STOCK PURCHASE AGREEMENT
AMONG,
KEY ENERGY DRILLING, INC.
AND
XXXX X. XXXXXXXX,
XXX XXXXXXXX
AND
X. X. XXXXXX
Dated as of January 30, 1998
Stock Purchase Agreement
This Stock Purchase Agreement (this "Agreement") is entered into as of January
30, 1998 by and among Key Energy Drilling, Inc., a Delaware corporation
("Buyer"), and Xxxx X. Xxxxxxxx ("Xxxxxxxx") Xxx Xxxxxxxx ("Xxxxxxxx"), and X.
X. Xxxxxx ("Xxxxxx") (collectively, Xxxxxxxx, Xxxxxxxx and Xxxxxx are referred
to herein as the "Shareholders").
--------------------------------------------------------------------------------
WITNESSETH
--------------------------------------------------------------------------------
Whereas, Buyer is a corporation duly organized and validly existing under the
laws of the State of Delaware, with its principal executive offices at Xxx Xxxxx
Xxxxxx, Xxxxxxxxx Xxxxx, Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000; and
Whereas, Xxxxxxxx Enterprises, Inc. d/b/a Legacy Drilling Co. (the "Company") is
a corporation duly organized and validly existing under the laws of the state of
Texas, with its principal executive offices at 000 Xxxxxx Xxxxxx, Xxx, Xxxxx
00000; and
Whereas, the Shareholders own 5,000 shares (the "Company Shares") of common
stock, par value $1.00 per share, of the Company (the "Company Common Stock"),
which constitutes all of the issued and outstanding shares of capital stock of
the Company; and
Whereas, the Shareholders desire to sell to Buyer, and Buyer desires to purchase
from the Shareholders all of the issued and outstanding capital stock of the
Company.
Now, Therefore, in consideration of the premises and of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:
ARTICLE 1
Purchase and Sale
1.1. Purchase and Sale of the Company Shares. Subject to the terms and
conditions of this Agreement, on the date hereof, the Shareholders agree to sell
and convey to Buyer, free and clear of all Encumbrances (as defined in Section
2.1.8.1 hereof), and Buyer agrees to purchase and accept from the Shareholders,
all of the Company Shares. Subject to adjustment as hereinafter provided in this
Agreement, the total purchase price for the Company Shares is $2,620,480.00
(exclusive of the consideration paid by Buyer to the Shareholders for their
covenants of non-competition pursuant to Section 3.1), payable by Buyer to
Shareholders in immediately available funds, with such funds to be paid 80% to
Xxxxxx Xxxxxxxx, 10% to Xxx Xxxxxxxx and 10% to X. X. Xxxxxx, less the Escrowed
Funds as provided for in Section 1.3 hereof.
1.2. Delivery of the Company Certificates. The Shareholders shall deliver to
Buyer at the Closing duly and validly issued certificate(s) representing all of
the Company Shares, each such certificate having been duly endorsed in blank and
in good form for transfer or accompanied by stock powers duly executed in blank,
sufficient and in good form to properly transfer such shares to Buyer.
1.3 Escrowed Funds; Adjustment of Purchase Price. At the Closing, Buyer, the
Shareholders and the Escrow Agent (as defined in the Escrow Agreement) shall
enter into an Escrow Agreement in the form of Exhibit A (the "Escrow Agreement")
pursuant to which Buyer shall deposit (out of the total consideration described
in Section 1.1) the sum of $262,480.00 (the "Escrowed Funds") into an account
established thereunder (the "Escrow Account"). Buyer shall cause to be prepared
and delivered to the Shareholders a balance sheet of the Company as of the date
hereof (the "Final Balance Sheet") within sixty (60) days after the date hereof
. Buyer and the Shareholders shall jointly review the Final Balance Sheet,
endeavor in good faith to resolve all disagreements regarding the entries
thereon and reach a final determination thereof within 90 days from the date
hereof (the "Final Determination"). Within 10 days of the Final Determination,
the following adjusting payments shall be made:
(a) If (i) the sum of (A) the Final Net Current Value of the Company (defined
below) plus (B) the Capital Expenditure Allowance (defined below) equals or
exceeds (ii) the 10/31 Net Current Value of the Company (defined below),
the Escrowed Funds shall be paid to the Shareholders (the "Cash Adjustment
Payment").
(b) If (i) the sum of (A) the Final Net Current Value of the Company plus (B)
the Capital Expenditure Allowance is less than (ii) the 10/31 Net Current
Value of the Company, a deduction shall be made to the Escrowed Funds (up
to the full amount thereof) to the extent of such amount and paid to Buyer
with the remaining amount (if any) of the Escrowed Funds paid to the
Shareholders.
(c) If (i) the sum of (A) the Final Net Current Value of the Company plus (B)
the Capital Expenditure Allowance is greater than (ii) the 10/31 Net
Current Value of the Company, Buyer shall make or cause the Company to make
a payment to the Shareholders to the extent of such amount.
The term "Final Net Current Value of the Company" means the dollar value of the
amount by which (i) the "Total Current Assets" plus the "Other Assets" as
recorded on the "Final Balance Sheet" exceeds (ii) the "Total Liabilities"
(including up to $310,000 to purchase the drilling rig which is presently leased
to the Company) as recorded on the "Final Balance Sheet". The term "10/31 Net
Current Value" of the Company means negative $829,520. The term Capital
Expenditure Allowance means the amount of Capital Expenditures made by the
Company from December 15, 1997 to the Closing Date approved by Buyer and which
expands the capability of the business of the Company.
