteed:
By:
(THE SIGNATURE(S) SHOULD BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(Banks, Stock Brokers, Savings and Loan Associations,
and Credit Unions) WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM PURSUANT TO S.E.C. RULE 17Ad-15.)
A1-10
053113\1008\02764\979QGT85.OTH
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL SECURITIES 2
The following exchanges of a part of this Global Security for Definitive
Securities have been made:
Amount of Principal Signature of decrease in Amount of Amount of authorized
Date of Principal Increase in this Global officer of Exchange Amount of
Principal Security Trustee or this Global Amount of this following such
Securities Security Global Security decrease (or Custodian increase)
------------------- ----------------------- --------------------------
- ------------------------- ---------------------------
- --------
2 This is to be included only if the Security is in global form
A1-11
053113\1008\02764\979QGT85.OTH
Exhibit A-2
(Face of Security)
5% CONVERTIBLE SUBORDINATED NOTE
DUE 2004
No. $______
KEY ENERGY GROUP, INC.
promises to pay to
or its registered assigns, the principal sum of
Dollars on September 25, 2004.
Interest Payment Dates: September 15 and March 15, commencing March 15, 1998.
Record Dates: September 1 and March 1 (whether or not a Business Day).
KEY ENERGY GROUP, INC.
By:
Officer of the Company
(SEAL)
Attest:
This is one of the 5% Convertible Subordinated
Notes due 2004 referred to in the By:
within-mentioned Indenture: Officer of the Company
American Stock Transfer & Trust Company, as Trustee
By
Authorized Signature
Dated: ,
053113\1008\02764\979QGT85.OTH
A2-1
(Back of Security)
5% CONVERTIBLE SUBORDINATED NOTE
DUE 2004
[THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE,
AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR
CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED
HEREIN).]
[THIS GLOBAL NOTE IS HELD BY THE DEPOSITORY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO
ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE
MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO
THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT
NOT IN PART PURSUANT TO SECTION 2.6 OF THE INDENTURE, (III) THIS GLOBAL
NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITORY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY.]
[Unless and until it is exchanged in whole or in part for Securities in
definitive form, this Security may not be transferred except as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or by the Depository or any
such nominee to a successor Depository or a nominee of such successor
Depository. Unless this certificate is presented by an authorized representative
of The Depository Trust Company, 55 Water Street, New York, New York ("DTC"), to
the issuer or its agent for registration of transfer, exchange or payment, and
any certificate issued is registered in the name of Cede & Co. or such other
name as requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]1
THE NOTE EVIDENCED HEREBY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501 (a)(1), (2), -------- 1 This paragraph is to be included
only if the Security is in global form.
053113\1008\02764\979QGT85.OTH
A2-2
(3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR")
OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN
OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY RESELL OR OTHERWISE TRANSFER THE
NOTE EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE
EXCEPT (A) TO KEY ENERGY GROUP, INC. OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, BEFORE SUCH TRANSFER, FURNISHES TO AMERICAN STOCK
TRANSFER & TRUST COMPANY, AS TRUSTEE (OR SUCCESSOR TRUSTEE, AS APPLICABLE), A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM SUCH TRUSTEE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR
(F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
TRANSFER); AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE
EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(F)
ABOVE), A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH
ANY TRANSFER OF THE NOTE EVIDENCED HEREBY WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF SUCH NOTE, (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(E) ABOVE),
THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO AMERICAN
STOCK TRANSFER & TRUST COMPANY, AS TRUSTEE (OR SUCCESSOR TRUSTEE, AS
APPLICABLE). IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE 2(F) ABOVE, THE
HOLDER MUST, BEFORE SUCH TRANSFER, FURNISH TO AMERICAN STOCK TRANSFER & TRUST
COMPANY, AS TRUSTEE (OR SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE NOTE
EVIDENCED HEREBY PURSUANT TO CLAUSE 2(F) ABOVE OR THE EXPIRATION OF TWO YEARS
FROM THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
053113\1008\02764\979QGT85.OTH
A2-3
Section 20. Interest. Key Energy Group, Inc., a Maryland corporation (the
"Company"), promises to pay interest on the principal amount of this 5%
Convertible Subordinated Note due 2004 (the "Note") at the rate and in the
manner specified below.
The Company will pay interest semi-annually on September 15 and March 15 of
each year commencing March 15, 1998, or if any such day is not a Business Day,
on the next Business Day (each an "Interest Payment Date") to record holders of
Notes ("Holders") at the close of business on September 1 or March 1 immediately
preceding the applicable Interest Payment Date. A copy of the Indenture (defined
below), the Registration Rights Agreement and all other agreements affecting
this Note or the Holders may be obtained from the Company upon request.
Interest shall be computed on the basis of a 360-day year consisting of
twelve 30-day months. Interest shall accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of the
original issuance of this Note. To the extent lawful, the Company shall pay
interest on overdue principal at the rate of 1% per annum in excess of the then
applicable interest rate on this Note; it shall pay interest on overdue
installments of interest (without regard to any applicable grace periods) at the
same rate to the extent lawful.
Section 1. Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) to Holders at the close of business on the record
date next preceding the Interest Payment Date, even if such Notes are canceled
after such record date and on or before such Interest Payment Date. The Holder
hereof must surrender this Note to a Paying Agent (as defined in the Indenture)
to collect principal payments. The Company shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. The Company, however, may pay principal and
interest by check payable in such money. It may mail an interest check to a
Holder's registered address.
Section 2. Paying Agent and Registrar. Initially, the Trustee shall act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co- Registrar without notice to any Holder. The Company and any of its
Subsidiaries may act in any such capacity.
Section 3. Indenture. The Company issued the Notes under an Indenture,
dated as of September 25, 1997 (the "Indenture"), among the Company and American
Stock Transfer & Trust Company, as Trustee. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S. Code SS 77aaa-77bbbb), as amended by the
Trust Indenture Reform Act of 1990, and as in effect on the date of the
Indenture. The Notes are subject to all such terms, and Holders are referred to
the Indenture and such Act for a statement of such terms. The terms of the
Indenture shall govern any inconsistencies between the Indenture and the Notes.
Capitalized terms used herein that are not specifically defined herein shall
have the meanings set forth in the Indenture. The Notes are unsecured general
obligations of the Company limited to $216,000,000 in aggregate principal
amount.
053113\1008\02764\979QGT85.OTH A2-4
Section 4. Optional Redemption. The Company may redeem at any time on or
after September 15, 2000, all or any portion of the Securities outstanding at
the following redemption prices expressed as a percentage of the principal
amount thereof, if the Securities are redeemed during the 12-month period
beginning September 15, of the following years:
Year Percentage
2000..................................................... 102.86%
2001..................................................... 102.14%
2002..................................................... 101.43%
2003..................................................... 100.71%
2004..................................................... 100%
Section 5. Redemption or Repurchase at Option of Holder. If there is a
Change in Control (as defined in the Indenture), the Company will be required to
offer to purchase on the Change in Control Payment Date (as defined in the
Indenture) all outstanding Notes at 100% of the principal amount thereof, plus
accrued and unpaid interest to the date of purchase. Holders whose Notes are
subject to an offer to purchase will receive an offer to purchase from the
Company prior to any related Change in Control Payment Date and may elect to
have their Notes purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
Section 6. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 45 days before the redemption date to each
Holder to be redeemed at its registered address. Notes may be redeemed in part
but only in whole multiples of $1,000, unless all of the Notes held by a Holder
are to be redeemed. On and after the redemption date, interest ceases to accrue
on Notes or portions of them called for redemption.
Section 7. Conversion. Subject to the provisions of the Indenture, the
Holder hereof has the right, at its option, at any time on or after 270 days
after the Issue Date and on or before the maturity, to convert the principal
hereof or any portion of such principal that is $1,000 or a multiple thereof,
into, at the Company's option, (a) cash in an amount equal to the Current Market
Price, as of the conversion date, of the Common Stock to which the principal
would otherwise be converted, or (b) that number of shares of the Company's
Common Stock (as such shares shall then be constituted) obtained by dividing the
principal amount of this Note or portion thereof to be converted by the
conversion price of $38.50, or such conversion price as adjusted from time to
time as provided in the Indenture or (c) a combination of cash and Common Stock
in proportions determined by the Company in its sole discretion; provided,
however, that the Company's option to convert the principal into cash or into a
combination of cash and Common Stock, shall terminate at the close of business
on the date the Company's charter is amended to increase the number of shares of
053113\1008\02764\979QGT85.OTH
A2-5
authorized Common Stock to at least that number of shares sufficient to
reserve for the conversion of all the Notes.
The right to convert with respect to any Security or portion of a Security
that shall be called for redemption or delivered for repurchase, shall terminate
at the close of business on the date fixed for redemption of such Security or
portion of a Security or the second trading day preceding a Change in Control
Payment Date, as the case may be, unless the Company shall default in payment
due upon redemption or repurchase thereof.
No adjustments in respect of interest or dividends will be made upon any
conversion; provided, however, that if the Note shall be surrendered for
conversion during the period from the close of business on any record date for
the payment of interest to the opening of business on the following interest
payment date, this Note (unless it or the portion being converted shall have
been called for redemption on a date in such period) must be accompanied by an
amount, in funds acceptable to the Company, equal to the interest payable on
such interest payment date on the principal amount being converted. No
fractional shares will be issued upon any conversion, but an adjustment in cash
shall be made, as provided in the Indenture, in respect of any fraction of a
share which would otherwise be issuable upon the surrender of any Note or Notes
for conversion. A holder of Notes is not entitled to any rights of a holder of
Common Stock until such holder has converted his Notes to Common Stock, and only
to the extent such Notes are to have been converted to Common Stock under the
Indenture.
The conversion price is subject to adjustment in accordance with Section
10.5 of the Indenture.
Section 8. Subordination. The Securities are subordinated to Senior
Indebtedness (as defined in the Indenture). To the extent provided in the
Indenture, Senior Indebtedness must be paid before the Securities may be paid
either by the Company or any guarantor of Obligations under this Indenture and
the Note. The Company agrees, and each Holder by accepting a Security agrees, to
the subordination provisions contained in the Indenture and authorizes the
Trustee to give effect to such provisions, and each Holder appoints the Trustee
his attorney-in-fact for any and all such purposes. This Note shall be pari
passu, in all respects, with the Existing Debentures (as defined in the
Indenture), except that the Existing Debentures have the benefit of guarantees
by the Company's Subsidiaries.
Section 9. Denominations, Transfer, Exchange. The Notes are initially
issued in global form. The global Note represents such of the outstanding
Securities as shall be specified therein or endorsed thereon in accordance with
the Indenture. The definitive Securities are in registered form without coupons
in denominations of $1,000 and whole multiples of $1,000. The transfer of Notes
may be registered and Notes may be exchanged as provided in the Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not exchange
or register the transfer of any Note or portion of an Note selected for
redemption. Also, it need not exchange or register the transfer of any Notes for
a period of 15 days before a selection of Notes to be redeemed.
053113\1008\02764\979QGT85.OTH
A2-6
Section 10. Persons Deemed Owners. Before due presentment to the Trustee
for registration of the transfer of this Note, the Trustee, any Agent and the
Company may deem and treat the person in whose name this Note is registered as
its absolute owner for the purpose of receiving payment of principal of and
interest on this Note and for all other purposes whatsoever, whether or not this
Note is overdue, and neither the Trustee, any Agent nor the Company shall be
affected by notice to the contrary. The registered holder of an Note shall be
treated as its owner for all purposes.
Section 11. Amendments and Waivers. Subject to certain exceptions, the
Indenture or the Securities may be amended with the consent of the Holders of at
least a majority in principal amount of the then outstanding Securities, and any
existing default (except a payment default) may be waived with the consent of
the holders of a majority in principal amount of the then outstanding
Securities. Without the consent of any Holder, the Indenture or the Securities
may be amended to cure any ambiguity, defect or inconsistency, to provide for
assumption of Company obligations to Holders, to make any change that does not
adversely affect the rights of any Holder, to provide for any uncertificated
Notes in addition to certificated Notes, or to comply with requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the TIA.
Section 12. Defaults and Remedies. Events of default include: default in
payment of interest on the Securities for 30 days; default in payment of
principal of or premium on the Securities when due; failure by the Company for
60 days after notice to it to comply with its agreements in the Indenture or the
Securities; defaults under and acceleration before express maturity of certain
other Indebtedness that aggregates $25,000,000 or more; certain final judgments
which remain undischarged if the aggregate of all such judgments exceeds
$25,000,000 or more; certain final judgments which remain undischarged if the
aggregate of all such judgments exceeds $25,000,000; and certain events of
bankruptcy or insolvency. If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Securities may declare all the Securities to be due and payable
immediately, except that in the case of an Event of Default arising from certain
events of bankruptcy or insolvency, all outstanding Securities become due and
payable immediately without further action or notice and all outstanding
Securities, and all Obligations and Claims with respect thereto, become
immediately due and payable. Holders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the Securities.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Securities may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders notice of any continuing default
(except a default in payment of principal or interest) if it determines that
withholding notice is in their interests. The Company must furnish an annual
compliance certificate to the Trustee.
