<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
(Date of Report): Date of earliest event reported: October 1, 1997
KEY ENERGY GROUP, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 1-8038 04-2648081
(STATE OF INCORPORATION) (COMMISSION FILE NUMBER) (IRS EMPLOYER
IDENTIFICATION NO.)
TWO TOWER CENTER, TENTH FLOOR
EAST BRUNSWICK, NEW JERSEY 08816
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
908/247-4822
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(NOT APPLICABLE)
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 1, 1997, Key Four Corners, Inc., a wholly owned subsidiary
of Key Energy Group, Inc. (the "Company"), completed an acquisition of
substantially all of the assets of Big A Well Service Co., Sunco Trucking Co.
and Justis Supply Co., Inc., each of which is a closely held New Mexico
corporation (collectively, the "Sellers"). The assets acquired from the Sellers
(the "Assets") consist of equipment and vehicles utilized in working over and
servicing oil and gas wells, oil field fluid sales and services, oil and gas
well drilling operations and the operation of a fabrication, repair and machine
shop in the Four Corners area of the Southwest as well as certain real property
and improvements located in Farmington, New Mexico. The consideration paid for
the Assets was $28 million, subject to certain adjustments based on the Sellers'
net working capital as of October 1, 1997, and 125,000 shares of common stock,
par value $.10 per share, of the Company. The amount of such consideration, the
cash portion of which was financed by the Company's credit facility and
available cash balances, was determined by negotiations between the Company, the
Sellers and the principal stockholder of Coleman Oil & Gas Co., the sole
stockholder of all of the issued and outstanding capital stock of each of the
Sellers. No material relationship exists between the Sellers or the principal
stockholder of Coleman Oil & Gas Co. and the Company or any of its affiliates,
any director or officer of the Company or any associate of any such officer or
director. The Company intends for the assets of the Sellers to be used by Key
Four Corners, Inc. in its well servicing operations.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
To be filed by amendment on or before December 15, 1997.
(b) Pro Forma Financial Information.
To be filed by amendment on or before December 15, 1997.
(c) Exhibits.
The following exhibits, from which schedules have been omitted and will
be furnished to the Commission upon its request, are filed with this report on
Form 8-K.
2.1 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 September 2, 1997.
2.2 Real Estate Purchase and Sale Agreement among Coleman Oil
& Gas Co., George E. Coleman and Key Four Corners, Inc., dated as of
October 1, 1997.
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 14, 1997 KEY ENERGY GROUP, INC.
By: /s/ Francis D. John
---------------------------
Francis D. John, President
<PAGE> 4
EXHIBIT INDEX
2.1 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 September 2, 1997.
2.2 Real Estate Purchase and Sale Agreement among Coleman Oil
& Gas Co., George E. Coleman and Key Four Corners, Inc., dated as of
October 1, 1997.
<PAGE> 1
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
SEPTEMBER 2, 1997
<PAGE> 2
TABLE OF CONTENTS
Page
Article 1
PURCHASE AND SALE OF ASSETS..................................................v
1.1. Purchase and Sale of the Assets.....................................v
1.2. Consideration for Assets............................................3
1.3. Post-Closing Adjustment with Respect to Sellers' Net Value..........3
1.4. Assumption of Liabilities...........................................4
1.5. Time and Place of Closing...........................................4
Article 2
REPRESENTATIONS AND WARRANTIES...............................................4
2.1. Representations and Warranties of the Sellers, COG and Coleman......4
2.1.1. Organization and Good Standing.............................4
2.1.2. Agreements Authorized and their Effect on Other
Obligations................................................4
2.1.3. Subsidiaries...............................................5
2.1.4. Liabilities................................................5
2.1.5. Contracts..................................................5
2.1.6. Title to and Condition of Assets...........................5
2.1.7. Licenses and Permits......................................6
2.1.8. Intellectual Property......................................6
2.1.9. Financial Statements.......................................6
2.1.10. Additional Information............................7
2.1.11. Absence of Certain Changes and Events.............8
2.1.12. Assets; Necessary Consents........................9
2.1.13. Environmental Matters.......................................9
2.1.14. Employee Benefit Plans; Labor Issues.............10
2.1.15. Investigations; Litigation.......................11
2.1.16. Absence of Certain Businesses Practices..........11
2.1.17. Solvency.........................................11
2.1.18. Untrue Statements................................11
2.1.19. Transactions with Management.....................11
2.1.20. Compliance with Other Laws.......................12
2.1.21. Taxes............................................12
2.1.22. Finder's Fee.....................................12
2.2. Investment Representations.........................................12
2.2.1. Sellers' Investment Suitability and Related Matters.......12
2.2.2. Key Shares Not Registered................................13
2.2.3. Reliance on Representations...............................13
2.2.4. Investment Intent.........................................13
2.2.5. Permitted Resale..........................................13
i
<PAGE> 3
2.2.6. Investor Sophistication...................................13
2.2.7. Availability of Information...............................13
2.2.8. Restrictive Legends......................................13
2.3. Representations and Warranties of Buyer............................14
2.3.1. Organization and Good Standing.............................14
2.3.2. Agreement Authorized and its Effect on Other Obligations...14
2.3.3. Necessary Consents.........................................14
2.3.4. Investigations.............................................14
2.4. Representations and Warranties of Key..............................14
2.4.1. Organization and Standing.................................15
2.4.2. Agreement Authorized and its Effect on Other Obligations..15
2.4.3. Capitalization............................................15
2.4.4. Reports and Financial Statements..........................16
2.4.5. Absence of Certain Changes and Events.....................16
2.4.6. Compliance with Other Laws...............................17
2.4.7. Necessary Consents........................................17
2.4.8. Investigations; Litigation.......................17
Article 3
OBLIGATIONS PENDING CLOSING DATE............................................17
3.1. Agreements of the Sellers, COG and Coleman............................17
3.1.1. Maintenance of Present Business...................17
3.1.2. Maintenance of Properties.........................17
3.1.4. Compliance with Law..............................18
3.1.5. Prohibition of Certain Contracts.................18
3.1.6. Prohibition of Loans.............................18
3.1.7. Prohibition of Certain Commitments...............18
3.1.8. Disposal of Assets...............................18
3.1.9. Maintenance of Insurance.........................18
3.1.10. No Amendment to Charter Documents and
Related Matters..................................18
3.1.11. No Issuance, Sale, or Purchase of Securities.....18
3.1.12. Prohibition on Dividends.........................18
3.1.13. Notice of Material Developments..................18
3.1.14. Acquisition Proposals.....................................19
3.2. HSR Compliance.....................................................19
Article 4
CONDITIONS PRECEDENT TO OBLIGATIONS.........................................19
4.1. Conditions Precedent to Obligations of Sellers, COG and Coleman.......19
4.1.1. Representations and Warranties of Buyer and Key True
at Closing Date............................................19
4.1.2. No Material Litigation.....................................19
4.1.3. Opinion of Buyer's and Key's Counsel.......................20
4.1.4. HSR.......................................................20
ii
<PAGE> 4
4.1.5. Listing of Key Shares.....................................20
4.1.6. Consent of Certain Parties in Privity With Buyer...........20
4.2. Conditions Precedent to Obligations of Buyer and Key..................20
4.2.1. Representations and Warranties of the Sellers, COG
and Coleman True at Closing Date...........................20
4.2.2. No Material Litigation.....................................21
4.2.3. Opinion of Counsel.........................................21
4.2.4. HSR........................................................21
4.2.5. Consent of Certain Parties in Privity with the Sellers,
COG or Coleman.............................................21
4.2.6. Assignment of Contracts and Issuance of Permits..21
4.2.7. Environmental Assessments..................................21
4.2.8. Real Estate Transaction...................................22
4.2.9. Employment and Non-Competition Agreement..................22
4.2.10. Leases...........................................22
Article 5
TERMINATION AND ABANDONMENT.................................................22
5.1. Termination...........................................................22
5.1.1. By Mutual Consent..........................................22
5.1.2. By Buyer Because of Failure to Perform Agreements or
Conditions Precedent.............................22
5.1.3. By the Sellers Because of Failure to Perform Agreements or
Conditions Precedent.............................22
5.1.4. By Buyer or by the Sellers Because of Legal Proceedings....22
5.1.5. By Buyer Because of a Material Adverse Effect..............23
5.1.6. By Buyer or by the Sellers if No Closing by
November 1, 1997...........................................23
5.2. Effect of Termination.................................................23
5.3. Waiver of Conditions..................................................23
5.4. Expense on Termination................................................23
Article 6
ADDITIONAL AGREEMENTS.......................................................23
6.1. Noncompetition.....................................................23
6.2. Employees..........................................................24
6.3. Allocation of Purchase Price.......................................24
6.4. Name Change........................................................25
6.5. Further Assurances Relating to the Real Estate.....................25
6.6. Further Assurances.................................................25
iii
<PAGE> 5
Article 7
INDEMNIFICATION.............................................................25
7.1. Indemnification by the Sellers, COG and Coleman....................25
7.2. Indemnification by Buyer and Key...................................26
7.3. Indemnification Procedure..........................................26
7.4. Limitation on Indemnification......................................27
Article 8
MISCELLANEOUS...............................................................27
8.1. Materiality........................................................27
8.2. Survival of Representations, Warranties and Covenants..............27
8.3. Entirety...........................................................28
8.4. Counterparts.......................................................28
8.5. Notices and Waivers................................................28
8.6. Captions...........................................................28
8.7. Successors and Assigns.............................................28
8.8. Severability.......................................................29
8.9. Applicable Law.....................................................29
iv
<PAGE> 6
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of
September 2, 1997 among, Key Four Corners, Inc., a Delaware corporation
("BUYER"); Key Energy Group, Inc., a Maryland corporation ("KEY"); Big A Well
Service Co. ("BIG A"), Sunco Trucking Co. ("SUNCO"), and Justis Supply Co., Inc.
("JUSTIS"), each of which is a New Mexico corporation and all of which are
collectively referred to in this Agreement as the "SELLERS;" Coleman Oil & Gas
Co., a New Mexico corporation and sole shareholder of each of the Sellers
("COG"); and George E. Coleman, a resident of Farmington, New Mexico, and
principal shareholder of COG ("COLEMAN").
W I T N E S S E T H:
WHEREAS, the respective Sellers are engaged in the business of (i)
providing oil and gas well services, including workovers, plugging and
abandonment and completion, (ii) oil field fluid sales, (iii) providing oil
field fluid services, including transportation, storage and disposal, (iv)
providing oil field equipment transportation and storage services, (v) oil
field, industrial and mining equipment and supplies sales, (vi) operating a
fabrication, repair and machine shop and (vii) conducting oil and gas well
drilling operations (collectively the "BUSINESSES");
WHEREAS, COG is the owner of certain real property and improvements
located at 815 and 821 East Main Street, Farmington, New Mexico (the "REAL
ESTATE"), and as of the date hereof, COG and the Buyer have entered into a Real
Estate Purchase and Sale Agreement (the "REAL ESTATE CONTRACT") with respect to
the acquisition by Buyer of the Real Estate; and
WHEREAS, Sellers desire to sell to the Buyer, and Buyer desires to
purchase from Sellers, substantially all of the assets of each of the Sellers on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and agreements, and subject to the terms and
conditions herein contained, the parties hereto hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1. Purchase and Sale of the Assets. Subject to the terms and
conditions set forth in this Agreement, the Sellers hereby agree to sell,
convey, transfer, assign and deliver to Buyer all of the assets of the Sellers
other than the Excluded Assets (defined below), whether real, personal, tangible
or intangible, including, without limitation, the following assets of the
Sellers relating to or used or useful in the operation of the Businesses, except
for additions or deletions thereto which occur between the date hereof and the
Closing Date in the ordinary course of Sellers' businesses and are disclosed to
Buyer on or before the Closing Date:
<PAGE> 7
(a) all tangible personal property of the Sellers (such as
machinery, equipment, leasehold improvements, furniture and fixtures,
and vehicles), including, without limitation, that which is more fully
described on Schedule 1.1(a) hereto (collectively, the "TANGIBLE
PERSONAL PROPERTY");
(b) all of the inventory of Sellers, including without
limitation, that which is more fully described on Schedule 1.1(b)
hereto (collectively, the "INVENTORIES");
(c) all of the Sellers' intangible assets, including without
limitation, (i) all of the Sellers' rights to the names under which
they are incorporated or under which they currently conduct their
respective Businesses, (ii) all of the Sellers' rights to any patents,
patent applications, trademarks and service marks (including
registrations and applications therefor), trade names, and copyrights
and written know-how, trade secrets, licenses and sublicenses and all
other similar proprietary data and the goodwill associated therewith
(collectively, the "INTELLECTUAL PROPERTY") used or held in connection
with the Businesses, including without limitation, that which is more
fully described on Schedule 1.1(c) hereto (the "SELLERS' INTELLECTUAL
PROPERTY") and (iii) the Sellers' phone numbers and all of their
account ledgers, sales and promotional literature, computer software,
books, records, files and data (including customer and supplier lists),
and all other records of the Sellers relating to the Assets or the
Business (collectively, the "INTANGIBLES");
(d) those leases, subleases, contracts, contract rights, and
agreements of the Sellers relating to the Assets or the operation of
the Businesses specifically listed on Schedule 1.1(d) hereto
(collectively, the "CONTRACTS");
(e) all of the permits, authorizations, certificates,
approvals, registrations, variances, waivers, exemptions,
rights-of-way, franchises, ordinances, orders, licenses and other
rights of every kind and character (collectively, the "PERMITS") of the
Sellers relating principally to all or any of the Assets or to the
operation of the Businesses, including, but not limited to, those that
are more fully described on Schedule 1.1(e) hereto (collectively, the
"SELLERS' PERMITS");
(f) the goodwill and going concern values of the Sellers
relating to the Businesses;
(g) the working capital of the Sellers as described on
Schedule 1.1(g); and
(h) all other or additional privileges, rights, interests,
properties and assets of the Sellers of every kind and description and
wherever located that are used in the Businesses or intended for use in
the Businesses in connection with, or that are necessary for the
continued conduct of, the Businesses.