ARTICLE 2
Representations and Warranties
2.1. Representations and Warranties of the Shareholders. Each of the
Shareholders jointly and severally represents and warrants (except as to
sections 2.1.2(a) and 2.1.4, Xxxxxxxx and Xxxxxx make each representation and
warranty to the knowledge of each, while the representations and warranties of
Xxxxxxxx and Xxxxxx in sections 2.1.2(a) and 2.1.4 and all of the
representations and warranties of Xxxxxxxx made in this Article 2 are absolute,
unconditioned and unqualified) to Buyer the following as of the Closing Date:
2.1.1. Organization and Standing. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the state of Texas, has
full requisite corporate power and authority to carry on its business as it is
currently conducted, and to own and operate the properties currently owned and
operated by it, and is duly qualified or licensed to do business and is in good
standing as a foreign corporation authorized to do business in all jurisdictions
in which the character of the properties owned or the nature of the business
conducted by it would make such qualification or licensing necessary, except
where the failure to be so qualified or licensed would not have a material
adverse effect on its financial condition, properties or business.
2.1.2. Agreement Authorized and its Effect on Other Obligations. (a) Each of the
Shareholders is a resident of Texas, above the age of 18 years, and has the
legal capacity and requisite power and authority to enter into, and perform his
or her obligations under this Agreement. This Agreement is a valid and binding
obligation of each of the Shareholders enforceable against each of the
Shareholders (subject to normal equitable principles) in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, debtor relief or similar laws affecting the rights of creditors
generally. (b) The execution, delivery and performance of this Agreement by the
Shareholders will not conflict with or result in a violation or breach of any
term or provision of, nor constitute a default under (i) the Certificate of
Incorporation or Bylaws of the Company or (ii) any obligation, indenture,
mortgage, deed of trust, lease, contract or other agreement to which the Company
or any of the Shareholders is a party or by which the Company or any of the
Shareholders or their respective properties are bound.
2.1.3. Capitalization. The authorized capitalization of the Company consists of
5,000 shares of Company Common Stock, of which, as of the date hereof, 5,000
shares were issued and outstanding and held beneficially and of record by the
Shareholders. On the date hereof, the Company does not have any outstanding
options, warrants, calls or commitments of any character relating to any of its
authorized but unissued shares of capital stock. All issued and outstanding
shares of Company Common Stock are validly issued, fully paid and non-assessable
and are not subject to preemptive rights. None of the outstanding shares of the
Company Common Stock is subject to any voting trusts, voting agreement or other
agreement or understanding with respect to the voting thereof, nor is any proxy
in existence with respect thereto.
2.1.4. Ownership of the Company Shares. The Shareholders hold good and valid
title to all of the Company Shares, free and clear of all Encumbrances. The
Shareholders possess full authority and legal right to sell, transfer and assign
to Buyer the Company Shares, free and clear of all Encumbrances. Upon transfer
to Buyer by the Shareholders of the Company Shares, Buyer will own the Company
Shares free and clear of all Encumbrances. There are no claims pending or, to
the knowledge of any of the Shareholders, threatened, against the Company or any
of the Shareholders that concern or affect title to the Company Shares, or that
seek to compel the issuance of capital stock or other securities of either the
Company.
2.1.5. No Subsidiaries. There is no corporation, partnership, joint venture,
business trust or other legal entity in which the Company, either directly or
indirectly through one or more intermediaries, owns or holds beneficial or
record ownership of at least a majority of the outstanding voting securities.
2.1.6. Financial Statements. The Company has delivered to Buyer copies of the
Company's unaudited balance sheet and related statements of income, copies of
which are attached hereto as Schedule 2.1.6 (a) as of and for the months ended
December 31, 1996 and copies of Legacy Drilling, Inc.'s unaudited balance sheet
and related statements of income, copies of which are attached hereto as
Schedule 2.1.6 as of and for the months ended December 31, 1996 (collectively,
the "12/31/96 Financial Statements") unaudited balance sheet (the "10/31 Balance
Sheet") and related statements of income, copies of which are attached hereto as
Schedule 2.1.6 (b) (collectively, the "10/31 Financial Statements"), as of and
for the ten (10) months ended October 31, 1997 (the "Balance Sheet Date"). The
12/31/96 Financial Statements and 10/31 Financial Statements are complete in all
material respects. The 12/31/96 Financial Statements and 10/31 Financial
Statements present fairly the financial condition of the Company and Legacy
Drilling, Inc. as of the dates and for the periods indicated. The 10/31
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis. The accounts receivable
reflected in the 12/31/96 Financial Statements and 10/31 Balance Sheet, or which
have been thereafter acquired by the Company, have been collected or are
collectible at the aggregate recorded amounts thereof less applicable reserves,
which reserves are adequate. The inventories of the Company reflected in the
10/31 Balance Sheet, or which have thereafter been acquired by it, consist of
items of a quality usable and salable in the normal course of the Company's
business, and the values at which inventories are carried are at the lower of
cost or market.