Section 13. Trustee Dealings with Company. The Trustee under the Indenture,
in its individual or any other capacity, may make loans to, accept deposits
from, and perform services for the Company or its Affiliates, and may otherwise
deal with the Company or its Affiliates, as if it were not Trustee; provided,
however, that if the Trustee acquires any conflicting interest as described in
the Trust Indenture Act, it must eliminate such conflict or resign.
053113\1008\02764\979QGT85.OTH
A2-7
Section 14. No Recourse Against Others. No director, officer, employee,
agent, manager, stockholder or other Affiliates of the Company shall have any
liability for any obligations of the Company under the Securities, the
Indenture, or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
Section 15. Authentication. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
Section 16. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST = Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
Section 17. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification number placed thereon.
Section 18. Additional Rights of Holders of Transfer Restricted Securities.
In addition to the rights provided to Holders of Securities under the Indenture,
Holders of Transferred Restricted Securities shall have all the rights set forth
in the Registration Rights Agreement referred to in the Indenture and certain
other agreements executed and delivered in connection therewith.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Request may be made to:
Key Energy Group, Inc.
Two Tower Center, Tenth Floor
East Brunswick, New Jersey 08816
Attn: Francis D. John
053113\1008\02764\979QGT85.OTH
A2-8
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
agent to transfer this Security on the books of the
Company. The agent may substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears
on the face of this Security)
Signature Guaranteed:
By:
(THE SIGNATURE(S) SHOULD BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(Banks, Stock Brokers, Savings and Loan Associations,
and Credit Unions) WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM PURSUANT TO S.E.C. RULE 17Ad-15.)
053113\1008\02764\979QGT85.OTH
A2-9
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Security purchased by
the Company pursuant to Section 4.10 of the Indenture (Change in Control), state
the amount you elect to have purchased (if all, write "ALL"):
$__________________________
Date:
Your Signature:
(Sign exactly as your name appears
on the face of this Security)
Signature Guaranteed:
By:
(THE SIGNATURE(S) SHOULD BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(Banks, Stock Brokers, Savings and Loan Associations,
and Credit Unions) WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM PURSUANT TO S.E.C. RULE 17Ad-15.)
053113\1008\02764\979QGT85.OTH
A2-10
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL SECURITIES 2
The following exchanges of a part of this Global Security for Definitive
Securities have been made:
Amount of Principal Signature of decrease in Amount of Amount of authorized
Date of Principal Increase in this Global officer of Exchange Amount of
Principal Security Trustee or this Global Amount of this following such
Securities Security Global Security decrease (or Custodian increase)
------------------- ----------------------- --------------------------
- ------------------------- ---------------------------
-------- 2 This is to be included only if the Security is in global form
053113\1008\02764\979QGT85.OTH
A2-11
::ODMA\PCDOCS\DOCS\139922\6
Stock Purchase Agreement
among
Key Rocky Mountain, Inc.,
Joseph R. Dunbar
and
Janice N. Dunbar
Dated as of September 29, 1997
::ODMA\PCDOCS\DOCS\139922\6
TABLE OF CONTENTS
Page
ARTICLE 1PURCHASE AND SALE
1.1 Purchase and Sale of the Company Shares...........................iii
1.2 Cash Adjustment Payment...........................................iii
1.3 Closing.............................................................2
1.4 Resignations; Consulting Agreement..................................2
1.5 Closing Deliveries..................................................2
1.5.1 Opinion of Buyer=s Counsel...................................2
1.5.2 Opinion of Shareholders= Counsel.............................3
ARTICLE 2REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Shareholders..................3
2.1.1 Organization and Standing..................................3
2.1.2 Agreement Authorized and its Effect on Other Obligations...4
2.1.3 Capitalization.............................................4
2.1.4 Ownership of the Company Shares............................4
2.1.5 No Subsidiaries............................................4
2.1.6 Financial Statements.......................................4
2.1.7 Liabilities................................................5
2.1.8. Additional Company Information.............................5
2.1.9 No Defaults................................................7
2.1.10 Absence of Certain Changes and Events......................7
2.1.11 Taxes......................................................8
2.1.12 Columbine Farms, Inc........................................9
2.1.13 Intellectual Property.......................................9
2.1.14 Title to and Condition of Assets............................9
2.1.15 Contracts...................................................9
2.1.16 Licenses and Permits........................................10
2.1.17 Litigation..................................................10
2.1.18 Environmental Compliance....................................10
2.1.19 Compliance with Other Laws..................................11
2.1.20 ERISA Plans or Labor Issues................................12
2.1.21 Investigations; Litigation..................................12
2.1.22 Absence of Certain Business Practices.......................13
2.1.23 No Untrue Statements........................................13
2.1.24 Consents and Approvals......................................13
2.1.25 Finder=s Fee................................................13
2.2 Representations and Warranties of Buyer.................................13
2.2.1 Organization and Good Standing...............................13
2.2.2 Agreement Authorized and its Effect on Other Obligations.....14
2.2.3 Consents and Approvals.......................................14
2.2.4 Investigations; Litigation...................................14
ARTICLE 3ADDITIONAL AGREEMENTS
3.1 Further Assurances..................................................14
3.2 Public Announcements................................................14
3.3 338(h)(10) Election.................................................14
ARTICLE 4INDEMNIFICATION
4.1 Indemnification by the Shareholders.................................15
4.2 Indemnification by Buyer............................................15
4.3. Indemnification Procedure...........................................15
ARTICLE 5MISCELLANEOUS
5.1 Survival of Representations, Warranties and Covenants...............16
5.2 Entirety............................................................16
5.3 Counterparts........................................................16
5.4 Notices and Waivers.................................................16
5.5 Table of Contents and Captions......................................17
5.6 Successors and Assigns..............................................17
5.7 Severability........................................................17
5.8 Applicable Law......................................................17
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this AAgreement@) is entered into as of
September 29, 1997, by and among Key Rocky Mountain, Inc., a Delaware
corporation (ABuyer@), and Joseph R. Dunbar and Janice N. Dunbar (collectively,
the AShareholders@).
W I T N E S S E T H:
WHEREAS, Buyer is a corporation duly organized and validly existing under
the laws of the State of Delaware, with its principal executive offices at Two
Tower Center, Tenth Floor, East Brunswick, New Jersey 08816;
WHEREAS, Dunbar Well Service, Inc. (the ACompany@) is a corporation duly
organized and validly existing under the laws of the State of Colorado, with its
principal executive offices at 1305 W. First Street, Gillette, Wyoming 82716;
WHEREAS, the Shareholders own 7,500 shares (the ACompany Shares@) of common
stock, par value $10 per share, of the Company (the ACompany Common Stock@),
which constitutes all of the issued and outstanding shares of capital stock of
the Company; and
WHEREAS, the Shareholders desire to sell to Buyer, and Buyer desires to
purchase from the Shareholders, all of the issued and outstanding capital stock
of the Company.
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
ARTICLE 1 PURCHASE AND SALE.1.1 Purchase and Sale of the Company Shares.1.1
Purchase and Sale of the Company Shares. Subject to the terms and conditions of
this Agreement, on the date hereof, the Shareholders agree to sell and convey to
Buyer, free and clear of all Encumbrances (as defined in Section 2.1.8.1
hereof), and Buyer agrees to purchase and accept from the Shareholders, all of
the Company Shares. In consideration of the sale of the Company Shares, Buyer
shall pay to the Shareholders a purchase price of Eleven Million Eight Hundred
Thirty Nine Thousand Dollars ($11,839,000) (the APurchase Price@) in cash, and
the Cash Adjustment Payment (as defined in Section 1.2 hereof), if any, in
accordance with Section 1.2 hereof.
20 ::ODMA\PCDOCS\DOCS\139922\6
1.2 Cash Adjustment Payment1.2Cash Adjustment Payment. Buyer shall cause to
be prepared and delivered to the Shareholders a consolidated balance sheet of
the Company as of the date hereof (the AFinal Balance Sheet@) within 60 days
after the date hereof, which balance sheet will be prepared in accordance with
generally accepted accounting principles, consistently applied in all respects.
Buyer and the Shareholders shall jointly review the Final Balance Sheet, and
endeavor in good faith to resolve all disagreements regarding the entries
thereon and reach a final determination thereof within 90 days from the date
hereof. If the parties cannot agree on the entries to be placed on the Final
Balance Sheet, the dispute will be resolved by an independent accounting firm
mutually agreed to by the Shareholders and Buyer (such agreement not to be
unreasonably withheld or delayed) whose resolution shall be binding on and
enforceable against the parties hereto. Within 10 days of reaching such final
determination, the following adjusting payments shall be made:
1.2.1 If the Final Net Current Value of the Company (defined below) exceeds
$1,839,000, Buyer shall pay to the Shareholders the amount of such difference
(the ACash Adjustment Payment@), or
1.2.2 If the Final Net Current Value of the Company (defined below) is less
than $1,839,000, Shareholders shall pay to Buyer the amount of such difference.
1.2.3 In addition, any capital expenditures made by Company since the HADCO
appraisal dated May 25, 1997, subject to Buyer=s approval, will be added to the
Final Net Current Value of the Company as set out in paragraph (1) or (2) above.
Buyer hereby acknowledges approval of the capital expenditures listed on
Schedule 1.2.
The term AFinal Net Current Value of the Company@ means the dollar value of
the amount by which the ATotal Current Assets@ as recorded on the Final Balance
Sheet exceed the ATotal Current Liabilities@ as recorded on the Final Balance
Sheet.
1.3 Closing1.3........Closing. Consummation of the transactions
contemplated by this Agreement (the AClosing@) shall take place at the offices
of Nicholas H. Carter, 310 South Gillette Avenue, Gillette, WY 82716,
contemporaneously with the execution of this Agreement by all of the parties
hereto (the AClosing Date@) unless another time, place or date is agreed to by
the Shareholders and the Buyer.
1.4 Resignations; Consulting Agreement1.4 Resignations; Consulting
Agreement. At the Closing, each of the officers and directors of the Company
will resign, and Buyer will enter into an consulting agreement (the AConsulting
Agreement@) with Joseph R. Dunbar. The performance of Joseph R. Dunbar as a
consultant to Buyer is separate and divisible from this Agreement and his manner
of performance of such consulting agreement shall not effect the binding
obligations of this Agreement.
1.5 Closing Deliveries1.5 Closing Deliveries. At the Closing, (a) the
Shareholders shall deliver to Buyer duly and validly issued certificate(s)
representing all of the Company Shares owned beneficially or of record by them,
each such certificate to be 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 Company Shares to Buyer, (b) the
Shareholders shall deliver Buyer an agreement not to compete dated the date
hereof (the ANon-Compete Agreement@), (c) the Shareholders and Buyer shall have
delivered to one another all other documents, instruments and agreements as
required under this Agreement, (d) Buyer shall deliver to the Shareholders the
cash purchase price payable at Closing as provided in Section 1.1 by a check
drawn on an account of Buyer or one of Buyer=s affiliates, and (e) the Buyer and
Shareholders will deliver to one another the opinions of counsel as described
below:
1.5.1 Opinion of Buyer=s Counsel1.5.1 Opinion of Buyer=s Counsel. The Buyer
shall deliver a favorable opinion, dated as of the Closing Date, from Porter &
Hedges, L.L.P., counsel for the Buyer, in form and substance satisfactory to the
Shareholders, to the effect that (i) the Buyer has been duly incorporated and is
validly existing as a corporation in good standing under the laws of its state
of organization; (ii) all corporate proceedings required to be taken by or on
the part of the Buyer to authorize the execution of this Agreement and the
implementation of the transactions contemplated hereby have been taken; and
(iii) this Agreement has been duly executed and delivered by, and is the legal,
valid and binding obligation of the Buyer and is enforceable against Buyer in
accordance with its terms, except as enforceability may be limited by (a)
equitable principles of general applicability or (b) bankruptcy, insolvency,
reorganization, fraudulent conveyance or similar laws affecting the rights of
creditors generally. In rendering such opinion, such counsel may rely upon (i)
certificates of public officials and of officers of the Buyer as to matters of
fact and (ii) the opinion or opinions of other counsel, which opinions shall be
reasonably satisfactory to the Shareholders, as to matters other than federal or
Texas law.
