PLAN AND AGREEMENT OF MERGER
AMONG
KEY ENERGY GROUP, INC.
WELLTECH EASTERN, INC.
AND
▇▇▇▇▇▇▇▇ WELL SERVICE, INC.
Dated as of September 30, 1996
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (this "Agreement") is entered into as
of September 30, 1996 by and among Key Energy Group, Inc., a Maryland
corporation ("Key"), WellTech Eastern, Inc., a Delaware corporation and a
wholly-owned subsidiary of Key ("WellTech" or the "Surviving Corporation"),
Woodward Well Service, Inc., an Oklahoma corporation ("Woodward"), and ▇▇▇▇▇
▇▇▇▇▇▇▇▇ (the "Shareholder"). WellTech and Woodward are sometimes collectively
referred to herein as the "Merging Corporations."
WITNESSETH :
WHEREAS, Key is a corporation duly organized and validly existing under
the laws of the State of Maryland, with its principal executive offices at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇; and
WHEREAS, WellTech is a corporation duly organized and validly existing
under the laws of the State of Delaware, with its principal executive offices at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇; and
WHEREAS, Woodward is a corporation duly organized and validly existing
under the laws of the State of Oklahoma, with its principal executive offices at
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; and
WHEREAS, Key owns 100 shares of common stock, par value $.01 per share,
of WellTech ("WellTech Common Stock"), which constitutes all of the issued and
outstanding shares of capital stock of WellTech; and
WHEREAS, the Shareholder owns 25,000 shares of common stock, par value
$1.00 per share, of Woodward ("▇▇▇▇▇▇▇▇ Common Stock"), which constitutes all of
the issued and outstanding shares of capital stock of ▇▇▇▇▇▇▇▇; and
WHEREAS, (i) the board of directors of Key, (ii) Key (in its capacity
as WellTech's sole stockholder) and the board of directors of WellTech and (iii)
the Shareholder (in his capacity as the sole shareholder of ▇▇▇▇▇▇▇▇) and the
board of directors of ▇▇▇▇▇▇▇▇ desire to merge ▇▇▇▇▇▇▇▇ with and into WellTech
in accordance with the provisions of Section 252 of the Delaware General
Corporation Law (the "DGCL") and Section 1082 of the Oklahoma General
Corporation Law (the "OGCL") pursuant to the terms and provisions of this
Agreement, and have approved such merger (the "Merger") and the other terms and
provisions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, and to prescribe the terms and
conditions of the Merger contemplated hereby, the mode of carrying the same into
effect, the manner and basis of converting the presently outstanding shares of
▇▇▇▇▇▇▇▇ Common Stock into the right to receive the Merger Consideration
1
described in Section 1.10.1 hereof, and such other details and provisions as are
deemed necessary or proper, the parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1. Surviving Corporation. WellTech and ▇▇▇▇▇▇▇▇ shall be, upon
the Effective Date, merged into a single surviving corporation, which
shall be WellTech, which shall continue its corporate existence and remain
a Delaware corporation governed by and subject to the laws of that State.
1.2. Effective Date. The Merger shall become effective upon (i) the
filing of the Certificate of Merger with the Secretary of State of Delaware
following its execution in accordance with Sections 252 and 103 of the DGCL and
(ii) the Certificate of Merger with the Secretary of State of Oklahoma following
its execution in accordance with Sections 1082 and 1007 of the OGCL. These
filings shall be made concurrently on the date hereof or as soon as practicable
thereafter, with the date on which such filings are made being referred to
elsewhere herein as the "Effective Date."
1.3. Name and Continued Corporate Existence of Surviving Corporation.
On the Effective Date, the identity, existence, purposes, powers, objects,
franchises, rights, and immunities of WellTech, the surviving corporation of the
Merger, shall continue unaffected and unimpaired by the Merger, and the
corporate identity, existence, purposes, powers, objects, franchises, rights,
and immunities of ▇▇▇▇▇▇▇▇ shall be wholly merged into WellTech, the surviving
corporation, and WellTech shall be fully vested therewith. Accordingly, on the
Effective Date, the separate existence of ▇▇▇▇▇▇▇▇, except insofar as continued
by statute, shall cease.
1.4. Governing Law and Articles of Incorporation of Surviving
Corporation. The laws of Delaware shall continue to govern the Surviving
Corporation. On and after the Effective Date, the Certificate of Incorporation
of WellTech shall be the Certificate of Incorporation of the Surviving
Corporation until further amended in the manner provided by law.
1.5. Bylaws of Surviving Corporation. On the Effective Date, the Bylaws
of WellTech shall be the Bylaws of the Surviving Corporation until altered,
amended, or repealed, or until new bylaws shall be adopted in accordance with
the provisions of law, the Certificate of Incorporation of WellTech, and the
Bylaws of WellTech.
1.6. Directors of Surviving Corporation. The incumbent directors of
WellTech immediately prior to the Effective Date shall continue to constitute
the board of directors of the Surviving Corporation from and after the Effective
Date, and such persons shall remain directors of the Surviving Corporation until
their successors are duly elected and qualify in accordance with the Certificate
of Incorporation and the Bylaws of the Surviving Corporation.
2
1.7. Officers of Surviving Corporation. The incumbent officers of
WellTech immediately prior to the Effective Date shall continue to hold their
respective offices of the Surviving Corporation from and after the Effective
Date and until their successors are duly elected and qualify in accordance with
the Certificate of Incorporation and the Bylaws of the Surviving Corporation.
1.8. Vacancies. If on or after the Effective Date, a vacancy shall for
any reason exist in the board of directors or in any of the offices of the
Surviving Corporation, such vacancy shall be filled in the manner provided in
the Certificate of Incorporation and Bylaws of the Surviving Corporation. 1.9.
Capital Stock of Surviving Corporation. The authorized number of shares of
capital stock of the Surviving Corporation, and the par value, designations,
preferences, rights, and limitations thereof, and the express terms thereof,
shall be as set forth in the Certificate of Incorporation of the Surviving
Corporation.
