UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) JUNE 24, 1996
DI INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
TEXAS 1-8226 74-2144774
State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
450 GEARS ROAD, SUITE 625
HOUSTON, TEXAS 77067
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 874-0202
N/A
(Former name or former address, if changed since last report.)
<PAGE>
Page 1 of 8
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 31, 1996, Western Oil Well Service Co., a wholly owned
subsidiary of the Company ("Western"), entered into a definitive agreement to
sell its operational assets to Pool Company ("Pool"), a subsidiary of Pool
Energy Services Co., for $3,950,000 in cash. This transaction closed June 24,
1996. Under the agreement, Western sold to Pool all of its operational assets,
which included 23 carrier-mounted workover rigs. Western provided oil and gas
well workover services; principally in Montana, Utah and North Dakota. Pool also
assumed all of Western's capital leases associated primarily with transportation
equipment which amounted to $217,000.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information
The accompanying unaudited pro forma consolidated financial statements
of DI Industries, Inc. (the "Company") are based upon the historical
consolidated financial statements of the Company as of March 31, 1996 and for
the year ended December 31, 1995 and the three months ended March 31, 1996, as
adjusted for certain items discussed in the notes to these unaudited pro forma
consolidated financial statements.
For purposes of the accompanying statements, the sale of Western's
operational assets has been accounted for as an asset sale. Accordingly, the
$3.95 million sale proceeds has been recorded against the book value of the
assets sold resulting in a gain on the sale of the assets. The accounts of
Western have also been adjusted to reflect the purchaser's assumption of
Western's operational leases, pursuant to the terms of the definitive agreement.
The unaudited pro forma balance sheet assumes the sale of Western's
assets occurred on March 31, 1996 while the unaudited pro forma statement of
operations assume sale of Western's assets occurred on January 1, 1995 for the
year ended December 31, 1995 and January 1, 1996 for the three months ended
March 31, 1996.
These unaudited pro forma consolidated financial statements should be
read in conjunction with the audited consolidated financial statements included
in the Company's Annual Report on Form 10-K, as amended by Form 10-K/A for the
year ended December 31, 1995 and the accompanying notes to unaudited pro forma
consolidated financial statements. Pro forma financial data is not necessarily
indicative of future operations of the Company as a result of numerous factors,
including changes in utilization rates for drilling rigs, changes in rates
received for contract drilling services and future equipment sales and
acquisitions. In addition, the results of operations for the three-month period
ending March 31, 1996, if annualized, are not necessarily indicative of annual
results.
2
DI INDUSTRIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
March 31, 1996
(In Thousands)
<TABLE>
<CAPTION>
WESTERN
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
ASSETS
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 996 $ 3,950 (1) $ 4,946
Restricted cash 1,862 1,862
Accounts receivable, net of allowance of $1,935 17,789 17,789
Rig inventory and supplies 2,902 2,902
Assets held for sale 2,398 2,398
Prepaids and other current assets 2,815 (110) (1) 2,705
---------- ---------- ----------
Total current assets 28,762 3,840 32,602
---------- ---------- ----------
Property and Equipment:
Land, buildings and improvements 3,523 (227) (1) 3,296
Drilling and well service equipment 39,910 (2,110) (1) 37,800
Furniture and fixtures 1,094 (29) (1) 1,065
Less accumulated depreciation and amortization (18,797) 986 (1) (17,811)
---------- ---------- ----------
Net property and equipment 25,730 (1,380) 24,350
---------- ---------- ----------
Other Noncurrent Assets 277 277
---------- ---------- ----------
$ 54,769 $ 2,460 $ 57,229
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 1,644 $ (90) (1) $ 1,554
Accounts payable - trade 10,246 10,246
Accrued workers' compensation 2,672 2,672
Payroll and related employee costs 4,029 4,029
Customer advances 60 60
Other accrued liabilities 3,862 3,862
---------- ---------- ----------
Total current liabilities 22,513 (90) 22,423
---------- ---------- ----------
Long-term debt less current maturities 10,379 (127) (1) 10,252
---------- ---------- ----------
Other long-term liabilities and minority interest 2,774 2,774
---------- ---------- ----------
Deferred income taxes - -
---------- ---------- ----------
Series A Preferred stock - mandatory redeemable 900 900
---------- ---------- ----------
Commitments and contingent liabilities
Shareholders' equity:
Series B Preferred stock, $1 par value;
10 shares authorized, 4 shares subscribed 4,150 4,150
Common stock, $.10 par value; 75,000 shares
authorized; 38,669 issued and outstanding 3,867 3,867
Additional paid-in capital 46,458 46,458
Deficit (36,272) 2,677 (1) (33,595)
---------- ---------- -----------
Total shareholders' equity 18,203 2,677 20,880
---------- ---------- -----------
$ 54,769 $ 2,460 $ 57,229
========== ========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
3
DI INDUSTRIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1995
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
WESTERN
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Revenues:
Contract drilling $ 94,709 $ (7,164) (2) $ 87,545
Costs and Expenses:
Drilling operations 93,825 (6,056) (2) 87,769
Depreciation, depletion and amortization 4,832 (339) (2) 4,493
Provision for SFAS #121 asset impairment 5,290 5,290
General and administrative 3,264 (300) (2) 2,964
Bad debt expense 291 291
---------- ---------- ----------
Total costs and expenses 107,502 (6,695) 100,807
Operating Income (Loss) (12,793) (469) (13,262)
Other Income (expense):
Interest income 292 292
Gain on sale of assets 466 (17) (2) 3,126
2,677 (3)
Interest expense (1,472) 8 (2) (1,464)
Gain on currency exchange 888 888
Minority Interest (56) (56)
---------- ---------- ----------
Other income (expense), net 118 2,668 2,786
Income (Loss) from Continuing Operations (12,675) 2,199 (10,476)
Discontinued Operations:
Income (loss) from oil and gas operations (4) (4)
Loss from sale of oil and gas properties (768) (768)
---------- ---------- ----------
Loss from Discontinued Operations (772) - (772)
Income Tax Provision:
Current - -
Deferred - -
Net Income (Loss) $ (13,447) $ 2,199 $ (11,248)
========== ========== ==========
Primary Earning (loss) per share:
From continuing operations $ (.33) $ (.27)
From discontinued operations (.02) (.02)
---------- ----------
Net income per common share $ (.35) $ (.29)
========== ==========
Fully Diluted Earning (loss) per share:
From continuing operations $ (.33) $ (.27)
From discontinued operations (.02) (.02)
---------- ----------
Net loss per common share $ (.35) $ (.29)
========== ==========
Weighted average common shares outstanding:
Primary 38,669 38,669
========== ==========
Fully Diluted 38,669 38,669
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
5
DI INDUSTRIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1996
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
WESTERN
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- --------------- -------------
<S> <C> <C> <C>
Revenues:
Contract drilling $ 20,102 $ (1,659) (2) $ 18,443
Costs and Expenses:
Drilling operations 18,936 (1,449) (2) 17,487
Depreciation, depletion and amortization 1,097 (61) (2) 1,036
General and administrative 720 (123) (2) 597
Employment severance 602 602
---------- ---------- ----------
Total costs and expenses 21,355 (1,633) 19,722
Operating Income (Loss) (1,253) (26) (1,279)
Other Income (expense):
Interest income 11 11
Gain on sale of assets 15 (12) (2) 2,680
2,677 (3)
Interest expense (262) 2 (2) (260)
Minority Interest (2) (2)
---------- ---------- ----------
Other income (expense), net (238) 2,667 2,429
Income (Loss) Before Income Taxes (1,491) 2,641 1,150
Income Tax Provision:
Current - - -
Deferred - - -
---------- ---------- ----------
Net income tax provision - - -
Net Income (Loss) (1,491) 2,641 1,150
Series B preferred stock subscription dividend (150) (150)
---------- ---------- ----------
Net Loss Applicable to Common Stock $ (1,641) $ 2,641 $ 1,000
========== ========== ==========
Primary Earning (loss) per share:
From continuing operations $ (.04) $ (.03)
From discontinued operations - -
---------- ----------
Net income (loss) per common share $ (.04) $ (.03)
========== ==========
Fully Diluted Earning (loss) per share:
From continuing operations $ (.04) $ (.03)
From discontinued operations - -
---------- ----------
Net income (loss) per common share $ (.04) $ (.03)
========== ==========
Weighted average common shares outstanding:
Primary 38,669 38,669
========== ==========
Fully Diluted 38,669 38,669
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
6
DI INDUSTRIES, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma financial statements reflect the adjustments described
below:
BALANCE SHEET -
(1) To record closing on June 24, 1996 of the sale of Western pursuant
to the May 31, 1996 definitive agreement for $3.95 million cash
plus the lease obligation assumption of $217,000.
STATEMENTS OF OPERATIONS -
(2) To record the effect of the Western sale on the operating accounts.