1.5.2 Opinion of Shareholders= Counsel1.5.2 Opinion of Shareholders=
Counsel. The Shareholders shall deliver a favorable opinion, dated the Closing
Date, from Nicholas H. Carter, Gillette, Wyoming, counsel to the Shareholders,
in form and substance satisfactory to Buyer, to the effect that (i) the Company
has been duly incorporated and is validly existing as a corporation in good
standing under the laws of the State of Colorado and is qualified to transact
business in every jurisdiction in which the nature of the Company=s contacts
require such qualification, (ii) all outstanding shares of the Company Common
Stock have been validly issued and are fully paid and nonassessable and are free
of preemptive rights; (iii) all of the Company Shares are owned beneficially and
of record by the Shareholders free of any Encumbrances; (iv) the Company owns
all of its assets free and clear of any Encumbrances other than those
Encumbrances listed on the Balance Sheet or Schedules hereto, and (v) this
Agreement, the Non-Competition Agreement and the Consulting Agreement have been
duly executed and delivered by, and this Agreement and the Consulting Agreement
are the legal valid and binding obligations of the Shareholders that are parties
thereto and are enforceable against the Shareholders that are parties thereto in
accordance with their terms, except as the enforceability of this Agreement may
be limited by (a) equitable principles of general applicability or (b)
bankruptcy, insolvency, reorganization, fraudulent conveyance or similar laws
affecting the rights of creditors generally. In rendering such opinion, such
counsel may rely upon (i) certificates of public officials and of officers of
the Company or the Shareholders as to matters of fact and (ii) on the opinion or
opinions of other counsel, which opinions shall be reasonably satisfactory to
Buyer, as to matters other than federal or Wyoming law.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Shareholders2.1 Representations
and Warranties of the Shareholders. Each of the Shareholders jointly and
severally represents and warrants to Buyer as follows:
2.1.1 Organization and Standing2.1.1 Organization and Standing. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Colorado, has full requisite corporate power and authority
to carry on its business as it is currently conducted, and to own and operate
the properties currently owned and operated by it, and is duly qualified or
licensed to do business and is in good standing as a foreign corporation
authorized to do business in all jurisdictions in which the character of the
properties owned or the nature of the business conducted by it would make such
qualification or licensing necessary.
2.1.2 Agreement Authorized and its Effect on Other
Obligations2.1.2Agreement Authorized and its Effect on Other Obligations. Each
of the Shareholders is a resident of Wyoming, above the age of 18 years, and has
the legal capacity and requisite power and authority to enter into, and perform
his obligations under this Agreement, the Non-Competition Agreement and the
Consulting Agreement. This Agreement, the Non-Competition Agreement and the
Consulting Agreement are valid and binding obligations of each of the
Shareholders that are a party thereto enforceable against each of the
Shareholders that are a party thereto in accordance with their terms. The
execution, delivery and performance of this Agreement, the Non-Competition
Agreement and the Consulting Agreement by each of the Shareholders that are a
party thereto will not conflict with or result in a violation or breach of any
term or provision of, nor constitute a default under (i) the Certificate of
Incorporation or Bylaws of the Company or (ii) any obligation, indenture,
mortgage, deed of trust, lease, contract or other agreement to which the Company
or either of the Shareholders is a party or by which the Company or either of
the Shareholders or their respective properties are bound.
2.1.3 Capitalization2.1.3 Capitalization. The authorized capitalization of
the Company consists of 15,000 shares of Company Common Stock, of which, as of
the date hereof, 7,500 shares are issued and outstanding and held beneficially
and of record by the Shareholders. On the date hereof, the Company 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 Company Common Stock are validly issued, fully
paid and non-assessable and are not subject to preemptive rights. None of the
outstanding shares of Company 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 the Company Shares.2.1.4 Ownership of the Company
Shares. The Shareholders hold good and valid title to all of the Company Shares,
free and clear of all Encumbrances. The Shareholders possess full authority and
legal right to sell, transfer and assign the Company Shares to Buyer, free and
clear of all Encumbrances. Upon transfer to Buyer by the Shareholders of the
Company Shares, Buyer will own the Company Shares free and clear of all
Encumbrances. There are no claims pending or, to the knowledge of either of the
Shareholders, threatened, against the Company or either of the Shareholders that
concern or affect title to the Company Shares, or that seek to compel the
issuance of capital stock or other securities of the Company.
2.1.5 No Subsidiaries2.1.5 No Subsidiaries. Except as specified in Schedule
2.1.5 hereto, there is no corporation, partnership, joint venture, business
trust or other legal entity in which the Company, either directly or indirectly
through one or more intermediaries, owns or holds beneficial or record ownership
of the outstanding voting securities.
2.1.6 Financial Statements2.1.6 Financial Statements. The Company has
delivered to Buyer copies of the Company=s unaudited balance sheet as of June
30, 1997, a copy of which is attached hereto as Schedule 2.1.6 (the A6/30
Balance Sheet@), and related statements of income (collectively, the AFinancial
Statements@), as at and for the six months ended as of June 30, 1997 (the
ABalance Sheet Date@). The financial Statements are complete in all material
respects. The Financial Statements present fairly the financial condition of the
Company as of the dates and for the periods indicated. The Financial Statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis. The accounts receivable reflected in the 6/30
Balance Sheet, or which have been thereafter acquired by the Company, have been
collected or are collectible at the aggregate recorded amounts thereof less
applicable reserves, which reserves are adequate.
2.1.7 Liabilities2.1.7 Liabilities. Except as disclosed on Schedule 2.1.7.
hereto, the Company 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)
reflected or reserved against in the 6/30 Balance Sheet or (ii) incurred in the
ordinary course of business since the Balance Sheet Date that would not
materially adversely affect the value and conduct of the business of the
Company.
2.1.8. Additional Company Information2.1.8. Additional Company Information.
Attached as Schedule 2.1.8 hereto are true, complete and correct lists of the
following items:
2.1.8.1 Real Estate2.1.8.1 Real Estate. All real property and structures
thereon owned, leased or subject to a contract of purchase and sale, or lease
commitment, by the Company, with a description of the nature and amount of any
Encumbrances thereon. The term AEncumbrances@ means all liens, security
interests, pledges, mortgages, deeds of trust, claims, rights of first refusal,
options, charges, restrictions or conditions to transfer or assignment,
liabilities, obligations, privileges, equities, easements, rights-of-way,
limitations, reservations, restrictions and other encumbrances of any kind or
nature;
2.1.8.2 Machinery and Equipment2.1.8.2 Machinery and Equipment. All rigs,
carriers, rig equipment, machinery, transportation equipment, tools, equipment,
furnishings, and fixtures owned, leased or subject to a contract of purchase and
sale, or lease commitment, by the Company with a description of the nature and
amount of any Encumbrances thereon;
2.1.8.3 Inventory2.1.8.3 Inventory. All Inventory items or groups of
inventory items owned by the Company, excluding raw materials and work in
process, which raw materials and work in process are valued on the 6/30 Balance
Sheet, together with the amount of any Encumbrances thereon;
2.1.8.4 Receivables2.1.8.4 Receivables. All accounts and notes receivable
of the Company, 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 the Company 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.
Buyer agrees to pay Shareholders any proceeds received from the case captioned
Schneider Oil Corporation vs. Dunbar Well Service Inc. vs. Centron, less any
costs or attorneys fees incurred by Buyer. Such proceeds will include the amount
deposited by Schneider Oil Corporation in the Park County District Court which
is an offer of judgment.
2.1.8.5 Payables2.1.8.5 Payables. All notes payable of the Company,
together with an appropriate aging schedule;
2.1.8.6 Insurance2.1.8.6 Insurance. All insurance policies or bonds
currently maintained by the Company, including title insurance policies, with
respect to the Company, including those covering the Company=s properties, rigs,
machinery, equipment, fixtures, employees and operations, as well as listing of
any premiums, deductibles, audit adjustments or retroactive adjustments dues or
pending on such policies or any predecessor policies;
2.1.8.7 Contracts2.1.8.7 Contracts. All contracts, including leases under
which the Company is lessor or lessee, which are to be performed in whole or in
part after the date hereof;
2.1.8.8 Employee Compensation Plans2.1.8.8 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 the Company
or any employee benefit plan maintained by the Company, together with copies of
the most recent reports with respect to such plans, arrangements, or trust
agreements filed with any governmental agency and all Internal Revenue Service
determination letters and other correspondence from governmental entities that
have been received with respect to such plans, arrangements or agreements
(collectively, AEmployee Plans@);
2.1.8.9 Salaries2.1.8.9 Salaries. The names and salary rates of all present
employees of the Company, and, to the extent existing on the date of this
Agreement, all arrangements with respect to any bonuses to be paid to them from
and after the date of this Agreement;
2.1.8.10 Bank Accounts2.1.8.10 Bank Accounts. The name of each bank in
which the Company has an account, the account balances as of the Closing Date
and the names of all persons authorized to draw thereon;
2.1.8.11 Employee Agreements2.1.8.11 Employee Agreements. Any collective
bargaining agreements of the Company 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 the Company;
2.1.8.12 Intellectual Property2.1.8.12 Intellectual Property. All patents,
patent applications, trademarks and service marks (including registrations and
applications therefore), trade names, copyrights and written know-how, trade
secrets and all other similar proprietary data and the goodwill associated
therewith (collectively, the AIntellectual Property@) used by the Company;
2.1.8.13 Trade Names2.1.8.13 Trade Names. All trade names, assumed and
fictitious names used or held by the Company, whether and where such names are
registered and where used;
2.1.8.14 Licenses and Permits2.1.8.14 Licenses and Permits. 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 APermits@) of the Company under
which it conducts its business;
2.1.8.15 Promissory Notes2.1.8.15 Promissory Notes. All long-term and
short-term promissory notes, installment contracts, loan agreements,
credit-agreements, and any other agreements of the Company relating thereto or
with respect to collateral securing the same;
2.1.8.16 Guaranties2.1.8.16 Guaranties. All indebtedness, liabilities and
commitments of others and as to which the Company 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;
2.1.8.17 Reserves and Accruals2.1.8.17 Reserves and Accruals. All
accounting reserves and accruals maintained in the 6/30 Balance Sheet;
2.1.8.18 Leases2.1.8.18 Leases. All leases to which the Company is a party;
and
2.1.8.19 Environment2.1.8.19 Environment. All environmental permits,
approvals, certifications, licenses, registrations, orders and decrees
applicable to current operations conducted by the Company and all environmental
audits, assessments, investigations and reviews conducted by the Company within
the last five years or otherwise in the Company=s possession on any property
owned, leased or used by the Company.
2.1.9 No Defaults2.1.9 No Defaults. The Company is not in default in any
obligation or covenant on its part to be performed under any obligation, lease,
contract, order, plan or other arrangement.
2.1.10 Absence of Certain Changes and Events2.1.10 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 Change2.1.10.1 Financial Change. Any adverse change in
the financial condition, backlog, operations, assets, liabilities or business of
the Company;
2.1.10.2 Property Damage2.1.10.2 Property Damage. Any material damage,
destruction, or loss to the business or properties of the Company (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 Company Common Stock, or any
direct or indirect redemption, purchase or any other acquisition by the Company
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 the Company=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; 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 the Company.
2.1.11 Taxes2.1.11 Taxes.
2.1.11.1 General2.1.11.1 General. 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 the Company 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 such returns are true and correct; the Company
has only done business in Wyoming, Montana, South Dakota and Utah; all taxes
shown by such returns to be payable and any other taxes due and payable have
been paid other than those being contested in good faith by the Company; and the
tax provision reflected in the 6/30 Balance Sheet is adequate, in accordance
with generally acceptable accounting principles, to cover liabilities of the
Company at the date thereof for all taxes, including, but not limited to,
interest and penalties, and additions to taxes of any character whatsoever
applicable to the Company or its assets or business. No waiver of any statute of
limitations executed by the Company with respect to any income or other tax is
in effect for any period. The income tax returns of the Company have not been
examined by the Internal Revenue Service or the taxing authorities of any other
jurisdiction. There are no tax liens on any assets of the Company except for
taxes not yet currently due. The Company is not a member of a consolidated group
subject to Treasury Regulation 1.1502-6 or any similar provision.
2.1.11.2 Subchapter S MattersSubchapter S Matters. The Company (i) made an
effective, valid and binding S election pursuant to Section 1362 of the Code
effective August 1, 1983, (ii) has since maintained its status as an
Corporation pursuant to Section 1361 of the Code without lapse or
interruption, and (iii) has made and continuously maintained elections similar
to the federal S election in each state or local jurisdiction where the Company
does business or is required to file a tax return to the extent such states or
jurisdictions permit such elections. The Company neither is nor will or can be
subject to the built-in gains tax under Section 1374 of the Code or any similar
corporate level tax imposed on the Company by any taxing authority. The Company
(i) has not adopted or utilized LIFO as a method of accounting for inventory,
and (ii) has no other tax item, election, agreement or adjustment which will
accelerate or trigger income or deferred deductions of the Company as a result
of termination of the Company=s status as an S Corporation.
2.1.12 Columbine Farms, Inc2.1.12 Columbine Farms, Inc. The spin-off of
Columbine Farms, Inc. described in Section 5.10 qualified as a valid Code
Section 355 spin-off and the ownership of Columbine Farms, Inc. did not
terminate the Company=s status as an S-Corporation under Code Section 1361.
2.1.13 Intellectual Property2.1.13 Intellectual Property. The Company owns
or possesses licenses to use all Intellectual Property that is either material
to the business of the Company or that is necessary for the rendering of any
services rendered by the Company and the use or sale of any equipment or
products used or sold by the Company, including all such Intellectual Property
listed in Schedule 2.1.8 hereto (the ARequired Intellectual Property@). The
Required Intellectual Property is owned or licensed by the Company free and
clear of any Encumbrance. The Company has not granted to any other person any
license to use any Required Intellectual Property. The Company has not
infringed, misappropriated, or conflicted with, the Intellectual Property rights
of others in connection with the use by the Company of the Required Intellectual
Property or otherwise in connection with the Company=s operation of its
business, nor has the Company received any notice of such infringement,
misappropriation, or conflict such Intellectual Property rights of others.