The purchased assets shall not include the following (collectively, the
"EXCLUDED ASSETS"): (i) all assets in possession of the Sellers but owned by
third parties; (ii) the assets listed
2
<PAGE> 8
on Schedule 1.1(a)-2; (iii) the corporate charter, related organizational
documents and minute books of the Sellers; and (iv) the consideration paid or
payable by Buyer to Sellers pursuant to Section 1.2 hereof. The assets
purchased and sold pursuant to this Agreement are collectively referred to
herein as the "ASSETS."
1.2. Consideration for Assets. As consideration for the sale of the
Assets and for the other covenants and agreements of COG, Sellers and Coleman
contained herein and subject to adjustments pursuant to Section 1.3, Buyer
agrees to pay to Sellers on the Closing Date, an aggregate purchase price (the
"PURCHASE PRICE") of (i) $26,993,000 ($28,000,000 less cash paid for Real
Estate) in immediately available funds to accounts designated by the Sellers
(the "CASH CONSIDERATION") and (ii) 125,000 shares of the common stock, par
value $.10 per share, of Key (the "KEY SHARES"), subject to appropriate
adjustment for any share split or combination in the common stock of Key during
the period between the date hereof and the Closing Date.
The aggregate Purchase Price payable hereunder shall be paid among the
Sellers in accordance with Schedule 1.2, provided that the Cash Consideration
portion of the Purchase Price shall be adjusted pursuant to Section 1.3.
1.3. Post-Closing Adjustment with Respect to Sellers' Net Value. Within
45 days after the Closing Date, Buyer shall provide to Sellers a schedule
setting forth the Sellers' Net Value (as hereinafter defined) as of the Closing
Date. If Sellers' Net Value is greater than $6,901,449, then Buyer shall
reimburse Sellers in cash the amount which equals the Sellers' Net Value at the
Closing Date less $6,901,449. If the Sellers' Net Value at the Closing Date is
less than $6,901,449, then Sellers, COG and Coleman jointly and severally agree
to pay to Buyer an aggregate amount in cash equal to $6,901,449 minus the
Sellers' Net Value at the Closing Date. Sellers shall have 30 days after receipt
of the schedule setting forth the Sellers' Net Value calculation to object to
the same; if no such objection is made, such net value calculation by Buyer
shall be deemed accepted by each of the Sellers, and the required payment shall
be made within ten days thereafter. If any of the Sellers object to the Sellers'
Net Value calculation, then the parties agree to mutually cooperate in reaching
agreement with respect thereto. If no such agreement can be reached within 90
days after the Closing Date, then the parties agree that either party may submit
the dispute to an independent accounting firm mutually acceptable to Buyer and
the Sellers, whose determination shall be made not later than 120 days after the
Closing Date and whose determination shall be binding on all the parties hereto.
All charges of such accounting firm and other expenses directly incurred in
making such determination shall be borne 50% by the Buyer and 50% by the
Sellers.
For purposes hereof, the Sellers' Net Value shall mean with respect to
a given date (i) the sum of (1) the amount by which (A) the total current assets
plus the other assets (less amounts due from affiliates or officers) exceeds (B)
the total current liabilities plus the total long-term liabilities (less accrued
or deferred income taxes and amounts due affiliates or officers), plus (2) total
funds expended for the purchase of capital equipment during the period between
3
<PAGE> 9
March 31, 1997 and the Closing Date in accordance with Section 3.1.7. Schedule
3.1 hereto shows the computation of Sellers' Net Value as of March 31, 1997,
based on the information contained in the Sellers' Financial Statements.
Any amount payable to Sellers under this Section 1.3 shall be paid
among the Sellers in accordance with the ratio which (i) the portion of the Cash
Consideration allocated to each Seller under Section 1.2 bears to (ii) the total
amount of the Cash Consideration.
1.4. Assumption of Liabilities. On the Closing Date, Buyer shall assume
those, and only those, liabilities and obligations of the Sellers hereinafter
listed and defined as the "ASSUMED LIABILITIES." For purposes of this Agreement,
"Assumed Liabilities" means (i) all items comprising each account balance under
the captions "Current Liabilities" or "Long Term Liabilities" on the March 31,
1997 unaudited balance sheet and (ii) liabilities incurred by the Sellers in the
ordinary course of business subsequent to the Balance Sheet Date for the account
or benefit of Buyer or, of the property, other assets and businesses of the
Sellers to be transferred to Buyer pursuant to this Agreement; provided,
however, the Assumed Liabilities shall not include any Excluded Liabilities. As
used herein, the term "EXCLUDED LIABILITIES" means (a) all liabilities of any of
the Sellers which are not "Assumed Liabilities," (b) any and all federal and
state income tax liability of any of the Sellers, COG or Coleman (c) any and all
intercompany accounts and (d) all attorneys' and accountants' fees and expenses
and any other fees and expenses incurred by the Sellers, COG or Coleman in
connection with transactions contemplated hereby.
1.5. Time and Place of Closing. The closing of the transactions
contemplated by this Agreement (the "CLOSING") shall be at the offices of
Laflin, Lieuwen, Tucker, Pick & Heer, P.A. located at 6400 Uptown Boulevard,
Northeast, Suite 600 West, Albuquerque, New Mexico 87110, on the second business
day following the satisfaction by all parties hereto of all of the conditions to
the Closing or as soon as practicable thereafter (the "CLOSING DATE").
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of the Sellers, COG and Coleman.
Except as disclosed on Schedule 2.1 (which shall identify the applicable Section
reference of this Agreement to which such disclosure relates), each of the
Sellers, COG and Coleman, jointly and severally, represent and warrant to Buyer
as follows:
2.1.1. Organization and Good Standing. Each of COG and the
Sellers are corporations duly organized, validly existing and in good
standing under the laws of their respective states of organization,
have full requisite corporate power and authority to carry on their
businesses as they are currently conducted, and to own and operate the
properties currently owned and operated by them, and are duly qualified
or licensed to do business and are in good standing as foreign
4
<PAGE> 10
corporations authorized to do business in all jurisdictions in which
the character of the properties owned or the nature of the businesses
conducted by them would make such qualification or licensing necessary.
2.1.2. Agreements Authorized and their Effect on Other
Obligations. The execution and delivery of this Agreement have been
authorized by all necessary corporate, shareholder and other action
on the part of each of COG and the Sellers, and this Agreement is the
valid and binding obligation of each of COG, the Sellers and Coleman
enforceable against each of such parties in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, debtor relief or similar laws affecting rights of
creditors generally and subject to normal equitable principles. The
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, will not conflict
with or result in a violation or breach of any term or provision of,
nor constitute a default under (i) the charter or bylaws (or other
organizational documents) of any of COG, the Sellers or Coleman, (ii)
any obligation, indenture, mortgage, deed of trust, lease, contract or
other agreement to which any of COG, the Sellers or Coleman is a party
or by which any of COG, the Sellers or Coleman or their respective
properties are bound; or (iii) any provision of any law, rule,
regulation, order, permit, certificate, writ, judgment, injunction,
decree, determination, award or other decision of any court,
arbitrator, or other governmental authority to which any of COG or the
Sellers or any of their respective properties are subject.
2.1.3. Subsidiaries. None of the Sellers has any subsidiary
corporations or any interest in any other organization, incorporated
or unincorporated, partnership or any other entity of any type.
2.1.4. Liabilities. The Sellers do not have any liabilities or
obligations, either accrued, absolute, contingent, or otherwise, or
have any knowledge of any potential liabilities or obligations that
would materially and adversely affect the value and conduct of the
Businesses by the Buyer or the Assets, other than those (i) reflected
or reserved against in the March 31, 1997 unaudited balance sheet of
the Sellers or (ii) incurred in the ordinary course of business since
March 31, 1997.
2.1.5. Contracts. Schedule 1.1(d) hereto sets forth a true,
complete and accurate list of all material Contracts of the Sellers,
including leases under which the Sellers are lessor or lessee, which
relate to the Assets or the Businesses and are to be performed in whole
or in part after the date hereof. All of the material Contracts are in
full force and effect, and constitute valid and binding obligations of
the Sellers. The Sellers are not, and no other party to any of the
Contracts is, in default thereunder, and no event has occurred which
(with or without notice, lapse of time, or the happening of any other
event) would constitute a default thereunder. No material Contract has
been entered into on terms that could reasonably be expected to have an
adverse effect on the use of the Assets or the Businesses by Buyer.
None of COG, the Sellers or Coleman has received any information which
5
<PAGE> 11
would cause any of such parties to conclude that any customer of the
Sellers will (or is likely to) cease doing business with Buyer (or its
successors) as a result of the consummation of the transactions
contemplated hereby. All of the Contracts set forth on Schedule 1.1(d),
other than the leases to be entered into pursuant to Section 4.2.10,
are assignable (and as of the Closing Date will be validly assigned) to
Buyer without the consent of any other party thereto, other than
consents obtained no later than the Closing Date.
2.1.6. Title to and Condition of Assets. The Sellers have
good, indefeasible and marketable title to all of the Assets, free
and clear of any Encumbrances (defined below). All of the
Assets are in a state of good operating condition and
repair, ordinary wear and tear excepted, and are free from any known
defects except as may be repaired by routine maintenance and such minor
defects as to not substantially interfere with the continued use
thereof in the conduct of normal operations. All of the Assets
materially conform to all applicable laws governing their use. No
notice of any violation of any law, statute, ordinance, or regulation
relating to any of the Assets has been received by any of the Sellers,
COG or Coleman, except such as have been fully complied with. For
purposes of this Agreement, the term "ENCUMBRANCES" means all liens,
security interests, pledges, mortgages, deeds of trust, claims, rights
of first refusal, options, charges, restrictions or conditions to
transfer or assignment, liabilities, obligations, privileges, equities,
easements, rights of way, limitations, reservations, restrictions, and
other encumbrances of any kind or nature.
2.1.7. Licenses and Permits. Schedule 1.1(e) hereto sets forth
a true, complete and accurate list of all Permits material to the
Businesses and the operation, maintenance and use of the Assets in the
manner in which they are now being operated, maintained and used. Each
of the Sellers' Permits and the Sellers' rights with respect thereto is
valid and subsisting, in full force and effect, and enforceable by the
respective Sellers subject to administrative powers of regulatory
agencies having jurisdiction. Each of the Sellers is in material
compliance in all respects with the terms of each of the Sellers'
Permits. None of the Sellers' Permits have been, or to the knowledge of
any of the Sellers, COG or Coleman, are threatened to be, revoked,
canceled, suspended or modified. Upon consummation of the transactions
contemplated hereby, all of the Sellers' Permits that are assignable
without the consent of any governmental or other agency shall be
assigned to the Buyer, and Buyer's rights with respect thereto will be
valid and subsisting in full force and effect, and enforceable by Buyer
subject only to the administrative powers of regulatory agencies having
jurisdiction over the assigned Sellers' Permits.
2.1.8. Intellectual Property. Schedule 1.1(c) hereto sets
forth a true, complete and accurate list of all Intellectual Property
material to the continued conduct of the Businesses. The Sellers'
Intellectual Property is owned or licensed by the Sellers free and
clear of any Encumbrances. The Sellers have not granted to any other
person any license to use any Sellers' Intellectual Property. Neither
the Sellers, COG nor Coleman has received any notice of infringement,
misappropriation, or conflict with the intellectual property rights of
others in connection with the use by the Sellers of the Sellers'
Intellectual Property.
6
<PAGE> 12
2.1.9. Financial Statements. The Sellers have delivered to
Buyer copies of certain unaudited financial statements of the Sellers,
copies of which are attached hereto as Schedule 2.1.9 (collectively,
the "SELLERS' FINANCIAL STATEMENTS") as of and for the five months
ended March 31, 1997 (the "BALANCE SHEET DATE"). The Sellers' Financial
Statements are true, correct and complete in all material respects and
present fairly and fully the financial condition of the Sellers as of
the dates and for the periods indicated thereon, and have been prepared
in accordance with generally accepted accounting principles as
promulgated by the American Institute of Certified Public Accountants
("GAAP") applied on a consistent basis, except as noted therein. Each
of the Sellers' Financial Statements include all adjustments
which are necessary for a fair presentation of the applicable Seller's
results for that period. The inventories of the Sellers reflected in
the Sellers' Financial Statements, or which have thereafter been
acquired by the Sellers, consist of items of a quality and quantity
salable in the normal course of the applicable business. The values at
which such inventories are carried are in accordance with GAAP applied
on a consistent basis, and are consistent with the normal inventory
level and practices of the Sellers with respect to the Businesses.
