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EXHIBIT 10.6
LEASE AGREEMENT
This Lease Agreement dated December 1, 1996 is entered into by and
between Xxxxxx Energy Services, Inc., a Delaware corporation ("Lessor"), whose
notice address is 0000 Xxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000 and Drilling
Tools International, Ltd., a Gibraltar corporation ("Lessee"), whose notice
address is X.X. Xxx 00000, Xxxxx, Xxxxxx Xxxx Xxxxxxxx.
1. LEASE. Lessor leases to Lessee, and Lessee leases from Lessor, the
Equipment described on the attached SCHEDULE A, including all replacement
parts, repairs, additions, and accessories ("Equipment"), on the terms and
conditions set forth in this Lease.
2. TERM. The Equipment is leased for a term ("Lease Term"), commencing
December 1, 1996 ("Lease Commencement Date"), and ending on the sooner of June
1, 1997 or the date on which Xxxxxx - DTI, Ltd., a Xxxxx Xxx free trade zone
corporation (the "Joint Venture"), is qualified to do business ("Lease
Termination Date").
3. RENT. Lessee shall pay to Lessor, in lawful money of the United States
of America, as rent ("Lease Payment") 50% of the cumulative net income of
Lessee's Oil Field Rental Tools Division (the "Division") during the Lease
Term, which shall be accrued and contributed to the Joint Venture upon its
formation. In the event of a cumulative net loss by the Division during the
Lease Term, Lessor shall pay 50% of such cumulative net loss to Lessee.
4. SELECTION OF EQUIPMENT; DISCLAIMER OF WARRANTY. Lessor has selected the
Equipment at Lessee's request. Lessor agrees to provide the equipment in
serviceable operating condition. EXCEPT AS SET FORTH IN THE PRECEDING
SENTENCE, LESSEE AGREES THAT THE EQUIPMENT IS LEASED "AS-IS" AND IS AS
SPECIFIED BY LESSEE, THAT IT IS SUITABLE FOR LESSEE'S PURPOSE, AND THAT LESSOR
HAS MADE NO REPRESENTATION OR WARRANTY ABOUT THE SUITABILITY OR DURABILITY OF
THE EQUIPMENT FOR THE PURPOSES AND USES OF LESSEE, OR ANY OTHER REPRESENTATION
OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. LESSOR FURTHER DISCLAIMS
ANY LIABILITY FOR LOSS, DAMAGE, OR INJURY TO LESSEE OR THIRD PARTIES AS A
RESULT OF ANY DEFECTS, LATENT OR OTHERWISE, IN THE EQUIPMENT, WHETHER ARISING
FROM THE APPLICATION OF THE LAWS OF STRICT LIABILITY OR OTHERWISE.
5. TITLE, PERSONAL PROPERTY, LOCATION, AND INSPECTION. Lessor holds title
to the Equipment, and title shall not pass to Lessee. Lessee has the right to
maintain possession and use the Equipment for the full Lease Term, provided
Lessee complies with the terms and conditions of this Lease. Lessee agrees not
to assign or permit a lien to be placed upon the Equipment. Lessor shall have
the right to enter upon the premises where the Equipment is located to confirm
the existence, condition, and proper maintenance of the Equipment.
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6. USE, MAINTENANCE, AND REPAIR. Lessee, at its own cost and expense, is
required to keep the Equipment in good repair, condition, and working order,
except for ordinary wear and tear, and shall supply all parts and servicing
required. All replacement parts used or installed and repairs made to the
Equipment will become the property of Lessor.
7. ASSIGNMENT. LESSEE AGREES NOT TO TRANSFER, SELL, ASSIGN, PLEDGE, OR
ENCUMBER EITHER THE EQUIPMENT OR ANY RIGHTS UNDER THIS LEASE WITHOUT THE PRIOR
WRITTEN CONSENT OF LESSOR.
8. RETURN OF EQUIPMENT. In the event that the Joint Venture has not been
formed on or before June 1, 1997, or upon demand of Lessor if this Lease is in
default, Lessee, at its own risk and expense, will immediately crate, insure,
and return the Equipment to Lessor in the same condition as when delivered,
except ordinary wear and tear, to a location designated by Lessor. If a
default exists, return of the Equipment shall not relieve Lessee from continued
liability under this Lease.
9. LOSS OR DAMAGE. In the event the Joint Venture is not formed on or
before June 1, 1997, Lessee assumes the entire risk of damage to or loss or
destruction of the Equipment from any and every cause whatsoever, whether or
not insured, until the Equipment is returned to Lessor or subsequently
transferred to the Joint Venture. No such loss or damage shall relieve Lessee
from any obligation under this Lease. In the event of damage to or loss or
destruction of the Equipment, Lessee shall promptly notify Lessor in writing of
such fact and shall, at the option of Lessor, (a) repair the Equipment to good
condition and working order or (b) replace the Equipment with like equipment in
good repair, condition, and working order, acceptable to Lessor and transfer
clear title to such replacement equipment to Lessor, such equipment shall be
subject to this Lease and be deemed the Equipment. All proceeds of insurance
received by Lessor as a result of such loss or damage will be applied, where
applicable, toward the replacement or repair of the Equipment or the payment of
the obligations of Lessee. If the Joint Venture is formed on or before June 1,
1997, Lessor shall receive a credit for 100% of any damage to or loss of the
Equipment toward its capital contribution to the Joint Venture.