(3) To record the gain on the sale of the operational assets of Western
7
ITEM 7 (c). EXHIBITS - The following document is filed as part of this report:
2.1 - Agreement between Pool Company and Western Oil Well Service Co.
executed May 31, 1996.
8
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 hereunto duly authorized.
DI INDUSTRIES, INC.
(Registrant)
7-8-96 /s/ THOMAS L. EASLEY
Date (Signature)
9
EXHIBIT 2.1
AGREEMENT
AGREEMENT, made the 31st day of May, 1996, by and between POOL COMPANY
("Pool"), a Texas corporation, having an office at 10375 Richmond Avenue,
Houston, Texas and Western Oil Well Service Co. ("Western"), a Montana
corporation, having an office at 450 Gears Road, Suite 625, Houston, Texas.
W I T N E S S E T H:
WHEREAS, Pool desires to purchase and Western desires to sell Western's
operational assets; and
WHEREAS, Pool desires to acquire leasehold interests in certain equipment
and real properties heretofore leased by Western;
NOW, THEREFORE, for and in consideration of the mutual promises and
covenants herein contained, the parties agree as follows:
1. PURCHASE AND LEASE TRANSACTIONS:
(a) On the Closing Date (hereinafter defined):
(1) Pool shall purchase from Western and Western shall sell to
Pool all of
(i) the rigs, equipment and other assets described on the
Equipment Inventory dated April 15, 1996 provided by
Western to Pool and
(ii) the land and buildings listed on Exhibit A attached
hereto (collectively herein, the "Assets"), subject,
however, to the provisions of paragraph 1(a)(4) below.
(2) Pool shall enter into lease agreements with respect to the
following properties heretofore leased by Western:
(i) Real property described on Exhibit B attached hereto.
(ii) Motor vehicles described in Exhibit A which are leased
rather than owned by Western.
(3) As consideration for the sale of the Assets, Pool shall pay
Western the sum of $3.95 million U.S. dollars (the "Purchase
Price"). Such consideration shall be paid in two (2)
installments:
(i) $395,000 payable as an earnest money deposit on the
date hereof pursuant to paragraph 1(e) below; and (ii)
$3,555,000 payable on the Closing Date.
(4) If Pool so elects prior to the Closing Date, (i) Pool may
decline to purchase any or all of the real estate listed on
Exhibit A, and (ii) unless Pool elects otherwise, Pool and
Western shall enter into fully paid lease agreements in the form
attached hereto as Exhibit C with respect to any such real
property that Pool elects not to purchase. Pool and Western
agree that the Purchase Price shall not be adjusted as a result
of any election by Pool to decline to purchase any property
pursuant to this paragraph and that no additional consideration
shall be payable by Pool in order to obtain fully paid leases
with respect thereto.
(b) the Assets shall be transferred and assigned to Pool free and
clear of liens or encumbrances except:
(1) liens for taxes not yet due and payable or being contested
in good faith by appropriate proceedings;
(2) statutory liens not yet delinquent; and
(3) liens specified in paragraph 7(a)(1)(iii) hereof as to which
the real estate conveyances described therein are expressly to
be made subject to.
(c) EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY OTHER
DOCUMENTS EXECUTED BY BOTH PARTIES IN CONNECTION HEREWITH, WITH
RESPECT TO THE ASSETS, WESTERN
-2-
MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED, AS TO ANY MATTER
WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE DESIGN OR CONDITION OF
THE ASSETS, THEIR MERCHANTABILITY OR FITNESS OR CAPACITY OR
DURABILITY FOR ANY PARTICULAR PURPOSE, THE QUALITY OF THE MATERIAL OR
WORKMANSHIP OF THE ASSETS OR CONFORMITY OF THE ASSETS TO THE
PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE ORDER OR ORDERS OR
OTHER DOCUMENTS RELATING THERETO AND, AS TO WESTERN, POOL PURCHASES
THE ASSETS "AS IS, WHERE IS."
(d) Concurrently with the execution hereof, Pool shall pay Western
the amount of $395,000 as an earnest money deposit to be credited
against the Purchase Price. In the event that this Agreement is
rescinded or terminated for any reason other than Pool's breach of
its obligations herein, said earnest money deposit shall be returned
to Pool without deduction or withholding of any kind. In the event
this Agreement is rescinded or terminated due to breach by Pool of
its obligations herein, said deposit shall be retained by Western as
liquidated damages for such breach. In the event this Agreement is
rescinded or terminated due to breach by Western of its obligations
herein, liquidated damages in the amount of $395,000 shall be payable
by Western to Pool.
(e) Notwithstanding the provisions of paragraph 1(a)(2) above or any
other provision in this agreement, it is understood and agreed that
Pool, at its option, may elect to decline to accept and enter into
lease agreements with respect to any of the leased real property
described on Exhibit B attached hereto, provided any such election
shall be made in writing by Pool no later than seven (7) days prior
to the Closing Date.
2. THE CLOSING:
The transactions contemplated in this Agreement shall be consummated
at a closing (the "Closing") to be held at Pool's offices at 10375
Richmond Avenue on June 24, 1996, or three (3) days following the receipt
of an acceptable commitment to issue the policies of title insurance
requested in Section 7(a)(1) hereof, whichever occurs later, or such other
date as the parties may mutually agree. The date of the Closing is herein
referred to as the "Closing Date." Closing shall be deemed to be effective
as of 12:01 a.m. on the Closing Date.
3. REPRESENTATION AND WARRANTIES OF WESTERN:
Western represents and warrants to Pool as of the date hereof and as
of the Closing Date as follows:
(a) ORGANIZATION AND AUTHORITY: Western is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Montana.
-3-
The execution, delivery and performance of this Agreement by Western
has been duly authorized by all necessary corporate action and this
Agreement constitutes a valid and binding obligation of Western,
enforceable in accordance with its terms.
(b) TITLE TO PROPERTY; LIENS: At the time of the Closing Western will
have good and indefeasible title to the property of every kind,
tangible or intangible, constituting the Assets, free and clear of
all liens, encumbrances and charges, except as described in Section
1(b) hereof.
(c) COMPLIANCE WITH CORPORATE DOCUMENTS: The consummation of the
transaction contemplated by this Agreement will not result in the
breach of any terms or provision of the Articles of Incorporation or
Bylaws of Western or of any shareholders agreement or other material
contractual obligation or arrangement of Western or any of its
affiliates. Consummation of such transaction will, however, require
the consent of Norlandsbanken A.S. and Charter National
Bank--Colonial, which consents will be obtained by Western prior to
Closing.
(d) DISSIPATION OF ASSETS: None of the Assets have been sold or
otherwise disposed of or dissipated other than through normal wear
and tear and/or consumption in the ordinary course of Western's
business, nor have any of the Assets been lost, damaged or destroyed
as a result of theft, fire or other casualty since April 15, 1996,
provided, however, that in the event of such loss, destruction, or
damage, this Agreement shall not terminate and instead the Purchase
Price shall be proportionately reduced by the value of the lost,
destroyed, or damaged Asset. The value of such Asset shall be
determined by mutual agreement or, absent such agreement, by an
independent appraiser appointed by the then President of the
Association of Oilwell Service Contractors.
4. REPRESENTATIONS AND WARRANTIES OF POOL:
Pool represents and warrants to Western as of the date hereof and as
of the Closing Date as follows:
-4-
(a) ORGANIZATION AND AUTHORITY:
Pool is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas. The execution,
delivery and performance of this Agreement by Pool have been duly
authorized of this Agreement by Pool has been duly authorized by all
necessary corporate action on the part of Pool and this Agreement
constitutes a valid and binding obligation of Pool, enforceable in
accordance with its terms.
(b) COMPLIANCE WITH CORPORATE DOCUMENTS:
The execution and delivery of this Agreement and consummation of
the transactions contemplated by this Agreement will not result in
the breach of any term or provision of the Articles of Incorporation
or Bylaws of Pool or of any shareholders agreement or other material
contractual obligation or arrangement of Pool or any of its
affiliates.
5. SURVIVAL OF WARRANTIES AND REPRESENTATIONS:
Notwithstanding any investigation conducted before or after the
Closing, the parties shall be entitled to rely upon the warranties and
representations set forth in Sections 3 and 4 hereof, and the obligations
of the parties with respect thereto shall survive the Closing and continue
in full force and effect until the third anniversary of the Closing Date,
at which time all warranties and representations set forth in this
Agreement and all liability of the parties with respect thereto shall
terminate, except with respect to any claims which are asserted in writing
on or before the third anniversary of the Closing Date.
6. INDEMNIFICATION:
(a) Western hereby agrees to indemnify, defend and hold harmless Pool
from and against any and all losses, liabilities, damages, expenses,
or deficiencies (including reasonable attorneys' fees), to the extent
such losses, liabilities, damages, expenses and deficiencies exceed
One Hundred Thousand and No/100 ($100,000.00), in the aggregate,
arising out of or due to, (i) any breach or default with respect to
any representation or warranty made by Western under this Agreement,
or (ii) the amount of any liability of Western, including contingent
-5-
liabilities whether or not asserted against it at or prior to the
Closing, that Pool may in any way become responsible for or that any
of the Assets sold to Pool pursuant to this Agreement may become
subject to as a result of the transactions provided for herein,
whether by operation of any bulk sale law, any similar law, or
otherwise.