2.1.10. Additional Information. Attached as Schedule
2.1.10.1 through and including Schedule 2.1.10.13 are true, complete
and correct lists of the following items (such schedule
may refer to the disclosures contained in the schedules delivered
pursuant to Section 1.1):
2.1.10.1. Real Estate. All real property and
structures thereon currently owned or leased or subject to a
contract of purchase and sale, or lease commitment,
by any of the Sellers, with a description of the nature and
amount of any Encumbrance thereto;
2.1.10.2. Machinery and Equipment. All machinery,
transportation equipment, tools, equipment, furnishings and
fixtures (excluding such items as did not have a cost basis of
$500 or more at their respective dates of acquisition by any
of the Sellers) owned, leased or subject to a contract of
purchase and sale, or lease commitment, by any of the Sellers,
with a description of the nature and amount of any
Encumbrances thereon;
2.1.10.3. Inventory. All inventory items or groups
of inventory items owned by any of the Sellers, together
with the amount of any Encumbrances thereon;
2.1.10.4. Receivables. All accounts and notes
receivable of the Sellers, together with (i) an appropriate
invoice date and due date aging schedule, (ii) the amounts
provided for as an allowance for bad debts, (iii) the identity
and location of any asset in which any of the Sellers holds a
security interest to secure payment of the underlying
indebtedness and (iv) a description of the nature and amount
of any Encumbrances on such accounts and notes receivable;
7
<PAGE> 13
2.1.10.5. Payables. All accounts and notes payable
of the Sellers, together with an appropriate aging schedule;
2.1.10.6. Insurance. All insurance policies or
bonds, including title insurance policies, with respect to
the Sellers, including those covering its properties
(real or personal), buildings, machinery, equipment,
fixtures, employees and operations;
2.1.10.7. Employee Compensation Plans. All bonus,
incentive compensation, deferred compensation, profit-sharing,
retirement, pension, welfare, group insurance, death benefit,
or other fringe benefit plans, arrangements or trust
agreements of any of the Sellers (collectively, the "EMPLOYEE
PLANS");
2.1.10.8. Bank Accounts. The name of each
bank in which any of the Sellers has an account, the names of
all persons authorized to draw thereon, the account balances
and the account numbers for each such account;
2.1.10.9. Employee Agreements. Any collective
bargaining agreements of any of the Sellers with employees,
including amendments, supplements, and written or oral
understandings, and all employment, compensation or
consulting agreements, whether written or oral, of any of the
Sellers with any person;
2.1.10.10. Trade Names. All trade names and
fictitious names used or held by any of the Sellers,
whether and where such names are registered and where
such names are used;
2.1.10.11. Promissory Notes and Indebtedness. All
long-term and short-term promissory notes, installment
contracts, loan agreements, credit agreements and
any other agreements of any of the Sellers relating thereto
or with respect to collateral securing the same;
2.1.10.12. Guaranties. All indebtedness, liabilities
and commitments of others and as to which any of the
Sellers is a guarantor, endorser, co-maker, surety,
or accommodation maker, or is contingently liable therefor
(excluding liabilities as an endorser of checks and the like
in the ordinary course of business) and all letters
of credit, whether stand-by or documentary, issued by any
third party; and
2.1.10.13. Financial Statements. Unaudited financial
statements for each of the Sellers as of October 31, 1995
and 1996.
Schedule 2.1.10.1 - 2.1.10.13 shall be true, complete and
correct as of the date hereof, except for items 2.1.10.3, 2.1.10.4 and
2.1.10.5 which are true, complete and correct as of March 31, 1997 and
2.1.10.13 which are true and correct as of and for the periods
indicated.
8
<PAGE> 14
2.1.11. Absence of Certain Changes and Events. Other than
as a result of the transactions contemplated by this Agreement
or as set forth on Schedule 2.1.11, since the Balance Sheet Date,
there has not been:
2.1.11.1. Financial Change. Any material adverse
change in the Assets, the Business or the financial
condition, operations, liabilities or prospects of the Sellers
taken as a whole;
2.1.11.2. Property Damage. Any material damage,
destruction, or loss to any of the Assets or the Business of
any of the Sellers (whether or not covered by insurance);
2.1.11.3. Waiver. Any waiver or release of a
material right of or claim held by any of the Sellers;
2.1.11.4. Change in Assets. Any acquisition,
disposition, transfer, dividend, encumbrance, mortgage, pledge
or other encumbrance of any asset of the Sellers other than
in the ordinary course of business;
2.1.11.5. Labor Disputes. Any labor disputes between
any of the Sellers and their respective employees;
2.1.11.6. Capitalization Change. Any change in the
capital stock or in the number of shares or classes
of any of the Sellers' or COG's capital stock as described
in Section 2.1.3;
2.1.11.7. Employment Arrangements. Any change in
the duration or level of compensation, bonus or severance
payable under any employment or contractor arrangement
with any of the Sellers (whether by amendment to any existing
arrangement or by the entering into a new arrangement); or
2.1.11.8. Other Material Changes. Any other event
or condition known to any of the Sellers, COG or Coleman
which would or may, more likely than not, have a Material
Adverse Effect on the Sellers.
2.1.12. Assets; Necessary Consents. The Assets constitute all
of the assets necessary to conduct the Business as historically
conducted by each of the Sellers (other than the Excluded Assets). As
of the Closing Date, each of the Sellers will have obtained and
delivered to Buyer all consents to assignment or waivers thereof
required to be obtained from any governmental authority or from any
other third party in order to validly transfer the Assets hereunder,
9
<PAGE> 15
including, without limitation, any consents required to assign the
Contracts and the Sellers' Permits.
2.1.13. Environmental Matters. None of the current or past
operations of the Businesses or any of the Assets is being or has been
conducted or used in such a manner as to constitute a violation of any
Environmental Law (defined below). None of the Sellers, COG or Coleman
has received any notice (whether formal or informal, written or oral)
from any entity, governmental agency or individual regarding any
existing, pending or threatened investigation or inquiry related to
violations of any Environmental Law or regarding any claims for
remedial obligations or contribution for removal costs or damages under
any Environmental Law. There are no writs, injunction decrees, orders
or judgments outstanding, or lawsuits, claims, proceedings or
investigations pending or, to the knowledge of any of the Sellers, COG
or Coleman, threatened, relating to the ownership, use, maintenance or
operation of the Assets or the conduct of the Business, nor, to the
knowledge of any of the Sellers, COG or Coleman, is there any basis for
any of the foregoing. Buyer will not be required to obtain any permits,
licenses or similar authorizations pursuant to any Environmental Law
after the Closing Date to operate and use any of the Assets for their
current or proposed purposes and uses, except for permits, licenses or
similar authorizations that would not have a Material Adverse Effect on
the Sellers. The Assets include all environmental and pollution control
equipment necessary for material compliance with
applicable Environmental Law. Except as disclosed on Schedule 2.1.13
(i) no Hazardous Materials (defined below) have been or are currently
being used by any of the Sellers in the operation of the Assets, (ii)
no Hazardous Materials are or have ever been situated on or under any
of the Sellers' properties, whether owned or leased, or incorporated
into any of the Assets, (iii) there are no, and there have never been
any, underground storage tanks (as defined under Environmental Law)
located under any of the Sellers' properties, whether owned or leased,
and (iv) there are no environmental conditions or circumstances,
including the presence or release of any Hazardous Materials, on any
property presently or previously owned or leased by any of the Sellers,
or on any property on which Hazardous Materials generated by any of the
Sellers' operations or the use of the Assets were disposed of. The term
"ENVIRONMENTAL LAW" means any and all laws, rules, orders, regulations,
statutes, ordinances, codes, decrees, and other legally enforceable
requirements (including, without limitation, common law) of the United
States, or any state, regional, city, local, municipal or other
governmental authority or quasi-governmental authority, regulating,
relating to, or imposing environmental standards of conduct concerning
protection of the environment or human health, or employee health and
safety as from time to time has been or is now in effect. The term
"HAZARDOUS MATERIALS" means (x) asbestos, polychlorinated biphenyls,
urea formaldehyde, lead based paint, radon gas, petroleum, oil, solid
waste, pollutants and contaminants, and (y) any chemicals, materials,
wastes or substances that are defined, regulated, determined or
identified as toxic or hazardous in any Environmental Law.
2.1.14. Employee Benefit Plans; Labor Issues. Upon request ,
each of the Sellers will deliver to the Buyer copies of the Employee
Plans and any other health, dental and life insurance plans, bonus,
10
<PAGE> 16
deferred compensation, pension, profit sharing and retirement plans and
all other employee benefit plans, programs or arrangements providing
benefits for employees of any of the Sellers (the "BENEFIT PLANS").
Each of the Benefit Plans has been administered and maintained in
material compliance with the requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and, if applicable,
the Internal Revenue Code of 1986, as amended (the "CODE"), and all
other applicable laws. There is no "ACCUMULATED FUNDING DEFICIENCY" (as
such term is defined in Section 302 of ERISA or Section 412 of the
Code) with respect to a Benefit Plan that is an "EMPLOYEE PENSION
BENEFIT PLAN" (as defined in Section 3(2) of ERISA), and there has been
no application for waiver of the minimum funding standards imposed by
Code Section 412 with respect to any such plan. There are no pending
or, to the knowledge of any of the Sellers, COG or Coleman, threatened
claims by or on behalf of the Benefit Plans, the United States
Department of Labor, the Internal Revenue Service, or by any current or
former employee of any of the Sellers or beneficiary of such current or
former employee alleging a breach of any fiduciary duties or a
violation of applicable state or federal law which could result in a
material liability on the part of any of the Sellers or a Benefit Plan
under ERISA or any other law (other than benefit claims and funding
obligations in the ordinary course of business). None of the Sellers
has suffered or otherwise caused a "complete withdrawal" or "partial
withdrawal," as such terms are respectively defined in Sections 4203
and 4205 of ERISA, from any Multiemployer Pension Plan, as such term is
defined in Section 3(37) of ERISA.
None of the Sellers have engaged in any unfair labor practices
which could reasonably be expected to result in an adverse effect on
the Business or the Assets. None of the Sellers have any dispute with
any of their existing or former employees, and there are no labor
disputes or, to the knowledge of any of the Sellers, COG or Coleman,
any disputes threatened by current or former employees of any of the
Sellers.
2.1.15. Investigations; Litigation. Except as required
pursuant to the Hart-Scott- Rodino Antitrust Improvements Act of 1978
and the rules and regulations promulgated thereunder (collectively,
"HSR"), no investigation or review by any governmental entity with
respect to any of the Sellers or any of the transactions contemplated
by this Agreement is pending or, to the knowledge of any of the
Sellers, COG or Coleman, threatened, nor has any governmental entity
indicated to any of the Sellers, COG or Coleman an intention to conduct
the same. Except as disclosed on Schedule 2.1.15, there is no suit,
action, or legal, administrative, arbitration, or other proceeding or
governmental investigation pending to which any of the Sellers, COG or
Coleman is a party or, to the knowledge of any of the Sellers, COG or
Coleman, might become a party.
2.1.16. Absence of Certain Businesses Practices. None of the
Sellers, COG or Coleman, nor any officer, employee or agent of any of
the Sellers or COG, nor any other person acting on behalf of any of the
Sellers, COG or Coleman, 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
11
<PAGE> 17
be in a position to help or hinder the profitable conduct of the
Businesses or the profitable use of the Assets (or to assist any of the
Sellers in connection with any actual or proposed transaction) which if
not given in the past, may more likely than not have had an adverse
effect on the profitable conduct of the Business or the profitable use
of the Assets, or if not continued in the future, may more likely than
not adversely affect the profitable conduct of the Businesses or the
profitable use of the Assets.
2.1.17. Solvency. None of the Sellers are presently insolvent,
nor will any of the Sellers be rendered insolvent by the occurrence of
the transactions contemplated by this Agreement. The term "INSOLVENT",
with respect to a particular Seller, means that the sum of the present
fair and saleable value of such Seller's assets does not and will not
exceed its debts and other probable liabilities, and the term "DEBTS"
includes any legal liability whether matured or unmatured, liquidated
or unliquidated, absolute fixed or contingent, disputed or undisputed
or secured or unsecured.
2.1.18. Untrue Statements. This Agreement and all other
agreements executed by any of the Sellers, COG or Coleman and delivered
to Buyer does not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
2.1.19. Transactions with Management. Except as set forth on
Schedule 2.1.19, none of the Sellers is a party to any contract, lease
or agreement with any of the officers or directors, any of the Sellers,
COG or Coleman or any of their affiliates or family members,
as applicable.
2.1.20. Compliance with Other Laws. None of the Sellers is in
material for violation of or in material default with respect to, or in
alleged violation of or alleged default with respect to the
Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq., as
amended), or any applicable law or any applicable rule, regulation, or
any writ or decree of any court or any governmental commission, board,
bureau, agency, or instrumentality, or delinquent with respect to any
report required to be filed with any governmental commission, board,
bureau, agency or instrumentality.
2.1.21. Taxes. The federal income tax returns of the Sellers
for the years 1995 and 1996 have been provided to the Buyer prior to
the date hereof. Proper and accurate federal, state and local income,
sales, use, franchise, gross revenue, turnover, excise, payroll,
property, employment, customs duties and any and all other tax returns,
reports, and estimates have been filed with appropriate governmental
agencies, domestic and foreign, by each of the Sellers and COG for each
period for which any returns, reports, or estimates were due. All taxes
shown by such returns to be payable have been paid. All sales taxes
have been properly collected and accounted for through the date hereof
by each of the Sellers, and the Sellers have made all required deposits
of such taxes with all taxing authorities. The tax provision reflected
12
<PAGE> 18
in each of the Sellers' financial statements as of March 31, 1997 is
adequate to cover liabilities of each of the Sellers at the date
thereof for all taxes of any character whatsoever applicable to each of
the Sellers or its assets or business. No waiver of any statute of
limitations executed by any of the Sellers or by COG with respect to
federal or state income or other tax is in effect for any period. No
deficiencies for any taxes have been proposed, asserted or assessed
against any of the Sellers, COG, and no requests or waivers of the time
to assess any such tax are pending. The federal income tax returns of
the Sellers or COG have not been audited by the Internal Revenue
Service since 1990. No audit of any federal or state or other tax
return of any of the Sellers or COG is presently in process nor has an
appointment for or notice of any such audit been requested or given by
any taxing authority.
2.1.22. Finder's Fee. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on
by the Sellers, COG and Coleman and their respective counsel directly
with Buyer and its counsel, without the intervention of any other
person in such manner as to give rise to any valid claim against any of
the parties hereto for a brokerage commission, finder's fee or any
similar payment.
2.2. Investment Representations. Each of the Sellers acknowledges,
represents and agrees that:
2.2.1. Sellers' Investment Suitability and Related Matters.
(i) Key has made available to the Sellers and COG the information and
documents described in Section 2.4.3, (ii) the Sellers understand the
risks associated with ownership of Key Common Stock, and (iii) the
Sellers are capable of bearing the financial risks associated with such
ownership.
