UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to ________
Commission file number 1-8038
KEY ENERGY GROUP, INC.
(Exact name of registrant as specified in its charter)
Maryland 04-2648081
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two Tower Center, 20th Floor, East Brunswick, NJ 08816
Address of Principal executive offices) (ZIP Code)
Registrant's telephone number including area code: (732) 247-4822
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Common Shares outstanding at November 11, 1998 - 18,293,060
<PAGE>
Key Energy Group, Inc. and Subsidiaries
INDEX
PART I. Financial Information
Item 1. Unaudited Consolidated Financial Statements 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 16
PART II. Other Information
Item 1. Legal Proceedings 21
Item 2. Changes in Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 26
<PAGE>
Key Energy Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, June 30,
1998 1998
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash $39,917 $25,265
Accounts receivable, net of allowance for doubtful accounts
($6,370 and $2,843 at September 30 and June 30, 1998, respectively) 102,894 82,406
Inventories 14,021 13,315
Deferred tax asset 1,203 1,203
Prepaid income taxes 456 537
Prepaid expenses and other current assets 5,135 4,831
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Total Current Assets 163,626 127,557
- ---------------------------------------------------------------------------------------------------------------------------
Property and Equipment:
Oilfield service equipment 641,699 400,731
Oil and gas well drilling equipment 62,579 61,629
Motor vehicles 49,975 19,748
Oil and gas properties and other related equipment, successful efforts 42,638
method 44,101
Furniture and equipment 5,753 5,333
Buildings and land 31,722 17,458
- ---------------------------------------------------------------------------------------------------------------------------
835,829 547,537
Accumulated depreciation and depletion (58,036) (48,385)
- ---------------------------------------------------------------------------------------------------------------------------
Net Property and Equipment 777,793 499,152
- ---------------------------------------------------------------------------------------------------------------------------
Goodwill, net of accumulated amortization ($4,051 and $2,264 at
September 30 and June 30, 1998, respectively) 228,810 44,936
Other assets 35,819 26,995
- ---------------------------------------------------------------------------------------------------------------------------
Total Assets $1,206,048 $698,640
===========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $27,573 $20,124
Other accrued liabilities 56,214 22,239
Accrued interest 2,896 3,818
Current portion of long-term debt 3,048 1,848
- ---------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 89,731 48,029
- ---------------------------------------------------------------------------------------------------------------------------
Long-term debt, less current portion 825,747 397,931
Non-current accrued expenses 4,337 4,812
Deferred tax liability 131,814 92,940
Stockholders' equity:
Common stock, $.10 par value; 100,000,000 shares authorized,
18,684,479 shares issued at September 30 and June 30, 1998, respectively 1,868 1,868
Additional paid-in capital 119,303 119,303
Treasury stock, at cost; 416,666 shares at September 30 and
June 30, 1998 (9,682) (9,682)
Unrealized gain on available-for-sale securities - 2,346
Retained earnings 42,930 41,093
- ---------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 154,419 154,928
- ---------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $1,206,048 $698,640
===========================================================================================================================
See the accompanying notes which are an integral part of these unaudited consolidated financial statements.
</TABLE>
<PAGE>
Key Energy Group, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended
September 30,
1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
REVENUES:
Oilfield services $105,799 $69,498
Oil and gas well drilling 7,610 2,823
Oil and gas 1,770 1,852
Other, net 408 1,226
- ---------------------------------------------------------------------------------------------------------------------------------
115,587 75,399
- ---------------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Oilfield services 73,698 48,239
Oil and gas well drilling 7,327 2,263
Oil and gas 759 803
Depreciation, depletion and amortization 10,703 4,812
General and administrative 11,438 7,678
Interest 8,505 5,086
- ---------------------------------------------------------------------------------------------------------------------------------
112,430 68,881
- ---------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 3,157 6,518
Income tax expense 1,320 2,407
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCOME $1,837 $4,111
=================================================================================================================================
EARNINGS PER SHARE :
Basic $0.10 $0.29
Diluted $0.10 $0.23
=================================================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 18,268 14,126
Diluted 18,976 19,764
=================================================================================================================================
See the accompanying notes which are an integral part of these unaudited consolidated financial statements.
</TABLE>
<PAGE>
Key Energy Group, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended
September 30,
1998 1997
- -----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,837 $4,111
Adjustments to reconcile income from operations to
net cash provided by operations:
Depreciation, depletion and amortization 10,703 4,812
Amortization of deferred debt costs 767 335
Deferred income taxes 1,320 2,407
Gain on sale of assets 47 -
Other non-cash items 202 1,313
Change in assets and liabilities net of effects
from the acquisitions:
(Increase) decrease in accounts receivable 4,477 (6,224)
(Increase) decrease in other current assets 537 1,400
Increase (decrease) in accounts payable and accrued expenses (4,291) (972)
Increase (decrease) in accrued interest (922) (1,829)
Other assets and liabilities (2,269) (1,293)
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 12,408 4,060
- -----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures - Oilfield service operations (6,587) (6,694)
Capital expenditures - Oil and gas well drilling operations (1,019) (339)
Capital expenditures - Oil and gas operations (1,608) (2,058)
Proceeds from sale of fixed assets 91 -
Cash received in acquisitions 27,008 2,903
Acquisitions - Oilfield service operations (272,292) (107,630)
Acquisitions - Oil and gas well drilling - (14,610)
Acquisitions - Minority interest - (3,426)
- -----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (254,407) (131,854)
- -----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on debt (1,713) (318)
Repayment of long-term debt - (197,000)
Borrowings under line-of-credit 278,000 134,000
Proceeds from warrants exercised - 4,123
Proceeds from long-term commercial paper - 194,500
Proceeds paid for debt issuance costs (19,636) -
Proceeds from other long-term debt - 61
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 256,651 135,366
- -----------------------------------------------------------------------------------------------------------------------
Net increase in cash 14,652 7,572
Cash at beginning of period 25,265 41,704
- -----------------------------------------------------------------------------------------------------------------------
Cash at end of period $39,917 $49,276
=======================================================================================================================
See the accompanying notes which are an integral part of these unaudited consolidated financial
statements.
</TABLE>
<PAGE>
Key Energy Group, Inc. and Subsidiaries
Unaudited Consolidated Statements of Comprehensive Income
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended
September 30,
1998 1997
---------------------- ---------------------
Net Income $ 1,837 $ 4,111
Other comprehensive income, net of tax:
Unrealized gains on available-for-sale securities 1,200 -
---------------------- ---------------------
Comprehensive income, net of tax $ 3,037 $ 4,111
====================== =====================
See the accompanying notes which are an integral part of these unaudited consolidated financial
statements.
</TABLE>
<PAGE>
KEY ENERGY GROUP AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
September 30, 1998 and 1997
1. BASIS OF PRESENTATION
The consolidated financial statements of Key Energy Group, Inc. (the "Company"
or "Key") and its wholly-owned subsidiaries for the three months ended September
30, 1998 and 1997 are unaudited. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted in this Form 10-Q
pursuant to the rules and regulations of the Securities and Exchange Commission.
However, in the opinion of management, these interim financial statements
include all the necessary adjustments to fairly present the results of the
interim periods presented. These unaudited interim consolidated financial
statements should be read in conjunction with the audited financial statements
included in the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1998. The results of operations for the three months ended September
30, 1998 are not necessarily indicative of the results of operations for the
full fiscal year ending June 30, 1999.
Accounting Changes
Effective July 1, 1998 the Company made certain changes in the estimated useful
lives of its workover rigs, increasing the lives from 17 years to 25 years. This
change increased first quarter fiscal year 1999 net income by $499,000 ($.03 per
share-basic). Had this change been made effective July 1, 1997, the effect on
the first quarter fiscal year 1998 would have been to increase net income by
$306,000 ($.02 per share-basic). This change was made to better reflect how the
assets are expected to be used over time and to better provide matching of
revenues and expenses and to better reflect the industry standard in regards to
estimated useful lives of workover rigs.
Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No. 130 ("SFAS
130") Reporting Comprehensive Income, at the beginning of fiscal year 1999. SFAS
130 establishes standards for reporting and presentation of comprehensive income
and its components. SFAS 130 requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. In accordance with the provisions of SFAS 130, the
Company has presented the components of comprehensive income in its Unaudited
Consolidated Statements of Comprehensive Income.
Reclassifications and Adjustments
Certain reclassifications have been made to the fiscal year 1998 results to
conform to the fiscal year 1999 presentations.
Amounts reported for the first quarter of fiscal 1998 differ from the amounts
previously reported on the Company's Quarterly Report on Form 10-Q, for the
quarter ended September 30, 1997, due to non-cash adjustments associated with
the conversion of the Company's 7% debentures converted in the first quarter of
fiscal year 1998. See footnote 4 for further discussion on conversion of the 7%
debentures.
<PAGE>
KEY ENERGY GROUP AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - Continued
2. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted net income
per common share:
Three Months Ended
September 30,
(in thousands)
1998 1997
Diluted EPS Computation:
Numerator-
Net Income $ 1,837 $ 4,111
Effect of Dilutive Securities,
Tax Effected:
Interest on Convertible Debt* - 427
-------------------------
$ 1,837 $ 4,538
-------------------------
Denominator-
Weighted Average Common
Shares Outstanding 18,268 14,126
Warrants 39 86
Stock Options ** 669 1,453
7% Convertible Subordinated
Debentures * - 4,102
5% Convertible Subordinated Notes * - -
-------------------------
18,976 19,764
-------------------------
Diluted EPS $ 0.10 $ 0.23
* Net income effect and share effect related to the 7% Convertible Subordinated
Debentures are omitted as they produce anti-dilution during the three months
ended September 30, 1998. The 5% Convertible Subordinated Notes are omitted as
they produce anti-dilution during the three months ended September 30, 1998 and
1997.
** Reflects an additional grant of employee and director stock options effective
as of September 3, 1998, including some stock options to be issued upon
cancellation of previously issued options.
3. BUSINESS AND PROPERTY ACQUISITIONS
The Company
The Company conducts its oil and gas well service operations through
wholly-owned subsidiaries in all major onshore oil and gas producing regions of
the continental United States and in Argentina. The Company conducts contract
drilling operations through wholly-owned subsidiaries in several oil and gas
producing regions of the continental United States and in Argentina and Canada.
The Company also owns and produces oil an natural gas in the Permian Basin and
the Texas Panhandle.
As of November 11, 1998, the Company owned a fleet of approximately 1,424 well
service rigs, 1,121 oilfield trucks, and 74 drilling rigs, including 21 service
rigs, 28 trucks and six drilling rigs in Argentina and three drilling rigs in
Canada.
<PAGE>
KEY ENERGY GROUP AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - Continued
Acquisitions Completed During the Three Months Ended September 30, 1998
The following acquisitions were completed during the three months ended
September 30, 1998. Except as otherwise noted, the results of operations from
these acquisitions are included in the Company's results of operations for the
applicable three months ended September 30, 1998 (effective as of the date of
completion of the acquisition unless otherwise noted). Each of the acquisitions
was accounted for using the purchase method of accounting. The purchase prices
specified below are based on cash paid and do not include any post-closing
adjustments, if any, paid or to be paid based upon a re-calculation of the
working capital of acquired companies as of the closing dates.
Colorado Well Service Inc.
On July 15, 1998, the Company completed the acquisition of the assets of
Colorado Well Service, Inc. ("Colorado") for approximately $6.5 million in cash.
These assets included seventeen well service rigs and one drilling rig in Utah
and Colorado.
TransTexas Oilfield Service Assets
On August 19, 1998, the Company completed the acquisition of certain oilfield
service assets of TransTexas Gas Corporation ("TransTexas") for approximately
$20.5 million in cash. The TransTexas assets are based in Laredo, Texas and
included nine well service rigs, approximately 80 oilfield trucks, 173 frac and
other tanks, and various pieces of equipment, parts and supplies.
Flint Well Servicing Assets
On September 16, 1998, the Company completed the acquisition of substantially
all of the well servicing assets of Flint Engineering & Construction Co., a
subsidiary of Flint Industries, Inc. ("Flint") for approximately $11.9 million
in cash. These assets included 55 well service rigs and 25 oilfield trucks in
Texas, Oklahoma, Kansas, Montana and Utah.
Iceberg S.A.
On September 24, 1998, the Company completed the acquisition of the assets of
Iceberg, S.A. ("Iceberg") for approximately $4.3 million in cash. The Iceberg
assets included four well service rigs in Comodoro Rivadavia, Argentina.
<PAGE>
KEY ENERGY GROUP AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - Continued
HSI Group
On September 24, 1998, the Company completed the acquisition of substantially
all of the operating assets of Hellums Services II, Inc., Superior Completion
Services, Inc., South Texas Disposal, Inc. and Elsik II, Inc. ("HSI Group") for
$47.9 million in cash. These assets included approximately 80 oilfield trucks
and eight well service rigs in South Texas.
Dawson Production Services, Inc.
On September 15, 1998, Midland Acquisition Corp. ("Midland"), a New Jersey
corporation and a wholly-owned subsidiary of the Company, completed its cash
tender offer (the "Tender Offer") for all outstanding shares of common stock,
par value $0.01 per share (the "Dawson Shares"), including the associated common
stock purchase rights, of Dawson Production Services, Inc. ("Dawson") at a price
of $17.50 per share. Midland accepted for payment 10,021,601 Dawson Shares for a
total purchase price of approximately $175.4 million. The acceptance of tendered
Dawson Shares, together with Dawson Shares previously owned by Midland and the
Company prior to the commencement of the Tender Offer resulted in Midland and
the Company acquiring approximately 97.0% of the outstanding Dawson Shares. The
purchase price for Dawson Shares pursuant to the Tender Offer was determined
pursuant to arms-length negotiations between the parties and was based on a
variety of factors, including, without limitation, the anticipated earnings and
cash flows of Dawson.
The Tender Offer was made pursuant to an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of August 11, 1998, by and among Midland, the
Company and Dawson. On September 18, 1998, pursuant to the terms of the Merger
Agreement, Midland was merged with and into Dawson (the "First Merger") under
the laws of the States of New Jersey and Texas and all Dawson Shares not owned
by Midland were cancelled and retired and converted into the right to receive
$17.50 in cash. On September 21, 1998, Dawson was merged with and into the
Company (the "Second Merger") pursuant to the laws of the States of Maryland and
Texas.
The total consideration paid for the Dawson Shares pursuant to the Tender Offer
and the First Merger was approximately $181.7 million.
At the time of the closing, Dawson owned approximately 527 well service rigs,
200 oilfield trucks, and 21 production testing units in South Texas and the Gulf
Coast, East Texas and Louisiana, the Permian Basin of West Texas and New Mexico,
the Anadarko Basin of Texas and Oklahoma, California, and in the inland waters
of the Gulf of Mexico.
Pro Forma Results of Operations - (unaudited)
The following unaudited pro forma results of operations have been prepared as
though Dawson had been acquired on July 1, 1997 with adjustments to record
specifically identifiable decreases in direct costs and general and
administrative expenses related to the termination of individual employees.
These adjustments only reflect efficiencies gained through September 30, 1998
and do not necessarily reflect all efficiences expected to be achieved in
accordance with managements future plans.
Three Months Ended
September 30,
(Thousands, except per share data) 1998 1997
- ------------------------------------------------------------------------------
Revenues $ 159,198 $135,943
Net income 605 2,550
-----------------------
Basic earnings per share $ .03 $ .18
<PAGE>
KEY ENERGY GROUP AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - Continued
4. LONG-TERM DEBT
At September 30, 1998, major components of the Company's long-term debt were as
follows:
(i) PNC Credit Facility
On June 6, 1997, the Company entered into an agreement (the "Initial Credit
Agreement") with PNC Bank, N.A. ("PNC"), as administrative agent, and a
syndication of other lenders pursuant to which the lenders provided a $255
million credit facility, consisting of a $120 million seven-year term loan and a
$135 million five-year revolver. The interest rate on the term loan was LIBOR
plus 2.75 percent. The interest rate on the revolver varied based on LIBOR and
the level of the Company's indebtedness. The Initial Credit Agreement contained
certain restrictive covenants and required the Company to maintain certain
financial ratios. On September 25, 1997, the Company repaid the term loan and a
portion of the then outstanding amounts under the revolver by applying the
proceeds from the initial and second closings of the Company's private placement
of $216 million of 5% Convertible Subordinated Notes (discussed below).
Effective November 6, 1997, the Company entered into an Amended and Restated
Credit Agreement with PNC (the "Amended PNC Credit Agreement"), as
administrative agent and lender, pursuant to which PNC agreed to make revolving
credit loans of up to a maximum loan commitment of $200 million. The maximum
commitment under the Amended PNC Credit Agreement decreased to $175 million on
November 6, 2000 and to $125 million on November 6, 2001. The loan commitment
terminated on November 6, 2002. Borrowings under the credit facility consisted
of (i) Eurodollar Loans with interest currently payable quarterly at LIBOR plus
1.25% subject to adjustment based on certain financial ratios, (ii) Base Rate
Loans with interest payable quarterly at the greater of PNC Prime Rate or the
Federal Funds Effective Rate plus 1/2 %, or (iii) a combination thereof, at the
Company's option. The Amended PNC Credit Agreement contained certain restrictive
covenants and required the Company to maintain certain financial ratios. A
change of control of the Company, as defined in the Amended PNC Credit
Agreement, was an event of default. Borrowings under the Amended PNC Credit
Agreement were secured by substantially all of the assets of the Company and its
domestic subsidiaries.
Effective December 3, 1997, PNC completed the syndication of the Amended PNC
Credit Agreement. In connection therewith, PNC, as administrative agent, a
syndication of lenders and the Company entered into a First Amendment to the
Amended PNC Credit Agreement providing for, among other things, an increase in
the maximum commitment to $250 million from $200 million.
In connection with the acquisition of Dawson, the total consideration paid for
the Dawson Shares pursuant to the Tender Offer and the First Merger was
approximately $181.7 million. The Company's source of funds to pay such amount,
certain outstanding debt of Dawson and the Company and related fees and expenses
was (i) a bridge loan agreement in the amount of $150,000,000, dated as of
September 14, 1998, among the Company, Lehman Brothers Inc., as Arranger, and
Lehman Commercial Paper Inc., as Administrative Agent, and the other lenders
party thereto (the "Bridge Loan Agreement"). and (ii) a $550,000,000 Second
Amended and Restated Credit Agreement, dated as of June 6, 1997, as amended and
restated through September 14, 1998, among the Company, PNC Bank, National
Association, as Administrative Agent, Norwest Bank Texas, N.A., as Collateral
Agent, PNC Capital Markets, Inc., as Arranger, and the other lenders named from
time to time parties thereto (the "Second Amended and Restated Credit
Agreement").
<PAGE>
KEY ENERGY GROUP AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - Continued
At September 30, 1998, $150,000,000 in principal amount under the Bridge Loan
Agreement was outstanding. Interest under the Bridge Loan Agreement is payable
on the 16th day of each month beginning October 16, 1998 and is currently
payable at LIBOR plus 6.5%. In connection with the Bridge Loan Agreement, the
Company entered into a Registration Rights Agreements (the "Registration Rights
Agreements") with Lehman Brothers Inc. and Lehman Commercial Paper Inc. pursuant
to which the Company agreed to file with the Securities and Exchange Commission
(the "Commission") within a certain time period a registration statement with
respect to (i) an offer to exchange borrowings under the Bridge Loan Agreement
for a new issue of debt securities of the Company, and (ii) the resale of
warrants (and the shares of common stock of the Company to be issued upon the
exercise of such warrants) to purchase shares of common stock of the Company
issued to Lehman Brothers Inc. in connection with the Bridge Loan Agreement. The
value of such warrants do not have a recorded value due to the fact that such
warrants are currently held in escrow and will only be released if certain
conditions are met and/or certain events occur and that the basic terms of the
warrants, including the number of shares subject to the warrants and the
exercise price for such shares, will not be determined until the release date,
if such release occurs. Loans outstanding after one year pursuant to the Bridge
Loan Agreement will convert into term loans which may be exchanged by the
holders thereof for exchange notes issued pursuant to an Indenture dated as of
September 14, 1998 (the "Indenture"), between the Company and The Bank of New
York, trustee.
At September 30, 1998, $300,000,000 in principal amount ($150,000,000 classified
as tranche term loan A, "Tranche A Term Loan" and $150,000,000 classified as
tranche term loan B, "Tranche B Term Loan") was outstanding under the Second
Amended and Restated Credit Agreement. In addition, at September 30, 1998, there
was $250,000,000 available in revolving commitments under the Second Amended and
Restated Credit Agreement.
The Tranche A Term Loan requires interest payable monthly at LIBOR plus 2.75%
and matures in sixteen consecutive quarterly installments commencing December
14, 1999. Quarterly installment amounts are equal to the applicable percentage
for a particular quarter multiplied by the outstanding principal amount: 4% for
installments 1 - 4, 6% for installments 5 - 8, 7% for installments 9 - 12 and 8%
for installments 13 - 16. Tranche B Term Loan requires interest payable monthly
at LIBOR plus 3.25% and matures in nineteen consecutive quarterly installments
commencing December 14, 1999. Quarterly installment amounts are equal to the
applicable percentage for a particular quarter multiplied by the outstanding
principal amount: 0.25% for installments 1 - 16, 24% for installments 17 - 18
and 48% for the final 19th installment.
In connection with the Bridge Loan Agreement and the Second Amended and Restated
Credit Agreement referred to above, the Company incurred approximately $19.6
million in various fees and associated financing charges.
In addition, the Company, its subsidiaries and U.S. Trust Company of Texas,
N.A., trustee ("U.S. Trust"), entered into a Supplemental Indenture dated
September 21, 1998 (the "Supplemental Indenture"), pursuant to which the Company
assumed the obligations of Dawson under the Indenture dated February 20, 1997
(the "Dawson Indenture") between Dawson and U.S. Trust. Most of the Company's
subsidiaries guaranteed those obligations and the notes issued pursuant to the
<PAGE>
KEY ENERGY GROUP AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - Continued
Dawson Indenture were equally and ratably secured with the obligations under the
Second Amended and Restated Credit Agreement. At September 30, 1998 there was
$140 million in principal amount of notes outstanding under the Dawson
Indenture. The notes bear interest at 9 3/8% with interest payments due on
February 1 and August 1 of each year. Approximately $5.9 million of interest was
paid by Dawson on August 1, 1998, prior to completion of the Tender Offer. As a
result of the completion of the Tender Offer, the Company is required and has
commenced a cash tender offer to purchase all of the outstanding notes at 101%
all of the aggregate principal amount of the outstanding notes (which
outstanding amount is $140 million), the source of funds for which will be
borrowings under the Second Amended and Restated Credit Agreement.
Additionally, the Company had outstanding letters of credit of $2,612,000 as of
September 30 and June 30, 1998 related to its workers compensation insurance.
The Company is contractually restricted from paying dividends under the terms of
the Bridge Loan Agreement and the Second Amended and Restated Credit Agreement.
(ii) 5% Convertible Subordinated Notes
On September 25, 1997, the Company completed an initial closing of its private
placement of $200 million of 5% Convertible Subordinated Notes due 2004 (the
"Notes"). On October 7, 1997, the Company completed a second closing of its
private placement of an additional $16 million of Notes pursuant to the exercise
of the remaining portion of the over-allotment option granted to the initial
purchasers of Notes. The placements were made as private offerings pursuant to
Rule 144A and Regulation S under the Securities Act of 1933. The Notes are
subordinate to the Company's senior indebtedness, which, as defined in the
indenture under which the Notes were issued, includes the borrowings under the
Second Amended and Restated Credit Agreement. The Notes are convertible, at the
holder's option, into shares of Common Stock at a conversion price of $38.50 per
share, subject to certain adjustments.
The Notes are redeemable, at the Company's option, on or after September 15,
2000, in whole or part, together with accrued and unpaid interest. The initial
redemption price is 102.86% for the year beginning September 15, 2000 and
declines ratably thereafter on an annual basis.
In the event of a change in control of the Company, as defined in the indenture
under which the Notes were issued, each holder of Notes will have the right, at
the holder's option, to require the Company to repurchase all or any part of the
holder's Notes, within 60 days of such event, at a price equal to 100% of the
principal amount thereof, together with accrued and unpaid interest thereon.
Proceeds from the placement of the Notes were used to repay then outstanding
balances under the Company's credit facilities (see above). At September 30,
1998, $216,000,000 principal amount of the Notes remain outstanding. Interest on
the Notes is payable on March 15 and September 15. Interest of approximately
$5.4 million was paid on September 15, 1998.
<PAGE>
KEY ENERGY GROUP AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - Continued
(iii) 7% Convertible Subordinated Debentures
In July 1996, the Company completed a $52,000,000 private offering of 7%
Convertible Subordinated Debentures due 2003 (the "Debentures") pursuant to Rule
144A under the Securities Act of 1933, as amended (the "Securities Act"). The
Debentures are subordinate to the Company's senior indebtedness, which as
defined in the indenture pursuant to which the Debentures were issued includes
the borrowings under the Second Amended and Restated Credit Agreement.
The Debentures are convertible, at any time prior to maturity, at the holders'
option, into shares of Common Stock at a conversion price of $9.75 per share,
subject to certain adjustments. In addition, Debenture holders who convert prior
to July 1, 1999 will be entitled to receive a payment, in cash or Common Stock
(at the Company's option), generally equal to 50% of the interest otherwise
payable from the date of conversion through July 1, 1999.
The Debentures are redeemable, at the option of the Company, on or after July
15, 1999, at a redemption price of 104%, decreasing 1% per year on each
anniversary date thereafter. In the event of a change in control of the Company,
as defined in the indenture under which the Debentures were issued, each holder
of Debentures will have the right, at the holder's option, to require the
Company to repurchase all or any part of the holder's Debentures within 60 days
of such event at a price equal to 100% of the principal amount thereof, together
with accrued and unpaid interest thereon.
As of September 30, 1998, $47,400,000 in principal amount of the Debentures had
been converted into 4,861,538 shares of common stock at the option of the
holders. An additional 165,423 shares of common stock were issued representing
50% of the interest otherwise payable from the date of conversion through July
1, 1999 and an additional 35,408 shares of common stock were issued as an
inducement to convert. The additional 165,423 shares of common stock,
representing 50% of the interest otherwise payable from the date of conversion
through July 1, 1999, are included in equity. The fair value of the additional
35,408 shares of common stock issued as inducement to convert was $710,186 and
is recorded as interest expense in the unaudited consolidated statement of
operations for the three months ended September 30, 1997. In addition, the
proportional amount of unamortized debt issuance costs associated with the
converted Debentures was charged to additional paid-in capital at the time of
conversion.
At September 30, 1998, $4,600,000 principal amount of the Debentures remained
outstanding. Interest on the Debentures is payable on January 1 and July 1 of
each year. Interest of approximately $172,500 was paid on July 1, 1998
(iv) Other Notes Payable
At September 30, 1998, other notes payable consisted primarily of capital leases
for automotive equipment and equipment leases with varying interest rates and
principal and interest payments.
<PAGE>
KEY ENERGY GROUP AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - Continued
5. RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 131 - Disclosures about Segments
of an Enterprise and Related Information
Statement of Financial Accounting Standards No. 131 ("SFAS 131") - Disclosures
about Segments of an Enterprise and Related Information, which establishes
standards for reporting information about operating segments in annual financial
statements and requires selected information about operating segments in interim
financial reports issued to shareholders. SFAS 131 also establishes standards
for related disclosure about products and services, geographic areas and major
customers. SFAS 131 is effective for financial statements for periods beginning
after December 15, 1997. SFAS 131 need not be applied to interim financial
statements in the initial year of its application. However, comparative
information for interim periods in the initial year of application is to be
reported in the financial statements for interim periods in the second year of
application. The Company will adopt SFAS 131 for the fiscal year ended June 30,
1999. The Company does not expect SFAS 131 to materially affect the Company's
reporting practices.
6. COMMITMENTS AND CONTINGENCIES
Various suits and claims arising in the ordinary course of business are pending
against the Company. Management does not believe that the disposition of any of
these items will result in a material adverse impact to the consolidated
financial position of the Company.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
audited consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended June 30, 1998.
Current and Subsequent Events
During the three months ended September 30, 1998, the Company completed the
acquisition of the following well servicing, trucking, drilling and ancillary
equipment companies and businesses:
Colorado Well Service, Inc.
Oilfield service assets of TransTexas Gas Corporation
Well servicing assets of Flint Engineering & Construcion Co.
Dawson Production Services, Inc.
Iceberg, S.A.
HSI Group
These acquisitions (which are more fully described in Note 3 to the unaudited
consolidated financial statements) involve approximately 620 well service rigs
(including four well service rigs in Argentina), 388 trucks and one drilling
rig. The total purchase price of these acquisitions totaled approximately $288.9
million in cash, excluding any assumed net liabilities.
As of November 11, 1998, the Company owned a fleet of approximately 1,424 well
service rigs, 1,121 oilfield trucks, and 74 drilling rigs, including 21 service
rigs, 28 trucks and six drilling rigs in Argentina and three drilling rigs in
Canada. Management currently believes that the Company's well servicing rig and
oilfield truck fleet are the largest onshore fleets in the world. The Company
operates in all major onshore oil and gas producing regions of the continental
United States and provides a full range of drilling, completion, maintenance,
workover and plugging and abandonment services for the oil and gas industry.
Impact of Lower Crude Oil Prices
As the result of the prolonged lower oil prices, the Company's drilling,
completion and workover activity have been adversely affected. Equipment
utilization for drilling, completion and workover activity has continued to
decline throughout the last three months of fiscal year 1998 and the first three
months of fiscal 1999. The demand for these services, which generate higher
margins, will continue to be adversely affected until oil prices substantially
increase from their current depressed levels.
Growth Strategy
Historically, the domestic well servicing industry has been highly fragmented,
characterized by a large number of smaller companies which have competed
effectively on a local basis in terms of pricing and the quality of services
offered. In recent years, however, many major and independent oil and gas
companies have placed increasing emphasis not only on pricing, but also on the
safety records and quality management systems of, and the breadth of services
offered by, their vendors, including well servicing contractors. This market
environment, which requires significant expenditures by smaller companies to
meet these increasingly rigorous standards, has forced many smaller well
servicing companies to sell their operations to larger competitors. As a result,
the industry has seen high levels of consolidation among the competing
contractors.
<PAGE>
Over the past two and one-half years, the Company has been the leading
consolidator of this industry, completing in excess of 50 acquisitions of well
servicing and drilling operations through September 30, 1998. This consolidation
has led to reduced fragmentation in the market and a more predictable demand for
well services for the Company and its competitors. The Company's management
structure is decentralized, which allows for rapid integration of acquisitions
and the retention of strong local identities of many of the acquired businesses.
As a result of the Company's recent growth through acquisition, the Company has
developed a strategy to:
1. Maximize operating efficiences by focusing on reducing costs;
2. Fully integrate acquisitions into the Company's decentralized
organizational structure and thereby attempt to maximize operating margins;
3. Expand business lines and services offered by the Company in existing areas
of operations; and
4. Extend the geographic scope and operating environments for the Company's
operations.
If the current decline in the oil prices persists for a protracted period or a
recovery in such prices remains uncertain, the Company may curtail or halt its
growth strategy until such time as prices reach more favorable ranges.
RESULTS OF OPERATIONS
The following discussion provides information to assist in the understanding of
the Company's financial condition and results of operations. It should be read
in conjunction with the unaudited consolidated financial statements and related
notes thereto appearing elsewhere in this report.
QUARTER ENDED SEPTEMBER 30, 1998 VERSUS THE QUARTER ENDED SEPTEMBER 30, 1997
Net Income
For the quarter ended September 30, 1998, the Company reported net income of
$1,837,000 ($.10 per share - basic) as compared to $4,111,000 ($.29 per share -
basic) for the quarter ended September 30, 1997, representing a decrease of
$2,274,000, or 55% (66% decrease in basic earnings per share). The decrease in
net income is primarily attributable to the Company's decrease in service and
drilling rig utilization rates.
Revenues
The Company's total revenues for the quarter ended September 30, 1998 increased
by $40,188,000, or 53%, to $115,587,000 compared to $75,399,000 reported for the
quarter ended September 30, 1997. The increase is primarily attributable to the
Company's acquisitions of oilfield service and drilling rig companies over the
past twelve months, offset by the Company's decrease in service and drilling rig
utilization rates.
<PAGE>
Oilfield service revenues for the quarter ended September 30, 1998 increased by
$36,301,000, or 52%, to $105,799,000 compared to $69,498,000 reported for the
quarter ended September 30, 1997. The increase is primarily attributable to the
Company's acquisitions of oilfield service companies over the past twelve
months, offset by the Company's decrease in oilfield service rig utilization
rates.
Drilling revenues for the quarter ended September 30, 1998 increased by
$4,787,000, or 170%, to $7,610,000 compared to $2,823,000 reported for the
quarter ended September 30, 1997. The increase is primarily attributable to the
Company's drilling rig acquisitions over the past twelve months, offset by the
Company's decrease in drilling rig utilization rates.
Costs and Expenses and Operating Margins
The Company's total costs and expenses for the quarter ended September 30, 1998
increased by $43,549,000, or 63%, to $112,430,000 compared to $68,881,000
reported for the quarter ended September 30, 1997. The increase is directly
attributable to increased operating costs and expenses associated with the
Company's acquisitions over the past twelve months.
Oilfield service expenses for the quarter ended September 30, 1998 increased by
$25,459,000, or 53%, to $73,698,000 compared to $48,239,000 reported for the
quarter ended September 30, 1997. Oilfield service margins (revenues less direct
costs and expenses) increased for the quarter ended September 30, 1998 by
$10,842,000, or 51%, to $32,101,000 compared to $21,259,000 for the quarter
ended September 30, 1997. Oilfield service margins as a percentage of oilfield
service revenue for the quarters ended September 30, 1998 and 1997 was 30% and
31%, respectively. In addition, the Company has continued to expand its
services, offering higher margin ancillary services and equipment such as well
fishing tools, blow-out preventers and frac tanks.
The Company's contract drilling costs and expenses for the quarter ended
September 30, 1998 increased by $5,064,000, or 224%, to $7,327,000 compared to
$2,263,000 for the quarter ended September 30, 1997. Oilfield drilling margins
for the Company's drilling operations during the quarter ended September 30,
1998 decreased by $277,000, or 49%, to $283,000 compared to $560,000 for the
quarter ended September 30, 1997. Oilfield drilling margin as a percentage of
oilfield drilling revenue for the quarters ended September 30, 1998 and 1997 was
4% and 20%, respectively. Such decreases are attributable to the decreases in
onshore drilling due to the lower crude oil and natural gas prices.
General and administrative expenses for the quarter ended September 30, 1998
increased by $3,760,000, or 49%, to $11,438,000 compared to $7,678,000 for the
quarter ended September 30, 1997. The increase was primarily attributable to the
Company's recent acquisitions and expanded services. General and administrative
expenses as a percentage of total revenue for the quarters ended September 30,
1997 and 1998 was 10% for each period.
Depreciation, depletion and amortization expense for the quarter ended September
30, 1998 increased by $5,891,000, or 122%, to $10,703,000 compared to $4,812,000
for the quarter ended September 30, 1997. The increase is directly related to
the increase in property and equipment and intangible assets of the Company over
the past twelve months as a result of its acquisitions.
<PAGE>
Interest expense for the quarter ended September 30, 1998 increased by
$3,419,000, or 67%, to $8,505,000 compared to $5,086,000 for the quarter ended
September 30, 1997. The increase was primarily the result of increased
indebtedness used to finance the Company's acquisition program.
Income tax expense for the quarter ended September 30, 1998 decreased by
$1,087,000, or 45%, to $1,320,000 compared to $2,407,000 for the quarter ended
September 30, 1997. The effective tax rate for the quarter ended September 30,
1998 as compared to the quarter ended September 30, 1997 has increased due to
amortization of intangible assets (which is generally non-deductible for tax
purposes). The Company does not expect to have to pay the full amount of the
income tax provision because of the availability of accelerated tax
depreciation, drilling tax credits, and tax loss carry-forwards.
Cash Flows
Net cash provided by operating activities for the quarter ended September 30,
1998 increased by $8,348,000 or 206%, to $12,408,000 compared to $4,060,000
provided for the quarter ended September 30, 1997. This increase is primarily
related to the Company's acquisitions over the past twelve months.
Net cash used in investing activities for the quarter ended September 30, 1998
increased by $122,553,000, or 93%, to $254,407,000 compared to $131,854,000 used
for the quarter ended September 30, 1997. This increase is primarily related to
the Company's acquisitions over the past twelve months.
Net cash provided by financing activities for the quarter ended September 30,
1998 increased by $121,285,000 or 90%, to $256,651,000 compared to $135,366,000
provided during the quarter ended September 30, 1997. The increase is primarily
the result of borrowings of long-term debt used to finance the Company's
acquisition program.
LIQUIDITY, CAPITAL COMMITMENTS AND CAPITAL RESOURCES
At September 30, 1998, the Company had cash of $39.9 million compared to $25.3
million at June 30, 1998 and $49.3 million at September 30, 1997. At September
30, 1998, the Company had working capital of $73.9 million compared to $79.5
million at June 30, 1998 and $77.9 million at September 30, 1997.
In addition to its ongoing acquisition program, for fiscal 1999, the Company has
projected approximately $40 million of capital expenditures for improvements of
existing service and drilling rig machinery and equipment, a decrease of $12.1
million over the $52.1 million expended during fiscal 1998. The Company expects
to finance these capital expenditures through internally generated operating
cash flows. Capital expenditures for service and drilling rig improvements for
the three months ended September 30, 1998 and 1997 were $7.6 million and $7.0
million, respectively.
The Company has projected approzimately $2.0 million of capital expenditures for
oil and gas exploration for fiscal 1999 as compared to $7.8 million expended for
fiscal 1998. Financing of these costs is expected to come from operations and
available credit facilities. For the three months ended September 30, 1998 and
1997, the Company expended $1.6 million and $2.1 million, respectively.
The Company's primary capital resources are net cash provided by operations and
proceeds from certain long-term debt facilities.
<PAGE>
Year 2000 Issue
The Company is currently implementing a new integrated management information
system along with updated hardware that will replace most of the systems
currently utilized. The implementation of the new management information system,
which is Year 2000 compliant, began in July 1998 and is scheduled to be
substantially completed by June 1999. The Company has not yet developed a plan
to formally communicate with its significant suppliers and customers to
determine if those parties have appropriate plans to remedy year 2000 issues
when their systems interface with the Company's systems or may otherwise impact
the operations of the Company. The Company does not anticipate that this will
have a material impact on operations. However, there can be no assurance that
the systems of other companies on which the Company's processes rely will be
timely converted, or that failure to successfully convert by another company, or
conversion that is incompatible with the Company's systems, would not have an
impact on the Company's operations. A potential source of risk includes, but is
not limited to, the inability of principal suppliers and major customers to be
year 2000 compliant, which could result in delays in product deliveries from
such suppliers and collection of accounts receivables. The Company currently
does not have a contingency plan in place to cover any unforeseen problems
encountered that relate to the year 2000, but intends to produce one before the
end of the fiscal year.
The cost of the new management information system, (a large part of which
management expects will be capitalized) is not expected to have a material
impact on the Company's business, operations or results thereof, financial
condition, liquidity or capital resources. Although the Company is not aware of
any material operational issues or costs associated with preparing its internal
systems for the year 2000, there can be no assurance that there will not be a
delay in, or increased costs associated with, the implementation of the
necessary systems and changes to address the year 2000.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities and Use of Proceeds.