2.1.14 Title to and Condition of Assets2.1.14 Title to and Condition of
Assets. Except as disclosed on Schedule 2.1.14 hereto, the Company has good,
indefeasible and marketable title to all its properties, interests in properties
and assets, real and personal, reflected in the 6/30 Balance Sheet or in
Schedule 2.1.8 hereto, free and clear of any Encumbrance of any nature
whatsoever, except Encumbrances reflected in the 6/30 Balance Sheet or in
Schedule 2.1.8 hereto. All leases pursuant to which the Company 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 the Company and in respect to which
the Company has not taken adequate steps to prevent a default from occurring.
The buildings and premises of the Company 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 the Company are in good operating condition and in a state
of good maintenance and repair, ordinary wear and tear excepted, and are free
from any known defects except as may be repaired by routine maintenance. All
such assets conform to all applicable laws governing their use. The Company has
not violated any law, statute, ordinance, or regulation relating to any such
assets, nor has any notice of such violation been received by the Company or
either of the Shareholders, except such as have been fully complied with.
2.1.15 Contracts2.1.15 Contracts. All contracts, leases, plans or other
arrangements to which the Company 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 the Company. The Company is not, and to the knowledge
of any 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 an adverse effect on the
Company. Neither the Company nor either of the Shareholders has received any
information which would cause the Company or such Shareholders to conclude that
any customer of the Company will (or is likely to) cease doing business with the
Company (or its successors) as a result of the consummation of the transactions
contemplated hereby.
2.1.16 Licenses and Permits2.1.16 Licenses and Permits. The Company
possesses all Permits necessary under law or otherwise for the Company 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, including all such Permits listed in
Schedule 2.1.8 hereto (collectively, the ARequired Permits@). Each of the
Required Permits and the Company=s rights with respect thereto is valid and
subsisting, in full force and effect, and enforceable by the Company subject to
administrative powers of regulatory agencies having jurisdiction, and will
continue in full force and effect after the Closing Date. The Company is in
compliance in all respects with the terms of each of the Required Permits. None
of the Required Permits have been, or to the knowledge either of the
Shareholders, is threatened to be, revoked, canceled, suspended or modified.
2.1.17 Litigation2.1.17 Litigation. Except as set forth in Schedule 2.1.17
hereto, there is no suit, action, or legal, administrative, arbitration, or
other proceeding or governmental investigation pending to which the Company is a
party or, to the knowledge of the Shareholders, might become a party which
particularly affects the Company or its assets, nor is any change in the zoning
or building ordinances directly affecting the real property or leasehold
interests of the Company pending or, to the knowledge of any of the either of
the Shareholders, threatened.
2.1.18 Environmental Compliance2.1.18 Environmental Compliance.
2.1.18.1 Environmental Conditions2.1.18.1 Environmental Conditions. There
are no environmental conditions or circumstances, including, without limitation,
the presence or release of any Substance of Environmental Concern, on any
property presently or previously owned, leased or operated by the Company, or on
any property to which any Substance of Environmental Concern or waste generated
by the Company=s operations or use of its assets were disposed of, which would
have a result a material adverse effect on the business or business prospects of
the Company. The term ASubstance of Environmental Concern@ means (a) any
gasoline, petroleum (including crude oil or any fraction thereof), petroleum
product, polychlorinated biphenyls, ureaformaldehyde 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 ( as defined in Section 2.1.18.3 hereof), that is regulated
pursuant to or could give rise to liability under any Environmental Law;
2.1.18.2 Permits, etc.2.1.18.2 Permits, etc. The Company has, and within
the period of all applicable statutes of limitations has had, in full force and
effect all environmental Permits required to conduct its operations, and is, and
within the period of all applicable statutes of limitations has been, operating
in compliance thereunder.
2.1.18.3 Compliance2.1.18.3 Compliance. The Company=s operations and use of
its assets are, and within the period of all applicable statutes of limitations,
have been in compliance with applicable Environmental Law. AEnvironmental Law@
as used herein 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 environmental or of human health, or
employee health and safety as from time to time has been or is now in effect;
2.1.18.4 Environmental Claims2.1.18.4 Environmental Claims. No notice has
been received by the Company or either of the Shareholders from any entity,
governmental agency or individual regarding any existing, pending or threatened
investigation, inquiry, enforcement action, litigation, or liability, including,
without limitation any claim for remedial obligations, response costs or
contribution, relating to any Environmental Law;
2.1.18.5 Enforcement2.1.18.5 Enforcement. The Company, and to the knowledge
of either of the Shareholders, no predecessor of the Company or other party
acting on behalf of the Company, 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;
2.1.18.6 Liabilities2.1.18.6 Liabilities. The Company 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.
2.1.18.7 Renewals2.1.18.7 Renewals. Neither of the Shareholders knows of
any reason the Company (or its successors) would not be able to renew without
material expense any of the permits, licenses, or other authorizations required
pursuant to any of the Environmental Law to conduct and use any of the Company=s
current or planned operations; and
2.1.18.8 Asbestos and PCBs2.1.18.8 Asbestos and PCBs. No material amounts
of friable asbestos currently exist on any property owned or operated by the
Company, nor do polychlorinated biphenyls exist in concentrations of 50 parts
per million or more in electrical equipment owned or being used by the Company
in its operations or on its properties.
2.1.19 Compliance with Other Laws2.1.19 Compliance with Other Laws. The
Company 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. ''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.
2.1.20 ERISA Plans or Labor Issues2.1.20 ERISA Plans or Labor Issues.
Except as identified in Schedule 2.1.8.8, the Company does not currently
sponsor, maintain or contribute to, and has not at any time sponsored,
maintained or contributed to, any Employee Plan (as defined in Section 2.1.8.8
hereof) or any employee benefit plan which is subject to any of the provisions
of the Employee Retirement Income Security Act of 1974, as amended (AERISA@), in
which any of its employees are or were participants (whether on an active or
frozen basis). Each Employee Plan set forth in Schedule 2.1.8.8 complies
currently, and has complied in the past, in form and operation, with the
applicable provisions of ERISA, the Internal Revenue Code of 1986, as amended
(the ACode@) and other applicable laws including, without limitation, all
qualification and reporting and disclosure requirements. Also, with respect to
each Employee Plan, the Company and any other party in interest has not engaged
in any prohibited transaction or any violation of its fiduciary duties to such
plan. All contributions required to be made to each Employee Plan under the
terms of such Employee Plan, ERISA or other applicable law have been timely made
and there are no delinquent contributions as of the Closing Date. None of the
Employee Plans (i) is a Amultiemployer plan@ (as defined in Section 3(37) of
ERISA), (ii) is a defined benefit pension plan subject to Title IV of ERISA,
(iii) is a Avoluntary employees= beneficiary association@ within the meaning of
Code Section 501(c)(9), (iv provides for medical or other insurance benefits to
current or future retired employees or former employees of the Company (other
than as required for group health plan continuation coverage under Code Section
4980B (ACOBRA@) or applicable state law), or (v) obligates the Company to pay
any benefits solely as a result of a change in control of the Company. During
the six years preceding the Closing Date, (i no under-funded pension plan
subject to Section 412 of the Code has been transferred out of the Company, (ii)
the Company has not participated in or contributed to, or had an obligation to
contribute to, any multiemployer plan (as defined in ERISA Section 3(37)) and
has no withdrawal liability with respect to any multiemployer plan, and (iii)
the Company has not maintained any pension plan subject to Title IV of ERISA.
There are no claims, lawsuits or regulatory actions which have been asserted,
instituted or threatened against any Employee Plan by any fiduciary or
participant of such plan, except routine claims for benefits thereunder, or by
any governmental entity. The Company has no collective bargaining agreements
with any labor union or other representative of employees. The Company has not
engaged in any unfair labor practices. The Company is not aware of any pending
or threatened dispute with any of its existing or former employees.
2.1.21 Investigations; Litigation2.1.21 Investigations; Litigation. No
investigation or review by any governmental entity with respect to the Company
or any of the transactions contemplated by this Agreement is pending or, to the
knowledge of either of the Shareholders, threatened, nor has any governmental
entity indicated to the Company or either of the Shareholders an intention to
conduct the same, and there is no action, suit or proceeding pending or, to the
knowledge of either of the Shareholders, threatened against or affecting the
Company 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
the Company.
2.1.22 Absence of Certain Business Practices2.1.22 Absence of Certain
Business Practices. Neither the Company nor any officer, employee or agent of
the Company, nor any other person acting on its behalf, has directly or
indirectly, within the past five years, given or agreed to give any gift or
similar benefit to any customer, supplier, government employee or other person
who is or may be in a position to help or hinder the business of the Company (or
to assist the Company in connection with any actual or proposed transaction)
which (i) might subject the Company 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 the Company as reflected in the Financial Statements, or (iii) if
not continued in the future, might materially adversely effect the assets,
business operations or prospects of the Company or which might subject the
Company to suit or penalty in a private or governmental litigation or
proceeding.
2.1.23 No Untrue Statements2.1.23 No Untrue Statements. The Company and
each of the Shareholders have made available to Buyer true, complete and correct
copies of all contracts, documents concerning all litigation and administrative
proceedings, licenses, permits, insurance policies, list of suppliers and
customers, and records relating principally to the Company=s assets and
business, and such information covers all commitments and liabilities of the
Company relating to its business or its assets. This Agreement and the
agreements and instruments to be entered into in connection herewith do not
include any untrue statement of a material fact of omit to state any material
fact or omit to state any material fact necessary to make the statements made
herein and therein not misleading in any material respect.
2.1.24 Consents and Approvals2.1.24 Consents and Approvals. No consent,
approval or authorization of, or filing or registration with, any governmental
or regulatory authority, or any other person or entity other than the
Shareholders, is required to be made or obtained by the Company or either of
Shareholders in connection with the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby.
2.1.25 Finder=s Fee2.1.25 Finder=s Fee. All negotiations relative to this
Agreement, the Non-Competition Agreement and the Consulting Agreement, and the
transactions contemplated hereby and thereby, have been carried on by the
Shareholders and their counsel directly with Buyer and its counsel, without the
intervention of any other person in such manner as to give rise to any valid
claim against any of the parties hereto for a brokerage commission, finder=s fee
or any similar payments.
2.2 Representations and Warranties of Buyer2.2 Representations and
Warranties of Buyer. Buyer represents and warrants to each of the Shareholders
as follows:
2.2.1 Organization and Good Standing2.2.1 Organization and Good Standing.
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, has full requisite corporate power and
authority to carry on its business as it is currently conducted, and to own and
operate the properties currently owned and operated by it, and is duly qualified
or licensed to do business and is in good standing as a foreign corporation
authorized to do business in all jurisdictions in which the character of the
properties owned or the nature of the business conducted by it would make such
qualification or licensing necessary.
2.2.2 Agreement Authorized and its Effect on Other Obligations2.2.2
Agreement Authorized and its Effect on Other Obligations. The consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of Buyer, and this Agreement is a
valid and binding obligation of Buyer enforceable in accordance with its terms.
The execution, delivery and performance of this Agreement by Buyer will not
conflict with or result in a violation of breach of any term or provision of, or
constitute a default under (a) the Certificate of Incorporation or Bylaws of
Buyer or (b) any obligation, indenture, mortgage, deed of trust, lease, contract
or other agreement to which Buyer or any of its property is bound.
2.2.3 Consents and Approvals2.2.3 Consents and Approvals. No consent,
approval or authorization of, or filing of a registration with, any governmental
or regulatory authority, or any other person or entity is required to be made or
obtained by Buyer in connection with the execution, delivery or performance of
this Agreement or the consummation of the transactions contemplated hereby.
2.2.4 Investigations; Litigation2.2.4 Investigations; Litigation. No
investigation or review by any governmental entity with respect to Buyer in
connection with any of the transactions contemplated by this Agreement is
pending or, to the best of Buyer=s knowledge, threatened, nor has any
governmental entity indicated to Buyer an intention to conduct the same. There
is no action, suit or proceeding pending or, to the Buyer=s knowledge,
threatened against or affecting Buyer by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
which either individually or in the aggregate, does or is likely to result in
any material adverse change in the financial condition, properties or businesses
of Buyer.
ARTICLE 3
ADDITIONAL AGREEMENTS
ARTICLE 3.........ADDITIONAL AGREEMENTS3.1 Further Assurances3.1 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.
3.2 Public Announcements3.2 Public Announcements. Except as mutually
agreed, neither Buyer, the Shareholders nor any of their respective Affiliates
or agents shall issue any press release or public announcement regarding the
execution of this Agreement or the transactions contemplated thereby. The
Shareholders hereby consent to Buyer=s issuance of a press release announcing
the completion of the transactions contemplated by this Agreement.