1.10. Conversion of Securities Upon Merger.
1.10.1. Conversion of ▇▇▇▇▇▇▇▇ Common Stock. On the Effective
Date, the 25,000 shares of ▇▇▇▇▇▇▇▇ Common Stock issued and
outstanding, on the date hereof, all of which is held by the
Shareholder (the "▇▇▇▇▇▇▇▇ Shares"), without any action on the part of
the Shareholder, shall automatically become and be converted into the
right to receive the following consideration from Key (collectively,
the "Merger Consideration"): (i) 75,000 shares of common stock, par
value $.10 per share, of Key ("Key Common Stock") to be issued to the
Shareholder in accordance with Section 4.4 hereof (the "Key Shares"),
(ii) $100,000 to be paid to the Shareholder in five annual installments
of $20,000 on September 30 of each year beginning on the date hereof;
(iii) $15,736.03 paid to the Shareholder on the date hereof (the
"Excluded Bank Accounts Estimate"); (iv) cash payments in amounts equal
to the payments received by WellTech (a) under that certain promissory
note made payable by ▇▇▇▇▇▇▇ Exploration to ▇▇▇▇▇▇▇▇ (the "▇▇▇▇▇▇▇
Receivable") and (b) pursuant to certain accounts receivable arising in
connection with ▇▇▇▇▇▇▇▇'▇ provision of services involving burying
permanent anchors (known as "deadman anchors") to secure rigs (the
"Anchor Receivables"), to be paid to the Shareholder within 10 days
from the date of WellTech's receipt of such payments; and (v) the Cash
Adjustment Payment (as defined in Section 1.10.3 hereof), if any, to be
paid to the Shareholder in accordance with Section 1.10.3 hereof.
Notwithstanding the foregoing, the Merger Consideration to be paid to
the Shareholder shall be reduced by the sum of $6,852.10 (the "Attorney
Fee Estimate") and $6,825.10 as follows: (1) the number of Key Shares
to be issued in accordance with Section 4.4 hereof shall be reduced by
-0- shares (based on a price of $7.50 per share) and (2) the amount of
cash equivalent payments to be received by the Shareholder on the date
hereof shall be reduced by $18,825.10.
1.10.2. Surrender of ▇▇▇▇▇▇▇▇ Certificates. The Shareholder has
surrendered(and Key acknowledges its receipt of) all the certificates
representing the ▇▇▇▇▇▇▇▇ Shares (the
3
"▇▇▇▇▇▇▇▇ Certificates") along with executed stock powers in a form
satisfactory to Key. On the Effective Date, Key will cancel the
▇▇▇▇▇▇▇▇ Certificates, and the Shareholder will become entitled to
receive the Merger Consideration.
1.10.3. Adjustment of Merger Consideration. The Shareholder
shall cause to be prepared and delivered to WellTech a balance sheet of
▇▇▇▇▇▇▇▇ as of the date hereof (the "Final Balance Sheet") within
fifteen (15) days after the date hereof. The parties hereto acknowledge
and agree that the Final Balance Sheet will reflect (i) as receivables
all amounts due to ▇▇▇▇▇▇▇▇ for services rendered through the date
hereof and (ii) as payables all amounts owed by ▇▇▇▇▇▇▇▇ for
obligations arising through the date hereof. WellTech and ▇▇▇▇▇▇▇▇
shall jointly review the Final Balance Sheet, endeavor in good faith to
resolve all disagreements regarding the entries thereon and reach a
final determination of the Final Balance Sheet. Within 10 days of
reaching such final determination of the Final Balance Sheet, the
following adjusting payments shall be made:
(1) If the Working Capital Deficit (as defined in
Schedule 1.10.3.1 hereto) is less than $239,083.31 by
more than $5,000, Key shall pay to the Shareholder
the amount by which such difference exceeds $5,000
(the "Cash Adjustment Payment").
(2) If the Working Capital Deficit exceeds $239,083.31 by
more than $5,000, the Shareholder shall pay to Key
the amount by which such excess exceeds $5,000.
(3) If the Seller's attorney's fees specified on the
Final Balance Sheet exceed the Attorney Fee Estimate,
the Shareholder shall pay to Key the amount of such
excess. If the Seller's attorney's fees specified on
the Final Balance Sheet are less than the Attorney
Fee Estimate, Key shall pay to the Shareholder the
amount of such difference.
(4) If the total amount of the Excluded Bank Accounts
(defined below) specified on the Final Balance Sheet
exceeds the Excluded Bank Accounts Estimate, Key
shall pay to the Shareholder the amount of such
excess. If the total amount of the Excluded Bank
Accounts specified on the Final Balance Sheet is less
than the Excluded Bank Accounts Estimate, the
Shareholder shall pay to the Key the amount of such
difference. The term "Excluded Bank Accounts" shall
mean those bank accounts identified on the 8/31
Balance Sheet and the Final Balance Sheet under the
line items "Cash on Hand", "Cash in Bank-Regular",
"Cash in Bank-Payroll" and "Cash in Bank-Anchors."
1.11. ▇▇▇▇▇▇▇▇'▇ Transfer Books Closed. Upon the Effective Date, the
stock transfer books of ▇▇▇▇▇▇▇▇ shall be deemed closed, and no transfer of any
shares of capital stock of ▇▇▇▇▇▇▇▇ shall thereafter be made or consummated.
4
1.12. Assets and Liabilities of Merging Corporations Become Those of
Surviving Corporation. On the Effective Date, all rights, privileges, powers,
and franchises of each of the Merging Corporations, and all property, real,
personal, and mixed, and all debts due on whatever account, as well as stock
subscriptions and all other things in action of or belonging to any of the
Merging Corporations, shall be taken by and deemed to be transferred to and
shall be vested in the Surviving Corporation without further act or deed, and
all such rights, privileges, powers, and franchises, property, debts, or things
in action, and all and every other interest of each of the Merging Corporations
shall be thereafter as effectually the property of the Surviving Corporation as
they were of the respective Merging Corporations, and the title to any real
property, whether vested by deed or otherwise, in either of the Merging
Corporations, shall not revert or be in any way impaired by reason of the
Merger; provided however, that all rights of creditors and all liens upon any
properties of each of the Merging Corporations shall be preserved unimpaired,
and all debts, liabilities and duties of the Merging Corporations shall
thenceforth attach to the Surviving Corporation and may be enforced against and
by it to the same extent as if such debts, liabilities and duties had been
incurred or contracted by it. Any action or proceeding pending by or against
either of the Merging Corporations may be prosecuted to judgment as if the
Merger had not taken place, or the Surviving Corporation may be substituted in
place of either of the Merging Corporations.