2.1.7. Liabilities. Except as disclosed on Schedule 2.1.7 hereto, the Company
does not have any liabilities or obligations, either accrued, absolute or
contingent, nor does any of the Shareholders have any knowledge of any potential
liabilities or obligations, other than those (i)reflected or reserved against
in the 10/31 Balance Sheet or (ii)incurred in the ordinary course of business
since the Balance Sheet Date that would not materially adversely affect the
value and conduct of the business of the Company
2.1.8. Additional Company Information. Attached as Schedule 2.1.8 hereto are
true, complete and correct lists of the following items:
2.1.8.1. Real Estate. All real property and structures thereon owned, leased or
subject to a contract of purchase and sale, or lease commitment, by the Company,
with a description of the nature and amount of any Encumbrances (defined below)
thereon. The term "Encumbrances" means all liens, security interests, pledges,
mortgages, deed of trust, claims, rights of first refusal, options, charges,
restrictions or conditions to transfer or assignment, liabilities, obligations,
privileges, equities, easements, rights-of-way, limitations, reservations,
restrictions and other encumbrances of any kind or nature;
2.1.8.2. Machinery and Equipment. All rigs, carriers, rig equipment, machinery,
transportation equipment, tools, equipment, furnishings, and fixtures owned,
leased or subject to a contract of purchase and sale, or lease commitment, by
the Company with a description of the nature and amount of any Encumbrances
thereon;
2.1.8.3. Inventory. All inventory items or groups of inventory items owned by
the Company, excluding raw materials and work in process, which raw materials
and work in process are valued on the 10/31 Balance Sheet, together with the
amount of any Encumbrances thereon;
2.1.8.4. Receivables. All accounts and notes receivable of the Company, together
with (i)aging schedules by invoice date and due date, (ii)the amounts provided
for as an allowance for bad debts, (iii)the identity and location of any asset
in which the Company holds a security interest to secure payment of the
underlying indebtedness, and (iv)a description of the nature and amount of any
Encumbrances on such accounts and notes receivable;
2.1.8.5. Payables. All accounts and notes payable of the Company, together with
an appropriate aging schedule;
2.1.8.6. Insurance. All insurance policies or bonds currently maintained by the
Company, including title insurance policies, with respect to the Company,
including those covering the Company's properties, rigs, machinery, equipment,
fixtures, employees and operations, as well as a listing of any premiums, audit
adjustments or retroactive adjustments due or pending on such policies or any
predecessor policies;
2.1.8.7. Contracts. All contracts, including leases under which the Company
is essor or lessee, which are to be performed in whole or in part after the date
hereof;
2.1.8.8. Employee Compensation Plans. All bonus, incentive compensation,
deferred compensation, profit-sharing, retirement, pension, welfare, group
insurance, death benefit, or other employee benefit or fringe benefit plans,
arrangements or trust agreements of the Company or any employee benefit plan
maintained by the Company (collectively, the "Employee Plans"), together with
copies of the most recent reports with respect to such plans, arrangements, or
trust agreements filed with any governmental agency and all Internal Revenue
Service determination letters and other correspondence from governmental
entities that have been received with respect to such plans, arrangements or
agreements;
2.1.8.9. Certain Salaries. The names and salary rates of all present employees
of the Company, and, to the extent existing on the date of this Agreement, all
arrangements with respect to any bonuses to be paid to them from and after the
date of this Agreement;
2.1.8.10. Bank Accounts. The name of each bank in which the Company has an
account and the names of all persons authorized to draw thereon;
2.1.8.11. Labor Agreements. Any collective bargaining agreements of the Company
with any labor union or other representative of employees, including amendments,
supplements, and written or oral understandings, and all employment and
consulting and severance agreements of the Company;
2.1.8.12. Intellectual Property. All patents, patent applications, trademarks
and service marks (including registrations and applications therefor), trade
names, copyrights and written know-how, trade secrets and all other similar
proprietary data and the goodwill associated therewith (collectively, the
"Intellectual Property") used by the Company;
2.1.8.13. Trade Names. All trade names, assumed names and fictitious names used
or held by the Company, whether and where such names are registered and where
used;
2.1.8.14. Licenses and Permits. All permits, authorizations, certificates,
approvals, registrations, variances, waivers, exemptions, rights-of-way,
franchises, ordinances, licenses and other rights of every kind and character
(collectively, the "Permits") of the Company under which it conducts its
business.
2.1.8.15 Promissory Notes. All long-term and short-term promisorry notes,
installment contracts, loan agreements, credit agreements, and any other
agreements of the installment contracts, loan agreements, credit agreements, and
any other agreements of the Company relating thereto or with respect to
collateral securing the same;
2.1.8.16. Guaranties. All indebtedness, liabilities and commitments of others
and as to which the Company is a guarantor, endorser, co-maker, surety, or
accommodation maker, or is contingently liable therefor and all letters of
credit, whether stand-by or documentary, issued by any third party;
2.1.8.17. Reserves and Accruals. All accounting reserves and accruals maintained
in the 10/31 Balance Sheet;
2.1.8.18. Leases. All leases to which the Company is a party; and
2.1.8.19. Environment. All environmental permits, approvals, certifications,
licenses, registrations, orders and decrees applicable to current operations
conducted by the Company and all environmental audits, assessments,
investigations and reviews conducted by the Company within the last five years
or otherwise in the Company's possession on any property owned, leased or used
by the Company.
2.1.9. No Defaults. The Company is not a party to, or bound by, any contract or
arrangement of any kind to be performed after the date hereof (except as
provided in Schedule 2.1.8.7 hereto), nor is the Company in default in any
obligation or covenant on its part to be performed under any obligation, lease,
contract, order, plan or other arrangement.
2.1.10. Absence of Certain Changes and Events. Other than as specified in
Schedule 2.1.10 hereto, since the Balance Sheet Date, there has not been:
2.1.10.1. Financial Change. Any material adverse change in the financial
condition, backlog, operations, assets, liabilities or business of the Company;
2.1.10.2. Property Damage. Any material damage, destruction, or loss to the
business or properties of the Company (whether or not covered by insurance);
2.1.10.3. Dividends. Any declaration, setting aside, or payment of any dividend
or other distribution in respect of the Company Common Stock, or any direct or
indirect redemption, purchase or any other acquisition by the Company of any
such stock;
2.1.10.4. Capitalization Change. Any change in the capital stock or in the
number of shares or classes of the Company's authorized or outstanding capital
stock as described in Section 2.1.3 hereof;
2.1.10.6. Other Adverse Changes. Any other event or condition known to any of
the Shareholders particularly pertaining to and adversely affecting the
operations, assets or business of the Company.