3.3 338(h)(10) Election3.3 338(h)(10) Election. If the Buyer elects to file
an election to treat the acquisition of the Company Shares as an asset purchase
under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended,
Shareholders agree to execute and deliver to Buyer any documents required to be
executed by Shareholders in connection with such election, and Buyer will
compensate and indemnify the Shareholders for any increased tax liability
resulting therefrom. In addition, Buyer will indemnify and reimburse
Shareholders for any additional tax that may be deemed to be paid by
Shareholders on income created by Buyer compensating Shareholders for taxes paid
on a Section 338(h)(10) election increase in asset values.
ARTICLE 4
INDEMNIFICATION ARTICLE 4 INDEMNIFICATION 4.1 Indemnification by the
Shareholders4.1 Indemnification by the Shareholders. In addition to any other
remedies available to Buyer under this Agreement, or at law or in equity, each
of the Shareholders shall jointly and severally indemnify, defend and hold
harmless the Company, Buyer and their affiliates and their respective officers,
directors, employees, agents and stockholders (collectively, the ABuyer
Indemnified Parties@), against and with respect to any and all claims, costs,
damages, losses, expenses, obligations, liabilities, recoveries, suits, causes
of action and deficiencies, including interest, penalties and reasonable fees
and expenses of attorneys, consultants and experts (collectively, the ADamages@)
that the Buyer Indemnified Parties shall incur or suffer, which arise, result
from or relate to any breach by either of the Shareholders of (or the failure of
either of the Shareholders to perform) their respective representations,
warranties, covenants or agreements in this Agreement or in any schedule,
certificate, exhibit or other instrument delivered to Buyer by either of the
Shareholders under this Agreement.
4.2 Indemnification by Buyer4.2 Indemnification by Buyer. In addition to
any other remedies available to the Shareholders under this Agreement, or at law
or in equity, Buyer shall indemnify, defend and hold harmless each of the
Shareholders against and with respect to any and all Damages that such
indemnitees shall incur or suffer, which arise, result from or relate to any
breach of, or failure by Buyer to perform any of its representations,
warranties, covenants or agreements in this Agreement or in any schedule,
certificate, exhibit or other instrument furnished or delivered to either of the
Shareholders by or on behalf of Buyer under this Agreement.
4.3. Indemnification Procedure4.3. Indemnification Procedure. In the event
that any party hereto discovers or otherwise becomes aware of an indemnification
claim arising under Section 4.1 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 Section 4.1 hereof,
such indemnified party shall, if a claim in respect thereof is to be made
against any indemnifying party, give written notice to the latter of the
commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of any obligations hereunder, to the extent the indemnifying
party is not materially prejudiced thereby. In case any such action is brought
against an indemnified party, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after such notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof unless the indemnifying party has
failed to assume the defense of such claim and to employ counsel reasonably
satisfactory to such indemnified person. As indemnifying party who elects not to
assume the defense of a claim shall not be liable for the fees and expenses of
more than one counsel in any single jurisdiction for all parties indemnified by
such indemnifying party with respect to such claim or with respect to claims
separate but similar or related in the same jurisdiction arising out of the same
general allegations. Notwithstanding any of the foregoing to the contrary, the
indemnified party will be entitled to select its own counsel and assume the
defense of any action brought against it if the indemnifying party fails to
select counsel reasonably satisfactory to the indemnified party, the expenses of
such defense to be paid by the indemnifying party. No indemnifying party shall
consent to entry of any judgment or enter into any settlement with respect to a
claim without the consent of the indemnified party, which consent shall not be
unreasonably withheld, or unless such judgment or settlement includes as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability with respect to such claim. No
indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action, the defense of which has been assumed by an
indemnifying party, without the consent of such indemnifying party, which
consent shall not be unreasonably withheld or delayed.
ARTICLE 5
MISCELLANEOUS
ARTICLE 5 MISCELLANEOUS 5.1 Survival of Representations, Warranties and
Covenants5.1 Survival of Representations, Warranties and Covenants. All
representations, warranties, covenants and agreements made by the parties hereto
shall survive indefinitely without limitation, notwithstanding any investigation
made by or on behalf of any of the parties hereto. 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
indefinitely despite any investigation made by any party hereto or on its
behalf.
5.2 Entirety5.2.......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 Counterparts5.3...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 Waivers5.4 Notices and Waivers. Any notice or waiver to be
given to any party hereto shall be in writing and shall be delivered by courier,
sent by facsimile transmission or first class registered or certified mail,
postage prepaid, return receipt requested:
If to Buyer:
Addressed to:.............. With a copy to:
Key Rocky Mountain, Inc.... Porter & Hedges, L.L.P.
Two Tower Center, Tenth Floor 700 Louisiana, 35th Floor
East Brunswick, New Jersey 08816 Houston, Texas 77210-4744
Attn: General Counsel..... Attn: Samuel N. Allen
Facsimile: (908) 247-5148.. Facsimile: (713) 228-1331
If to either Shareholder:
Addressed to:.............. With a copy to:
Joseph R. Dunbar........... Nicholas H. Carter
P.O. Box 1209.............. P. O. Box 909
Gillette, Wyoming 82717-1209 Gillette, WY 82717-0909
Facsimile: (307) 687-0029. Facsimile: (307) 687-7690
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.
5.5 Table of Contents and Captions5.5 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 Successors and Assigns5.6 Successors and Assigns. This Agreement shall
be binding upon and shall inure to the benefit of and be enforceable by the
successors and assigns of the parties hereto.
5.7 Severability5.7...Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void, or unenforceable, the remainder of the terms, provisions,
covenants and restrictions shall remain in full force and effect and shall in no
way be affected, impaired or invalidated. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such
which may be hereafter declared invalid, void or unenforceable.
5.8 Applicable Law5.8.Applicable Law. This Agreement shall be governed by
and construed and enforced in accordance with the applicable laws of the State
of Wyoming.
5.9 Sale of Certain Properties. Company currently owns several oil and gas
properties which are included in the 6/30 Balance Sheet. The Company is
attempting to sell the properties and it is agreed that if the properties have
not been sold before the Closing Date, the properties will be assigned by the
Company to the Shareholders and all proceeds from the sale of the properties and
any oil or gas production following the Closing Date will belong to the
Shareholders.
IN WITNESS WHEREOF, the Shareholders have executed this Agreement and the
Buyer has caused this Agreement to be signed in its corporate name by its duly
authorized representative, all as of the day and year first above written.
BUYER:
KEY ROCKY MOUNTAIN, INC.
By:
Kenneth V. Huseman, Vice President
SHAREHOLDERS:
Joseph R. Dunbar
Janice N. Dunbar
::ODMA\PCDOCS\DOCS\141015\3
Stock Purchase Agreement
among
Key Rocky Mountain, Inc.,
Bruce L. Bummer,
Jack Hartnett,
Diane Hartnett
and
Bruce Bummer 7/14/82 Family Trust
Dated as of September 30, 1997
::ODMA\PCDOCS\DOCS\141015\3
TABLE OF CONTENTS
Page
ARTICLE 1Purchase and Sale
1.1. Purchase and Sale of the Company Shares.............................1
1.2. Adjustment of Purchase Price........................................1
1.3. Closing.............................................................2
1.4. Closing Deliveries..................................................2
1.4.1. Opinion of Buyer=s Counsel..................................2
1.4.2. Opinion of Shareholders= Counsel............................3
1.5. Resignations; Consulting Agreement..................................3
ARTICLE 2Representations and Warranties
2.1. Representations and Warranties of the Shareholders..................3
2.1.1. Organization and Standing..................................3
2.1.2. Agreement Authorized and its Effect on Other Obligations...4
2.1.3. Capitalization.............................................4
2.1.4. Ownership of the Company Shares............................4
2.1.5. No Subsidiaries............................................4
2.1.6. Financial Statements.......................................4
2.1.7. Liabilities................................................5
2.1.8. Additional Company Information.............................5
2.1.9. No Defaults................................................7
2.1.10. Absence of Certain Changes and Events......................7
2.1.11. Taxes......................................................8
2.1.12. Intellectual Property......................................8
2.1.13. Title to and Condition of Assets...........................9
2.1.14. Contracts..................................................9
2.1.15. Licenses and Permits.......................................9
2.1.16. Litigation.................................................10
2.1.17. Environmental Compliance...................................10
2.1.18. Compliance with Other Laws.................................11
2.1.19. No ERISA Plans or Labor Issues.............................11
2.1.20. Investigations; Litigation.................................12
2.1.21. Absence of Certain Business Practices......................12
2.1.22. No Untrue Statements.......................................12
2.1.23. Consents and Approvals.....................................12
2.1.24. Finder=s Fee...............................................13
2.2. Representations and Warranties of Buyer.............................13
2.2.1. Organization and Good Standing..............................13
2.2.2. Agreement Authorized and its Effect on Other Obligations....13
2.2.3. Consents and Approvals......................................13
2.2.4. Finder=s Fee................................................13
ARTICLE 3Additional Agreements
3.1. Noncompetition......................................................13
3.2. Further Assurances..................................................14
3.3. Public Announcements................................................14
3.4. 338(h)(10) Election.................................................14
3.5. Waste Disposal......................................................14
ARTICLE 4Indemnification
4.1. Indemnification by the Shareholders................................15
4.2. Indemnification by Buyer............................................15
4.3. Indemnification Procedure...........................................15
ARTICLE 5Miscellaneous
5.1. Survival of Representations, Warranties and Covenants...............16
5.2. Entirety............................................................16
5.3. Counterparts........................................................16
5.4. Notices and Waivers.................................................16
5.5. Table of Contents and Captions......................................17
5.6. Successors and Assigns..............................................17
5.7. Severability........................................................17
5.8. Applicable Law......................................................18
::ODMA\PCDOCS\DOCS\141015\3
Stock Purchase Agreement
This Stock Purchase Agreement (this AAgreement@) is entered into as of
September 30, 1997, by and among Key Rocky Mountain, Inc., a Delaware
corporation (ABuyer@), and Bruce L. Bummer (ABummer@), Jack Hartnett, Bruce
Bummer 7/14/82 Family Trust (AFamily Trust@) and Diane Hartnett (Bummer,
Hartnett, Diane Hartnett and the Family Trust, collectively the AShareholders@).
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WITNESSETH :
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Whereas, Buyer is a corporation duly organized and validly existing under
the laws of the State of Delaware, with its principal executive offices at Two
Tower Center, Tenth Floor, East Brunswick, New Jersey 08816;
Whereas, Frontier Well Service, Inc. (the ACompany@) is a corporation duly
organized and validly existing under the laws of the State of Wyoming, with its
principal executive offices at 2377 Melody Lane, Casper, Wyoming 82601;
Whereas, the Shareholders own 2,000 shares (the ACompany Shares@) of common
stock, no par value, of the Company (the ACompany Common Stock@), which
constitutes all of the issued and outstanding shares of capital stock of the
Company; and
Whereas, the Shareholders desire to sell to Buyer, and Buyer desires to
purchase from the Shareholders, all of the issued and outstanding capital stock
of the Company.
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
ARTICLE 1 Purchase and Sale
1.1. Purchase and Sale of the Company Shares.Purchase and Sale of the
Company Shares. Subject to the terms and conditions of this Agreement, on the
date hereof, the Shareholders agree to sell and convey to Buyer, free and clear
of all Encumbrances (as defined in Section 2.1.8.1 hereof), and Buyer agrees to
purchase and accept from the Shareholders, all of the Company Shares. In
consideration of the sale of the Company Shares, Buyer shall pay to the
Shareholders a purchase price of $3,500,000 (the APurchase Price@), and the Cash
Adjustment Payment (as defined in Section 1.2 hereof), if any, in accordance
with Section 1.2 hereof.
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TABLE OF CONTENTS
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(continued)
Page
21
::ODMA\PCDOCS\DOCS\141015\3
1.2. Adjustment of Purchase Price1.2. Adjustment of Purchase Price. Buyer
shall cause to be prepared and delivered to the Shareholders a consolidated
balance sheet of the Company as of the date hereof (the AFinal Balance Sheet@)
within 60 days after the date hereof, which balance sheet will be prepared in
accordance with generally accepted accounting principles, consistently applied
in all respects (which shall not include any reserve or accruals for employee
termination costs). Buyer and the Shareholders shall jointly review the Final
Balance Sheet, and endeavor in good faith to resolve all disagreements regarding
the entries thereon and reach a final determination thereof within 90 days from
the date hereof. In the event that the parties cannot agree on the entries to be
placed on the Final Balance Sheet, the dispute will be resolved by an
independent accounting firm mutually agreed to by the Shareholders and Buyer
(such agreement not to be unreasonably withheld or delayed) whose resolution
shall be binding on and enforceable against the parties hereto. Within 10 days
of reaching such final determination, the following adjusting payments shall be
made:
(1) If the sum of (A) the Final Net Current Value of the Company (defined
below) plus (B) any amounts spent by the Company as capital expenditures used to
expand the Company=s business (the ACapital Expenditure Amount@) exceeds $0.00,
Buyer shall pay to the Shareholders the amount of such excess (the ACash
Adjustment Payment@); or
(2) If the sum of (A) the Final Net Current Value of the Company plus the
Capital Expenditure Amount is less than $0.00, the Shareholder shall pay to
Buyer the amount of such difference.