(b) Pool hereby agrees to indemnify, defend and hold harmless Western
and its officers, directors, employees and affiliates from and
against any and all losses, liabilities, damages, expenses or
deficiencies (including reasonable attorneys' fees), to the extent
such losses, liabilities, damages, expenses and deficiencies exceed
One Hundred Thousand and No/100 ($100,000.00), in the aggregate,
arising out of or due to: (i) any breach or default under this
Agreement by Pool, (ii) any inaccuracy in any representation or
warranty made by Pool under this Agreement; or, subject, however, to
the provisions of paragraph 1(e), in the case of breach resulting in
this Agreement being rescinded or terminated, (iii) the operation of
the Assets by Pool subsequent to Closing, including claims alleging
preexisting defects or strict liability causes of action against
Western or relating to negligent or other acts or omissions of
Western prior to Closing, but excluding, however, claims relating to
negligent or other acts or omissions of Western after the Closing.
7. CONDITIONS PRECEDENT:
(a) The obligations of Pool under this Agreement are subject to the
condition that:
(1) Pool shall receive at the Closing the following:
(i) Duly executed bill(s) of sale and assignments in form
of Exhibit E, conveying to Pool the personal property
described in Exhibit A.
(ii) A guaranty in the form of Exhibit F with respect to
all of Western's obligations under this Agreement,
including, without limitation, Section 6 hereof, duly
executed by DI Industries, Inc. ("DI"), as Western's parent
company (the "Guaranty").
-6-
(iii) Special warranty deeds in a form acceptable to both
parties conveying good and indefeasible title in and to the
land and buildings described in Exhibit A, subject only to
the following:
- Present restrictions and/or restrictive covenants,
if any, existing against said properties.
- Taxes for the current and subsequent years;
- Existing building and zoning ordinances, if any; and
- Recorded liens, easements, licenses or encumbrances
not caused or created by Western or its affiliates.
(iv) Owner's Policies of Title Insurance issued by a
mutually acceptable title insurance company, tax
certificates showing no delinquent taxes, (current taxes
and insurance to be prorated to the Closing Date). Each of
the Title Policies issued to Pool shall be in an amount
equal to the value shown on Exhibit A as assigned to the
property to which such policy pertains and shall guarantee
Pool's title to be good and indefeasible subject only to
the foregoing exceptions and, the following standard
printed exception:
- Any discrepancies, conflicts, or shortages in areas or
boundary lines, or any encroachments, or any
overlapping of improvements.
Such title insurance shall not in any way release Western
from the warranties of the deed to each property.
(v) Documents in form satisfactory to Pool evidencing the
release of all liens or encumbrances affecting any of the
Assets other than the liens described in Section 1(b)
hereof.
(vi) A noncompetition agreement executed by Western and DI
substantially in the form of Exhibit D attached hereto (the
"Noncompete Agreement").
(vii) An opinion of Western's counsel, to the effect that:
- Western is a corporation duly organized, validly
-7-
existing and in good standing under the laws of
the State of Montana.
- The execution, delivery and performance of this
Agreement and each of the other agreements and
instruments to be executed and delivered by Western on
the Closing Date and the execution, delivery and
performance of the Guaranty and the Noncompete
Agreement by DI have been duly authorized by all
requisite corporate action. Subject to bankruptcy,
insolvency and similar laws affecting the rights of
creditors and to the power of courts to award damages
in lieu of equitable remedies, all of the obligations
of Western and of DI contained in this Agreement, the
Guaranty and each of the other agreements and
instruments delivered at Closing are valid and binding
obligations, enforceable in accordance with their
terms.
(2) Western shall have performed all of its covenants contained
in this Agreement which are to be performed on or before the
Closing Date.
(3) No litigation or other proceedings shall be pending or
threatened which, in Pool's reasonable judgment, would
materially or adversely affect any of the Assets.
(4) All requisite board of directors and shareholder actions to
authorize the execution and delivery of this Agreement and the
performance by Western and DI of their respective obligations
hereunder and under the Guaranty and under the Noncompete
Agreement shall have been taken and certificates to that effect
provided to Pool.
(5) Pool, at its expense, shall have been permitted to conduct
environmental audits of the real properties which are included
among the Assets.
-8-
(6) With respect to any of Western's rig operations which are
not completed prior to the close of business on the Closing
Date, arrangements shall have been made (i) with each of the
customers involved whereby Western shall be released from any
contractual obligation to complete such work and Pool shall
undertake the completion thereof, or (ii) as to any contract
with a customer that is not willing to release Western from
completion thereof, for Western to complete such work in
Western's name utilizing the Assets, with Pool receiving the net
compensation therefrom, provided no such arrangement shall
endure for a period of more than 30 days following the Closing
Date.
(7) None of the Assets shall have been lost, destroyed or
materially damaged by theft, fire or other casualty, since April
15, 1996, provided, however, that in the event of such loss,
destruction, or damage, this Agreement shall not terminate and
instead the Purchase Price shall be proportionately reduced by
the value of the lost, destroyed, or damaged Asset. The value of
such Asset shall be determined by mutual agreement or, absent
such agreement, by an independent appraiser appointed by the
then President of the Association of Oilwell Service
Contractors.
(b) The obligations of Western under this Agreement are subject to
the condition that:
(1) Western shall receive at Closing the following:
(i) A wire transfer of funds in the amount of $3,555,000
U.S. dollars to such account as shall be designated by
Western in writing at or prior to Closing, representing the
balance in excess of the earnest money deposit of the
Purchase Price of $3.95 million U.S. dollars.
(ii) A guaranty in the form of Exhibit F with respect to
all of Pool's obligations under this Agreement, including,
without limitation, Section 6 hereof, duly executed by Pool
Energy Services Co. as Pool's ultimate parent entity.
-9-
(iii) An opinion of Pool's counsel, to the effect that:
- Pool is a corporation duly organized, validly
existing and in good standing under the laws of
the State of Texas.
- the execution, delivery and performance of this
Agreement and each of the other agreements and
instruments to be executed and delivered by Pool on
the Closing Date has been duly authorized by all
requisite corporate action. Subject to bankruptcy,
insolvency and similar laws affecting the rights of
creditors and to the power of courts to award damages
in lieu of equitable remedies, this Agreement is a
valid and binding obligation of Pool, enforceable in
accordance with its terms.
(2) No litigation or other proceeding shall be pending or threatened
which seeks to prevent the consummation of this Agreement.
(3) Pool shall have performed all of its covenants contained in this
Agreement which are to be performed on or before the Closing Date.
(4) All requisite action on the part of the Board of Directors of
Pool to authorize the execution and delivery of this Agreement and
the performance by Pool of its obligations hereunder shall have been
taken and a certificate to that effect provided to Western.
(5) With respect to any of Western's rig operations which are not
completed prior to the close of business on the Closing Date,
arrangements shall have been made (i) with each of the customers
involved whereby Western shall be released from any contractual
obligation to complete such work and Pool shall undertake the
completion thereof, or (ii) as to any contract with a customer that
is not willing to release Western from completion thereof, for
Western to complete such work in Western's name utilizing the Assets,
with Pool receiving the net compensation therefrom, provided no such
arrangement shall endure for more than 30 days following the Closing
Date.
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8. COVENANTS OF WESTERN:
(a) From the date hereof until the Closing Date, Western will:
(1) Use its best commercially reasonable efforts to conduct and
operate its well servicing business only in the ordinary and
usual course, preserve its current business relationships with
well servicing customers and keep available the services of
Western's rig crew personnel to facilitate their becoming
employed by Pool following the Closing Date.
(2) Use its best commercially reasonable efforts to maintain all
of the Assets in good condition and preserve them from loss,
damage, destruction or other deterioration, except normal wear
and tear and damage by fire or other casualty.
(3) Not sell nor agree to sell or transfer to any other person
any of the Assets or subject any thereof to a mortgage, pledge,
lien or any other form of security interest or encumbrance of
any kind, other than as described in Section 1(c) above.
(4) Permit or obtain any permission required to enable Pool and
any persons designated by Pool, at Pool's sole risk and expense,
to inspect the properties and assets to be assigned or leased
hereunder.
(5) pay all taxes, fees, assessments and other charges, when
due, which are assessed, levied or due in with respect to any of
the properties and assets to be assigned or transferred
hereunder, whether owned or leased, except to the extent being
contested in good faith by appropriate proceedings.
(6) Not take any course of action inconsistent with satisfaction
of its obligations under this Agreement and promptly do all such
acts and take all other measures as may be appropriate to enable
Western to perform its obligations hereunder as early as
possible.