(c) Recent Sales of Unregistered Securities:
During the three months ended September 30, 1998, the Company effected the
following sales of unregistered securities:
Effective September 14, 1998, in connection with the Bridge Loan Agreement, the
Company issued to Lehman Brothers, Inc. warrants to purchase a number of shares
of Common Stock at a per share exercise price to be determined on the date, if
any, such warrants are released from escrow, such release to occur if certain
conditions are met and/or certain events occur. The issuance of the warrants was
exempt from registration under Section 4(2) of the Securities Act of 1933, as
amended, as a sale of securities not invovling any public offering.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as a part of the Form 10-Q
Number Description
10(a)Asset Purchase Agreement among Key Four Corners, Inc., Colorado Well
Service, Inc. and Keith Poole effective July 10, 1998.
10(b)Asset Purchase Agreement among Key Energy Services - South Texas, Inc. and
TransTexas Gas Corporation effective August 17, 1998.
10(c)Asset Purchase Agreement among Key Energy Group, Inc., Flint Engineering &
Construction Co. and Flint Industries, Inc. effective September 9, 1998.
10(d)Asset Purchase Agreement among Dawson Production Partners, L.P., Dawson
Production Services, Inc., and Hellums Services II, Inc., Superior
Completion Services, Inc., South Texas Disposal, Inc., Elsik II, Inc.,
Roger D. Hellums, Charles C. Forbes, Jr., Robert W. Randle, Jr., Ronald D.
Brieden, John E. Crisp, Charles Talley, and James J. Acker effective August
14, 1998.
10(e)Commitment Letter between Key Energy Group, Inc. and PNC Bank, N.A., dated
as of August 17, 1998 (filed as Exhibit (b)(1) to Schedule 14D-1 and
Schedule 13D filed by Midland Acquisition Corp. and the Company on August
12, 1998, File No. 005-47031, and incorporated herein by reference).
10(f)Engagement Letter between Key Energy Group, Inc. and Bear, Stearns & Co,
Inc., dated as of May 8, 1998. (filed as Exhibit (b)(2) to Schedule 14D-1
and Schedule 13D filed by Midland Acquisition Corp. and the Company on
August 12, 1998, File No. 005-47031, and incorporated herein by reference).
10(g)Engagement Letter between Key Energy Group, Inc. and Dain Rauscher
Wessels, dated as of July 2, 1998. (filed as Exhibit (b)(3) to Schedule
14D-1 and Schedule 13D filed by Midland Acquisition Corp. and the Company
on August 12, 1998, File No. 005-47031, and incorporated herein by
reference).
10(h)Confidentiality Agreement, dated as of August 8, 1998 by and among Key
Energy Group, Inc., Midland Acquisition Corp. and Dawson Production
Services, Inc. (filed as Exhibit (c)(2) to Schedule 14D-1 and Schedule 13D
filed by Midland Acquisition Corp. and the Company on August 12, 1998, File
No. 005-47031, and incorporated herein by reference).
10(i)Agreement and Plan of Merger, dated as of August 11, 1998, by and among
Key Energy Group, Inc., Midland Acquisition Corp. and Dawson Production
Services, Inc. (filed as Exhibit 2.1 to the Company's Current Report on
Form 8-K dated September 28, 1998, File No. 001-08038, and incorporated
herein by reference).
<PAGE>
10(j)$150,000,000 Bridge Loan Agreement, dated as of September 14, 1998 among
Key Energy Group, Inc., Lehman Brothers Inc., Lehman Commercial Paper Inc.,
and certain lenders and guarantors. (filed as Exhibit 99.1 to the Company's
Current Report on Form 8-K dated September 28, 1998, File No. 001-08038,
and incorporated herein by reference).
10(k)Indenture for the Key Energy Group, Inc. Exchange Notes due 2008, dated as
of September 14, 1998 (filed as Exhibit 99.2 to the Company's Current
Report on Form 8-K dated September 28, 1998, File No. 001-08038, and
incorporated herein by reference).
10(l)Warrant Agreement among Key Energy Group, Inc. and The Bank of New York as
Trustee, dated as of September 14, 1998. (filed as Exhibit 99.3 to the
Company's Current Report on Form 8-K dated September 28, 1998, File No.
001-08038, and incorporated herein by reference).
10(m)Debt Registration Rights Agreement, among Key Energy Group, Inc., Lehman
Commercial Paper Inc. and the guarantors set forth therein, dated as of
September 14, 1998 (filed as Exhibit 99.4 to the Company's Current Report
on Form 8-K dated September 28, 1998, File No. 001-08038, and incorporated
herein by reference).
10(n)Equity Registration Rights Agreement, between Key Energy Group, Inc. and
Lehman Brothers Inc., dates as of September 14 1998 (filed as Exhibit 99.5
to the Company's Current Report on Form 8-K dated September 28, 1998, File
No. 001-08038, and incorporated herein by reference).
10(o)Escrow Agreement among Key Energy Group, Inc., Lehman Brothers Inc.,
Lehman Commercial Paper Inc. and The Bank of New York, dated as of
September 14, 1998 (filed as Exhibit 99.6 to the Company's Current Report
on Form 8-K dated September 28, 1998, File No. 001-08038, and incorporated
herein by reference).
10(p)$550,000,000 Second Amended and Restated Credit Agreement, among Key
Energy Group, Inc., PNC Bank, National Association, Norwest Bank Texas,
N.A., PNC Capital Markets, Inc. and the several lenders from time to time
parties thereto, dated as of June 6, 1997, as amended and restated through
September 14, 1998 (filed as Exhibit 99.7 to the Company's Current Report
on Form 8-K dated September 28, 1998, File No. 001-08038, and incorporated
herein by reference).
10(q)Amended and Restated Master Guarantee and Collateral Agreement made by Key
Energy Group, Inc. and certain of its subsidiaries in favor of Norwest Bank
Texas, N.A., dated as of June 6, 1998, as amended and restated through
September 14, 1998 (filed as Exhibit 99.8 to the Company's Current Report
on Form 8-K dated September 28, 1998, File No. 001-08038, and incorporated
herein by reference).
10(r)Intercreditor and Collateral Agency Agreement, dated as of September 14,
1998 (filed as Exhibit 99.9 to the Company's Current Report on Form 8-K
dated September 28, 1998, File No. 001-08038, and incorporated herein by
reference).
10(s)Indenture dated February 20, 1997 between Dawson Production Services, Inc.
and U.S. Trust Company of Texas, N.A. (filed as Exhibit 99.10 to the
Company's Current Report on Form 8-K dated September 28, 1998, File No.
001-08038, and incorporated herein by reference).
<PAGE>
10(t)Supplemental Indenture dated September 21, 1998, among Key Energy Group,
Inc., its Subsidiaries and U.S. Trust Company of Texas, N.A. (filed as
Exhibit 99.11 to the Company's Current Report on Form 8-K dated September
28, 1998, File No. 001-08038, and incorporated herein by reference).
10(u)Form of Indemnification Agreement and provisions regarding indemnification
of directors and officers from the Company's Articles of Incorporation and
Bylaws (filed as Exhibit 3 to the Schedule 14D-9 filed by Dawson Production
Services, Inc. on August 17, 1998, and incorporated herein by reference).
10(v)Employment Agreement effective as of April 1, 1996 between the Company and
Michael E. Little (filed as Exhibit 4 to the Schedule 14D-9 filed by Dawson
Production Services, Inc. on August 17, 1998, File No. 005-47031, and
incorporated herein by reference).
10(w)Amendment No. 1 to Employment Agreement between the Company and Michael E.
Little (filed as Exhibit 5 to the Schedule 14D-9 filed by Dawson Production
Services, Inc. on August 17, 1998, File No. 005-47031, and incorporated
herein by reference).
10(x)Amendment No. 2 to Employment Agreement between the Company and Michael E.
Little (filed as Exhibit 6 to the Schedule 14D-9 filed by Dawson Production
Services, Inc. on August 17, 1998, File No. 005-47031, and incorporated
herein by reference).
10(y)Employment Agreement effective as of April 1, 1996 between the Company and
Joseph Eustace (filed as Exhibit 7 to the Schedule 14D-9 filed by Dawson
Production Services, Inc. on August 17, 1998, File No. 005-47031, and
incorporated herein by reference).
10(z)Amendment No. 1 to Employment Agreement between the Company and Joseph
Eustace (filed as Exhibit 8 to the Schedule 14D-9 filed by Dawson
Production Services, Inc. on August 17, 1998, File No. 005-47031, and
incorporated herein by reference).
10(aa) Employment Agreement effective as of July 1, 1998 between the Company
and Jim Byerlotzer (filed as Exhibit 9 to the Schedule 14D-9 filed by
Dawson Production Services, Inc. on August 17, 1998, File No. 005-47031,
and incorporated herein by reference).
10(bb) Amendment No. 1 to Employment Agreement between the Company and Jim
Byerlotzer (filed as Exhibit 10 to the Schedule 14D-9 filed by Dawson
Production Services, Inc. on August 17, 1998, File No. 005-47031, and
incorporated herein by reference).
10(cc) Employment Agreement effective April 1, 1996 between the Company and P.
Mark Stark (filed as Exhibit 11 to the Schedule 14D-9 filed by Dawson
Production Services, Inc. on August 17, 1998, File No. 005-47031, and
incorporated herein by reference).
10(dd) Amendment No. 1 to Employment Agreement between the Company and P. Mark
Stark (filed as Exhibit 12 to the Schedule 14D-9 filed by Dawson Production
Services, Inc. on August 17, 1998, File No. 005-47031, and incorporated
herein by reference).
<PAGE>
10(ee) Employee Severance Pay Plan of Dawson Production Services, Inc. (filed as
Exhibit 13 to the Schedule 14D-9 filed by Dawson Production Services, Inc.
on August 17, 1998, File No. 005-47031, and incorporated herein by
reference).
10(ff) Consulting Agreement Term Sheet dated August 11, 1998 between the Company
and Midland Acquisition Corp. and Michael E. Little (filed as Exhibit 14 to
the Schedule 14D-9 filed by Dawson Production Services, Inc. on August 17,
1998, File No. 005-47031, and incorporated herein by reference).
10(gg) Consulting Agreement Term Sheet dated August 11, 1998 between the Company
and Midland Acquisition Corp. and James J. Byerlotzer (filed as Exhibit 15
to the Schedule 14D-9 filed by Dawson Production Services, Inc. on August
17, 1998, File No. 005-47031, and incorporated herein by reference).
10(hh) Consulting Agreement Term Sheet dated August 11, 1998 between the Company
and Midland Acquisition Corp. and Joseph E. Eustace (filed as Exhibit 16 to
the Schedule 14D-9 filed by Dawson Production Services, Inc. on August 17,
1998, File No. 005-47031, and incorporated herein by reference).
27(a) Statement - Financial Data Schedule
(b) The following report on Form 8-K was filed during the quarter ended
September 30, 1998:
The Company's Current Report on Form 8-K was filed on September 28, 1998 to
report the Company's acquisition of Dawson Production Services, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KEY ENERGY GROUP, INC.
(Registrant)
By /s/ Francis D. John
Dated: November 16, 1998 President and Chief Executive Officer
By /s/ Stephen E. McGregor
Dated: November 16, 1998 Executive Vice President, Chief Financial
Officer and Treasurer
By /s/ Danny R. Evatt
Dated: November 16, 1998 Vice President Financial Operations and
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> SEP-30-1998
<CASH> 39,917
<SECURITIES> 0
<RECEIVABLES> 102,894
<ALLOWANCES> 0
<INVENTORY> 14,021
<CURRENT-ASSETS> 163,626
<PP&E> 835,829
<DEPRECIATION> (58,036)
<TOTAL-ASSETS> 1,206,048
<CURRENT-LIABILITIES> 89,731
<BONDS> 0
<COMMON> 1,868
0
0
<OTHER-SE> 152,551
<TOTAL-LIABILITY-AND-EQUITY> 1,206,048
<SALES> 115,179
<TOTAL-REVENUES> 115,587
<CGS> 81,784
<TOTAL-COSTS> 103,925
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,505
<INCOME-PRETAX> 3,157
<INCOME-TAX> 1,320
<INCOME-CONTINUING> 1,837
<DISCONTINUED> 0
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</TABLE>
Asset Purchase Agreement
among
Key Four Corners, Inc.,
Colorado Well Service, Inc.
and
Keith Poole
July 10, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 Purchase and Sale of Assets 1
1.1 Purchase and Sale of the Assets 1
1.2 Excluded Assets 2
1.3 Consideration for Assets 3
1.4 Liabilities 3
1.5 Closing 3
1.6 Closing Deliveries 3
1.6.1 Opinion of Buyer's Counsel 3
1.6.2 Opinion of Seller's Counsel. 4
ARTICLE IIRepresentations and Warranties 4
2.1 Representations and Warranties of
the Seller and the Shareholders 4
2.1.1 Organization and Good Standing 4
2.1.2 Agreement Authorized and Effect
on Other Obligations. 4
2.1.3 Contracts 5
2.1.4 Title to Assets 5
2.1.5 Licenses and Permits 5
2.1.6 Intellectual Property 6
2.1.7 Financial Statements 6
2.1.8 Absence of Certain Changes and Events 6
(a) Financial Change 6
(b) Property Damage 6
(c) Waiver 6
(d) Change in Assets 6
(e) Labor Disputes 7
(f) Other Changes 7
2.1.9 Necessary Consents 7
2.1.10 Environmental Matters 7
2.1.11 Termination of the Colorado Well Service,
Inc. Profit Sharing Plan and Trust 8
2.1.12 Investigations; Litigation8
2.1.13 Absence of Certain Businesses Practices 9
2.1.14 Solvency 9
2.1.15 Finder's Fee 9
2.1.16 Taxes 9
2.2 Representations and Warranties of Buyer 9
2.2.1 Organization and Good Standing 10
2.2.2 Agreement Authorized and its Effect
on Other Obligations 10
2.2.3 Consents and Approvals 10
2.2.4 Finder's Fee 10
2.2.5 Non-Forecasts 10
ARTICLE III Additional Agreements 11
3.1 Noncompetition. 11
3.2 Hiring Employees 11
3.3 Allocation of Purchase Price 12
3.4 Name Change 12
3.5 Budget Agreement 12
3.6 Acknowledgment of Adequate Considerations 12
3.7 Lease Agreement 12
3.8 Further Assurances 13
ARTICLE IV Indemnification 13
4.1 Indemnification by the Seller
and the Shareholder 13
4.2 Indemnification by Buyer 13
4.3 Indemnification Procedure 13
ARTICLE V Miscellaneous 14
5.1 Survival of Representations,
Warranties and Covenants 14
5.2 Entirety 15
5.3 Counterparts. 15
5.4 Notices and Waivers. 15
5.5 Captions. 15
5.6 Successors and Assigns. 16
5.7 Severability. 16
5.8 Applicable Law. 16
5.9 Non Disclosure of Purchase Price 16
<PAGE>
Asset Purchase Agreement
This Asset Purchase Agreement (this "Agreement") is entered into as of July 10,
1998 among Key Four Corners, Inc., a Delaware corporation (the "Buyer"),
Colorado Well Service, Inc., a Colorado corporation (the "Seller") and Keith
Poole (the "Shareholder").
RECITATIONS
The Seller desires to sell substantially all of its assets, and Buyer desires to
acquire such assets.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements, and subject to the terms
and conditions herein contained, the parties hereto hereby agree as follows:
ARTICLE 1
Purchase and Sale of Assets
1.1 Purchase and Sale of the Assets. Subject to the terms and conditions set
forth in this Agreement, the Seller hereby agrees to sell, convey, transfer,
assign and deliver to Buyer effective as of 11:59 P.M. Colorado time (the
"Effective Time") on the date of delivery and payment of the cash consideration
set forth in Section 1.3 hereof, but in no event later than July 15, 1998 (the
"Closing Date"), all of the assets of the Seller existing as of the Effective
Time other than the Excluded Assets (defined below), whether real, personal,
tangible or intangible, including, without limitation, the following assets
owned by the Seller relating to or used or useful in the operation of the
business as conducted by the Seller on and before the Effective Time (the
"Business") (all such assets being sold hereunder are referred to collectively
herein as the "Assets"):
(a) all tangible personal property owned by Seller (such as machinery,
equipment, leasehold improvements, furniture and fixtures, and vehicles),
including, without limitation, that which is more fully described on
Schedule 1.1(a) hereto (collectively, the "Tangible Personal Property");
(a) all of the inventory owned by Seller, including without limitation, that
which is more fully described on Schedule 1.1(b) hereto (collectively, the
"Inventory");
(a) all of the Seller's intangible assets (the "Intangibles"), including
without limitation, (i) all of the Seller's rights to the name under which
it is incorporated or under which it currently does business, (ii) all of
the Seller's rights to any patents, patent applications, trademarks and
service marks (including registrations and applications therefor), trade
names, and copyrights and written know-how, trade secrets, licenses and
sublicenses and all other similar proprietary data and the goodwill
associated therewith (collectively, the "Intellectual Property") used or
held in connection with the Business, including without limitation, that
which is more fully described on Schedule 1.1(c) hereto (the "Seller
Intellectual Property"), (iii) the Seller's telephone numbers, and (iv) the
sales and promotional literature, computer software, customer and supplier
lists and all other records of the Seller relating to the Assets or the
Business, excluding the corporate minute books, accounting records, files,
tax returns and other financial data on whatever media, relating to the
Seller or the Shareholder or the Excluded Assets (the "Retained Records");
(a) those leases, subleases, contracts, contract rights and agreements relating
to the Assets or the operation of the Business listed on Schedule 1.1(d)
hereto (collectively, the "Contracts");
(a) all of the permits, exemptions from permit requirements, authorizations,
certificates, approvals, registrations, variances, waivers, exemptions,
rights-of-way, franchises, ordinances, orders, licenses and other rights of
every kind and character (collectively, the "Permits") relating to all or
any of the Assets or to the operation of the Business, including, but not
limited to, those that are more fully described on Schedule 1.1(e) hereto;
(a) the goodwill and going concern value of the Business; and
(g) all other or additional privileges, rights, interests, properties and
assets of the Seller of every kind and description and wherever located
that are used in the Business or intended for use in the Business in
connection with, or that are necessary for the continued conduct of, the
Business.
1.2 Excluded Assets. The Assets shall not include the following (collectively,
the "Excluded Assets"): (i) all of the Seller's accounts receivable and all
other rights of the Seller to receive payment for services rendered by the
Seller before the Effective Time; (ii) all cash accounts of the Seller, all
petty cash of the Seller kept on hand for use in the Business and all
investments, investment accounts, notes receivable and other accounts maintained
by the Seller at financial institutions; (iii) all other receivables and prepaid
expenses, including all right, title and interest of the Seller in and to any
prepaid expenses, bonds, deposits and other current assets relating to any of
the Assets or the Businesses; (iv) the Retained Records; (v) the cash
consideration paid or payable by Buyer to Seller pursuant to Sections 1.3 and
3.1 hereof; and (vi) the other assets described in Schedule 1.2 attached hereto.
1.3 Consideration for Assets. As consideration for the sale of the Assets to
Buyer and for the other covenants and agreements of the Seller and the
Shareholder contained herein, Buyer agrees to pay on the Closing Date, the sum
of Six Million, Four Hundred Eighty Thousand Dollars ($6,480,000) to Seller by
wire transfer of immediately available funds to an account designated by the
Seller or by delivery of immediately available funds.
1.4 Liabilities. Effective as of the Effective Time, Buyer shall assume those,
and only those, (a) liabilities and obligations of the Seller to perform the
Contracts to the extent that the Contracts (i) are not in default on the
Effective Time (other than by reason of defaults caused by not having required
consents to assignment) and (ii) have either been duly assigned to Buyer or, if
not so assigned, Buyer has performed or rendered services under such Contracts
after the Effective Time, and (b) the obligations of Seller expressly assumed by
Buyer as described and set forth in Section 3.2 hereof (the "Assumed
Liabilities"). On and after the Effective Date, the Seller shall be responsible
for any and all liabilities and obligations of the Seller other than the Assumed
Liabilities, including, without limitation, (a) any obligations arising from the
Seller's employment of those employees of the Seller listed on Schedule 3.2
hereto (other than those expressly assumed by Buyer as set forth on Schedule 3.2
hereto); (b) any liabilities arising from or relating to Seller's failure to be
duly qualified or licensed to do business and in good standing as a foreign
corporation in all jurisdictions in which the character of the properties owned
or the nature of the business conducted by Seller would make such qualification
or licensing necessary; (c) any failure to pay any taxes owed by Seller which
are applicable to the period ending with the Effective Time; (d) any liabilities
arising out of any matters listed on Schedules 2.1.10 and 2.1.12 hereto; (e) any
liability incurred by the Seller or the Shareholder for commission or other fees
payable to brokers, attorneys or others; and (f) any other liabilities resulting
from Seller's operation of the Assets or conduct of its business before the
Effective Time (collectively, the "Retained Liabilities").
1.5 Closing. The closing of the purchase and sale provided for hereunder (the
"Closing") shall take place on the Closing Date, at the offices of Williams,
Turner & Holmes, P.C., 200 N. 6th Street, Grand Junction, Colorado.
1.6 Closing Deliveries. At the Closing, in addition to the conveyances of the
Assets to the Buyer in exchange for the Purchase Price, Buyer and Seller will
deliver to one another the following:
1.6.1 Opinion of Buyer's Counsel. The Seller shall have received a favorable
opinion, dated as of the Closing Date, from Lynch, Chappell & Alsup, P.C.,
counsel for Buyer, in the form attached hereto as Schedule 1.6.1. In rendering
such opinion, such counsel may rely upon (x) certificates of public officials
and of officers or Buyer as to the matters of fact and (y) the opinion or
opinions of other counsel, which opinions shall be reasonably satisfactory to
the Seller, as to matters other than federal or Colorado law.
1.6.2 Opinion of Seller's Counsel. The Buyer shall have received a favorable
opinion, dated as of the Closing Date, from Williams, Turner & Holmes, P.C.,
counsel to Seller and the Shareholder, in the form of that attached hereto as
Schedule 1.6.2. In rendering such opinion, such counsel may rely upon (x)
certificates of public officials and of officers of the Seller as to the matters
of fact and (y) on the opinion or opinions of other counsel, which opinions
shall be reasonably satisfactory to Buyer, as to matters other than federal or
Colorado law.
1.6.3 Consent to Sublease. The Buyer shall have received a consent, in form and
substance satisfactory to the Buyer, consenting to the execution and delivery of
the Sublease Agreement described in Section 3.7 hereof.
1.7 Post-Closing Adjustments. With respect to accounts receivable and all other
rights of the Seller to receive payment for services rendered by the Seller
before the Effective Time which have not been invoiced by Seller prior to the
Effective Time, Buyer shall invoice all such receivables and services as an
accomodation to Seller, and Buyer will account to Seller for all amounts paid to
Buyer thereon (less any expenses authorized by Seller to be paid on Seller's
behalf by Buyer) upon the expiration of thirty (30) days (the "First Settlement
Date") and sixty (60) days (the "Second Settlement Date") following the
Effective Time (with any such accounts as are unpaid as of the Second Settlement
Date to be surrendered by Buyer to Seller upon request by Seller). In addition,
on the First Settlement Date, Buyer will pay Seller an additional amount equal
to the amounts paid by Seller for equipment purchases made by Seller after May
12, 1998, and before the date hereof which expand the capabilities of the
Business and which are described on Schedule 1.7 hereto, less any amounts
representing Seller's obligations to its employees which have been expressly
assumed by Buyer as set forth on Schedule 3.2 hereto.
ARTICLE II
Representations and Warranties
2.1 Representations and Warranties of the Seller and the Shareholder. As of the
Closing and the Effective Time, the Seller and the Shareholder jointly and
severally represent and warrant to Buyer as follows:
2.1.1 Organization and Good Standing. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado,
is qualified to do business in Wyoming, Utah and Nevada and in each other state
in which the nature and conduct of its business requires it to be qualified to
do business and has full requisite corporate power and authority to carry on its
businesses as it is currently conducted and to own and operate the properties
currently owned and operated by it. The Shareholder owns all of the issued and
outstanding shares of the Seller's capital stock and has the sole right to vote
the same.
2.1.2 Agreement Authorized and Effect on Other Obligations. The execution and
delivery of this Agreement and all instruments to be executed by Seller and the
Shareholder hereunder have been authorized by all necessary corporate,
shareholder and other action on the part of the Seller and the Shareholder and
this Agreement and all instruments to be executed by the Seller and the
Shareholder hereunder are the valid and binding obligations of the Seller and
the Shareholder enforceable (subject to normal equitable principals) against
each of such parties in accordance with their terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, debtor relief or
similar laws affecting the rights of creditors generally. The execution,
delivery and performance of this Agreement and all instruments to be executed by
the Seller and the Shareholder hereunder and the consummation of the
transactions contemplated hereby and thereby, will not conflict with or result
in a violation or breach of any term or provision of, nor constitute a default
under (i) the Articles of Incorporation or Bylaws (or other organizational
documents) of the Seller, (ii) except as set forth on Schedule 2.1.9 hereto, any
obligation, indenture, mortgage, deed of trust, lease, contract or other
agreement to which the Seller or the Shareholder is a party or by which the
Seller or the Shareholder or their respective properties are bound; or (iii) to
the their knowledge, any provision of any law, rule, regulation, order, permits,
certificate, writ, judgment, injunction, decree, determination, award or other
decision of any court, arbitrator or other governmental authority to which the
Seller or the Shareholder, or any of their respective properties are subject.
2.1.3 Contracts. Schedule 1.1(d) hereto sets forth a complete list of all
contracts, including leases under which the Seller is lessor or lessee, which
relate to the Assets. In addition, except as set forth on Schedule 1.1(d) hereto
(a) all of the Contracts are in full force and effect, and constitute valid and
binding obligations of the Seller, (b) except as set forth on Schedule 2.1.9
hereto, the Seller is not, and to the knowledge of the Seller and the
Shareholder, no other party to any of the Contracts is, in default thereunder,
and no event has occurred which (with or without notice, lapse of time, or the
happening of any other event) would constitute a default thereunder, (c) no
Contract has been entered into on terms which could reasonably be expected to
have an adverse effect on the use of the Assets by Buyer for the same purpose as
they were used by the Seller prior to the Closing Date, (d) neither the Seller
nor the Shareholder has received any information which would cause any of such
parties to conclude that any customer of the Seller will (or is likely to) cease
doing business with Buyer (or its successors) as a result of the consummation of
the transactions contemplated hereby.
2.1.4 Title to Assets. The Seller has good, indefeasible and marketable title to
all of the Assets, free and clear of any Encumbrances (defined below) except as
set forth in Schedule 2.1.4 hereto. Except as set forth in Schedule 1.1(a) and
Schedule 2.1.4 hereto, all of the Assets are (a) in a state of good repair,
ordinary wear and tear excepted, (b) are free from any known defects except as
may be repaired by routine maintenance and such minor defects as do not
substantially interfere with the continued use thereof in the conduct of normal
operations and (c) to the knowledge of the Seller and the Shareholder, conform
to all applicable laws governing their use. No notice of any violation of any
law, statute, ordinance or regulation relating to any of the Assets has been
received by the Seller or the Shareholder, except such as have been fully
complied with. The term "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, taxes, privileges, equities, easements, rights of way, limitations,
reservations, restrictions and other encumbrances of any kind or nature.
2.1.5 Licenses and Permits. Schedule 1.1(e) hereto sets forth a complete list of
all Permits necessary under law or otherwise for the operation, maintenance and
use of the Assets in the manner in which they are now being operated, maintained
and used; each of the Permits and the Seller's rights with respect thereto is
valid and subsisting, in full force and effect, and enforceable by the Seller;
the Seller is in compliance in all material respects with the terms of each of
the Permits; none of the Permits have been, or to the knowledge of the Seller or
the Shareholder, are threatened to be, revoked, canceled, suspended or modified
(although certain of the Permits (as identified on Schedule 1.1(e) hereto) shall
expire as of June 30, 1998).
2.1.6 Intellectual Property. Schedule 1.1(c) hereto sets forth a complete list
of all Seller Intellectual Property material or necessary for the continued use
of the Assets; the Seller Intellectual Property is owned or licensed by the
Seller free and clear of any Encumbrances; the Seller has not granted to any
other person any license to use any Seller Intellectual Property and use of the
Seller Intellectual Property will not, and the conduct of the Business did not,
to the knowledge of the Seller and the Shareholder, infringe, misappropriate or
conflict with the Intellectual Property rights of others. Neither the Seller or
the Shareholder has received any notice of infringement, misappropriation or
conflict with the Intellectual Property rights of others in connection with the
use by Seller of the Seller Intellectual Property.
2.1.7 Financial Statements. The Seller has delivered to Buyer a copy of Seller's
unaudited statement of income for the four (4) month period ended April 30,
1998, a copy of which is attached hereto as Schedule 2.1.7 (the "Seller's
Statement of Income"); the Seller's Statement of Income is true, correct and
complete in all material respects and presents fairly and fully the income and
expenses of the Seller as at the date and for the periods indicated thereon, and
except as set forth on Schedule 2.1.7 hereto has been prepared in accordance
with generally accepted accounting principles as promulgated by the American
Institute of Certified Public Accountants ("GAAP") applied on a consistent basis
and the Seller's Statement of Income includes all adjustments which are
necessary for a fair presentation of the Seller's income and expenses for the
period indicated.
2.1.8 Absence of Certain Changes and Events. Since April 30, 1998, there has not
been:
(a) Financial Change. Any adverse change in the Assets, the Business or the
financial condition, operations, liabilities or prospects of the Seller,
except as set forth on Schedule 2.1.8(d);
(b) Property Damage. Any damage, destruction, or loss to any of the Assets or
the Business (whether or not covered by insurance);
(c) Waiver. Any waiver or release of a material right of or claim held by the
Seller;
(d) Change in Assets. Any acquisition, disposition, transfer, encumbrance,
mortgage, pledge or other encumbrance of any asset of the Seller except as
set forth on Schedule 2.1.8(d) hereto or as otherwise made in the ordinary
course of business;
(e) Labor Disputes. Any labor disputes between the Seller and its employees; or
(f) Other Changes. Any other event or condition known to the Seller or the
Shareholder that particularly pertains to and has or might have an adverse
effect on the Assets, the operations of the Business or the financial
condition or prospects of the Seller, except as expressly noted on Schedule
2.1.8(d) hereto.
2.1.9 Necessary Consents. The Seller has obtained and delivered to Buyer all
consents to assignment or waivers thereof required to be obtained from any
governmental authority or from any other third party in order to validly
transfer the Assets hereunder, including, without limitation, the Contracts and
the Seller Permits, except as expressly noted on Schedule 2.1.9 hereto.
2.1.10 Environmental Matters. (a) Except as described in a letter dated July 6,
1998 from Mesa Environmental, Inc. to Donna Stoner of the Colorado Department of
Health and Environment, Grand Junction, Colorado (the "Mesa Environmental
Letter"), none of the current or past operations of the Business or any of the
Assets are being or have been conducted or used in such a manner as to
constitute a violation of any Environmental Law (defined below); except as
described in the Mesa Environmental Letter, neither the Seller or the
Shareholder 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 the Seller
or the Shareholder, threatened relating to the ownership, use, maintenance or
operation of the Assets or the conduct of the Business, nor, to the knowledge of
the Seller or the Shareholder, is there any basis for any of the foregoing;
Buyer is not required to obtain any permits, licenses or similar authorizations
pursuant to any Environmental Law in effect as of the date hereof to operate and
use any of the Assets for their current purposes and uses; to the knowledge of
the Seller or the Shareholder, the Assets include all environmental and
pollution control equipment necessary for compliance with applicable
Environmental Law; except as disclosed on Schedule 2.1.10, no Hazardous
Materials (defined below) have been or are currently being used by the Seller in
the operation of the Assets; except as disclosed on Schedule 2.1.10 hereto, no
Hazardous Materials are or have ever been situated on or under any of the
Seller's properties, whether owned or leased, or incorporated into any of the
Assets; except as disclosed on Schedule 2.1.10 hereto, there are no, and there
have never been any, underground storage tanks (as defined under Environmental
Law) located under any of the Seller's properties, whether owned or leased; and,
except as disclosed on Schedule 2.1.10 hereto, there are no environmental
conditions or circumstances, including the presence or release of any Hazardous
Materials, on any property presently or previously owned or leased by the
Seller, or on any property on which Hazardous Materials generated by the
Seller's operations or the use of the Assets were disposed of, which would
result in an adverse change in the Assets, Business or business prospects of the
Seller. The term "Environmental Law" means any and all laws, rules, orders,
regulations, statutes, ordinances, codes, decrees, and other legally enforceable
requirements (including, without limitation, common law) of the United states,
or any state, regional, city, local, municipal or other governmental authority
or quasi-governmental authority, regulating, relating to, or imposing
environmental standards of conduct concerning protection of the environment or
human health, or employee health and safety as from time to time has been or is
now in effect. The term "Hazardous Materials" means (x) asbestos,
polychlorinated biphenyls, urea formaldehyde, lead based paint, radon gas,
petroleum, oil, solid waste, pollutants and contaminants, and (y) any chemicals,
materials, wastes or substances that are defined, regulated, determined or
identified as toxic or hazardous in any Environmental Law.
(b) With respect to the matters identified in the Mesa Environmental Letter in
Schedule 2.1.10 hereto, Seller and Shareholder shall undertake at their
cost and expense all appropriate remediation and clean-up procedures in
accordance with the requirements of each applicable regulatory authority
(the "Remedial Work"), and Seller and Shareholder shall jointly indemnify
and hold harmless Buyer from all such costs, expenses and fees incurred by
Seller and Shareholder in performing the Remedial Work pertaining to the
matters set forth in the Mesa Environmental Letter.
2.1.11 Termination of the Colorado Well Service, Inc. Profit Sharing Plan and
Trust. Seller hereby agrees to amend and terminate the Colorado Well Service,
Inc. Profit Sharing Plan (the "Plan") prior to the Effective Time by adopting
board resolutions and an agreement for amendment and termination of the Plan.
After the effective date of termination of the Plan, the Plan shall be "frozen"
pending distribution of its assets to Participants and their beneficiaries. No
persons who are not Participants as of the termination date shall be eligible to
participate in the Plan or receive benefits thereunder, and no distributions
shall be made by the Plan except normal distributions in the ordinary course of
business to or on behalf of employees who have separated from service with the
Seller or, after the Closing Date, with Buyer and its parent and subsidiaries
("Key"). Within 90 days after the Closing Date, Seller agrees to file a
submission to formally request a determination letter from the Internal Revenue
Service ("IRS") to the effect that the Plan is a qualified plan under Section
401(a) of the Code upon its termination and that the trust used to fund the Plan
(the "Trust") is tax exempt under Section 501(a) of the Code. As soon as
administratively practicable following receipt of a favorable IRS determination
letter, the trustee of the Trust shall effectuate distributions of all remaining
assets from the Trust and, thereafter, it shall be liquidated. After liquidation
of the Trust, Seller agrees to file a final IRS form 5500 for the Plan with the
IRS. Key assumes no liability or obligation with respect to or arising out of
the Plan or Trust at any time, before, on or after the Closing Date, and all
costs, damages, liabilities, penalties, taxes and expenses, of any nature,
relating to, or arising out of, the Plan and Trust, including termination of the
Plan and Trust, shall be paid by Seller and its shareholders and not by Key.
2.1.12 Investigations; Litigation. No investigation or review by any
governmental entity with respect to the Seller or any of the transactions
contemplated by this Agreement is pending or threatened, nor has any
governmental entity indicated to the Seller or the Shareholder, an intention to
conduct the same; and there is no suit, action, or legal, administrative,
arbitration or other proceeding or governmental investigation pending, , to
which the Seller or the Shareholder, is a party or any other unasserted claims
against the Seller or the Shareholder which would have an adverse effect on any
of the Assets or the Business, except as set forth on the Schedule 2.1.12
hereto.
2.1.13 Absence of Certain Businesses Practices. Neither the Seller or the
Shareholder, nor to the knowledge of the Seller or the Shareholder, any officer,
employee or agent of the Seller, or any other person acting on behalf of the
Seller or the Shareholder has, directly or indirectly, within the past five
years, given or agreed to give any gift or similar benefit to any customer,
supplier, government employee or other person who is or may be in a position to
help or hinder the profitable conduct of the Business or the profitable use of
the Assets (or to assist the Seller in connection with any actual or proposed
transaction) which if not given in the past, might have had an adverse effect on
the profitable conduct of the Business or the profitable use of the Assets, or
if not continued in the future, might adversely affect the profitable conduct of
the Business or the profitable use of the Assets.
2.1.14 Solvency. The Seller is not presently insolvent, nor will the Seller be
rendered insolvent by the occurrence of the transactions contemplated by this
Agreement. The term "insolvent," with respect to the Seller, means that the sum
of the present fair and saleable value of the Seller's assets does not and will
not exceed its debts and other probable liabilities, and the term "debts"
includes any legal liability whether matured or unmatured, liquidated or
unliquidated, absolute fixed or contingent, disputed or undisputed or secured or
unsecured.
2.1.15 Finder's Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by the Seller and the
Shareholder and their counsel directly with Buyer and its counsel, without the
intervention of any other person in such manner as to give rise to any valid
claim against Buyer for a brokerage commission, finder's fee or any similar
payment.
2.1.16 Taxes. All federal, state and local taxes assessed or assessable against
the Assets for periods prior to January 1, 1998 have been paid by Seller and the
Assets will be conveyed to Buyer free and clear of any such taxes or claims
therefor. All taxes assessed against the Assets for the period commencing
January 1, 1998 will be prorated through the Closing Date (based on 1997
assessed values) with Seller paying to Buyer at Closing an amount equal to the
portion of such taxes applicable to the period between January 1, 1998 and the
Closing Date. Buyer shall be responsible for the payment of any sales taxes due
as a result of the sale of the Assets by Seller to Buyer.
2.2 Representations and Warranties of Buyer. Buyer represents and warrants to
the Seller and the Shareholder as follows:
2.2.1 Organization and Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
has full requisite corporate power and authority to carry on its businesses 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 businesses and is in
good standing as a foreign corporation authorized to do business in the State of
Colorado.
2.2.2 Agreement Authorized and its Effect on Other Obligations. The consummation
of the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of Buyer, and this Agreement is a
valid and binding obligation of Buyer enforceable (subject to normal equitable
principles) in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, debtor relief or similar laws
affecting the rights of creditors generally. The execution, delivery and
performance of this Agreement by Buyer will not conflict with or result in a
violation or breach of any term or provision of, or constitute a default under
(a) the Certificate of Incorporation or Bylaws of Buyer or (b) any obligation,
indenture, mortgage, deed of trust, lease, contract or other agreement to which
Buyer or any of its property is bound.
2.2.3 Consents and Approvals. No consent, approval or authorization of, or
filing of a registration with, any governmental or regulatory authority, or any
other person or entity is required to be made or obtained by Buyer in connection
with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
2.2.4 Finder's Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Buyer and its counsel
directly with the Seller and the Shareholder and their counsel, without the
intervention by any other person as the result of any act of Buyer in such a
manner as to give rise to any valid claim against the Seller or the Shareholder
for any brokerage commission, finder's fee or any similar payments.