1.13. Conveyances to Surviving Corporation. The Merging Corporations
hereby agree, respectively, that from time to time, as and when requested by the
Surviving Corporation, or by its successors and assigns, they will execute and
deliver or cause to be executed and delivered, all such deeds, conveyances,
assignments, and other instruments, and will take or cause to be taken such
further or other action as the Surviving Corporation, its successors or assigns,
may deem necessary or desirable to vest or perfect in or confirm to the
Surviving Corporation, its successors and assigns, title to and possession of
all the property, rights, privileges, powers, immunities, franchises, and
interests referred to in this Section 1.13 and otherwise carry out the intent
and purposes of this Agreement.
1.14. Accounting Treatment. The assets and liabilities of the Merging
Corporations shall be taken up on the books of the Surviving Corporation in
accordance with generally accepted accounting principles, and the capital
surplus and retained earnings accounts of the Surviving Corporation shall be
determined, in accordance with generally accepted accounting principles, by the
board of directors of the Surviving Corporation. Nothing herein shall prevent
the board of directors of the Surviving Corporation from making any future
changes in its accounts in accordance with law.
1.15. Federal Income Tax Treatment. The Merger is intended to qualify
as a forward triangular merger transaction described in ss. 368(a)(2)(D) of the
Internal Revenue Code of 1986, as amended (the "Code").
5
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF SHAREHOLDER
2.1. Representations and Warranties of the Shareholder. The
Shareholder represents and warrants to Key and WellTech as follows:
2.1.1. Organization and Standing. Woodward is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Oklahoma, 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. The execution and delivery of this Agreement has been
authorized by the board of directors and all of the holders of capital
stock of ▇▇▇▇▇▇▇▇, the consummation of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate
action on the part of ▇▇▇▇▇▇▇▇, and this Agreement is a valid and
binding obligation of ▇▇▇▇▇▇▇▇ and the Shareholder enforceable against
▇▇▇▇▇▇▇▇ and the Shareholder (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 and the consummation of the
Merger contemplated by this Agreement 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
▇▇▇▇▇▇▇▇ or (ii) any obligation, indenture, mortgage, deed of trust,
lease, contract or other agreement to which ▇▇▇▇▇▇▇▇ or the Shareholder
is a party or by which ▇▇▇▇▇▇▇▇ or the Shareholder or their respective
properties are bound.
2.1.3. Capitalization. The authorized capitalization of
Woodward consists of 25,000 shares of ▇▇▇▇▇▇▇▇ Common Stock, of which,
as of the date hereof, 25,000 shares were issued and outstanding and
held beneficially and of record by the Shareholder. On the date hereof,
▇▇▇▇▇▇▇▇ 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
▇▇▇▇▇▇▇▇ Common Stock are validly issued, fully paid and non-assessable
and are not subject to preemptive rights. None of the outstanding
shares of ▇▇▇▇▇▇▇▇ Common Stock is subject to any voting trusts, voting
agreement or other
6
agreement or understanding with respect to the voting thereof, nor is
any proxy in existence with respect thereto.
2.1.4. Ownership of ▇▇▇▇▇▇▇▇ Shares. The Shareholder holds
good and valid title to all of the ▇▇▇▇▇▇▇▇ Shares, free and clear of
all Encumbrances (as defined in Section 2.1.8.1 hereof). There are no
claims pending or, to the Shareholder's knowledge, threatened, against
▇▇▇▇▇▇▇▇ or the Shareholder that concern or affect title to the
▇▇▇▇▇▇▇▇ Shares, or that seek to compel the issuance of capital stock
or other securities of ▇▇▇▇▇▇▇▇.
2.1.5. No Subsidiaries. There is no corporation, partnership,
joint venture, business trust or other legal entity in which ▇▇▇▇▇▇▇▇,
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. ▇▇▇▇▇▇▇▇ has delivered to Key and
WellTech copies of ▇▇▇▇▇▇▇▇'▇ unaudited balance sheet attached hereto
as Schedule 2.1.6 (the "8/31 Balance Sheet") and related statements of
income (collectively, the "8/31 Financial Statements"), as at and for
the six months ended August 31, 1996 (the "Balance Sheet Date") and
will deliver the Final Balance Sheet in accordance with Section 1.10.3
hereof. The 8/31 Financial Statements are (and the Final Balance Sheet
will be) complete in all material respects. The 8/31 Financial
Statements present (and the Final Balance Sheet will present) fairly
the financial condition of ▇▇▇▇▇▇▇▇ as at the dates and for the periods
indicated. The 8/31 Financial Statements have been (and the Final
Balance Sheet will be) prepared in accordance with generally accepted
accounting principles applied on a consistent basis. The accounts
receivable reflected in the 8/31 Balance Sheet, or which have been
thereafter acquired by ▇▇▇▇▇▇▇▇, have been collected or are collectible
at the aggregate recorded amounts thereof less applicable reserves,
which reserves are adequate. The inventories of ▇▇▇▇▇▇▇▇ reflected in
the 8/31 Balance Sheet, or which have thereafter been acquired by it,
consist of items of a quality usable and salable in the normal course
of ▇▇▇▇▇▇▇▇'▇ 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, ▇▇▇▇▇▇▇▇ does not have any liabilities or obligations, either
accrued, absolute or contingent, nor does the Shareholder have any
knowledge of any potential liabilities or obligations, which would
materially adversely affect the value and conduct of the business of
▇▇▇▇▇▇▇▇, other than those (i) reflected or reserved against in the
8/31 Balance Sheet or (ii) incurred in the ordinary course of business
since the Balance Sheet Date.