10. INSURANCE. Lessee shall obtain and maintain transit insurance, keeping
the Equipment insured against marine and transit hazards, in an amount not less
than the replacement cost of the Equipment without deductible and without co-
insurance. Lessee shall obtain and maintain, for the term of this Lease,
property insurance, keeping the Equipment insured against all risks of loss or
damage, in an amount not less than the replacement cost of the Equipment
without deductible and without co-insurance. The property insurance shall
contain a breach of warranty clause in favor of Lessor. Lessee shall also
obtain and maintain, for the term of this Lease, comprehensive public liability
insurance covering both personal injury and property damage of at least
$100,000.00 per person and $300,000.00 per occurrence for bodily injury and
$50,000.00 for property damage. Lessee agrees if Lessee fails to procure,
maintain, and pay for such insurance, Lessor has the right, but not the
obligation, to obtain such insurance on behalf of and at the expense of Lessee.
In the event Lessor does obtain such insurance, Lessee agrees to pay all costs
thereof.
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11. INDEMNITY. Lessee agrees to assume the risk of liability arising from
the possession or use of the Equipment. Lessee further agrees to defend and
hold Lessor harmless from all claims and liabilities arising from the
possession or use of the Equipment and to indemnify and hold Lessor harmless
from and against any loss or damage arising from the loss, disallowance, or
recapture of any tax benefits anticipated to be realized by Lessor from the
ownership of the Equipment. The obligations contained in this paragraph
continue beyond the termination of this Lease if the liability occurred during
the term of this Lease.
12. TAXES. Lessee agrees to pay all license and registration fees, sale and
use taxes, personal property taxes, and all other taxes, assessments, levies,
fees, and charges, relating to the ownership, leasing, rental, sale, purchase,
possession, or use of the Equipment, as part of the Lease Payment or as billed
by Lessor. Lessee is not responsible for any taxes based upon income or
receipt of Lessor.
13. NOTICE. Written notices will be deemed to have been given when
delivered personally or deposited in the United States mails or with an
international courier for two day delivery, postage prepaid, addressed to such
party at its address set forth above or at such other address as such party may
have subsequently provided in writing.
14. CHOICE OF LAW. THIS LEASE WAS MADE IN THE STATE OF TEXAS, UNITED STATES
OF AMERICA (BY LESSOR HAVING COUNTERSIGNED IT IN HOUSTON, TEXAS) AND IT IS TO
BE PERFORMED IN THE STATE OF TEXAS BY REASON OF THE LEASE PAYMENTS REQUIRED TO
BE MADE TO LESSOR IN TEXAS. LESSEE CONSENTS TO AND AGREES THAT PERSONAL
JURISDICTION OVER LESSEE AND SUBJECT MATTER JURISDICTION OVER THE EQUIPMENT
SHALL BE WITH THE COURTS OF THE STATE OF TEXAS, OR THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF TEXAS, SOLELY AT LESSOR'S OPTION, WITH
RESPECT TO ANY PROVISION OF THIS LEASE.
15. ENTIRE AGREEMENT; NON-WAIVER; SEVERABILITY. This Lease together with
the Formation and Shareholders' Agreement of even date herewith concerning the
Joint Venture contains the entire agreement and understanding between Lessee
and Lessor. No agreements or understandings are binding on the parties unless
set forth in writing and signed by the parties. Time is of the essence in this
Lease. No waiver by Lessor of any breach or default constitutes a waiver of
any additional or subsequent breach or default by Lessee nor is it a waiver of
any of Lessor's rights. Any provision of this Lease which for any reason may
be held unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such unenforceability without invalidating the
remaining provisions of this Lease, and any such unenforceability in any
jurisdiction shall not render unenforceable such provision in any other
jurisdiction.
This Lease may be executed in multiple counterparts, each of which, when
taken together, shall constitute a fully executed original.
[signatures on next page]
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Executed by Lessor this 15th day of November, 1996.
XXXXXX ENERGY SERVICES, INC.
By: /s/ XXXXX XXXXXXXXX
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Name:Xxxxx Xxxxxxxxx
Title: President/CEO
Executed by Lessee this 15th day of November, 1996.
DRILLING TOOLS INTERNATIONAL, LTD
By: /s/ XX XXXXXXXXX
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Name: Xx Xxxxxxxxx
Title: Managing Director
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SCHEDULE A
EQUIPMENT
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