2.2.5 Non-Forecasts. Seller and the Shareholder make no other representations
and warranties except as expressly set forth in this Agreement and the Schedules
hereto, including any general representations, warranties, guaranties or other
assurances as to the future profitability of the Business or the Assets
following the Closing of the transactions contemplated by this Agreement.
ARTICLE III
Additional Agreements
3.1 Noncompetition. Except as set forth below or as otherwise consented to or
approved in writing by Buyer, the Seller and the Shareholder each agree that for
a period of 60 months following the date hereof, such party will not (and will
cause its affiliates and successors not to) directly or indirectly, acting alone
or as a member of a partnership or as an officer, director, employee,
consultant, representative, advisor, lender (including gifts used for
capitalization or collateral), a holder of, or investor in as much as 3% of any
security of any class of any corporation or other business entity (a) engage in
any business in competition with the business or businesses conducted by the
Seller on or before the date hereof or by Buyer (or Buyer's affiliates) on or
after the date hereof, or in any service business the services of which were
provided and marketed by the Seller on or before the date hereof or by Buyer (or
Buyer's affiliates) on or after the date hereof in the states of Colorado,
Nevada, Utah and Wyoming; (b) request any present customers or suppliers of the
Seller or any customers of Buyer (or Buyer's affiliates) to curtail or cancel
their business with Buyer (or Buyer's affiliates); (c) disclose to any person,
firm or corporation any trade, technical or technological secrets of Buyer (or
Buyer's affiliates) or of the Seller or any details of their organization or
business affairs or (d) induce or actively attempt to influence any employee of
Buyer (or Buyer's affiliates) to terminate his or her employment. The Seller and
the Shareholder agree that if either the length of time or geographical area as
set forth in this Section 3.1 is deemed too restrictive in any court proceeding,
the court may reduce such restrictions to those which it deems reasonable under
the circumstances. The obligations expressed in this Section 3.1 are in addition
to any other obligations that the Seller or the Shareholder may have under the
laws of any state requiring a corporation selling its assets (or a shareholder
of such corporation) to limit its activities so that the goodwill and business
relations being transferred with such assets will not be materially impaired.
The Seller and the Shareholder further agree and acknowledge that Buyer does not
have any adequate remedy at law for the breach or threatened breach by the
Seller or the Shareholder of the covenants contained in this Section 3.1, and
agree that Buyer may, in addition to the other remedies which may be available
to it hereunder, file a suit in equity to enjoin the Seller or the Shareholder
from such breach or threatened breach. If any provisions of this Section 3.1 are
held to be invalid or against public policy, the remaining provisions shall not
be affected thereby. The Seller and the Shareholder acknowledge that the
covenants set forth in this Section 3.1 are being executed and delivered by such
party in consideration of (i) the covenants of Buyer contained in this
Agreement, (ii) additional consideration in the amount of $10,000 payable by
Buyer to Seller and $10,000 payable by Buyer to Shareholder on the date hereof
by wire transfer of immediately available funds and (iii) for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged.
3.2 Hiring Employees. Schedule 3.2 hereto is a complete and accurate listing of
all employees of the Seller who devote their full or part time in the operation
of the Assets and the conduct of the Business and their job titles (the
"Employees"). Effective as of 12:01 A.M. next following the Effective Time, all
of the Employees actively engaged in the conduct of Seller's business shall be
offered full or part-time employment by Buyer, subject to such Employees meeting
Buyer's standard employment eligibility requirements. Except as specifically set
forth as being assumed by Buyer on Schedule 3.2 hereto for those Employees
actually hired by Buyer, 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
Effective Time. The Seller and the Shareholder 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.
3.3 Allocation of Purchase Price. The parties hereto agree to allocate the
Purchase Price payable by Buyer for the Assets hereunder as set forth on
Schedule 3.3 hereto, and shall report this transaction for federal income tax
purposes in accordance with the allocation so agreed upon. The parties hereto
for themselves and for their respective successors and assigns covenant and
agree that they will file coordinating Form 8594's in accordance with Section
1060 of the Internal Revenue Code of 1986, as amended, with their respective
income tax returns for the taxable year that includes the date hereof.
3.4 Name Change. The Seller and the Shareholder shall, within twenty (20) days
from the date of Closing, cause to be filed with the Secretary of State of
Colorado an amendment to the Articles of Incorporation of the Seller changing
the names of the Seller from its current name to a name that is not similar to
such name. The Seller and the Shareholder shall, within five (5) days from the
date of its receipt of confirmation of such filings from the Secretary of State
of Colorado, cause the same to be filed with the appropriate office of each
state in which the Seller is qualified to do business and deliver to Buyer a
copy of such filings.
3.5 Employment Agreement. Concurrently herewith, the Shareholder and Buyer shall
have executed an Employment Agreement (the "Employment Agreement") in a form
acceptable to them.
3.6 Acknowledgment of Adequate Considerations. The Shareholder acknowledges and
agrees that Buyer is relying upon the accuracy of the representation and
warranties made herein by the Shareholder and the enforceability of the
covenants and agreements of the Shareholder contained herein and that Buyer
would not be willing to complete the transactions contemplated hereby without
such representations, warranties, covenants and agreements. The Shareholder
acknowledges and agrees that he will personally benefit from the consideration
being paid by Buyer to Seller hereunder and that such consideration, together
with the other benefits and consideration resulting to them hereunder, is
adequate to support the enforcement of their representation, warranties,
covenants and agreements contained herein.
3.7 Sublease Agreement. Concurrently herewith, the Buyer shall have executed a
Sublease Agreement with Seller and Shareholder, pursuant to which Buyer shall
have subleased the property currently leased by Seller in Rangely, Colorado, for
the remaining term of the primary lease and on terms and conditions otherwise
acceptable to Buyer.
3.8 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 and other actions as may be reasonably necessary to
effect the transactions contemplated hereby.
ARTICLE IV
Indemnification
4.1 Indemnification by the Seller and the Shareholder. In addition to any other
remedies available to Buyer under this Agreement, or at law or in equity, the
Seller and the Shareholder shall, jointly and severally, indemnify, defend and
hold harmless Buyer and its officers, directors, employees, agents and
stockholders (collectively, the "Buyer Indemnified Parties"), against and with
respect to any and all claims, costs, damages, losses, expenses, obligations,
liabilities, recoveries, suits, causes of action and deficiencies, including
interest, penalties and reasonable attorneys' fees and expenses (collectively,
the "Damages") which exceed the sum of $10,000 in the aggregate that a Buyer
Indemnified Party shall incur or suffer (whether the damages are suffered or
incurred by such Buyer Indemnified Party directly or as a result of a third
party claim against such Buyer Indemnified Party), which arise, result from or
relate to (a) any breach of, or failure by the Seller and the Shareholder to
perform, their respective representations, warranties, covenants or agreements
in this Agreement or in any schedule, certificate, exhibit or other instrument
furnished or delivered to Buyer by the Seller or the Shareholder under this
Agreement; or (b) the Retained Liabilities.
4.2 Indemnification by Buyer. In addition to any other remedies available to the
Seller or the Shareholder under this Agreement, or at law or in equity, Buyer
shall indemnify, defend and hold harmless the Seller and its officers,
directors, employees, agents and stockholders and the Shareholder against and
with respect to any and all Damages which exceed the sum of $10,000 in the
aggregate that such indemnitees shall incur or suffer, which arise, result from
or relate to (a) any breach of, or failure by Buyer to perform, any of its
representations, warranties, covenants or agreements in this Agreement or in any
schedule, certificate, exhibit or other instrument furnished or delivered to the
Seller or the Shareholder by or on behalf of Buyer under this Agreement or (b)
the Assumed Liabilities.
4.3 Indemnification Procedure. If any party hereto discovers or otherwise
becomes aware of an indemnification claim arising under Section 4.1 or 4.2 of
this Agreement, such indemnified party shall give written notice to the
indemnifying party, specifying such claim, and may thereafter exercise any
remedies available to such party under this Agreement; provided, however, that
the failure of an indemnified party to give notice as provided herein shall not
relieve the indemnifying party of any obligation hereunder to the extent the
indemnifying party is not materially prejudiced thereby. Further, promptly after
receipt by an indemnified party hereunder of written notice of the commencement
of any third party action or proceeding against such indemnified party with
respect to which a claim for indemnification may be made pursuant to this
Article IV, such indemnified party shall, if a claim in respect thereof is to be
made against any indemnifying party, give written notice to the latter of the
commencement of such third party action; provided, however, that the failure of
an indemnified party to give notice as provided herein shall not relieve the
indemnifying party of any obligation hereunder to the extent the indemnifying
party is not materially prejudiced thereby. In case any such third party 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 third party claim and to employ counsel
reasonably satisfactory to such indemnified person. An indemnifying party who
elects not to assume the defense of a third party 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 third
party claim or with respect to third party 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 third party
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 third party
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 third party claimant or plaintiff
to such indemnified party of a release from all liability with respect to such
third party claim. No indemnified party shall consent to entry of any judgment
or enter into any settlement of any such third party 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, delayed or
continued.
ARTICLE V
Miscellaneous
5.1 Survival of Representations, Warranties and Covenants. All representations
and warranties made by the parties hereto shall survive for a period of three
(3) years from the date hereof, notwithstanding any investigation made on the
part of the parties hereto; provided, however, that the representation and
warranties contained in Section 2.1.16 hereof shall survive until the expiration
of the applicable statute of limitations associated with the taxes at issue. All
statements contained in any certificate, schedule, exhibit or other instrument
delivered pursuant to this Agreement shall be deemed to have been
representations and warranties by the respective party or parties, as the case
may be, and shall also survive for a period of three (3) years from the date
being, notwithstanding any investigations made by any party hereto or on its
behalf. All covenants and agreements contained herein shall survive as provided
herein.
5.2 Entirety. This Agreement embodies the entire agreement among the
parties with respect to the subject matter hereof, and all prior agreements
between the parties with respect thereto are hereby superseded in their
entirety.
5.3 Counterparts. Any number of counterparts (including facsimile
counterparts) of this Agreement may be executed and each such counterpart
shall be deemed to be an original instrument, but all such counterparts
together shall constitute but one instrument.
5.4 Notices and Waivers. Any notice or waiver to be given to any party
hereto shall be in writing and shall be delivered by courier, sent by
facsimile transmission or first class registered or certified mail, postage
prepaid, return receipt requested:
If to Buyer
Addressed to: With a copy to:
Key Four Corners, Inc. Lynch, Chappell & Alsup, P.C.
Two Tower Center, 20th Floor 300 N. Marienfeld, Suite 700
East Brunswick, New Jersey 08816 Midland, Texas 79701
Attn: General Counsel Attn: James M. Alsup, Esq.
Facsimile: (908) 247-5148 Facsimile: (915) 683-2587
If to the Seller or the Shareholder
Addressed to: With a copy to:
Colorado Well Service, Inc. Williams, Turner & Holmes
2603 E. Main 200 N. 6th Street
Rangely, Colorado 81648 Grand Junction, Colorado 81501
Attn: Mr. Keith Poole Attn: J. D. Snodgrass, Esq.
Facsimile: (970) 675-2014 Facsimile: (970) 241-3026
Any communication so addressed and mailed by first-class registered or
certified mail, postage prepaid, with return receipt requested, shall be
deemed to be received on the fifth (5th) businesses day after so mailed,
and if delivered by courier or facsimile to such address, upon delivery
during normal businesses hours on any businesses day.
5.5 Captions. The captions contained in this Agreement are solely for
convenient reference and shall not be deemed to affect the meaning or
interpretation of any article, section, or paragraph hereof.
5.6 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the successors and assigns of
the parties hereto.
5.7 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void,
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and declared to
be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such
which may be hereafter declared invalid, void or unenforceable.
5.8 Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the applicable laws of the State of Colorado.
5.9 Non Disclosure of Purchase Price. Buyer agrees that it will not issue a
press release, public announcement or otherwise provide information to
employees or former employees of Seller, following the Closing of the
transaction contemplated by this Agreement which discloses the purchase
price being paid hereunder for the Assets (except as a portion of the
aggregate purchase price paid by Buyer to Seller and others for the Assets
purchased hereunder and assets being purchased from others) unless deemed
to be necessary or appropriate by Buyer to do so in order to comply with
applicable securities, tax or other laws or regulations and except as
required by court order or subpoena.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the Shareholder has executed this Agreement and the
Buyer has caused this Agreement to be executed in its corporate name by its
duly authorized representative, all as of the day and year first above
written.
BUYER:
KEY FOUR CORNERS, INC.
By:
Ron Fellabaum, Vice President
SELLER:
COLORADO WELL SERVICE, INC.
By:
Keith Poole, President
SHAREHOLDER:
___________________________________________
Keith Poole
Asset Purchase Agreement
by and BETWEEN
Key Energy Services South Texas, Inc.
and
TransTexas Gas Corporation
August 17, 1998
<PAGE>
1. Asset Purchase Agreement
This Asset Purchase Agreement (this "Agreement") is entered into as of August
17, 1998 between Key Energy Services South Texas, Inc., a Delaware corporation
("Buyer"), and TransTexas Gas Corporation, a Delaware corporation (the
"Seller").
RECITATIONS
WHEREAS, the Seller is currently engaged in the business of providing onshore
oilfield services through its Integrated Services Division and its Fluids
Services Division (such business being collectively referred to herein as the
"Services Divisions"); and
WHEREAS, the Seller desires to sell substantially all the assets of the Services
Divisions, and Buyer desires to acquire such assets.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements, and subject to the terms
and conditions herein contained, the parties hereto hereby agree as follows:
ARTICLE 1
Purchase and Sale of Assets
1.1 Purchase and Sale of the Assets. Subject to the terms and conditions set
forth in this Agreement, the Seller hereby agrees to sell, convey, transfer,
assign and deliver to Buyer effective as of 12:01 A.M. Texas time on the date of
the execution hereof (the "Closing Date"), all of the assets, rights and
interests of the Seller used, primarily or exclusively, in the conduct of the
Services Divisions as the Services Divisions were conducted by the Seller before
the Closing Date other than the Excluded Assets (as defined in Section 1.2
hereof), whether real, personal, tangible or intangible, including, without
limitation, the following assets (all such assets being sold hereunder are
referred to collectively herein as the "Assets"):
(a) all tangible personal property owned by the Seller and used, primarily or
exclusively, in the conduct of the Service Divisions or the operation of
the Assets (such as rigs, 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, including parts supplies and spare parts inventory,
owned by the Seller and used, primarily or exclusively, in the conduct of
the Services Divisions or the operation of the Assets, including without
limitation, that which is more fully described on Schedule 1.1(b) hereto
(collectively, the "Inventory");
(c) all of the Seller's intangible assets used, primarily or exclusively, in
the conduct of the Services Divisions or the operation of the Assets,
including without limitation, (i) the Seller's rights to the name
"PetroAmerican Services Corporation" (or any name similar thereto or which
incorporates the term "PetroAmerican") which the Seller used, primarily or
exclusively, in connection with the Services Divisions, (ii) all of the
Seller's rights to any patents, patent applications, trademarks and service
marks (including registrations and applications therefor), trade names, and
copyrights and written know-how, trade secrets, licenses and sublicenses
and all other similar proprietary data and the goodwill associated
therewith (collectively, the "Intellectual Property") used or held,
primarily or exclusively, in the conduct of the Services Divisions (the
"Seller Intellectual Property"), and (iii) the sales and promotional
literature, computer software, customer and supplier lists and all other
records of the Seller relating, primarily or exclusively, to the Assets or
the Services Divisions (collectively, the "Intangibles");
(d) all of Seller's rights under those leases, subleases, contracts, contract
rights and agreements relating to the operation of the Assets or the
conduct of the Services Divisions listed on Schedule 1.1(d) hereto
(collectively, the "Contracts");
(e) all of the permits, authorizations, certificates, approvals, registrations,
variances, waivers, exemptions, rights-of-way, franchises, ordinances,
orders, licenses and other rights of every kind and character
(collectively, the "Permits") relating, primarily or exclusively, to all or
any of the Assets or to the conduct of the Services Divisions to the extent
they are assignable, including, but not limited to, those that are more
fully described on Schedule 1.1(e) hereto (collectively, the "Seller
Permits");
(f) the goodwill associated with the Assets or the Services Divisions; and
(g) all other or additional privileges, rights, interests, properties and
assets of the Seller of every kind and description and wherever located
that are used, primarily or exclusively, in the conduct of the Services
Divisions or the operation of the Assets.
1.2 Excluded Assets. The Assets shall not include the following (collectively,
the "Excluded Assets"): (i) all of the Seller's accounts receivable and all
other rights of the Seller to payment for services rendered by the Seller in its
conduct of the Services Divisions before the Closing Date ("Pre-Closing Accounts
Receivable"), it being understood that Seller shall bill all of its customers on
the Closing Date for services or materials provided up to that date and that (A)
Buyer will forward any payment on Pre-Closing Accounts Receivable received by it
to the Seller within ten (10) business days of receipt thereof; (B) the Seller
will forward to Buyer any payment received by it in respect of revenues and
accounts receivable relating to the Assets, which relate to services or
materials provided on or after the Closing Date, and any such amounts shall not
be deemed Excluded Assets; and (C) the Seller will coordinate all collection
efforts in respect of Pre-Closing Accounts Receivable through Buyer and will not
directly or indirectly contact the customers of the business regarding
Pre-Closing Accounts Receivable (or any other matters) without the consent of
Buyer (which consent will not be unreasonably withheld or delayed); (ii) all
cash accounts of the Seller and all petty cash of the Seller kept on hand; (iii)
all other receivables and prepaid expenses relating to the Services Divisions,
including all right, title and interest of the Seller in and to any prepaid
expenses, bonds, deposits and other current assets; (iv) the real estate and
other assets described in Schedule 1.2 attached hereto relating to the Services
Divisions; (v) the corporate minute books, accounting records, files, tax
returns and other financial data on whatever media, relating to the Seller or
the Excluded Assets; (vi) the cash consideration paid or payable by Buyer to the
Seller pursuant to Section 1.3 hereof; (vii) all other rights of Seller under
this Agreement; (viii) all rights to refunds, rebates or credits of any taxes
for all periods prior to the Closing; (ix) all insurance policies and (x) all of
the assets and rights of Seller under all employee benefit plans and programs of
Seller.
1.3 Consideration for Assets. As consideration for the sale of the Assets to
Buyer and for the other covenants and agreements of the Seller contained herein,
Buyer agrees to pay to the Seller by wire transfer of immediately available
funds to an account designated by the Seller or by delivery of immediately
available funds.
(a) on or within 3 business days of the Closing Date, the sum of Sixteen
Million Seventy-Seven thousand and No/100 dollars ($16,077,000); and
(b) an amount up to Four Hundred Twenty-Three thousand and No/100 Dollars
($423,000), upon satisfaction of the terms and conditions set forth in the
Letter Agreement dated of even date herewith between the Seller and Buyer.
The aggregate amounts paid by Buyer to the Seller pursuant to this Section 1.3
shall be referred to herein as the "Purchase Price".
1.4 Liabilities. Effective on the Closing Date, Buyer shall assume those, and
only those, liabilities and obligations of the Seller to perform the Contracts
to the extent that the Contracts have not been performed and are not in default
on the Closing Date (the "Assumed Liabilities"). On and after the Closing Date,
the Seller shall be responsible for any and all liabilities and obligations of
the Seller other than the Assumed Liabilities (collectively, the "Retained
Liabilities"), including, without limitation, (a) any obligations arising from
the Seller's employment of the Employees (as defined in Section 3.2 hereof),
including those employees of the Seller listed on Schedule 3.2 hereto; (b) any
liabilities arising from or relating to the Seller's failure to be duly
qualified or licensed to do business and in good standing as a foreign
corporation in all jurisdictions in which the character of the properties owned
or the nature of the business conducted by the Seller would make such
qualification or licensing necessary; (c) any failure to pay any taxes owed by
the Seller which are applicable to the period ending with the Closing Date; (d)
any liability for commissions or other fees payable to brokers, attorneys or
others; (e) all liabilities and obligations relating to, resulting from or
arising out of any and all businesses, assets, properties, rights and interests
that are not being acquired by Buyer hereunder, including without limitation the
Excluded Assets, whether such liabilities or obligations arose before or after
the Closing Date; and (f) any other liabilities resulting from the Seller's
operation of the Assets or conduct of the Services Divisions or any of its
businesses before the Closing Date, including all liabilities and obligations of
the Seller in connection with accounts payable as of the Closing Date.
1.5 Closing. The closing of the purchase and sale provided for hereunder (the
"Closing") shall take place on the Closing Date at the offices of TransTexas Gas
Corporation, 1300 N. Sam Houston Parkway East, Suite 310, Houston, Texas
77032-2949.
1.6 Closing Deliveries. At the Closing, Buyer and the Seller will deliver to one
another the documents described below:
1.6.1. Certificate of Secretary of the Seller. The Seller shall deliver an
originally executed Certificate of its Secretary certifying that (i) the Company
has been duly incorporated, and is validly existing and in good standing in the
State of Delaware, as evidenced by a good standing certificate issued by the
Secretary of State of the State of Delaware attached thereto; (ii) the Articles
of Incorporation (as certified as by the Secretary of State of the State of
Delaware) and By-laws of the Company, copies of each of which shall be attached
thereto, are true and complete copies of each as of the Closing Date; (iii) an
annex of the board resolutions authorizing the transactions contemplated by this
Agreement and attached thereto were duly adopted and have not been amended or
rescinded; and (iv) the officers of the Company whose signatures are set forth
on such Certificate, one or more of whom will execute the Agreement and such
other documents contemplated thereby on behalf of the Company, are duly elected,
qualified and incumbent as of the Closing Date, and that the signatures of each
are genuine.
1.6.2. Bill of Sale. Buyer and the Seller shall execute a Bill of Sale
transferring the Assets to Buyer and such other instruments of transfer as are
necessary to transfer the Assets to Buyer, all of which shall be in a form
mutually acceptable to the Seller and Buyer.
1.6.3. Instrument of Assumption. Buyer and the Seller shall execute an
Instrument of Assumption, which shall be in a form mutually acceptable to the
Seller and Buyer, pursuant to which Buyer will assume the Assumed Liabilities.
1.6.4. Opinion of Seller's Counsel. Buyer shall have received a favorable
opinion, dated as of the Closing Date, from Gardere & Wynne, L.L.P., counsel to
the Seller, in a form and substance satisfactory to Buyer, to the effect that
(i) the Seller has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware and is
qualified to do business in the State of Texas; (ii) all proceedings required to
be taken by or on the part of the Seller to authorize the execution of this
Agreement, the other agreements and instruments to be entered into between the
Seller and Buyer contemplated hereby (collectively, the "Other Agreements"), and
the consummation of the transactions contemplated hereby and thereby have been
taken; (iii) the compliance by the Seller with all of the provisions of this
Agreement and the Other Agreements and the transactions contemplated hereby and
thereby will not result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement, or other agreement or instrument to which the Seller is a
party or by which the Seller is bound or to which any of the Assets of the
Seller are subject; and (iv) this Agreement and the Other Agreements have been
duly executed and delivered by, and are the legal, valid and binding obligation
of the Seller, and are enforceable against the Seller in accordance with their
respective 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 (x)
certificates of public officials and of officers of the Seller as to the matters
of fact and (y) the opinion or opinions of other counsel, which opinions shall
be reasonably satisfactory to Buyer, as to matters other than federal or Texas
law.
1.6.5 Officer's Certificate. Seller shall deliver an originally executed
Certificate of one of its Vice Presidents or its President to the effect that
(i) this Agreement and all other agreements to be entered into by Buyer and the
Seller do not conflict with, or result in a breach or violation of, any of the
terms or provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other material agreement or instrument to which
the Seller or its affiliates is a party or by which the Seller or its affiliates
or the Assets are bound; and (ii) the Seller is qualified to do business in each
jurisdiction in which the operations of the Services Divisions requires it to be
qualified to do business.
ARTICLE II
Representations and Warranties
2.1 Representations and Warranties of the Seller. The Seller represents and
warrants to Buyer as follows:
2.1.1 Organization and Good Standing. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, is qualified to do business in the State of Texas and in each other
state in which the nature and conduct of its business requires it to be
qualified to do business, has full requisite corporate power and authority to
carry on its business as it is currently conducted, and to own and operate the
properties currently owned and operated by it.
2.1.2 Agreement Authorized and Effect on Other Obligations. The execution and
delivery of this Agreement and all instruments to be executed by the Seller
hereunder and all transactions contemplated to be entered into by the Seller
hereby have been authorized by all necessary corporate, shareholder and other
action on the part of the Seller, and this Agreement and all instruments to be
executed by the Seller hereunder are the valid and binding obligations of the
Seller enforceable (subject to normal equitable principles) in accordance with
their terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, debtor relief or similar laws affecting the rights of creditors
generally. The execution, delivery and performance of this Agreement and all
instruments to be executed by the Seller hereunder and the consummation of the
transactions contemplated hereby and thereby, will not (i) conflict with or
result in a violation or breach of any term or provision of, nor constitute a
default under (A) the Certificate of Incorporation or Bylaws (or other
organizational documents) of the Seller, (B) any obligation, indenture,
mortgage, deed of trust, lease, contract or other agreement to which the Seller
is a party or by which the Seller or its respective properties are bound, or (C)
any provision of any law, rule, regulation, order, permits, certificate, writ,
judgment, injunction, decree, determination, award or other decision of any
court, arbitrator or other governmental authority to which the Seller or its
properties are subject; (ii) result in the creation or imposition of any
Encumbrance (as defined in Section 2.1.4 hereof) on any of the Assets; or (iii)
constitute a breach of, default under, result in the termination, right of
termination or cancellation of, or accelerate the performance required by, any
of the Contracts.
2.1.3 Contracts. Schedule 1.1(d) hereto sets forth a complete list of all
contracts, including leases under which the Seller is lessor or lessee, which
relate to the Assets or the conduct of the Services Divisions and which are to
be performed in whole or in part on or after the date hereof. In addition, (a)
all of the Contracts are in full force and effect, and constitute valid and
binding obligations of the Seller, (b) the Seller is not, and to the knowledge
of the Seller no other party to any of the Contracts is, in default thereunder,
and no event has occurred which (with or without notice, lapse of time, or the
happening of any other event) would constitute a default thereunder, (c) no
Contract has been entered into on terms which could reasonably be expected to
have an adverse effect on the use of the Assets by Buyer, (d) the Seller has not
received any information which would cause any of such parties to conclude that
any customer of the Seller will (or is likely to) cease doing business with
Buyer (or its successors) as a result of the consummation of the transactions
contemplated hereby.
2.1.4 Title to Assets. Except as set forth in Schedule 2.1.4 hereto, the Seller
has good, indefeasible and marketable title to all of the Assets, free and clear
of any Encumbrances (defined below). All of the Assets conform to all applicable
laws governing their use, and no notice of any violation of any law, statute,
ordinance or regulation relating to any of the Assets has been received by the
Seller, except such as have been fully complied with. The term "Encumbrances"
means all liens, security interests, pledges, mortgages, deeds of trust, claims,
rights of first refusal, options, charges, restrictions or conditions to
transfer or assignment, liabilities, obligations, taxes, privileges, equities,
easements, rights of way, limitations, reservations, restrictions and other
encumbrances of any kind or nature except for statutory liens for taxes,
assessments, governmental charges or levies, or claims of materialmen, carriers,
landlords and like persons, all of which are not yet due and payable and have
not attached.
2.1.5 Licenses and Permits. Schedule 1.1(e) hereto sets forth a complete list of
all Permits necessary under law or otherwise for the operation, maintenance and
use of the Assets in the manner in which the Assets were operated, maintained
and used before the date hereof; each of the Seller Permits and the Seller=s
rights with respect thereto is valid and subsisting, in full force and effect,
and enforceable by the Seller; the Seller is in compliance in all material
respects with the terms of each of the Seller Permits; none of the Seller
Permits have been, or are threatened to be, revoked, canceled, suspended or
modified.
2.1.6 Intellectual Property. Schedule 1.1(c) hereto sets forth a complete list
of all Intellectual Property material or necessary for the continued use of the
Assets; the Seller Intellectual Property is owned or licensed by the Seller free
and clear of any Encumbrances; the Seller has not granted to any other person
any license to use any the Seller Intellectual Property and use of the Seller
Intellectual Property by Buyer in the manner used by Seller before the Closing
will not infringe, misappropriate or conflict with the Intellectual Property
rights of others. The Seller has not received any notice of infringement,
misappropriation or conflict with the Intellectual Property rights of others in
connection with the use by the Seller of the Seller Intellectual Property.
2.1.7 Absence of Certain Changes and Events. Since May 28, 1998, there has not
been:
(a) Financial Change. Any adverse change in the Assets, the Services Divisions
or the financial condition, operations or liabilities of the Seller
relating to the Services Divisions;
(b) Property Damage. Any damage, destruction, or loss to any of the Assets or
the Services Divisions (whether or not covered by insurance);
(c) Waiver. Any waiver or release of a material right of or claim held by the
Seller not purported to be transferred hereunder;
(d) Change in Assets. Any acquisition, disposition, transfer, encumbrance,
mortgage, pledge or other encumbrance of any of the Asset other than in the
ordinary course of business;
(e) Labor Disputes. Any labor disputes between the Seller and its employees who
work in the Services Divisions; or
(f) Other Changes. Any other event or condition known to the Seller that
particularly pertains to and has or might have an adverse effect on the
Assets or the operations of Services Divisions.
2.1.8 Necessary Consents. Except for the Seller Permits, the Seller has obtained
and delivered to Buyer all consents to assignment or waivers thereof required to
be obtained from any governmental authority or from any other third party in
order to validly transfer the Assets hereunder, including, without limitation,
the Contracts.
2.1.9 Environmental Matters.
(a) The Seller is and has been in compliance in all respects with all
applicable Environmental Laws (as defined below) relating to the Assets, or
any operations conducted by the Seller utilizing the Assets, the violation
of which would create any liabilities or obligations for Buyer. The Seller
has obtained and is and has been in compliance with all permits relating to
any operations conducted by the Seller utilizing the Assets required under
applicable Environmental Laws. There is no past or present event, condition
or circumstance that will interfere with the use of the Assets or the
operations of Buyer utilizing the Assets (as such Assets were operated by
the Services Divisions) or which would interfere in any respect with the
Buyer's compliance with Environmental Laws in connection with the Assets or
the operations utilizing the Assets or constitute a violation thereof.
(b) The Assets are not subject to any actual or, to the knowledge of the
Seller, potential action, claim, investigation, review or other proceeding
by any third party or before any governmental entity or authority (or
subdivision thereof) under or based upon any Environmental Law.
(c) The facilities and property included in the Assets and the operations of
the Services Division have been operated in substantial compliance with all
applicable Environmental Laws and are not (and would not be, if all
relevant facts were known to any applicable governmental entity or
authority (or subdivision thereof)) subject to any removal, clean-up,
remediation, restoration, reporting, notification, closure, recordation
obligations under such laws. There are not, and there have not been, any
underground or above-ground storage tanks or pits on the real property
included in the Assets that require (and would require if all relevant
facts were known to any applicable any governmental entity or authority (or
subdivision thereof)) removal, clean-up, remediation, restoration,
reporting, notification, closure, recordation, or any other action.
(d) There are no environmental conditions or circumstances, including the
presence or release of any Hazardous Materials (as defined below), on any
property presently or previously owned or leased by the Seller, or on any
property on which Hazardous Materials generated by the Seller=s operations
or the use of the Assets were disposed of, which would result in an adverse
change in the Assets or which would result in a claim against Buyer.
(e) The Seller has provided to Buyer true and correct copies of all
environmental audits, assessments or other reports relating to (i) the
Assets or operations conducted by the Seller utilizing the Assets, and (ii)
compliance by the Seller with, or liability of the Seller under,
Environmental Laws in connection with the Assets or the operations
conducted by the Seller utilizing the Assets.
(f) 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.
2.1.10 No ERISA Plans or Labor Issues. No employee benefit plan, program or pay
practice of the Seller, whether or not subject to any provisions of the Employee
Retirement Income Security Act of 1974, as amended, will by its terms or
applicable law, become binding upon or an obligation, liability or
responsibility of Buyer, financial or otherwise; the Seller has not engaged in
any unfair labor practices which will result in an adverse effect on the Assets
or a claim against Buyer; and there are no labor disputes, pending or threatened
by any employee of the Seller listed on Schedule 3.2 or any former employee of
the Services Divisions. The Seller has no knowledge of any organizational effort
presently being made or threatened on behalf of any labor union with respect to
the employees listed on Schedule 3.2 hereto or any former employee of the
Services Divisions.
2.1.11 Investigations; Litigation. No investigation or review by any
governmental entity with respect to any of the transactions contemplated by this
Agreement is pending or threatened, nor has any governmental entity indicated to
the Seller an intention to conduct the same; and, there is no civil or criminal
suit, action, or legal, administrative, arbitration or other proceeding or
governmental investigation pending, threatened or unasserted to which the Seller
is or would be a party or any other unasserted claims against the Seller which
would have an adverse effect on any of the Assets or result in a claim against
Buyer.
2.1.12 Solvency. The Seller is not presently insolvent, nor will the Seller be
rendered insolvent by the occurrence of the transactions contemplated by this
Agreement. The term Ainsolvent,@ with respect to the Seller, means that the sum
of the present fair and saleable value of the Seller=s assets does not and will
not exceed its debts and other probable liabilities, and the term Adebts@
includes any legal liability whether matured or unmatured, liquidated or
unliquidated, absolute fixed or contingent, disputed or undisputed or secured or
unsecured.
2.1.13 Finder's Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by the Seller, Jefferies &
Co., and their counsel directly with Buyer and its counsel, without the
intervention of any other person in such manner as to give rise to any valid
claim against Buyer for a brokerage commission, finder=s fee, financial advisory
fee or any similar payment. The Seller shall pay all fees associated with
Jefferies & Co. and Buyer shall have no liabilities or obligations therefor.
2.1.14 Taxes. All federal, state and local taxes assessed or assessable against
the Assets for periods prior to January 1, 1998 have been paid by the Seller and
the Assets will be conveyed to Buyer free and clear of any such taxes or claims
therefor. All taxes assessed against the Assets for the period commencing
January 1, 1998 will be prorated through the Closing Date (based on 1997
assessed values) with the Seller paying to Buyer at Closing an amount equal to
the portion of such taxes applicable to the period between January 1, 1998 and
the Closing Date.
2.1.15 Equipment and Inventory. Buyer acknowledges that, as to condition and
quality of the equipment and inventory, it will take the equipment and Inventory
to be sold, transferred and conveyed to it hereunder "as is" and "where is" and
that the Seller makes no representation or warranty, expressed or implied, as to
freedom from defects or as to the merchantibility or fitness for any particular
purpose of the equipment or the Inventory.
2.2 Representations and Warranties of Buyer. Buyer represents and warrants to
the Seller as follows:
2.2.1 Organization and Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
has full requisite corporate power and authority to carry on its businesses 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 businesses and is in
good standing as a foreign corporation authorized to do business in the State of
Texas.
2.2.2 Agreement Authorized and its Effect on Other Obligations. The consummation
of the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of Buyer, and this Agreement is a
valid and binding obligation of Buyer enforceable (subject to normal equitable
principles) in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, debtor relief or similar laws
affecting the rights of creditors generally. The execution, delivery and
performance of this Agreement by Buyer will not conflict with or result in a
violation or breach of any term or provision of, or constitute a default under
(a) the Certificate of Incorporation or Bylaws of Buyer or (b) any obligation,
indenture, mortgage, deed of trust, lease, contract or other agreement to which
Buyer or any of its property is bound.
2.2.3 Consents and Approvals. No consent, approval or authorization of, or
filing of a registration with, any governmental or regulatory authority, or any
other person or entity is required to be made or obtained by Buyer in connection
with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
2.2.4 Finder's Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Buyer and its counsel
directly with the Seller, Jefferies & Co. and their counsel, without the
intervention by any other person as the result of any act of Buyer in such a
manner as to give rise to any valid claim against the Seller for any brokerage
commission, finder's fee, financial advisory fee or any similar payments.
2.3 Survival of Representations and Warranties. Notwithstanding any
investigation made on the part of the parties hereto, the respective
representations and warranties of the parties contained herein shall survive for
a period of one year following the Closing Date, except for the representations
and warranties set forth in Sections 2.1.4, 2.1.10, 2.1.11 and 2.1.14 hereof,
which shall survive for the applicable statute of limitations period therefor,
and except for the representations and warranties set forth in Section 2.1.9
hereof which shall survive for a period of two years following the Closing Date,
provided that there shall be no expiration of any such representation or
warranty with respect to any bona fide claim that has been asserted by written
notice of such claim delivered to the party or parties making such
representation or warranty during 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
notwithstanding any investigation made on the part of the parties hereto shall
also survive for a period of one year following the Closing Date except for the
representations and warranties set forth in any certificate, schedule, exhibit
or other instrument relating to the subject matter of Sections 2.1.4, 2.1.10,
2.1.11 and 2.1.14 hereof, which shall survive for the applicable statute of
limitations period therefor, and except for the representations and warranties
set forth in any certificate, schedule, exhibit or other instrument relating to
the subject matter of Section 2.1.9 hereof which shall survive for a period of
two years following the Closing Date. This Section 2.3 shall not, at any time,
relieve any party hereto from the performance of such party's covenants,
agreements and undertakings set forth in this Agreement, which shall survive as
provided herein.
2.4 Remedy for Breach of Representations and Warranties. The exclusive remedy
for any breach by a party of the representations and warranties contained in
Section 2.1 and 2.2 hereof shall be as set forth in Article IV hereof.
ARTICLE III
Additional Agreements
3.1 Noncompetition. Except as set forth below or as otherwise consented to or
approved in writing by Buyer, the Seller agrees that for a period of 48 months
following the Closing Date, it will not, directly or indirectly, acting alone or
as a member of a partnership or as a consultant, representative, advisor, lender
(including gifts used for capitalization or collateral), a holder of, or
investor in as much as 3% of any security of any class of any corporation or
other business entity (a) engage in any business in competition with the
operations engaged in by the Seller through the Services Divisions within a
territory defined as the Texas Railroad Commission Districts 1 through 6, but
excluding the area east of Highway 288 and south of Interstate 10, (b) request
any present customers or suppliers of the Seller or any customers of Buyer or
any affiliate of Buyer to curtail or cancel their business with Buyer (or
Buyer=s affiliates); (c) disclose to any person, firm or corporation any trade,
technical or technological secrets of the operations of the Services Divisions,
Buyer or any affiliate of Buyer or any non-public details of their business
affairs; or (d) seek out and actively attempt to influence any employee of Buyer
or any affiliate of Buyer to terminate his or her employment. The Seller agrees
that if either the length of time or geographical area as set forth in this
Section 3.1 is deemed too restrictive in any court proceeding, the court may
reduce such restrictions to those which it deems reasonable under the
circumstances (and any monetary damages for a violation of such restrictions and
breach of the court-altered provisions hereof shall run from the date such
violation began). The obligations expressed in this Section 3.1 are in addition
to any other obligations that the Seller may have under the laws of any state
requiring a corporation selling its assets (or a shareholder of such
corporation) to limit its activities so that the goodwill and business relations
being transferred with such assets will not be materially impaired. The Seller
further agrees and acknowledges that Buyer and affiliates of Buyer do not have
any adequate remedy at law for the breach or threatened breach by the Seller of
the covenants contained in this Section 3.1, and agree that Buyer and/or
affiliates of Buyer may, in addition to the other remedies which may be
available to them hereunder, file a suit in equity to enjoin the Seller from
such breach or threatened breach. If any provisions of this Section 3.1 are held
to be invalid or against public policy, the remaining provisions shall not be
affected thereby. The Seller acknowledges that the covenants set forth in this
Section 3.1 are being executed and delivered by such party in consideration of
(i) the covenants of Buyer contained in this Agreement, (ii) additional
consideration in the amount of $500,000 payable by Buyer on the date hereof by
wire transfer of immediately available funds to the Seller, on the Closing Date
or within 3 business days of the Closing Date, and (iii) for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged.