2.1.8. Additional ▇▇▇▇▇▇▇▇ Information. Attached as
Schedule 2.1.8 hereto are true, complete and correct lists of the
following items:
7
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 ▇▇▇▇▇▇▇▇, with a
description of the nature and amount of any Encumbrances
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 ▇▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇▇, excluding raw materials
and work in process, which raw materials and work in process
are valued on the 8/31 Balance Sheet, together with the amount
of any Encumbrances thereon;
2.1.8.4. Receivables. All accounts and notes
receivable of ▇▇▇▇▇▇▇▇, 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 ▇▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇▇, together with an appropriate aging schedule;
2.1.8.6. Insurance. All insurance policies or bonds
currently maintained by ▇▇▇▇▇▇▇▇, including title insurance
policies, with respect to Woodward, including those covering
▇▇▇▇▇▇▇▇'▇ 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 ▇▇▇▇▇▇▇▇ is lessor 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 fringe benefit plans, arrangements or trust
agreements of ▇▇▇▇▇▇▇▇, together with copies of the most
recent reports with respect to such plans, arrangements, or
trust agreements filed with any governmental agency and all
8
Internal Revenue Service determination letters that have been
received with respect to such plans (collectively, "Employee
Plans");
2.1.8.9. Certain Salaries. The names and salary
rates of all present employees of ▇▇▇▇▇▇▇▇, 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 ▇▇▇▇▇▇▇▇ has an account and the names of all persons
authorized to draw thereon;
2.1.8.11. Employee Agreements. Any collective
bargaining agreements of ▇▇▇▇▇▇▇▇ 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
▇▇▇▇▇▇▇▇;
2.1.8.12. Intellectual Property. All patents,
trademarks, copyrights and other intellectual property rights
owned, licensed, or used by ▇▇▇▇▇▇▇▇;
2.1.8.13. Trade Names. All trade names, assumed
names and fictitious names used or held by ▇▇▇▇▇▇▇▇, whether
and where such names are registered and where used;
2.1.8.14. Promissory Notes. All long-term and
short-term promissory notes, installment contracts, loan
agreements, credit agreements, and any other agreements
of ▇▇▇▇▇▇▇▇ relating thereto or with respect to collateral
securing the same;
2.1.8.15. Guaranties. All indebtedness, liabilities
and commitments of others and as to which ▇▇▇▇▇▇▇▇ 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;
2.1.8.16. Reserves and Accruals. All accounting
reserves and accruals maintained in the 8/31 Balance Sheet;
2.1.8.17. Leases. All leases to which ▇▇▇▇▇▇▇▇ is a
party; and
2.1.8.18. Environment. All environmental permits,
approvals, certifications, licenses, registrations, orders and
decrees applicable to current operations conducted by ▇▇▇▇▇▇▇▇
and all environmental audits, assessments, investigations and
reviews conducted by ▇▇▇▇▇▇▇▇ within the last five years on
any property owned or used by ▇▇▇▇▇▇▇▇.
9
Schedule 2.1.8 hereto shall be true, complete and correct as of the
date hereof except for items contained in Section 2.1.8.3, 2.1.8.4, 2.1.8.5 and
2.1.8.16, which are true, complete and correct as of the Balance Sheet Date.
2.1.9. No Defaults. Except as is specified in Schedule 2.1.8
hereto, ▇▇▇▇▇▇▇▇ is not a party to, or bound by, any contract or
arrangement of any kind to be performed after the Effective Date, nor
is ▇▇▇▇▇▇▇▇ 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. Except as set
forth in Schedule 2.1.10 hereto, other than as a result of the trans-
actions contemplated by this Agreement, 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 ▇▇▇▇▇▇▇▇;
2.1.10.2. Property Damage. Any material damage,
destruction, or loss to the business or properties of ▇▇▇▇▇▇▇▇
(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 ▇▇▇▇▇▇▇▇ Common Stock, or any direct or
indirect redemption, purchase or any other acquisition by
▇▇▇▇▇▇▇▇ 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
▇▇▇▇▇▇▇▇'▇ authorized or outstanding capital stock as
described in Section 2.1.3 hereof;
2.1.10.5. Labor Disputes. Any labor dispute; or
2.1.10.6. Other Material Changes. Any other event
or condition known to the Shareholder particularly pertaining
to and adversely affecting the operations, assets or business
of ▇▇▇▇▇▇▇▇ which would constitute a material adverse change.
2.1.11. Taxes. 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 ▇▇▇▇▇▇▇▇ 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 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 ▇▇▇▇▇▇▇▇; and the tax provision reflected in the 8/31
Balance Sheet is (and the tax provision reflected in the Final Balance
Sheet will be) adequate, in accordance with generally accepted
accounting
10
principles, to cover liabilities of ▇▇▇▇▇▇▇▇ at the date thereof for
all taxes, including any assessed interest, assessed penalties and
additions to taxes of any character whatsoever applicable to ▇▇▇▇▇▇▇▇
or its assets or business. No waiver of any statute of limitations
executed by ▇▇▇▇▇▇▇▇ with respect to any income or other tax is in
effect for any period. The income tax returns of ▇▇▇▇▇▇▇▇ 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
▇▇▇▇▇▇▇▇ except for taxes not yet currently due.
2.1.12. Intellectual Property. ▇▇▇▇▇▇▇▇ owns or possesses
licenses to use 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") that are either material to
the business of ▇▇▇▇▇▇▇▇ or that are necessary for the rendering of any
services rendered by ▇▇▇▇▇▇▇▇ and the use or sale of any equipment or
products used or sold by ▇▇▇▇▇▇▇▇, including all such Intellectual
Property listed in Schedule 2.1.8 hereto. The Intellectual Property is
owned or licensed by ▇▇▇▇▇▇▇▇ free and clear of any Encumbrance.
▇▇▇▇▇▇▇▇ has not granted to any other person any license to use any
Intellectual Property. ▇▇▇▇▇▇▇▇ has not received any notice of
infringement, misappropriation, or conflict with, the intellectual
property rights of others in connection with the use by ▇▇▇▇▇▇▇▇ of the
Intellectual Property or otherwise in connection with ▇▇▇▇▇▇▇▇'▇
operation of its business.