(7) Assist Pool in establishing agreements with Western's
customers providing for the performance by Pool of rig services
for such customers
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on terms substantially similar to those contained in Western's
existing agreements with such customers.
(8) Use its best commercially reasonable efforts to obtain the
lease agreements called for in Section (1)(a)(2) hereof.
(b) From the date hereof until the Closing Date, Pool will:
(1) not contact or communicate with any of the employees of
Western or (insofar as this transaction is concerned) any of the
well servicing customers of Western without the consent of
Western, which consent shall not be unreasonably withheld;
(2) not take any course of action inconsistent with satisfaction
of its obligations under this Agreement and promptly do all such
acts and take all of the measures as may be appropriate to
enable Pool to perform its obligations hereunder as early as
possible;
(3) assist Western in establishing agreements between Pool and
the customers of Western providing for the performance by Pool
of rig services to such customers on terms substantially similar
to those contained in Western's existing agreements with such
customers; and
(4) use its best commercially reasonable efforts to obtain the
lease agreements called for in Section (1)(a)(2).
9. EXPENSES:
(a) Except as otherwise provided in this Agreement, all costs and
expenses, including, without limitation, legal fees and local, state
and federal income taxes incurred by the parties in negotiating this
Agreement or in, or as a result of, consummating the transaction
contemplated hereby, shall be paid by the party incurring same.
(b) With respect to the real estate being purchased and sold, Western
shall bear the cost of title insurance and recording any lien
releases and Pool shall bear the cost of recording deeds; any title
company escrow fees shall be borne equally.
(c) Western shall be responsible for and shall indemnify and hold
Pool harmless for any and all accrued benefits or other obligations
with respect to
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Western's employees incurred or accrued up until the Closing Date
regardless of whether such employees are subsequently hired by Pool
in connection with the Closing of this transaction.
10. FINDER'S FEES:
The parties mutually acknowledge and agree that neither has incurred
obligation to pay any brokerage commission or finder's fee with regard to
the transactions contemplated by this Agreement. Each of the parties
hereby covenants to indemnify the other against any and all liability
(including, without limitation, counsel fees and other costs of defending
any such liability or enforcing this indemnification) for payment of any
commission or finder's fee to any person, firm or corporation claiming to
have acted on behalf of such indemnifying party in connection with the
transactions contemplated by this Agreement.
11. NOTICES:
All notices, requests, demands or other communications hereunder
shall be in writing and shall be deemed to have been duly delivered if,
(i) delivered in person, (ii) sent by registered or certified mail,
postage prepaid, return receipt requested at the following addresses, or
(iii) sent by telecopy or facsimile transmission to the numbers indicated
below:
(a) If to Western, to President, Western Oil Well Service Co., 450
Gears Road, Suite 625, Houston, Texas 77067. Facsimile No.
713/874-0193
With a copy to: Casey W. Doherty
Cokinos, Bosien & Young
2919 Allen Parkway, Suite 1500
Houston, Texas 77019
(b) If to Pool, to Mr. W. J Myers, 10375 Richmond Avenue, Houston,
Texas 77042. Facsimile No. 713/954-3037.
Such notices shall be effective, (i) if delivered in person or by
courier, on actual receipt by the intended recipient, (ii) if sent by
telecopy or facsimile transmission,
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when the answer back is received, or (iii) if mailed, upon the
earlier of five (5) days after deposit in the mail or the date of
delivery as shown by the return receipt therefor.
Any party may, by giving written notice to the other, designate any
other address in substitution of the foregoing address to which such
notice shall be given.
12. APPLICABLE LAW AND VENUE:
This Agreement shall be controlled, construed and enforced in
accordance with the laws of the State of Texas. Venue for any legal or
equitable action brought with respect to the interpretation or enforcement
of this Agreement or any agreement executed in connection therewith shall
lie in Harris County, Texas.
13. SEVERABILITY:
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under applicable law, 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
hereof 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 therefrom. Furthermore, in
lieu of each such 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.
14. RESCISSION OF AGREEMENT:
In the event the Closing Date has not occurred on or before July 15,
1996 for any reason other than the mutual agreement of the parties or the
failure to receive acceptable title insurance commitments and one of the
parties hereto is in default of one or more of its obligations, the
nondefaulting party shall have the right to terminate this Agreement by
written notice to the other. Subject to the provisions of paragraph 1(e)
hereof, the termination of this Agreement by the nondefaulting party
pursuant to this section shall not prejudice any other rights the
nondefaulting party may have at law or in equity with respect to any
breach of this Agreement.
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15. ENTIRE AGREEMENT:
This Agreement contains the entire agreement between the parties
hereto with respect to the subject matter hereof and may be amended only
by a written agreement signed by all of the parties.
16. BINDING EFFECT:
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns and nothing
contained herein, express or implied, is intended to confer upon any
person other than the parties hereto, their successors and assigns, any
rights or remedies under or by reason of this Agreement.
17. ATTORNEYS' FEES:
The prevailing party in any dispute with respect to the
interpretation or enforcement of this Agreement shall be entitled to
recover reasonable attorneys' fees incurred by such party in connection
therewith.
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IN WITNESS WHEREOF, the Parties have each caused this Agreement to be
executed on their behalf by their officers thereunto duly authorized, as of the
date first above written.
POOL COMPANY
By: /s/ WILLIAM J. MYERS
Its: GROUP VICE PRESIDENT
WESTERN OIL WELL SERVICE CO.
By: /s/ T. SCOTT O'KEEFE
Its: ATTORNEY-IN-FACT
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EXHIBIT A
Exhibit A has been omitted pursuant to Item 601(b)(2) of Regulation S-K.
Registrant hereby agrees to provide copies of Exhibit A to the Commission upon
request.
EXHIBIT B
LEASED REAL PROPERTY
Exhibit B has been omitted pursuant to Item 601(b)(2) of Regulation S-K.
Registrant hereby agrees to provide copies of Exhibit B to the Commission upon
request.
EXHIBIT C
FORM OF LEASE
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made and entered into by and
between WESTERN OIL WELL SERVICE CO. ("Landlord"), and POOL COMPANY ("Tenant").
1. PREMISES
1.1 PREMISES. In consideration of the obligation of Tenant to pay rent as
herein provided and in consideration of the other terms, covenants, and
conditions hereof, Landlord leases to Tenant, and Tenant takes from Landlord,
the premises situated at Marsh Road, Glendive, Montana, and more fully and
particularly described on Exhibit A attached hereto and incorporated herein for
all purposes (the "Premises"), to have and to hold the Premises for the Lease
Term, subject to the terms, covenants and conditions of this Lease.
1.2 ACCEPTANCE. Tenant accepts the Premises in its condition as of the
Commencement Date, subject to all applicable laws, ordinances, and regulations.
Tenant acknowledges that Landlord has made no representation or warranty as to
the suitability of the Premises for the conduct of Tenant's business, and Tenant
waives any implied warranty that the Premises are suitable for Tenant's intended
purposes. The taking of possession of the Premises shall be conclusive evidence
that Tenant accepts the Premises in their condition at the time possession was
taken. In no event shall Landlord be liable to Tenant for any defects in the
Premises or for any limitation on its use.
2. TERM
2.1 TERM OF LEASE. The initial term of this Lease (the "Lease Term") shall
be for a period of ten (10) years commencing on June 24, 1996 (the "Commencement
Date"), and ending on June 23, 2006.
2.2 TERMINATION. Notwithstanding any other language contained in this
Lease to the contrary, Tenant shall have the right to terminate this Lease at
any time by giving written notice to the Landlord at least sixty (60) days prior
to the intended termination date.
2.3 HOLDOVER. If, for any reason, Tenant retains possession of the
Premises after the expiration or early termination of the Lease Term, such
possession shall be subject to immediate termination by Landlord at any time,
and all of the other terms and provisions of this Lease shall be applicable
during such holdover period, except that the Base Rate during such holdover
period shall be the fair market rental value of the Premises. No holding over by
Tenant, whether with or without consent of Landlord, shall operate to extend
this Lease except as otherwise expressly provided, and this Section shall not be
construed as consent for Tenant to retain possession of the Premises.
3. USE OF PREMISES
3.1 PERMITTED USE. The Premises shall be used only as an office facility,
shop facility, and/or equipment storage yard, and for such other lawful purposes
as may be incidental thereto. Tenant may not use the Premises for any other
purpose without the written consent of Landlord, which consent will not be
unreasonably withheld. Tenant will use the Premises in a careful, safe and
proper manner and will not commit waste thereon.
3.2 COMPLIANCE WITH LAWS. Tenant, at its sole expense, shall comply with
all laws (including, without limitation, Environmental Requirements, as defined
herein, and laws regarding access for handicapped or disabled persons),
ordinances and regulations, and all declarations, covenants, and restrictions,
applicable to Tenant's use or occupation of the Premises, and with all
governmental orders and directives of public officers which impose any duty or
restriction with respect to the use or occupation of the Premises.