2.1.11. Taxes.
2.1.11.1. General. All federal, state and local income, value added, sales, use,
franchise, gross revenue, turnover, excise, payroll, property, employment,
customs, duties and any and all other tax returns, reports, and estimates have
been filed with appropriate governmental agencies, domestic and foreign, by the
Company for each period for which any such returns, reports, or estimates were
due (taking into account any extensions of time to file before the date hereof);
all such returns are true and correct; the Company has only done business in the
state of Texas; all taxes shown by such returns to be payable and any other
taxes due and payable have been paid other than those being contested in good
faith by the Company; and the tax provision reflected in the 10/31 Balance Sheet
is adequate, except as disclosed in Schedule 2.1.11, in accordance with
generally accepted accounting principles, to cover liabilities of the Company at
the date thereof for all taxes, including any assessed interest, assessed
penalties and additions to taxes of any character whatsoever applicable to the
Company or its assets or business. No waiver of any statute of limitations
executed by the Company with respect to any income or other tax is in effect for
any period. The income tax returns of the Company have never been examined by
the Internal Revenue Service or the taxing authorities of any other
jurisdiction. There are no tax liens on any assets of The Company except for
taxes not yet currently due. The Company is not subject to any tax-sharing or
allocation agreement. The Company is not and never has been, a member of a
consolidated group subject to Treasury Regulation 1.1502-6 or any similar
provision.
2.1.11.2. Subchapter S Matters. The Company (i) made an effective, valid and
binding S election pursuant to Section 1362 of the Code effective January 11,
1989, (ii) has since maintained its status as a S Corporation pursuant to
Section 1361 of the Code without lapse or interruption, and (iii) has made and
continuously maintained elections similar to the federal S election in each
state of local jurisdiction where the Company does business or is required to
file a tax return to the extent such states or jurisdictions permit such
elections. The Company neither is nor will or can be subject to the built-in
gains tax under Section 1374 of the Code or any similar corporate level tax
imposed on the Company by any taxing authority. The Company (i) has not adopted
or utilized LIFO as a method of accounting for inventory, and (ii) has no other
tax item, election, agreement or adjustment which will accelerate or trigger
income or deferred deductions of the Company as a result of termination of the
Company's status as an S Corporation.
2.1.11.3. 338(h)(10) Election. If the Buyer elects to file an election to treat
the acquisition of the Company Shares as an asset purchase under Section
338(h)(10) of the Internal Revenue Code of 1986, as amended, Shareholders agree
to execute and deliver to Buyer any documents required to be executed by
Shareholders in connection with such election, and Buyer will compensate and
indemnify the Shareholders for any increased tax liability resulting therefrom.
In addition, Buyer will indemnify and reimburse Shareholders for any additional
tax that may be deemed to be paid by Shareholders on income created by Buyer
compensating Shareholders for taxes paid on a Section 338(h)(10) election
increase in asset values.
2.1.12. Intellectual Property. The Company owns or possesses licenses to use all
Intellectual Property that is either material to the business of the Company or
that is necessary for the rendering of any services rendered by the Company and
the use or sale of any equipment or products used or sold by the Company,
including all such Intellectual Property listed in Schedule 2.1.8 hereto (the
"Required Intellectual Property"). The Required Intellectual Property is owned
or licensed by the Company free and clear of any Encumbrance. The Company has
not granted to any other person any license to use any Required Intellectual
Property. The Company has not received any notice of infringement,
misappropriation, or conflict with, the Intellectual Property rights of others
in connection with the use by the Company of the Required Intellectual Property
or otherwise in connection with the Company's operation of its business.
2.1.13. Title to and Condition of Assets. The Company has good, indefeasible and
marketable title to all its properties, interests in properties and assets, real
and personal, reflected in the 10/31 Balance Sheet or in Schedule 2.1.8 hereto,
free and clear of any Encumbrance of any nature whatsoever, except
(i)Encumbrances reflected in the 10/31 Balance Sheet or in Schedule 2.1.8
hereto, (ii)liens for current taxes not yet due and payable, and (iii) such
imperfections of title, easements and Encumbrances, if any, as are not
substantial in character, amount, or extent and do not and will not materially
detract from the value, or interfere with the present use, of the property
subject thereto or affected thereby, or otherwise materially impair business
operations. All leases pursuant to which the Company leases (whether as lessee
or lessor) any substantial amount of real or personal property are in good
standing, valid, and effective; and there is not, under any such leases, any
existing default or event of default or event which with notice or lapse of
time, or both, would constitute a default by the Company and in respect to which
the Company has not taken adequate steps to prevent a default from occurring.
The buildings and premises of the Company that are used in its business are in
good operating condition and repair, subject only to ordinary wear and tear. All
rigs, rig equipment, machinery, transportation equipment, tools and other major
items of equipment of the Company are in good operating condition and in a state
of reasonable maintenance and repair, ordinary wear and tear excepted, and are
free from any known defects except as may be repaired by routine maintenance and
such minor defects as to not substantially interfere with the continued use
thereof in the conduct of normal operations. To the best of each Shareholder's
knowledge, all such assets conform to all applicable laws governing their use.
No notice of any violation of any law, statute, ordinance, or regulation
relating to any such assets has been received by the Company or any of the
Shareholders, except such as have been fully complied with.
2.1.14. Contracts. All contracts, leases, plans or other arrangements to which
the Company is a party, by which it is bound or to which it or its assets are
subject are in full force and effect, and constitute valid and binding
obligations of the Company. The Company is not, and to the knowledge of any of
the Shareholders, no other party to any such contract, lease, plan or other
arrangement is, in default thereunder, and no event has occurred which (with or
without notice, lapse of time, or the happening of any other event) would
constitute a default thereunder. No contract has been entered into on terms
which could reasonably be expected to have an adverse effect on the Company.
None of the Shareholders has received any information, except that Xxxxxxxx may
become employed by a company in competition with the Company, which would cause
such Shareholder to conclude that any customer of the Company will cease doing
business with the Company (or its successors) as a result of the consummation of
the transactions contemplated hereby.