3.2 Hiring Employees. Schedule 3.2 hereto is a complete and accurate listing of
all employees of the Seller who devote their full time in the operation of the
Assets (the "Employees"), together with each Employee's pay rate and job
description. Effective as of the Closing Date, those Employees which Buyer, in
its sole discretion, determines to be necessary to continue to operate the
Assets as Buyer deems appropriate, will be offered employment by Buyer, subject
to such Employees meeting Buyer=s standard employment eligibility requirements.
Buyer shall have no liability or obligation with respect to any employee
benefits of any Employees except those benefits that accrue pursuant to such
Employees= employment with Buyer on or after the Closing Date. The Seller shall
cooperate with Buyer in connection with any offer of employment from Buyer to
the Employees and use reasonable efforts to cause the acceptance of any and all
such offers.
3.3 Allocation of Purchase Price. The parties hereto agree to allocate the
Purchase Price payable by Buyer for the Assets hereunder as set forth on
Schedule 3.3 hereto, and shall report this transaction for federal income tax
purposes in accordance with the allocation so agreed upon. The parties hereto
for themselves and for their respective successors and assigns covenant and
agree that they will file coordinating Form 8594's in accordance with Section
1060 of the Internal Revenue Code of 1986, as amended, with their respective
income tax returns for the taxable year that includes the date hereof.
3.4 Publicity; Non-disclosure. The Seller and Buyer agree that each of Buyer and
the Seller will be authorized to issue a press release announcing the
consummation of the transactions contemplated by this Agreement, subject to
prior review and approval of the other party. Except as provided in the
preceding sentence, Buyer and the Seller will not issue any publication or press
release, or disclose to any third party (except for their respective advisors,
counsel and other agents, provided that Buyer and the Seller will remain liable
for any disclosures in violation of the provisions of this Section by such
persons) the existence or provisions of this Agreement, the transactions
contemplated hereby or the negotiations preceding the execution hereof, except
as may be required by (i) applicable law, including disclosures required by the
securities laws, (ii) an order of a court or governmental or administrative
body, or (iii) obligations pursuant to any listing agreement with any securities
exchange or securities exchange regulation.
3.5 Further Assurances. From time to time, as and when requested by any party
hereto, any other party hereto shall execute and deliver, or cause to be
executed and delivered, such documents and instruments and shall take, or cause
to be taken, such further or other actions as may be reasonable necessary to
effect the transactions contemplated hereby.
ARTICLE IV
Indemnification
4.1 Indemnification by the Seller. In addition to any other remedies available
to Buyer under this Agreement, or at law or in equity, the Seller shall
indemnify, defend and hold harmless Buyer and its officers, directors,
employees, agents and stockholders (collectively, the ABuyer Indemnified
Parties@), against and with respect to any and all claims, costs, damages,
losses, expenses, obligations, liabilities, recoveries, suits, causes of action
and deficiencies, including interest, penalties and reasonable attorneys= fees
and expenses (collectively, the ADamages@) a Buyer Indemnified Party shall incur
or suffer (whether the damages are suffered or incurred by such Buyer
Indemnified Party directly or as a result of a third party claim against such
Buyer Indemnified Party), which arise or result from (a) any breach of, or
failure by the Seller to perform, its representations, warranties, covenants or
agreements in this Agreement or in any schedule, certificate, exhibit or other
instrument furnished or delivered to Buyer by the Seller under this Agreement or
(b) the Seller's failure to satisfy the Retained Liabilities.
4.2 Indemnification by Buyer. In addition to any other remedies available to the
Seller under this Agreement, or at law or in equity, Buyer shall indemnify,
defend and hold harmless the Seller and its officers, directors, employees,
agents and stockholders against and with respect to any and all Damages that
such indemnitees shall incur or suffer, which arise or result from (a) any
breach of, or failure by Buyer to perform, any of its representations,
warranties, covenants or agreements in this Agreement or in any schedule,
certificate, exhibit or other instrument furnished or delivered to the Seller by
or on behalf of Buyer under this Agreement, (b) Buyer's failure to satisfy the
Assumed Liabilities, or (c) all liabilities and obligations resulting from
Buyer's operation of the Assets or the conduct of the Services Divisions after
the Closing Date except to the extent such Damages result from or relate to (x)
any breach of, or failure by the Seller to perform its representations,
warranties, covenants or agreements in this Agreement or in any schedule,
certificate, exhibit or other instrument furnished or delivered to Buyer by the
Seller under this Agreement or (y) the Seller's failure to satisfy the Retained
Liabilities.
4.3 Limitations on Indemnification. With respect to Damages that arise or result
from or relate to the matters referred to in Section 4.1(a) and 4.2(a) hereof
(collectively, the "Capped Damages"), neither the Seller nor Buyer shall be
obligated to pay any amounts for indemnification under Article IV of this
Agreement for any Capped Damages until the aggregate of all Capped Damages
actually incurred by the indemnified party equals $50,000, whereupon the
indemnifying party shall be obligated to pay any Capped Damages actually
incurred by the indemnified party in excess of $50,000, but in no event shall
the indemnifying party be liable for an aggregate amount of Capped Damages in
excess of the Maximum Amount (as defined here). With respect to the matters
referred to in Sections 4.1(b), 4.2(b) and 4.2(c) hereof, the indemnifying party
shall be obligated to pay any and all Damages actually incurred by an
indemnified party up to the full amount thereof. As used herein, the "Maximum
Amount" shall mean, with respect to an indemnifying party, an amount equal to
$20,500,000 less any damages actually paid by such indemnifying party as of the
date such indemnification is sought pursuant to the indemnification provisions
of the Purchase and Sale Agreement relating to certain real property to be
purchased by Buyer, dated an even date herewith, by and between the Seller and
Buyer.
4.4 Indemnification Procedure. If any party hereto discovers or otherwise
becomes aware of an indemnification claim arising under Section 4.1 or 4.2 of
this Agreement, such indemnified party shall give written notice to the
indemnifying party, specifying such claim, and may thereafter exercise any
remedies available to such party under this Agreement; provided, however, that
the failure of an indemnified party to give notice as provided herein shall not
relieve the indemnifying party of any obligation hereunder to the extent the
indemnifying party is not materially prejudiced thereby. Further, promptly after
receipt by an indemnified party hereunder of written notice of the commencement
of any third party action or proceeding against such indemnified party with
respect to which a claim for indemnification may be made pursuant to this
Article IV, such indemnified party shall, if a claim in respect thereof is to be
made against any indemnifying party, give written notice to the latter of the
commencement of such third party action; provided, however, that the failure of
an indemnified party to give notice as provided herein shall not relieve the
indemnifying party of any obligation hereunder to the extent the indemnifying
party is not materially prejudiced thereby. In case any such third party 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 third party claim and to employ counsel
reasonably satisfactory to such indemnified person. An indemnifying party who
elects not to assume the defense of a third party 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 third
party claim or with respect to third party 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 third party
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 third party
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 third party claimant or plaintiff
to such indemnified party of a release from all liability with respect to such
third party claim. No indemnified party shall consent to entry of any judgment
or enter into any settlement of any such third party 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, delayed or
continued.
ARTICLE V
Miscellaneous
5.1 Entirety. This Agreement embodies the entire agreement among the parties
with respect to the subject matter hereof, and all prior agreements between the
parties with respect thereto are hereby superseded in their entirety.
5.2 Counterparts. Any number of counterparts of this Agreement may be executed
and each such counterpart shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one instrument.
5.3 Notices and Waivers. Any notice or waiver to be given to any party hereto
shall be in writing and shall be delivered by courier, sent by facsimile
transmission or first class registered or certified mail, postage prepaid,
return receipt requested:
If to Buyer
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Addressed to: With a copy to:
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Key Energy Services South Texas, Inc. Key Energy Group, Inc.
C/o Key Energy Group, Inc. Two Tower Center, 20th Floor
Two Tower Center, 20th Floor East Brunswick, New Jersey 08816
East Brunswick, New Jersey 08816 Attn: General Counsel
Facsimile: (732) 247-5148 Facsimile: (732) 247-5148
Attention: President
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If to the Seller
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Addressed to:
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Trans Texas Gas Corporation
1300 N. Sam Houston Pkwy. East, Suite 310
Houston, Texas 77032-2949
Attn: Arnold Brackenridge, President
Facsimile: (281) 986-8877
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Any communication so addressed and mailed by first-class registered or certified
mail, postage prepaid, with return receipt requested, shall be deemed to be
received on the fifth (5th) businesses day after so mailed, and if delivered by
courier or facsimile to such address, upon delivery during normal businesses
hours on any businesses day.
5.4 Captions. The captions contained in this Agreement are solely for convenient
reference and shall not be deemed to affect the meaning or interpretation of any
article, section, or paragraph hereof.
5.5 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. No assignment of this Agreement or of any rights or obligations
hereunder may be made by either the Seller or Buyer (by operation of law or
otherwise) without the prior written consent of the other parties hereto and any
attempted assignment without the required consents shall be void; provided,
however, that Seller or Buyer may assign this Agreement and any or all rights
and obligations hereunder, in whole or in part, to any of its affiliates. Upon
such permitted assignment, the references in this Agreement to Seller or Buyer
shall also apply to any such assignee unless the context otherwise requires.
5.6 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.
4.7 Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the applicable laws of the State of Texas
(regardless of the laws that might be otherwise be applicable under its
conflicts of law principles).
IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement to be
executed in their respective corporate names by their respective duly authorized
representatives, all as of the day and year first above written.
BUYER:
KEY ENERGY SERVICES SOUTH
TEXAS, INC.
By:
Name:
Title:
SELLER:
TRANSTEXAS GAS CORPORATION
By:
Name:
Title:
Asset Purchase Agreement
dated September 9, 1998
By and Among
KEY ENERGY GROUP, INC.,
FLINT ENGINEERING & CONSTRUCTION CO.
and
FLINT INDUSTRIES, INC.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I AGREEMENT FOR SALE AND PURCHASE OF ASSETS
Section 1.01. Purchase and Sale of Assets 1
Section 1.02. Identification of Assets 1
Section 1.03. Instruments of Conveyance and Transfer 3
Section 1.04. Further Assurances 3
Section 1.05. Record Retention 3
ARTICLE II CONSIDERATION FOR SALE OF ASSETS
Section 2.01. Consideration Paid 4
Section 2.02. Value Assigned to the Assets 4
Section 2.03. Non-Assumption of Liabilities 4
Section 2.04. Other Funds Received 4
Section 2.05. Assumption of Obligations;
Excluded Liabilities; Excluded Assets 4
ARTICLE II CLOSING
Section 3.01. Closing 7
Section 3.02. Closing Obligations 7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT
Section 4.01. Organization and Qualification 8
Section 4.02. Authority, Approval and Enforceability 9
Section 4.03. No Violation or Consent 9
Section 4.04. Material Contracts, Agreements, Plans
and Commitments 9
Section 4.05. Compliance with Law 10
Section 4.06. Litigation 10
Section 4.07. Environmental Matters 10
Section 4.08. Taxes 11
Section 4.09. Insurance 12
Section 4.10. Labor and Employee Benefits 12
Section 4.11. Brokerage Agreements 12
Section 4.12. Title to Property 13
Section 4.13. Absence of Certain Changes 13
Section 4.14. Permits 13
Section 4.15. Employees 13
Section 4.16. Customers 14
Section 4.17. No Arrangements with Respect to Assets 14
Section 4.18. Limitation of Representations and Warranties 14
Section 4.19. Absence of Certain Businesses Practices 14
Section 4.20. Solvency 15
Section 4.21. Real Property 15
Section 4.22. Intellectual Property 16
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER
Section 5.01. Formation and Existence 16
Section 5.02. Authorization of Agreement; No Violation;
No Consents 16
Section 5.03. Litigation 17
Section 5.04. Brokerage Agreements 17
ARTICLE VI COVENANTS OF SELLER
Section 6.01. Conduct of Seller Pending the Closing and
the Vacuum Truck Closing 17
Section 6.02. Employees 19
Section 6.03. Access 19
Section 6.04. Consents 19
Section 6.05. Additional Action to Assure Transfers 19
ARTICLE VII COVENANTS OF BUYER
Section 7.01. Cooperation 20
Section 7.02. Post-Closing Employment 20
Section 7.03. Performance of Obligations 21
Section 7.04. Consents. 21
ARTICLE VIII CONDITIONS TO BUYER'S OBLIGATIONS
Section 8.01. Representations and Warranties 21
Section 8.02. Performance 21
Section 8.03. Officer's Certificate 21
Section 8.04. Conveyance of Documents 22
Section 8.05. Litigation 22
Section 8.06. Third-Party Consents 22
Section 8.07. Opinion of Counsel 22
Section 8.08. Environmental Matters 22
Section 8.09. Real Estate Matters 23
ARTICLE IX CONDITIONS TO SELLER'S OBLIGATIONS
Section 9.01. Representations and Warranties 24
Section 9.02. Performance 24
Section 9.03. Payment of Purchase Price 24
Section 9.04. Officer's Certificate 24
Section 9.05. Opinion of Counsel 24
ARTICLE X SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS
Section 10.01. Survival of Representations 24
Section 10.02. Agreement to Indemnify Buyer 25
Section 10.03. Agreement to Indemnify Seller 25
Section 10.04. Additional Agreements Concerning Indemnification 26
Section 10.05. Minimum and Maximum Amounts 26
Section 10.06. Exclusive Remedy 26
ARTICLE XI ADDITIONAL AGREEMENTS OF THE PARTIES
Section 11.01. Public Announcements 27
Section 11.02. Employees 27
Section 11.03. Non-Solicitation 28
Section 11.04. Covenant Not to Compete 28
ARTICLE XII TERMINATION OF AGREEMENT
Section 12.01. Termination 30
Section 12.02. Effect of Termination 30
ARTICLE XIIIMISCELLANEOUS
Section 13.01. Interpretive Provisions 31
Section 13.02. Expenses 31
Section 13.03. Reliance 31
Section 13.04. Notices 31
Section 13.05. Headings; References 32
Section 13.06. Entire Agreement 32
Section 13.07. Waiver 32
Section 13.08. Severability 32
Section 13.09. Amendment 33
Section 13.10. Further Actions 33
Section 13.11. Assignment; Parties in Interest 33
Section 13.12. Governing Law 33
Section 13.13. Specific Performance 33
Section 13.14. Counterparts 33
<PAGE>
SCHEDULES
1.02(a) Rigs
1.02(b) Equipment & Rolling Stock
1.02(c) Real Property
1.02(d) Leased Vehicles
1.02(f) Contracts and Work Orders
1.02(g) Permits
1.02(i) Computers
1.02(k) Construction Equipment
1.02(l) Vacuum Trucks
3.02(a)(1) Form of Conveyance, Assignment and Bill of Sale
3.02(a)(2) Form of General Warranty Deed
3.02(b)(1) Form of Conveyance and Bill of Sale
4.03 No Violation or Consent
4.04 Contracts in Default
4.05 Compliance with Law
4.06 Litigation
4.07 Environmental Matters
4.09 Insurance
4.12 Permitted Liens
4.13 Absence of Certain Changes
4.15 Employees
4.16 Customers
8.07 Opinion of Seller's Counsel
9.05 Opinion of Buyer's Counsel
11.02 Excluded Employees
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into this
9th day of September, 1998 by and among Key Energy Group, Inc., a Maryland
corporation ("Buyer"), Flint Engineering & Construction Co., an Oklahoma
corporation ("Seller"), and Flint Industries, Inc., a Delaware corporation
("Parent").
RECITALS
WHEREAS, Seller owns and operates 55 workover rigs, related well servicing
equipment and rolling stock and five yards located in Chickasha, Oklahoma,
Liberty, Texas, Sidney, Montana, Ulysses, Kansas and Roosevelt, Utah through
which Seller conducts its well servicing business (the "WSB") and desires to
sell to Buyer the assets and to transfer certain liabilities of the WSB, in each
case upon the terms and subject to the conditions contained herein.
WHEREAS, Buyer desires to purchase the assets and to assume certain liabilities
of the WSB upon such terms and conditions.
WHEREAS, Parent owns all of the issued and outstanding capital stock of Seller.
NOW, THEREFORE, in consideration of the premises and representations, warranties
and agreements herein contained, the parties agree as follows:
ARTICLE I
AGREEMENT FOR SALE AND PURCHASE OF ASSETS
Section 1.01. Purchase and Sale of Assets. Seller agrees to sell, transfer,
convey and assign to Buyer, and Buyer agrees to purchase and acquire from Seller
at the Closing or the Vacuum Truck Closing (as such terms are hereinafter
defined in Article III hereof), as the case may be, all of Seller's right, title
and interest in and to the assets, properties and rights of the WSB existing on
the date hereof, including without limitation, those assets, properties and
rights of the WSB set forth in Section 1.02 hereof, (such assets, properties and
rights being collectively referred to herein as the "Assets"), but excluding
those assets referred to in Section 2.05(b) hereof (the "Excluded Assets"), for
and in consideration of the payment by Buyer to Seller of the amounts
hereinafter specified.
Section 1.02. Identification of Assets. The Assets to be acquired by Buyer
hereunder shall include the following:
(a) Rigs. The 55 workover rigs which are described on Schedule 1.02(a) (the
"Rigs") and all spare parts related to the Rigs.
(b) Equipment and Rolling Stock. The utility/dog house trailers, mud pumps,
frac tanks, power swivels, blowout preventers and other miscellaneous
equipment and the vacuum trucks (other than those described on Schedule
1.02(l) which will be conveyed at the Vacuum Truck Closing), utility
vehicles, crew cabs, pick-up trucks and winch trucks which are described on
Schedule 1.02(b) (the "Equipment and Rolling Stock").
(c) Real Property. All of the right, title and interest of Seller in and to the
real property and buildings located at Chickasha, Oklahoma, Liberty, Texas,
Sidney, Montana, Ulysses, Kansas and Roosevelt, Utah which are described on
Schedule 1.02(c), together with all fixtures, improvements, betterments,
installments and additions constructed, erected or located on or attached
to such property (the "Fixtures and Improvements") and all reversionary
interests, privileges and appurtenances belonging, pertaining or relating
to such property including but not limited to all easements, mineral
rights, rights of way and utility facilities (collectively, the "Real
Property").
(d) Leased Vehicles. All right, title and interest in and to the rolling stock
leased by Seller prior to the Closing in connection with the operations of
the WSB and which are listed on Schedule 1.02(d) (the "Leased Vehicles").
(e) Inventory. The fuel stock inventory of Seller owned by Seller in connection
with the WSB located on the Real Property (the "Inventory").
(f) Contracts and Work Orders. The contracts and agreements (the "Contracts")
of Seller that were entered into in connection with the operation of the
WSB and which, with respect to any Contract for consideration in excess of
$10,000 (the "Material Contracts"), are described on Schedule 1.02(f),
together with any open work orders (the "Work Orders") of Seller that are
entered into by Seller in connection with the WSB prior to the Closing,
which provide for the delivery of services by the WSB following the Closing
and which, with respect to any Work Order for consideration in excess of
$10,000 (the "Material Work Orders") and any "rate sheets" pursuant to
which such work orders are written, are described on Schedule 1.02(f).
(g) Permits. All certificates, authorizations and similar rights granted by any
accrediting or governmental entity to Seller, or its predecessors in
interest, and used or held by Seller for use solely in connection with the
operation of the WSB (as distinct from general corporate and other similar
authorizations not specific to the WSB, such as qualifications to transact
business), including, without limitation, those listed on Schedule 1.02(g)
(the "Permits") that may be transferred without the payment of other than a
de minimis fee.
(h) Records. All books, files, documents, sales literature, customer lists and
records, instructions, advertising and marketing and sales materials (other
than central filing and legal records) used solely in the operation of the
WSB (the "Records").
(i) Computers. All right, title and interest of Seller in computer hardware
located on the Real Property which are described on Schedule 1.02(i).
(j) Other Intangibles. All of Seller's intangible assets (the "Intangibles"),
including (i) all right, title and interest of Seller in, to and under all
privileges, claims, causes of action and options relating or pertaining to
the WSB or the foregoing Assets and (ii) the WSB's telephone numbers other
than the telephone numbers related to the WSB's property at Farmington, New
Mexico.
(k) Construction Equipment. The engineering and construction equipment located
at Sydney, Montana which is described on Schedule 1.02(k) (the "Purchased
Construction Equipment").
(l) Vacuum Trucks. The vacuum trucks which are described on Schedule 1.02(l)
(the "Vacuum Trucks").
(m) Goodwill. All of Seller's goodwill in the WSB.
Section 1.03. Instruments of Conveyance and Transfer. Seller agrees that it will
execute, acknowledge and deliver to Buyer, or its designee or designees, at the
Closing such good and sufficient instruments of sale, conveyance, transfer and
assignment as shall be effective to vest in Buyer all right, title and interest
of Seller in and to the Assets (other than the Vacuum Trucks, which will be
conveyed at the Vacuum Truck Closing), in each case, free and clear of all
claims, liens, security interests, mortgages, encumbrances and restrictions of
any kind or nature. Seller will take such steps as may be necessary to put Buyer
in actual possession and operating control of (i) the Assets as of the Closing
and (ii) the Vacuum Trucks as of the Vacuum Truck Closing. Such instruments of
sale, conveyance, transfer and assignment shall include, without limitation:
(a) general warranty deeds for the Real Property, (b) a bill of sale, (c) an
assignment of the Contracts (together with any written consents required for
such assignments) and (d) title transfers to vehicles and any other certificated
personal property.
Section 1.04. Further Assurances. Seller agrees that from time to time after the
Closing it will, at the request of Buyer and without further consideration,
execute and deliver such supplemental and additional instruments of sale,
conveyance, transfer and assignment and take such other action as may be
reasonably necessary to effectively sell, convey, transfer and assign to Buyer,
and to put it in the possession of, the Assets.
Section 1.05. Record Retention. For a period of three years after the Closing,
Buyer and Seller each agree that prior to the destruction or disposition of any
Records, Contracts or any commitments that relate directly to the WSB, each
party shall provide not less than 30 nor more than 60 days prior written notice
to the other of any such proposed destruction or disposal. If the recipient of
such notice desires to obtain any of such documents, it may do so by notifying
the other party in writing at any time prior to the scheduled date for such
destruction or disposal. Such notice must specify the documents which the
requesting party wishes to obtain. The parties shall then promptly arrange for
the delivery of such documents. All out-of-pocket costs associated with the
delivery of the requested documents shall be paid by the requesting party.
ARTICLE II
CONSIDERATION FOR SALE OF ASSETS
Section 2.01. Consideration Paid. The purchase price (the "Purchase Price") for
the Assets shall consist of cash in the amount of $12,350,000. In addition,
Buyer shall pay $500,000 in cash (the "Non-Compete Payment") at the Closing in
consideration of the non-compete agreement set forth in Section 11.04. Buyer
shall pay Seller the Purchase Price and the Non-Compete Payment, by wire
transfer of immediately available funds into an account or accounts designated
by Seller or as otherwise agreed to by Buyer and Seller, as follows:
(a) $11,875,000 at the Closing;
(b) $950,000 at the Vacuum Truck Closing; and
(c) $25,000 as provided in Section 8.08(b).
Section 2.02. Value Assigned to the Assets. As soon as practicable after the
Closing, the proportion of the consideration allocable to the Assets purchased
pursuant to the terms of this Agreement shall be determined by Buyer and Seller,
and Buyer and Seller agree that they will take no action inconsistent with such
allocation subsequent to such date in the filing of any federal income tax
returns, including for purposes of filing Form 8594.
Section 2.03. Non-Assumption of Liabilities. Buyer shall not be deemed in any
manner to have assumed or agreed to perform or pay any debts, liabilities,
obligations or contracts of Seller of any nature, whether or not known,
presently existing, absolute, accrued, contingent or otherwise, except with
respect to any obligations expressly assumed by Buyer as set forth in
Section 2.05(a) of this Agreement.
Section 2.04. Other Funds Received. If any party to this Agreement receives or
otherwise acquires funds (including, but not limited to, rebates, warranty
proceeds, incentives, accounts receivables, deposits and asset dispositions, in
any form whatsoever), which are properly due and payable to any other party to
this Agreement, the recipient of such funds shall immediately (and within three
business days following the receipt thereof) forward such funds to the other
party at the address provided in Section 13.04 hereof.
Section 2.05. Assumption of Obligations; Excluded Liabilities; Excluded Assets.
(a) As additional consideration to Seller in exchange for the performance by
Seller of its obligations hereunder, at the Closing Date or, in the case of
the Vacuum Trucks and the Vacuum Truck Transferred Employees (as defined in
Section 11.02(a)), at the Vacuum Truck Closing Date (as defined in Section
3.01(b)), Buyer hereby assumes and agrees to pay, discharge and perform as
and when due, each of the following obligations of Seller (the "Assumed
Obligations"):
(1) all obligations and liabilities of Seller under the Contracts and Work
Orders, to the extent that such obligations are attributable to the period
of time following the Closing, except to the extent that such obligations
arise solely from a breach or default by Seller under the Contracts or Work
Orders prior to the Closing Date;
(2) all liabilities and obligations arising from activities of the WSB (other
than those arising from the activities of the Vacuum Trucks) on and after
the Closing Date, and all liabilities and obligations arising from
activities of the Vacuum Trucks on and after the Vacuum Truck Closing Date;
and
(3) accrued vacation liabilities attributable to the Transferred Employees and
the Vacuum Truck Transferred Employees (each as defined in Section
11.02(a)) as set forth on Schedule 4.15.
(b) It is agreed that Buyer shall not assume or be liable for, directly or
indirectly, any liabilities or obligations of Seller that are not
specifically identified as Assumed Obligations in Section 2.05(a) hereof,
including, without limitation, the following debts, liabilities and
obligations of Seller in respect of the Assets or the WSB (collectively,
the "Unassumed Obligations"), as to which Seller shall be liable:
(1) any payable balances as of the Closing Date for intercompany advances;
(2) any accruals as of the Closing Date for professional fees (legal and
accounting), broker's fees or commissions, printing costs, severance and
relocation;
(3) any insurance reserves accruing prior to the Closing Date;
(4) all liabilities and obligations attributable to the WSB, including accounts
payable and accrued payrolls attributable to the WSB;
(5) any obligations arising from Seller's employment of (i) the Transferred
Employees prior to the Closing Date, and the Vacuum Truck Transferred
Employees prior to the Vacuum Truck Closing Date, other than as specified
in Section 2.05(a)(3) hereof and (ii) all other employees of Seller whether
before or after the Closing Date;
(6) any failure to pay any taxes owed by Seller which are applicable to the
period ending with the Closing Date, or, for taxes owed with respect to the
operations of the Vacuum Trucks, if any, the Vacuum Truck Closing Date; and
(7) any other liabilities resulting from Seller's operation of the Assets
(other than the Vacuum Trucks) or conduct of the WSB before the Closing
Date or, with respect to the Vacuum Trucks, any other liabilities resulting
from Seller's operation of the Vacuum Trucks before the Vacuum Truck
Closing Date.
(c) Notwithstanding anything in this Agreement to the contrary, Seller shall
not, and is not hereby agreeing to, sell, assign, convey, transfer or
deliver to Buyer any of Seller's right, title and interest in, to or under
any of the assets listed below (the "Excluded Assets"):
(1) cash or cash equivalents, whether on hand at the premises, in banks or in
transit between accounts of Seller and whether or not relating to the WSB;
(2) the bank accounts, deposit accounts or similar accounts of the WSB;
(3) any and all policies of insurance or surety bonds of the WSB;
(4) any and all notes receivable of the WSB, except those notes receivable
related to the Contracts or Work Orders;
(5) all receivables of Seller relating to the WSB outstanding as of the Closing
Date;
(6) all interest of Seller in and to all advance payments, prepayments, prepaid
expenses, deposits and the like, that are recorded on the books and records
of Seller as of the Closing Date and which were incurred by Seller solely
with respect to the operation of the WSB;
(7) any and all accruals as of the Closing Date for income taxes and deferred
income taxes relating to the WSB;
(8) any choses in action, claims or causes of action or rights of Seller to
recovery or offset of any kind or character relating to the operation of
the WSB prior to the Closing Date, except as such may arise with respect to
the Contracts and the Work Orders; and
(9) any of the assets of Seller relating to Seller's engineering and
construction business other than the Purchased Construction Equipment,
which assets are being conveyed to a third party in a separate transaction.
ARTICLE III
CLOSING
Section 3.01. Closing.
(a) Subject to the terms and conditions of this Agreement, the Closing with
respect to all of the Assets except for the Vacuum Trucks (the "Closing")
shall occur on September 15, 1998 (the "Closing Date") at 9:00 a.m.;
provided, however, that if all of the conditions to Closing set forth in
Articles VIII and IX have not been satisfied or waived by such date or any
extended date for Closing, either party shall have the right to extend the
date of Closing for successive periods of up to seven days each, or for
such longer period as the parties may agree upon in writing, in either case
until such conditions have been satisfied or waived or until this Agreement
shall have been terminated pursuant to Section 12.01(a).
(b) The Closing with respect to the Vacuum Trucks (the "Vacuum Truck Closing")
shall occur within three (3) business days after notice from Buyer (which
notice shall be delivered in a timely manner) of the receipt by Buyer of
permits authorizing the operation of the Vacuum Trucks in the State of
Colorado and states contiguous thereto; provided, however, that the Vacuum
Truck Closing is expressly conditioned upon (i) the occurrence of the
Closing, (ii) Seller's compliance with the covenants set forth in Article
VI hereof with respect to the Vacuum Trucks and (iii) satisfaction or
waiver of the conditions to the Vacuum Truck Closing set forth in Articles
VIII and IX hereof. The date on which the Vacuum Truck Closing occurs is
referred to herein as the "Vacuum Truck Closing Date".
(c) The Closing and the Vacuum Truck Closing shall be held at the Tulsa office
of Parent, or at such other location as may be mutually agreed upon by
Seller and Buyer.
Section 3.02. Closing Obligations.
(a) At the Closing, the following events shall occur:
(1) Seller and Buyer shall each execute, acknowledge and deliver to one another
a Conveyance, Assignment and Bill of Sale in the form of
Schedule 3.02(a)(1) whereby Seller shall convey the Assets (other than the
Vacuum Trucks, which will be conveyed at the Vacuum Truck Closing) to
Buyer;
(2) Seller shall execute and deliver general warranty deeds in the form of
Schedule 3.02(a)(2) whereby Seller shall convey the Real Property to Buyer;
(3) Seller shall deliver to Buyer evidence of the amount owed to U.S. Fleet
Leasing with respect to the Leased Vehicles, proof (in the form of a wire
transfer confirmation) of the payment of such amount, and a payoff letter
from U.S. Fleet Leasing confirming that upon payment of such amount it will
endorse and convey certificates of title to the Leased Vehicles in the name
of Buyer. Seller shall cause U.S. Fleet Leasing to deliver to Buyer
certificates of title free of all Liens (as defined in Section 4.12) with
respect to each of the Leased Vehicles within 10 business days of the
Closing Date;
(4) Seller, Parent and Buyer shall exchange the certificates described in
Sections 8.03 and 9.04;
(5) Seller, Parent and Buyer shall provide each other with a certified copy of
the resolutions of their respective Boards of Directors (and, in the case
of Seller, shareholder resolutions) authorizing the execution of this
Agreement and the consummation of the transactions contemplated hereby in a
form reasonably acceptable to the other party;
(6) each of Seller, Parent and Buyer shall execute such other instruments and
take such other action as may be necessary to carry out their respective
obligations under this Agreement; and
(7) Seller and Buyer shall provide each other with the legal opinion of their
respective counsel in the form attached hereto as Schedule 8.07 and
Schedule 9.05, respectively.
(b) At the Vacuum Truck Closing, the following events shall occur:
(1) Seller and Buyer shall each execute, acknowledge and deliver to one another
a Conveyance and Bill of Sale in the form of Schedule 3.02(b)(1) whereby
Seller shall convey the Vacuum Trucks to Buyer; and
(2) Seller, Parent and Buyer shall exchange the certificates described in
Sections 8.03 and 9.04.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT
Each of Parent and Seller jointly and severally hereby represents and warrants
to Buyer as of the date hereof as follows:
Section 4.01. Organization and Qualification. Each of Parent and Seller is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and Oklahoma, respectively, and has the requisite corporate power to
own, lease and operate its properties and, in the case of Seller, to carry on
its business as now being conducted. Seller is qualified to do business and is
in good standing in each jurisdiction in which the nature and conduct of its
business requires it to be qualified to do business. Parent owns beneficially
and of record all of the issued and outstanding shares of Seller's capital
stock.
Section 4.02. Authority, Approval and Enforceability. Each of Parent and Seller
has all requisite corporate power and authority to execute and deliver this
Agreement and all other instruments, agreements and other documents to be
executed and delivered by Parent or Seller in connection herewith (the
"Collateral Documents") and to perform its obligations hereunder and thereunder.
The execution and delivery of this Agreement and the Collateral Documents by
Seller and Parent and the performance of the transactions contemplated hereby
and thereby have been duly and validly authorized by all corporate action on the
part of Seller and Parent. This Agreement constitutes the legal, valid and
binding obligation of Seller and Parent, enforceable against Seller and Parent
in accordance with its terms, except as enforceability may be affected by
bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting
creditors' rights generally and general principles of equity, whether in a
proceeding in equity or at law.
Section 4.03. No Violation or Consent. Except as set forth in Schedule 4.03,
neither the execution and delivery of this Agreement, nor the effectuation by
Seller or Parent of the transactions contemplated hereby (a) will violate any
applicable statute or law, or any rule, regulation, order, writ, injunction or
decree of any court or governmental authority, or (b) will violate or conflict
with or constitute a default (or an event which, with notice or lapse of time,
or both, would constitute a default) under, or will result in the termination
of, or accelerate the performance required by, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the Assets under, any
term or provision of (i) the Certificate of Incorporation or Bylaws of Seller or
Parent or (ii) any lease, contract, commitment, understanding, arrangement,
agreement or restriction of any kind or character to which Seller or Parent is a
party or by which Seller, Parent or any of the Assets may be bound or affected.
No filing with, or consent, approval, authorization or action by, any
governmental authority is required in connection with the execution and delivery
by Seller or Parent of this Agreement or the effectuation by Seller of the
transactions contemplated hereby or thereby other than (A) those which if not
made, obtained or taken would have no material adverse effect on the WSB or the
Assets and (B) those that have been made, obtained or taken.
Section 4.04. Material Contracts, Agreements, Plans and Commitments.
Schedules 1.02(d) and 1.02(f) set forth a complete list of all Material
Contracts and agreements and all open Material Work Orders to which Seller is a
party or by which any of the Assets are bound that are in existence as of the
date hereof and have been entered into by Seller in connection with the WSB.
True and complete copies of the Material Contracts and Material Work Orders have
been furnished by Seller to Buyer prior to the date hereof. Except as set forth
on Schedule 4.04, Seller is not in default, nor but for the requirement that
notice be given or that a period of time elapse or both, would be in default,
under any of the Contracts or Work Orders, nor to the knowledge of Seller or
Parent, is any other party to such Contracts or Work Orders in default
thereunder.
Section 4.05. Compliance with Law. Except as set forth in Schedule 4.05, Seller
is in compliance with all legal requirements applicable to the ownership, use or
operation of the Assets or the conduct of the WSB, including, without
limitation, the Occupational Health and Safety Act and the Americans with
Disabilities Act, other than environmental legal requirements (the compliance
with which is governed by Section 4.07).
Section 4.06. Litigation. Except as described in Schedule 4.06, there are no
civil, criminal, administrative, arbitration, or other proceedings or
governmental investigations pending or, to the knowledge of Seller or Parent,
threatened, against Seller or its Affiliates that could materially adversely
affect (a) any of the transactions contemplated by this Agreement or (b) the
ownership, use, operation or value of the Assets or (c) the conduct of the WSB.
Section 4.07. Environmental Matters. Except as set forth in Schedule 4.07:
(a) The land and premises comprising the Real Property and all operations
conducted thereon by Seller are in compliance in all material respects with
all applicable Environmental Legal Requirements (defined below) and there
are no Hazardous Materials (defined below) present on the Real Property,
except for those Hazardous Materials that are used in the ordinary course
of operating the Assets and the WSB or that do not require remedial action
under applicable Environmental Legal Requirements. The term "Hazardous
Materials" means any substance that is defined as hazardous or toxic under
Environmental Legal Requirements or that is known, as of the date of this
Agreement, to pose a threat or endangerment to human health, safety or the
environment (including, without limitation, any asbestos, formaldehyde,
radioactive substance, hydrocarbons, polychlorinated biphenyls, industrial
solvents, flammables, explosives and any other hazardous substance, solid
waste or toxic material). The term "Environmental Legal Requirements" means
any and all laws, statutes, ordinances, rules, regulations, orders or
legally enforceable requirements of any governmental authority pertaining
to health or the environment in effect as of the date of this Agreement,
including the Clean Air Act, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 ("CERCLA"), the Federal Water
Pollution Control Act, the Occupational Safety and Health Act of 1970, the
Resource Conservation and Recovery Act of 1976 ("RCRA"), the Toxic
Substances Control Act, the Hazardous Materials Transportation Act, and the
Oil Pollution Act of 1990, all as amended through the date of this
Agreement, and any state or local laws implementing the foregoing federal
laws.
(b) No Hazardous Materials have been disposed or otherwise released onto or
under the Real Property by Seller or in connection with the ownership, use
or operation of the Assets of the conduct of the WSB by Seller at any
on-site or off-site location in quantities, concentrations or locations
that require remedial action under any such Environmental Legal
Requirements.
(c) All permits, licenses or similar authorizations, if any, required to be
obtained or filed by Seller under any Environmental Legal Requirements in
connection with the Real Property, the operation of the Assets or the
conduct of the WSB have been duly obtained, applied for or filed, and
Seller is in compliance in all material respects with the terms and
conditions of such permits, licenses and similar authorizations.
(d) Neither Seller nor Parent has received any notice or other communication of
any claims, notices, actions, suits, citations, summons, investigations or
other demands or proceedings ("Claims") regarding the environmental
condition of the Real Property or the Assets, and there exists no writ,
injunction, decree, order or judgment outstanding, nor any pending or
threatened claim, relating to any alleged or suspected violation of
Environmental Legal Requirements arising out of the ownership, use or
operation of the Assets, whether or not corrected to the satisfaction of
the appropriate governmental entity.
(e) To the knowledge of Seller or Parent, there has been no exposure of any
person or property to Hazardous Materials on the Real Property or in
connection with the Assets or the WSB that could reasonably be expected to
result in a Claim for damages or compensation.