The term AFinal Net Current Value of the Company@ means the dollar value of
the amount by which the ATotal Current Assets@ (excluding ACash Value-Life
Insurance@) as recorded on the Final Balance Sheet exceeds the ATotal Current
Liabilities@ as recorded on the Final Balance Sheet. In determining the Final
Net Current Value of the Company, the Buyer shall have the option to either
acquire and pay for the uncollected receivables listed on Schedule 2.1.6 or
assign such uncollected receivables to Sellers and, to the extent so assigned,
the amount of such assigned uncollected receivables shall be deducted from the
Net Current Value of the Company.
1.3. Closing.Closing. Consummation of the transactions contemplated by this
Agreement (the AClosing@) shall take place at the offices or the Company located
at 2377 Melody Lane, Casper, Wyoming 82601 at 9:00 a.m. on September 30, 1997
(the AClosing Date@), unless another time, place or date is agreed to by the
Shareholders and the Buyer.
1.4. Closing Deliveries.Closing Deliveries. At the Closing, (a) the
Shareholders shall deliver to Buyer duly and validly issued certificate(s)
representing all shares of Company Shares owned beneficially or of record by
them, each such certificate to be 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 Buyer, (b) the Shareholders and
Buyer shall have delivered to one another all other documents, instruments and
agreements as required under this Agreement, (c) Buyer shall deliver to the
Shareholders the cash purchase price payable at Closing as provided in
Section 1.1 by a check drawn on the account of Buyer or one of Buyer=s
affiliates, and (d) the Buyer and Shareholders will deliver to one another the
opinions of counsel as described below:
1.4.1. Opinion of Buyer=s Counsel.Opinion of Buyer=s Counsel. The Buyer
shall deliver a favorable opinion, dated as of the Closing Date, from Porter &
Hedges, L.L.P., counsel for the Buyer, in form and substance satisfactory to the
Shareholders, to the effect that (i) the Buyer has been duly incorporated and is
validly existing as a corporation in good standing under the laws of its state
of organization; (ii) all corporate proceedings required to be taken by or on
the part of the Buyer to authorize the execution of this Agreement and the
implementation of the transactions contemplated hereby have been taken; and
(iii) this Agreement has been duly executed and delivered by, and is the legal,
valid and binding obligation of the Buyer and is enforceable against Buyer in
accordance with its terms, except as enforceability may be limited by
(a) equitable principles of general applicability or (b) bankruptcy, insolvency,
reorganization, fraudulent conveyance or similar laws affecting the rights of
creditors generally. In rendering such opinion, such counsel may rely upon
(i) certificates of public officials and of officers of the Buyer as to matters
of fact and (ii) the opinion or opinions of other counsel, which opinions shall
be reasonably satisfactory to the Shareholders, as to matters other than federal
or Texas law.
1.4.2. Opinion of Shareholders= Counsel.Opinion of Shareholders= Counsel.
The Shareholders shall deliver a favorable opinion, dated the Closing Date, from
Jeffrey C. Gosman, counsel to the Shareholders, in form and substance
satisfactory to Buyer, to the effect that (i) the Company has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the State of Wyoming and is qualified to transact business in every
jurisdiction in which the nature of the Company=s contacts require such
qualification, (ii) all outstanding shares of the Company Common Stock have been
validly issued and are fully paid and nonassessable; (iii) all of the Company
Shares are owned beneficially and of record by the Shareholders free of any
Encumbrances; (iv) the Company owns all of its assets free and clear of any
Encumbrances other than those Encumbrances listed on the Balance Sheet or
Schedules hereto, and (v) this Agreement has been duly executed and delivered
by, and is the legal, valid and binding obligation of the Shareholders and is
enforceable against the Company and the Shareholders in accordance with its
terms, except as the enforceability may be limited by (a) equitable principles
of general applicability or (b) bankruptcy, insolvency, reorganization,
fraudulent conveyance or similar laws affecting the rights of creditors
generally. In rendering such opinion, such counsel may rely upon (i)
certificates of public officials and of officers of the Company or the
Shareholders as to matters of fact and (ii) on the opinion or opinions of other
counsel, which opinions shall be reasonably satisfactory to Buyer, as to matters
other than federal or Wyoming law.
1.5. Resignations; Consulting Agreement.Resignations; Consulting Agreement.
At the Closing, each of the officers and directors of the Company will resign,
and Buyer will enter into a Consulting Agreement with Bummer and an Employment
Agreement with Hartnett (the AEmployment Agreement@) in form and substance
satisfactory to the parties thereto.
ARTICLE 2
Representations and Warranties
ARTICLE 2 Representations and Warranties
2.1. Representations and Warranties of the Shareholders.Representations and
Warranties of the Shareholders. Each of the Shareholders jointly and severally
represents and warrants to Buyer as follows:
2.1.1. Organization and Standing.Organization and Standing. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Wyoming, has full requisite corporate power and authority
to carry on its business as it is currently conducted, and to own and operate
the properties currently owned and operated by it, and is duly qualified or
licensed to do business and is in good standing as a foreign corporation
authorized to do business in all jurisdictions in which the character of the
properties owned or the nature of the business conducted by it would make such
qualification or licensing necessary.
2.1.2. Agreement Authorized and its Effect on Other Obligations.Agreement
Authorized and its Effect on Other Obligations. Each of the Shareholders is a
resident of Wyoming, above the age of 18 years, and has the legal capacity and
requisite power and authority to enter into, and perform his obligations under
this Agreement. This Agreement is a valid and binding obligation of each of the
Shareholders enforceable against each of the Shareholders in accordance with its
terms. The execution, delivery and performance of this Agreement by the Company
and each of 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
Certificate of Incorporation or Bylaws of the Company or (ii) any obligation,
indenture, mortgage, deed of trust, lease, contract or other agreement to which
the Company or either of the Shareholders is a party or by which the Company or
either of the Shareholders or their respective properties are bound.
2.1.3. Capitalization.Capitalization. The authorized capitalization of the
Company consists of 50,000 shares of Company Common Stock, of which, as of the
date hereof, 2,000 shares are issued and outstanding and held beneficially and
of record by the Shareholders. On the date hereof, the Company 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 Company Common Stock are validly issued, fully paid and
non-assessable and are not subject to preemptive rights. None of the outstanding
shares of Company 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 the Company Shares.Ownership of the Company Shares. The
Shareholders hold good and valid title to all of the Company Shares, free and
clear of all Encumbrances. The Shareholders possess full authority and legal
right to sell, transfer and assign the Company Shares to Buyer, free and clear
of all Encumbrances. Upon transfer to Buyer by the Shareholders of the Company
Shares, Buyer will own the Company Shares free and clear of all Encumbrances.
There are no claims pending or, to the knowledge of either of the Shareholders,
threatened, against the Company or either of the Shareholders that concern or
affect title to the Company Shares, or that seek to compel the issuance of
capital stock or other securities of the Company.
2.1.5. No Subsidiaries2.1.5. No Subsidiaries. There is no corporation,
partnership, joint venture, business trust or other legal entity in which the
Company, either directly or indirectly through one or more intermediaries, owns
or holds beneficial or record ownership of the outstanding voting securities.
2.1.6. Financial Statements2.1.6.Financial Statements. The Company has
delivered to Buyer copies of the Company=s unaudited balance sheet as of
June 30, 1997, a copy of which is attached hereto as Schedule 2.1.6 (the A6/30
Balance Sheet@), and related statements of income (collectively, the AFinancial
Statements@), as at and for the six months ended as of June 30, 1997 (the
ABalance Sheet Date@). The Financial Statements are complete in all material
respects. The Financial Statements present fairly the financial condition of the
Company as at the dates and for the periods indicated. The Financial Statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis. Except as set forth on Schedule 2.1.6, the
accounts receivable reflected in the 6/30 Balance Sheet, or which have been
thereafter acquired by the Company, have been collected or are collectible at
the aggregate recorded amounts thereof less applicable reserves, which reserves
are adequate. The inventories of the Company reflected in the 6/30 Balance
Sheet, or which have thereafter been acquired by it, consist of items of a
quality usable and salable in the normal course of the Company=s business, and
the values at which inventories are carried are at the lower of cost or market.
2.1.7. Liabilities2.1.7.Liabilities. The Company 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) reflected or reserved against in the 6/30
Balance Sheet or (ii) incurred in the ordinary course of business since the
Balance Sheet Date that would not materially adversely affect the value and
conduct of the business of the Company
2.1.8. Additional Company Information2.1.8. Additional Company Information.
Attached as Schedule 2.1.8 hereto are true, complete and correct lists of the
following items:
2.1.8.1. Real Estate2.1.8.1. Real Estate. All real property and structures
thereon owned, leased or subject to a contract of purchase and sale, or lease
commitment, by the Company, with a description of the nature and amount of any
Encumbrances thereon. The term AEncumbrances@ means all liens, security
interests, pledges, mortgages, deeds of trust, claims, rights of first refusal,
options, charges, restrictions or conditions to transfer or assignment,
liabilities, obligations, privileges, equities, easements, rights-of-way,
limitations, reservations, restrictions and other encumbrances of any kind or
nature;
2.1.8.2. Machinery and Equipment2.1.8.2. Machinery and Equipment. All rigs,
carriers, rig equipment, machinery, transportation equipment, tools, equipment,
furnishings, and fixtures owned, leased or subject to a contract of purchase and
sale, or lease commitment, by the Company with a description of the nature and
amount of any Encumbrances thereon;
2.1.8.3. Inventory2.1.8.3. Inventory. All inventory items or groups of
inventory items owned by the Company, excluding raw materials and work in
process, which raw materials and work in process are valued on the 6/30 Balance
Sheet, together with the amount of any Encumbrances thereon;
2.1.8.4. Receivables2.1.8.4. Receivables. All accounts and notes receivable
of the Company, 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 the Company 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. Payables2.1.8.5. Payables. All accounts and notes payable of the
Company, together with an appropriate aging schedule. The amounts owed
represented by the line items ACurrent MaturitiesCNotes Payable@ and ANotes
PayableCDue After One Year@ on the 6/30 Balance Sheet still owed and outstanding
(including accrued and unpaid interest) as of the date hereof is $0.00 (the
ANotes Payable Amount@);
2.1.8.6. Insurance2.1.8.6. Insurance. All insurance policies or bonds
currently maintained by the Company, including title insurance policies, with
respect to the Company, including those covering the Company=s properties, rigs,
machinery, equipment, fixtures, employees and operations, as well as a listing
of any premiums, deductibles, audit adjustments or retroactive adjustments due
or pending on such policies or any predecessor policies;
2.1.8.7. Contracts2.1.8.7. Contracts. All contracts, including leases under
which the Company is lessor or lessee, which are to be performed in whole or in
part after the date hereof;
2.1.8.8. Employee Compensation Plans2.1.8.8. 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 the Company
or any employee benefit plan maintained by the Company, together with copies of
the most recent reports with respect to such plans, arrangements, or trust
agreements filed with any governmental agency and all Internal Revenue Service
determination letters and other correspondence from governmental entities that
have been received with respect to such plans, arrangements or agreements
(collectively, AEmployee Plans@);
2.1.8.9. Salaries2.1.8.9. Salaries. The names and salary rates of all
present employees of the Company, and, to the extent existing on the date of
this Agreement, all arrangements with respect to any bonuses to be paid to them
from and after the date of this Agreement;
2.1.8.10. Bank Accounts2.1.8.10. Bank Accounts. The name of each bank in
which the Company has an account and the names of all persons authorized to draw
thereon;
2.1.8.11. Employee Agreements2.1.8.11. Employee Agreements. Any collective
bargaining agreements of the Company 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 the Company;
2.1.8.12. Intellectual Property2.1.8.12. Intellectual Property. All
patents, patent applications, trademarks and service marks (including
registrations and applications therefor), trade names, copyrights and written
know-how, trade secrets and all other similar proprietary data and the goodwill
associated therewith (collectively, the AIntellectual Property@) used by the
Company;
2.1.8.13. Trade Names2.1.8.13. Trade Names. All trade names, assumed names
and fictitious names used or held by the Company, whether and where such names
are registered and where used;
2.1.8.14. Licenses and Permits2.1.8.14. Licenses and Permits. 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 APermits@) of the Company under
which it conducts its business;
2.1.8.15. Promissory Notes2.1.8.15. Promissory Notes. All long-term and
short-term promissory notes, installment contracts, loan agreements, credit
agreements, and any other agreements of the Company relating thereto or with
respect to collateral securing the same;
2.1.8.16. Guaranties2.1.8.16. Guaranties. All indebtedness, liabilities and
commitments of others and as to which the Company 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;
2.1.8.17. Reserves and Accruals.2.1.8.17. Reserves and Accruals. All
accounting reserves and accruals maintained in the 6/30 Balance Sheet;
2.1.8.18. Leases.2.1.8.18. Leases. All leases to which the Company is a
party; and
2.1.8.19. Environment.2.1.8.19. Environment. All environmental permits,
approvals, certifications, licenses, registrations, orders and decrees
applicable to current operations conducted by the Company and all environmental
audits, assessments, investigations and reviews conducted by the Company within
the last five years or otherwise in the Company=s possession on any property
owned, leased or used by the Company.