3.3 PROHIBITED USE. Tenant shall not permit or take any action on the
Premises that would constitute a nuisance. Tenant will not use or permit the
Premises to be used for any purpose or in any manner that would void Tenant's or
Landlord's insurance or increase the insurance risk. Notwithstanding any other
provision contained herein to the contrary, no use shall be made or permitted to
be made of the Premises nor acts done which will cause the cancellation of any
kind of insurance policy covering said Premises or any building of which the
Premises may be a part. No use shall be made of the Premises other than a use
permitted under Section 3.1 that would constitute the Premises as a place of
public accommodation under the Americans with Disabilities Act or similar state
statutes or local ordinances or any regulations promulgated thereunder, all as
may be amended from time to time.
4. BASE RENT
4.1 PAYMENT. Tenant shall pay Landlord a one-time payment in the amount of
TEN DOLLARS ($10) as Base Rent for the entire initial term of this Lease,
receipt of which amount is hereby acknowledged. All other payments required to
be made by Tenant to Landlord hereunder shall be payable at such address as
Landlord may specify from time to time by written notice delivered in accordance
herewith.
4.2 NO OFFSET. The obligation of Tenant to pay Rent and other sums to
Landlord and the obligations of Landlord under this Lease are independent
obligations. Tenant shall have no right at any time to abate, reduce, or set-off
any Rent due hereunder except
-2-
where expressly provided in this Lease. Tenant waives and releases
all statutory liens and offset rights as to rent.
5. TAXES AND ASSESSMENTS AS ADDITIONAL CHARGES
5.1 PAYMENT OF TAXES. Tenant shall pay all real property taxes applicable
to the Premises during the term of this Lease. All such payments shall be made
at least thirty (30) days prior to the delinquency date of such payment. Tenant
shall promptly furnish Landlord with satisfactory evidence that such taxes have
been paid. If Tenant shall fail to pay any such taxes, Landlord shall have the
right to pay the same, in which case Tenant shall repay such amount to Landlord
upon demand, together with interest at the highest legal rate.
5.2 DEFINITION OF "REAL PROPERTY" TAXES. As used herein, the term "real
property tax" shall include any form of assessment, license fee, rent tax, levy,
penalty, or tax (other than inheritance or estate taxes) imposed by any
authority having the direct or indirect power to tax, including any city,
county, state, or federal government, or any school, agricultural, lighting,
water, drainage, or other improvement district thereof, as against any legal or
equitable interest of Landlord in the Premises or in the real property of which
the Premises are a part, as against Landlord's right to rent or other income
therefrom, or as against Landlord's business of leasing the Premises. Tenant
shall pay any and all charges and fees which may be imposed by any governmental
regulations or authorities.
6. INSURANCE AND INDEMNITY
6.1 LIABILITY INSURANCE. Tenant, at Tenant's sole cost and expense, shall
provide and maintain in force during the term of this Lease, comprehensive
liability insurance in the amount of $500,000.00 per occurrence with a
$1,000,000.00 policy aggregate, covering Landlord as well as Tenant, for any
liability for property damage or personal injury arising during Tenant's
occupation or as a result of Landlord's ownership of the Premises, excluding,
however, any liability for environmental damage resulting from events occurring,
or conditions existing prior to Tenant's taking possession of the Premises.
6.2 GENERAL PROVISIONS. All insurance policies required pursuant to this
Agreement shall not be cancelable unless thirty (30) days prior written notice
shall have been given to Landlord, and provide primary coverage to Landlord (any
policy issued to Landlord providing duplicate or similar coverage shall be
deemed excess over Tenant's policies). Such policies or certificates thereof
shall be delivered to Landlord by Tenant upon commencement of the Lease Term or
otherwise upon request and upon each renewal of said insurance.
-3-
6.3 REMEDY FOR FAILURE TO PROVIDE INSURANCE. Tenant shall furnish Landlord
with certificates of all insurance required by this section. If Tenant does not
provide such certificates upon Landlord's delivery of possession to Tenant or
otherwise upon request, or if Tenant allows any insurance required under this
section to lapse, Landlord may, at its option, upon notice to Tenant, take out
and pay the premiums on the necessary insurance to comply with Tenant's
obligations under the provisions of this section. Landlord is entitled to
reimbursement from Tenant for all amounts spent by it to procure and maintain
such insurance, together with interest on any such amounts at the highest legal
rate from the date of receipt of Landlord's notice of payment until the date
that Landlord is reimbursement by Tenant. In the event Tenant fails to maintain
insurance as provided in this Article , Tenant shall become indebted to, and
shall promptly reimburse Landlord to the full extent of any loss as if fully
insured under the terms of this Lease.
7. REPAIRS AND MAINTENANCE
Landlord shall have no obligation whatsoever to maintain the Premises or
any portion thereof.
8. UTILITIES
Tenant shall pay for all water, gas, electricity, heat, light, power,
telephone, sewer, sprinkler services, and other utilities and services used on
the Premises, all maintenance charges for utilities, and any storm sewer charges
or other similar charges for utilities imposed by any governmental entity or
utility provider, together with any taxes, penalties, surcharges or the like
pertaining to Tenant's use of the Premises. Landlord shall not be liable for any
interruption or failure of utilities or any other service to the Premises and no
such interruption or failure shall result in the abatement of rent hereunder or
otherwise permit Tenant to terminate this Lease.
9. ALTERATIONS, ADDITIONS, AND IMPROVEMENTS
All material alterations, additions, leasehold improvements or other
improvements made by Tenant shall become the property of Landlord at the
termination of this Lease. Landlord may, however, require that Tenant remove any
or all alterations, additions, and improvements installed or made by Tenant, and
any other property placed on the Premises by Tenant, upon termination of the
Lease. In the event that Landlord requires Tenant to remove such alterations,
additions, leasehold improvements or other improvements, Tenant shall repair any
damage to the Premises caused by such removal.
-4-
10. DEFAULT
10.1 DEFAULT BY TENANT. Each of the following events shall be an event of
default ("Event of Default") by Tenant under this Lease:
(a) Tenant shall fail to pay any payment required herein when due, and
such failure shall continue for a period of five (5) days after
notice from Landlord.
(b) Tenant shall (i) become insolvent; (ii) admit in writing its
inability to pay its debts; (iii) make a general assignment for the
benefit of creditors; (iv) commence any case, proceeding or other
action seeking to have an order for relief entered on its behalf as
a debtor or to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, liquidation, dissolution or
composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors or seeking
appointment of a receiver, trustee, custodian or other similar
official for it or for all or of any substantial part of its
property; or (v) take any action to authorize or in contemplation of
any of the actions set forth above in this subparagraph.
(c) Any case, proceeding or other action against Tenant shall
be commenced seeking (i) to have an order for relief entered against
it as debtor or to adjudicate it a bankrupt or insolvent; (ii)
reorganization, arrangement, adjustment, liquidation, dissolution or
composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors; or (iii)
appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its property,
and such case, proceeding or other action results in the entry of an
order for relief against it which it is not stayed or dismissed
within sixty (60) days of its filing or entry.
(d) There shall occur any assignment, subleasing or other transfer of
Tenant's interest in or with respect to this Lease, other than as
permitted herein.
(e) Tenant shall fail to discharge, or otherwise take appropriate action
to prevent the enforcement of, any lien placed upon the Premises
within thirty (30) days after any such lien or encumbrance is filed
against the Premises.
(f) Tenant shall be dissolved or otherwise fail to maintain
its legal existence.
-5-
(g) Tenant shall fail to comply with any provision of this Lease other
than those specifically referred to in this Section , and except as
otherwise expressly provided therein, such default shall continue
for more than thirty (30) days after Landlord shall have given
Tenant written notice of such default.
11. LANDLORD'S REMEDIES
11.1 GENERAL. Upon each occurrence of an Event of Default and so long as
such Event of Default shall be continuing, Landlord may at any time thereafter
at its election: (i) terminate this Lease or Tenant's right of possession, but
Tenant shall remain liable as hereinafter provided; and/or (ii) pursue any
remedies provided for under this Lease or at law or in equity. Upon the
termination of this Lease or termination of Tenant's right of possession, it
shall be lawful for Landlord, without formal demand or notice of any kind, to
re-enter the Premises by summary dispossession proceedings or any other action
or proceeding authorized by law and to remove Tenant and all persons and
property therefrom. If Landlord re-enters the Premises, Landlord shall have the
right to keep in place and use, or remove and store, all of the furniture,
fixtures and equipment at the Premises.
11.2 LEASE TERMINATION. If Landlord terminates this Lease, Landlord may
recover from Tenant the sum of (i) all Rent and all other amounts accrued
hereunder to the date of such termination, and (ii) all reasonable expenses
incurred by Landlord in pursuing its remedies, including reasonable attorneys'
fees and court costs.