(f) There are no underground storage tanks (as defined under Environmental
Legal Requirements) located under any of the Real Property except for
underground storage tanks that are in compliance with Environmental Legal
Requirements and except for such underground storage tanks the presence of
which would not have a material adverse effect on the WSB. Each underground
storage tank previously located under the Real Property was removed in
accordance with Environmental Legal Requirements in effect at the time of
such removal.
(g) There are no environmental conditions or circumstances, including the
presence or release of any Hazardous Materials, on any property presently
or previously owned, used or leased by Seller, which would result in a
material adverse change in the Assets or the WSB or a Claim against Buyer
following the Closing.
Section 4.08. Taxes. With respect solely to the operation of the WSB: (a) all
contributions due from Seller pursuant to any unemployment insurance or workers
compensation laws and all sales or use taxes which are due or payable by Seller
have been paid in full and will be so paid through the Closing Date; (b) Seller
has withheld and paid to, or will cause to be paid to, the appropriate taxing
authorities all amounts required to be withheld from the wages of the employees
of the WSB under state law and the applicable provisions of the Internal Revenue
Code of 1986, as amended (the "Code") (and Seller will continue to do so with
respect to all wages paid by them prior to the Closing); and (c) Seller has
timely paid, or will pay prior to the due date therefor, all taxes which, if not
paid, could result in the imposition of a lien or encumbrance on the Assets
(except for liens for taxes not yet due) or otherwise interfere with Buyer's
ability to own and operate the Assets after the Closing. All taxes assessed
against the Real Property for the period commencing January 1, 1998 will be
prorated through the Closing Date (based on 1997 assessed values) with Seller
paying to Buyer at Closing an amount equal to the portion of such taxes
applicable to the period between January 1, 1998 and the Closing Date.
Section 4.09. Insurance. Schedule 4.09 sets forth a list of all insurance
policies, by which the Assets or the WSB, and any operations relating thereto,
are covered against present losses or claims and which insurance provides
coverage consistent with the past conduct of the WSB.
Section 4.10. Labor and Employee Benefits.
(a) Seller has not at any time had or been threatened with any work stoppages
or other material labor disputes.
(b) As to any "employee benefit plan," as such term is defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") sponsored or maintained by Seller within six years prior to the
Closing Date ("Plan"), including without limitation (i) a multiemployer
plan within the meaning of Section 3(37) of ERISA and (ii) a Plan subject
to Title IV of ERISA, there has been no event or condition which presents
the material risk of Plan termination, no accumulated funding deficiency,
whether or not waived, within the meaning of Section 302 of ERISA or
Section 412 of the Code has been incurred, no reportable event within the
meaning of Section 4043 of ERISA (for which the disclosure requirements of
Regulation ss2615.3 promulgated by the Pension Benefit Guaranty Corporation
("PBGC") have not been waived) has occurred, no notice of intent to
terminate the Plan has been given under Section 4041 of ERISA, no
proceeding has been instituted under Section 4042 of ERISA to terminate the
Plan, no liability to the PBGC has been incurred, and the assets of the
Plan equal or exceed the actuarial present value of the benefit
liabilities, within the meaning of Section 4041 of ERISA, under the Plan,
based upon reasonable actuarial assumptions and the asset valuation
principles established by the PBGC. For purposes of this Section 4.10, the
term "Seller" shall collectively refer to Seller and each other entity
which is treated as a single employer with Seller under Section 414 of the
Code. No employee benefit plan, program or arrangement of whatever nature,
whether or not subject to any provisions of ERISA, bonus or other employee
pay practice or leave policy maintained by Seller (a "Plan"), will by its
terms or applicable law, become binding upon or an obligation, liability or
responsibility of Buyer, financial or otherwise. Seller warrants that no
Plan provides for payments of retiree benefits in any manner such that
Buyer would become liable to make such payments. There have been no
failures to offer or provide health care continuation coverage ("COBRA
Coverage") under any employee welfare benefit plan sponsored or maintained
by Seller which is required under Sections 601 through 608 of ERISA or
applicable state law.
(c) Seller does not maintain or contribute to any multiemployer plan within the
meaning of Section 3(37) of ERISA.
Section 4.11. Brokerage Agreements. Seller has not entered (directly or
indirectly) into any agreement with any Person that provides for the payment of
any commission, brokerage or "finder's fee" arising out of the transaction
contemplated by this Agreement for which Buyer might have any liability or
obligation.
Section 4.12. Title to Property. Seller has good and marketable title to the
personal and tangible property included in the Assets being acquired by Buyer
under this Agreement, including, without limitation, the assets described in
Sections 1.02(a), 1.02(b), 1.02(e), 1.02(i), 1.02(k) and 1.02(l), free and clear
of all mortgages, pledges, liens, security interests, encumbrances or claims of
any kind or nature (collectively, "Liens"), except (i) Liens for current taxes
and assessments not yet due and payable, (ii) Liens in existence that do not
materially detract from the value thereof or interfere with the present use of
the property subject thereto and (iii) Liens set forth on Schedule 4.12
(collectively, "Permitted Liens").
Section 4.13. Absence of Certain Changes. Except as disclosed in Schedule 4.13
and except for changes, events or occurrences permitted by Section 6.01, since
May 31, 1998, there has not been:
(a) any material adverse change in the WSB, taken as a whole;
(b) any damage, destruction or loss, whether covered by insurance or not, to
the Assets that could have a material adverse effect on the WSB, taken as a
whole;
(c) any waiver by Seller of any rights under the Contracts or Leases that,
singularly or in the aggregate, are material to the WSB, taken as a whole;
or
(d) any intention, contract, agreement or commitment on the part of Seller or
any of its Affiliates to do any of the foregoing.
Section 4.14. Permits. To Seller's and Parent's knowledge, there are no other
permits not listed on Schedule 1.02(g) that are material to the operation and
use of the Assets or the conduct of the WSB as currently conducted. Each of the
Permits and Seller's rights with respect thereto is valid and subsisting, in
full force and effect, and enforceable by Seller and Seller is in compliance in
all material respects with the terms of each of the Permits. To Seller's and
Parent's knowledge, no proceeding is pending or threatened which seeks to repeal
or limit any of the Permits, and to Seller's and Parent's knowledge, no
suspension or cancellation of any Permit is threatened.
Section 4.15. Employees. Set forth in Schedule 4.15 is an accurate list of the
employees of the WSB, which list shall include their duties and/or job titles,
current salaries and other compensation, date of employment, date of last salary
increase, the number of accrued but unused vacation days to which such employees
will be entitled as of the Closing Date and an indication by the name of any
employee employed in connection with the operation of the Vacuum Trucks (such
employees being referred to herein as the "Vacuum Truck Employees"). Except as
set forth on Schedule 4.15, no employee of Seller has an employment agreement or
understanding with Seller which is not terminable on notice by Seller without
cost or other liability to Seller.
Section 4.16. Customers. Set forth in Schedule 4.16 is an accurate list of all
customers of the WSB that constituted 5% or more of the revenues of the WSB for
the fiscal year ended May 31, 1998, including the amount of billings made by the
WSB to such customers during such periods. Seller has not received written
notice that any customer of the WSB intends to cease doing business with Buyer
(or its successors) as a result of the consummation of the transactions
contemplated hereby.
Section 4.17. No Arrangements with Respect to Assets. There are no existing
agreements, options, commitments or rights that have been provided to any person
or entity to acquire any of the Assets to be acquired by Buyer, except for those
contracts entered into in the normal course of business consistent with past
practices with respect to the sale of inventory of the business.
Section 4.18. Limitation of Representations and Warranties. EXCEPT AS
SPECIFICALLY SET FORTH IN THIS AGREEMENT, THE SCHEDULES AND EXHIBITS HERETO AND
ALL OTHER DOCUMENTS EXECUTED BY PARENT OR SELLER IN CONNECTION HEREWITH, SELLER
MAKES NO REPRESENTATION OR WARRANTY, AND HEREBY DISCLAIMS ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, WHICH RELATES TO THE RIGS, THE EQUIPMENT AND
ROLLING STOCK, THE VACUUM TRUCKS, THE INVENTORY OR THE FIXTURES AND
IMPROVEMENTS, INCLUDING ANY WARRANTY OF MERCHANTABILITY, VALUE, REPAIR,
SUITABILITY OR FITNESS FOR A PARTICULAR USE, OR QUALITY, OR AS TO THE ABSENCE OF
ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, IT BEING UNDERSTOOD THAT THE
RIGS, THE EQUIPMENT AND ROLLING STOCK, THE VACUUM TRUCKS, THE INVENTORY AND THE
FIXTURES AND IMPROVEMENTS ARE BEING TRANSFERRED HEREUNDER "AS IS AND WHERE IS"
WITH ALL FAULTS AND IN THEIR PRESENT STATE AND CONDITION. BUYER ACKNOWLEDGES
THAT IT HAS EXAMINED AND MADE ITS OWN INDEPENDENT INVESTIGATION AS IT RELATES TO
THE RIGS, THE EQUIPMENT AND ROLLING STOCK, THE VACUUM TRUCKS, THE INVENTORY AND
THE FIXTURES AND IMPROVEMENTS AND, AS IT RELATES TO SUCH ASSETS, HAS NOT RELIED
ON ANY STATEMENTS OF ANY SELLER, OFFICER OR REPRESENTATIVE AS TO VALUES, OR
CONDITION OR APPRAISALS OF, OR REPRESENTATIONS OR WARRANTIES (OTHER THAN AS SET
FORTH IN THIS AGREEMENT, THE SCHEDULES AND EXHIBITS HERETO AND ALL OTHER
DOCUMENTS EXECUTED BY PARENT OR SELLER IN CONNECTION HEREWITH). NOTHING IN THIS
SECTION 4.18 SHALL BE CONSTRUED TO IN ANY WAY DETRACT FROM THE REPRESENTATIONS
AND WARRANTIES OF SELLER AND PARENT IN SECTION 4.12, 4.13 OR 4.17.
Section 4.19. Absence of Certain Businesses Practices. Neither Seller, nor any
officer, employee or agent of Seller, or any other person acting on behalf of
Seller, has, within the past five years, given or agreed to give any gift or
similar benefit (the fair market value of which exceeded $10,000) to any
customer, supplier, government employee or other person, for purposes of
influencing such person's judgment or decision, who is in a position to help or
hinder the profitable conduct of the WSB or the profitable use of the Assets (or
to assist Seller in connection with any actual or proposed transaction) which if
not given in the past, would have had a material adverse effect on the
profitable conduct of the WSB or the profitable use of the Assets, or if not
continued in the future, would have a material adverse effect on the profitable
conduct of the WSB or the profitable use of the Assets.
Section 4.20. Solvency. Seller is not presently insolvent, nor will Seller be
rendered insolvent by the occurrence of the transactions contemplated by this
Agreement. The term "insolvent," with respect to Seller, means that the sum of
the present fair and saleable value of 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.
Section 4.21. Real Property.
(a) All of the real property owned by Seller in connection with the WSB is
described on Schedule 1.02(c). Seller has and will convey to Buyer good and
indefeasible title to the Real Property free and clear of any and all
Liens.
(b) The Real Property does not violate any material provisions of any
applicable building code, fire, health or safety regulations, or other
governmental ordinances, orders or regulations. No condition exists with
respect to the Real Property which would prevent, or require repair or
modification thereof as a prerequisite to Buyer using the Real Property in
the conduct of the WSB.
(c) The zoning classification of the Real Property is such that the Real
Property may be used as currently used in the WSB.
(d) There are no parties in possession of any portion of the Real Property as
lessees, tenants, at sufferance or trespassers.
(e) There is no pending or threatened condemnation or similar proceeding or
assessment affecting the Real Property, or any part thereof, nor is any
such proceeding or assessment contemplated by any governmental body or
entity.
(f) Seller has complied in all material respects with all applicable laws,
ordinances, regulations, statutes, rules and restrictions relating to the
Real Property, or any part thereof.
(g) There are water, sewer, and electricity lines to the Real Property
presently sufficient for the conduct of the WSB in the ordinary course of
business.
(h) The Real Property has full and free access to and from public highways,
streets or roads and, to the best of Seller's knowledge, there is no
pending or threatened proceeding by any governmental entity which would
impair or result in the termination of such access.
Section 4.22. Intellectual Property. No intellectual property is necessary to
the conduct of the WSB as presently conducted. Neither Seller nor Parent has
received notice of any claim for infringement or interference or other conflict
by Seller with the asserted rights of others with respect with any intellectual
property.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as of the date hereof as follows:
Section 5.01. Formation and Existence. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has the requisite corporate power to own, lease and operate
its properties and to carry on its business as now being conducted.
Section 5.02. Authorization of Agreement; No Violation; No Consents.
(a) Buyer has all requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations under this Agreement.
The execution and delivery of this Agreement by Buyer and the performance
of the transactions contemplated hereby by Buyer have been duly and validly
authorized by all corporate action on the part of Buyer. This Agreement
constitutes the legal, valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms, except as enforceability may be
affected by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally and general principles of
equity, whether in a proceeding in equity or at law.
(b) Neither the execution and delivery of this Agreement nor the effectuation
by Buyer of the transactions contemplated hereby (a) will violate any
statute or law, or any rule, regulation, order, writ, injunction or decree
of any court or governmental authority, or (b) will violate or conflict
with or constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, or will result in the
termination of, or accelerate the performance required by, any term or
provision of (i) the Amended and Restated Articles of Incorporation, Bylaws
or other constituent documents of Buyer or (ii) any contract, commitment,
understanding, arrangement, agreement or restriction of any kind or
character to which Buyer is a party or by which Buyer or any of its assets
or properties may be bound or affected. No filing with, or consent,
approval, authorization or action by, any governmental authority is
required in connection with the execution and delivery by Buyer of this
Agreement or the effectuation by Buyer of the transactions contemplated
hereby or thereby other than (A) those which if not made, obtained or taken
would have no material adverse effect and (B) those that have been made,
obtained or taken.
Section 5.03. Litigation. There are no civil, criminal, administrative,
arbitration or other proceedings or governmental investigations pending, or, to
the knowledge of Buyer, threatened against Buyer that could jeopardize or
adversely affect any of the transactions contemplated by this Agreement.
Section 5.04. Brokerage Agreements. Buyer has not entered (directly or
indirectly) into any agreement with any person that provides for the payment of
any commission, brokerage or "finder's fee" arising out of the transactions
contemplated by this Agreement for which Seller might have any liability or
obligation.
ARTICLE VI
COVENANTS OF SELLER
Section 6.01. Conduct of Seller Pending the Closing and the Vacuum Truck
Closing. Except as otherwise required by, or agreed in, this Agreement, from and
after the execution of this Agreement and until the Closing, or, in the case of
the Vacuum Trucks, until the Vacuum Truck Closing, Seller agrees to:
(a) maintain all Assets in such manner that at the Closing, or, in the case of
the Vacuum Trucks, at the Vacuum Truck Closing, they will be in
substantially the same condition and repair as on the date of the execution
of the Agreement, subject only to ordinary wear and tear;
(b) except in the ordinary course of business, not (i) enter into any (A)
Contracts, Work Orders or other agreements relating to the WSB or (B) other
agreements relating to the WSB for consideration in excess of $25,000, or
(ii) make any sales, assignments, trades or transfers of or encumber all or
any part of the Assets;
(c) use reasonable efforts to continue to employ the present employees engaged
in the operation of the WSB and preserve the present business organization
and customer relations of the WSB; provided, however, that Seller (i) may
hire or fire employees in the ordinary course of business, consistent with
past practices, (ii) may terminate any contract which is not included in
the Assets and (iii) shall not be required to make any expenditures out of
the ordinary course of business in order to comply with the covenants set
forth in this Section 6.01(c); provided, further, that this paragraph shall
not apply to the WSB employees not being retained by Buyer as contemplated
by this Agreement;
(d) in a timely manner make all payments due under and otherwise perform in all
material respects all its other obligations under the Contracts, the Work
Orders and other agreements relating to the WSB in accordance with their
respective terms and not cancel, amend, modify, abandon, extend or renew
any of the same, or permit any of the same to lapse (except in accordance
with their terms);
(e) maintain in full force and effect all of the insurance set forth on
Schedule 4.09;
(f) comply in all material respects with and fulfill its obligations and
responsibilities under all legal requirements applicable to the Assets or
their ownership, use or operation, including, but not limited to,
preparation and submittal of any and all reports required by any
governmental entities in connection therewith;
(g) promptly notify Buyer of any actions, claims or proceedings commenced or,
to the knowledge of Seller, threatened against Seller or Parent that
affects the WSB or any of the Assets after the date of this Agreement;
(h) 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 customer, suppliers, jobbers, distributors and others
having business dealing with it;
(i) 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; (j) 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;
(k) 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;
(l) not declare any dividend on shares of its capital stock or make any other
non-cash distribution of assets to the holders thereof;
(m) promptly notify Buyer in writing of any event or condition which could
reasonably be expected to have a material adverse effect on the Assets or
the WSB (a "Material Adverse Event"); and
(n) not directly or indirectly (i) solicit, initiate or encourage any inquiry
or Acquisition Proposal (defined below) 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 "Acquired Proposal" means any proposal for a merger,
consolidation or other business combination involving Seller or for the
acquisition or purchase of any equity interest in, or a material portion of
the assets of, Seller, other than the transactions with Buyer contemplated
by this Agreement. Seller 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.
Section 6.02. Employees. As soon as reasonably administratively practicable
after the Closing, Seller agrees to pay or otherwise provide for payment of all
amounts due and payable to the Transferred Employees (as defined in Section
11.02(a)) as of such date and through the Closing, including salaries, wages,
commissions and bonuses due and arising out of their employment with Seller,
except with respect to any obligations expressly assumed by Buyer as set forth
in Section 2.05(a)(3) hereof. As soon as reasonably administratively practicable
after the Vacuum Truck Closing, Seller agrees to pay or otherwise provide for
payment of all amounts due and payable to the Vacuum Truck Transferred Employees
(as defined in Section 11.02(a)) as of such date and through the Closing,
including salaries, wages, commissions and bonuses due and arising out of their
employment with Seller, except with respect to any obligations expressly assumed
by Buyer as set forth in Section 2.05(a)(3) hereof.
Section 6.03. Access. Seller will give to Buyer and its representatives and
agents, after reasonable advance notice to Seller, and as often as Buyer may
reasonably request, full and complete access to the Assets and the WSB,
including, without limitation, such of Seller's assets, books, agreements,
papers and records, employees and financial statements pertaining to the Assets
or the WSB, and Seller will cause its officers, employees, agents, advisors and
other representatives to cooperate fully with Buyer's officers, employees and
other representatives in the course of such obligation.
Section 6.04. Consents. Seller will use all commercially reasonable efforts to
satisfy or cause to be satisfied all of the conditions to Closing set forth in
Article VIII hereof, including obtaining, prior to the Closing, all consents
necessary to the effectuation of the transactions contemplated hereby. All such
consents will be in writing and executed counterparts thereof will be delivered
to Buyer promptly after receipt by Seller thereof, but in no event later than
immediately prior to the Closing.
Section 6.05. Additional Action to Assure Transfers. Nothing in this Agreement
shall be construed to assign any Contract that is by its terms or by law
nonassignable without the consent of the other party or parties thereto, unless
such consent shall have been given, or as to which all the remedies for the
enforcement thereof enjoyed by Seller would not, as a matter of law pass to
Buyer as an incident of the assignments provided for by this Agreement. In
order, however, to provide Buyer the full realization and value of the
Contracts, Seller, at and after the Closing, will, at the request and under the
direction of Buyer and in the name of Seller or otherwise as Buyer shall
specify, take or cause to be taken all such action and do or cause to be done
all such things as shall be necessary or proper to (a) assure that the rights of
Seller under the Contracts shall be preserved for the benefit of Buyer, and (b)
facilitate receipt by Buyer of the consideration to which Seller would otherwise
be entitled in and under the Contracts which consideration shall be held for the
benefit of, and shall be delivered to, Buyer. In order to accomplish the
foregoing, Seller may designate Buyer as subcontractor (under mutually agreeable
terms and conditions) to perform obligations of Seller under the Contracts if so
requested by Buyer.
ARTICLE VII
COVENANTS OF BUYER
Section 7.01. Cooperation. Buyer acknowledges that Seller may have continuing
obligations on certain matters relating to the WSB after the Closing.
Accordingly, Buyer agrees to grant to Seller and its representatives access
during normal business hours to such books and records as may be necessary for
the defense and/or disposition of such other matters that Seller may be
obligated to perform relating to the WSB, and to furnish such additional
information as Seller or its representatives may reasonably request.
Section 7.02. Post-Closing Employment. After the Closing Date, Buyer agrees to
provide employee benefits to the Transferred Employees through one of its wholly
owned subsidiaries that are, in all material respects, no less favorable to such
transferred employees than the employee benefits provided to similarly situated
employees of Buyer located in the same geographic region under employee benefit
plans sponsored by Buyer; provided that such Transferred Employees will be
subject to the terms and conditions of the applicable employee benefit plan,
subject, in all cases, to the provisions of this Section 7.02. After the Vacuum
Truck Closing Date, Buyer agrees to provide employee benefits to the Vacuum
Truck Transferred Employees that are, in all material respects, no less
favorable to such transferred employees than the employee benefits provided to
similarly situated employees of Buyer located in the same geographic region
under employee benefit plans sponsored by Buyer; provided that such Vacuum Truck
Transferred Employees will be subject to the terms and conditions of the
applicable employee benefit plan, subject, in all cases, to the provisions of
this Section 7.02. Further, Buyer shall (i) provide the Transferred Employees
and the Vacuum Truck Transferred Employees and their eligible dependents as of
the Closing Date or the Vacuum Truck Closing Date, as the case may be, with
coverage in a group medical and dental plan maintained by Buyer, (ii) waive any
preexisting condition limitations applicable to the Transferred Employees or the
Vacuum Truck Transferred Employees under Buyer's group medical plan to the
extent that a Transferred Employee's or a Vacuum Truck Transferred Employee's
condition would not have operated as a preexisting condition limitation under
Seller's group medical plan, (iii) cause any employee pension benefit plan (as
such term is defined in Section 3(2) of ERISA) which is intended to be qualified
under Section 401 of the Code to be amended to provide that the Transferred
Employees and the Vacuum Truck Transferred Employees shall receive credit for
participation and vesting purposes under such plan for their period of
continuous employment with Seller and its predecessors to the extent such
predecessor employment was recognized by Seller, and (iv) credit the Transferred
Employees and the Vacuum Truck Transferred Employees under each other employee
benefit plan or policy of Buyer for their period of continuous employment with
Seller or its predecessors to the extent such predecessor employment was
recognized by Seller.
Section 7.03. Performance of Obligations. Buyer agrees to perform all
obligations under the Contracts and Work Orders for all periods following the
Closing Date as such obligations become due, except to the extent that such
obligations arise solely from a breach or default by Seller under the Contracts
or Work Orders prior to the Closing Date.
Section 7.04. Consents. Buyer will use all commercially reasonable efforts to
satisfy or cause to be satisfied all of the conditions to Closing set forth in
Article IX hereof, including obtaining, prior to the Closing, all consents
necessary to the effectuation of the transactions contemplated hereby. All such
consents will be in writing and executed counterparts thereof will be delivered
to Seller promptly after receipt by Buyer thereof, but in no event later than
immediately prior to the Closing.
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATIONS
Except as may be waived by Buyer, the obligations of Buyer are subject to the
fulfillment, prior to or at the Closing, or, where specifically identified, the
Vacuum Truck Closing, of each of the following conditions:
Section 8.01. Representations and Warranties. The representations and warranties
made by Seller and Parent in this Agreement shall have been true, correct and
accurate, in all material respects, when made and shall be true, correct and
accurate, in all material respects, at and as of the Closing, with the same
force and effect as if such representations and warranties were made at and as
of the Closing, and the representations and warranties made by Seller and Parent
in Sections 4.01, 4.02, 4.03, 4.05, 4.10, 4.12, 4.17, 4.18 and 4.19 of this
Agreement, insofar as, and only to the extent that, they relate to the ownership
or operation of the Vacuum Trucks, shall be true, correct and accurate, in all
material respects, at and as of the Vacuum Truck Closing, with the same force
and effect as if such representations and warranties were made at and as of the
Vacuum Truck Closing.
Section 8.02. Performance. Seller and Parent shall have performed and complied
with all covenants and conditions required by this Agreement to be performed or
complied with prior to or at the Closing, and Seller and Parent shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed or complied with prior to or at the Vacuum Truck
Closing.
Section 8.03. Officer's Certificate. Seller and Parent shall deliver to Buyer at
the Closing certificates, attesting to the truth, accuracy and correctness of
such representations and warranties and to Seller's and Parent's compliance and
conformity with such covenants and conditions in a form reasonably satisfactory
to Buyer, and Seller and Parent shall deliver to Buyer at the Vacuum Truck
Closing certificates, attesting to the truth, accuracy and correctness of the
representations and warranties contained in Sections 4.01, 4.02, 4.03, 4.05,
4.10, 4.12, 4.17, 4.18 and 4.19 of this Agreement to the extent they relate to
the ownership or operation of the Vacuum Trucks and to Seller's and Parent's
compliance and conformity with such covenants and conditions in a form
reasonably satisfactory to Buyer.
Section 8.04. Conveyance of Documents. At the Closing, Seller shall have
executed and delivered to Buyer the necessary instruments and documents to vest
in Buyer all right, title and interest to the Assets (other than the Vacuum
Trucks), including those documents described in Section 3.02(a) hereof. At the
Vacuum Truck Closing, Seller shall have executed and delivered to Buyer the
necessary instruments and documents to vest in Buyer all right, title and
interest to the Vacuum Trucks, including those documents described in Section
3.02(b) hereof.
Section 8.05. Litigation.
(a) With respect to the Closing or the Vacuum Truck Closing, as the case may
be, there shall be no litigation, inquiry or proceeding pending or imminent
in or by any court, tribunal or any governmental agency or authority
including, without limitation, the entry of a preliminary or permanent
injunction that (i) prevents or delays the performance by Seller or Buyer
of its obligations hereunder, or (ii) would impose any material limitation
on the ability of Seller effectively to convey full rights of ownership to
(A) the Assets (other than the Vacuum Trucks) to Buyer as of the Closing or
(B) the Vacuum Trucks to Buyer as of the Vacuum Truck Closing Date.
(b) With respect to the Closing and the Vacuum Truck Closing, no action, suit
or proceeding before any court, tribunal or any governmental agency or
authority shall be pending against Seller or Buyer challenging the validity
or legality of the transactions contemplated by this Agreement.
Section 8.06. Third-Party Consents. All consents required to be obtained in
connection with the assignment by Seller to Buyer of the Assets (other than the
Vacuum Trucks) at the Closing, or the Vacuum Trucks at the Vacuum Truck Closing,
shall have been received and delivered to Buyer.
Section 8.07. Opinion of Counsel. Buyer shall have received an opinion, dated
the Closing Date, from Doerner, Saunders, Daniel & Anderson, L.L.P., counsel to
Seller and Parent, in the form attached hereto as Schedule 8.07.
Section 8.08. Environmental Matters.
(a) Seller will have caused to be conducted a Phase I Environmental Site
Assessment (a "Phase I") (including any updates as are, in the judgment of
Buyer, necessary; provided that such updates shall be at Buyer's sole
expense), and if deemed necessary by Buyer, at Buyer's sole expense, a
Phase II Environmental Site Assessment (a "Phase II"), on all of the Real
Property, both of which shall be conducted in conformance with the scope
and limitations of ASTM Standard Practice E1527 (except for the survey
requirements included therein) by an environmental surveyor approved by
Buyer. Buyer will be satisfied, in its reasonable judgment, that either (x)
the results of such Phase I's and, if necessary, such Phase II's have
revealed no environmental condition except for Permitted Conditions (as
defined below) that would result in any liability or obligation on the part
of Buyer or would, except for any Permitted Conditions, adversely affect or
reduce the value of the Real Property, or (y) any such conditions have been
cured or appropriate agreements shall be in place to provide for such a
cure. As used herein, the term "Permitted Conditions" means any
environmental conditions on the Real Property that would (i) result in
liabilities or obligations routinely incurred in connection with the
ordinary operation of the business or (ii) adversely affect or reduce the
value of the Real Property, in the case of clauses (i) and (ii) above, by
no more that $10,000 in the aggregate. If neither of the conditions set
forth in clauses (x) and (y) above can be met with respect to any tract of
Real Property, Seller shall have the option to exclude such tract of Real
Property from the Assets and the Purchase Price shall be reduced by the
value of such excluded tract or tracts (as agreed to in good faith by
Seller and Buyer).
(b) If all environmental conditions on the Liberty, Texas tract of Real
Property (the "Liberty Property") have not been Remediated (as defined
below) as of the Closing, Buyer shall have the right to withhold $25,000
from the Purchase Price. Buyer shall have no obligation to pay such amount
to Seller until all environmental conditions on the Liberty Property are
Remediated. Once the Liberty Property has been Remediated, Buyer will
deliver to Seller the entire amount withheld by Buyer at the Closing
without interest thereon. As used herein, the term "Remediated" means the
receipt by Buyer of a Phase I on the Liberty Property which, in Buyer's
reasonable judgment, demonstrates that, except for Permitted Conditions, no
environmental conditions exist that would (i) result in any liability or
obligation on the part of Buyer or (ii) materially adversely affect or
reduce the value of the Liberty Property.
Section 8.09. Real Estate Matters. Buyer shall have obtained, at its sole
expense, a commitment to issue an owner's title policy insuring that Buyer will
own, upon the Closing, fee simple title to the Real Property subject to no
exceptions other than those encumbrances reasonably acceptable to Buyer.
ARTICLE IX
CONDITIONS TO SELLER'S OBLIGATIONS
Except as may be waived by Seller, the obligations of Seller under this
Agreement are subject to the fulfillment, prior to or at the Closing, or, where
specifically identified, the Vacuum Truck Closing, of each of the following
conditions:
Section 9.01. Representations and Warranties. The representations and warranties
made by Buyer in this Agreement shall have been true, correct and accurate in
all material respects when made and shall be true, correct and accurate in all
material respects at and as of the Closing, and the representations and
warranties made by Buyer in Sections 5.01 and 5.02 of this Agreement shall be
true, correct and accurate in all material respects at and as of the Vacuum
Truck Closing.
Section 9.02. Performance. Buyer shall have performed and complied with in all
material respects all covenants and conditions required by this Agreement to be
performed or complied with prior to or at the Closing, and Buyer shall have
performed and complied with in all material respects all covenants and
conditions required by this Agreement to be performed or complied with prior to
or at the Vacuum Truck Closing.
Section 9.03. Payment of Purchase Price. At the Closing, or in the case of the
Vacuum Trucks, the Vacuum Truck Closing, Buyer shall have delivered to the
parties referred to therein the amounts payable pursuant to and in the manner
set forth in Article II of this Agreement.
Section 9.04. Officer's Certificate. Buyer shall deliver to Seller at the
Closing a certificate, attesting to the truth, accuracy and correctness of such
representations and warranties and to Buyer's compliance and conformity with
such covenants and conditions, and Buyer shall deliver to Seller at the Vacuum
Truck Closing a certificate, attesting to the truth, accuracy and correctness of
the representations and warranties contained in Section 5.01 and 5.02 of this
Agreement and to Buyer's compliance and conformity with such covenants and
conditions.
Section 9.05. Opinion of Counsel. Seller shall have received an opinion, dated
the Closing Date, from Jack D. Loftis, Jr., General Counsel of Buyer, in the
form attached hereto as Schedule 9.05.
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS
Section 10.01. Survival of Representations. The representations and warranties
in this Agreement and in any certificate delivered pursuant hereto shall,
notwithstanding any investigation made by or on behalf of the parties hereto,
survive the Closing solely for purposes of this Article X and shall terminate at
the close of business one year after the Closing Date; provided, however, that
(i) the representations and warranties contained in Section 4.07 shall survive
the Closing and shall terminate at the close of business two years after the
Closing Date, (ii) the representations and warranties contained in Sections
4.02, 4.12, 4.17 and 4.20 shall survive the Closing and shall terminate at the
close of business four years after the Closing Date and (iii) the
representations and warranties contained in Section 4.08 shall survive the
Closing and shall terminate upon the expiration of the applicable statute of
limitations period therefor.
Section 10.02. Agreement to Indemnify Buyer. Seller and Parent shall, jointly
and severally indemnify, defend and hold harmless Buyer and any of its officers,
directors, shareholders, affiliates, representatives or agents (the "Buyer
Group") from and against all losses, damages, liabilities, costs and expenses,
including, without limitation, reasonable attorneys' fees and expenses, incurred
by Buyer, the Buyer Group or any member thereof, directly or indirectly, by
reason of or resulting from (a) a breach or inaccuracy of any representation or
warranty of Seller or Parent contained in or made pursuant to this Agreement;
(b) any failure to perform any covenant or obligation required to be performed
by Seller or Parent under this Agreement; or (c) the Unassumed Obligations.
Buyer agrees to give Seller prompt notice of any action or proceedings to which
they or any of the Buyer Group believe they have a right of indemnification
hereunder, and failure to give such notice shall be a breach of this
Section 10.02; provided, however, that the failure to provide notice promptly to
Seller shall not release Seller from any liability that they may have to Buyer
or the Buyer Group, except to the extent that the failure to give prompt notice
materially prejudices Seller's ability to defend any such actions or
proceedings. If any action or proceeding shall be brought against Buyer or the
Buyer Group, and Seller shall be notified or otherwise learn of the commencement
thereof, then Seller shall have the right to participate in, and, to the extent
that it may wish, to assume the defense thereof, and after notice of its
election to assume the defense thereof, Seller will not be liable to Buyer or
the Buyer Group for any further legal or other expenses incurred by Buyer or the
Buyer Group in connection with any such action or proceeding. Buyer may
participate actively, at its expense, after notice of assumption of defense has
been given by Seller, in any negotiations, lawsuit or other resolution of such
claim. Buyer shall have the right to approve any out-of-court settlement if it
would divest Buyer of any Asset or otherwise materially affect the WSB acquired
by Buyer; provided that such approval shall not be unreasonably withheld.
Section 10.03. Agreement to Indemnify Seller. Buyer hereby agrees to indemnify,
defend and hold harmless Seller and any of its respective officers, directors,
shareholders or Affiliates (the "Seller Group") from and against all losses,
damages, liabilities, costs and expenses, including, without limitation,
reasonable attorneys' fees and expenses, incurred by Seller, the Seller Group or
any member thereof, directly or indirectly, by reason of or resulting from (a) a
breach or inaccuracy of any material representation or warranty of Buyer
contained in or made pursuant to this Agreement; (b) any failure to perform any
covenant or obligation required to be performed by Buyer under this Agreement;
or (c) any claims or damages relating to the Assumed Obligations set forth in
Section 2.05. Seller agrees to give Buyer prompt notice of any action or
proceeding to which it or any of the Seller Group believes they have a right of
indemnification hereunder, and failure to give such notice shall be a breach of
this Section 10.03; provided, however, that the failure to provide notice
promptly to Buyer shall not release Buyer from any liability that Buyer may have
to Seller or the Seller Group, except to the extent that the failure to give
prompt notice materially prejudices Buyer's ability to defend any such actions
or proceedings. If any action or proceeding shall be brought against Seller or
the Seller Group, and Buyer shall be notified or otherwise learn of the
commencement thereof, then Buyer shall have the right to participate in, and, to
the extent that they may wish, to assume the defense thereof, and after notice
of its election to assume the defense thereof, Buyer will not be liable to
Seller or the Seller Group for any further legal or other expenses incurred by
Seller or the Seller Group in connection with any such action or proceeding.
Seller may participate actively, at its expense, after notice of assumption of
defense has been given by Buyer, in any negotiations, lawsuit or other
resolution of such claim.
Section 10.04. Additional Agreements Concerning Indemnification. Buyer and
Seller and Parent agree that if either of them or the Buyer Group or the Seller
Group, respectively, becomes entitled to indemnification under this Agreement
(the "Indemnified Party"), they shall cooperate with the party obligated to
provide such indemnification (the "Indemnifying Party") and permit the
Indemnifying Party reasonable access to the Indemnified Party's books, records,
facilities and employees for the purpose of permitting the Indemnifying Party to
perform its obligations under this Article X.
Section 10.05. Minimum and Maximum Amounts. Notwithstanding anything to the
contrary in Article X hereof, (i) the Indemnifying Party shall not be required
to make any payment pursuant to the terms hereof or otherwise in connection with
any claims, demands, actions, losses, expenses or other liability incurred by
the Indemnifying Party in connection with or arising out of this Agreement
("Liabilities") until the aggregate amount of all Liabilities exceeds on a
cumulative basis Three Hundred Thousand Dollars ($300,000) (and then only to the
extent of the excess), and (ii) except as provided, in the following sentence,
the maximum amount that an Indemnifying Party shall be required to pay to the
Indemnified Party or anyone claiming by, through or under them, with respect to
Liabilities, shall be One Million Five Hundred Thousand Dollars ($1,500,000)
(the "Maximum Amount"). The limitations set forth in this Section 10.05 with
respect to the Maximum Amount shall not apply (i) to Liabilities arising out of
the breach of representations and warranties contained in Sections 4.02, 4.11,
4.12, 4.17, 4.20, 5.02 and 5.04, (ii) to Liabilities arising out of any matter
subject to indemnification pursuant to clause (c) of Section 10.02 or clause (c)
of Section 10.03 or (iii) to Liabilities arising out of the breach of the
covenant contained in Section 11.04.
For purposes of the indemnification obligations set forth in this Section 10.05,
all representations, warranties and covenants set forth in this Agreement shall
be assumed to be free of qualifications with respect to materiality.
Section 10.06. Exclusive Remedy. Subsequent to Closing, the provisions of this
Article X shall provide the exclusive monetary, but not injunctive, remedy of
the parties for any breach of this Agreement.
ARTICLE XI
ADDITIONAL AGREEMENTS OF THE PARTIES
Section 11.01. Public Announcements. Buyer and Seller shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to this Agreement or the transactions contemplated hereby and shall
not issue any such press release or make any such public statement prior to such
consultation.
Section 11.02. Employees.
(a) Buyer shall through one of its wholly owned subsidiaries employ (i) all
employees of Seller who (A) have been engaged directly in the WSB (except
for the operations relating to the Vacuum Trucks), including rig crews and
supervisors and certain administrative personnel, (B) are listed on
Schedule 4.15, (C) are in active service on the Closing Date and not on
leave of absence for any health or non-health related reason or confined in
any health care facility, and (D) pass a drug test and/or the physical
exam, which, to the extent applicable, will be administered by Buyer or its
subsidiaries prior to the Closing, other than those listed on Schedule
11.02 (the"Transferred Employees") and (ii) all Vacuum Truck Employees who
pass the drug test and/or the physical exam, which, to the extent
applicable, will be administered by Buyer or its subsidiaries prior to the
Closing, other than those listed on Schedule 11.02 (the "Vacuum Truck
Transferred Employees"). Seller shall remain solely responsible for those
employees that are listed on Schedule 11.02 and Buyer shall have no
responsibility therefor, including responsibility for severance or other
benefits for such employees. Seller shall provide eligible employees (and
dependants thereof) with COBRA Coverage upon their termination of
employment with Seller according to the applicable requirements of ERISA
and the Code and any applicable state law. Seller will retain liability for
all workers' compensation claims for work-related injuries occurring prior
to the Closing Date, or, with respect to the Vacuum Truck Transferred
Employees, the Vacuum Truck Closing Date.