2.2.2. Key Shares Not Registered. The Key Shares have not
been registered under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), or registered or qualified under any applicable
state securities laws.
2.2.3. Reliance on Representations. The Key Shares are being
issued to the Sellers in reliance upon exemptions from such
registration or qualification requirements, and the availability of
such exemptions depends in part upon the Sellers' bona fide investment
intent with respect to the Key Shares.
2.2.4. Investment Intent. The Sellers' acquisition of the Key
Shares are solely for their respective own accounts for investment,
and the Sellers are not acquiring the Key Shares for the account of
any other person or with a view toward distribution thereof.
2.2.5. Permitted Resale. The Sellers shall not offer for sale,
sell, transfer, pledge, hypothecate or otherwise dispose of any of the
Key Shares except in accordance with the registration requirements of
the Securities Act and applicable state securities laws or upon
13
<PAGE> 19
delivery to Key of an opinion of legal counsel reasonably satisfactory
to Key that an exemption from registration is available.
2.2.6. Investor Sophistication. Each of the Sellers has such
knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of an investment in the
Key Shares, and to make an informed investment decision with
respect thereto.
2.2.7. Availability of Information. Each of the Sellers has
had the opportunity to ask questions of, and receive answers from Key's
officers and directors concerning the Seller's acquisition of the Key
Shares and to obtain such other information concerning Key and the Key
Shares, to the extent Key's officers and directors possessed the same
or could acquire it without unreasonable effort or expense, as the
Sellers deemed necessary in connection with making an informed
investment decision.
2.2.8. Restrictive Legends. In addition to any other
legends required by law or the other agreements entered into in
connection herewith, each certificate evidencing the Key Shares will
bear a conspicuous restrictive legend substantially as follows:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS, AND THEY CANNOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE HYPOTHECATED
EXCEPT IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE
ACT AND SUCH OTHER STATE LAWS OR UPON DELIVERY TO THIS
CORPORATION OF AN OPINION OF LEGAL COUNSEL SATISFACTORY TO THE
CORPORATION THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
2.3. Representations and Warranties of Buyer. Buyer represents and
warrants to each of the Sellers, COG and Coleman as follows:
2.3.1. Organization and Good Standing. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Delaware, has full requisite corporate power and authority
to carry on its business as it is currently conducted, and to own and
operate the properties currently owned and operated by it, and is duly
qualified or licensed to do business and is in good standing as a
foreign corporation authorized to do business in all jurisdictions in
which the character of the properties owned or the nature of the
business conducted by it would make such qualification or licensing
necessary, including the State of New Mexico.
14
<PAGE> 20
2.3.2. Agreement Authorized and its Effect on Other
Obligations. The execution and delivery of this Agreement has been
authorized by all necessary corporate, shareholder and other action on
the part of Buyer, and this Agreement is the valid and binding
obligation of Buyer enforceable against Buyer in accordance with its
terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, debtor relief or similar laws affecting
rights of creditors generally and subject to normal equitable
principles. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby, will not
conflict with or result in a violation or breach of any term or
provision of, nor constitute a default under (i) the charter or bylaws
(or other organizational documents) of Buyer, (ii) any obligation,
indenture, mortgage, deed of trust, lease, contract or other agreement
to which Buyer is a party or by which Buyer or its properties are
bound; or (iii) any provision of any law, rule, regulation, order,
permits, certificate, writ, judgment, injunction, decree,
determination, award or other decision of any court, arbitrator, or
other governmental authority to which Buyer or any of its properties
are subject, except, with respect to items (ii) and (iii), such
violations, breaches, or defaults as would not have a Material Adverse
Effect on Buyer, any Seller or the transactions contemplated by this
Agreement.
2.3.3. Necessary Consents. No consent, approval or
authorization of, or filing of a registration with, any governmental or
regulatory authority, or any other person or entity is required to be
made or obtained by Buyer in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby.
2.3.4. Investigations. Except as required pursuant to HSR, no
investigation or review by any governmental entity with respect to the
Buyer or any of the transactions contemplated by this Agreement is
pending, or to knowledge of Buyer, threatened, nor has any governmental
entity indicated to Buyer an intention to conduct the same.
2.4. Representations and Warranties of Key. Key represents and
warrants to each of the Sellers, COG and Coleman as follows:
2.4.1. Organization and Standing. Key is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Maryland, has full requisite corporate power and authority to
carry on its business as it is currently conducted, and to own and
operate the properties currently owned and operated by it, and is duly
qualified or licensed to do business and is in good standing as a
foreign corporation authorized to do business in all jurisdictions in
which the character of the properties owned or the nature of the
business conducted by it would make such qualification or licensing
necessary.
2.4.2. Agreement Authorized and its Effect on Other
Obligations. The execution and delivery of this Agreement has been
authorized by all necessary corporate, shareholder and other action on
the part of Key, and this Agreement is the valid and binding obligation
of Key enforceable against Key in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
15
<PAGE> 21
reorganization, debtor relief or similar laws affecting rights of
creditors generally and subject to normal equitable principles. The
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, will not conflict
with or result in a violation or breach of any term or provision of,
nor constitute a default under (i) the charter or bylaws (or other
organizational documents) of Key, (ii) any obligation, indenture,
mortgage, deed of trust, lease, contract or other agreement to which
Key is a party or by which Key or its properties are bound; or (iii)
any provision of any law, rule, regulation, order, permits,
certificate, writ, judgment, injunction, decree, determination, award
or other decision of any court, arbitrator, or other governmental
authority to which Key or any of its properties are subject.
2.4.3. Capitalization. The capitalization of Key consists of
25,000,000 shares of common stock, par value $.10 per share ("KEY
COMMON STOCK"), of which as of the date hereof, 12,422,964 shares are
issued and outstanding, 8,177,246 shares are reserved for issuance
pursuant to stock options, warrants and other convertible securities.
Pursuant to Key's Certificate of Incorporation, Key's board of
directors has the authority, without further shareholder action, to
redesignate all of the authorized and unissued shares of Key Common
Stock into one or more series of preferred stock. As of the date
hereof, no shares have been so designated or issued. Except as set
forth in this Section 2.4.3., there are outstanding as of the date
hereof (i) no securities of Key or any other person convertible into or
exchangeable or exercisable for shares of capital stock or other voting
securities of Key, and (ii) no subscriptions, options, warrants, calls,
rights obligating Key to issue, deliver, sell, purchase, redeem or
acquire shares of capital stock or other voting securities of Key. All
of the outstanding Key Common Stock is, and, when issued, the Key
Shares will be, validly issued, fully paid and nonassessable and not
subject to any preemptive right. As of the date hereof there is no, and
at the Closing Date there will not be any, stockholder agreement,
voting trust, or other agreement or understanding to which Key is a
party or by which it is bound relating to the voting of any shares of
capital stock of Key.
2.4.4. Reports and Financial Statements. Key has previously
furnished to the Sellers true and complete copies of (i) Key's annual
report filed with the Securities and Exchange Commission (the
"COMMISSION") pursuant to the Securities and Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), for Key's fiscal year ended June 30,
1996; (ii) Key's quarterly and other reports filed with the Commission
since June 30, 1996; (iii) all definitive proxy solicitation materials
filed with the Commission since June 30, 1996; (iv) any registration
statements (other than those relating to employee benefit plans)
declared effective by the Commission since June 30, 1996; and (v) Key's
Private Offering Memorandum dated June 28, 1996, relating to Key's 7%
Convertible Subordinated Debentures (collectively, the "DISCLOSURE
DOCUMENTS"). The Disclosure Documents contain all information required
to be disclosed under the Securities Act of 1933, as amended, the
Exchange Act and the rules and regulations of the Commission. The
consolidated financial statements of Key and its consolidated
subsidiaries included in Key's most recent report on Form 10-K were
prepared in accordance with GAAP applied on a consistent basis during
16
<PAGE> 22
the periods involved and fairly present the consolidated financial
position of Key and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and changes in
financial position for the periods then ended; and the Disclosure
Documents did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were, made not misleading. Since June
30, 1997, Key has filed with the Commission all material reports,
registration statements and other material filings required to be filed
with the Commission under the rules and regulations of the Commission.
2.4.5. Absence of Certain Changes and Events. Since June
30, 1997, there has not been:
2.4.5.1. Financial Change. Any material adverse
change in the Assets, the business or the financial
condition, operations, liabilities or prospects of Key;
2.4.5.2. Property Damage. Any damage, destruction,
or loss to any of the assets or the businesses of Key
(whether or not covered by insurance);
2.4.5.3. Waiver. Any waiver or release of a
material right of or claim held by Key;
2.4.5.4. Change in Assets. Any acquisition,
disposition, transfer, encumbrance, mortgage, pledge or
other encumbrance of any asset of Key other than in the
ordinary course of business;
2.4.5.5. Labor Disputes. Any labor disputes between
Key and its employees;
2.4.5.6. Capitalization Change. Any change in the
capital stock or in the number of shares of any classes
of Key's capital stock as described in Section 2.4.3; or
2.4.5.7. Other Material Changes. Any other event
or condition known to Key which may, more likely than
not, have a Material Adverse Effect on Key.
2.4.6. Compliance with Other Laws. Key is not in material
violation of or in material default with respect to, or in alleged
violation of or alleged default with respect to the Occupational Safety
and Health Act (29 U.S.C. ss. 651 et seq., as amended), or any
applicable law or any applicable rule, regulation, or any writ or
decree of any court or any governmental commission, board, bureau,
agency, or instrumentality, or delinquent with respect to any report
required to be filed with any governmental commission, board, bureau,
agency or instrumentality.
17
<PAGE> 23
2.4.7. Necessary Consents. No consent, approval or
authorization of, or filing of a registration with, any governmental or
regulatory authority, or any other person or entity is required to be
made or obtained by Key in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby, other than what is required by the American Stock
Exchange for the listing of the Key Shares issuable hereunder.
2.4.8. Investigations; Litigation. Except as required pursuant
to HSR, no investigation or review by any governmental entity with
respect to Key in connection with any of the transactions contemplated
by this Agreement is pending or, to the best of Key's knowledge,
threatened, nor has any governmental entity indicated to Key an
intention to conduct the same. Except as set forth in the Disclosure
Documents, there is no action, suit or proceeding pending or, to the
best of Key's knowledge, threatened against or affecting Key by any
federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, which either individually or
in the aggregate, does or may more likely than not, result in any
Material Adverse Effect on Key.
ARTICLE 3
OBLIGATIONS PENDING CLOSING DATE
3.1. Agreements of the Sellers, COG and Coleman. Except as expressly
contemplated elsewhere in this Agreement, the Sellers, COG and Coleman agree
that from the date hereof until the Closing Date, each of the Sellers will:
3.1.1. Maintenance of Present Businesses. Except as
contemplated by this Agreement, operate its business only in the usual,
regular, and ordinary manner so as to maintain the goodwill it now
enjoys and, to the extent consistent with such operation, preserve
intact its present business organization, keep available the services
of its present officers and employees, and preserve its relationship
with customers, suppliers, jobbers, distributors and others having
business dealings with it;
3.1.2. Maintenance of Properties. At their expense, maintain
all of their property and Assets in customary repair, order, and
condition, reasonable wear and tear excepted;
3.1.3. Maintenance of Books and Records. Maintain its books
of account and records in the usual, regular, and ordinary manner, in
accordance with its customary accounting principles applied on a
consistent basis;
3.1.4. Compliance with Law. Comply with all laws applicable
to, and having a material effect on, it and to the conduct of its
business;
18
<PAGE> 24
3.1.5. Prohibition of Certain Contracts. Except for orders
made and contracts entered into in the ordinary course of business,
not enter into any contracts which involve the payment of more
than $25,000 each;
3.1.6. Prohibition of Loans. Not incur any obligations for
borrowed money, except for loans in the usual and ordinary
course of business;
3.1.7. Prohibition of Certain Commitments. Except for
orders made and contracts entered into in the ordinary course of
business, not enter into a commitment for expenditures or incur
any liability exceeding $10,000 in the aggregate, unless approved in
writing by Buyer;
3.1.8. Disposal of Assets. Not sell, dispose of, or
encumber any property or assets, except in the usual and ordinary
course of business;
3.1.9. Maintenance of Insurance. Maintain insurance upon all
its properties and with respect to the conduct of its business of such
kinds and in such amounts as is not less than that presently carried by
it, which is adequate for the business operated by it, which insurance
may be added to from time to time upon the written approval by Buyer;
3.1.10. No Amendment to Charter Documents and Related Matters.
Not amend its charter documents, or merge or consolidate with or into
any person, change in any manner the rights of its capital stock or
the character of its business;
3.1.11. No Issuance, Sale, or Purchase of Securities. Not
issue or sell, or issue options or rights to subscribe to, or enter
into any contract or commitment to issue or sell (upon conversion or
otherwise), any shares of its capital stock, or subdivide or in any way
reclassify any shares of its capital stock, or acquire, or agree to
acquire, any shares of its capital stock;
3.1.12. Prohibition on Dividends. Except as otherwise
provided herein, not declare any dividend on shares of its capital
stock or make any other non-cash distribution of assets
to the holders thereof;
3.1.13. Notice of Material Developments. Promptly notify the
Buyer in writing of any Material Adverse Effect on such Seller; and
3.1.14. Acquisition Proposals. Not directly or indirectly (i)
solicit, initiate or encourage any inquiry or Acquisition Proposal from
any person or (ii) participate in any discussions or negotiations
regarding, or furnish to any person other than Buyer or its
representatives any information with respect to, or otherwise
facilitate or encourage any Acquisition Proposal by any other person.
As used herein "Acquisition Proposal" means any proposal for a merger,
consolidation or other business combination involving any of the
Sellers or for the acquisition or purchase of any equity interest in,
19
<PAGE> 25
or a material portion of the assets of, any of the Sellers, other than
the transactions with Buyer contemplated by this Agreement. The
Sellers, COG and Coleman shall promptly communicate to Buyer the terms
of any such written Acquisition Proposals which they may receive or any
written inquiries made to them or any of their respective directors,
officers, representatives or agents.