11.3 NO WAIVER. Exercise by Landlord of any one or more remedies hereunder
granted or otherwise available shall not be deemed to be an acceptance of
surrender of the Premises and/or a termination of this Lease by Landlord,
whether by agreement or by operation of law, it being understood that such
surrender and/or termination, except as provided in Section , can be effected
only by the written agreement of Landlord. Any law, usage, or custom to the
contrary notwithstanding, Landlord shall have the right at all times to enforce
the provisions of this Lease in strict accordance with the terms hereof; and the
failure of Landlord at any time to enforce its rights under this Lease strictly
in accordance with same shall not be construed as having created a custom in any
way or manner contrary to the specific terms, provisions, and covenants of this
Lease or as having modified the same. Tenant and Landlord further agree that
forbearance or waiver by Landlord to enforce its rights pursuant to this Lease
or at law or in equity, shall not be a waiver of Landlord's right to enforce one
or more of its rights in connection with any subsequent default. A receipt by
Landlord of Rent or other payment with knowledge of the breach of any covenant
hereof shall not be deemed a waiver of such breach, and no waiver by Landlord of
any provision of this Lease shall be deemed to have
-6-
been made unless expressed in writing and signed by Landlord. To the greatest
extent permitted by law, Tenant waives the service of notice of Landlord's
intention to re-enter as provided for in any statute, or to institute legal
proceedings to that end, and also waives all right of redemption in case Tenant
shall be dispossessed by a judgment or by warrant of any court or judgment. The
terms "enter," "re-enter," "entry" or "re-entry," as used in this Lease, are not
restricted to their technical legal meanings. Any reletting of the Premises
shall be on such terms and conditions as Landlord in its sole discretion may
determine (including without limitation a term different than the remaining
Lease Term, rental concessions, alterations and repair of the Premises, and
lease of less than the entire Premises to any tenant). Landlord shall not be
liable, nor shall Tenant's obligations hereunder be diminished because of,
Landlord's failure to relet the Premises or collect rent due in respect of such
reletting.
12. INSPECTION BY LANDLORD
Landlord and its agents, representatives, and contractors shall have the
right to enter the Premises at any reasonable time to inspect the Premises and
to make such repairs as may be permitted pursuant to this Lease and for any
other business purpose.
13. ASSIGNMENT AND SUBLEASE
13.1 ASSIGNMENT AND SUBLETTING BY TENANT. Tenant may not sublet, assign,
encumber, or in any way otherwise transfer this Lease, or any right or interest
in this Lease or in the Premises or the improvements on the Premises other than
to a subsidiary or affiliate of Tenant, unless Landlord consents in writing
thereto, which consent shall not be unreasonably withheld. If Tenant sublets,
assigns, encumbers, or otherwise transfers its rights or interests in this Lease
or in the Premises or the improvements on the Premises without Landlord's prior
written consent, Landlord may, at its option, declare this Lease terminated
without notice.
13.2 ASSIGNMENT BY LANDLORD. Landlord may assign or transfer any or all of
its interests under the terms of this Lease. Such assignation or transfer shall
not alter or inhibit the rights, duties, or obligations of Tenant under this
Lease.
14. DISCLAIMER OF ALL WARRANTIES
NOTWITHSTANDING ANYTHING CONTAINED IN THIS LEASE TO THE CONTRARY, LANDLORD
HAS LEASED THE PREMISES TO TENANT "AS IS", "WHERE IS," "WITH ALL FAULTS," AND
WITHOUT ANY WARRANTIES, EITHER EXPRESS OR IMPLIED, AS TO CONDITION OF THE
PREMISES, AND TENANT UNCONDITIONALLY ACCEPTS THE PREMISES IN ITS PRESENT
CONDITION. BY SIGNING THIS LEASE, TENANT COVENANTS, REPRESENTS AND WARRANTS THAT
LANDLORD HAS MADE NO REPRESENTATIONS OR WARRANTIES, AND TENANT
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COVENANTS, REPRESENTS AND WARRANTS THAT IT HAS NOT RELIED UPON ANY
REPRESENTATION OF LANDLORD, ITS AGENTS OR REPRESENTATIVES IN ENTERING INTO THIS
LEASE AND THAT NO STATEMENT, REPRESENTATION OR WARRANTY BY LANDLORD, ITS AGENTS
OR REPRESENTATIVES HAS BEEN A PRODUCING CAUSE OF TENANT ENTERING INTO THIS
LEASE. TENANT HEREBY RELEASES LANDLORD FROM ANY IMPLIED REPRESENTATIONS OR
WARRANTIES, INCLUDING BUT NOT LIMITED TO WARRANTIES OF HABITABILITY OR
TENANTABILITY, FITNESS FOR A PARTICULAR USE, MERCHANTABILITY, OR CONSTRUCTION IN
A GOOD AND WORKMANLIKE MANNER.
15. INDEMNIFICATION AND WAIVER
EXCEPT FOR LANDLORD'S GROSS NEGLIGENCE, TENANT AGREES TO INDEMNIFY, DEFEND
AND HOLD HARMLESS LANDLORD, AND LANDLORD'S PARTNERS, OFFICERS, DIRECTORS, AGENTS
AND EMPLOYEES, FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, ACTIONS,
LIABILITIES, DAMAGES, COSTS AND EXPENSES (INCLUDING ATTORNEYS' FEES) FOR
INJURIES TO ANY PERSON AND DAMAGE TO OR THEFT OR MISAPPROPRIATION OR LOSS OF
PROPERTY WHETHER OCCURRING IN OR ABOUT THE PROJECT AND ARISING FROM THE USE AND
OCCUPANCY OF THE PREMISES OR FROM ANY ACTIVITY, WORK, OR THING DONE, PERMITTED
OR SUFFERED BY TENANT IN OR ABOUT THE PREMISES (INCLUDING, WITHOUT LIMITATION,
ANY ALTERATION BY TENANT) OR FROM ANY BREACH OR DEFAULT ON THE PART OF TENANT IN
THE PERFORMANCE OF ANY COVENANT OR AGREEMENT ON THE PART OF TENANT TO BE
PERFORMED UNDER THIS LEASE OR DUE TO ANY OTHER ACT OR OMISSION OF TENANT, ITS
SUBTENANTS, ASSIGNEES, INVITEES, EMPLOYEES, CONTRACTORS AND AGENTS OR THE
ORDINARY NEGLIGENCE OF LANDLORD. THE FURNISHING OF INSURANCE REQUIRED HEREUNDER
SHALL NOT BE DEEMED TO LIMIT TENANT'S OBLIGATIONS UNDER THE PROVISIONS OF THIS
PARAGRAPH. LANDLORD AND ITS PARTNERS, OFFICERS, DIRECTORS, AGENTS AND EMPLOYEES
SHALL NOT BE LIABLE FOR, AND TENANT HEREBY WAIVES ALL CLAIMS AGAINST SUCH
PARTIES FOR, INJURY TO PERSONS OR DAMAGE TO PROPERTY SUSTAINED BY TENANT OR ANY
PERSON CLAIMING THROUGH TENANT RESULTING FROM ANY ACCIDENT OR OCCURRENCE IN OR
UPON THE PREMISES OR IN OR ABOUT THE PROJECT FROM ANY CAUSE WHATSOEVER. ANYTHING
TO THE CONTRARY HEREIN NOTWITHSTANDING, TENANT SHALL NOT INDEMNIFY LANDLORD FOR
ANY CLAIMS, DEMANDS, ACTIONS, LIABILITIES, DAMAGES, COSTS AND EXPENSES ARISING
OUT OF (i) ACTUAL NEGLIGENCE OF LANDLORD, ITS EMPLOYEES OR AGENTS, OCCURRING
SUBSEQUENT TO THE DATE OF THIS LEASE, OR (ii) ANY ENVIRONMENTAL DAMAGE OR
CONDITION AFFECTING THE PREMISES RESULTING FROM EVENTS OCCURRING PRIOR TO THE
DATE OF THIS LEASE.
16. ENVIRONMENTAL REQUIREMENTS
16.1 GENERAL. Except for such incidental cleaning agents and solutions or
maintenance materials used in the ordinary course or materials and goods stored
as part of Tenant's warehouse operations (but such use and storage shall be in
compliance with all Environmental Requirements), Tenant shall not permit or
cause any party to bring any Hazardous Material upon the Premises or store or
use any Hazardous Material in or about the Premises without
-8-
Landlord's prior written consent. Tenant, at its sole cost and expense, shall
operate its business in the Premises in compliance with all Environmental
Requirements, and will obtain, comply with, and properly maintain all permits
and licenses, or applications required by Environmental Requirements for its
operations. The term "Environmental Requirements" means all applicable present
and future statutes, regulations, ordinances, rules, codes, or other similar
enactments of any governmental authority of agency, and any applicable judicial,
administrative or regulatory decrees, judgments, orders, or policies regulating
or relating to any Hazardous Materials or pertaining to health, safety,
industrial hygiene, or the environmental conditions on, under, or about the
Premises or the environment, including, without limitation, the following: the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA");
the Resource Conservation and Recovery Act; the Toxic Substances Control Act;
the Clean Air Act; the Federal Water Pollution Control Act; the Federal
Hazardous Materials Transportation Act; and all state and local counterparts,
supplements or additions thereto, and any regulations or policies promulgated or
issued thereunder. The term "Hazardous Materials" means and includes petroleum
(as defined in CERCLA), asbestos and any substance, material, waste, pollutant,
or contaminant listed or defined as hazardous or toxic, under any Environmental
Requirements. Nothing in this section or in any other section of this Lease
shall require Tenant to comply with any Environmental Requirement to the extent
it imposes an obligation to clean up, remediate, or correct any condition
existing on the Premises at the time of Tenant's taking possession of the
Premises.