(b) As soon as administratively practicable following the Closing Date, or,
with respect to the Vacuum Truck Transferred Employees, the Vacuum Truck
Closing Date, Seller shall cause to be transferred from the trustee of the
Flint Companies Hourly Savings Plus Plan and from the trustee of the Flint
Engineering & Construction Co. Savings Plus Plan (collectively, the "Seller
Plan") to the trustee of the Key Energy Group, Inc. 401(k) Savings and
Retirement Plan ("Buyer's 401(k) Plan") an amount in cash equal to the
aggregate account balances of the Transferred Employees and the Vacuum
Truck Transferred Employees who transfer to employment with Buyer under the
Seller Plan determined as of the transfer date (which shall be a valuation
date) in accordance with the methods of valuation as set forth in the
Seller Plan; provided, however, that to the extent any Transferred Employee
or any Vacuum Truck Transferred Employee owes any amount to the Seller Plan
pursuant to the terms of a loan from such plan to such Transferred Employee
or Vacuum Truck Transferred Employee, as the case may be, an in-kind
transfer of such loan shall be made in lieu of the transfer of cash. From
and after the date of such transfer, Buyer shall cause Buyer's 401(k) Plan
to assume the obligations of the Seller Plan with respect to benefits
accrued by the Transferred Employees and the Vacuum Truck Transferred
Employees under the Seller Plan, and the Seller Plan shall cease to be
responsible therefor. Buyer and Seller shall cooperate in making all
appropriate arrangements and filings, if any, in connection with the
transfer described above. Further, Buyer and Seller shall cooperate and
take such actions as are necessary to permit the continuation of loan
repayments by Transferred Employees and Vacuum Truck Transferred Employees
to the Seller Plan by payroll deductions during the period beginning on the
Closing Date, or in the case of the Vacuum Truck Transferred Employees, the
Vacuum Truck Closing Date, and ending on the date of the transfer described
in this Subsection. Seller represents, covenants and agrees with respect to
the Seller Plan, and Buyer represents, covenants and agrees with respect to
Buyer's 401(k) Plan, that, as of the date of the transfer described in this
paragraph, such plan will satisfy the requirements of Sections 401(a), (k),
and (m) of the Code. Buyer and Seller agree to enter into a "spin-off
agreement" to record and effectuate the transfer of plan assets from the
Seller Plan trust to Buyer's 401(k) Plan trust for the benefit of the
Transferred Employees, the Vacuum Truck Transferred Employees and their
respective beneficiaries.
(c) Effective as of the Closing, Buyer assumes, and Seller shall have no
further responsibility for, any accrued but unused vacation liabilities
that are set forth on Schedule 4.15 as of the Closing Date. Buyer agrees
that employees of the WSB shall be entitled to use such vacation in
accordance with the vacation policy currently in effect as of the Closing
Date.
Section 11.03. Non-Solicitation. For a period of one year from the date of
Closing, neither Seller nor any of its directors will directly or indirectly
solicit, or attempt to solicit, for employment any Transferred Employee or any
Vacuum Truck Transferred Employee.
Section 11.04. Covenant Not to Compete. Seller and Parent covenant and agree
that, for a period of three years from the date of Closing (the "Noncompete
Term"), neither they nor any of their subsidiaries will, directly or indirectly,
(i) engage in the WSB acquired by Buyer within the states of Utah, Texas,
Oklahoma, Colorado, Kansas, North Dakota, New Mexico or Montana (the "Restricted
Territory") or (ii) own any interest in any person, corporation, partnership,
proprietorship or other business organization or association (whether as
stockholder, agent, independent contractor, consultant, representative, partner,
lender (other than through a passive, non-control investment in an entity that
acts as a lender) or otherwise) which derives a substantial portion of its
revenues from business operations which compete with the WSB acquired by Buyer.
Notwithstanding anything to the contrary in this Agreement, Seller may (A) make
passive investments of five percent (5%) or less in any outstanding equity
securities of corporations whose equity securities are publicly traded and which
compete with the WSB, (B) acquire outstanding equity securities of a corporation
that competes in the WSB in the Restricted Territory whose equity securities are
publicly traded in connection with the sale of the capital stock or
substantially all of the assets of Servicios Petroleros Flint C.A., a Venezuelan
corporation, the capital stock of which is owned by Flint Construction Company
of South America, Inc., a majority shareholder of Parent; provided that such
acquisition will not result in Seller (or a successor thereof) being a majority
or controlling shareholder of such entity, or (C) maintain a passive, minority
investment in an entity to be formed with SCF Partners, Inc. (the "SCF Entity")
in conjunction with the sale of the remaining assets of Seller even in the case
that the SCF Entity invests in an entity that competes in the WSB in the
Restricted Territory; provided that no employee, officer or director of Seller
or Parent (or successors thereof) may work for, render assistance or advice to,
or participate in the management of the well servicing business of such entity,
except for any work, assistance, advice or participation that may be rendered
indirectly and solely as a result of such employee's, officer's or director's
obligations or duties as a director of such entity.
In addition, Seller and Parent agree that for a period of three years from the
Closing Date, they will not:
(a) request any present customers or suppliers of the WSB or any customers of
Buyer or any affiliates of Buyer ("Buyer's Affiliates") to curtail or
cancel their business with Buyer (or Buyer's Affiliates);
(b) disclose to any person, firm or corporation any trade, technical or
technological secrets of or any details of the organization or business
affairs of the WSB; or
(c) induce or actively attempt to influence any employee of Buyer (or Buyer's
Affiliates) to terminate his or her employment.
Seller and Parent agree that if either the length of time or geographical area
as set forth in this Section 11.04 is deemed too restrictive in any court
proceeding, the court may reduce such restrictions to those which it deems
reasonable under the circumstances. The obligations expressed in this Section
11.04 are in addition to any other obligations that Seller and Parent may have
under the laws of any state requiring a corporation selling its assets (or a
shareholder of such corporation) to limit its activities so that the goodwill
and business relations being transferred with such assets will not be materially
impaired. Seller and Parent further acknowledge that Buyer and Buyer's
Affiliates do not have any adequate remedy at law for the breach or threatened
breach by Seller or Parent of the covenants contained in this Section 11.04, 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 Seller or Parent from such
breach or threatened breach. If any provisions of this Section 11.04 are held to
be invalid or against public policy, the remaining provisions of this Section
11.04 and the Agreement shall not be affected thereby. Seller and Parent
acknowledge that the covenants set forth in this Section 11.04 are being
executed and delivered by such party in consideration of (i) the covenants of
Buyer contained in this Agreement, (ii) the Non-Compete Payment, and (iii) for
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged.
ARTICLE XII
TERMINATION OF AGREEMENT
Section 12.01. Termination.
This Agreement may be terminated at any time prior to the Closing:
(a) by mutual agreement of Seller and Buyer;
(b) by Buyer, if notice has been given to Seller of the occurrence of a
material violation or breach by Seller of any of its agreements,
representations or warranties contained in this Agreement that has not been
waived in writing; provided, however, that Seller shall, after receipt of
such notice, have a period of twenty (20) business days in which to cure
such default, and, if it is so cured, Buyer shall, for that reason, have no
right to terminate this Agreement;
(c) by Seller, if notice has been given to Buyer of the occurrence of a
material violation or breach by Buyer of any of its agreements,
representations or warranties contained in this Agreement which has not
been waived in writing; provided, however, that Buyer shall, after receipt
of such notice, have a period of twenty (20) business days in which to cure
such default, and, if it is so cured, Seller shall, for that reason, have
no right to terminate this Agreement; or
(d) by any party hereto if the Closing shall not have occurred on or before
November 1, 1998; provided, however, that any termination by a defaulting
party shall not affect any rights that a non-defaulting party may have
against such defaulting party.
Section 12.02. Effect of Termination. In the event of the termination of this
Agreement by either party in accordance with the provisions of Section 12.01
hereof, this Agreement shall become void and have no force or effect, without
any liability on the part of any party hereto (or its stockholders or
controlling persons or directors or officers) and with each party bearing its
own expenses as incurred; provided, however, that if such termination is the
result of the non-terminating party having breached (i) its obligations under
Section 6.04 or 7.05 hereof, as applicable, or (ii) any of its other material
representations, warranties, covenants or agreement contained herein, the
terminating party shall have the right to issue all remedies available to it at
law or in equity as a result of such breach (including reasonable attorney's
fees and expenses incurred in connection with enforcing such remedies).
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Interpretive Provisions. For purposes of this Agreement, the
phrase "to the knowledge" and any other phrases generally referring to the
knowledge of a party hereto, shall mean the actual knowledge of such party's
officers or of such party's managerial and supervisory personnel having
responsibility for the matters in question.
Section 13.02. Expenses. Except as otherwise expressly provided in this
Agreement, each party hereto shall bear all of its legal, accounting and other
costs and expenses incident to the negotiation of this Agreement and the
performance of the transactions contemplated herein, including any fees paid to
any governmental entity in connection with the obtaining of any consent required
or contemplated by this Agreement.
Section 13.03. Reliance. The parties hereto agree that, notwithstanding the
right of any party to this Agreement to investigate the affairs of any other
party to this Agreement, the party having such right shall have the right to
rely fully upon the representations and warranties of the other party expressly
contained in the Agreement and on the accuracy of any exhibit or other document
attached hereto or referred to herein or delivered by such other party or
pursuant to this Agreement.
Section 13.04. Notices. All notices, consents, requests or other documents
required or expressly provided to be furnished hereunder shall be in writing and
delivered by hand, or sent by facsimile transmission, prepaid air courier or
prepaid U.S. registered mail, return receipt requested, as follows:
If to Seller: Flint Industries, Inc.
P.O. Box 490
Tulsa, Oklahoma 74101-0490
Attn: John R. Bates
Fax: 918/584-6957
with a copy to: Vinson & Elkins L.L.P.
1001 Fannin Street, Suite 2300
Houston, Texas 77002-6760
Attn: T. Mark Kelly
Fax: 713/615-5531
and to: Doerner, Saunders, Daniel & Anderson, L.L.P.
320 South Boston, Suite 500
Tulsa, Oklahoma 74103
Attn: Lawrence T. Chambers, Jr.
Fax: 918/591-5360
If to Buyer: Key Energy Group, Inc.
Two Tower Center, 20th Floor
East Brunswick, New Jersey 08816
Attn: General Counsel
Fax: 732/247-5148
provided that any notice furnished by facsimile shall be followed immediately
with notice by delivery using one of the other means of notice provide for
above. The addresses and facsimile numbers for notices to a party given pursuant
to this Agreement may be changed by means of a written notice given to the other
party in the manner stated above at least two business days prior to the
effective date of such change. Any notice delivered by any of the means provided
for above shall be considered effective upon receipt by or on behalf of the
intended recipient; provided, however, that any notice sent by prepaid U.S.
registered mail, return receipt requested, to the address provided for above
shall be considered effective on the fifth day after mailing, if not previously
received.
Section 13.05. Headings; References. The descriptive headings of the Articles
and Sections of this Agreement are inserted for convenience only and do not
constitute a part of the Agreement. All references to "Section" shall refer to a
section of this Agreement and all references to a "Schedule" shall refer to a
Schedule attached hereto unless otherwise stated.
Section 13.06. Entire Agreement. This Agreement (including the documents,
schedules, attachments, exhibits, annexes and instruments referred to herein)
constitutes the entire agreement between the parties and supersedes all prior
agreements, documents or other instruments with respect to the matters covered
hereby. The parties will make, and have made, no oral agreements or undertakings
pertaining to the subject matter of this Agreement, except for any that are no
longer in effect.
Section 13.07. Waiver. At any time prior to the Closing, either party may
(a) extend the time for the performance of any of the obligations or other acts
of the other party or (b) waive compliance with any of the agreements of the
other party or with any conditions to its own obligations. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party.
Section 13.08. Severability. If any provision of this Agreement is declared by a
court of competent jurisdiction to be invalid or unenforceable, such declaration
shall not affect the validity or enforceability of the remaining provisions of
this Agreement, which shall continue in full force and effect. In such event,
however, the parties shall negotiate in good faith to replace such invalid or
unenforceable provision with a valid and enforceable provision that places each
party in substantially the same position it would have been in had such original
provision been valid and enforceable.
Section 13.09. Amendment. This Agreement (including the documents, schedules,
attachments, exhibits, annexes and instruments referred to herein) may not be
amended except by an instrument in writing signed by each of the parties.
Section 13.10. Further Actions. Each party shall execute and deliver such other
certificates, agreements and other documents and take such other actions as may
reasonably be requested by the other party in order to consummate or implement
the transactions contemplated by this Agreement.
Section 13.11. Assignment; Parties in Interest. The rights under this Agreement
shall not be assignable nor the duties delegable by any party without the
written consent of the other party, which consent shall not be unreasonably
withheld; provided, however, that Buyer may assign the rights to a subsidiary;
provided, further, that such assignment shall not affect Buyer's obligations
hereunder. This Agreement shall be binding upon and inure solely to the benefit
of each of the parties hereto and their permitted assigns, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement. Nothing in this Agreement shall be construed to create any rights or
obligations except among the parties hereto, and no person or entity shall be
regarded as a third-party beneficiary of this Agreement.
Section 13.12. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF OKLAHOMA, WITHOUT REGARD TO CONFLICT
OF LAW RULES THAT WOULD DIRECT APPLICATION OF THE LAWS OF ANOTHER JURISDICTION,
EXCEPT TO THE EXTENT THAT IT IS MANDATORY THAT THE LAW OF SOME OTHER
JURISDICTION, WHEREIN THE ASSETS ARE LOCATED, SHALL APPLY, EXCLUDING THE
CONFLICT OF LAWS RULES OF SUCH STATE.
Section 13.13. Specific Performance. Buyer and Seller each agree that, in
addition to the other legal remedies provided by the terms of this Agreement,
they shall be entitled to a decree of specific performance to enforce this
Agreement.
Section 13.14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed an original but all
of which together shall constitute one and the same instrument.
[remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by Buyer
and Seller as of the date first above written.
BUYER:
KEY ENERGY GROUP, INC.
By
Name: Kenneth V. Huseman
Title: Executive Vice President
and Chief Operating Officer
SELLER:
FLINT ENGINEERING &
CONSTRUCTION CO.
By
Name: Gary E. Whipple
Title: President
PARENT:
FLINT INDUSTRIES, INC.
By
Name: John R. Bates
Title: President
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
DAWSON PRODUCTION PARTNERS, L.P.,
a Delaware limited partnership
("PURCHASER")
DAWSON PRODUCTION SERVICES, INC.
a Texas corporation
("DPS")
AND
HELLUMS SERVICES II, INC.
SUPERIOR COMPLETION SERVICES, INC.
SOUTH TEXAS DISPOSAL, INC.
ELSIK II, INC.,
all Texas corporations
("SELLERS"),
AND
ROGER D. HELLUMS
CHARLES C. FORBES, JR.
ROBERT W. RADLE, JR.
RONALD D. BRIEDEN
JOHN E. CRISP
CHARLES TALLEY
and
JAMES J. ACKER
(the "SELLER SHAREHOLDERS")
August 14, 1998
================================================================================
This Agreement contains important indemnity provisions.
See particularly Article VI.
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I - PURCHASE AND SALE 1
1.1 Agreement to Sell 1
(a) Included Assets 2
(b) Excluded Assets 3
1.2 Agreement to Purchase 3
1.3 The Purchase Price; Tax Basis 3
1.4 Assumption of Liabilities 4
1.5 Prorations 4
1.6 Transfer Taxes; Recording Fees 5
ARTICLE II - CLOSING, ITEMS TO BE DELIVERED, THIRD PARTY CONSENTS
AND FURTHER ASSURANCES 5
2.1 Closing 5
2.2 Items to be Delivered at Closing 6
2.3 Release of Liens 7
2.4 Third Party Consents 7
2.5 Further Assurances 7
2.6 No Equitable Conversion 8
ARTICLE III - REPRESENTATIONS AND WARRANTIES 8
3.1 Representations and Warranties of Seller 8
(a) Corporate Existence 8
(b) Corporate Power; Authorization;
Enforceable Obligations 8
(c) Validity of Contemplated
Transactions, Etc 8
(d) No Third Party Options 9
(e) Financial Statements 9
(f) Taxes; Tax and Other Returns and Reports 10
(g) Books of Account 10
(h) Existing Condition. 10
(i) Title to Properties 11
(j) Compliance with Laws; Authorizations 11
(k) Transactions With Affiliates 11
(l) Litigation 12
(m) Equipment 12
(n) Contracts and Commitments 12
(o) Environmental Matters 13
(p) Availability of Documents 15
(q) Assets 16
(r) Restrictions 16
(s) Conditions Affecting Seller 16
(t) Employee Benefit Plans 16
(u) Personnel. 17
(v) Legal Compliance; Undisclosed Liabilities. 18
(w) Inventory. 18
(x) Warranty. 18
(y) Investment 18
(z) Disclosure. 19
3.2 Representations and Warranties of Purchaser 19
(a) Partnership 19
(b) Power and Authorization 19
(c) Noncontravention. 19
3.3 Survival 19
ARTICLE IV - AGREEMENTS PENDING CLOSING 20
4.1 Agreements of Seller Pending the Closing 20
(a) Business in the Ordinary Course 20
(b) Conduct of Business 20
(c) Exclusive Dealing 20
(d) Access 20
(e) Press Release 21
(f) Actions of Directors and Shareholders 21
(g) Employee Matters. 21
(h) Actions of Seller 21
4.2 Agreements of Purchaser Pending the Closing 21
(a) Press Release 21
(b) Actions of Directors of Purchaser. 22
(c) Actions of Purchaser 22
ARTICLE V - CONDITIONS PRECEDENT TO THE CLOSING 22
5.1 Conditions Precedent to Purchaser's Obligations 22
(a) Representations and Warranties True
as of the Closing Date 22
(b) Compliance with this Agreement 22
(c) Closing Certificate 22
(d) Opinion of Counsel for Seller 22
(e) No Threatened or Pending Litigation 22
(f) Consents and Approvals 23
(g) Material Adverse Changes 23
(h) Approval of Counsel; Corporate Matters 23
(i) Physical Inventory 23
(j) Employment Contracts 23
(k) SWD Lease 23
(l) Frac Tanks 23
5.2 Conditions Precedent to the Obligations of Seller 23
(a) Representations and Warranties True
as of the Closing Date 23
(b) Compliance with this Agreement 24
(c) Closing Certificates 24
(d) No Threatened or Pending Litigation 24
(e) Consent of Shareholders. 24
ARTICLE VI - INDEMNIFICATION 24
6.1 Definitions 24
6.2 Indemnification by Seller and
the Seller Shareholders 24
6.3 Indemnification by Purchaser 25
6.4 Procedure 26
6.5 Payment and Offset 26
6.6 Failure to Pay Indemnification 27
6.7 Express Negligence 27
6.8 Other Rights and Remedies Not Affected 27
ARTICLE VII - POST CLOSING MATTERS 27
7.1 Arbitration. 27
(a) Negotiation Period. 27
(b) Commencement of Arbitration. 27
(c) Consolidation of Hearings. 28
(d) Discovery. 28
(e) Conclusion of Arbitration. 28
(f) Expenses of Arbitrators. 28
7.2 Discharge of Business Obligations. 28
7.3 Maintenance of Books and Records 28
7.4 Payments Received 29
7.5 Inquiries 29
7.6 Covenant Not to Compete 29
7.7 Transition Period 30
(a) Collections 30
(b) Accounting 30
(c) Licenses and Permits 30
7.8 Accounting Records 30
7.9 Nondisclosure of Proprietary Information 30
7.10 Contact with Former Employees 31
7.11 Registration of Buyer Common Stock. 31
(a) Registration Obligation. 31
(b) Blue Sky. 31
(c) Suspension Period. 31
(d) Registration Expenses. 31
7.12 Health Insurance. 31
ARTICLE VIII - TERMINATION 32
8.1 Events of Termination 32
8.2 Liability Upon Termination 32
8.3 Notice of Termination 32
ARTICLE IX - MISCELLANEOUS 32
9.1 Finders' Fees 32
9.2 Expenses 33
9.3 Assignment and Binding Effect 33
9.4 Notices 33
9.5 Governing Law 34
9.6 No Benefit to Others 34
9.7 Entire Agreement 34
9.8 Headings 34
9.9 Severability 34
9.10 Counterparts 34
9.11 Construction 35
9.12 Waiver 35
9.13 Specific Performance 35
9.14 Submission to Jurisdiction 35
9.15 Good Faith 35
9.16 Attorneys' Fees 35
DEFINITIONS:
The definition of "Affected Employees" can be found in Section 3.1(t).
The definition of "Agreement" can be found on page 1.
The definition of "Assets" can be found in Section 1.1.
The definition of "Assigned Contracts" can be found in Section 1.1(a)(i).
The definition of "Assumed Liabilities" can be found in Section 1.4(a).
The definition of "Authorizations" can be found in Section 3.1(j).
The definition of "Business" can be found on page 1.
The definition of "Closing" can be found in Section 2.1.
The definition of "Closing Date" can be found in Section 2.1.
The definition of "Contamination" can be found in Section 3.1(o)(i)(A).
The definition of "Contracts" can be found in Section 3.1(c)(iv).
The definition of "Damages" can be found in Section 6.2.
The definition of "Dispute Notice" can be found in Section 7.1(a).
The definition of "Effective Date" can be found on page 1.
The definition of "Employee Benefit Plan" can be found in Section 3.1(t)(i).
The definition of "Environmental, Health and Safety Laws" can be
found in Section 3.1(o)(i)(B).
The definition of "Environmental Loss" can be found in Section 3.1(o)(i)(C).
The definition of "Equipment" can be found in Section 1.1(a)(v).
The definition of "Equipment Leases" can be found in Section 1.1(a)(ii).
The definition of "ERISA" can be found in Section 3.1(t).
The definition of "Excluded Assets" can be found in Section 1.1(b).
The definition of "Fuel and Inventory" can be found in Section 1.1(a)(ix).
The definition of "Governmental Entity" can be found in Section 6.1(a).
The definition of "Hazardous Substance" can be found in Section 3.1(o)(i)(D).
The definition of "Indemnitee" can be found in Section 6.1(b).
The definition of "Indemnitor" can be found in Section 6.1(c).
The definition of "Negotiation Period" can be found in Section 7.1(a).
The definition of "Operating Assets" can be found in Section 1.1(a)(iii).
The definition of "Permits" can be found in Section 1.1(a)(viii).
The definition of "Permitted Liens" can be found in Section 3.1(i).
The definition of "person" can be found in Section 9.11.
The definition of "Personal Property" can be found in Section 1.1(a)(vii).
The definition of "Property Taxes" can be found in Section 1.5.
The definition of "Proprietary Information" can be found in Section 7.9.
The definition of "Purchase Price" can be found in Section 1.3(a).
The definition of "Purchaser" can be found on page 1.
The definition of "Purchaser Losses" can be found in Section 6.2.
The definition of "Records" can be found in Section 1.1(a)(vi).
The definition of "Regulations" can be found in Section 3.1(j).
The definition of "Release" can be found in Section 3.1(o)(i)(E).
The definition of "Remediation" can be found in Section 3.1(o)(i)(F).
The definition of "Seller" can be found on page 1.
The definition of "Seller Losses" can be found in Section 6.3.
The definition of "Seller Shareholders" can be found on page 1.
The definition of "Tax Returns" can be found in Section 3.1(f).
The definition of "Taxes" can be found in Section 3.1(f).
The definition of "Third Party Claims" can be found in Section 6.4(b).
The definition of "Transition Period" can be found in Section 7.7.
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of August 14,
1998 (the "Effective Date"), is entered into by and among Hellums Services
II, Inc. ("Hellums"), Superior Completion Services, Inc. ("Superior"),
South Texas Disposal, Inc. ("South Texas"), and Elsik II, Inc. ("Elsik"),
each of which is a Texas corporation (together, the "Sellers"), and Roger
D. Hellums, Charles C. Forbes, Jr., Robert W. Radle, Jr., Ronald D.
Brieden, John E. Crisp, Charles Talley and James J. Acker (together, the
"Seller Shareholders"), Dawson Production Services, Inc., a Texas
corporation ("DPS"), and Dawson Production Partners, L.P., a Delaware
limited partnership (the "Purchaser").
RECITALS:
(1) The Sellers are engaged in the following aspects of the oil field servicing
business (collectively, the "Business"): Hellums is engaged in the business
of supplying vacuum truck, frac tank, open top tank and related services;
Superior is in workover rig business; South Texas is in the business of
operating salt water disposal wells; and Elsik is in the business of
supplying camp rental equipment, including trailer houses and satellite
antennas.
B. The Seller Shareholders own 79.4% of the outstanding stock of Hellums and
South Texas; the Seller Shareholders own 84.5% of the outstanding stock of
Elsik; and Hellums owns 100% of the outstanding stock of Superior;
C. DPS owns all of the issued and outstanding stock of Dawson Production
Management, Inc., a Delaware corporation ("Management"), Dawson Production
Acquisition Corp., a Delaware corporation ("Acquisition Corp."), and Dawson
Production Taylor, Inc., a Delaware corporation ("Taylor"); Management is
the sole general partner of Purchaser, and Acquisition Corp. and Taylor own
all of the limited partnership interests of Purchaser.
D. Each of the Boards of Directors of the Sellers and DPS, and the General
Partner of Purchaser has approved this Agreement and the transactions
contemplated by this Agreement;
E. Subject to the limitations and exclusions contained in this Agreement and
on the terms and conditions hereinafter set forth, the Sellers desire to
sell and Purchaser desires to purchase, and DPS desires to cause Purchaser
to purchase the Business including all of the oil field servicing
operations and substantially all of the oil field servicing assets of the
Sellers.
F. It is the intention of the Purchaser and the Sellers that, unless otherwise
specified in this Agreement, all damages, liabilities and losses not in the
ordinary course of business that result from events or conditions that
occur or exist prior to the Closing (whether or not reported prior to the
Closing) shall be the financial responsibility of the Sellers and subject
to the indemnification provisions provided in Section 6.2 of this
Agreement, and that all such damages, liabilities and losses that result
from events or conditions that occur or first exist after the Closing shall
be the financial responsibility of the Purchaser and subject to the
indemnification provisions provided in Section 6.3 of this Agreement.
NOW, THEREFORE, in consideration of the recitals and of the respective
covenants, representations, warranties and agreements contained in this
Agreement, and intending to be legally bound by this Agreement, the parties
agree as follows:
I. ARTICLE - PURCHASE AND SALE
A. Agreement to Sell. At the Closing (as defined in Section 2.1), and except
as otherwise specifically provided in this Section 1.1, the Sellers shall
grant, sell, convey, assign, transfer and deliver to Purchaser, upon and
subject to the terms and conditions of this Agreement, all right, title and
interest of the Sellers in and to (a) the Business as a going concern, and
(b) all of the assets, properties and rights of the Sellers constituting
the Business or used therein, of every kind and description, real, personal
and mixed, tangible and intangible, wherever situated (which Business,
assets, properties and rights, together with the Vehicle Sub Stock as
hereinafter defined, are herein sometimes collectively referred to as the
"Assets"), free and clear of all mortgages, liens, pledges, security
interests, charges, claims, restrictions and encumbrances of any nature
whatsoever, except Permitted Liens (as defined in Section 3.1(i)).
(a) Included Assets. The Assets shall include, without limitation, the
following assets, properties and rights of the Sellers used directly or
indirectly in the conduct of, or generated by or constituting the Business:
(i) all Contracts (as hereinafter defined) to which any one or more of the
Sellers is a party all of which are described in Schedule 1.1(a)(i)
(collectively, the "Assigned Contracts");
(i) all of the Sellers' rights in and to operating leases of personal property
including vehicles, all of which are described in Schedule 1.1(a)(ii) (the
"Equipment Leases"), subject to the consents of lessors, if required;
(i) all of Sellers' interest in equipment material to the operation of the
Business, all of which is described on Schedule 1.1(a)(iii) (the "Operating
Assets");
(i) all of the issued and outstanding stock of Hellums Vehicle Corporation, a
Texas corporation (the "Vehicle Sub Stock"), which, as of the Closing Date,
will own all of the vehicles of the Sellers (the "Vehicles") all of which
are listed in Schedule 1.1(a)(iv);
(i) all office furniture, fixtures and equipment owned by the Sellers and all
other equipment, parts, materials, supplies, furniture and fixtures owned
by the Sellers including, without limitation, the equipment, furniture,
fixtures, computers, servers, local area network systems, intranet systems,
financial accounting equipment, and systems described on Schedule 1.1(a)(v)
(collectively, the "Equipment");
(i) all books, records, correspondence, files, plans and other documents and
instruments of the Sellers, including but not limited to customer and
supplier information and sales information relating to the Business or to
the Assets (collectively, the "Records") subject to a continuing right of
the Sellers and the Seller Shareholders to access and copy the Records for
tax reporting purposes;
(i) all other intangible and tangible personal property, all technologies,
methods, formulations, data bases, trade secrets, customer lists, know-how,
inventions and other intellectual property used in the Business or under
development, and owned, leased or licensed by the Sellers, all of which is
described on Schedule 1.1(a)(vii) (collectively, the "Personal Property");
(i) all permits, authorizations, certificates, approvals, registrations, or
other approvals and licenses granted by any federal, state, local or
foreign court, arbitrator or administrative or Governmental Entity (as
hereinafter defined) in connection with the Business, which are described
on Schedule 1.1(a)(viii) (collectively, the "Permits") to the extent that
they may be legally assigned by the Sellers; and
(i) all motor fuel and inventory on hand on the Closing Date, including without
limitation, all motor fuel, oil, lubricants, drilling mud and other items
of tangible personal property of similar character (collectively, the "Fuel
and Inventory");
(i) all other personal property not listed in this Section 1.1(a) or excluded
by Section 1.1(b), which is owned by any of the Seller or the Seller
Shareholders and is reasonably necessary to operate the Business.
(a) Excluded Assets. The Assets shall not include the corporate seals,
certificates of incorporation, minute books, stock books, or other records
having to do with the corporate organization of the Sellers, cash, the
Sellers' prepaid items and the deposits not subject to proration under
Section 1.5; the Assets additionally shall not include the rights which
accrue or will accrue to the Sellers under this Agreement, the Sellers'
customers' accounts receivable and un-invoiced work relating to the
Business in existence on the Closing Date (whether billed or unbilled as of
the Closing), the rights to any of the Sellers' claims for any federal,
state, local, or foreign tax refunds, the Sellers' financial and accounting
records not relating to the Business, Sellers' tax returns, or any items
listed on Schedule 1.1(b) all of which are referred to in this Agreement as
the "Excluded Assets."
A. Agreement to Purchase. At the Closing, Purchaser shall purchase the Assets
from the Sellers upon and subject to the terms and conditions of this
Agreement and in reliance on the representations, warranties and covenants
of the Sellers contained herein, in exchange for the Purchase Price (as
defined in Section 1.3). In addition, Purchaser shall assume, and DPS shall
cause Purchaser to assume, at the Closing and agree to pay, discharge or
perform, as appropriate, certain liabilities and obligations of the
Sellers, but only to the extent expressly provided in Section 1.4. Except
as expressly provided in Section 1.4, Purchaser shall not assume or be
responsible for any liabilities or obligations based on events occurring
prior to Closing relative to the Assets, the Business or the Sellers.
A. The Purchase Price; Tax Basis.
(a) The Purchase Price. In consideration of the transfer to Purchaser of the
Assets and the undertakings of the Seller Shareholders, and subject to
adjustment as provided below, Purchaser shall pay (and DPS shall cause
Purchaser to pay) Forty-Six Million Dollars ($46,000,000) (the "Purchase
Price"), as follows: (i) Thirty-Nine Million Eight Hundred Twenty Thousand
Dollars ($39,820,000) shall be paid to the individual Sellers in the
amounts set forth on Schedule 1.3(a) by wire transfer at the Closing, and
(ii) Six Million One Hundred Eighty Thousand Dollars ($6,180,000) shall be
delivered into escrow (together, the "Cash") to be held pursuant to the
escrow agreement in the form of Exhibit A (the "Escrow Agreement").
The foregoing form of payment of the Purchase Price is predicated on the
presumption that DPS shall be merged with Key Energy Group, Inc., a
Maryland corporation ("Key"), or its wholly owned subsidiary (the
"Merger"). If, at the time of the Closing, Key has not completed the
Merger, or, in the reasonable judgment of Purchaser, it is unlikely that
the Merger will be completed, then Purchaser shall have the right to pay
Eleven Million Dollars ($11,000,000) of the Purchaser Price by delivering
880,000 shares of unregistered common stock, $0.01 par value per share, of
DPS in the names and in the amounts set forth on Schedule 1.3(a) (the
"Shares"). The Shares shall be subject to a Registration Rights Agreement
in the form of Exhibit B (the "Registration Rights Agreement").
Notwithstanding the foregoing, the Purchase Price shall be reduced (by a
reduction in the amount wire transferred to the Sellers at the Closing) by
the amount, if any, (i) determined in accordance with Section 1.5 of this
Agreement and (ii) by the amount of accrued vacation shown on Schedule
3.1(u). In addition, the Purchaser Price shall be adjusted after the
Closing in accordance with Sections 1.3(b) and 1.3(c).
(a) Seller Tax Basis and Fair Market Value of Assets. The fair market value and
the tax basis for federal income tax purposes of the Assets of the Sellers
being transferred to Purchaser shall be set forth on Schedule 1.3(b). The
Sellers and Purchaser each hereby covenant and agree that such amounts
reflect the fair market value of the Assets and that none of them, directly
or indirectly, through a subsidiary or affiliate or otherwise, will take a
position on any income tax return, before any governmental agency charged
with the collection of any income tax, or in any judicial proceeding that
is in any way inconsistent with the tax basis and fair market value of the
Assets set forth on Schedule 1.3(b). Such allocations will be reflected in
Forms 8594 to be signed and filed by Seller and Purchaser in accordance
with Section 1060 of the Internal Revenue Code of 1986, as amended (the
"Code"). In addition, the Purchase Price payable under Section 1.2 shall be
allocated in the manner set forth on Schedule 1.3(b).
A. Assumption of Liabilities.
(a) At the Closing and except as otherwise specifically provided in this
Section 1.4, Purchaser shall assume and agree to pay, discharge or perform,
as appropriate, the liabilities and obligations of the Sellers set forth on
Schedule 1.4(a) (the "Assumed Liabilities"); provided, however, that the
aggregate amount of any debt and leases included in the Assumed Liabilities
shall not exceed $150,000.
(b) Notwithstanding Section 1.4(a), it is expressly understood that, other than
obligations and liabilities expressly assumed in Section 1.4(a), Purchaser
shall not be liable for, and shall not assume, any of the Sellers' or the
Seller Shareholders' obligations or liabilities, whether known or unknown,
matured or unmatured, or fixed or contingent, including but not limited to
liabilities relating to events occurring prior to the Closing, any Taxes
(as hereinafter defined, other than those pro rated as of the Closing
Date), or any liabilities under any Employee Benefit Plans of the Sellers.
The Sellers shall remain obligated to pay and discharge any liabilities and
obligations not expressly assumed by Purchaser hereby. The Sellers and the
Seller Shareholders hereby agree that they will indemnify Purchaser for any
liabilities of the Sellers not expressly assumed pursuant to Section 1.4(a)
by Purchaser and Purchaser and DPS agree that they will indemnify the
Sellers and the Seller Shareholders with respect to the Assumed
Liabilities.
A. Prorations. All annual or periodic ad valorem fees, taxes and assessments,
licensing fees and vehicle use fees, and similar charges imposed by taxing
authorities on the Assets (collectively, "Property Taxes") shall be borne
and paid (a) by Seller for all full tax years or periods ending before the
date of the Closing and for that portion of any tax year or period ending
on or after the effective date of Closing from the date of commencement of
such year or period to the date immediately preceding the effective date of
the Closing and (b) by Purchaser for all full tax years or periods
beginning on or after the effective date of Closing and for that portion of
any tax year or period ending on or after the effective date of the Closing
from and including the effective date of Closing to the final date of such
year or period, regardless of when or by which party such Property Taxes
are actually paid to the applicable taxing authority. In addition, all
rents and other lease charges, power and utility charges, license or other
fees, Assigned Contracts, and similar items shall be allocated between
Purchaser and the Sellers effective as of 12:01 a.m. on the effective date
of the Closing. Such allocations shall be determined and payment
accordingly made from one party to the other, as the case may be, on the
date of the Closing to the extent they are known and agreed to by Purchaser
and Seller; otherwise such allocations shall be determined and payment made
(effective as of 12:01 a.m. on the effective date of the Closing) as soon
as practicable but not later than the date 30 days thereafter.
I. ARTICLE - CLOSING, ITEMS TO BE DELIVERED,
THIRD PARTY CONSENTS AND FURTHER ASSURANCES
A. Closing. Subject to the terms and conditions of this Agreement, the
execution of documents relative to the sale and purchase of the Assets
shall be held at Jenkens & Gilchrist, A Professional Corporation, in
Austin, Texas on or about the date of the closing of the Merger. The
effective date and time of the Closing (referred to herein as the "Closing"
or "Closing Date") shall be 12:01 a.m., the Closing Date, and all risk of
loss shall be borne by the Sellers until the Closing, and thereafter all
such risk of loss shall be borne by Purchaser.
A. Items to be Delivered at Closing. At the Closing and subject to the terms
and conditions contained in this Agreement,
(a) the Sellers shall deliver to Purchaser the following:
(i) bills of sale with covenants of warranty of title and assignments of
contracts in a form reasonable acceptable to the parties, stock
certificates representing the Vehicle Sub Stock, together with executed
stock powers, and other good and sufficient instruments and documents of
conveyance and transfer, in a form reasonably satisfactory to Purchaser and
its counsel, as shall be necessary and effective to transfer and assign to
and vest in Purchaser all of the Sellers' right, title and interest in and
to the Assets;
(i) all of the certificates, certificates of title, Contracts, customer lists,
supplier lists, Equipment Leases assumed by Purchaser, all correspondence,
files, plans and other documents and instruments, books, Records, and data
belonging to the Sellers which are part of the Assets;
(i) a Closing and Secretary's Certificate from each of the Sellers, dated as of
the Closing Date, certifying, among other items, that all representations
and warranties of the Sellers and the Seller Shareholders contained in this
Agreement or in any Schedule, certificate or document delivered by the
Sellers to Purchaser pursuant to the provisions of this Agreement are true
on the Closing Date and that the applicable Seller has performed and
complied in all material respects with all of its obligations under this
Agreement to be performed or complied with by it prior to or at the Closing
and certifying that the Sellers and the Seller Shareholders have obtained
all consents and approvals required with respect to the Sellers or the
Business except as otherwise set forth on a Schedule hereto;
(i) a certificate of existence issued by the Secretary of State of the State of
Texas, and a certificate of good standing issued by the Comptroller of
Public Accounts of the State of Texas, as of a date not more than ten
calendar days prior to the Closing Date;
(i) Employment Agreements, Non-Competition Agreements and Mutual Agreements to
Arbitrate Claims in substantially the form attached hereto as Exhibit C
executed by each of the Selling Shareholders (the "Employment,
Non-Competition and Arbitration Agreement"); and
(i) the Escrow Agreement; and
(i) a Form P-4 executed by the applicable Sellers showing a change in the
operator of each of the Assets that is a salt water disposal well;
simultaneously with such delivery, the Sellers shall take all steps as may
be reasonably required to put Purchaser in actual possession and operating
control of the Assets.