3.2. HSR Compliance. Each of Key and COG shall file, not later than 15
days after the date of this Agreement, such materials as a required under HSR
and shall (a) cooperate with the other party to the extent necessary to assist
the other party in the preparation of such filings, and (b) request early
termination of the waiting period required by HSR.
ARTICLE 4
CONDITIONS PRECEDENT TO OBLIGATIONS
4.1. Conditions Precedent to Obligations of Sellers, COG and Coleman.
The obligation of Sellers to consummate and effect the transactions contemplated
hereunder shall be subject to the satisfaction of the following conditions, or
to the waiver thereof by the Sellers before the Closing Date:
4.1.1. Representations and Warranties of Buyer and Key True at
Closing Date. The representations and warranties of Buyer and Key
herein contained shall be, in all material respects, true as of and at
the Closing Date with the same effect as though made at such date,
except as affected by transactions permitted or contemplated by this
Agreement; Buyer and Key shall have performed and complied, in all
material respects, with all covenants required by this Agreement to be
performed or complied with by Buyer and Key before the Closing Date;
and Buyer and Key shall have delivered to the Sellers a certificate,
dated the Closing Date and signed by their respective vice presidents
and its secretaries, to such effect.
4.1.2. No Material Litigation. No suit, action, or other
proceeding shall be pending, or to Buyer's or Key's knowledge,
threatened, before any court or governmental agency in which it will
be, or it is, sought to restrain or prohibit or to obtain damages or
provide other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby.
4.1.3. Opinion of Buyer's and Key's Counsel. The Sellers shall
have received a favorable opinion, dated as of the Closing Date, from
Porter & Hedges, L.L.P., counsel for Buyer and Key, in form and
substance satisfactory to the Sellers, to the effect that (i) Buyer and
Key have been duly incorporated and are validly existing as
corporations in good standing under the laws of their respective states
of organization; (ii) all corporate proceedings required to be taken by
or on the part of the Buyer and Key to authorize the execution of this
Agreement and the implementation of the transactions contemplated
hereby have been taken; (iii) the Key Shares that are to be delivered
in accordance with this Agreement will, when issued, be validly issued,
20
<PAGE> 26
fully paid and nonassessable outstanding shares of Key Common Stock;
and (iv) this Agreement has been duly executed and delivered by, and is
the legal, valid and binding obligation of Buyer and Key and is
enforceable against Buyer and Key in accordance with its terms, except
as enforceability may be limited by (a) equitable principles of general
applicability or (b) bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the rights of creditors generally.
In rendering such opinion, such counsel may rely upon (i) certificates
of public officials and of officers of Buyer and Key as to matters of
fact and (ii) the opinion or opinions of other counsel, which opinions
shall be reasonably satisfactory to the Sellers, as to matters other
than federal or Texas law.
4.1.4. HSR. All waiting periods required by HSR shall have
expired with respect to the transactions contemplated by this
Agreement, or early termination with respect thereto shall have been
obtained. In addition, any approvals required under any state laws
comparable to HSR shall have been obtained.
4.1.5. Listing of Key Shares. The American Stock Exchange
shall have agreed that on the Closing Date it will list the Key Shares
issuable pursuant to this Agreement.
4.1.6. Consent of Certain Parties in Privity With Buyer. The
holders of any material indebtedness of Buyer, the lessors of any
material property leased by Buyer, and the other parties to any other
material agreements to which Buyer is a party shall, when and to the
extent necessary in the reasonable opinion of the Sellers, have
consented to the transactions contemplated hereby.
4.2. Conditions Precedent to Obligations of Buyer and Key. The
obligation of Buyer to consummate and effect the transactions contemplated
hereunder shall be subject to the satisfaction of the following conditions, or
to the waiver thereof by Buyer before the Closing Date.
4.2.1. Representations and Warranties of the Sellers, COG and
Coleman True at Closing Date. The representations and warranties of the
Sellers, COG and Coleman herein contained shall be, in all material
respects, true as of and at the Closing Date with the same effect as
though made at such date, except as affected by transactions permitted
or contemplated by this Agreement; the Sellers, COG and Coleman shall
have performed and complied in all material respects, with all
covenants required by this Agreement to be performed or complied with
by them before the Closing Date; and the Sellers, COG and
Coleman each shall have delivered to Buyer a certificate, dated the
Closing Date and signed by each of them individually or by their
respective presidents, chief financial or accounting officers, and
secretaries, as applicable, to such effects.
4.2.2. No Material Litigation. No suit, action, or other
proceeding shall be pending, or to the Seller's, COG's or Coleman's
knowledge, threatened, before any court or governmental agency in which
it will be, or it is, sought to restrain or prohibit or to obtain
21
<PAGE> 27
damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby.
4.2.3. Opinion of Counsel. The Sellers shall have received a
favorable opinion, dated the Closing Date, from Laflin, Lieuwen,
Tucker, Pick & Heer, P.A., counsel to Sellers, COG and Coleman, in form
and substance satisfactory to Buyer, to the effect that (i) each of the
Sellers and COG has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its state of
organization; (ii) this Agreement has been duly executed and delivered
by, and is the legal, valid and binding obligation of each of the
Sellers, COG and Coleman, and is enforceable against each of the them
in accordance with its terms, except as the enforceability may be
limited by (a) equitable principles of general applicability or (b)
bankruptcy, insolvency, reorganization, fraudulent conveyance or
similar laws affecting the rights of creditors generally. In rendering
such opinion, such counsel may rely upon (i) certificates of public
officials and of officers of the Sellers, COG and Coleman as to matters
of fact and (ii) on the opinion or opinions of other counsel, which
opinions shall be reasonably satisfactory to Buyer, as to matters other
than federal or New Mexico law.
4.2.4. HSR. All waiting periods required by HSR shall have
expired with respect to the transactions contemplated by this
Agreement, or early termination with respect thereto shall have been
obtained. In addition, any approvals required under any state laws
comparable to HSR shall have been obtained.
4.2.5. Consent of Certain Parties in Privity with the Sellers,
COG or Coleman. The holders of any material indebtedness of the
Sellers, COG or Coleman, the lessors of any material property leased by
the Sellers, COG or Coleman, and the other parties to any other
material agreements to which the Sellers, COG or Coleman are a party
shall, when and to the extent necessary in the reasonable opinion of
Buyer, have consented to the transaction contemplated hereby.
4.2.6. Assignment of Contracts and Issuance of Permits. All of
the material Contracts shall have been assigned to Buyer. Buyer shall
have received from the appropriate regulatory agencies all permits
necessary for the operation of the Businesses as such Businesses have
been conducted by the Sellers and COG, including permits of like tenor
of the Sellers' Permits, or the Sellers' Permits shall have been
assigned to the Buyer with the consent of the appropriate regulatory
agencies.
4.2.7. Environmental Assessments. The Sellers or COG shall
have caused, at their sole expense, a Phase I Environmental Site
Assessment of all real property being transferred or leased
to the Buyer as contemplated by this Agreement and the Real
Estate Contract. Such Environmental Site Assessment will be conducted
in conformance with the scope and limitations of the ASTM Standard
Practice E1527 by an environmental surveyor approved by the Buyer. At
Buyer's reasonable request, the Sellers, COG or Coleman will cause, at
their sole expense, a Phase II environmental site assessment to be
conducted in conformance with the scope and limitations of the ASTM
Standard Practice E1527 by an environmental surveyor approved by Buyer.
The results of such Phase I and Phase II Environmental Site Assessments
shall have revealed no environmental condition that would result in a
Material Adverse Effect on the Sellers or materially reduce the value
of the Real Estate.
22
<PAGE> 28
4.2.8. Real Estate Transaction. Buyer and COG shall have
concurrently either closed the Real Estate Contract or shall have
entered into a lease with respect to the Real Estate as contemplated by
Section 6.5 of this Agreement.
4.2.9. Employment and Non-Competition Agreement. Ronald
Fellabaum shall have entered into an employment and non-competition
agreement with Buyer.
4.2.10. Leases. COG, Coleman or their respective affiliates,
as applicable, shall have entered into lease agreements with Buyer
covering the real property and improvements currently used by any of
the Sellers in connection with the Businesses, other than the Real
Estate, on such terms and conditions as is mutually acceptable to such
party and Buyer.
ARTICLE 5
TERMINATION AND ABANDONMENT
5.1. Termination. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement may be terminated and the purchase
and sale contemplated hereby abandoned at any time before the Closing Date:
5.1.1. By Mutual Consent. By mutual consent of Buyer and
the Sellers.
5.1.2. By Buyer Because of Failure to Perform Agreements or
Conditions Precedent. By Buyer, if the Sellers, COG or Coleman have
failed to perform any material agreement set forth herein, or if any
material condition set forth in Section 4.2 hereof has not been met,
and such condition has not been waived.
5.1.3. By the Sellers Because of Failure to Perform Agreements
or Conditions Precedent. By the Sellers, if Buyer or Key has failed to
perform any material agreement set forth herein, or if any material
condition set forth in Section 4.1 hereof has not been met, and such
condition has not been waived.
5.1.4. By Buyer or by the Sellers Because of Legal
Proceedings. By either Buyer or the Sellers if any suit, action, or
other proceeding shall be pending or threatened by the federal or
a state government before any court or governmental agency, in which
it is sought to restrain, prohibit, or otherwise affect the
consummation of the transactions contemplated hereby.
5.1.5. By Buyer Because of a Material Adverse Effect. By
Buyer if there has been a Material Adverse Effect on Sellers since
the date hereof.
23
<PAGE> 29
5.1.6. By Buyer or by the Sellers if No Closing by November 1,
1997. By either Buyer or the Sellers, if the Closing of the purchase
and sale contemplated hereby shall not have been consummated on or
before November 1, 1997 through no fault of any party hereto; provided,
however, that this Agreement may not be terminated by any party hereto
if the transactions contemplated hereby have not occurred due to the
breach of any provision of this Agreement by the party desiring to
terminate this Agreement.
5.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to and in accordance with the provisions
of Section 5.1 hereof, this Agreement shall become void and have no effect,
without any liability on the part of any party hereto (or its stockholders or
controlling persons or directors or officers), except as otherwise provided in
this Agreement; provided, however, that a termination of this Agreement shall
not relieve any party hereto from any liability for damages incurred as a result
of a breach by such party of its representations, warranties, covenants,
agreements, or other obligations hereunder, occurring before such termination.
5.3. Waiver of Conditions. Subject to the requirements of any
applicable law, any of the terms or conditions of this Agreement may be waived
at any time by the party which is entitled to the benefit thereof.
5.4. Expense on Termination. If the transactions contemplated hereby
are abandoned pursuant to and in accordance with the provisions of Section 5.1
hereof, all expenses will be paid by the party incurring them.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1. Noncompetition. Except as otherwise consented to or approved in
writing by Buyer, each of the Sellers, COG and Coleman, and their respective
affiliates, officers and directors agree that for a period of 60 months
following the Closing Date, such party will not (and in the case of Coleman will
cause any members of his family not to), directly or indirectly, acting alone or
as a member of a partnership or a holder of, or investor in as much as 5% of any
security of any class of any corporation or other business entity (i) engage in
any business on or after the Closing Date in competition with the businesses
conducted by any of the Sellers on or before the Closing Date, or in any service
business the services of which were provided and marketed by any of the Sellers
on or before the Closing Date in any state of the United States, or any foreign
country in which any of the Sellers transacted business on or before the Closing
Date; provided, however, that nothing in this Agreement will restrict any of the
above persons from pursuing oil and gas exploration and
production operations; (ii) request any present customers or suppliers of any of
the Sellers to curtail or cancel their business with Buyer (or Buyer's
affiliates); (iii) disclose to any person, firm or corporation any trade,
technical or technological secrets of Buyer (or Buyer's affiliates) or of the
Sellers or any details of their organization or business affairs or (iv) induce
or actively attempt to influence any employee of Buyer (or Buyer's affiliates)
24
<PAGE> 30
to terminate his employment. The Sellers, COG and Coleman agree that if either
the length of time or geographical as set forth in this Section 6.1 is deemed
too restrictive in any court proceeding, the court may reduce such restrictions
to those which it deems reasonable under the circumstances, and such
restrictions as modified shall be enforceable hereunder. The obligations
expressed in this Section 6.1 are in addition to any other obligations that the
Sellers, COG and Coleman may have under the laws of any state requiring a
corporation selling its assets (or the shareholders of such corporation) to
limit its activities so that the goodwill and business relations being
transferred with such assets will not be materially impaired. The Sellers, COG
and Coleman further agree and acknowledge that Buyer does not have any adequate
remedy at law for the breach or threatened breach by the Sellers, COG or Coleman
of the covenants contained in this Section 6.1, and agree that Buyer may, in
addition to the other remedies which may be available to it hereunder, file a
suit in equity to enjoin the Sellers, COG or Coleman from such breach or
threatened breach. If any provisions of this Section 6.1 are held to be invalid
or against public policy, the remaining provisions shall not be affected
thereby. The Sellers, COG and Coleman acknowledge that the covenants set forth
in this Section 6.1 are being executed and delivered by such party in
consideration of the covenants of Buyer contained in this Agreement, and for
other good and valuable consideration, the receipt of which is hereby
acknowledged.