16.2 INDEMNITY FOR ENVIRONMENTAL CONDITIONS. TENANT SHALL INDEMNIFY,
DEFEND, AND HOLD LANDLORD ANY ITS PARTNERS, OFFICERS, DIRECTORS, AGENTS AND
EMPLOYEES HARMLESS FROM AND AGAINST ANY AND ALL MANNER OF LOSSES (INCLUDING,
WITHOUT LIMITATION, DIMINUTION IN VALUE OF THE PREMISES OR THE PROJECT AND LOSS
OF RENTAL INCOME FROM THE PROJECT), CLAIMS, DEMANDS, ACTIONS, SUITS, DAMAGES
(INCLUDING, WITHOUT LIMITATION, PUNITIVE DAMAGES), FINES, PENALTIES,
ADMINISTRATIVE AND JUDICIAL PROCEEDINGS, JUDGMENTS, SETTLEMENTS, EXPENSES
(INCLUDING, WITHOUT LIMITATION, CONSULTANT FEES, ATTORNEYS' FEES, OR EXPERT
FEES) WHICH ARISE DURING OR AFTER THE LEASE TERM WHICH ARE BROUGHT OR
RECOVERABLE AGAINST, OR SUFFERED OR INCURRED BY LANDLORD OR SUCH PARTIES AS A
RESULT OF ANY BREACH OF THE OBLIGATIONS UNDER THIS PARAGRAPH OR NONCOMPLIANCE
WITH ANY ENVIRONMENTAL REQUIREMENT BY TENANT, IT AGENTS, EMPLOYEES, CONTRACTORS,
SUBTENANTS, OR INVITEES, REGARDLESS OF WHETHER TENANT HAD KNOWLEDGE OF SUCH
NONCOMPLIANCE. THE INDEMNIFICATION AND HOLD HARMLESS OBLIGATIONS OF TENANT SHALL
SURVIVE ANY TERMINATION OF THIS LEASE, ANY RENEWAL, EXPANSION OR AMENDMENT OF
THIS LEASE AND/OR THE EXECUTION AND DELIVERY OF ANY NEW LEASE WITH TENANT
COVERING ALL OR ANY PORTION OF THE PROJECT.
16.3 ASSESSMENTS. Landlord shall have access to, and a right
to perform inspections and tests of, the Premises as it may
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reasonably require to determine Tenant's compliance with Environmental
Requirements and Tenant's obligations under this Article . Access shall be
granted to Landlord upon Landlord's prior notice to Tenant and at such times so
as to minimize, so far as may be reasonable under the circumstances, any
disturbance to Tenant's operations. Such inspections and tests shall be
conducted at Landlord's expense, unless such inspections or tests reveal that
Tenant has not complied with the provisions of this Lease with respect to
Environmental Requirements, in which case Tenant shall immediately, upon demand,
reimburse Landlord for the cost of such inspection and tests. At the expiration
or earlier termination of the Lease, Landlord shall have the right, at its
option and at Tenant's sole cost and expense, to undertake an environmental
assessment of the Premises to determine Tenant's compliance with the provisions
of this Lease with respect to Environmental Requirements. Landlord and Tenant
agree that Landlord's receipt of or satisfaction with any environmental
assessment in no way waives any rights that Landlord holds against Tenant.
17. NOTICES AND ADDRESSES
All notices required under this Lease must be given by certified mail or
registered mail, addressed to the proper party, at the following addresses:
TO LANDLORD AT: Western Oil Well Service Co.
450 Gears Road, Suite 625
Houston, Texas 77067
TO TENANT AT: Pool Company
P.O. Box 4271
Houston, Texas 77210
Attn: Vice President
U.S. Land Operations
Either party may change the address to which notices are to be sent it by giving
the other party notice of change of address in the manner providing for notices
set forth in this section.
18. MISCELLANEOUS
18.1 Notwithstanding anything contained in this Lease to the contrary, no
part of this Lease shall be deemed or construed by the parties hereto, nor by
any third party, as creating the relationship of principal and agent or a
partnership or of a joint venture between the parties hereto, it being
understood and agreed that neither the method of computation of rent, nor any
other provision contained herein, nor any acts of the parties hereto, shall be
deemed to create any relationship between the parties hereto other than the
relationship of Landlord and Tenant or Landlord and Tenant.
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18.2 This agreement shall be binding upon, and inure to the benefit of,
the parties to this Lease and their respective heirs, executors, administrators,
legal representatives, successors, and assigns.
18.3 This agreement shall be construed under, and in accordance with, the
laws of the State of Texas, and all obligations of the parties created by this
Lease shall be performed in Harris County, Texas.
18.4 In case any one or more of the provisions contained in this agreement
shall for any reason be held by a court of competent jurisdiction to be invalid,
illegal, or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision of the agreement, and this
agreement shall be construed as if the invalid, illegal, or unenforceable
provision had never been included in the agreement.
18.5 This Lease constitutes the sole and only agreement of the parties to
the agreement and is intended to be the final expression of this Lease and
supersedes any prior understandings or written or oral agreements between
Landlord and Tenant respecting the subject matter of this Lease.
18.6 No amendment, modification, or alteration of the terms of this Lease
shall be binding unless it is in writing, dated subsequent to the date of this
agreement, and duly executed by all parties to this Lease or subsequent
agreements.
18.7 If, as a result of a breach of this agreement by either party, the
other party employs an attorney or attorneys to enforce its rights under this
Lease, then the prevailing party shall be entitled to, and the breaching or
defaulting party shall be required to pay, reasonable attorney's fees and costs
incurred to enforce the Lease.
18.8 Neither Landlord nor Tenant shall be required to perform any term,
condition, or covenant in this Lease so long as such performance is delayed or
prevented by FORCE MAJEURE, which shall mean acts of God, strikes, lockouts,
material or labor restrictions by any governmental authority, civil riot,
floods, and any other cause not reasonably within the control of Landlord or
Tenant and which by the exercise of due diligence Landlord or Tenant is unable,
wholly or in part, to prevent or overcome.
18.9 Any payments or charges due from Tenant to Landlord hereunder shall
be considered rent ("Rent") for all purposes of this Lease.
18.10 Tenant hereby waives any claim for money damages or for termination
of this Lease based upon any claim or assertion by Tenant that Landlord
unreasonably or arbitrarily withheld or
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delayed its consent or approval in any case where Landlord's consent or approval
is required. Except as otherwise expressly provided in this Lease, Landlord's
granting or withholding of any consent or approval shall be at its complete
discretion.
18.11 The term "Landlord", as used in this Article, shall mean only the
owner or owners at the time in question of the fee title or its interest in a
ground lease of the Premises, and in the event of any transfer of such title or
interest, Landlord herein named (and in case of any subsequent transfers the
then grantor) shall be relieved from and after the date of such transfer of all
liability with respect to any of Landlord's obligations thereafter to be
performed, provided that any funds in the hands of Landlord or the then grantor
at the time of such transfer, in which Tenant has an interest, shall be
delivered to the grantee. The obligations contained in this Lease to be
performed by Landlord shall, subject as aforesaid, be binding on Landlord's
successors and assigns, only during their respective periods of ownership.
18.12 The normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Lease or any exhibits or amendments hereto.
18.13 Words of any gender used in this Lease shall be held and construed
to include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires. The captions inserted
in this Lease are for convenience only and in no way define, limit or otherwise
describe the scope or intent of this Lease, or any provisions hereof, or in any
way affect the interpretation of this Lease.
18.14 Time is of the essence as to the performance of Tenant's obligations
under this Lease.
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THE UNDERSIGNED Landlord and Tenant execute this agreement in multiple
originals effective June 24, 1996, at Houston, Harris County, Texas.
"LANDLORD"
WESTERN OIL WELL SERVICE CO.
BY:__________________________________
SCOTT O'KEEFE, Attorney-in-fact
"TENANT"
POOL COMPANY
BY:__________________________________
WILLIAM J MYERS
Group Vice President
U.S. Operations
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EXHIBIT D
NONCOMPETITION AGREEMENT
NONCOMPETITION AGREEMENT
This Agreement entered into this 24th day of June, 1996, by and among
Western Oil Well Service Co., a Montana corporation ("Western"), and DI
INDUSTRIES, INC., a Texas corporation ("DI") (Western and DI being hereinafter
collectively referred to as "Sellers"), in favor of POOL COMPANY, a Texas
corporation ("Pool").