2.1.15. Licenses and Permits. The Company possesses all Permits necessary under
law or otherwise for the Company to conduct its business as now being conducted
and to construct, own, operate, maintain and use its assets in the manner in
which they are now being constructed, operated, maintained and used, including
all such Permits listed in Schedule 2.1.8 hereto (collectively, the "Required
Permits"). Each of the Required Permits and the Company's rights with respect
thereto is valid and subsisting, in full force and effect, and enforceable by
the Company subject to administrative powers of regulatory agencies having
jurisdiction. The Company is in compliance in all respects with the terms of
each of the Required Permits. None of the Required Permits have been, or to the
knowledge of any of the Shareholders, is threatened to be, revoked, canceled,
suspended or modified.
2.1.16. Litigation. Except as set forth in Schedule 2.1.16 hereto, there is no
suit, action, or legal, administrative, arbitration, or other proceeding or
governmental investigation pending to which the Company is a party or, to the
knowledge of any of the Shareholders, might become a party or which particularly
affects the Company or its assets, nor is any change in the zoning or building
ordinances directly affecting the real property or leasehold interests of the
Company, pending or, to the knowledge of any of the Shareholders, threatened.
2.1.17. Environmental Compliance.
2.1.17.1. Environmental Conditions. Except as disclosed in Schedule 2.1.17.1,
there are no environmental conditions or circumstances, including, without
limitation, the presence or release of any Substance of Environmental Concern,
on any property presently or previously owned, leased or operated by the
Company, or on any property to which any Substance of Environmental Concern or
waste generated by the Company's operations or use of its assets were disposed
of, which would have a result a material adverse effect on the business or
business prospects of the Company. The term "Substance of Environmental Concern"
means (a) any gasoline, petroleum (including crude oil or any fraction thereof),
petroleum product, polychlorinated biphenyls, urea-formaldehyde insulation,
asbestos, pollutant, contaminant, radiation and any other substance of any kind,
whether or not any such substance is defined as toxic or hazardous under any
Environmental Law (as defined in Section 2.1.17.3 hereof), that is regulated
pursuant to or could give rise to liability under any Environmental Law;
2.1.17.2. Permits, etc. Except as disclosed in Schedule 2.1.17.2, the Company
has, and within the period of all applicable statute of limitations has had, in
full force and effect all environmental Permits required to conduct its
operations, and is, within the period of all applicable statutes of limitations
has been, operating in compliance thereunder;
2.1.17.3. Compliance. Except as disclosed in Schedule 2.1.17.3, the Company's
operations and use of its assets are, and within the period of all applicable
statutes of limitations, have been in compliance with applicable Environmental
Law. "Environmental Law" as used herein means any and all laws, rules, orders,
regulations, statutes, ordinances, codes, decrees, and other legally enforceable
requirements (including, without limitation, common law) of the United States,
or any State, local, municipal or other governmental authority or
quasi-governmental authority, regulating, relating to, or imposing liability or
standards of conduct concerning protection of the environmental or of human
health, or employee health and safety as from time to time has been or is now in
effect.
2.1.17.4. Environmental Claims. No notice has been received by the Company or
any of the Shareholders from any entity, governmental agency or individual
regarding any existing, pending or threatened investigation, inquiry,
enforcement action. litigation, or liability, including, without limitation any
claim for remedial obligations, response costs or contribution, relating to any
Environmental Law;
2.1.17.5. Enforcement. The Company, and to the knowledge of any of the
Shareholders, no predecessor of the Company or other party acting on behalf of
the Company, has entered into or agreed to any consent, decree, order,
settlement or other agreement, nor is subject to any judgment, decree, order or
other agreement, in any judicial, administrative, arbitral, or other forum,
relating to compliance with or liability under any Environmental Law;
2.1.17.6. Liabilities. The Company has not assumed or retained, by contract or
operation of law, any liabilities of any kind, fixed or contingent, known or
unknown, under any Environmental Law;
2.1.17.7. Renewals. None of the Shareholders knows of any reason the Company (or
its successors) would not be able to renew without material expense any of the
permits, licenses, or other authorizations required pursuant to any of the
Environmental Law to conduct and use any of the Company's current or planned
operations; and
2.1.17.8. Asbestos and PCBs. No material amounts of friable asbestos currently
exist on any property owned or operated by the Company, nor do polychlorinated
biphenyls exist in concentrations of 50 parts per million or more in electrical
equipment owned or being used by the Company in its operations or on its
properties.
2.1.18. Compliance with Other Laws. The Company is not in violation of or in
default with respect to, or in alleged violation of or alleged default with
respect to, the Occupational Safety and Health Act (29 U.S.C. ''651 et seq.) As
amended, or any other applicable law or any applicable rule, regulation, or any
writ or decree of any court or any governmental commission, board, bureau,
agency, or instrumentality, or delinquent with respect to any report required to
be filed with any governmental commission, board, bureau, agency or
instrumentality.
2.1.19. ERISA Plans and Labor Issues. Except as identified in Schedule 2.1.19,
the Company does not currently sponsor, maintain or contribute to, and has not
at any time sponsored, maintained or contributed to, any Employee Plan (as
defined in Section 2.1.19 hereof) or any employee benefit plan which is subject
to any of the provisions of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), in which any of its employees are or were participants
(whether on an active or frozen basis). Each Employee Plan set forth in Schedule
2.1.19 complies currently, and has complied in the past, in form and operation,
with the applicable provisions of ERISA, the Internal Revenue Code of 1986, as
amended (the "Code") and other applicable laws including, without limitation,
all qualification and reporting and disclosure requirements. Also, with respect
to each Employee Plan, the Company and any other party in interest has not
engaged in any prohibited transaction or any violation of its fiduciary duties
to such plan. All contributions required to be made to each Employee Plan under
the terms of such Employee Plan, ERISA or other applicable law have been timely
made and there are no delinquent contributions as of the Closing Date. None of
the Employee Plans (i) is a "multiemployer plan" (as defined in Section 3(37) of
ERISA), (ii) is a defined benefit pension plan subject to Title IV of ERISA,
(iii) is a "voluntary employees' beneficiary association" within the meaning of
Code Section 501(c)(9), (iv) provides for medical or other insurance benefits to
current or future retired employees or former employees of the Company (other
than as required for group health plan continuation coverage under Code Section
4980B ("COBRA") or applicable state law), or (v) obligates the Company to pay
any benefits solely as a result of a change in control of the Company. During
the six years preceding the Closing Date, (i) no underfunded pension plan
subject to Section 412 of the Code has been transferred out of the Company, (ii)
the Company has not participated in or contributed to, or had an obligation to
contribute to, any multiemployer plan (as defined in ERISA Section 3(37)) and
has no withdrawal liability with respect to any multiemployer plan, and (iii)
the Company has not maintained any pension plan subject to Title IV or ERISA.