2.1.13. Title to and Condition of Assets. ▇▇▇▇▇▇▇▇ has good,
indefeasible and marketable title to all its properties, interests in
properties and assets, real and personal, reflected in the 8/31 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 8/31
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 ▇▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇▇ and in respect to which ▇▇▇▇▇▇▇▇ has not taken
adequate steps to prevent a default from occurring. The buildings and
premises of ▇▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇▇ 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 the Shareholder's knowledge, all
such assets conform to all applicable laws
11
governing their use. No notice of any violation of any law, statute,
ordinance, or regulation relating to any such assets has been received
by ▇▇▇▇▇▇▇▇ or the Shareholder, except such as have been fully complied
with.
2.1.14. Contracts. All contracts, leases, plans or other
arrangements to which ▇▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇▇ is not,
and to the knowledge of the Shareholder, 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
Shareholder has not received any information which would cause the
Shareholder to conclude that any customer of ▇▇▇▇▇▇▇▇ will (or is
likely to) cease doing business with ▇▇▇▇▇▇▇▇ as a result of the
consummation of the transactions contemplated hereby.
2.1.15. Licenses and Permits. ▇▇▇▇▇▇▇▇ possesses 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") necessary under law or otherwise for ▇▇▇▇▇▇▇▇ 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. Each of such Permits and
▇▇▇▇▇▇▇▇'▇ rights with respect thereto is valid and subsisting, in full
force and effect, and enforceable by ▇▇▇▇▇▇▇▇ subject to administrative
powers of regulatory agencies having jurisdiction. ▇▇▇▇▇▇▇▇ is in
compliance in all material respects with the terms of such Permits.
None of such Permits have been, or to the knowledge of the Shareholder,
are threatened to be, revoked, canceled, suspended or modified.
2.1.16. Litigation. There is no suit, action, or legal,
administrative, arbitration, or other proceeding or governmental
investigation pending to which ▇▇▇▇▇▇▇▇ is a party or, to the knowledge
of the Shareholder, might become a party or which particularly affects
▇▇▇▇▇▇▇▇, nor is any change in the zoning or building ordinances
directly affecting the real property or leasehold interests of
▇▇▇▇▇▇▇▇, pending or, to the knowledge of the Shareholder, threatened.
2.1.17. Environmental Compliance.
2.1.17.1. Environmental Conditions. There are no
environmental conditions or circumstances, including, without
limitation, the presence or release of any hazardous
substance, on any property presently or previously owned by
▇▇▇▇▇▇▇▇, or on any property to which hazardous substances or
waste generated by ▇▇▇▇▇▇▇▇'▇ operations or use of its assets
were disposed of, which would result in a material adverse
change in the business or business prospects of ▇▇▇▇▇▇▇▇;
12
2.1.17.2. Permits, etc. ▇▇▇▇▇▇▇▇ has in full force
and effect all environmental permits, licenses, approvals and
other authorizations required to conduct its operations, other
than those that are not material to the business or operations
of ▇▇▇▇▇▇▇▇, and is operating in compliance thereunder;
2.1.17.3. Compliance. ▇▇▇▇▇▇▇▇'▇ operations and use
of its assets do not violate in any material respect any
applicable federal, state or local law, statute, ordinance,
rule, regulation, order or notice requirement pertaining to
(a) the condition or protection of air, groundwater, surface
water, soil, or other environmental media,(b) the environment,
including natural resources or any activity which affects the
environment, or (c) the regulation of any pollutants,
contaminants, waste, substances (whether or not hazardous or
toxic), including, without limitation, the Comprehensive
Environmental Response Compensation and Liability Act (42
U.S.C. ss. 9601 et seq.), the Hazardous Materials Transporta-
tion Act (49 U.S.C. ss. 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss. 1609 et seq.),
the Clean Water Act (33 U.S.C. 1251 et seq.), the Clean Air
Act (42 U.S.C. ss. 7401 et seq.), the Toxic Substances Control
Act (17 U.S.C. ss. 2601 et seq.), the Federal Insecticide
Fungicide and Rodenticide Act (7 U.S.C. ss. 136 et seq.), the
Safe Drinking Water Act (42 U.S.C. ss. 201 and ss. 300f et
seq.), the Rivers and Harbors Act (33 U.S.C. ss. 401 et
seq.), the Oil Pollution Act (33 U.S.C. ss. 2701 et seq.) and
analogous federal, interstate, state and local requirements,
as any of the foregoing may have been amended or supplemented
from time to time (collectively the "Applicable Environmental
Laws");
2.1.17.4. Past Compliance. None of the operations
or assets of ▇▇▇▇▇▇▇▇ has ever been conducted or used in such
a manner as to constitute violation of any of the Applicable
Environmental Laws, other than violations that in the
aggregate are not material to the business or operations of
▇▇▇▇▇▇▇▇;
2.1.17.5. Environmental Claims. No notice has been
served on ▇▇▇▇▇▇▇▇ or the Shareholder from any entity,
governmental agency or individual regarding any existing,
pending or threatened investigation, inquiry, enforcement
action or litigation related to alleged violations under any
Applicable Environmental Laws, or regarding any claims for
remedial obligations, response costs or contribution under any
Applicable Environmental Laws;
2.1.17.6. Renewals. The Shareholder knows of no
reason WellTech would not be able to renew any of the permits,
licenses, or other authorizations required pursuant to any of
the Applicable Environmental Laws to operate and use any of
▇▇▇▇▇▇▇▇'▇ assets for their current purposes and uses; and
2.1.17.7. Asbestos and PCBs. No material amounts of
friable asbestos currently exist on any property owned or
operated by ▇▇▇▇▇▇▇▇, nor do
13
polychlorinated biphenyls exist in concentrations of 50 parts
per million or more in electrical equipment owned or being
used by ▇▇▇▇▇▇▇▇ in its operations or on its properties.
2.1.18. Compliance with Other Laws. ▇▇▇▇▇▇▇▇ 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. ss.ss.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. No ERISA Plans or Labor Issues. ▇▇▇▇▇▇▇▇ does not
currently sponsor, maintain or contribute to and has not at any time
sponsored, maintained or contributed to any employee benefit plan which
is or was subject to any provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). ▇▇▇▇▇▇▇▇ has not engaged in
any unfair labor practices which could reasonably be expected to result
in a material adverse effect on its operations or assets. ▇▇▇▇▇▇▇▇ does
not have any dispute with any of its existing or former employees.