(a) Purchaser shall deliver (and DPS shall cause Purchaser to deliver) to the
Sellers the following:
(i) the wire transfer of the Cash less adjustments, if any, in accordance with
Section 1.3 and less the amount delivered into escrow;
(i) the Escrow Agreement;
(i) the Non-Competition Payment (defined below);
(i) a copy of a letter addressed to the DPS transfer agent providing for the
issuance of the Shares to the Sellers; and
(i) the Registration Rights Agreement. In addition, Purchaser shall deliver
(and DPS shall cause Purchaser to deliver) that portion of the Cash subject
to the Escrow Agreement to the escrow agent.
A. Release of Liens. The Sellers shall cause all liens and other encumbrances
other than Permitted Liens affecting the Assets to be released and
discharged prior to Closing and shall provide Purchaser with proof thereof
including but not limited to copies of UCC-3 filings.
A. Third Party Consents. To the extent that any of the Sellers' rights under
any Contracts, Authorizations (as defined in Section 3.1(j)), Permits or
Equipment Leases assumed by Purchaser, or other Assets to be assigned to
Purchaser may not be assigned without the consent of another person, which
consent has not been obtained prior to the Closing, this Agreement shall
not constitute an agreement to assign the same if an attempted assignment
would constitute a breach thereof or be unlawful, and the applicable
Seller, at such Seller's expense, shall use reasonable commercial efforts
to obtain any such required consent(s) as promptly as possible after
Closing. If any consent is not obtained or if any attempted assignment
would be ineffective or would impair Purchaser's rights under or to the
Asset in question so that Purchaser would not acquire the benefit of all
such rights, the applicable Seller, to the maximum extent permitted by law
and by the terms of any documents affecting the Asset, at such Seller's
expense, shall act for one year after the Closing as Purchaser's agent in
order to obtain for Purchaser the benefits thereunder and shall cooperate,
to the maximum extent permitted by law and by the terms of any document
affecting the Asset, with Purchaser in any other reasonable arrangement
designed to provide such benefits to Purchaser.
A. Further Assurances. Each Seller from time to time after the Closing, at
Purchaser's request, will execute, acknowledge and deliver to Purchaser
such other instruments of conveyance and transfer and will take such other
actions and execute and deliver such other documents, certifications and
further assurances as Purchaser may reasonably request in order to vest
more effectively in Purchaser, or to put Purchaser more fully in possession
of, any of the Assets, or to better enable Purchaser to complete, perform
or discharge any of the liabilities or obligations assumed by Purchaser at
the Closing pursuant to Section 1.4. Each of the parties will cooperate
with the other and execute and deliver to the other parties such other
instruments and documents and take such other actions as may be reasonably
requested from time to time by any other party as necessary to carry out,
evidence and confirm the intended purposes of this Agreement. If any of the
Sellers dissolves within one year following the Closing Date, effective as
of the dissolution of such Seller, such Seller hereby irrevocably appoints
Purchaser or Purchaser's substitute as its attorney-in-fact coupled with an
interest and with full power of substitution to carry out the provisions of
this Section 2.5.
A. No Equitable Conversion. Prior to the Closing, neither the execution of
this Agreement nor the performance of any provision contained herein shall
cause Purchaser to become liable for any aspect or obligation of relating
to the Assets or the Business.
I. ARTICLE - REPRESENTATIONS AND WARRANTIES
A. Representations and Warranties of the Sellers and the Seller Shareholders.
Each of the Sellers and the Seller Shareholders, jointly and severally,
hereby represent and warrant to Purchaser and to DPS that the following
statements are true and correct, except as set forth on the Schedules, each
of which scheduled exceptions shall specifically identify the relevant
section of this Agreement to which it relates and shall be deemed to be
representations and warranties as if made hereunder; provided, however,
that the representations and warranties made regarding the Seller
Shareholders (as opposed to the Sellers) shall be deemed to be made by each
Seller Shareholder severally and not jointly, wholly with respect to such
Seller Shareholder individually.
(a) Corporate Existence. Each of the Sellers is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas.
Each of the Sellers is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the conduct of
the Business requires it to be so qualified, all of which jurisdictions are
listed on Schedule 3.1(a). None of the Sellers is nor has ever been an
investment company within the meaning of the Investment Company Act of
1940.
(a) Corporate Power; Authorization; Enforceable Obligations. Each of the
Sellers has the corporate power, authority and legal right to execute,
deliver and perform this Agreement. The execution, delivery and performance
of this Agreement by each of the Sellers has been duly authorized by all
necessary corporate action as of the Closing Date. This Agreement has been,
and the other agreements, documents and instruments required to be
delivered by the Sellers in accordance with the provisions hereof
(collectively, the "Seller Documents") will be duly executed and delivered
on behalf of each Seller by duly authorized officers or directors of each
Seller and this Agreement constitutes, and the Seller Documents when
executed and delivered will constitute, the legal, valid and binding
obligation of each of the Sellers enforceable against each of the Sellers
in accordance with their respective terms except as the same may be limited
by applicable bankruptcy, insolvency, reorganization, or other laws
affecting the enforcement of creditors' rights generally and the
application of general principles of equity. The Board of Directors of each
of the Sellers has approved this Agreement and the transactions
contemplated hereby.
(a) Validity of Contemplated Transactions, Etc. Except as identified on
Schedule 3.1(c), the execution, delivery and performance of this Agreement
by each of the Sellers and the Seller Shareholders does not and will not
violate, conflict with or result in the breach of any material term,
condition or provision of, require notice to or the consent of any other
person, result in the acceleration of or give any party a right to
terminate, modify, accelerate or change the terms, rights or obligations
under any of the following:
(i) any Regulation (as hereinafter defined);
(i) any judgment, order, writ, injunction, decree or award of any court,
arbitrator or Governmental Entity;
(i) the charter documents of any of the Sellers or any securities issued by any
Seller; or
(i) any material mortgage, indenture, undertaking, note, bond, debenture,
letter of credit, commitment, agreement, contract, lease, Authorization,
Assigned Contract (including but not limited to Vehicle Operating Leases
and Equipment Leases) or other instrument, or understanding, whether or not
assigned hereby (collectively, the "Contracts"), by which any of the
Sellers may have rights or by which any of the Assets may be bound or
affected.
As of the Effective Date and as of the Closing Date, no fact or condition
exists or will exist which would result in the termination of or give any
party to a Contract the right to terminate, modify, accelerate or otherwise
change the existing rights or obligations of the Sellers in or to the
Assets or the Business. Except as otherwise identified on Schedule 3.1(c),
no Authorization, approval or consent of, and no registration or filing
with, any Governmental Entity is required in connection with the execution,
delivery or performance of this Agreement by any of the Sellers or by any
Seller Shareholder.
(a) No Third Party Options. No person has any existing agreements, options,
commitments or rights to acquire any of the Assets or any interest therein.
(a) Financial Statements. Attached hereto as Schedule 3.1(e) are the following
financial statements (collectively, the "Financial Statements") for the
Sellers: (i) unaudited consolidated and consolidating balance sheet and
statement of income, changes in shareholders' equity and cash flows, and
unaudited earnings before interest, taxes, depreciation and amortization
("Adjusted EBITDA") as of and for the fiscal years ended December 31, 1995,
and December 31, 1996, and December 31, 1997 (the "Most Recent Fiscal Year
End") and as of and for the 12 month period ended June 30, 1998; and (ii)
the unaudited consolidated balance sheet and statement of income, changes
in shareholders' equity and cash flow and Adjusted EBITDA (the "Most Recent
Financial Statements") as of and for the six month period ended June 30,
1998 (the "Most Recent Fiscal Month End") for the Sellers. The Financial
Statements (including the notes thereto) have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby, present fairly the financial
condition of the Sellers as of such dates and the results of operations of
the Sellers for such periods, are correct and complete, and are consistent
with the books and records of the Sellers (which books and records are
correct and complete); provided, however, that the Most Recent Financial
Statements are subject to normal year-end adjustments (which will not be
material, individually or in the aggregate) and lack footnotes. The
Financial Statements fairly present all of the activities of the Sellers
that will be part of the operations and Business of the Sellers at Closing,
and all assets, tangible or intangible, and all Contracts, formal or
informal whether or not in writing, necessary to conduct the Business, as
actually operating as of the Effective Date and as set forth in the
Financial Statements, will be owned by the Sellers (in the case of such
assets) and will be in full force and effect (in the case of such
Contracts) immediately prior to the Closing.
(a) Taxes; Tax and Other Returns and Reports. All federal, state, local and
foreign tax returns, reports, statements and other similar filings required
to be filed by the Sellers and affecting the Assets or the Business (the
"Tax Returns") with respect to any federal, state, local or foreign taxes,
assessments, interest, penalties, deficiencies, fees, duties and other
governmental charges or impositions (including without limitation all
income tax, unemployment compensation, social security, payroll, sales and
use, excise, gross receipts, value-added, privilege, property, ad valorem,
franchise, license, school transfer, mortgage recording, customs,
withholding, estimated and other tax or similar governmental charge or
imposition under laws of the United States or any state, county, or
municipal entity, agency or instrumentality or political subdivision
thereof or any foreign country or political subdivision thereof) insofar as
same may affect the Assets or the Business (the "Taxes") have been timely
filed with the appropriate governmental agencies in all jurisdictions in
which such Tax Returns are required to be filed, and all such Tax Returns
properly reflect the liabilities of Sellers for Taxes for the periods,
property and events covered thereby. All Taxes, including without
limitation, those which are called for by the Tax Returns, have been
properly accrued or timely paid. Purchaser will have no liability to any
person or taxing authority for Taxes relating to actions or events
occurring prior to 12:01 a.m. on the Closing Date, except as otherwise
provided by Section 1.5. The Sellers' warranties and representations under
this Section 3.1(f) shall be construed consistently with Section 1.5.
(a) Books of Account. The books, records and accounts of the Sellers maintained
with respect to the Business and the Assets fairly reflect, in all material
respects and in reasonable detail, the transactions and the assets and
liabilities of each of the Sellers with respect to the Business.
(a) Existing Condition. Except as set forth on Schedule 3.1(h), and except for
such changes as have affected the oil field services business generally,
since December 31, 1997, there has not been, and through the date of the
Closing there will not have been, any material adverse change in the Assets
or the Business or the financial condition, operations, results of
operations, or future prospects of the Business. Without limiting the
generality of the foregoing, since that date, except as otherwise stated on
Schedule 3.1(h), none of the Sellers has (i) entered into any transaction
or agreement affecting the Business or the Assets except in the ordinary
course of business, consistent with past practice; (ii) encumbered, leased,
licensed or transferred any tangible or intangible assets which would have
been included in the Assets if the Closing had been held on December 31,
1997 or on any date since then; (iii) subjected any of the Assets to any
lien or other encumbrance of any nature whatsoever, except in the ordinary
course of business, consistent with past practices, and except for
Permitted Liens (defined in Section 3.1(i)); (iv) entered into any
agreement, Contract, lease, or license (or series of related agreements,
Contracts, leases, and licenses) outside the ordinary course of business,
made any amendment to or terminated any material agreement affecting the
Business or the Assets, or canceled, modified or waived any rights
affecting the Business or the Assets, whether or not in the ordinary course
of business; (v) changed any of the accounting principles followed by it or
the methods of applying such principles; (vi) increased the compensation of
any employee other than in the ordinary course of business, entered into
any employment Contract or collective bargaining agreement, written or
oral, or modified the terms of any existing Contract or agreement, made any
other change in employment terms for any of its directors, officers, or
employees outside the ordinary course of business, or adopted, amended,
modified, or terminated any bonus, profit-sharing, incentive, severance,
retirement, employee benefit plan, employee pension benefit plan, or other
plan, Contract, or commitment relating to its directors, officers, and
employees; (vii) suffered any damage, destruction or loss to its property
or other loss, whether or not covered by insurance, (a) materially and
adversely affecting the Business or Assets or (b) of any items which amount
to $20,000 or more in the aggregate; (vii) granted any license or
sublicense of any rights under or with respect to any of Seller's
intellectual property or other proprietary rights; (viii) canceled,
compromised, waived, or released any right or claim (or series of related
rights and claims) outside of the ordinary course of business; (ix) delayed
or postponed the payment of accounts payable or any other liabilities
outside the ordinary course of business; or (x) committed to any of the
foregoing. In addition, no party (including the Sellers) has accelerated,
terminated, modified, or canceled any agreement, Contract, lease, or
license (or series of related agreements, Contracts, leases, and licenses)
to which any of the Sellers is or was a party or by which any of them is or
was bound.
(a) Title to Properties. Notwithstanding anything herein to the contrary, each
of the Sellers has good, valid and marketable title (or in the case of real
property, indefeasible title) to all of its assets, real, personal and
mixed, which would be included in the Assets if the Closing took place on
the Effective Date, which it purports to own, including without limitation
all assets reflected on the Schedules hereto, free and clear of all liens
(including but not limited to tax liens), claims, restrictions and other
encumbrances and defects of title of any nature whatsoever, except for
(i) liens for current real or personal property taxes not yet due and
payable; (ii) Personal Properties as to which the applicable Seller is the
lessee; and (iii) liens and other exceptions to title as disclosed in
Schedules 3.1(i) (collectively, "Permitted Liens").
(a) Compliance with Laws; Authorizations. Each of the Sellers has complied in
all material respects with each, and is not in material violation of any,
law, ordinance or governmental or regulatory rule or regulation, whether
federal, state, local or foreign, to which the Business or Assets is
subject ("Regulations"). Each of the Sellers owns, holds, possesses or
lawfully uses in the operation of the Business all permits, franchises,
licenses, easements, rights, applications, filings, registrations and other
authorizations ("Authorizations") which are in any material respect
necessary for it to conduct the Business as now conducted or for the
ownership and use of the Assets in the conduct of the Business. Each of the
Sellers is in compliance with all Regulations related to the
Authorizations. All such Authorizations are listed and described in
Schedule 3.1(j). None of the Sellers is not in default, nor has any of the
Sellers received any notice of any claim of default, with respect to any
such Authorization. None of the Sellers has received any notice that any of
the Authorizations used by a Seller in the operation of the Business would
not or cannot be renewed or continued in the ordinary course of business,
and all such Authorizations are renewable by the Sellers by their terms or
in the ordinary course of business. No person other than the Sellers owns
or has any proprietary, financial or other interest (direct or indirect) in
any Authorization.
(a) Transactions With Affiliates. Any and all material transactions between
each of the Sellers and its Affiliates (as defined herein) affecting the
Business or the Assets have been upon terms substantially comparable to
those that would have been available to such Seller from third parties in
arms length transactions.
(a) Litigation. Except as set forth on Schedule 3.1(l), no litigation or
administrative proceeding, including any arbitration, investigation or
other proceeding of or before any court, arbitrator or Governmental Entity
is pending or, to the best knowledge of the Sellers, threatened against any
Seller, which relates to the Business or Assets or the transactions
contemplated by this Agreement, nor do the Sellers know of any reasonably
likely basis for any such litigation, arbitration, investigation or
proceeding, the result of which could reasonably be expected to adversely
affect the Assets or Business, or the transactions contemplated hereby.
None of the Sellers is a party to or subject to the provisions of any
judgment, order, writ, injunction, decree or award of any court, arbitrator
or Governmental Entity which may materially adversely affect the Assets or
Business, or the transactions contemplated hereby. The Sellers shall
reimburse and indemnify Purchaser for any damages, liabilities or other
losses incurred by Purchaser in connection with any and all matters
identified on Schedule 3.1(l).
(a) Equipment. The Operating Assets are at the execution of this Agreement, and
will be at Closing, in good working condition and sufficient to maintain
the operation of the Business.
(a) Contracts and Commitments. Except as set forth on Schedule 3.1(n), none of
the Sellers is a party to any written or oral:
(i) lease under which it is either lessor or lessee relating to the Assets or
any property at which the Assets are located other than those set forth on
the Schedules to this Agreement;
(i) Contract or agreement for any capital expenditure or leasehold improvement
relating to the Assets or Business;
(i) Contract or agreement limiting or restraining such Seller, its successor or
assigns, from engaging or competing in any manner in the Business, or any
agreement concerning confidentiality, nor is any employee of any Seller
subject to any such Contract;
(i) agreement (or group of related agreements) for the purchase or sale of raw
materials, supplies, products, or other personal property or for the
furnishing or receipt of services, the performance of which will extend
over a period of one year or result in a material loss to such Seller;
(i) collective bargaining agreement;
(i) agreement for the employment of any individual on a full-time, part-time,
consulting or other basis, other than an oral Contract for employment at
will; or
(i) agreement under which the consequences of a default or termination could
have a material adverse effect on the Business or the financial condition,
operations, results of operations, or future prospects of any Seller.
Each of the Contracts and agreements listed in Schedule 3.1(n), and each
other Assigned Contract, including but not limited to Equipment Leases
under which Purchaser is to acquire rights or obligations, is valid and
enforceable in accordance with its terms; each of the Sellers is, and to
each Seller's knowledge all other parties thereto are, in compliance with
the provisions thereof; none of the Sellers is, and to each of the Seller's
knowledge, no other party is, in default in the performance, observance or
fulfillment of any material obligation, covenant or condition contained
therein; and to each of the Seller's knowledge, no event has occurred which
with or without the giving of notice or lapse of time, or both, would
constitute a default thereunder. Furthermore, no such Contract or
agreement, in the reasonable opinion of the Sellers contains any
requirement with which there is a reasonable likelihood a Seller or, to the
Sellers' knowledge, any other party thereto will be unable to comply.
(a) Environmental Matters.
(i) Definitions. For purposes of this Agreement the following terms shall have
the following meanings:
A. "Contamination" shall mean the Release, in violation of Environmental,
Health and Safety Laws, of Hazardous Substances in, on, underlying or
surrounding (including into air, soils, surface water or groundwater) any
real property, including migration of or depositing of Hazardous Substances
onto or from adjoining or neighboring properties or the Release or presence
of Hazardous Substances from or associated with the operations conducted on
any real property when such Hazardous Substances have been transported to
any other offsite location.
B. "Environmental, Health and Safety Laws" shall mean any and all federal,
state or local laws (including common law), rules, Regulations, orders,
agreements, ordinances, writs, judgments, injunctions, decrees or
determinations, or similar requirements, whether issued by a court or a
Governmental Entity, relating to the protection of the environment, the
Release of any Hazardous Substances into the environment, the generation,
management, transportation, storage, treatment and disposal of Hazardous
Substances, public health and safety, or employee health and safety,
including laws relating to emissions, discharges, Releases, or threatened
releases of pollutants, Contaminants, or chemical, industrial, hazardous,
or toxic materials or wastes into ambient air, soils, surface water, ground
water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes (including, without limitation, the Clean Air Act, the
Toxic Substance Control Act, the Clean Water Act, the Oil Pollution Act of
1990, the Comprehensive Environmental Response, Compensation and Liability
Act, the Resource Conservation and Recovery Act, and the Occupational
Safety and Health Act of 1970, all as amended, including similar state or
local laws).
C. "Environmental Loss" shall mean any and all claims, damages, losses,
expenses, costs, deficiencies, penalties, liens, interests, fines,
assessments, charges, compensation, obligations and liabilities of any
kind, whether known or unknown, imposed by private parties or Governmental
Entities in civil, criminal or administrative proceedings, and which are
incurred by, under or pursuant to Environmental, Health and Safety Laws,
whether based on negligence, strict liability or otherwise, under any
theory or process of recovery or relief, at law or at equity, including
Remediation, restoration, abatement, investigation, testing, monitoring,
personal injury, death and property damage costs, contribution for, or
recovery of such costs under the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, or similar state or federal
laws, and reasonable attorneys' fees, court costs and interest paid or
accrued, related to Contamination or the presence of Hazardous Substances
at offsite locations arising from Seller's operations or activities,
including but not limited to transportation or disposal activities.
D. "Hazardous Substance" shall mean any toxic or hazardous substance, material
or waste, pollutant, petroleum or petroleum derived substance or waste,
salt water, oil and gas waste, radioactive substance, material or waste,
asbestos containing materials, or any constituent of any such substance or
waste regulated under or pursuant to any Environmental, Health and Safety
Law.
E. "Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the environment or into or out of any real property, including the
movement of Hazardous Substances through or in the air, soil, surface water
or groundwater of any real properties or adjoining properties.
F. "Remediation" shall mean all actions, whether undertaken pursuant to
judicial or administrative order or otherwise, reasonably necessary to
comply with applicable Environmental, Health and Safety Laws, (a) to
investigate, clean up, remediate, remove, treat, cover or in any other way
adjust the levels of Hazardous Substances in or around the real properties;
or (b) to prevent or control the Release of Hazardous Substances so that
they do not migrate or endanger or threaten to endanger public health or
welfare or the indoor or outdoor environment.
(i) Representations and Warranties. The parties agree that the following
representations and warranties shall govern in the event of any conflict
between the provisions of this Section 3.1(o) and any other provision of
this Agreement or of the other agreements or conveyance instruments
contemplated hereby. The Sellers and the Seller Shareholders, jointly and
severally, represent and warrant that, except as otherwise set forth on
Schedule 3.1(o), the following statements are true and correct in all
material respects:
A. Each of the Sellers has obtained all Authorizations, including permits,
which are required in connection with the conduct of the Business under
Environmental, Health and Safety Laws;
B. Each of the Sellers is in compliance in all material respects in the
conduct of the Business with all terms and conditions of the required
Authorizations, and is also in compliance in all material respects with all
Environmental, Health and Safety Laws and with any plan required by law,
order, decree, judgment, or injunction entered, promulgated or approved
thereunder, and, with any notice or demand letter issued thereunder;
C. None of the Sellers is aware of, nor has any Seller received notice of, any
past or present circumstances that, if continued, are reasonably likely to
interfere with or prevent compliance or continued compliance in the conduct
of the Business with any Environmental, Health and Safety Laws or with any
plan required by law, order, decree, judgment or injunction entered,
promulgated or approved thereunder, or, with any notice or demand letter,
or which may otherwise form the basis of any claim, action, demand, suit,
proceeding, hearing, study or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or threatened
release into the environment, of any Hazardous Substance;
D. There is no civil, criminal or administrative action, suit, order, demand,
claim, hearing, notice or demand letter, notice of violation,
investigation, or proceeding pending or, to the Sellers' knowledge,
threatened against any Seller in connection with the conduct of the
Business relating in any way to any Environmental, Health and Safety Laws;
E. Each of the Sellers agrees to cooperate with Purchaser, both prior to and
following the Closing, in connection with Purchaser's application for the
transfer, renewal or issuance of any Authorizations or Purchaser's efforts
to satisfy any Environmental, Health and Safety Laws involving the
Business, (provided, however, that the Sellers shall not be required to
incur any material expense in connection therewith);
F. None of the Sellers, in connection with the operation of the Business, has
handled or disposed of any Hazardous Substance in violation of
Environmental, Health and Safety Laws, arranged for the disposal of any
Hazardous Substance in violation of Environmental, Health and Safety Laws,
exposed any employee or other individual to any Hazardous Substance or
condition in violation of Environmental, Health and Safety Laws, or
operated any Assets in any manner that could form the basis for any present
or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand for damage to, or for investigation and
Remediation of, any site, location, or body of water (surface or
subsurface), for any illness of or personal injury to any employee or other
individual, or for any reason under any Environmental, Health and Safety
Laws or Authorizations;
G. Each of the Sellers has provided Purchaser all material information in such
Seller's control or possession relating to: (1) the existence of
Contamination on or affecting all Assets; (2) compliance with all
Environmental, Health and Safety Laws; and (3) any alleged or actual
Environmental Losses; and
H. No oral or written agreements, including but not limited to indemnity or
cleanup agreements, exist between the Sellers or the Seller Shareholders
and any third parties, relating to or concerning the environmental, safety
or health conditions of the Assets.
(a) Availability of Documents. Each of the Sellers has provided Purchaser with
copies of all material documents, including without limitation all of the
Contracts, permits, licenses, patents, trademarks, copyrights and
applications therefor listed in the Schedules. Each of the Sellers will use
its best efforts to obtain any such documents not in its possession and
promptly deliver same to Purchaser. Such copies are true and complete and
include all amendments, supplements and modifications thereto or waivers
currently in effect thereunder.
(a) Assets. Except as set forth in Schedule 3.1(q), the Assets include all
rights and property, other than real property, reasonably necessary for the
conduct of the Business by Purchaser in the manner in which it has been
conducted by the Sellers for the period of time reflected in the Financial
Statements and for the conduct of the Business as presently conducted by
each of the Sellers, and no property excluded from the Assets under Section
1.1(b), other than real property, constitutes property or rights material
to the Business. Each such tangible Asset is structurally sound, has been
maintained in accordance with normal industry practice, is in good
operating condition and repair, subject to normal wear and tear, is
suitable for the purposes for which it presently is used and for use in the
continued conduct of the Business in substantially the same manner as
conducted prior to the Closing. None of the tangible Assets is in need of
maintenance or repairs except for ordinary routine maintenance and repairs
that are not material in nature or cost. Any modifications that have been
made to any of the tangible Assets prior to Closing, have been made in
accordance with normal industry practice.
(a) Restrictions. None of the Sellers is a party to any material agreement,
license, Permit, Authorization or other instrument or any understanding or
oral agreement, and none of the Sellers is subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree or
award, which materially adversely affects or materially restricts the
Business or Assets.
(a) Conditions Affecting the Sellers. Except as provided in this Agreement or
disclosed in the Schedules, and except for conditions that affect as a
whole the oil field servicing industry generally, there is no fact known to
the Sellers which may reasonably be expected to materially adversely affect
the Business considered as a whole. Notwithstanding the foregoing, the
Sellers and the Seller Shareholders shall not be deemed to have made to
Purchaser or DPS any representation or warranty other than as expressly
made in this Article II. Without limiting the generality of the foregoing,
the Sellers and the Seller Shareholders make no representations or
warranties to Purchaser or DPS with respect to (i) any projections,
estimates or budgets heretofore delivered to or made available to Purchaser
or DPS of future revenues, expenses or expenditures or future results of
operations; or (ii) except as expressly covered by a representation and
warranty contained in this Article II, any other information or documents
(financial or otherwise) made available to Purchaser or DPS or its counsel,
accountants or other advisors with respect to the Sellers, the Business or
the Assets.
(a) Employee Benefit Plans. Schedule 3.1(t) lists all of the Sellers' Employee
Benefit Plans. None of the Sellers is now and for the preceding five years
has not been, a party to any "employee pension benefit plan" as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). None of the Sellers is under any legal obligation to
create a new Employee Benefit Plan, or amend an existing Employee Benefit
Plan, that would affect any of the employees of the Sellers who are
employed or otherwise compensated for activities involving the Assets or
the Business ("Affected Employees").
(i) Purchaser shall have no responsibility or liability with respect to
benefits which may have accrued or been promised to any Affected Employee
under any "Employee Benefit Plan" of the Sellers or any member of a
Seller's control group as determined under Sections 414(b) or (c) of the
Code, or which form an affiliated service group with any of the Sellers or
the Seller Shareholders within the meaning of Section 414(m) of the Code.
The term "Employee Benefit Plan" includes, but is not limited to any profit
sharing, stock, bonus, 401(k), nonqualified deferred compensation, medical,
dental, workers' compensation, life insurance, incentive, vacation
benefits, and fringe benefits plan or program and each "employee benefit
plan" described in Section 3(3) of ERISA. The Sellers shall indemnify
Purchaser as provided in Section VI of this Agreement against and in
respect of any Damages (as hereinafter defined) which arise directly or
indirectly with respect to an Employee Benefit Plan. None of the Sellers
contributes to any "multiemployer plan" as defined in Section 3(37) or
4001(o)(3) of ERISA.
(i) The Sellers shall pay and be liable to Purchaser, and shall indemnify
Purchaser as provided in Section VI of this Agreement, from and against and
in respect of any and all Damages that arise under section 4980B of the
Code, imposed upon, incurred by, or assessed against Purchaser or any of
its employees arising by reason of or relating (x) to any failure to comply
with the continuation health care coverage requirements of section 4980B of
the Code, which failure occurred with respect to any current or prior
employee of Seller or any "qualified beneficiary" of such employee (as
defined in section 4980B(g)(I) of the Code) on or prior to the Closing
Date, and (y) to the extent, if any, of any amounts paid by Purchaser under
its health plan to any current or prior employee of the Sellers as a result
of a "qualifying event" (as defined in Section 4980B(f)(3) of the Code)
which occurred prior to the Closing Date, over the amount of the
"applicable premium" (as defined in section 4980B(f)(4) of the Code) paid
to Purchaser or Purchaser's health plan, by such current or prior employee.
References to the Code include any amendments that may be made to the Code
from time to time.
(a) Personnel. Schedule 3.1(u) lists the names and monthly or, as applicable,
hourly rates of compensation (including base salary, bonus, commissions,
and incentive pay) of the Affected Employees and summarizes the bonus,
profit sharing, percentage compensation, automobile, club membership and
other benefits, if any, paid or payable to the Affected Employees during
the Sellers' 1997 fiscal year and from the beginning of each of the
Seller's current fiscal year to the Effective Date and identifies all
accrued vacation relating to the Affected Employees. Schedule 3.1(u) also
contains a brief description of all material terms of all written or oral
employment agreements, severance agreements, confidentiality agreements,
noncompete agreements or similar agreements to which any Affected Employee
is or may be subject. The Sellers have delivered to Purchaser accurate and
complete copies of all such agreements, and all other agreements, plans and
other instruments to which any of the Sellers is a party and under which
the Affected Employees are entitled to receive benefits of any nature. To
the Sellers' knowledge, and except as set forth on Schedule 3.1(u), the
employee relations of each of the Sellers are good and there is no pending
or threatened controversy, labor dispute or union organization campaign
between any Seller and any of its employees or former employees. None of
the Affected Employees are represented by any labor union or organization
nor is any Seller a party to any collective bargaining agreement. Except as
set forth on Schedule 3.1(u), each of the Sellers is in compliance in all
material respects with all federal and state laws respecting employment and
employment practices, terms and conditions of employment and wages and
hours and is not engaged in any unfair labor practices. There is no unfair
labor practices complaint or charge of employment discrimination pending,
or threatened with respect to an Affected Employee before the National
Labor Relations Board, the Equal Employment Opportunity Commission, or any
other state, federal or local court or Governmental Entity, or any strike,
labor dispute, work slowdown or work stoppage pending or, to the Sellers'
knowledge, threatened against or involving any Seller, and none of the
Sellers has experienced any material labor difficulty during the last three
years. Except as otherwise specifically provided in this Agreement,
Purchaser shall have no liability for any severance or termination expenses
of any Seller or Seller Shareholder, including accrued vacation and sick
leave time, in connection with the termination of employment by Seller of
any Affected Employee, whether or not such person is employed by Purchaser.
None of the Sellers nor any Seller Shareholder shall have any such
liability in connection with the termination of employment by Purchaser of
any Affected Employee who has been employed by Purchaser and subsequently
terminated by Purchaser after the Closing.
(a) Legal Compliance; Undisclosed Liabilities. Each of the Sellers and each of
their predecessors and "Affiliates" (as defined in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934) has complied with all applicable
laws (including rules, Regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local,
and foreign governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or
notice has been filed or commenced against any of them alleging any failure
so to comply. None of the Sellers has any liability and there is no basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against Seller), except for
(i) liabilities set forth on the face of the Financial Statements, (ii)
liabilities which have arisen in the ordinary course of business (none of
which results from, arises out of, relates to, is in the nature of, or was
caused by any breach of Contract, breach of warranty, tort, infringement,
or violation of law), and (iii) liabilities listed on Schedule 3.1(l).
(a) Inventory. All inventory of the Sellers, whether or not reflected in the
balance sheets, consists of a quality and quantity usable and where
applicable, salable in the ordinary course of business.
(a) Warranty. Schedule 3.1(x) includes copies of the standard terms and
conditions of sale or lease for each of the products and services of the
Sellers (containing applicable guaranty, warranty, and indemnity
provisions). The products and services provided by the Sellers have, in
each case, been in conformity with all applicable contractual commitments
and all express and implied warranties, and none of the Sellers has any
liability (and there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of them giving rise to any liability) for replacement or repair
or other damages in connection therewith, subject only to the reserve for
warranty claims set forth on the face of the Financial Statements (rather
than in any notes thereto) as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the
Sellers. No service provided by any of the Sellers is subject to any
guaranty, warranty, or other indemnity beyond the applicable standard terms
and conditions of sale or lease listed in Schedule 3.1(x).
(a) Investment. The Sellers and the Seller Shareholders understand that the
Shares have not been, nor will be, registered under the Securities Act of
1933 or under any state securities laws and are being offered and sold in
reliance upon federal and state exemptions for transactions not involving
any public offering. Each of the Sellers is acquiring the Shares solely for
its own account for investment purposes, and not with a view to the
distribution thereof. The Sellers and Seller Shareholders are sophisticated
investors, with knowledge and experience in business and financial matters,
and are able to bear the economic risk and lack of liquidity inherent in
holding the Shares. The Sellers and Seller Shareholders acknowledge and
agree that (i) they have fully reviewed all periodic reports filed with the
Securities and Exchange Commission by DPS within the past 12 months, (ii)
they have had the opportunity to ask questions of and receive information
from representatives of DPS and have received all information necessary for
each of them to evaluate the merits and risks inherent in holding the
Shares, (iii) the stock certificates issued to each Seller shall bear a
restrictive legend indicating that the Shares have not been registered
under the Securities Act or any other state securities laws.
A. Representations and Warranties of Purchaser. Purchaser and DPS, jointly and
severally, represent and warrant to the Sellers and the Seller Shareholders
as follows:
(a) Existence. Purchaser is a limited partnership validly existing and in good
standing under the laws of the State of Delaware. DPS is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Texas.
(a) Power and Authorization. Purchaser and DPS each has the power, authority
and legal right to execute, deliver and perform this Agreement. The
execution, delivery and performance of this Agreement by Purchaser and by
DPS have been duly authorized by all necessary corporate and partnership
action. This Agreement has been duly executed and delivered by Purchaser
and DPS and constitutes the legal, valid and binding obligation of
Purchaser and DPS, enforceable against Purchaser and DPS in accordance with
its terms except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, or other laws affecting the enforcement of
creditors' rights generally and the application of general principles of
equity.
(a) Noncontravention. The execution, delivery and performance of this Agreement
by Purchaser and DPS does not and will not violate, conflict with or result
in the breach of any material term, condition or provision of, or require
the consent of any other party which has not already been obtained under,
(i) any existing law, ordinance, or governmental rule or regulation to
which Purchaser or DPS is subject, (ii) any judgment, order, writ,
injunction, decree or award of any court, arbitrator or governmental or
regulatory official, body or authority which is applicable to Purchaser or
DPS, (iii) the Limited Partnership Agreement, Articles of Incorporation or
Bylaws or equivalent organizational documents, or any securities issued by
Purchaser, its general partner, or DPS as the case may be, or (iv) any
Contract to which Purchaser or DPS is a party or by which Purchaser or DPS
is otherwise bound. Except as otherwise contemplated by this Agreement, no
Authorization, approval or consent of, and no registration or filing with,
any Governmental Entity is required in connection with the execution,
delivery and performance of this Agreement by Purchaser or DPS.
(a) Shares. The Shares, if issued and delivered in accordance with the terms of
this Agreement for the consideration expressed herein, will be duly and
validly issued, fully paid and nonassessable and will be free of
restrictions on transfer other than restrictions on transfer set forth in
this Agreement and under applicable state and federal securities laws.
(a) No Material Misstatements. The documents filed by DPS pursuant to the
Securities Exchange Act of 1934 do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements made, in the light of the circumstances under which they
were made, not misleading.
A. Survival. All statements of fact contained in any written statement
(including financial statements), certificate, instrument or document
delivered by or on behalf of any party hereto pursuant to this Agreement
shall be deemed representations and warranties of such party. All
covenants, agreements, representations and warranties of the parties to
this Agreement shall survive and remain in full force and effect after the
Closing Date and shall not be affected by any investigation heretofore or
hereafter made by and on behalf of any of them or be deemed merged into any
instruments or agreements delivered in connection with this Agreement or
otherwise in connection with the transactions contemplated hereby. Subject
to the limitations on indemnification obligations set forth in Article VI,
the representations and warranties set forth in this Article III and in any
schedule, certificate or instrument delivered by or on behalf of any party
hereto in connection with this Agreement, shall terminate on the close of
business on the fifth anniversary of the Closing Date, following which all
the parties shall cease to have any right to bring any action or present
any claim for a breach of such representations and warranties; provided
that there shall be no termination of any such representation and warranty
as to which a bona fide claim has been asserted and notice of such claim
has been delivered prior to such termination date. Nothing in this Section
3.3 shall at any time relieve any party hereto from the performance of such
party's agreements, covenants and undertakings set forth in the Agreement
or in any other agreement executed and delivered by or on behalf of any
party hereto at or prior to the Closing pursuant to this Agreement.
I. ARTICLE - AGREEMENTS PENDING CLOSING
A. Agreements of the Sellers and the Seller Shareholders Pending the Closing.
The Sellers and the Seller Shareholders covenant and agree that, pending
the Closing and except as otherwise agreed to in writing by Purchaser, they
shall take the following actions:
(a) Business in the Ordinary Course. The Business shall be conducted solely in
the ordinary course consistent with past practice. The Sellers shall
continue to maintain and service the physical Assets used in the conduct of
the Business in good working condition consistent with past practices. The
Sellers shall not cause or permit to occur any of the events or occurrences
described in Section 3.1(h) (Existing Condition). Each of the Sellers shall
use its reasonable commercial efforts to maintain in full force and effect
all Authorizations currently in effect and used in the conduct of the
Business, and shall comply with all Regulations applicable to the Business,
the noncompliance with which might materially and adversely affect the
Business or the Assets. The Sellers shall not (i) sell, lease, license,
assign or otherwise transfer any of the Assets, (ii) enter into any
Contract outside of the ordinary course of business, (iii) amend, modify,
terminate, waive any material provision of, or breach any material
Contract, or (iv) cancel, terminate or cause or allow to lapse any
insurance coverage affecting the Business or the Assets.
(a) Conduct of Business. Each of the Sellers shall use its best efforts to
conduct the Business in such a manner that on the Closing Date the
representations and warranties contained in this Agreement shall be true,
except as specifically contemplated by this Article IV, as though such
representations and warranties were made on and as of such date.
Furthermore, each of the Sellers shall cooperate with Purchaser and use its
reasonable commercial efforts to cause all of the conditions to the
obligations of Purchaser under this Agreement to be satisfied on or prior
to the Closing Date.
(a) Exclusive Dealing. Until such time, if any, as this Agreement is terminated
pursuant to Article VIII, none of the Sellers shall (nor shall any Seller
cause its representatives and agents directly or indirectly, through any
third party or otherwise to), sell or encumber any part of the Assets, or
solicit, initiate, encourage or entertain any inquiries, proposals or
offers from, discuss or negotiate with, provide any non-public information
to or consider the merits of any inquiries or proposals from any person
(other than Purchaser) relating to any transaction involving the sale of
the Business or Assets, in whole or in part (other than sales of inventory
in the ordinary course of business), or any of the capital stock of the
Sellers, or any merger, consolidation, business combination or similar
transaction involving any of the Sellers.