There are no claims, lawsuits or regulatory actions which have been asserted,
instituted or threatened against any Employee Plan by any fiduciary or
participant of such plan, except routine claims for benefits thereunder, or by
any governmental entity. The Company has no collective bargaining agreements
with any labor union or other representative of employees. The Company has not
engaged in any unfair labor practices. The Company is not aware of any pending
or threatened dispute with any of its existing or former employees.
2.1.20. Insurance. All premiums due and payable under the insurance policies or
bonds identified on Schedule 2.1.8.6 have been paid. The Company is not, and but
for a requirement that notice be given or that a period of time elapse or both
would not be, in violation of any of the insurance policies listed on such
Schedule.
2.1.21. Investigations; Litigation. No investigation or review by any
governmental entity with respect to the Company or any of the transactions
contemplated by this Agreement is pending or, to the knowledge of any of the
Shareholders, threatened, nor has any governmental entity indicated to the
Company an intention to conduct the same, and there is no action, suit or
proceeding pending or, to the knowledge of any of the Shareholders, threatened
against or affecting the Company at law or in equity, or before any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, that either individually or in the aggregate, does or
is likely to result in any material adverse change in the financial condition,
properties or business of the Company.
2.1.22. Absence of Certain Business Practices. Except as disclosed on Schedule
2.1.22, neither the Company nor any officer, employee or agent of the Company,
nor any other person acting on its behalf, has, directly or indirectly, within
the past five years, given or agreed to give any gift or similar benefit to any
customer, supplier, government employee or other person who is or may be in a
position to help or hinder the business of the Company (or to assist the Company
in connection with any actual or proposed transaction) which (i) might subject
the Company to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not given in the past, might have had a
material adverse effect on the assets, business or operations of the Company as
reflected in the 10/31 Financial Statements, or (iii) if not continued in the
future, might materially adversely effect the assets, business operations or
prospects of the Company or which might subject the Company to suit or penalty
in a private or governmental litigation or proceeding.
2.1.23. No Untrue Statements. The Company and each of the Shareholders have made
available to Buyer true, complete and correct copies of all contracts, documents
concerning all litigation and administrative proceedings, licenses, permits,
insurance policies, lists of suppliers and customers, and records relating
principally to the Company's assets and business, and such information covers
all commitments and liabilities of the Company relating to its business or the
assets. This Agreement and the agreements and instruments to be entered into in
connection herewith do not include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements made herein and
therein not misleading in any material respect.
2.1.24. Consents and Approvals. No consent, approval or authorization of, or
filing or registration with, any governmental or regulatory authority, or any
other person or entity other than the Shareholders, is required to be made or
obtained by the Company or any of the Shareholders in connection with the
execution, delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.
2.1.25. Finder's Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by the Shareholders and
their counsel directly with Buyer and its counsel, without the intervention of
any other person in such manner as to give rise to any valid claim against Buyer
or the Company for a brokerage commission, finder's fee or any similar payments.
2.2. Representations and Warranties of Buyer. Buyer represents and warrants to
each of the Shareholders as follows
2.2.1. Organization and Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
has full requisite corporate power and authority to carry on its business as it
is currently conducted, and to own and operate the properties currently owned
and operated by it, and is duly qualified or licensed to do business and is in
good standing as a foreign corporation authorized to do business in all
jurisdictions in which the character of the properties owned or the nature of
the business conducted by it would make such qualification or licensing
necessary, except where the failure to be so qualified or licensed would not
have a material adverse effect on its financial condition, properties or
business.
2.2.2. Agreement Authorized and its Effect on Other Obligations. The
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Buyer, and this
Agreement is a valid and binding obligation of Buyer enforceable (subject to
normal equitable principles) in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, debtor
relief or similar laws affecting the rights of creditors generally. The
execution, delivery and performance of this Agreement by Buyer will not conflict
with or result in a violation or breach of any term or provision of, or
constitute a default under (a) the Certificate of Incorporation or Bylaws of
Buyer or (b) any obligation, indenture, mortgage, deed of trust, lease, contract
or other agreement to which Buyer or any of its property is bound.
2.2.3. Consents and Approvals. No consent, approval or authorization of, or
filing of a registration with, any governmental or regulatory authority, or any
other person or entity is required to be made or obtained by Buyer in connection
with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
2.2.4. Finder's Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Buyer and its counsel
directly with the Company and the Shareholders and their counsel, without the
intervention by any other person as the result of any act of Buyer in such a
manner as to give rise to any valid claim against any of the parties hereto for
any brokerage commission, finder's fee or any similar payments.