6.2. Employees. Schedule 6.2 hereto is a complete and accurate listing
of all employees of the Sellers that devote their full time and effort in the
operation of the Assets and the conduct of the Business (the "EMPLOYEES"). Each
of the Sellers, COG and Coleman will use their best efforts to make all of their
Employees available for hire by the Buyer or its affiliates, and the Buyer
agrees to hire all of such Employees on the Closing Date, subject to such
Employees meeting Buyer's standard employment eligibility requirements and
mutual agreement between such Employees and Buyer as to their compensation
levels. Buyer shall have no liability or obligation with respect to any employee
benefits of any Employee except those benefits that accrue pursuant to such
Employees' employment with Buyer on or after the Closing Date. The Sellers, COG
and Coleman shall cooperate with Buyer in connection with any offer of
employment from Buyer to the Employees and use their best efforts to cause the
acceptance of any and all such offers. Except as provided in Section 4.2.9, all
Employees hired by Buyer shall be at-will employees of Buyer. Notwithstanding
any other provisions of this Agreement, this Section 6.2 shall not be deemed to
create any right or claim for the benefit of, and shall not be enforceable by,
any person which is not a party to this Agreement.
6.3. Allocation of Purchase Price. The parties hereto agree to allocate
the purchase price paid by Buyer for the Assets hereunder as set forth on
Schedule 6.3 hereto, and shall report this transaction for federal income tax
purposes in accordance with the allocation so agreed upon. The parties hereto
for themselves and for their respective successors and assigns covenant and
agree that they will file coordinating Form 8594's in accordance with Section
1060 of the Internal Revenue Code of 1986, as amended, with their respective
income tax returns for the taxable year that includes the date hereof.
6.4. Name Change. The Sellers shall, within ten days from the Closing
Date, cause to be filed (i) with the applicable agency of the Sellers' states of
organization an amendment to their charters (or other applicable organization
documents) of the Sellers changing the name of the Sellers from their current
25
<PAGE> 31
names to names that are not similar to such names, and (ii) with the appropriate
authorities of the Sellers' states of organization and any other states such
documents as are required to effect such name change, including without
limitation, amendments or withdrawals of certificates of authority to do
business and assumed name filings. The Sellers shall, within five days from the
date of their receipt of confirmation of such filings from the applicable state
authorities, cause to be delivered to Buyer copies of all such confirmations.
6.5. Further Assurances Relating to the Real Estate. Buyer and COG
agree that if the Title Commitment (as defined in the Real Estate Contract)
contains any Material Encumbrance (as defined in the Real Estate Contract), then
Buyer and COG shall in good faith either (i) negotiate an adjustment to the
Purchase Price (as defined in the Real Estate Contract) to reflect the
diminution in value of the Real Estate caused by such Material Encumbrance;
provided however that the Buyer shall not be required to purchase the Real
Estate under any circumstances that would prohibit the Buyer from operating the
Real Estate, without interference of any third party, in the same manner as the
Real Estate was operated by COG or (ii) enter into a lease with respect to the
Real Estate pursuant to which Buyer shall obtain use of the Real Estate
sufficient to operate such Real Estate, without interference of any third party,
in the same manner as the Real Estate was operated by COG. The provisions of
this Section 6.5 shall not relieve COG of its obligation under the Real Estate
Contract to use its best efforts to cure or remove all Material Encumbrances (as
defined in the Real Estate Contract).
6.6. Further Assurances. From time to time, as and when requested by
any party hereto, any other party hereto shall execute and deliver, or cause to
be executed and delivered, such documents and instruments and shall take, or
cause to be taken, such further or other actions as may be reasonably necessary
to effect the transactions contemplated hereby.
ARTICLE 7
INDEMNIFICATION
7.1. Indemnification by the Sellers, COG and Coleman. In addition to
any other remedies available to Buyer under this Agreement, or at law or in
equity, each of the Sellers, COG and Coleman shall, jointly and severally,
indemnify, defend and hold harmless Buyer and Key and their respective officers,
directors, employees, agents and stockholders, against and with respect to any
and all claims, costs, damages, losses, expenses, obligations, liabilities,
recoveries, suits, causes of action and deficiencies, including interest,
penalties and reasonable attorneys' fees and expenses (collectively, the
"DAMAGES") that such indemnitee shall incur or suffer, which arise, result from
or relate to (i) any breach of, or failure by the Sellers, COG or Coleman to
perform their respective representations, warranties, covenants or agreements in
this Agreement or in any schedule, certifi cate, exhibit or other instrument
furnished or delivered to Buyer by the Sellers, COG or Coleman under this
Agreement; and (ii) the Excluded Liabilities.
26
<PAGE> 32
7.2. Indemnification by Buyer and Key. In addition to any other
remedies available to the Sellers, COG and Coleman under this Agreement, or at
law or in equity, Buyer shall indemnify, defend and hold harmless the Sellers,
COG and Coleman against and with respect to any and all Damages that such
indemnitees shall incur or suffer, which arise, result from or relate to (i) any
breach of, or failure by Buyer or Key to perform, any of their respective
representations, warranties, covenants or agreements in this Agreement or in any
schedule, certificate, exhibit or other instrument furnished or delivered to
Sellers, COG or Coleman by or on behalf of Buyer or Key under this Agreement;
and (ii) the Assumed Liabilities.
7.3. Indemnification Procedure. If any party hereto discovers or
otherwise becomes aware of an indemnification claim arising under Section 7.1 or
7.2 of this Agreement, such indemnified party shall give written notice to the
indemnifying party, specifying such claim, and may thereafter exercise any
remedies available to such party under this Agreement; provided, however, that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of any obligations hereunder, to the extent the
indemnifying party is not materially prejudiced thereby. Further, promptly after
receipt by an indemnified party hereunder of written notice of the commencement
of any action or proceeding with respect to which a claim for indemnification
may be made pursuant to this Article 7, such indemnified party shall, if a claim
in respect thereof is to be made against any indemnifying party, give written
notice to the latter of the commencement of such action; provided, however, that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of any obligations hereunder, to the extent the
indemnifying party is not materially prejudiced thereby. In case any such action
is brought against an indemnified party, the indemnifying party shall be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified, to the extent that it may wish,
with counsel reasonably satisfactory to such indemnified party, and after such
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof unless the indemnifying party
has failed to assume the defense of such claim and to employ counsel reasonably
satisfactory to such indemnified person. An indemnifying party who elects not to
assume the defense of a claim shall not be liable for the fees and expenses of
more than one counsel in any single jurisdiction for all parties indemnified by
such indemnifying party with respect to such claim or with respect to claims
separate but similar or related in the same jurisdiction arising out of the same
general allegations. Notwithstanding any of the foregoing to the contrary, the
indemnified party will be entitled to select its own counsel and assume the
defense of any action brought against it if the indemnifying party fails to
select counsel reasonably satisfactory to the indemnified party, the expenses of
such defense to be paid by the indemnifying party. No indemnifying party shall
consent to entry of any judgment or enter into any settlement with respect to a
claim without the consent of the indemnified party, which consent shall not be
unreasonably withheld, or unless such judgment or settlement includes as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability with respect to such claim. No
indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action, the defense of which has been assumed by an
indemnifying party, without the consent of such indemnifying party, which
consent shall not be unreasonably withheld or delayed.
27
<PAGE> 33
7.4. Limitation on Indemnification. The obligation of Sellers, COG and
Coleman to indemnify Buyer and Key for breach of a representation or warranty
pursuant to Section 7.1, and the obligation of Buyer and Key to indemnify the
Sellers, COG and Coleman for the breach of a representation or warranty pursuant
to Section 7.2, shall be limited as to amount as follows:
(i) the indemnifying party shall not be required to indemnify
the indemnified party for any Damages not related to environmental
matters (the "NON-ENVIRONMENTAL DAMAGES") except to the extent the
aggregate amount of all such Non-Environmental Damages exceeds
$250,000; and
(ii) neither the Sellers, COG, Coleman shall be required to
indemnify Buyer or Key for any Damages relating to the breach of a
representation or warranty contained in Section 2.1.14 (Environmental
Matters) (the "ENVIRONMENTAL DAMAGES") except to the extent the
aggregate amount of all such Environmental Damages exceeds $250,000.
(iii) for purposes of the indemnification obligations set
forth in this Section 7.4, all representations, warranties and
covenants set forth in this Agreement shall be assumed to be free of
qualifications with respect to materiality.
ARTICLE 8
MISCELLANEOUS
8.1. Materiality. "MATERIAL ADVERSE EFFECT" when used in this Agreement
shall mean any adverse effect on the business, operations, assets or financial
condition or results of operations of the party or parties at issue unless such
effect either can reasonably be expected to result in less than a $250,000
effect on the financial condition or results of operations, or the effect is due
to general changes in the economy or the general industry in which the party at
issue operates.
8.2. Survival of Representations, Warranties and Covenants. All
representations, warranties, covenants and agreements made by the parties hereto
shall survive indefinitely without limitation, notwithstanding any investigation
made by or on behalf of any of the parties hereto; provided, however, that all
representations and warranties of each party hereto shall terminate on the
second anniversary of the Closing Date except (i) as to representations and
warranties contained in Section 2.1.6 with respect to title to the Assets which
shall continue and survive indefinitely, and (ii) as to the representations and
28
<PAGE> 34
warranties contained in Section 2.1.21 (Taxes), which shall continue and survive
for the full period of the applicable statutes of limitation (giving effect to
any waiver or extension thereof). All claims for indemnification by any party
hereto with respect to a breach of a representation or warranty must be asserted
in writing with specificity prior to the expiration of the applicable survival
period. All statements contained in any certificate, schedule, exhibit or other
instrument delivered pursuant to this Agreement shall be deemed to have been
representations and warranties by the respective party or parties, as the case
may be, and shall also survive subject to the limitations stated above despite
any investigation made by any party hereto or on its behalf.
8.3. Entirety. This Agreement embodies the entire agreement among
the parties with respect to the subject matter hereof, and all prior agreements
between the parties with respect thereto are hereby superseded in their
entirety.
8.4. Counterparts. Any number of counterparts of this Agreement
may be executed and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
instrument.
8.5. Notices and Waivers. Any notice or waiver to be given to any
party hereto shall be in writing and shall be delivered by courier, sent by
facsimile transmission or first class registered or certified mail, postage
prepaid, return receipt requested:
IF TO BUYER
<TABLE>
<S> <C>
Addressed to: With a copy to:
Key Four Corners, 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
</TABLE>
IF TO ANY OF THE SELLERS, COG OR COLEMAN
<TABLE>
<S> <C>
Addressed to: With a copy to:
George E. Coleman, President John N. Lieuwen
Coleman Oil & Gas Co. Laflin, Lieuwen, Tucker, Pick, & Heer, P.A.
1800 McDonald Road P.O. Box 3260
Farmington, New Mexico 87190 Albuquerque, New Mexico 87190
Facsimile: (505) 327-4962 Facsimile: (505) 883-5834
</TABLE>
29
<PAGE> 35
Any communication so addressed and mailed by first-class registered or
certified mail, postage prepaid, with return receipt requested, shall be deemed
to be received on the third business day after so mailed, and if delivered by
courier or facsimile to such address, upon delivery during normal businesses
hours on any business day.
8.6. Captions. The captions contained in this Agreement are solely
for convenient reference and shall not be deemed to affect the meaning or
interpretation of any article, section, or paragraph hereof.
8.7. Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of and be enforceable by the successors and
assigns of the parties hereto.
8.8. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void,
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
8.9. Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the applicable laws of the State of
New Mexico.
[SIGNATURE PAGE FOLLOWS]
30
<PAGE> 36
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
in their individual names or their respective corporate names by their
respective duly authorized representatives, as applicable, all as of the day and
year first above written.
BUYER:
KEY FOUR CORNERS, INC.
By: /s/ Kenneth V. Huseman
Name: Kenneth V. Huseman
Title: Vice President
KEY:
KEY ENERGY GROUP, INC.
By: /s/ Kenneth V. Huseman
Name: Kenneth V. Huseman
Title: Vice President
COG:
COLEMAN OIL & GAS CO.
By: /s/ George E. Coleman
Name: George E. Coleman
Title: President
SELLERS:
BIG A WELL SERVICE CO.
By: /s/ George E. Coleman
Name: George E. Coleman
Title: Chairman of the Board
31
<PAGE> 37
SUNCO TRUCKING CO.
By: /s/ George E. Coleman
Name: George E. Coleman
Title: Chairman of the Board
JUSTIS SUPPLY CO., INC.
By: /s/ G. Chris Coleman
Name: G. Chris Coleman
Title: President
COLEMAN:
/s/ George E. Coleman
------------------------
George E. Coleman
/s/ G. Christopher Coleman
--------------------------
G. Christopher Coleman
For purposes of Section 6.1 only
32
<PAGE> 1
REAL ESTATE PURCHASE AND SALE AGREEMENT
THIS REAL ESTATE PURCHASE AND SALE AGREEMENT ("AGREEMENT") is entered
into as of the Effective Date (as hereinafter defined) between COLEMAN OIL & GAS
CO., a New Mexico corporation, and GEORGE E. COLEMAN (collectively, the
"SELLER") and KEY FOUR CORNERS, INC., a Delaware corporation ("PURCHASER").