(a) Access. Each of the Sellers shall give to Purchaser's officers, employees,
counsel, accountants and other representatives free and full access to and
the right to inspect, during normal business hours, all of the premises,
properties, assets, records, Contracts and other documents relating to the
Business and the Assets and shall permit them to consult with the officers,
employees, accountants, counsel and agents of Seller for the purpose of
making such investigation of the Business and the Assets as Purchaser shall
desire to make, provided that such investigation shall be at Purchaser's
sole cost and expense and shall not unreasonably interfere with the
Sellers' business operations. Furthermore, each Seller shall furnish to
Purchaser all such documents and copies of documents and Records and
information with respect to the Business and the Assets and copies of any
internal financial records relating thereto as Purchaser shall from time to
time reasonably request and shall permit Purchaser and its agents to make
such physical inventories and inspections of the Assets as Purchaser may
reasonably request from time to time.
(a) Press Release. Except for such press release and discussions with employees
and customers as mutually agreed to by the Sellers and Purchaser and except
as required by applicable law, the Sellers shall not give notice to third
parties or otherwise make any public statement or releases concerning this
Agreement or the transactions contemplated hereby except for such written
information as shall have been approved in writing as to form and content
by Purchaser, which approval shall not be unreasonably withheld.
(b) Actions of Directors and Shareholders. Each of the Sellers shall promptly
and diligently take all action necessary in accordance with law and its
Articles of Incorporation, Bylaws and other organizational documents to
approve this Agreement and to consummate the transactions contemplated
hereby.
(a) Employee Matters. Each of the Sellers shall give its employees all notices
required by law, including but not limited to notices of their rights under
the Comprehensive Omnibus Budget Reconciliation Act of 1986. Each of the
Sellers shall terminate all of such Seller's Employee Benefit Plans, as
listed on Schedule 3.1(u), as of the Closing.
(a) Actions of Sellers and Seller Shareholders. None of the Sellers or the
Seller Shareholders will intentionally take any action which would result
in a breach of any of its representations and warranties.
(a) Required Approvals; HSR. As promptly as practicable after the Effective
Date, the Sellers and the Seller Shareholders will make all filings
required to be made by them in order to consummate the transactions
contemplated by this Agreement, including any filings required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and
will use reasonable commercial efforts to cause the early termination of
any applicable waiting period under the HSR Act.
A. Agreements of Purchaser Pending the Closing. Purchaser and DPS covenant and
agree that, pending the Closing and except as otherwise agreed to in
writing by the Sellers, they shall take the following actions:
(a) Press Release. Except for such press release and discussions with employees
and customers as mutually agreed to by the Sellers and Purchaser and except
as required by applicable law, Purchaser will not give notice to third
parties or otherwise make any public statement or releases concerning this
Agreement or the transactions contemplated hereby except for such written
information as shall have been approved in writing as to form and content
by Seller, which approval shall not be unreasonably withheld.
(a) Actions of DPS and Purchaser. Each of DPS and Purchaser shall promptly and
diligently take all action necessary in accordance with law and its
Articles of Incorporation, Bylaws, Limited Partnership Agreement, or other
organizational documents, as the case may be, to approve this Agreement and
to consummate the transactions contemplated hereby.
(a) Actions of Purchaser and DPS. Neither Purchaser nor DPS will intentionally
take any action which would result in a breach of any of its
representations and warranties hereunder.
(b) Required Approvals; HSR. As promptly as practicable after the Effective
Date, Purchaser and DPS will make all filings required to be made by them
in order to consummate the transactions contemplated by this Agreement,
including any filings required by the HSR Act and will use reasonable
commercial efforts to cause the early termination of any applicable waiting
period under the HSR Act.
I. ARTICLE - CONDITIONS PRECEDENT TO THE CLOSING
A. Conditions Precedent to the Obligation of Purchaser and DPS. All
obligations of Purchaser and DPS under this Agreement are subject to the
fulfillment or satisfaction, prior to or at the Closing, of each of the
following conditions precedent:
(a) Representations and Warranties True as of the Closing Date. The
representations and warranties of the Sellers and the Seller Shareholders
contained in this Agreement or in any Schedule, certificate or document
delivered by the Sellers to Purchaser pursuant to the provisions hereof
shall have been true on the date hereof and shall be true on the Closing
Date as though such representations and warranties were made as of such
date.
(a) Compliance with this Agreement. Each of the Sellers shall have performed
and complied in all material respects with all of its obligations under
this Agreement to be performed or complied with by it prior to or at the
Closing.
(a) No Threatened or Pending Litigation. Except as otherwise provided on
Schedule 5.1(c), on the Closing Date, no suit, action or other proceeding,
or injunction or final judgment relating thereto, shall be threatened or be
pending before any Governmental Entity in which it is sought to restrain or
prohibit or to obtain damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby, and
no investigation that might result in any such suit, action or proceeding
shall be pending or threatened.
(a) Consents and Approvals. The Sellers and the Seller Shareholders shall have
obtained all third party consents required for the assignment or transfer
of the Assets from the Sellers to Purchaser which are material to the
continued operations of the Business after the Closing, all of which are
listed on Schedule 5.1(d).
(a) Material Adverse Changes. Neither the Assets nor the Business in the
aggregate shall have been or shall be threatened to be materially adversely
affected in any way as a result of any event or occurrence other than such
conditions as may affect the well servicing industry as a whole.
(a) Closing Certificate. Purchaser shall have received certificates from the
Sellers, dated the Closing Date, certifying in such detail as Purchaser may
reasonably request that the conditions specified in Sections 5.1(a) through
5.1(e) have been fulfilled.
(a) Approval of Counsel; Corporate Matters. All actions, proceedings,
resolutions, instruments and documents required to carry out this Agreement
or incidental hereto and all other related legal matters shall have been
approved on the Closing Date by Jenkens & Gilchrist, A Professional
Corporation, counsel for Purchaser, in the exercise of its reasonable
judgment. The Sellers also shall have delivered to Purchaser such other
documents, instruments, certifications and further assurances as such
counsel may reasonably require.
(b) Physical Inventory. Purchaser shall be entitled to conduct an inventory of
the Assets immediately prior to Closing to determine, among other matters,
whether a Purchase Price adjustment will be required.
(a) Employment Contracts. The Selling Shareholders shall have executed and
delivered to Purchaser the Employment, Non-Competition and Arbitration
Agreements.
(a) Hart-Scott-Rodino Approval. The waiting period (including any extension
thereof) applicable to the consummation of the transactions contemplated by
this Agreement under the HSR Act shall have expired or terminated or the
transaction shall have been approved thereunder.
(a) EBITDA. Purchaser's auditors shall have confirmed that Sellers' EBITDA for
the 12-month period beginning June 1, 1997 through May 31, 1998 is not less
than $9,400,000 determined on a basis consistent with that certain report
dated July 24, 1998 prepared by Simmons & Co. for Purchaser attached as
Schedule 5.1(k) and that Sellers' EBITDA for each of the months of June
1998 and July 1998 is not less than $800,000 for each such month.
A. Conditions Precedent to the Obligations of the Sellers and the Seller
Shareholders. All obligations of the Sellers and the Seller Shareholders
under this Agreement are subject to the fulfillment or satisfaction, prior
to or at the Closing, of each of the following conditions precedent:
(a) Representations and Warranties True as of the Closing Date. The
representations and warranties of Purchaser and DPS contained in this
Agreement or in any list, certificate or document delivered by Purchaser or
DPS to the Sellers pursuant to the provisions of this Agreement shall be
true on the Closing Date as though such representations and warranties were
made as of such date.
(a) Compliance with this Agreement. Purchaser and DPS shall have performed and
complied with all obligations required by this Agreement to be performed or
complied with by it prior to or at the Closing.
(a) No Threatened or Pending Litigation. Except as otherwise provided on
Schedule 5.1(c), on the Closing Date, no suit, action or other proceeding,
or injunction or final judgment relating thereto, shall be threatened or be
pending before any Governmental Entity in which it is sought to restrain or
prohibit or to obtain damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby, and
no investigations that might result in any such suit, action or proceeding
shall be pending or threatened.
(a) Closing Certificates. The Sellers shall have received a certificate from
Purchaser and DPS, dated the Closing Date, certifying in such detail as the
Sellers may reasonably request that the conditions specified in Sections
5.2(a) through 5.2(c) have been fulfilled.
(a) Consent of Shareholders. If required, the requisite percentage of each of
the Seller's shareholders shall have approved the consummation of the
transactions contemplated in accordance with the requirements of applicable
law.
(a) Approval of Counsel; Corporate Matters. All actions, proceedings,
resolutions, instruments and documents required to carry out this Agreement
or incidental hereto and all other related legal matters shall have been
approved on the Closing Date by Baker & Botts, L.L.P., counsel for the
Sellers, in the exercise of its reasonable judgment. Purchaser and DPS also
shall have delivered to the Sellers such other documents, instruments,
certifications and further assurances as such counsel may reasonably
require.
(a) Employment Contracts. Purchaser shall have executed and delivered to the
Selling Shareholders, the Employment, Non-Competition and Arbitration
Agreements, and DPS shall have executed and delivered to the Sellers the
Registration Rights Agreement.
(a) Hart-Scott-Rodino Approval. The waiting period (including any extension
thereof) applicable to the consummation of the transactions contemplated by
this Agreement under the HSR Act shall have expired or terminated or the
transaction shall have been approved thereunder.
I. ARTICLE - INDEMNIFICATION
================================================================================
The following Sections are important
and should be read carefully.
================================================================================
A. Definitions.
(a) "Governmental Entity" shall mean any arbitrator, court, administrative or
regulatory agency, commission, department, board or bureau or body or other
government or authority or instrumentality or any entity or person
exercising, executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
(a) "Indemnitee" shall mean the person or persons indemnified, or entitled or
claiming to be entitled to be indemnified, pursuant to the provisions of
Article VI.
(a) "Indemnitor" shall mean the person or persons having the obligation to
indemnify pursuant to the provisions of Article VI.
A. Indemnification by the Sellers and the Seller Shareholders. Except as
otherwise limited by this Article VI, (and subject to the limitations set
forth in Section 3.1 regarding the several, as opposed to joint, liability
of the Seller Shareholders for representations and warranties made
regarding the Seller Shareholders), the Sellers and the Seller
Shareholders, jointly and severally, agree to indemnify, defend and hold
harmless DPS, Purchaser and each of their officers, directors, employees,
agents, shareholders and controlling persons, and their respective
successors and assigns (the "Purchaser Indemnified Parties"), separate
consideration for which is hereby acknowledged, of, from and against and in
respect of any and all liabilities, losses, damages, demands, assessments,
claims, costs and expenses (including interest, awards, judgments,
penalties, settlements, fines, costs of Remediation, costs and expenses
incurred in connection with investigating and defending any claims or
causes of action including attorneys' fees and expenses and all fees and
expenses of consultants and other professionals) ("Damages") actually
suffered, incurred or realized by the Purchaser Indemnified Parties
(collectively, "Purchaser Losses") arising out of or resulting from or
relating to any of the following:
any misrepresentation, breach of warranty or breach of any covenant or
agreement made or undertaken by the Sellers or the Seller Shareholders in
this Agreement or any misrepresentation in or omission from any other
agreement, certificate, exhibit or writing delivered to Purchaser pursuant
to this Agreement, including the Schedules;
any liability other than the Assumed Liabilities relating to the Assets or
the Business, whether known or unknown, now existing or hereafter arising,
contingent or liquidated, including without limitation, any Tax liabilities
of the Sellers prior to the Closing;
(a) any products manufactured, sold or distributed or services provided by or
on behalf of the Sellers on or prior to the Closing or with respect to any
claims made pursuant to warranties to third persons in connection with
products manufactured, sold or distributed or services provided by or on
behalf of the Sellers on or prior to the Closing;
(a) any Environmental Losses in connection with, relating to, or arising from
acts or omissions of any of the Sellers or Seller Shareholders or
conditions in existence on or prior to the Closing which relate to the
Assets or the operations of the Business; and
(a) any claims arising from, in connection with, or relating to, any breach of
this Agreement by any of the Sellers or Seller Shareholders.
A. Indemnification by Purchaser and DPS. Except as otherwise limited by this
Article VI, Purchaser and DPS, jointly and severally, agree to indemnify,
defend and hold each of the Sellers and the Seller Shareholders and each of
their officers, directors, employees, agents, shareholders and controlling
persons and their successors and assigns (the "Seller Indemnified Parties")
harmless, separate consideration for which is hereby acknowledged, of, from
and against and in respect of Damages actually suffered, incurred or
realized by the Seller Indemnified Parties (collectively, "Seller Losses")
arising out of or resulting from any of the following:
(a) any misrepresentation, breach of warranty or breach of any covenant or
agreement made or undertaken by Purchaser or DPS in this Agreement or any
misrepresentation in or omission from any other agreement, certificate,
exhibit or writing delivered to the Sellers pursuant to this Agreement;
(a) (i) any Assumed Liability and (ii) any other liability relating to the
Assets or the Business that arises out of the operation of the Business by
Purchaser or DPS after the Closing, whether contingent or liquidated,
including without limitation, any Tax liabilities of Purchaser or DPS
pertaining to the Assets or the Business arising subsequent to the Closing;
(a) any products manufactured, sold or distributed or services provided by or
on behalf of Purchaser after the Closing or with respect to any claims made
pursuant to warranties to third persons in connection with products
manufactured, sold or distributed or services provided by or on behalf of
Purchaser after the Closing;
(a) any Environmental Losses in connection with, relating to, or arising from
acts or omissions of Purchaser or DPS subsequent to the Closing which
relate to the Assets or the operations of the Business; and
(a) any claims arising from, in connection with, or relating to, any breach of
this Agreement by Purchaser or DPS.
A. Procedure. All claims for indemnification pursuant to Article VI of this
Agreement shall be asserted and resolved as follows:
(a) An Indemnitee promptly shall give the Indemnitor notice of any matter that
an Indemnitee has determined has given or could give rise to a right of
indemnification under this Agreement, stating the amount of the Damages, if
known, and method of computation thereof, all with reasonable
particularity, and stating with particularity the nature of such matter.
Failure to provide such notice shall not affect the right of an Indemnitee
to indemnification except to the extent such failure shall have resulted in
liability to the Indemnitor that actually could have been avoided had such
notice been provided.
(a) The obligations and liabilities of an Indemnitor with respect to Damages
arising from claims of any third party that are subject to the
indemnification provided for in this Article VI ("Third Party Claims")
shall be governed by and contingent upon the following additional terms and
conditions. If an Indemnitee receives notice of any Third Party Claim, the
Indemnitee shall give the Indemnitor written notice of such Third Party
Claim and the Indemnitor may, at its option, assume and control the defense
of such Third Party Claim at the Indemnitor's expense and through counsel
of the Indemnitor's choice reasonably acceptable to the Indemnitee. If the
Indemnitor assumes the defense against any such Third Party Claim as
provided above, the Indemnitee shall have the right to participate at its
own expense in the defense of such asserted liability, shall cooperate with
the Indemnitor in such defense and will attempt to make available on a
reasonable basis to the Indemnitor all witnesses, pertinent records,
materials and information in its possession or under its control relating
thereto as reasonably required by the Indemnitor. If the Indemnitor does
not elect to conduct the defense against any such Third Party Claim, the
Indemnitor shall pay all reasonable costs and expenses of such defense as
incurred and shall cooperate with the Indemnitee (and be entitled to
participate) in such defense and attempt to make available to it on a
reasonable basis all such witnesses, records, materials and information in
its possession or under its control relating thereto as reasonably required
by the Indemnitee. Except for the settlement of a Third Party Claim that
involves the payment of money only and for which the Indemnitee is totally
indemnified by the Indemnitor, no Third Party Claim may be settled without
the written consent of the Indemnitee.
A. Survival; Limitations on Amount. All of the representations and warranties
of the parties contained in this Agreement shall survive until the fifth
anniversary of the Closing (even if the damaged party knew or had reason to
know of any misrepresentation or breach of warranty at the time of Closing
except as disclosed on the Schedules). No party who is a Purchaser
Indemnified Party shall make a claim for indemnification with respect to a
claim based upon a breach of a representation or warranty until the
aggregate amount of the Purchaser Losses attributable to claims for breach
of representations or warranties is at least $50,000, at which time, all
such amounts may be claimed. No party who is Seller Indemnified Party shall
make a claim for indemnification with respect to a claim based upon a
breach of a representation or warranty until the aggregate amount of the
Seller Losses attributable to claims for breach of representations or
warranties is at least $50,000 at which time, all such amounts may be
claimed. However, neither the Sellers and the Seller Shareholders on the
one hand, nor Purchaser or DPS on the other hand, shall be required to pay
in the aggregate more than $25,000,000 to satisfy claims made pursuant to
this Article 6 for claims based upon breaches of the representations and
warranties.
A. Payment; Failure to Pay Indemnification. Payment of any amount due pursuant
to this Article VI shall be made by the Indemnitor within 30 business days
after notice is sent by the Indemnitee. If and to the extent an Indemnitee
makes written demand upon an Indemnitor for indemnification pursuant to
this Article VI and the Indemnitor refuses or fails to pay in full within
30 business days of such written demand, then the Indemnitee after
arbitration of the matter may use any legal or equitable remedy to collect
from the Indemnitor the amount of its Damages. Nothing contained herein is
intended to limit or constrain an Indemnitee's rights against an Indemnitor
for indemnity, the remedies herein being cumulative and in addition to all
other rights and remedies of the Indemnitee.
A. Express Negligence. THE FOREGOING INDEMNITIES ARE INTENDED TO BE
ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE WITH THE EXPRESS TERMS AND
SCOPE THEREOF NOTWITHSTANDING TEXAS' EXPRESS NEGLIGENCE RULE OR ANY SIMILAR
DIRECTIVE THAT WOULD PROHIBIT OR OTHERWISE LIMIT INDEMNITIES BECAUSE OF THE
NEGLIGENCE (WHETHER SOLE, CONCURRENT, ACTIVE OR PASSIVE) OR OTHER FAULT OR
STRICT LIABILITY OF ANY OF THE INDEMNIFIED PARTIES.
A. Other Rights and Remedies Not Affected. The indemnification rights of the
parties under this Agreement are independent of and in addition to such
rights and remedies as the parties may have at law or in equity or
otherwise for any misrepresentation, breach of warranty or failure to
fulfill any agreement or covenant hereunder on the part of any party
hereto, including without limitation the right to seek specific
performance, rescission or restitution, none of which rights or remedies
shall be affected or diminished hereby.
I. ARTICLE - POST CLOSING MATTERS
A. Arbitration.
(a) Negotiation Period. All disputes arising under this Agreement (other than a
suit for injunctive relief) or arising with respect to any transaction
contemplated hereby will be subject to binding arbitration in accordance
with this Section 7.1 If such a dispute exists, the parties shall attempt
for a thirty-day period (the "Negotiation Period") from the date any party
gives any one or more of the other parties notice (the "Dispute Notice")
pursuant to this Section, to negotiate in good faith, a resolution of the
dispute. The Dispute Notice shall set forth with specificity the basis of
the dispute and shall be delivered to each party to this Agreement to whom
the dispute relates. During the Negotiation Period, representatives of each
party involved in the dispute who have authority to settle the dispute
shall meet at mutually convenient times and places and use their best
efforts to resolve the dispute.
(a) Commencement of Arbitration. If a resolution is not reached by the parties
prior to the end of the Negotiation Period, the parties agree to submit to
binding arbitration in San Antonio, Texas with an arbitrator or arbitrators
experienced in the arbitration of complex commercial disputes.
(a) Consolidation of Hearings. If more than one party delivers a Dispute Notice
to one or more other parties pursuant to this Section 7.1, the arbitrators
selected with respect to each such Dispute Notice may elect, in their sole
discretion, to combine the matters set forth in one or more, but not
necessarily all, of the Dispute Notices into one or more hearings, in which
case, the arbitrators shall adjust the time deadlines set forth herein as
they determine appropriate, and shall decide which one of them will hear
the evidence and render a final determination with respect to each hearing.
(a) Conclusion of Arbitration. The arbitrator shall make the final decision as
to the parties' respective rights and obligations. The arbitrator may
determine that a party is entitled to damages hereunder from one or more
other parties, and the manner in which such damages shall be assessed
against the other parties. However, the arbitrator may not award emotional
distress or punitive damages.
(a) Expenses of Arbitrators. The expenses of the arbitrator(s) shall be shared
equally by the parties to the arbitration.
A. Discharge of Business Obligations. Following the Closing Date, the Sellers
shall pay and discharge, in accordance with past practice but not more than
30 days within receipt of an invoice, all obligations and liabilities
incurred prior to the Closing Date relating to the Business and the Assets
(except for those expressly assumed by Purchaser hereunder and except to
the extent prorated pursuant to Section 1.5), including without limitation
any liabilities or obligations to employees, trade creditors and clients of
the Business. The Sellers, Seller Shareholders, Purchaser and DPS shall
each use commercially reasonable efforts following the Closing to ensure a
smooth transition of the Business to Purchaser.
A. Maintenance of Books and Records. The Sellers and Purchaser shall each
preserve all records possessed by such party relating to the Business or
Assets prior to the Closing Date for a period of at least six years
following the fiscal year to which the records relate. After the Closing
Date, where there is a legitimate purpose, such party shall provide the
other parties and their representatives with access, upon prior reasonable
written request specifying the need therefor, during regular business
hours, to (a) the officers, employees and other duly appointed
representatives of such party and (b) the books of account and records of
such party, but, in each case, only to the extent relating to the Assets or
Business prior to the Closing Date, and the other parties and their
representatives shall have the right to make copies of such books and
records; provided, however, that the foregoing right of access shall not be
exercisable in such a manner as to interfere unreasonably with the normal
operations and business of such party; and further, provided that, as to so
much of such information as constitutes trade secrets or confidential
business information of such party, the requesting party and its officers,
directors and representatives will use due care to not disclose such
information except (x) as required by law, (y) with the prior written
consent of such party, which consent shall not be unreasonably withheld, or
(z) where such information becomes available to the public generally, or
becomes generally known to competitors of such party through sources other
than the requesting party, its Affiliates or its officers, directors or
representatives. Such records may nevertheless be destroyed by a party if
such party sends to the other parties written notice of its intent to
destroy the records, specifying with particularity the contents of the
records to be destroyed. Such records may then be destroyed after the 30th
day after such notice is given unless another party objects to the
destruction in which case the party seeking to destroy the records shall
deliver such records to the objecting party.
A. Payments Received. The Sellers and Purchaser after the Closing shall hold
and will promptly transfer and deliver to the other, from time to time as
and when received by them, any cash, checks with appropriate endorsements
(using their best efforts not to convert such checks into cash), or other
property that they may receive on or after the Closing which properly
belongs to the other party, including without limitation any insurance
proceeds, and will account to the other for all such receipts. Following
the Closing, Purchaser shall have the right and authority to endorse
without recourse the name of the Sellers on any check or any other
evidences of indebtedness received by Purchaser on account of the Business
and the Assets transferred to Purchaser hereunder, for the sole purpose of
depositing such items into accounts over which the Sellers have signatory
authority.
A. Inquiries. Following the Closing Date, the Sellers will promptly refer all
inquiries with respect to ownership of the Assets or the Business to
Purchaser. The Sellers will execute such documents and financing statements
as Purchaser may reasonably request from time to time to evidence the
transfer of the Assets to Purchaser, including any necessary assignments of
financing statements. In addition, the Sellers shall take all reasonable
steps necessary to convey to Purchaser any Assets used in the normal course
of the Business which are not listed in the Schedules set forth in Section
1.1(a) of this Agreement.
A. Covenant Not to Compete. In exchange for the payment by Purchaser to the
Seller Shareholders of Two Million Dollars ($2,000,000) in immediately
available funds (the "Non-Competition Payment") in accordance with Schedule
7.6, and as part of the transactions described in this Agreement, the
Sellers and the Seller Shareholders each separately agree, for a period of
five years after the Closing Date, not to, directly or indirectly, own,
manage, operate, join or control, or participate in ownership, management,
operation or control of, any business whether in corporate, proprietorship
or partnership form or otherwise as more than a one percent owner in such
business where such business is competitive with the Business and is within
a 300-mile radius of the Sellers' facilities used in the Business or in the
operation of the Assets as of the Closing Date. The parties hereto
specifically acknowledge and agree that the remedy at law for any breach of
the foregoing will be inadequate and that Purchaser, in addition to any
other relief available to it, shall be entitled to temporary and permanent
injunctive relief without the necessity of proving actual damage. The
Seller and the Seller Shareholders acknowledge that this covenant not to
compete is being provided as an inducement to Purchaser to acquire the
Business and the Assets and that this Section 7.6 contains reasonable
limitations as to time, geographical area and scope of activity to be
restrained that do not impose a greater restraint than is necessary to
protect the goodwill or other business interest of Purchaser in the
Business. Whenever possible, each provision of this Section 7.6 shall be
interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Section 7.6 is prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remaining
provisions of this Section 7.6. If any provision of this Section 7.6 is,
for any reason, judged by any court of competent jurisdiction to be invalid
or unenforceable, such judgment shall not affect, impair or invalidate the
remainder of this Section 7.6 but shall be confined in its operation to the
provision of this Section 7.6 directly involved in the controversy in which
such judgment has been rendered. If the provisions of this Section 7.6 are
ever deemed to exceed the time or geographic limitations permitted by
applicable laws, then such provisions shall be reformed to the maximum time
or geographic limitations permitted by applicable law.
A. Transition Period. During the six-month period following the Closing (the
"Transition Period"), the parties shall operate the Business in the
following manner:
(a) Collections. Purchaser's employees shall issue invoices for work in process
as of the Closing Date for both the portion of the work completed by the
Sellers prior to the Closing and the portion of the work completed by
Purchaser thereafter.
(a) Accounting. Purchaser's employees will assist Seller as reasonably
necessary to close out the Sellers' books and records relating to the
Business.
(a) Licenses and Permits. The Sellers will continue to cooperate with Purchaser
in connection with Purchaser's applications for the transfer, renewal or
issuance of any permits, licenses, approvals or other Authorizations and as
required to satisfy any regulatory requirements arising as a result of the
sale of the Business pursuant to this Agreement, provided that all
out-of-pocket expenses incurred in connection therewith shall be paid by
Purchaser.
A. Accounting Records. For a five year period following the Closing, each of
the Sellers will use commercially reasonable efforts to take all action
necessary or appropriate to allow Purchaser to obtain access to audit work
papers of the Sellers' accountants for the immediately preceding five
years, if Purchaser requests such access in connection with the audit by
Purchaser of the Business for periods preceding the Closing.
A. Nondisclosure of Proprietary Information. The Sellers and the Seller
Shareholders agree that, from and after the Closing Date, they and all of
their Affiliates shall hold in confidence and will not directly or
indirectly at any time reveal, report, publish, disclose or transfer to any
person other than Purchaser any proprietary information relating to the
Business or the Assets (the "Proprietary Information") that is not
generally known to the public or use any Proprietary Information for any
purpose. The Sellers and the Seller Shareholders acknowledge that all
documents and objects containing or reflecting any Proprietary Information
whether developed by any of the Sellers or by a third party for any of the
Sellers, will after the Closing Date become the exclusive property of
Purchaser and be delivered to Purchaser.
A. Contact with Former Employees. The Sellers and the Seller Shareholders
agree that for a period of five years following the Closing Date, they will
not solicit for employment, directly or indirectly, any of Purchaser's
employees, or employees of Purchaser's Affiliates or related companies, or
any person who has been so employed within one year prior to such
solicitation.
I. ARTICLE - TERMINATION
A. Events of Termination. The obligation to close the transactions
contemplated by this Agreement may be terminated as follows:
(a) by mutual agreement of Purchaser and Sellers;
(a) by Purchaser, if a material default is made by the Sellers or the Seller
Shareholders in the observance or in the due and timely performance by the
Sellers or the Seller Shareholders of any agreements and covenants of the
Sellers or the Seller Shareholders herein contained, or if there has been a
breach by the Sellers or the Seller Shareholders of any of the warranties
and representations of the Sellers or the Seller Shareholders herein
contained, and such default or breach has not been cured or waived within
20 days of written notice thereof;
(a) by the Sellers, if a material default is made by Purchaser or DPS in the
observance or in the due and timely performance by Purchaser or DPS of any
agreements and covenants of Purchaser or DPS herein contained, or if there
has been a breach by Purchaser or DPS of any of the warranties and
representations of Purchaser or DPS herein contained, and such default or
breach has not been cured or has not been waived within 20 days of written
notice thereof;
(a) by Purchaser or the Sellers (provided the terminating party has not
materially breached any of its agreements, covenants or representations and
warranties), if the Closing has not occurred on or before October 15, 1998.
A. Liability Upon Termination. If the obligation to consummate the
transactions contemplated by this Agreement is terminated pursuant to any
provision of this Article VIII, then this Agreement shall forthwith become
void and there shall not be any liability or obligation with respect to
this Agreement on the part of Seller or Purchaser except and to the extent
such termination results from the willful breach by a party of any of its
representations, warranties or agreements hereunder.
A. Notice of Termination. The parties hereto may exercise their respective
rights of termination under this Article VIII only by delivering written
notice to that effect to the other party on or before the Closing Date,
specifically describing the factual basis and provisions of this Agreement
relied upon for such termination.
I. ARTICLE - MISCELLANEOUS
A. Finders' Fees. Neither the Sellers nor the Seller Shareholders have engaged
any person to act on their behalf in connection with the transactions
contemplated by this Agreement who would have any claim against Purchaser
or DPS or any of their respective Affiliates for brokerage or finders' fees
or agent commissions or similar payments.
A. Expenses. Except as otherwise provided in this Agreement, each party hereto
shall pay its own expenses incidental to the preparation of this Agreement,
the carrying out of the provisions of this Agreement and the consummation
of the transactions contemplated hereby.
A. Assignment and Binding Effect. This Agreement may not be assigned prior to
the Closing by any party hereto without the prior written consent of the
other party; provided, however, Purchaser and DPS may assign their rights
but not their obligations hereunder to any other entity that is
controlling, controlled by or under common control with Purchaser or DPS.
Purchaser shall give Sellers prompt written notice of any such assignment.
Subject to the foregoing, all of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
successors and assigns of the Sellers, the Seller Shareholders, Purchaser
and DPS.
A. Notices. Any notice, request, demand, waiver, consent, approval or other
communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by telegram,
facsimile, first class mail, postage prepaid, or overnight courier as
follows:
If to Purchaser or DPS, to: With a copy to:
Dawson Production Partners, L.P. Jenkens & Gilchrist,
112 E. Pecan Street, Suite 1000 A Professional Corporation
San Antonio, Texas 78205 600 Congress Avenue, Suite 2200
ATTN: Michael E. Little Austin, Texas 78701
Facsimile Number: (210) 354-1041 ATTN: J. Rowland Cook
Facsimile Number: (512) 404-3520
If to the Sellers or
the Seller Shareholders, to: With a copy to:
Mr. Roger Hellums Baker & Botts, L.L.P.
P.O. Drawer 330 One Shell Plaza
Freer, Texas 78357 910 Louisiana Street
Houston, Texas 77002
ATTN: L. Proctor Thomas, III
Facsimile Number: (713) 229-1522
or to such other address as the addressee may have specified in a notice
duly given to the sender as provided herein. Such notice, request, demand,
waiver, consent, approval or other communication will be deemed to have
been given as of the date so delivered, telegraphed or faxed or five
business days after the date so mailed, or on the day after the date
delivered to Federal Express or another similar courier marked for next day
delivery if delivered within the continental United States, and, if
delivered overseas, two business days after the date so delivered to DHL,
Federal Express or another similar overseas delivery service.
A. Governing Law. This Agreement shall be governed by, interpreted and
enforced in accordance with the laws of the State of Texas (without regard
to the choice or conflicts of law provisions of Texas law).
A. No Benefit to Others. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the
parties hereto and, in the case of Article VI hereof, certain other
indemnified parties, and their heirs, executors, administrators, legal
representatives, successors and assigns, and they shall not be construed as
conferring any rights on any other persons.
A. Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the parties and supersedes
any prior understandings, agreements, or representations by or among the
parties, written or oral, to the extent they related in any way to the
subject matter hereof. All Exhibits and Schedules referred to herein are
incorporated herein in full and are specifically made a part of this
Agreement.
A. Headings. All Section headings contained in this Agreement are for
convenience of reference only, do not form a part of this Agreement and
shall not affect in any way the meaning or interpretation of this
Agreement.
A. Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of
such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining provisions hereof, and any such invalidity or
enforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction; provided if any
provision of this Agreement is held to be illegal, invalid, or
unenforceable under present or future laws effective during the effective
period of this Agreement, such provision shall be fully severable; this
Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part of this Agreement; and
the remaining provisions of this Agreement shall remain in full force and
effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance from this Agreement. Furthermore, in lieu of
each illegal, invalid, or unenforceable provision there shall be added
automatically as part of this Agreement a provision as similar in terms to
such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid, and enforceable.
A. Counterparts. This Agreement may be executed in any number of counterparts
and any party hereto may execute any such counterpart, each of which when
executed and delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when all counterparts taken
together shall have been executed and delivered by the parties. It shall
not be necessary in making proof of this Agreement as to a party to produce
or account for any of the other counterparts signed by another party not
joined in the action.
A. Construction. The parties have participated jointly in the negotiation and
drafting of this Agreement. If an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as drafted jointly
by the parties and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
Regulations promulgated thereunder, unless the context requires otherwise.
The word "including" shall mean including without limitation. Words used
herein, regardless of the number and gender specifically used, shall be
deemed and construed to include any other number, singular or plural, and
any other gender, masculine, feminine or neuter, as the context requires.
Any reference to a "person" herein shall include an individual, firm,
corporation, partnership, trust, Governmental Entity, association,
unincorporated organization and any other entity. Any references to a
Section, Article, Schedule or Exhibit are to sections, articles, schedule
and exhibits to this Agreement, unless otherwise specifically stated.
A. Waiver. No waiver by any party of any default, misrepresentation, or breach
of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
A. Specific Performance. The Sellers and the Seller Shareholders acknowledge
and agree that Purchaser and DPS would be damaged irreparably if any of the
provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, the Sellers agree
that Purchaser and DPS shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions of this Agreement
in any action instituted in any court of the United States or any state
thereof having jurisdiction over the parties and the matter (subject to the
provisions set forth in Section__), in addition to any other remedy to
which they may be entitled, at law or in equity.
A. Submission to Jurisdiction. Each of the parties submits to the jurisdiction
of any state or federal court sitting in San Antonio, Texas, in any action
or proceeding arising out of or relating to this Agreement and agrees that
all claims or proceedings will be heard and determined in any such court.
Each party also agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the parties
waives any defense of inconvenient forum to the maintenance of any action
or proceeding so brought and waives any bond, surety, or other security
that might be required of any other party with respect thereto. Each party
agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other
manner provided by law or at equity.
A. Good Faith. The parties agree to act in good faith in the performance and
enforcement of this Agreement.
B. Attorneys' Fees. If any arbitration or action at law or in equity,
including an action for declaratory relief, is brought to enforce or
interpret the provisions of this Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees and costs from the other
party; provided, however, that no party shall be a prevailing party unless
such party has recovered more or paid less as a result of arbitration or a
final order resulting from judicial proceedings than the amount offered in
writing by an opposing party to settle the dispute.
A. Appointment of Seller Shareholders' Representative. Each of the Seller
Shareholders hereby constitutes and appoints Roger D. Hellums as such
Seller Shareholder's duly authorized representative and attorney-in-fact
(the "Representative") for all purposes of this Agreement, the Escrow
Agreement, the Registration Rights Agreement and all actions to be taken
hereunder and thereunder, having the power and authority, without
limitation, (i) to execute and deliver, for and on behalf of such Seller
Shareholder, the Escrow Agreement, the Registration Rights Agreement and
any other documents, certificates or instruments required to be executed in
connection with the transactions contemplated by this Agreement; (ii) to
act for and on behalf of such Seller Shareholder with respect to any
dispute arising under this Agreement, the Escrow Agreement or the
Registration Rights Agreement; (iii) to exercise any investment authority
conferred upon any of the Seller Shareholders individually or as a group by
the Escrow Agreement; and (iv) to execute and deliver, for and on behalf of
such Seller Shareholder, all certificates, confirmations and other
documents as shall be necessary and appropriate to consummate the
transactions provided for in this Agreement and to fulfill any and all of
such Seller Shareholder obligations hereunder. Such power and authority of
the Representative shall be irrevocable. Each Seller Shareholder expressly
acknowledges and agrees that the Representative shall have no liability to
such Seller Shareholder for error in judgment or acts or omissions in
connection herewith, whether or not disclosed and whether or not due to his
negligence, unless caused by his willful misconduct.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the date first written.
<PAGE>
PURCHASER:
DAWSON PRODUCTION PARTNERS, L.P.
By: Dawson Production Management, Inc.
its General Partner
By:
P. Mark Stark, Vice President
DPS:
DAWSON PRODUCTION SERVICES, INC.
By:
P. Mark Stark, Chief Financial Officer
SELLERS:
HELLUMS SERVICES II, INC.
By:
Roger D. Hellums, President
SUPERIOR COMPLETION SERVICES, INC.
By:
Charles C. Forbes, President
SOUTH TEXAS DISPOSAL, INC.
By:
Roger D. Hellums, President
ELSIK, II, INC.
By:
Roger D. Hellums, President
SELLER SHAREHOLDERS:
Roger D. Hellums
Charles C. Forbes, Jr.
Robert W. Radle, Jr.
Ronald D. Brieden
John E. Crisp
Charles Talley
James J. Acker
<PAGE>
SCHEDULES
Schedule 1.1(a)(i) Assigned Contracts
Schedule 1.1(a)(ii) Equipment Leases
Schedule 1.1(a)(iii) Operating Assets
Schedule 1.1(a)(iv) Vehicles
Schedule 1.1(a)(v) Equipment
Schedule 1.1(a)(vii) Personal Property
Schedule 1.1(a)(viii) Permits
Schedule 1.1(b) Excluded Assets
Schedule 1.3(a) Purchase Price
Schedule 1.3(b) Seller Tax Basis and Fair Market Value of Assets
Schedule 1.4(a) Assumed Liabilities
Schedule 3.1(a) Corporate Jurisdiction
Schedule 3.1(c) Validity of Contemplated Transactions
Schedule 3.1(e) Financial Statements
Schedule 3.1(h) Existing Condition
Schedule 3.1(i) Permitted Liens
Schedule 3.1(j) Compliance with Laws; Authorizations
Schedule 3.1(l) Litigation
Schedule 3.1(n) Contracts and Commitments
Schedule 3.1(o) Environmental Matters
Schedule 3.1(q) Assets
Schedule 3.1(t) Employee Benefit Plans
Schedule 3.1(u) Personnel
Schedule 3.1(x) Warranty
Schedule 5.1(c) No Threatened or Pending Litigation
Schedule 5.1(f) Consents and Approvals
Schedule 7.6 Covenant Not to Compete
Schedule 9.1 Finders' Fees
EXHIBITS:
Exhibit A Escrow Agreement
Exhibit B Registration Rights Agreement
Exhibit C Employment Agreement, Non-Competition Agreement
and Mutual Agreement to Arbitrate Claims