There are no labor disputes or, to the knowledge of the Shareholder,
any disputes threatened by current or former employees of ▇▇▇▇▇▇▇▇.
2.1.20. Terminated Employees. ▇▇▇▇▇▇▇▇ has terminated those
employees listed on Schedule 2.1.20 hereof effective prior to the date
hereof (the "Terminated Employees") and has paid the Terminated
Employees all wages and other compensation owed them through the date
of termination.
2.1.21. Investigations; Litigation. No investigation or review
by any governmental entity with respect to ▇▇▇▇▇▇▇▇ or any of the
transactions contemplated by this Agreement is pending or, to the best
of the Shareholder's knowledge, threatened, nor has any governmental
entity indicated to ▇▇▇▇▇▇▇▇ an intention to conduct the same, and
there is no action, suit or proceeding pending or, to the best of the
Shareholder's knowledge, threatened against or affecting ▇▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇▇.
2.1.22. Absence of Certain Business Practices. Neither
▇▇▇▇▇▇▇▇ nor any officer, employee or agent of ▇▇▇▇▇▇▇▇, 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 ▇▇▇▇▇▇▇▇ (or to
assist ▇▇▇▇▇▇▇▇ in connection with any actual or proposed transaction)
which (i) might subject ▇▇▇▇▇▇▇▇ to any damage or penalty in any civil,
criminal or governmental litigation or proceeding, (ii) if not given in
the past,
14
might have had a material adverse effect on the assets, business or
operations of ▇▇▇▇▇▇▇▇ as reflected in the 8/31 Financial Statements,
or (iii) if not continued in the future, might materially adversely
effect the assets, business operations or prospects of ▇▇▇▇▇▇▇▇ or
which might subject ▇▇▇▇▇▇▇▇ to suit or penalty in a private or
governmental litigation or proceeding.
2.1.23. Untrue Statements. ▇▇▇▇▇▇▇▇ and the Shareholder have
made available to Key and WellTech 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 ▇▇▇▇▇▇▇▇'▇ assets
and business, and such information covers all commitments and
liabilities of ▇▇▇▇▇▇▇▇ relating principally 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. Investment Representations. The Shareholder
acknowledges, represents and agrees that:
(a) the Key Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or
registered or qualified under any applicable state securities laws;
(b) the Key Shares are being issued to the Shareholder in
reliance upon exemptions from such registration or qualification
requirements, and the availability of such exemptions depends in part
upon the Shareholder's bona fide investment intent with respect to the
Key Shares;
(c) the Shareholder's acquisition of the Key Shares is solely
for his own account for investment, and the Shareholder is not
acquiring the Key Shares for the account of any other person or with a
view toward resale, assignment, fractionalization, or distribution
thereof;
(d) the Shareholder shall not offer for sale, sell, transfer,
pledge, hypothecate or otherwise dispose of any of the Key Shares
except in accordance with the registration requirements of the
Securities Act and applicable state securities laws or upon delivery to
Key of an opinion of legal counsel reasonably satisfactory to Key that
an exemption from registration is available;
(e) the Shareholder has such knowledge and experience in
financial and business matters that he is capable of evaluating the
merits and risks of an investment in the Key Shares, and to make an
informed investment decision;
15
(f) the Shareholder has received a copy of (i) Key's Private
Offering Memorandum dated June 28, 1996 relating to Key's recent
private placement of convertible debentures and (ii) Key's annual
report on Form 10-K for the year ended June 30, 1996 as filed with the
Securities and Exchange Commission. The Shareholder has had the
opportunity to ask questions of, and receive answers from Key's
officers and directors concerning the Shareholder's acquisition of the
Key Shares and to obtain such other information concerning Key and the
Key Shares, to the extent Key's officers and directors possessed the
same or could acquire it without unreasonable effort or expense, as the
Shareholder deemed necessary in connection with making an informed
investment decision;
(g) since the Key Shares have not been registered under the
Securities Act or applicable state securities laws, the Shareholder
must bear the economic risk of holding the Key Shares for an indefinite
period of time, and is capable of bearing such risk; and
(h) in addition to any other legends required by law or the
other agreements entered into in connection herewith, each certificate
evidencing the Key Shares will bear a conspicuous restrictive legend
substantially as follows:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS, AND THEY CANNOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE HYPOTHECATED
EXCEPT IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE
ACT AND SUCH OTHER STATE LAWS OR UPON DELIVERY TO THIS
CORPORATION OF AN OPINION OF LEGAL COUNSEL SATISFACTORY TO THE
CORPORATION THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
2.1.25. 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 ▇▇▇▇▇▇▇▇
and the Shareholder, is required to be made or obtained by ▇▇▇▇▇▇▇▇ or
the Shareholder in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby.
2.1.26. Finder's Fee. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on
by ▇▇▇▇▇▇▇▇ and the Shareholder and their counsel directly with Key and
WellTech and their counsel, without the intervention of any other
person in such manner as to give rise to any valid claim against any of
the parties hereto for a brokerage commission, finder's fee or any
similar payments.
16
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
KEY AND WELLTECH
3.1. Representations and Warranties of Key. Key represents and
warrants to the Shareholder as follows:
3.1.1. Organization and Standing. Key is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Maryland, has full requisite corporate power and authority to
carry on its business as it is currently conducted, and to own and
operate the properties currently owned and operated by it, and is duly
qualified or licensed to do business and is in good standing as a
foreign corporation authorized to do business in all jurisdictions in
which the character of the properties owned or the nature of the
business conducted by it would make such qualification or licensing
necessary.
3.1.2. 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 Key, and this Agreement is a valid and binding
obligation of Key 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 and the consummation of the
Merger contemplated by this Agreement will not result in the breach of
any term or provision of or constitute a default under any obligation,
indenture, mortgage, deed of trust, lease, contract or other agreement
to which Key or any of its subsidiaries is a party.