W I T N E S S E T H:
In consideration of the mutual covenants set forth herein and in
consideration of the earnest money deposit herein called for, the receipt and
sufficiency of which are hereby acknowledged by Seller, the parties hereto
hereby agree as follows:
Section 1. Sale and Purchase. Seller shall sell, convey, and assign to
Purchaser, and Purchaser shall purchase and accept from Seller, for the Purchase
Price (hereinafter defined) and on and subject to the terms and conditions
herein set forth, the following:
a. the tracts or parcels of land situated in San Juan County,
New Mexico more particularly described in Exhibit A hereto together
with all rights and interests appurtenant thereto, including all of
Seller's right, title, and interest in and to adjacent streets, alleys,
rights-of-way, and any adjacent strips or gores of real estate (the
"LAND"); any and all right, title and interest of Seller in and to any
oil, gas or other minerals or mineral rights of whatever nature or
character in, on or beneath the Land and/or appurtenant thereto (the
"MINERALS"); any and all right, title and interest of Seller, to the
present or future use of wastewater, wastewater capacity, drainage,
water or other utility facilities to the extent same pertain to or
benefit the Land or the Improvements, including, without limitation,
any and all reservations of or commitments or letters covering any such
use in the future, whether now owned or hereafter acquired (the
"UTILITIES"); all fixtures and improvements located on the Land (the
"IMPROVEMENTS"); and all rights, titles, and interests appurtenant to
the Land and Improvements;
b. all tangible personal property and fixtures of any
kind attached to or used in connection with the ownership, maintenance,
or operation of the Land or Improvements (the "PERSONALTY"), including
without limitation those items described in Exhibit B hereto; and
c. all (i) contracts or agreements, such as maintenance,
service, or utility contracts (the, "PROPERTY AGREEMENTS"), to the
extent Purchaser elects to take assignment thereof, (ii) warranties,
guaranties, indemnities and claims, (iii) licenses, permits or similar
documents, (iv) telephone exchanges, trade names, marks and other
identifying material, (v) plans, drawings, specifications, surveys,
engineering reports and other technical information, (vi) insurance
contracts or policies, to the extent Purchaser elects to take
assignment thereof, and (vii) other property (real, personal, or
mixed), owned or held by Seller that relates, in any way, to the
<PAGE> 2
design, construction, ownership, use, leasing, maintenance, service or
operation of the Land, Minerals, Utilities, Improvements or Personalty.
The above listed items are herein collectively called the "PROPERTY". All of the
Property shall be conveyed, assigned, and transferred to Purchaser at Closing
(hereinafter defined) free and clear of all liens, claims, easements, and
encumbrances whatsoever except for the Permitted Encumbrances (hereinafter
defined).
Section 2. Purchase Price. The price for which Seller shall sell and
convey the Property to Purchaser, and which Purchaser shall pay to Seller, is
One Million and Seven Thousand and NO/100 Dollars ($1,007,000.00) ("PURCHASE
PRICE"). The Purchase Price shall be payable in cash or cash equivalent at the
Closing (hereinafter defined).
Section 3. Earnest Money. Within five (5) business days after the
execution hereof, Purchaser shall deliver to San Juan County Abstract & Title
Company, 111 N. Orchard Avenue, Farmington, New Mexico 87401 Attn: Mr. Rob
Grinage ("TITLE COMPANY") a check in the amount of $50,000.00 which the Title
Company shall immediately deposit for collection in an interest bearing account.
As used in this Agreement, the term "EARNEST MONEY" shall mean the amount so
deposited by Purchaser, together with all interest earned thereon while in the
custody of Title Company. The "EFFECTIVE DATE" of this Agreement shall be the
date the Earnest Money and a fully executed copy of this Agreement is delivered
to the Title Company and such delivery is acknowledged by the Title Company.
Section 4. Independent Consideration. Contemporaneously with the
delivery of the Earnest Money, Purchaser shall deliver to Seller and Seller
hereby acknowledges the receipt of, a check in the amount of FIFTY AND NO/100
DOLLARS ($50.00) ("INDEPENDENT CONSIDERATION"), which amount the parties
bargained for and agreed to as consideration for the Seller's grant to Purchaser
of Purchaser's exclusive right to purchase the Property pursuant to the terms
hereof and for Seller's execution, delivery and performance of this Agreement.
This Independent Consideration is in addition to and independent of any other
consideration or payment provided in this Agreement, is nonrefundable under any
circumstances, and shall be retained by Seller notwithstanding any other
provisions of this Agreement.
Section 5. Delivery of Information by Seller.
a. Within fifteen (15) days after the Effective Date, Seller,
at its sole cost and expense, shall deliver or cause to be delivered to
Purchaser the following:
i. commitment for Title Insurance ("TITLE
COMMITMENT") from the Title Company, underwritten by Chicago
Title Insurance Company or Commonwealth Land Title Insurance
Company, setting forth the status of the title of the Land and
Improvements and showing all liens, claims, encumbrances,
easements, rights-of-way, encroachments, reservations,
restrictions, and all other matters of record affecting the
Land or Improvements; and
2
<PAGE> 3
ii. a true, complete, and legible copy of all
documents referred to in the Title Commitment ("TITLE
COMMITMENT DOCUMENTS").
b. Within fifteen (15) days after a request from Purchaser,
Seller, at its sole cost and expense, shall deliver to Purchaser an
updated survey ("SURVEY") consisting of a plat and field notes prepared
by a licensed surveyor acceptable to Purchaser and Title Company,
which Survey shall (i) reflect the actual dimensions of, and area
within, the Land, the location of any easements, setback lines,
encroachments, or overlaps thereon or thereover, and the outside
boundary lines of all Improvements, (ii) identify by recording
reference all easements, set back lines, and other matters referred to
in the Title Commitment, (iii) include the surveyor's registered number
and seal, the date of the Survey, and a certificate satisfactory to
Purchaser, (iv) reflect that there is access to and from the Land from
a publicly dedicated street or road, (v) be sufficient to cause the
Title Company to delete the printed exception for "discrepancies,
conflicts or shortages in area or boundary lines, or encroachments, or
any overlapping of improvements" in the Owner's Title Policy to be
delivered pursuant to Section 9 hereof, (vi) reflect any area within
the Land that has been designated by the Federal Insurance
Administration, the Army Corps of Engineers, or any other governmental
agency or body as being subject to special or increased flooding
hazards, and (vii) in general, comply with the requirements for an ALTA
survey. For purposes of the property description to be included in the
general warranty deed to be delivered pursuant to Section 9 hereof, the
field notes prepared by the surveyor shall control any conflicts or
inconsistencies with Exhibit A hereto, and such field notes shall be
incorporated herein by this reference upon their completion and
approval by Purchaser.
c. Within fifteen (15) days after the Effective Date of this
Agreement, Seller, at its sole cost and expense, shall deliver to
Purchaser current searches of all Uniform Commercial Code financing
statements filed with the Office of the Secretary of State of New
Mexico and the County Clerk of San Juan County, New Mexico against
Seller and Seller's predecessors in title reflecting all effective
financing statements then of record relating to the Property or any
part thereof.
d. Within fifteen (15) days after the Effective Date of this
Agreement, Seller, at its sole cost and expense, shall deliver to
Purchaser (i) legible copies of all Property Agreements; (ii) copies of
all engineering and technical reports in the possession of Seller or
its representatives that concern the Land or Improvements, including
oils testing reports and reports of environmental or hazardous waste
inspections or surveys; (iii) copies of all plans and specifications
that describe or relate to the Improvements; and (iv) profit and loss
statements reflecting the results of operation of the Property for the
preceding year. The documents described in this Section 5(d) are herein
collectively called the "DOCUMENTS", and the information contained in
the Documents is herein collectively called the "INFORMATION".
Section 6. Right of Inspection; Contingency Period. From the Effective
Date to the Closing Date, Seller shall afford Purchaser and its representatives
a continuing right to inspect, at reasonable hours, the Property, and all books,
records, contracts, and other documents or data pertaining to the ownership,
3
<PAGE> 4
operation, or maintenance of the Property; provided, however, that in conducting
its inspection Purchaser shall not unreasonably interfere with the business and
operations of the Seller.
Section 7. Title. Purchaser shall have the right, within ten (10) days
after receipt of the last of the Title Commitment, Title Documents, Survey, UCC
search and Documents, to object in writing to any Material Encumbrances (as
hereinafter defined) reflected by the Title Commitment, Survey or UCC search. If
a notice of objection is not given during such ten (10) day period, then it
::ODMA\PCDOCS\DOCS\136430\4
3
<PAGE> 5
shall be deemed that all matters reflected by the Survey and Title Commitment
are "PERMITTED ENCUMBRANCES". Seller shall use reasonable efforts, at its sole
cost, to cure or remove all Material Encumbrances and give Purchaser written
notice thereof before Closing; provided, however, that Seller, at its sole cost,
shall be obligated to cure or remove at or before Closing all mortgages, deeds
of trust, judgment liens, mechanics and materialmen's liens, and other liens
against the Property, whether or not Purchaser objects thereto. Further, Seller
shall cause any leases relating to the Land and Improvements to be terminated on
or before Closing. If Seller does not timely cause all of the Material
Encumbrances to be removed or cured, and timely written notice thereof to be
given to Purchaser, then Purchaser shall have the right to either (i) terminate
this Agreement in accordance with Section 12(b) hereof by delivering notice to
Seller, or (ii) attempt to remove or cure the Material Encumbrances and deduct
the cost of such removal or cure from the Purchase Price, or (iii) elect to
purchase the Property subject to the Material Encumbrances, other than liens
that Seller is obligated to cure or remove, and the Material Encumbrances (other
than liens that Seller is obligated to cure or remove) subject to which
Purchaser elects to purchase the Property shall thereafter be Permitted
Encumbrances, and with a reduction in the Purchase Price to reflect the
diminution in value of the Property. For the purposes of this Agreement, a
"MATERIAL ENCUMBRANCE" shall mean a lien, or an encumbrance on the Property
which affects Seller's ability to convey good, marketable and indefeasible title
to the Property to Purchaser or materially interferes with Purchaser's intended
use of the Property.
Section 8. Seller's Representations, Warranties, and Covenants. Seller
hereby represents and warrants to, and covenants with, Purchaser that:
a. Seller has full right, power, and authority to execute and
deliver this Agreement and to consummate the purchase and sale
transactions provided for herein without obtaining any further consents
or approvals from, or the taking of any other actions with respect to,
any third parties. This Agreement, when executed and delivered by
Seller and Purchaser, will constitute the valid and binding agreement
of Seller, enforceable against Seller in accordance with its terms.
b. Seller has good, marketable and indefeasible title in fee
simple to the Land and Improvements, free and clear of all liens
(except those liens that will be released at or before Closing), and no
party, except as herein set forth, has or shall have on the Closing
Date any rights in, or to acquire, the Property.
c. The Land is not located within an area that has been
designated by the Federal Insurance Administration, the Army Corps of
Engineers, or any other governmental agency or body as being subject to
special flooding hazards.
4
<PAGE> 6
d. Seller is the owner of all Personalty free and clear of all
material liens, claims or encumbrances, except liens and security
interests that will be released at or before Closing.
e. The copies of all Documents, Title Commitment Documents
and other documents delivered by or on behalf of Seller to Purchaser
pursuant to this Agreement shall be true and complete in all material
respects and, to the best of Seller's knowledge and belief, the
information shall be true and complete in all material respects.
f. There are no actions, suits, claims, assessments, or
proceedings pending or, to the knowledge of Seller, threatened that
could materially adversely affect the ownership, operation, or
maintenance of the Property or Seller's ability to perform hereunder.
g. All bills and other payments due with respect to the
ownership, operation, and maintenance of the Property have been paid or
to be paid prior to Closing in the ordinary course of business.
h. From the Effective Date until the Closing Date, Seller
shall: (i) operate the Property in a good and businesslike manner in
accordance with good and prudent business practices; (ii) continue all
Property Agreements, and insurance policies or contracts relative to
the Property in full force and effect and neither cancel, amend, nor
renew any of the same without Purchaser's prior written consent; (iii)
not commit or permit to be committed any waste to the Property; (iv)
not, without the prior written consent of Purchaser, enter into any
agreement or instrument or take any action that would encumber the
Property after Closing, that would bind Purchaser or the Property after
Closing, or that would be outside the normal scope of maintaining and
operating the Property; and (v) not remove any item of the Personalty
from the Land or Improvements unless it is replaced with an item of at
least equal value that is properly suited for its intended purpose.
i. There are no labor disputes, organizational campaigns, or
union contracts existing or under negotiation with respect to the
Property or the operation thereof. There are no employees engaged in
the operation or maintenance of the Property for whom Purchaser will be
responsible after Closing.
j. Attached hereto as Exhibit C is a complete and correct list
of all Property Agreements setting forth the identity of the parties
thereto, the date of such agreement, the consideration payable
thereunder, the services to be rendered thereunder, and the expiration
date thereof. Except as otherwise expressly indicated on Exhibit C, all
of the Property Agreements are cancelable on thirty (30) or fewer days
notice, without payment of any cancellation consideration.
k. None of the current or past operations of the Property is
being or has been conducted or used in such a manner as to constitute a
violation of any Environmental Law (defined below) that would or might
result in a Material Adverse Effect (defined below). The Seller has not
received any notice (whether formal or informal, written or oral) from
5
<PAGE> 7
any entity, governmental agency or individual regarding any existing,
pending or threatened investigation or inquiry related to violations of
any Environmental Law or regarding any claims for remedial obligations
or contribution for removal costs or damages under any Environmental
Law. There are no writs, injunction decrees, orders or judgments
outstanding, or lawsuits, claims, proceedings or investigations pending
or, to the knowledge of Seller, threatened, relating to the ownership,
use, maintenance or operation of the Property, nor, to the knowledge of
any of Seller, is there any basis for any of the foregoing.
Purchaser will not be required to obtain any permits, licenses or
similar authorizations pursuant to any Environmental Law after the
Closing Date to operate and use any of the Property for their current
or proposed purposes and uses, except for permits, licenses or similar
authorizations that would not have a Material Adverse Effect. The
Property includes all environmental and pollution control equipment
necessary for material compliance with applicable Environmental Law.