2.1.9. No Defaults.2.1.9. No Defaults. The Company is not a party to, or
bound by, any contract or arrangement of any kind to be performed after the date
hereof, nor is the Company in default in any obligation or covenant on its part
to be performed under any obligation, lease, contract, order, plan or other
arrangement.
2.1.10. Absence of Certain Changes and Events2.1.10. 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 Change2.1.10.1. Financial Change. Any adverse change in
the financial condition, backlog, operations, assets, liabilities or business of
the Company;
2.1.10.2. Property Damage2.1.10.2. Property Damage. Any material damage,
destruction, or loss to the business or properties of the Company (whether or
not covered by insurance); 2.1.10.3. Dividends2.1.10.3. Dividends. Any
declaration, setting aside, or payment of any dividend or other distribution in
respect of the Company Common Stock, or any direct or indirect redemption,
purchase or any other acquisition by the Company of any such stock;
2.1.10.4. Capitalization Change2.1.10.4. Capitalization Change. Any change
in the capital stock or in the number of shares or classes of the Company=s
authorized or outstanding capital stock as described in Section 2.1.3 hereof;
2.1.10.5. Labor Disputes2.1.10.5. Labor Disputes. Any labor or employment
dispute of whatever nature; or
2.1.10.6. Other Material Changes2.1.10.6. 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 the Company.
2.1.11. Taxes2.1.11. Taxes.
2.1.11.1. GeneralGeneral. 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 the Company 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 such returns are true and correct; the Company has only
done business in Wyoming, Colorado, Nevada, North Dakota, Montana and New
Mexico; all taxes shown by such returns to be payable and any other taxes due
and payable have been paid other than those being contested in good faith by the
Company; and the tax provision reflected in the 6/30 Balance Sheet is adequate,
in accordance with generally accepted accounting principles, to cover
liabilities of the Company at the date thereof for all taxes, including any
assessed interest, assessed penalties and additions to taxes of any character
whatsoever applicable to the Company or its assets or business. No waiver of any
statute of limitations executed by the Company with respect to any income or
other tax is in effect for any period. The income tax returns of the Company
have never been examined by the Internal Revenue Service or the taxing
authorities of any other jurisdiction. There are no tax liens on any assets of
the Company except for taxes not yet currently due. The Company is not subject
to any tax-sharing or allocation agreement. The Company is not and never has
been, a member of a consolidated group subject to Treasury Regulation 1.1502-6
or any similar provision. The Company has not received any notice and has no
knowledge of any proposal for increasing the assessed value of any of the
Company=s properties for tax purposes, or of any pending proceedings or public
improvements which would result in the levy of any special tax or assessment
against any of the Company=s properties.
2.1.11.2. Subchapter S MattersSubchapter S Matters. The Company (i) made an
effective, valid and binding S election pursuant to Section 1362 of the Code
effective August 6, 1975, (ii) has since maintained its status as an
S Corporation pursuant to Section 1361 of the Code without lapse or
interruption, and (iii) has made and continuously maintained elections similar
to the federal S election in each state or local jurisdiction where the Company
does business or is required to file a tax return to the extent such states or
jurisdictions permit such elections. The Company neither is nor will or can be
subject to the built-in gains tax under Section 1374 of the Code or any similar
corporate level tax imposed on the Company by any taxing authority. The Company
(i) has not adopted or utilized LIFO as a method of accounting for inventory,
and (ii) has no other tax item, election, agreement or adjustment which will
accelerate or trigger income or deferred deductions of the Company as a result
of termination of the Company=s status as an S Corporation.
2.1.12. Intellectual Property2.1.12. Intellectual Property. The Company
owns or possesses licenses to use all Intellectual Property that is either
material to the business of the Company or that is necessary for the rendering
of any services rendered by the Company and the use or sale of any equipment or
products used or sold by the Company, including all such Intellectual Property
listed in Schedule 2.1.8 hereto (the ARequired Intellectual Property@). The
Required Intellectual Property is owned or licensed by the Company free and
clear of any Encumbrance. The Company has not granted to any other person any
license to use any Required Intellectual Property. The Company has not
infringed, misappropriated, or conflicted with, the Intellectual Property rights
of others in connection with the use by the Company of the Required Intellectual
Property or otherwise in connection with the Company=s operation of its
business, nor has the Company has received any notice of such infringement,
misappropriation, or conflict such Intellectual Property rights of others.
2.1.13. Title to and Condition of Assets2.1.13. Title to and Condition of
Assets. The Company has good, indefeasible and marketable title to all its
properties, interests in properties and assets, real and personal, reflected in
the 6/30 Balance Sheet or in Schedule 2.1.8 hereto, free and clear of any
Encumbrance of any nature whatsoever, except Encumbrances reflected in the 6/30
Balance Sheet or in Schedule 2.1.8 hereto. All leases pursuant to which the
Company 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 the Company
and in respect to which the Company has not taken adequate steps to prevent a
default from occurring. The buildings and premises of the Company 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 the Company are in good
operating condition and in a state of good maintenance and repair, ordinary wear
and tear excepted, and are free from any known defects except as may be repaired
by routine maintenance. All such assets conform to all applicable laws governing
their use. The Company has not violated any law, statute, ordinance, or
regulation relating to any such assets, nor has any notice of such violation
been received by the Company or either of the Shareholders, except such as have
been fully complied with.
2.1.14. Contracts.Contracts. All contracts, leases, plans or other
arrangements to which the Company 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 the Company. The Company is not, and to the knowledge
of the Company or any 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 an adverse effect on
the Company. Neither the Company nor either of the Shareholders has received any
information which would cause such the Company or such Shareholders to conclude
that any customer of the Company will (or is likely to) cease doing business
with the Company (or its successors) as a result of the consummation of the
transactions contemplated hereby.
2.1.15. Licenses and Permits.Licenses and Permits. The Company possesses
all Permits necessary under law or otherwise for the Company 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, including all such Permits listed in Schedule 2.1.8 hereto
(collectively, the ARequired Permits@). Each of the Required Permits and the
Company=s rights with respect thereto is valid and subsisting, in full force and
effect, and enforceable by the Company subject to administrative powers of
regulatory agencies having jurisdiction, and will continue will continue in full
force and effect after the Closing Date. The Company is in compliance in all
respects with the terms of each of the Required Permits. None of the Required
Permits have been, or to the knowledge of the Company or either of the
Shareholders, is threatened to be, revoked, canceled, suspended or modified.
2.1.16. Litigation2.1.16. Litigation. Except as set forth in Schedule
2.1.16 hereto, there is no suit, action, or legal, administrative, arbitration,
or other proceeding or governmental investigation pending to which the Company
is a party or, to the knowledge of any of the Company or the Shareholders, might
become a party or which particularly affects the Company or its assets, nor is
any change in the zoning or building ordinances directly affecting the real
property or leasehold interests of the Company, pending or, to the knowledge of
any of the either of the Shareholders, threatened.
2.1.17. Environmental Compliance.Environmental Compliance.
2.1.17.1. Environmental Conditions2.1.17.1. Environmental Conditions. There
are no environmental conditions or circumstances, including, without limitation,
the presence or release of any Substance of Environmental Concern, on any
property presently or previously owned, leased or operated by the Company, or on
any property to which any Substance of Environmental Concern or waste generated
by the Company=s operations or use of its assets were disposed of, which could
have or result in a material adverse effect on the business or business
prospects of the Company. The term ASubstance of Environmental Concern@ means
(a) any gasoline, petroleum (including crude oil or any fraction thereof),
petroleum product, polychlorinated biphenyls, urea-formaldehyde insulation,
asbestos, pollutant, contaminant, radiation, and (b) any other substance of any
kind, whether or not any such substance is defined as toxic or hazardous under
any Environmental Law (as defined in Section 2.1.17.3 hereof), that is regulated
pursuant to or could give rise to liability under any existing Environmental
Law;
2.1.17.2. Permits, etc2.1.17.2. Permits, etc. The Company has, and within
the period of all applicable statutes of limitations has had, in full force and
effect all environmental Permits required to conduct its operations, and is,
within the period of all applicable statutes of limitations has been, operating
in compliance thereunder;
2.1.17.3. Compliance2.1.17.3. Compliance. The Company=s operations and use
of its assets are, and within the period of all applicable statutes of
limitations, have been in compliance with applicable Environmental Law.
AEnvironmental Law@ as used herein 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 environmental or of human
health, or employee health and safety as from time to time has been or is now in
effect;
2.1.17.4. Environmental Claims2.1.17.4. Environmental Claims. No notice has
been received by the Company or either of the Shareholders from any entity,
governmental agency or individual regarding any existing, pending or threatened
investigation, inquiry, enforcement action. litigation, or liability, including,
without limitation any claim for remedial obligations, response costs or
contribution, relating to any Environmental Law;
2.1.17.5. Enforcement.Enforcement. Neither the Company, and to the
knowledge of either of the Shareholders, nor any predecessor of the Company or
any other party acting on behalf of the Company, 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;
2.1.17.6. Liabilities.Liabilities. The Company 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;
2.1.17.7. Renewals2.1.17.7. Renewals. Neither the Company nor either of the
Shareholders knows of any reason the Company (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 to use any of the
Company=s assets or to conduct current or planned operations; and
2.1.17.8. Asbestos and PCBs2.1.17.8. Asbestos and PCBs. No material amounts
of friable asbestos currently exist on any property owned or operated by the
Company, nor do polychlorinated biphenyls exist in concentrations of 50 parts
per million or more in electrical equipment owned or being used by the Company
in its operations or on its properties.
2.1.18. Compliance with Other Laws2.1.18. Compliance with Other Laws. The
Company 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. ''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.
2.1.19. No ERISA Plans or Labor Issues2.1.19. No ERISA Plans or Labor
Issues. Except as set forth on Schedule 2.1.19, the Company 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
(AERISA@). Except as set forth on Schedule 2.1.19, the Company does not maintain
any plan, program, policy, contract or other arrangement that provides
retirement, medical, dental, disability, life insurance or other benefits to any
current or former employees of the Company, including any retired employees, or
their beneficiaries or dependents. The Company is not obligated to pay any
severance or benefits to any employee or former employee of the Company as the
result of any change in the ownership or control of the Company. The Company has
not engaged in any unfair labor practices which could reasonably be expected to
result in an adverse effect on its operations or assets. The Company does not
have any existing dispute with any of its existing or former employees. There
are no existing labor disputes or, to the knowledge of either of the
Shareholders, any disputes threatened by current or former employees of the
Company.
2.1.20. Investigations; Litigation2.1.20. Investigations; Litigation. No
investigation or review by any governmental entity with respect to the Company
or any of the transactions contemplated by this Agreement is pending or, to the
knowledge of the Company or either of the Shareholders, threatened, nor has any
governmental entity indicated to the Company or either of the Shareholders an
intention to conduct the same, and there is no action, suit or proceeding
pending or, to the knowledge of either of the Shareholders, threatened against
or affecting the Company 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 the Company.
2.1.21. Absence of Certain Business Practices2.1.21. Absence of Certain
Business Practices. Neither the Company nor any officer, employee or agent of
the Company, nor any other person acting on its behalf, has, directly or
indirectly, within the past five years, given or agreed to give any gift or
similar benefit to any customer, supplier, government employee or other person
who is or may be in a position to help or hinder the business of the Company (or
to assist the Company in connection with any actual or proposed transaction)
which (i) might subject the Company 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 the Company as reflected in the Financial Statements, or (iii if
not continued in the future, might materially adversely effect the assets,
business operations or prospects of the Company or which might subject the
Company to suit or penalty in a private or governmental litigation or
proceeding.
2.1.22. No Untrue Statements.No Untrue Statements. The Company and each of
the Shareholders have made available to Buyer true, complete and correct copies
of all contracts, documents concerning all litigation and administrative
proceedings, licenses, permits, insurance policies, lists of suppliers and
customers, and records relating principally to the Company=s assets and
business, and such information covers all commitments and liabilities of the
Company relating to its business or the assets. This Agreement and the
agreements and instruments to be entered into in connection herewith do not
include any untrue statement of a material fact or omit to state any material
fact necessary to make the statements made herein and therein not misleading in
any material respect.
2.1.23. Consents and Approvals.Consents and Approvals. No consent, approval
or authorization of, or filing or registration with, any governmental or
regulatory authority, or any other person or entity other than the Shareholders,
is required to be made or obtained by the Company or either of the Shareholders
in connection with the execution, delivery or performance of this Agreement or
the consummation of the transactions contemplated hereby.
2.1.24. Finder=s Fee2.1.24. Finder=s Fee. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on by the
Shareholders and their counsel directly with Buyer and its counsel, without the
intervention of any other person in such manner as to give rise to any valid
claim against any of the parties hereto for a brokerage commission, finder=s fee
or any similar payments.