3.1.3. Capitalization. The capitalization of Key consists of
25,000,000 shares of Key Common Stock, of which, as of June 27, 1996,
10,413,513 shares were issued and outstanding; provided, however, that
the board of directors of Key has the authority, without further
shareholder action, to redesignate, all of the authorized and unissued
shares of Key Common Stock into one or more series of preferred stock,
of which, as of the date hereof, no shares have been so designated or
issued.
3.1.4. Finder's Fee. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on
by Key and its counsel directly with ▇▇▇▇▇▇▇▇ and the Shareholder and
their counsel, without the intervention by any other person as the
result of any act of Key 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.
3.2. Representations and Warranties of WellTech. WellTech
represents and warrants to the Shareholder as follows:
17
3.2.1. Organization and Standing. WellTech is a corporation
duly organized, validly existing, and in good standing under the laws
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.
3.2.2. Agreement Authorized and its Effect on Other
Obligations. The execution and delivery of this Agreement has been
authorized by the board of directors and all of the holders of capital
stock of WellTech, the consummation of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate
action on the part of WellTech, and this Agreement is a valid and
binding obligation of WellTech enforceable against WellTech (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 and the consummation of the Merger contemplated by this
Agreement 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 WellTech or (ii) any
obligation, indenture, mortgage, deed of trust, lease, contract or
other agreement to which WellTech is a party or by which WellTech or
its respective properties are bound.
3.2.3. Capitalization. The authorized capital stock of Well-
Tech consists of 3,000 shares of WellTech Common Stock, of which at the
date hereof, 1,000 shares were issued and outstanding and held
beneficially and of record by Key.
3.2.4. Finder's Fee. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on
by WellTech and its counsel and ▇▇▇▇▇▇▇▇ and the Shareholder and their
counsel, without the intervention of any other person as the result of
any act of WellTech 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 4
ADDITIONAL AGREEMENTS
4.1. Noncompetition. Except as otherwise consented to or approved in
writing by WellTech and Key, the Shareholder agrees that for a period of 60
months following the Effective Date, he 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
any business providing well services, anchoring services or swabbing services in
those territories specified on Schedule 4.1 hereto;
18
(ii) request any present customers or suppliers of ▇▇▇▇▇▇▇▇ to curtail or cancel
their business with WellTech or Key; (iii) disclose to any person, firm or
corporation any trade, technical or technological secrets of ▇▇▇▇▇▇▇▇, WellTech
or Key or any details of their organization or business affairs or (iv) induce
or actively attempt to influence any employee of WellTech or Key to terminate
his employment. The Shareholder agrees that if either the length of time or
geographical area set forth in this Section is deemed too restrictive in any
court proceeding, the court may reduce such restrictions to those which it deems
reasonable under the circumstances. The obligations expressed in this Section
4.1 are in addition to any other obligations that the Shareholder may have under
the laws of the State of Oklahoma 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. The Shareholder further agrees and
acknowledges that WellTech and Key do not have any adequate remedy at law for
the breach or threatened breach by the Shareholder of this covenant, and agree
that WellTech or Key may, in addition to the other remedies which may be
available to it hereunder, file a suit in equity to enjoin the Shareholder from
such breach or threatened breach. If any provisions of this Section 4.1 are held
to be invalid or against public policy, the remaining provisions shall not be
affected thereby. The Shareholder acknowledges that the covenants set forth in
this Section 4.1 are being executed and delivered by the Shareholder in
consideration of the covenants of WellTech and Key contained in this Agreement,
and for other good and valuable consideration, receipt of which is hereby
acknowledged.
4.2. Registration Rights. Key has delivered to the Shareholder a copy
of the Registration Right Agreement among Key, ▇▇▇▇▇▇▇ Securities Co. L.P. and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Refsnes, Inc. dated July 3, 1996 (the "Registration Rights
Agreement") pursuant to which Key has agreed to register the resale of certain
shares of Key Common Stock issuable upon conversion of certain outstanding
convertible debentures of Key pursuant to the terms of the Registration Rights
Agreement. Key hereby agrees to include in the registration statement filed
pursuant to the Registration Rights Agreement (the "Shelf Registration
Statement") the resale of the Key Shares; provided, that (i) the Shareholder
shall have all duties and obligations of a "Holder" under the Registration
Rights Agreement and (ii), notwithstanding the inclusion of the resale of the
Key Shares in the Registration Statement, the Shareholder shall have no right to
participate in an underwritten offering of Key Common Stock by those persons
holding rights under the Registration Rights Agreement, if any, except to the
extent that the underwriters of such an offering agree and pursuant to any
underwriting arrangements in connection therewith.
4.3. Short Period Tax Reporting. WellTech shall cause to be filed for
▇▇▇▇▇▇▇▇ federal and state income tax returns the periods beginning on March 1,
1996 and ending on the date hereof. Such returns shall be prepared by ▇▇▇▇▇
▇▇▇▇▇, certified public accountant, and reviewed and filed by WellTech or Key.
The expenses incurred in connection with the preparation and filing of these
returns shall be borne by WellTech. The Shareholder shall assist WellTech in the
preparation and filing of such returns as reasonably requested.
19
4.4. Stock Certificate Issuance. On the Effective Date Key shall file
an additional listing application with the American Stock Exchange requesting
the listing of the Key Shares. On the date Key receives notice of approval of
such request, Key shall send written instructions to its transfer agent and
registrar to issue, countersign and register a certificate representing the Key
Shares in the name of the Shareholder and deliver such certificate to the
Shareholder at the address specified in Section 6.4 hereof.
4.5. Further Assurances. From time to time, as and when requested by
any party hereto, any other party hereto shall execute and deliver, or cause to
be executed and delivered, such documents and instruments and shall take, or
cause to be taken, such further or other actions as may be reasonably necessary
to effectuate the transactions contemplated hereby.