ARTICLE 3
Additional Agreements
3.1. Noncompetition. Except as otherwise consented to or approved in writing by
Buyer, Xxxxxxxx agrees that for a period of 36 months from the date hereof,
Xxxxxxxx will not, directly or indirectly acting alone or as a member of a
partnership or as an officer, director, employee, consultant, representative,
holder of, or investor in as much as 5% of any security of any class of any
corporation or other business entity (i) engage in competition with the business
or businesses of well servicing, oil field trucking and oil and gas contract
drilling conducted by the Company, Buyer or any affiliate of Buyer on the date
hereof, or in any service business the services of which are provided and
marketed by the Company, Buyer or any affiliate of Buyer on the date hereof
within a 000-xxxx xxxxxx xx Xxxxxxx, Xxxxx; (ii) request any present customers
or suppliers of the Company to curtail or cancel their business with Buyer or
any affiliate of Buyer; (iii) disclose to any person, firm or corporation any
trade, technical or technological secrets of the Company, Buyer or any affiliate
of Buyer or any details of their organization or business affairs or (iv) induce
or actively attempt to influence any employee of the Company, Buyer or any
affiliate of Buyer to terminate his employment. Except as otherwise consented to
or approved in writing by Buyer, Xxxxxx agrees that for a period of 36 months
from the date hereof, Xxxxxx will not, directly or indirectly acting alone or as
a member of a partnership or as an officer, director, employee, consultant,
representative, holder of, or investor in as much as 5% of any security of any
class of any corporation or other business entity (i) engage in competition with
the business of oil and gas contract drilling conducted by the Company, Buyer or
any affiliate of Buyer on the date hereof, or any service business the services
of which are provided and marketed by the Company, Buyer or any affiliate of
Buyer on the date hereof within a 000-xxxx xxxxxx xx Xxxxxxx, Xxxxx; (ii)
request any present customers or suppliers of the Company to curtail or cancel
their business with Buyer or any affiliate of Buyer; (iii) disclose to any
person, firm or corporation any trade, technical or technological secrets of the
Company, Buyer or any affiliate of Buyer or any details of their organization or
business affairs or (iv) induce or actively attempt to influence any employee of
the Company, Buyer or any affiliate of Buyer to terminate his employment;
however, nothing in this Section 3.1 shall be construed to prevent Xxxxxx from
being engaged in the oil and gas contract drilling business as an employee of a
party or entity that is not owned in whole or in part by Xxxxxx. Xxxxxxxx and
Xxxxxx agree that if either the length of time or geographical area set forth in
the Section 3.1 is deemed too restrictive in any court proceeding, such court
may reduce such restrictions to those which it deems reasonable under the
circumstances. The obligations expressed in this Section 3.1 are in addition to
any other obligations that the Shareholders may have under the laws of the
states in which they do business requiring an employee of a business or a
shareholder who sells his stock in a corporation (including a disposition in a
merger) to limit his activities so that the goodwill and business relations of
his employer and of the corporation whose stock he has sold (and any successor
corporation) will not be materially impaired. Xxxxxxxx and Xxxxxx further agree
and acknowledge that the Company, Buyer and its affiliates do not have any
adequate remedy at law for the breach or threatened breach by either Xxxxxxxx or
Xxxxxx of this covenant, and agree that the Company, Buyer or any affiliate of
Buyer may, in addition to the other remedies which may be available to it
hereunder, file a suit in equity to enjoin Xxxxxxxx or Xxxxxx 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. Xxxxxxxx and Xxxxxx acknowledge that the covenants set forth in this
Section 3.1 are being executed and delivered by such Shareholder in
consideration of the covenants of Buyer contained in this Agreement, and for
other good and valuable consideration, receipt of which is hereby acknowledged.
In return for the noncompetition covenants contained in this Section 3.1, Buyer
shall pay $255,000 to Xxxxxx Xxxxxxxx and $45,000 to X. X. Xxxxxx, in 36 equal
monthly installments, commencing March 1, 1998. Notwithstanding any provision
contained in this Section 3.1, in the event that Buyer fails to employ Xxxxxx or
terminates Xxxxxx without cause, the obligations of Xxxxxx contained in Section
3.1 of this Agreement shall terminate and be of no further force and effect
however, the obligations of Buyer under this Section 3.1 will continue in full
force and effect.
3.2. Further Assurances. From time to time, as and when requested by any party
hereto, any other party hereto shall execute and deliver, or cause to be
executed and delivered, such documents and instruments and shall take, or cause
to be taken, such further or other actions as may be reasonably necessary to
effectuate the transactions contemplated hereby.
ARTICLE 4
Indemnification
4.1. Indemnification by the Shareholders. In addition to any other remedies
available to Buyer under this Agreement, or at law or in equity, each of the
Shareholders shall jointly and severally indemnify, defend and hold harmless the
Company, Buyer and their affiliates and their respective officers, directors,
employees, agents and stockholders (collectively, the "Buyer Indemnified
Parties"), against and with respect to any and all claims, costs, damages,
losses, expenses, obligations, liabilities, recoveries, suits, causes of action
and deficiencies, including interest, penalties and reasonable fees and expenses
of attorneys, consultants and experts (collectively, the "Damages") that the
Buyer Indemnified Parties shall incur or suffer, which arise, result from or
relate to (i) any breach by any of the Shareholders of (or the failure of any of
the Shareholders to perform) their respective representations, warranties,
covenants or agreements in this Agreement or in any schedule, certificate,
exhibit or other instrument furnished or delivered to Buyer by any of the
Shareholders under this Agreement (ii) any environmental matters scheduled on
Schedules 2.1.17.1, 2.1.17.2, 2.1.17.3 or (iii) the Company's ownership and/or
operation of those properties distributed to the Shareholders prior to the date
hereof referred to in Schedule 2.1.10 hereto (the "Indemnification"). The
Indemnification provided by Xxxxxxxx and Xxxxxx shall be limited to $262,048.00
each.
4.2. Indemnification by Buyer. In addition to any other remedies available to
the Shareholders under this Agreement, or at law or in equity, Buyer shall
indemnify, defend and hold harmless each of the Shareholders against and with
respect to any and all Damages that such indemnitees shall incur or suffer,
which arise, result from or relate to any breach of, or failure by Buyer to
perform, any of its representations, warranties, covenants or agreements in this
Agreement or in any schedule, certificate, exhibit or other instrument furnished
or delivered to any of the Shareholders by or on behalf of Buyer under this
Agreement.