2.2. Representations and Warranties of Buyer2.2. Representations and
Warranties of Buyer. Buyer represents and warrants to each of the Shareholders
as follows
2.2.1. Organization and Good Standing.Organization and Good Standing. Buyer
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, has full requisite corporate power and authority
to carry on its business as it is currently conducted, and to own and operate
the properties currently owned and operated by it, and is duly qualified or
licensed to do business and is in good standing as a foreign corporation
authorized to do business in all jurisdictions in which the character of the
properties owned or the nature of the business conducted by it would make such
qualification or licensing necessary.
2.2.2. Agreement Authorized and its Effect on Other Obligations.Agreement
Authorized and its Effect on Other Obligations. The consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Buyer, and this Agreement is a valid
and binding obligation of Buyer enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by Buyer will not conflict
with or result in a violation or breach of any term or provision of, or
constitute a default under (a) the Certificate of Incorporation or Bylaws of
Buyer or (b) any obligation, indenture, mortgage, deed of trust, lease, contract
or other agreement to which Buyer or any of its property is bound.
2.2.3. Consents and Approvals.Consents and Approvals. No consent, approval
or authorization of, or filing of a registration with, any governmental or
regulatory authority, or any other person or entity is required to be made or
obtained by Buyer in connection with the execution, delivery or performance of
this Agreement or the consummation of the transactions contemplated hereby.
2.2.4. Finder=s FeeFinder=s Fee. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on by the
Buyer and their counsel directly with the Shareholders and their counsel,
without the intervention of any other person in such manner as to give rise to
any valid claim against any of the parties hereto for a brokerage commission,
finder=s fee or any similar payments.
ARTICLE 3
Additional Agreements
ARTICLE 3 Additional Agreements
3.1. NoncompetitionNoncompetition. Except as otherwise consented to or
approved in writing by Buyer, each of the Shareholders agrees that for a period
of 60 months from the date hereof, 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 well service rig and associated
equipment business conducted by the Company, Buyer or any affiliate of Buyer on
the date hereof in the states of Wyoming, Montana, South Dakota, Colorado,
Nebraska and Utah; (ii) request any present customers or suppliers of the
Company to curtail or cancel their business with Buyer or any affiliate of
Buyer; (iii) disclose to any person, firm or corporation any trade, technical or
technological secrets of the Company, Buyer or any affiliate of Buyer or any
details of their organization or business affairs; or (iv) induce or actively
attempt to influence any employee of the Company, Buyer or any affiliate of
Buyer 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. The
obligations expressed in this Section 3.1 are in addition to any other
obligations that the Shareholders may have under the laws of the states in which
they do business requiring an employee of a business or a shareholder who sells
his stock in a corporation (including a disposition in a merger) to limit his
activities so that the goodwill and business relations of his employer and of
the corporation whose stock he has sold (and any successor corporation) will not
be materially impaired. Each of the Shareholders further agrees and acknowledges
that the Company, Buyer 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 the Company, Buyer or any affiliate of Buyer 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 Buyer
contained in this Agreement, and for other good and valuable consideration,
receipt of which is hereby acknowledged.
3.2. Further Assurances.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.
3.3. Public Announcements.Public Announcements. Except as mutually agreed,
neither Buyer, the Shareholders nor any of their respective Affiliates or agents
shall issue any press release or public announcement regarding the execution of
this Agreement or the transactions contemplated thereby. The Shareholders hereby
consent to Buyer=s issuance of a press release announcing the completion of the
transactions contemplated by this Agreement.
3.4. 338(h)(10) Election.338(h)(10) Election. If the Buyer elects to file
an election to treat the acquisition of the Company Shares as an asset purchase
under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended,
Shareholders agree to execute and deliver to Buyer any documents required to be
executed by Shareholders in connection with such election, and Buyer will
compensate and indemnify the Shareholders for any increased tax liability
resulting therefrom. In addition, Buyer will indemnify and reimburse
Shareholders for any additional tax that may be deemed to be paid by
Shareholders on income created by Buyer compensating Shareholders for taxes paid
on a Section 338(h)(10) election increase in asset values.
3.5. Waste Disposal.Waste Disposal. At Casper, Riverton and Douglas, there
are unidentified drums and containers as specified in the Phase I Environmental
Site Assessment Report dated September 15, 1997 prepared by Carpenter
Environmental Services, L.L.C. (the APhase I Report@). The Phase I Report also
documents unknown material on a flatbed trailer at Casper in Photograph Number
4. Seller agrees to identify material contained in all such unidentified drums
and containers and the material on the flatbed trailer at Casper and advise
Buyer of the identity of such material within 14 days of the Closing. Seller
further agrees, at Buyer=s request, to properly characterize and dispose of all
materials specified by Buyer and all empty containers within 30 days of such
request.
ARTICLE 4
Indemnification
ARTICLE 4 Indemnification
4.1. Indemnification by the Shareholders4.1. Indemnification by the
Shareholders. In addition to any other remedies available to Buyer under this
Agreement, or at law or in equity, each of the Shareholders shall jointly and
severally indemnify, defend and hold harmless the Company, Buyer and their
affiliates and their respective officers, directors, employees, agents and
stockholders (collectively, the ABuyer Indemnified Parties@), against and with
respect to any and all claims, costs, damages, losses, expenses, obligations,
liabilities, recoveries, suits, causes of action and deficiencies, including
interest, penalties and reasonable fees and expenses of attorneys, consultants
and experts (collectively, the ADamages@) that the Buyer Indemnified Parties
shall incur or suffer, which arise, result from or relate to any breach by
either of the Shareholders of (or the failure of either of the Shareholders to
perform) their respective representations, warranties, covenants or agreements
in this Agreement or in any schedule, certificate, exhibit or other instrument
furnished or delivered to Buyer by either of the Shareholders under this
Agreement.
4.2. Indemnification by Buyer4.2. Indemnification by Buyer. In addition to
any other remedies available to the Shareholders under this Agreement, or at law
or in equity, Buyer shall indemnify, defend and hold harmless each of the
Shareholders against and with respect to any and all Damages that such
indemnitees shall incur or suffer, which arise, result from or relate to any
breach of, or failure by Buyer to perform, any of its representations,
warranties, covenants or agreements in this Agreement or in any schedule,
certificate, exhibit or other instrument furnished or delivered to either of the
Shareholders by or on behalf of Buyer under this Agreement.
4.3. Indemnification Procedure4.3. Indemnification Procedure. In the event
that any party hereto discovers or otherwise becomes aware of an indemnification
claim arising under this Article ?, 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 ?, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party, give written notice to the latter of the commencement of such action;
provided, however, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of any obligations
hereunder, to the extent the indemnifying party is not materially prejudiced
thereby. In case any such action is brought against an indemnified party, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after such notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof unless the indemnifying party has failed to assume the defense
of such claim and to employ counsel reasonably satisfactory to such indemnified
person. An indemnifying party who elects not to assume the defense of a claim
shall not be liable for the fees and expenses of more than one counsel in any
single jurisdiction for all parties indemnified by such indemnifying party with
respect to such claim or with respect to claims separate but similar or related
in the same jurisdiction arising out of the same general allegations.
Notwithstanding any of the foregoing to the contrary, the indemnified party will
be entitled to select its own counsel and assume the defense of any action
brought against it if the indemnifying party fails to select counsel reasonably
satisfactory to the indemnified party, the expenses of such defense to be paid
by the indemnifying party. No indemnifying party shall consent to entry of any
judgment or enter into any settlement with respect to a claim without the
consent of the indemnified party, which consent shall not be unreasonably
withheld, or unless such judgment or settlement includes as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability with respect to such claim. No indemnified party
shall consent to entry of any judgment or enter into any settlement of any such
action, the defense of which has been assumed by an indemnifying party, without
the consent of such indemnifying party, which consent shall not be unreasonably
withheld or delayed.
ARTICLE 5
Miscellaneous
ARTICLE 5 Miscellaneous
5.1. Survival of Representations, Warranties and Covenants5.1. Survival of
Representations, Warranties and Covenants. All representations, warranties,
covenants and agreements made by the parties hereto shall survive indefinitely
without limitation, notwithstanding any investigation made by or on behalf of
any of the parties hereto. 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 indefinitely despite any
investigation made by any party hereto or on its behalf.
5.2. Entirety5.2. 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.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.Notices and Waivers. Any notice or waiver to be
given to any party hereto shall be in writing and shall be delivered by courier,
sent by facsimile transmission or first class registered or certified mail,
postage prepaid, return receipt requested:
- ------------------------------------------------------------------------------
If to Buyer:
- -------------------------------------------------------------------------------
- ------------------------------- -----------------------------------------------
Addressed to: With a copy to:
- --------------------------- -----------------------------------------------
- ------------------------------ -----------------------------------------------
Key Rocky Mountain, Inc. Porter & Hedges, L.L.P.
Two Tower Center, Tenth Floor 700 Louisiana, 35th Floor
East Brunswick, New Jersey 08816 Houston, Texas 77210-4744
Attn: General Counsel Attn: Samuel N. Allen
Facsimile: (908) 247-5148 Facsimile: (713) 228-1331
- ------------------------------ -----------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
If to Bruce L. Bummer or the Family Trust:
- ------------------------------------------------------------------------------
- ------------------------------ -----------------------------------------------
Addressed to: With a copy to:
- ------------------------------ -----------------------------------------------
- ------------------------------ -----------------------------------------------
Bruce L. Bummer Jeffrey C. Gosman
150 Riverbend Road 123 West 1st Street
Casper, Wyoming 82604 Casper, Wyoming 82601
Facsimile: (307) 472-4010
- ------------------------------ -----------------------------------------------
- ------------------------------------------------------------------------------
If to Jack Hartnett or Diane Hartnett:
- -----------------------------------------------------------------------------
- ----------------------------- -----------------------------------------------
Addressed to: With a copy to:
- ------------------------------ -----------------------------------------------
- ------------------------------ -----------------------------------------------
Jack Hartnett Jeffrey C. Gosman
6220 S. Walnut 123 West 1st Street
Casper, Wyoming 82601 Casper, Wyoming 82601
Facsimile: (307) 472-4010
- ------------------------------ -----------------------------------------------
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.
5.5. Table of Contents and Captions.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. Successors and Assigns.Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of and be enforceable by the
successors and assigns of the parties hereto.
5.7. Severability.Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void, or unenforceable, the remainder of the terms, provisions,
covenants and restrictions shall remain in full force and effect and shall in no
way be affected, impaired or invalidated. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such
which may be hereafter declared invalid, void or unenforceable.
5.8. Applicable Law.Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the applicable laws of the State of
Wyoming.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Shareholders have executed this Agreement and the
Buyer has caused this Agreement to be signed in its corporate name by its duly
authorized representative, all as of the day and year first above written.
BUYER:
KEY ROCKY MOUNTAIN, INC.
By:
Kenneth V. Huseman, Vice President
SHAREHOLDERS:
Bruce Bummer, 7/14/82 Family Trust
Bruce Bummer, Trustee
Jack Hartnett
Diane Hartnett
Bruce L. Bummer
KEY ENERGY GROUP, INC.
COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11(a)
THREE MONTHS ENDED NOVEMBER 30, 1997 AND 1996
Three Months Ended Three Months Ended
November 30, 1997 November 30, 1996
---------------------- ---------------------
(Thousands, except per share Fully- Fully-
amounts) Primary Diluted Primary Diluted
Net Income and Adjusted
Earnings:
Net Income before income taxes
and minority interest $7,831 $7,831 $2,396 $2,396
Effect of interest on debentures - 219 - 975
----------------------- --------------------
Adjusted net income before
income taxes
and minority interest $7,831 $8,050 $2,396 $3,371
====================== ===================
Net Income $4,938 $4,938 $1,554 $1,554
Effect of interest on convertible
debentures, net of tax effect - 138 - 649
---------------------- -------------------
Adjusted net income $4,938 $5,076 $1,554 $2,203
Weighted Average Shares and Share Equivalents Outstanding:
Weighted average shares
outstanding (as reported) 14,126 14,126 10,425 10,425
Common Share equivalents
issuable under
stock option plans 1,453 1,682 347 373
Common share equivalents
issuable on assumed
conversion of WellTech
warrants 86 94 122 150
Common share equivalents
issuable on assumed
conversion of
convertible debentures - 4,259 - 5,333
Common share equivalents
issuable on assumed
conversion of CIT warrants - - - 693
Weighted average shares and share
equivalents outstanding 15,665 20,161 10,894 16,974
Earnings per Share:
Net income before income taxes
and minority interest $0.50 $0.40 $0.22 $0.20
Net income $0.32 $0.25 $0.14 $0.13
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 49,276
<SECURITIES> 0
<RECEIVABLES> 64,909
<ALLOWANCES> 0
<INVENTORY> 6,421
<CURRENT-ASSETS> 121,601
<PP&E> 354,538
<DEPRECIATION> (23,890)
<TOTAL-ASSETS> 501,228
<CURRENT-LIABILITIES> 43,708
<BONDS> 0
0
0
<COMMON> 1,795
<OTHER-SE> 104,185
<TOTAL-LIABILITY-AND-EQUITY> 501,228
<SALES> 75,556
<TOTAL-REVENUES> 75,556
<CGS> 51,439
<TOTAL-COSTS> 51,439
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 3,438
<INCOME-PRETAX> 7,831
<INCOME-TAX> 2,893
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