ARTICLE 5
INDEMNIFICATION
5.1. Indemnification by the Shareholder. In addition to any other
remedies available to Key and WellTech under this Agreement (including, without
limitation, those remedies specified in Section 5.5 hereof), or at law or in
equity, the Shareholder shall indemnify, defend and hold harmless each of Key
and WellTech, and their respective officers, directors, employees, agents and
stockholders, against and with respect to any and all claims, costs, damages,
losses, expenses, obliga tions, liabilities, recoveries, suits, causes of action
and deficiencies, including interest, penalties and reasonable attorneys' fees
and expenses (collectively, the "Damages") that such indemnitees shall incur or
suffer, which arise, result from or relate to (i) any breach of, or failure by
the Shareholder to perform, his respective representations, warranties,
covenants or agreements in this Agreement or in any schedule, certificate,
exhibit or other instrument furnished or delivered to WellTech or Key by the
Shareholder under this Agreement or (ii) ▇▇▇▇▇▇▇▇'▇ relationship with any
Terminated Employee.
5.2. Indemnification by Key and WellTech. In addition to any other
remedies available to the Shareholder under this Agreement, or at law or in
equity, WellTech and Key shall jointly and severally indemnify, defend and hold
harmless the Shareholder and his employees and agents 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 WellTech or Key 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 ▇▇▇▇▇▇▇▇ or the Shareholder by or on behalf of Key or WellTech
under this Agreement.
5.3. Indemnification Procedure. In the event that any party hereto
discovers or otherwise becomes aware of an indemnification claim arising under
Section 5.1 or Section 5.2 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;
20
provided, however, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of any obligations
hereunder, to the extent the indemnifying party is not materially prejudiced
thereby. Further, promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding with respect to
which a claim for indemnification may be made pursuant to this Article 5, 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.
5.4. Offset. The parties hereto agree that if WellTech or Key shall
incur any Damages for which it is entitled to indemnification by the Shareholder
pursuant to the terms of this Agreement, Key shall have the right to offset any
payments due or to be due under the terms of this Agreement or any other
agreement executed in connection herewith, by the amount of the Damages. Such
right of offset shall not be considered an exclusive remedy, it being agreed
that Key shall also be entitled to exercise any other remedies available to it
at law or in equity, including, without limitation, the indemnification rights
set forth in this Article 5. In the event of an offset by Key as a result of any
account receivable of ▇▇▇▇▇▇▇▇ not being collected in breach of the
representation of the Shareholder in Section 2.1.6 hereof, upon any such offset,
Key shall assign to the Shareholder the account receivable subject to offset,
and the Shareholder shall thereafter have the right to take any reasonable
action to collect such account receivable. In the event of an offset by Key as a
result of
21
any inventory of ▇▇▇▇▇▇▇▇ being unsalable in the normal course of business in
breach of the representations of ▇▇▇▇▇▇▇▇ and the Shareholder in Section 2.1.6
hereof, upon any such offset, Key shall convey and transfer to the Shareholder
title to such inventory subject to offset.
5.5. Self Insurance Agreement. Notwithstanding any provision of this
Article 5 or elsewhere herein to the contrary, and notwithstanding the accuracy
of the Shareholder's representation contained in Section 2.1.7, the Shareholder
shall indemnify, defend and hold harmless each of Key and WellTech, and their
respective officers, directors, employees, agents and stockholders against and
with respect to any and all Damages arising during the one-year period beginning
on the date hereof that such indemnitees shall incur or suffer, which arise or
result from or relate to WellTech's assumption of ▇▇▇▇▇▇▇▇'▇ obligations under
the self-insurance pooling agreement referred to in Schedule 2.1.7 hereto, but
only to the extent that such Damages (the "Self Insurance Damages") exceed
$25,000 in the aggregate during such one-year period. The Shareholder shall not
be liable for any Self Insurance Damages arising on or after September 30, 1997.
ARTICLE 6
MISCELLANEOUS
6.1. Survival of Representations, Warranties and Covenants. All
representations and warranties made by the parties hereto shall survive for a
period of 14 months from the date hereof, notwithstanding any investigation made
by or on behalf of any of the parties hereto; provided, however, that the
representations and warranties contained in Section 2.1.11 hereof shall survive
until the expiration of the applicable statute of limitations associated with
the taxes at issue. All statements contained in any certificate, schedule,
exhibit or other instrument delivered pursuant to this Agreement shall be deemed
to have been representations and warranties by the respective party or parties,
as the case may be, and shall also survive for a period of 14 months from the
date hereof despite any investigation made by any party hereto or on its behalf.
All covenants and agreements contained herein shall survive indefinitely without
limitation, except as otherwise provided herein.
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.
22
If to Key or WellTech
Addressed to: With a copy to:
Key Energy Group, Inc. ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
Two Tower Center, Tenth Floor 700 Louisiana, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Shareholder
Addressed to: With a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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
Oklahoma.
23
IN WITNESS WHEREOF, the Shareholder has 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 GROUP, INC.
By: \s\ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
WELLTECH EASTERN, INC.
By: \s\ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇▇▇ WELL SERVICE, INC.
By: \s\ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
SHAREHOLDER
\s\ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
24
SCHEDULE 1.10.3
WORKING CAPITAL DEFICIT DEFINITIONS
"Working Capital Deficit" means the dollar amount by which Eligible Liabilities
exceed Eligible Assets.
"Eligible Liabilities" means the dollar amount by which Total Liabilities
exceeds Attorney Fees Payable
"Eligible Assets" means the dollar amount of the sum of (a) Inventory, (b)
Prepaid Taxes, (c) Eligible Accounts Receivable, (d) Workers' Compensation
Receivable and (e) Insurance Claim Receivable
"Total Liabilities" means the dollar amount specified for the "Total Current
Liabilities" line item on the Final Balance Sheet.
"Attorney Fees Payable" means the dollar amount specified for the "Attorney Fees
Payable" line item on the Final Balance Sheet.
"Inventory" means the dollar amount specified for the "Inventory" line item on
the Final Balance Sheet.
"Prepaid Taxes" means the dollar amount specified for the "Prepaid Taxes" line
item on the Final Balance Sheet.
"Eligible Accounts Receivable" means the dollar amount specified for the
"Accounts Receivable - Reg" line item on the Final Balance Sheet
"Workers' Compensation Receivable" means the dollar amount specified for the
"Workers' Compensation Receivable" line item on the Final Balance Sheet.
"Insurance Claim Receivable" means the dollar amount specified for the
"Insurance Claim Receivable" line item on the Final Balance Sheet.