WHEREAS, Pool and Western have entered into an Agreement dated June 24,
1996 (the "Purchase Agreement"), pursuant to which Pool is acquiring the
operating assets of Western; and
WHEREAS, DI is the owner of all of the capital stock of Western and will
benefit indirectly from the transactions contemplated in the Purchase Agreement;
WHEREAS, to accord Pool the full value of its purchase, one of the
conditions to the consummation of the transactions called for by the Purchase
Agreement is the execution and delivery by Sellers of a noncompetition
agreement;
NOW, THEREFORE, pursuant to the Purchase Agreement and in consideration of
the purchase by Pool therein contemplated and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged:
1. Each of the Sellers hereby covenants and agrees that for a period of
three (3) years from and after the date hereof, it shall not, for its own
account, or as a partner, owner or stockholder of any other firm,
partnership or corporation or otherwise, conduct, engage in, have any
interest in, the business of ownership or operation of well
servicing/workover rigs in the States of Utah, North Dakota, South Dakota,
Montana, Wyoming and Colorado, (the "Territory") nor will any of the
Sellers in any way during such period, directly or indirectly, solicit,
divert, take away or attempt to hire any of the employees of Pool which
were previously employed by Western, provided, however, nothing contained
herein shall prohibit Sellers from acquiring stock in any publicly-owned
company, if such transactions do not result in Sellers individually owning
beneficially at any time an aggregate of five percent (5%) or more of the
equity of any corporation engaged in a business of the type hereinabove
mentioned.
2. Sellers further agree and acknowledge that such three (3) year period
herein provided is the minimum period of time and that the territory
defined above is the minimum and reasonable area necessary to protect Pool
in the use and employment of the assets acquired from Western. Sellers
further agree that damages cannot compensate in the event of a violation
of this Agreement and that injunctive relief would be essential for the
protection of Pool. Sellers, therefore, agree and covenant that, in case
of any such breach or violation, Pool may have (and Sellers hereby consent
thereto) such injunctive relief. No waiver hereof shall be implied from
forbearance or failure by any party to take action hereon. It is the
desire and intent of the parties that the provisions of this Agreement be
enforced to the fullest permissible under the laws and public policies of
the State of Texas. If any provision of this Agreement is held to be
illegal, invalid or unenforceable, such provision shall be fully
severable, this Agreement shall be construed and enforced as if such
provision had never comprised a part hereof and the remaining provisions
shall remain in full force and effect and shall not be affected by such
provision or by its severance herefrom. Furthermore, in lieu of such
provision there shall be added automatically as a 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. Any
reference herein to Pool shall include any affiliate. For purposes hereof,
"affiliate" shall mean any entity which, directly or indirectly, controls,
is controlled by, or is under common control with, Pool. "Control," for
purposes hereof, means ownership of more than fifty percent (50%) of an
entity's voting capital stock.
3. No modification, termination or waiver under this Agreement shall be
valid unless in writing and signed by Pool and the Sellers.
4. This Agreement shall be binding upon the successors and assigns of each
of the Sellers.
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5. This Agreement shall not be assignable by Pool, whether by operation of
law or otherwise, except to an affiliate (as defined above).
IN WITNESS WHEREOF, the Sellers have caused this Agreement to be executed
as of the day and year first above written.
WESTERN OIL WELL SERVICE CO.
By: _______________________________________
Its: _______________________________________
DI INDUSTRIES, INC.
By: _______________________________________
Its: _______________________________________
EXHIBIT E
BILL OF SALE
BILL OF SALE
EQUIPMENT SOLD: The workover, well servicing and associated equipment described
in Exhibit A attached hereto (hereinafter the "Equipment")
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NAME OF SELLER: Western Oil Well Service Co. - INTEREST OWNED: 100%
- --------------------------------------------------------------------------------
NAME OF BUYER: Pool Company - INTEREST TRANSFERRED: 100%
- --------------------------------------------------------------------------------
CONSIDERATION RECEIVED: TEN ($10.00) DOLLARS AND OTHER GOOD AND
VALUABLE CONSIDERATION
- --------------------------------------------------------------------------------
Seller does hereby sell to the Buyer named above, all of its right, title and
interest in the Equipment named above, and hereby grants to the Buyer full
subrogation in and to all of the rights and actions of warranty which the Seller
has or may have against all preceding owners and vendors of the Equipment. TO
HAVE AND TO HOLD the said Equipment unto the said Buyer, its executors,
administrators, successors, and assigns, to the sole and only proper use,
benefit and behalf of the said Buyer, its executors, administrators, successors,
and assigns forever. The said Seller hereby warrants title to the equipment and
hereby warrants and guarantees that the Equipment is free and clear of any and
all liens (whether tort, contract, or arising by operation of law), mortgages,
debts, charges, assessments, privileges, levies or other encumbrances of any
kind or nature whatsoever, whether recorded, secret, state, tax or otherwise, as
of the date and time of the execution of the within instrument and the said
Seller hereby agrees to protect, defend, indemnify, and hold Buyer harmless from
any and all liens (whether tort, contract, or arising by operation of law),
mortgages, debts, charges, assessments, privileges, levies or other encumbrances
of any kind or nature whatsoever, whether recorded, secret, state, tax or
otherwise, which attached or arose against such Equipment prior to the date and
time of the execution of the within instrument. THIS SALE IS MADE ON AN "AS IS,
WHERE IS" BASIS WITHOUT ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR NATURE
WHATSOEVER, EXPRESSED OR IMPLIED, CONCERNING THE CONDITION OF THE EQUIPMENT
HEREIN CONVEYED, AND BUYER HEREBY SPECIFICALLY WAIVES ALL IMPLIED WARRANTIES,
INCLUDING ANY AND ALL WARRANTIES AGAINST VICES OR DEFECTS, OF MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR USE OR PURPOSE WHATSOEVER.
Date: June 24, 1996 WESTERN OIL WELL SERVICE CO.
By: ______________________________
Name: ______________________________
Title: ______________________________
EXHIBIT F
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this "Guaranty") is delivered by
_____________________ ("Guarantor") in favor of ______________________________
(the "Contract Party").
W I T N E S S E T H:
WHEREAS, the Contract Party and __________________________ (the
"Subsidiary") have entered into that certain Agreement dated May 31, 1996 (the
"Agreement"); and
WHEREAS, pursuant to the Agreement, the Guarantor, as the ultimate parent
entity of the Subsidiary, is required to deliver this Guaranty at the closing
contemplated therein;
NOW, THEREFORE, in order to induce the Contract Party to close the
transactions contemplated in the Agreement, Guarantor hereby delivers this
Guaranty pursuant to the terms and conditions set forth below:
1. GUARANTY. Guarantor hereby absolutely and unconditionally guarantees
the prompt performance when required of the obligations of the Subsidiary
pursuant to the Agreement (the "Obligations").
2. WAIVER. Guarantor absolutely and unconditionally waives demand and
notice of nonperformance of any and all of the Obligations.
3. COSTS. Guarantor agrees to pay to the Contract Party its collection
costs, including any additional amounts for reasonable attorney's fees, if the
Obligations are not performed by the Guarantor upon demand when and as required
herein or if this Guaranty is enforced by suit or through probate or bankruptcy
court or through any judicial proceedings whatsoever, and should it be necessary
to reduce the claim of the Contract Party to judgment, such judgment shall bear
interest at the rate of ten percent (10%) per annum or such greater maximum
rate, if any, allowed by applicable laws.
4. ABSOLUTE GUARANTY. This is an absolute and unconditional guaranty of
performance and not of collection by Guarantor and Guarantor waives any right to
require that (i) any action be brought against the Subsidiary or any other
person or entity, or (ii) the Contract Party proceed to enforce its rights
against or exhaust any security given to secure the Obligations.
5. BANKRUPTCY. The obligations of the Guarantor hereunder should not be
released, diminished, impaired, reduced, or adversely affected by reason of the
insolvency, bankruptcy, liquidation, or dissolution of the Subsidiary.
6. NOTICES. Any notices to be given in connection herewith shall be given
at the addresses specified in the Agreement (which, for purposes of the
Guarantor, shall be at the address as specified in the Agreement as being
applicable to the Subsidiary).
7. BENEFIT. Guarantor does hereby acknowledge that it has investigated
fully the benefits and advantages which will be derived by it from the execution
of this Guaranty, and Guarantor does hereby acknowledge, warrant, and represent
that a direct or indirect benefit will accrue to Guarantor by reason of the
execution of this Guaranty.
8. INTERPRETATION. This Guaranty shall be interpreted in accordance with
the laws of the state of Texas. Venue for any action brought hereunder shall lie
in Harris County, Texas.
IN WITNESS WHEREOF, the undersigned has delivered this Guaranty effective
the _____ day of _________________, 1996.
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