4.3. Indemnification Procedure. In the event that any party hereto discovers or
otherwise becomes aware of an indemnification claim arising under Section 4.1 or
4.2 of this Agreement, such indemnified party shall give written notice to the
indemnifying party, specifying such claim, and may thereafter exercise any
remedies available to such party under this Agreement; provided, however, that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of any obligations hereunder, to the extent the
indemnifying party is not materially prejudiced thereby. Further, promptly after
receipt by an indemnified party hereunder of written notice of the commencement
of any action or proceeding with respect to which a claim for indemnification
may be made pursuant to Section 4.1 or 4.2 hereof, such indemnified party shall,
if a claim in respect thereof is to be made against any indemnifying party, give
written notice to the latter of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of any obligations hereunder, to
the extent the indemnifying party is not materially prejudiced thereby. In case
any such action is brought against an indemnified party, the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified, to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
such notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof unless the
indemnifying party has failed to assume the defense of such claim and to employ
counsel reasonably satisfactory to such indemnified person. An indemnifying
party who elects not to assume the defense of a claim shall not be liable for
the fees and expenses of more than one counsel in any single jurisdiction for
all parties indemnified by such indemnifying party with respect to such claim or
with respect to claims separate but similar or related in the same jurisdiction
arising out of the same general allegations. Notwithstanding any of the
foregoing to the contrary, the indemnified party will be entitled to select its
own counsel and assume the defense of any action brought against it if the
indemnifying party fails to select counsel reasonably satisfactory to the
indemnified party, the expenses of such defense to be paid by the indemnifying
party. No indemnifying party shall consent to entry of any judgment or enter
into any settlement with respect to a claim without the consent of the
indemnified party, which consent shall not be unreasonably withheld, or unless
such judgment or settlement includes as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability with respect to such claim. No indemnified party shall consent to
entry of any judgment or enter into any settlement of any such action, the
defense of which has been assumed by an indemnifying party, without the consent
of such indemnifying party, which consent shall not be unreasonably withheld or
delayed.
ARTICLE 5
The Closing
5.1. Time and Place. The Closing ("Closing") of the transactions contemplated by
this Agreement shall take place at 9.00 a.m., local time, on January 30, 1998,
at, 000 Xxxx Xxxxxx, Xxxxxxx, Xxxxx, or at such other time and place as the
parties might hereafter mutually agree in writing. The date on which Closing
occurs is referred to in this Agreement as the "Closing Date".
5.2. Deliveries. At the Closing, the following shall occur:
(a) The Shareholders shall transfer good, marketable and valid title to the
Company Shares to Buyer, free and clear of liens, claims and encumbrances,
by endorsing and delivering the stock certificates referred to in Section
1.2;
(b) Xxxxxx X. Xxxxxx, counsel to the Shareholders, shall deliver its opinion of
counsel covering such matters as may be requested by Buyer;
(c) Buyer, Shareholders and the Escrow Agent shall execute and deliver the
Escrow Agreement;
(d) Buyer shall pay to Shareholders in immediately available funds, the
purchase price specified in Section 1.1, as adjusted pursuant to this
Agreement, less the Escrowed Funds; and
(e) Buyer shall pay the Escrowed Funds to the Escrow Agent in immediately
available funds for its handling in accordance with this Agreement and the
Escrow Agreement.
(f) Buyer shall deliver an original executed Certificate of the Secretary of
Buyer certifying that resolutions contained therein authorizing the
transactions contemplated by this Agreement were duly adopted by the Board
of Directors of Buyer and have not been amended.
ARTICLE 6
Miscellaneous
6.1. Survival of Representations, Warranties and Covenants. All representations,
warranties, covenants and agreements made by the parties hereto shall survive
indefinitely without limitation, notwithstanding any investigation made by or on
behalf of any of the parties hereto. All statements contained in any
certificate, schedule, exhibit or other instrument delivered pursuant to this
Agreement shall be deemed to have been representations and warranties by the
respective party or parties, as the case may be, and shall also survive
indefinitely despite any investigation made by any party hereto or on its
behalf.
6.2. 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.
6.3. Counterparts. Any number of counterparts of this Agreement may be executed
and each such counterpart shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one instrument.
6.4. 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 Energy Drilling, Inc. Cotton, Xxxxxxx, Xxxxx & Xxxxxx
Two Tower Center, Xxxxx Xxxxx X. X. Xxx 0000
Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000 Xxxxxxx, Xxxxx 00000-0000
Attn: General Counsel Attn: Xxxxxxx X. XxXxxxxx
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
--------------------------------------------------------------------------------
If to any Shareholder
---------------------------------------------------------------------------
Addressed to: With a copy to:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Xxxx X. Xxxxxxxx Xxxxxx X. Xxxxxx
P. O. Box 303 Attorney at Law
Xxx, Xxxxx 00000 P. X. Xxx 000
Xxxxxxx, Xxxxx 00000
Xxx Xxxxxxxx
0000 XX 000
Xxxxx, Xxxxx 00000
X. X. Xxxxxx
301 Xxxxx
Xxxxx, Texas 79510
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Any communication so addressed and mailed by first-class registered or certified
mail, postage prepaid, with return receipt requested, shall be deemed to be
received on the third business day after so mailed, and if delivered by courier
or facsimile to such address, upon delivery during normal business hours on any
business day.
6.5. Table of Contents and Captions. The table of contents and captions
contained in this Agreement are solely for convenient reference and shall not be
deemed to affect the meaning or interpretation of any article, section, or
paragraph hereof.
6.6. 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.
6.7. 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.
6.8. Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the applicable laws of the State of Texas.
IN WITNESS WHEREOF, the Shareholders have executed this Agreement and the other
parties hereto have caused this Agreement to be signed in their respective
corporate names by their respective duly authorized representatives, all as of
the day and year first above written.
KEY ENERGY DRILLING, INC.
By:
Xxx Xxx Xxxxxx, President
SHAREHOLDERS
XXXX X. XXXXXXXX
XXX XXXXXXXX
X. X. XXXXXX