Except as disclosed in Schedule 8(k) hereof, (i) no Hazardous Materials
(defined below) have been or are currently being used by Seller in the
operation of the Property, (ii) no Hazardous Materials are or have ever
been situated in, on or under the Property, (iii) there are no, and
there have never been any, underground storage tanks (as defined under
Environmental Law) located under the Property, and (iv) there are no
environmental conditions or circumstances, including the presence or
release of any Hazardous Materials, on the Property, or on any property
on which Hazardous Materials generated by Seller's operations or the
use of the Property were disposed of, to the extent any of the above
individually or in the aggregate would or might result in a Material
Adverse Effect. The term "ENVIRONMENTAL LAW" means any and all laws,
rules, orders, regulations, statutes, ordinances, codes, decrees, and
other legally enforceable requirements (including, without limitation,
common law) of the United States, or any state, regional, city, local,
municipal or other governmental authority or quasi-governmental
authority, regulating, relating to, or imposing environmental standards
of conduct concerning protection of the environment or human health, or
employee health and safety as from time to time has been or is now in
effect. The term "HAZARDOUS MATERIALS" means (x) asbestos,
polychlorinated biphenyls, urea formaldehyde, lead based paint, radon
gas, petroleum, oil, solid waste, pollutants and contaminants, and (y)
any chemicals, materials, wastes or substances that are defined,
regulated, determined or identified as toxic or hazardous in any
Environmental Law. The term "MATERIAL ADVERSE EFFECT" when used in this
Agreement shall mean any adverse effect on the business, operations,
assets or financial condition or results of operations of the party or
parties at issue which can reasonably be expected to have an effect in
excess of $200,000.00.
l. The current zoning classification of the Property is
small commercial and light industrial; the Improvements have been
constructed and are being occupied and maintained in compliance
therewith; and there are no proceedings pending or contemplated to
alter such zoning classification.
If (i) any of Seller's representations and warranties set forth in this Section
8 are untrue in any material respect, or (ii) at any time at or before Closing
there is any material change with respect to the matters represented and
warranted by Seller pursuant to this Section 8, then Seller shall give Purchaser
prompt written notice thereof, and Purchaser shall have the right to terminate
6
<PAGE> 8
this Agreement in accordance with Section 12(b) hereof by delivering notice to
Seller at any time at or before the Closing. All of Seller's representations and
warranties stated herein shall survive the Closing for a period of two (2)
years.
Section 9. Closing. The closing ("CLOSING") of the sale of the Property
by Seller to Purchaser shall occur on the second business day following the
satisfaction by all parties hereto of all of the conditions to the Closing or as
soon as practicable thereafter, but in any event, no later than November 1, 1997
(the "CLOSING DATE"). Time is of the essence with regard to the Closing Date.
The Closing shall occur in the offices of Laflin, Lieuwen, Tucker, Pick & Heer,
P.A., 6400 Uptown Blvd., Northeast, Suite 600 West, Albuquerque, New Mexico
87110 commencing prior to 5:00 PM, New Mexico time, on the Closing Date. At the
Closing the following, which are mutually concurrent conditions, shall occur:
a. Purchaser, at its sole cost and expense, shall deliver or
cause to be delivered to Seller the following:
i. Cashier's check, or the check of the Title
Company, made payable to the order of Seller, or immediately
available cash funds, in the amount of the Purchase Price as
specified in Section 2 hereof, adjusted in accordance with
Section 9(c) hereof; and
ii. Evidence satisfactory to Seller and Title
Company that the person executing the Closing documents on
behalf of Purchaser has full right, power, and
authority to do so.
b. Seller, at its sole cost and expense, shall deliver or
cause to be delivered to Purchaser the following:
i. General Warranty Deed in the form of Exhibit D
hereto, fully executed and acknowledged by Seller, conveying
to Purchaser the Land and Improvements, subject only to the
Permitted Encumbrances;
ii. Bill of Sale and Assignment in the form of
Exhibit E hereto, fully executed and acknowledged by Seller,
assigning, conveying, and transferring all of the Property
other than the Land and Improvements, to Purchaser, subject
only to the Permitted Encumbrances;
iii. Owner's Policy of Title Insurance in the amount
of the Purchase Price issued by Title Company (with such
reinsurance as Purchaser may require), insuring that Purchaser
is the owner of the Land and Improvements subject only to the
Permitted Encumbrances and the standard printed exceptions
included in an ALTA standard form owner's policy of title
insurance; provided, however, that (A) the standard exception
for discrepancies, conflicts, or shortages in area shall be
deleted; (B) such policy shall have "None of Record" endorsed
regarding restrictions except for restrictions that are
Permitted Encumbrances; (C) the rights of parties in
7
<PAGE> 9
possession shall be limited only to those holding under
written leases; (D) the standard exception for taxes shall be
limited to the year in which the Closing occurs, marked "not
yet due and payable", and subsequent years and subsequent
assessments for prior years due to change in land usage or
ownership; and (E) the Owner's Policy shall provide
comprehensive coverage, lien coverage and gap coverage;
iv. Current certificate issued by company acceptable
to Purchaser reflecting that since the date of the
searches furnished pursuant to Section 5(c) hereof no Uniform
Commercial Code filings, chattel mortgages, assignments,
pledges, or other encumbrances have been filed in the offices
of the Secretary of State of the State of New Mexico or the
County Clerk of San Juan County with reference to the
Property;
v. Evidence satisfactory to Purchaser and the Title
Company that the persons executing and delivering the Closing
documents on behalf of Seller have full right, power and
authority to do so;
vi. Certificate executed by Seller stating that, as
of the Closing Date, each of Seller's representations and
warranties set forth in Section 8 hereof is true and
correct;
vii. Certificate meeting the requirements of Section
1445 of the Internal Revenue Code of 1986, as amended,
executed and sworn to by Seller; and
viii. Such other instruments as are customarily
executed in New Mexico to effectuate the conveyance of
property similar to the Property, with the effect that, after
the Closing, Purchaser will have succeeded to all of the
rights, titles, and interests of Seller related to the
Property and Seller will no longer have any rights, titles, or
interests in and to the Property.
c. All normal and customarily proratable items, including
without limitation real estate and personal property taxes, utility
bills, rents, interest, and Property Agreement payments shall be
prorated as of the Closing Date, Seller being charged and credited for
all of same up to such date and Purchaser being charged and credited
for all of same on and after such date. If the actual amounts to be
prorated are not known as of the Closing Date, the prorations shall be
made on the basis of the best evidence then available, and thereafter,
when actual figures are received, a cash settlement will be made
between Seller and Purchaser. The provisions of this Section 9(c) shall
survive the Closing.
d. Seller shall pay all costs and liabilities relating to the
Property that arise out of or are attributable to the period prior to
the Closing Date, and shall indemnify and hold harmless Purchaser from
such costs and liabilities and from all reasonable attorneys' fees
expended by Purchaser in connection therewith; provided, however, that
Seller's obligations under this indemnity shall be subject to the
provisions of Paragraph 8(k). Seller shall have the right to receive
all proceeds relating to the Property that are properly allocable to
8
<PAGE> 10
the period before the Closing Date, and Purchaser shall have the right
to receive all proceeds relating to the Property that are properly
allocable to the period from and after the Closing Date. Purchaser
shall pay all costs and liabilities relating to the Property that arise
out of or are attributable to the period from and after the Closing
Date, except such costs and liabilities that arise out of or result
from a breach by Seller of its representations and warranties set forth
in Section 8 hereof, and Purchaser shall indemnify and hold harmless
Seller from such costs and liabilities and from all reasonable
attorneys' fees expended by Seller in connection therewith. This
Section 9(d) shall survive the Closing.
e. Upon completion of the Closing, Seller shall deliver to
Purchaser possession of the Property free and clear of all tenancies of
every kind and parties in possession, with all parts of the Property
(including without limitation the Improvements and Personalty) in the
same condition as on the date hereof, normal wear only excepted.
Section 10. Commissions. Seller shall defend, indemnify, and hold
harmless Purchaser, and Purchaser shall defend, indemnify, and hold harmless
Seller, from and against all claims by third parties for brokerage, commission,
finders, or other fees relative to this Agreement or the sale of the Property,
and all court costs, attorneys' fees, and other costs or expenses arising
therefrom, and alleged to be due by authorization of the indemnifying party.
Section 11. Destruction, Damage or Taking Before Closing. If, before
Closing, all or any part of the Land, Minerals, Utilities, Improvements or
Personalty are destroyed or damaged, or become subject to condemnation or
eminent domain proceedings, then Seller shall promptly notify Purchaser thereof.
Purchaser shall have the right to terminate this Agreement or may elect to
proceed with the Closing (subject to the other provisions of this Agreement). In
the event Purchaser elects to proceed to Closing, Purchaser shall be entitled to
all insurance proceeds or condemnation awards payable as a result of such damage
or taking and, to the extent the same may be necessary or appropriate, Seller
shall assign to Purchaser at Closing Seller's rights to such proceeds or awards.
If, within ten (10) business days of receipt of Seller's notice respecting the
damage, destruction, or taking, Purchaser notifies Seller of its intent to
terminate this Agreement, then this Agreement shall be deemed terminated
pursuant to Section 12(b) hereof.
Section 12. Termination and Remedies.
a. If Purchaser fails to consummate the purchase of the
Property pursuant to this Agreement for any reason other than
termination hereof pursuant to a right granted to Purchaser in Sections
6, 7, 8, 11 and 13 hereof, then Seller, as its sole remedies, shall
have the right to: (i) terminate this Agreement by notifying Purchaser
thereof, in which event Title Company shall deliver the Earnest Money
to Seller as liquidated damages, whereupon neither Purchaser nor Seller
shall have any further rights or obligations hereunder, or (ii) enforce
specific performance of the obligations of Purchaser hereunder.
b. If Purchaser terminates this Agreement pursuant to Section
6, 7, 8, 11 or 13 hereof, then Title Company shall return the Earnest
Money to Purchaser, whereupon neither party hereto shall have any
further rights or obligations hereunder.
9
<PAGE> 11
c. If Seller fails to consummate the sale of the Property
pursuant to this Agreement for any reason other than termination hereof
pursuant to Section 13, Purchaser's failure to perform its obligations
hereunder or termination hereof by Purchaser in accordance with Section
12(b), then Purchaser, as its sole remedies, shall have the right to:
(i) terminate this Agreement by notifying Seller thereof, in which case
Title Company shall return the Earnest Money to Purchaser and neither
party hereto shall have any further rights or obligations hereunder; or
(ii) enforce specific performance of the obligations of Seller
hereunder.
d. Seller and Purchaser hereby acknowledge and agree that they
have included the provision for payment of liquidated damages in
Section 12(a) because, in the event of a breach by Purchaser, the
actual damages to be incurred by Seller can reasonably expected to
approximate the amount of liquidated damages called for herein and
because the actual amount of such damages would be difficult if not
impossible accurately to measure.
Section 13. Consideration. A material part of the consideration to the
Seller for selling is that the Seller has the option to qualify this transaction
as part of a tax deferred exchange under Section 1031 of the Internal Revenue
Code. Buyer agrees to cooperate in the exchange provided Buyer incurs no
additional liability, cost or expense.
Section 14. Conditions to Closing. This Agreement is expressly
conditioned upon the consummation of an Asset Purchase Agreement dated on or
about September 2, 1997, between Purchaser, Key Energy Group, Inc., Seller, Big
A Well Service Co., Sunco Trucking Co. and Justis Supply Co., Inc. (the "ASSET
PURCHASE AGREEMENT"). In the event the Asset Purchase Agreement is not
consummated for any reason, Seller shall have no further obligation to sell and
Purchaser shall have no further obligation to purchase the Property and this
Agreement shall be automatically terminated and of no further force and effect.
Section 15. Notices. All notices provided or permitted to be given
under this Agreement must be in writing and may be served by depositing same in
the United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested; by delivering the
same in person to such party; transmitted by Federal Express or a similar
generally recognized overnight carrier generally providing proof of delivery; by
prepaid telegram or telex; or by facsimile copy transmission. Notice given in
accordance herewith shall be effective upon receipt at the address of the
addressee. For purposes of notice, the addresses of the parties shall be as
follows:
If to Seller, to: George E. Coleman, President
Coleman Oil & Gas Co.
1800 McDonald Road
Farmington, New Mexico 87401
(505)
Facsimile: (505)327-4962
10
<PAGE> 12
with a copy to: Laflin, Lieuwen, Tucker, Pick, & Heer, P.A.
6400 Uptown Boulevard Northeast
Suite 600 West
Albuquerque, New Mexico 87110
Attn: John N. Lieuwen, Esquire
(505)883-0679
Facsimile: (505) 883-5834
If to Purchaser, to: Key Four Corners, Inc.
Two Tower Center, Tenth Floor
East Brunswick, New Jersey 08816
Attn: General Counsel
(908)247-4822
Facsimile: (908) 247-5148
with a copy to: Porter & Hedges, L.L.P.
700 Louisiana
Houston, Texas 77210-4744
Attn: Samuel N. Allen, Esquire
(713)226-0629
Facsimile: (713) 228-1331
Either party hereto may change its address for notice by giving three (3) days
prior written notice thereof to the other party.
Section 16. Assigns; Beneficiaries. This Agreement shall inure to the
benefit of and be binding on the parties hereto and their respective heirs,
legal representatives, successors, and assigns. This Agreement is for the sole
benefit of Seller and Purchaser, and no third party is intended to be a
beneficiary of this Agreement.
Section 17. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New Mexico.
Section 18. Entire Agreement. This Agreement is the entire agreement
between Seller and Purchaser concerning the sale of the Property, and no
modification hereof or subsequent agreement relative to the subject matter
hereof shall be binding on either party unless reduced to writing and signed by
the party to be bound. Exhibits A through E, inclusive, attached hereto, are
incorporated herein by this reference for all purposes.
[SIGNATURE PAGE FOLLOWS]
11
<PAGE> 13
IN WITNESS WHEREOF, Purchaser and Seller have executed this Agreement
on September 2, 1997.
PURCHASER:
KEY FOUR CORNERS, INC.
By: /s/ Kenneth V. Huseman
Name: Kenneth V. Huseman
Title: Vice President
SELLER:
COLEMAN OIL & GAS CO.
By: /s/ George E. Coleman
Name: George E. Coleman
Title: President
/s/ George E. Coleman
----------------------
GEORGE E. COLEMAN
Schedule of Exhibits and Schedules
A - Description of Land
B - Description of Personal Property
C - List of Property Agreements
D - Form of General Warranty Deed
E - Form of Bill of Sale and Assignment
8(k) - Environmental conditions
12
